Wood optimistic as profits grow by 35%

Group Business Correspondent

Wednesday 6 March 2013

SHARES in Wood Group rose 8% yesterday adding around £220 mil-lion to its stock market worth after the company posted 35% growth in profits and reassured the City about the outlook for trading.

LOOKING FORWARD: Wood chief executive Bob Keiller says there is confident talk over future investment.

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MARK WILLIAMSON

The Aberdeen-based oil services giant achieved $461m (£305m) earnings before interest tax and amortisation (EBITA) from continuing operations in 2012, compared with $342m in the preceding year, after benefiting from booming investment by oil and gas firms around the world.

Chief executive Bob Keiller said Wood is on course to make further progress in 2013 in markets set for long-term growth amid rising energy demand in areas like Asia.The Wood Group PSN division expects to capitalise on efforts by firms to boost production from and extend the life of existing North Sea assets.Wood's engineering arm, which helps develop new facilities such as pipelines and platforms, is busy in the North Sea and countries such as Australia."Overall, we see growth prospects in all three divisions [including gas turbines], when you combine that, you're probably looking at an EBITA for 2013 - probably around or just above 15%," Mr Keiller said. This is in line with consensus analysts forecasts. He added: "We're certainly not expecting the trajectory from the past two years to continue, but we do see continued growth prospects driven by strong underlying fundamentals."Signalling confidence, Wood Group said the full-year dividend will increase by 26% annually to 17 cents, from 13.5 cents. The news helped reassure investors that Wood has not been badly affected by increasing competition in key markets such as Asia and cost inflation.In January a leading sector player, Saipem, highlighted pressure on margins when it issued a surprise profit warning, sending shockwaves through what was seen as a buoyant sector.Shares in Wood Group closed up 60p at 818p, giving it a market capitalisation of £3bn.Developed by Sir Ian Wood from his family's fishing business, the company still looks set to lose its place in the FTSE 100 elite to mid-cap London Stock Exchange.In November, Sir Ian's charitable trusts and members of his family raised around £127m by selling 16.4 million shares at 775p each. Sir Ian retained a 2.4% holding following the sale, valued at around £70m at yesterday's closing price. In his first results announcement since succeeding Allister Langlands in November, Mr Keiller said he wants to build on the business run successfully by his predecessors.Sir Ian retired from the board in November after 45 years as chairman or chief executive. Mr Langlands became chairman.Mr Keiller sees potential to capitalise on opportunities that the divisions might help generate for each other. He said Wood Group could fund a sizeable acquisition if the right opportunity arose.Mr Keiller expects activity levels to remain strong in the North Sea for the foreseeable future. "We are optimistic about our prospects for the UK," he said.Changes made to the tax regime by the Coalition Government in recent months have helped."After a number of attempts, things seem to be on a much better footing than they were," he said. "We have lots of people talking confidently about future investments ... which translates into activity. Activity means jobs."Wood employs more than 7000 people in Scotland, including 600 in Glasgow. Asked what Chancellor George Osborne should do in the Budget on March 20, Mr Keiller said: "No surprises." Sanjeev Bahl, of Numis Securities, said: "We expect another solid year in FY13 driven by topline and margin growth in Engineering and Wood Group PSN. We believe Wood Group has been unfairly de-rated by profit warnings and consensus downgrades at Saipem and Petrofac respectively."

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Wood optimistic as profits grow by 35%

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