John Wood Group PLC (‘Wood’) today announces it has initiated a strategic review of the part of its Consulting business facing the built environment end market.
The scope of the review will consider a range of options to best unlock value from this part of the business for shareholders that Wood believes is not currently being recognised in its market capitalisation. It will also assess how best to take advantage of the positive trends and investment opportunities in energy transition and industrial decarbonisation where the company is already a global leader.
The built environment business provides consulting and engineering solutions that address environmental risks, increase climate resilience, help to build more sustainable infrastructure and improve mobility. It operates across government, transportation, water, industrial, energy and mining markets and has a track record of attractive growth and resilient performance through Covid-19. A growing order book and exposure to both government stimulus for infrastructure development and the drive for sustainability and climate resilience, most notably in North America and the UK, positions the business well for future growth.
In 2021, the part of the business that services the built environment end market is expected to account for c$1.3bn of gross revenue within Wood’s Consulting business unit. It has approximately 7,000 professionals, with c6,000 in the US and Canada and the remainder largely in the UK.
Trading update
The review is taking place against the backdrop of improving momentum in many of Wood’s markets following the challenging market conditions created by the impact of Covid-19.
Overall, we expect to deliver improved revenue and earnings in the second half of 2021 relative to H1 2021. While we are seeing robust activity in Consulting and Operations, the rate of recovery in Projects has been slower than anticipated largely due to the deferral of activity and awards into 2022.
We have maintained strength in our order book which is up c18% at the end of September compared to December 2020, with growth in Consulting and Operations, and representing a book to bill of 1.3x. Whilst this also includes improvement in Projects order book, which is up c3% compared to June 2021, it reflects lower than anticipated lump sum engineering, procurement and construction (EPC) awards offset by higher reimbursable project awards. The working capital impact of lower than anticipated EPC awards together with deferred activity will result in higher than previously anticipated full year net debt, which we expect to be broadly in line with H1 2021.
Full year revenue is expected to be approximately $6.4bn. Adjusted EBITDA margin is expected to be 8.5% to 8.7%.
Our next update is a full year 2021 trading update on 13 January 2022.
Notes:
- Previous guidance for the full year 2021, as set out in our Half Year 2021 results issued on 24 August 2021, was for revenue in the range of $6.6bn to $6.8bn and adjusted EBITDA margin in the range of 8.7% to 8.9%.
- Company compiled, publicly available consensus comprises 10 analysts who have published estimates since our Half Year Results for the period ended 30 June 2021 issued on 24 August 2021. Consensus includes: JP Morgan Cazenove, Barclays, RBC, Morgan Stanley, Berenberg, Exane BNP Paribas, Citigroup, HSBC, Kepler Cheuvreux and Jefferies.
Consensus 2021 revenue is $6.7bn (range: $6.6bn to $6.8bn) and consensus adjusted EBITDA is $587m (range: $574m-$598m).