Join our community of smart investors

John Wood bags bumper contract

A bumper contract augers well for the oil and gas engineer, although markets remain as tight as ever
August 16, 2016

Management at John Wood (WG.) didn't try to downplay the severity of the problems besetting its core oil and gas markets, but pre-emptive measures have kept the engineering group's balance sheet in good order. And while the half-year comparatives make for grim reading, there are early signs that opportunities are returning in the upstream segment.

IC TIP: Hold at 723p

Indeed, it was announced under separate cover that the group has just signed a $700m (£543m) contract to provide automation services to Tengizchevroil, a joint venture between Chevron, ExxonMobil, KazMunayGaz and LukArco, on its Tengiz Field in Kazakhstan. That comes on top of recently signed deals in Iraq and Baku, and shareholders can take encouragement from the strengthening commercial relationship with Saudi Aramco.

Still, there's no escaping the wider industry malaise, reflected in a 26 per cent fall in adjusted profit to $166m and top-line falls at the engineering and production services segments of 23 per cent and 15 per cent, respectively. Operating cash flows also contracted by 45 per cent, highlighting the importance of maintaining capital discipline when markets aren't working in your favour.

JPMorgan Cazenove forecasts cash profit of $372m and EPS of 61¢ for the year to December 2016, against $476m and 94¢ in 2015.

 

JOHN WOOD (WG.)
ORD PRICE:723pMARKET VALUE:£2.75bn
TOUCH:723-726p12-MONTH HIGH:740pLOW: 524p
DIVIDEND YIELD:3.4%PE RATIO:na
NET ASSET VALUE:610¢*NET DEBT:15%

Half-year to 30 JunTurnover ($bn)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20152.6616131.79.8
20162.1659.310.910.8
% change-19-63-66+10

Ex-div: 25 Aug

Payment: 22 Sep

£1=$1.29 *Includes intangible assets of $1.97bn, or 517¢ a share