Britain’s Wood Group warns of a 19% decline in its adjusted EBITDA in the first half

Britain’s John Wood Group (LON: WG) said on Friday that its adjusted earnings in the first half (H1) of the current financial year are likely to take a significant hit. The company attributed the downbeat forecast to the Coronavirus pandemic that has weighed on the energy market.

Shares of the company opened about 6% up on Friday. At 223 pence per share, Wood Group is roughly 40% down year to date in the stock market. At the time of writing, it is valued at £1.53 billion and has a price to earnings ratio of 26.74.

Wood Group estimates an 11% decline in H1 like-for-like revenue

For the six months that will end in June, the engineering services company estimated its adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) to drop by 19% to the range of £238 million to £246 million. The company also warned of an about 11% decline in its like-for-like revenue in H1. Wood Group recently secured solar farm contracts in the United States.

According to Wood, strong trading in its other segments, including oil refining, chemicals, and the built environment at large, has helped to partially offset the massive decline ascribed to the weakness in its upstream oil and gas business.

On a comparable basis, the Aberdeen-headquartered company sees a 70 basis points contraction in margins in the first half. In the second quarter, Wood added, it took measures to deliver on its commitment of cutting overhead costs by more than £161 million. The engineering consultancy company also said that the savings measures resulted in over £44 million of exceptional costs.

Wood Group valued its order book at £5.64 billion at the start of June that represents an about 11% decline since December 2019. Roughly £2.82 billion worth of orders, as per the company, are scheduled to be delivered this year. In the past two months (April and May), Wood received £1.05 billion worth of new orders.

CEO Robin Watson’s comments on Friday

CEO Robin Watson of the FTSE-250 listed firm said in a statement on Friday:

“The global engineering and consultancy market is facing unique and unparalleled challenges in 2020 from COVID-19 and volatility in oil prices. Despite the disruption, we are continuing to successfully win and execute work, supported by our strategy of broadening the business across the global energy market and the built environment. The relative strength we are seeing in chemicals and downstream, the built environment and renewables, where we will double our revenues in 2020, is helping to mitigate the impact of challenging conditions in upstream and midstream oil & gas.”