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Wood Group pulling back on all fronts

The diversified engineer is tailoring its business for a prolonged downturn
August 18, 2020

Half-year figures from John Wood Group (WG.) might best be summed up as an exercise in contraction. Sales, profits, costs, and net debt have all fallen year-on-year and management felt it prudent to can the interim pay-out.

IC TIP: Sell at 220p

No real surprise given the circumstances, but the twin effects of the lockdowns and oil price volatility have been partially mitigated by the diversification of the engineering group’s business mix. The chemicals & downstream, renewables and built environment segments - which account for two-thirds of group sales - has provided a degree of resilience even as aggregate economic demand pulled back sharply.

Interim cash profits, though down by just over a fifth to $305m (£235m), landed in the upper range of guidance, but the group has essentially been battening down the hatches in expectation of a prolonged global recession. Net debt has been cut by nearly a third, while “around half of the $200m of overhead savings in 2020 are structural and will endure beyond 2020”.

Consensus estimates point to adjusted EPS of 19.41c, rising to 22.64c in 2021.

WOOD GROUP (WG.)   
ORD PRICE:220pMARKET VALUE:£ 1.51bn
TOUCH:219-220p12-MONTH HIGH:462pLOW: 101p
DIVIDEND YIELD:NILPE RATIO:45
NET ASSET VALUE:617p*NET DEBT:29%
Half-year to 30 JunTurnover ($bn)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (ȼ)
20194.7962.22.1011.4
20204.080.90-2.20nil
% change-15-99--
Ex-div:-   
Payment:-   
£1=$1.30. *Includes intangible assets of $6.1bn or 893ȼ per share.