ENERGY and engineering services giant John Wood Group, which this week rejected a £1.4 billion takeover offer from Dubai-based rival Sidara, which it said “fundamentally undervalued” the company, posted an increase in first-quarter underlying profits but a drop in revenues.
The Aberdeen-headquartered group, in a trading update yesterday, said that adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) were up 4%, with margin expansion across all of its business units offsetting lower revenue. It said margin performance was helped by “both improved pricing and a strategic focus on building a higher quality business”.
Wood’s Q1 revenue was $1.35 billion, down 6% compared to $1,46bn in Q1 2023, with growth in its operations offset by lower revenue in projects, mainly reflecting lower pass-through activity and lower EPC revenue in line with its strategic shift. Its order book at March 31, 2004 was $6.2 bn, up 9% compared to March 2023.
Aberdeen-based Wood rejects £1.4bn takeover approach
Ken Gilmartin, Wood’s chief executive, said: “We are now in the second year of our growth strategy and are making good progress, with Ebitda growth, margin expansion and an order book 9% higher than a year ago. We continue to win exciting and complex work across energy and materials, with sustainable solutions representing 40% of our pipeline.
“We are progressing with our simplification programme and have made some significant appointments this year including welcoming Arvind Balan as our new CFO. I am proud of the strong leadership team we have in place and confident that we will deliver on our significant potential. We are reiterating our Ebitda guidance for 2024 and our outlook for 2025.”
Wood, which employs around 4,500 people in Aberdeen and its North Sea operations and has a 35,000-strong global workforce, said that an “unsolicited, preliminary, and conditional proposal” from Sidara on Wednesday “fundamentally undervalued Wood and its future prospects”.
Sir Ian Wood calls for North Sea production to be stepped up
It said in a statement: “The board of Wood notes recent speculation and confirms that it received an unsolicited, preliminary and conditional proposal from Dar Al-Handasah Consultants Shair and Partners Holdings Ltd (“Sidara”), regarding a possible cash offer to acquire the entire issued and to be issued ordinary share capital of Wood (the “Proposal”).
“The Proposal was received on April 30, 2024 and proposed an offer price of 205 pence per Wood share. The board carefully considered the proposal, together with its financial advisers, and concluded that it fundamentally undervalued Wood and its future prospects. Accordingly, the board rejected the proposal unanimously on May 8, 2024.”
Sidara, which has around 20,000 employees across 60 countries, noted the announcement from Wood and said it was “considering its next steps”. The company generates nearly half of its revenues in North America.
Wood Group 'comes out swinging' with cost-cutting plan
Wood, which trades on the FTSE 250, is the latest British company on the London Stock Exchange to face takeover speculation amid growing concerns that UK-listed stocks are undervalued compared with other markets.
The company was the subject of five takeover proposals from US private equity group Apollo last year. Apollo had been prepared to pay £1.7bn for Wood but ultimately walked away from the bidding process.
John Moore, senior investment manager at RBC Brewin Dolphin, described Wednesday’s announcement of another rejected bid for Wood as an “interesting set-up” for yesterday’s trading statement,” particularly in the context of previous private equity bids and shareholder unrest”.
Wood investor puts focus on Aberdeen firm after shares fall
He noted: “What unites recent events surrounding the company is the belief that a smaller, slimmed-down structure is what will help Wood achieve its full potential. Today’s update shows some progress in that direction, and the management team is patiently trying to work that out for the company to make sure it is maximising value – while other parties see speedier change as critical.
“As ever, the truth is likely to be somewhere in the middle. Estimates point to an improving earnings picture and Wood’s simplification programme is uncovering savings, but there is more that could be done – regardless of where the company’s future lies.”
By mid-afternoon yesterday, shares were down 0.31% at 192.30p.
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