TIDMWG.
RNS Number : 5007I
Wood Group (John) PLC
02 April 2020
2 April 2020
This announcement contains inside information
John Wood Group PLC ('Company')
LEI: 549300PLYY6I10B6S323
Actions taken in response to Covid-19, withdrawal of final
dividend recommendation and postponement of AGM
"Like many companies, Wood is being affected by the
unprecedented event of Covid-19 and its impact on the global
economy - an event compounded by the sharpest decline in oil price
in 20 years. Our strategy has led to a substantial broadening of
our business across energy and built environment markets, reducing
our reliance on any one industry or sector. Our proven track record
of leveraging our flexible, asset light model in response to
changing market conditions stands us in good stead. Today we
announce a series of actions which keep our people safe and healthy
and will further protect our business and our stakeholders by
reducing cost, protecting cashflow and ensuring continued balance
sheet strength. This includes the Board's prudent and appropriate
decision to withdraw its recommendation to pay the proposed 2019
final dividend." - Robin Watson, Chief Executive
Proactive actions to protect our stakeholders
Safety and client delivery
The safety of our people, our clients and suppliers is our top
priority and we are following the guidelines issued by the
governments in each of the locations in which we operate. We have
taken significant steps to enable our workforce to work from home
and deliver for clients resulting in over 40,000 employees
successfully working remotely. Many Wood employees continue to work
safely at customer sites with a number involved in supporting vital
services across the world during this challenging time. We are
thankful to all of our employees for their commitment to ensuring
that these services continue and are working with our customers to
ensure that we put in place appropriate protection measures to
ensure the ongoing safety and wellbeing of our workforce.
Maintaining a strong balance sheet foundation and liquidity
We have considerable levels of financial headroom and liquidity.
We e ntered 2020 with a strong balance sheet foundation with
c$1.4bn of headroom against our debt facilities. At 31 December net
debt to pre-IFRS 16 EBITDA was 2.0x. The completed disposals of our
nuclear and industrial services businesses in Q1 2020 for proceeds
of c$430m reduced net debt to pre-IFRS16 EBITDA to 1.5x on a pro
forma basis.
Wood has access to financing facilities that consist of
bilateral term loans of $300m, a revolving credit facility of
$1.75bn and US private placement debt of c$880m. The bilateral and
revolving credit facilities have a maturity date of May 2022. The
US private placement debt has a variety of maturity dates between
2021 and 2031 with first maturity of $77m in late 2021 and the
majority weighted to later dates. Covenants are set at 3.5x
pre-IFRS 16 EBITDA.
Leveraging our flexible, asset light business model: salary,
headcount and capex reductions
We have a proven track record of leveraging our flexible, asset
light business model in response to changing market conditions.
Although it is too early to quantify the impacts of Covid-19 and
the substantial reduction in oil price we are taking early action
to significantly adjust the cost base in anticipation of a
reduction in activity levels. These include:
-- Salary Reductions. The Board, executive directors and senior
leaders have elected to take a voluntary, temporary 10%
reduction in base salary. An additional group of employees
is also being asked to do the same. In total, we anticipate
that this will generate overhead savings in 2020 of c$40m.
-- Headcount reductions, temporary furloughing, unpaid leave
and operational salary reductions. The active management
of utilisation is a key measure of efficiency within our
business. In response to changing activity levels we are
focusing on redeploying people wherever possible alongside
considering reduced working hours, unpaid leave and furloughs.
Regrettably, employee reductions are also being made in
certain areas reflecting the reduction in operational activity.
-- Capital expenditure reductions. We have taken the decision
to pause the implementation of our ERP system and other
discretionary capex which is expected to generate a c$20
- 25m reduction in capex in 2020.
-- Other overhead cost reductions including the stoppage of
discretionary spend, travel costs and further utilisation
of shared service centers and high value engineering centers.
Withdrawal of final dividend recommendation
In the statement of our results for 2019, which we published on
10 March 2020, we noted that the Board had recommended a final
dividend of 23.9 cents per share (total cost $160m). Whilst the
Board recognises the importance of dividends to shareholders, given
the unprecedented levels of uncertainty and measures being taken to
protect cashflows and preserve long term value, the Board considers
it prudent and appropriate to withdraw its recommendation. The
Board will no longer propose a resolution to approve the dividend
at the AGM and will review the future policy once there is greater
clarity on the impact of COVID-19 and the substantial fall in oil
prices.
Order book
Our order book at the end of February before the recent fall in
oil prices was $8.0bn with around 70% of 2020 activity delivered or
secured. Looking forward, we anticipate that some of the existing
order book will be subject to postponement and that new order
intake will slow due to the impact of COVID 19 and lower oil
prices.
Accelerating Margin Improvement Initiatives
We remain committed to, and are identifying opportunities to
accelerate, margin improvement initiatives as highlighted in our
Capital Markets presentation in November 2019. These initiatives
include delivering improved operational efficiency and cost
reductions, including synergies related to the creation of our
dedicated consulting offering in TCS, and driving exceptional
execution across the business.
Postponement of AGM
As a result of the requirements of the UK and Scottish
Governments with regard to social distancing, and in order to
protect the health and safety of our shareholders and employees, it
will not be possible to allow shareholders to attend the Annual
General Meeting due to be held on 7 May, 2020. The Board considers
it important for shareholders to have the opportunity to attend the
meeting if they are able to do so and, regretfully, the Board has
decided to postpone the meeting. The Board is hopeful that
circumstances will improve and that shareholders will be able to
attend the meeting at a later date if restrictions on public
gathering and social distancing requirements are reduced. Details
of the revised date and arrangements for the AGM will be provided
as soon as possible. A trading update to the market will continue
to be provided on this date.
Publication of Annual Report and Accounts
Notwithstanding the postponement of the AGM, the Company will
shortly post the following documents to those shareholders who have
requested hard copies:
-- Annual Report and Accounts 2019
-- Letter to shareholders concerning the postponement of the
AGM and withdrawal of final dividend recommendation
The above documents will also be available on the Company's
website at www.woodplc.com/investors/annual-general-meeting .
In compliance with Listing Rule 9.6.1R the documents listed
above have been submitted to the UK Listing Authority via the
National Storage Mechanism and will shortly be available for
inspection at www.morningstar.co.uk/uk/NSM .
Notification authorised by:
Martin J McIntyre
Group General Counsel and Company Secretary
Note to Editors:
Wood is a global leader in consulting, projects and operations
solutions in energy and the built environment . We operate in more
than 60 countries, employing around 55,000 people, with revenues of
around $10 billion. www.woodplc.com
Wood
Andrew Rose - Group Head of Investor
Relations 01224 532 716
Ellie Dixon - Investor Relations
Senior Manager 01224 851 369
Citigate Dewe Rogerson
Kevin Smith 020 7638 9571
Chris Barrie
Wood's financial advisers are not responsible to anyone other
than the Company
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END
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April 02, 2020 02:00 ET (06:00 GMT)
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