Investing.com -- Shares of John Wood Group (LON:WG) held steady on Tuesday following the company’s release of its first-half results. Despite reporting a significant net loss and undertaking substantial write-offs, Wood Group reaffirmed its guidance for the year and provided a clear outlook for 2025.
For the first half of 2024, Wood Group reported a net loss of $983 million, driven by charges totaling $966 million. These included an $815 million non-cash impairment of goodwill related to legacy acquisitions and a $140 million charge associated with the exit from lump-sum turnkey (LSTK) and large-scale engineering, procurement, and construction (EPC) activities.
This loss was worse than initial estimates by Jefferies, which had projected a $41 million loss, and consensus expectations of a $36 million loss. Despite these exceptional items, Wood Group’s revenues were reported at $2.84 billion, in line with guidance.
Adjusted EBITDA for the period stood at $219 million, surpassing the guided figure of approximately $210 million and reflecting a margin of 7.7%, up from 6.8% in the previous year. The order book remained stable at $6.2 billion, slightly exceeding the guidance and remaining flat compared to the first quarter of 2024.
“Before exceptionals, results were relatively in line with ours and consensus expectations, with adjusted EBITDA of $219mn coming in slightly ahead of the ~$210mn level guided in the trading update from last month,” said analysts from Morgan Stanley in a note.
Morgan Stanley, J.P. Morgan, and Jefferies emphasized that the large write-off exercise, including the impairment and exit costs, could lead to short-term volatility in the company's share price.
“Key new information includes the recognition of a $815m non-cash goodwill impairment and a $140m exceptional LSTK-related charge as Wood concludes its business review following the appointment of the new CFO in April,” said analysts at J.P. Morgan.m
J.P. Morgan analysts also pointed out that the revenue decline was offset by margin improvements and growth in Operations, reflecting a mixed but strategically focused performance.
Jefferies added that while the financial results might initially impact trading negatively due to the large write-offs, the company’s reaffirmed guidance and strategic adjustments provide a stabilizing factor.
The brokerage noted that Wood Group’s net debt, excluding leases, was reported at $876 million, above the forecasted $792 million but in line with the guidance for a similar level of net debt at year-end 2024 after accounting for planned disposals.
Wood Group has maintained its guidance for 2024, expecting high single-digit growth in adjusted EBITDA, with continued improvements in operating cash flow. The company also anticipates net debt by the end of 2024 to be similar to the level reported at the end of 2023, supported by proceeds from planned asset sales. For the second half of 2024, the sale of CEC Controls is expected to yield approximately $30 million, and the disposal of the Ethos Energy joint venture is projected to complete as planned.
Looking forward to 2025, Wood Group remains confident in achieving adjusted EBITDA growth above its medium-term targets. The company anticipates annualized benefits of around $60 million from its Simplification program and expects to generate significant free cash flow.