Wood chief executive Ken Gilmartin has said the group continues to "update a refresh" its capital allocation policy with a view to rewarding shareholders as the Scottish energy services giant makes strides with its strategic overhaul plans.

Speaking after the Aberdeen-headquartered group said annual earnings would come in slightly ahead of expectations, Mr Gilmartin declared "the big ship Wood is on a significant turnaround". While unwilling to be drawn on exactly when cash might be headed shareholders' way, he emphasised that Wood is committed to maintaining growth momentum and "rebuilding trust with investors".

“I think for now, as a company and where we have come from, [having] sustainable free cash flow has always been front and centre on the back of an organic growth strategy that we all believe in and we are starting to deliver on," Mr Gilmartin told The Herald. "We’ve got capital allocation [and are] looking at how we possibly return some money to our investors as we go through that.”

In a trading update issued yesterday morning, Wood said operating cash flow for the year ended December 31 came to $210 million (£164.9m), reversing the $66m outflow in the previous 12 months. The majority of last year's cash flow, about $175m, was generated in the second half.

Revenues were up 9% on the prior year at $6 billion thanks to contract wins in oil and gas, clean power and pharmaceuticals. Adjusted earnings are expected to come in between $420m and $425m.

The only glaring blot on the jotter was the net debt level of $680m which was 8% higher than consensus estimates due to currency swings and the timing of customer receipts. Analysts at Jeffries highlighted this as a "frustrating key item".

“However, it is also very important, in our view, that cash exceptionals in 2023 have remained as expected at c.$140m, hence we remain positive on Wood’s overall recovery story, but focus will remain on delivery of the reiterated ‘positive free cashflow in 2024, as previously guided," they said in a note to investors.

The Herald: Ken GilmartinKen Gilmartin (Image: Wood)

Mr Gilmartin was bullish on this point, saying new contract wins will drive positive cash flow in 2024 and "significant" positive cash flow the following year.

Wood's order book was up by 4% at $6.1bn boosted by fourth-quarter oil and gas wins with Woodside, BP and Equinor. During the year the group also secured an offshore clean power project in Germany, one focused on green hydrogen in Spain, and an engineering contract to help produce active pharmaceutical ingredients.

Roughly 40% of the company’s bidding pipeline is coming from sustainable solutions as the group seeks to diversify from its traditional roots in the oil and gas sector as part of its three-year turnaround plan unveiled in November 2022. Further to that, Wood has announced the latest in a series of portfolio shifts with plans to sell its 51% stake in Ethos Energy.

READ MORE: Wood Group set to offload Scottish-based Ethos Energy

“We’re excited about the momentum we are building," Mr Gilmartin said. "The big ship Wood is on a significant turnaround, we’ve delivered on the promises that we’ve made for the past four quarters and closed out the year really solid, and we’re in a really good position for continued growth.”

Wood was the subject of five takeover approaches from Apollo before the US private equity group abandoned its solicitations in May of last year. Its final offer had valued the business at £1.7bn, or 240p per share.

Shares in the FTSE 250 group, which employs about 36,000 people globally including 3,000 in Aberdeen, closed yesterday's trading nearly 3% higher at 156.9p.

Analyst Alex Smith of Investec said Wood delivered a "strong" set of results for 2023 and is winning significant contracts in its key growth markets. He is forecasting revenues of $6.4bn for the coming year with earnings up at nearly $453m.