Policy must catch up with investment demand, says Wood Group boss
Policy agendas need to keep up with growing investment appetite for low and zero carbon projects, if developed economies are serious about their net zero goals, the boss of Wood Group has warned.
Ken Gilmartin, chief executive of the engineering giant, told Morning Wire that governments need to “match the ambition we have and need to accelerate to net zero.”
“There are multiple facets to that, which need to happen in a parallel – policy as well as planning needs to be in a proper framework. In certain areas, and certain jurisdictions, it needs to be accelerated to match the ambition and scale of the challenge we have ahead of us,” he said.
The boss of the FTSE 250 firm referenced the US Inflation Reduction Act as a key development in the green energy race, and also praised the UK government’s decision to back carbon capture projects £20bn of investment support as a “very encouraging” move.
“That’s a clear signal of intent from the government, and having that joined up thinking while continuing to push will always be important,” he said.
His comments follow today Wood’s` latest half-year results this morning, where the company hiked its guidance – predicting higher pre-tax profits after hefty contract wins bolstered its order book.
The firm anticipates yearly revenues of $6bn, while gross earnings are set to be within its medium term target of mid to high single digit growth.
This follows a16 per cent spike saw its group revenues rise to $3bn over the first si months of trading this year, with adjusted pre-tax profits climbing to $202m – up nine per cent on last year.
This was fuelled by a sharp increase in revenues from its sustainable solutions – which have climbed to $600m, a 20 per cent hike year-on-year.
A third of the company’s sales pipeline now comes from low and zero carbon projects, up from 31 per cent at year end.
Green projects helped power a five per cent boost in its order book – which has risen to $6bn – alongside growth in its carbon capture and hydrogen businesses and fresh contract wins.
Earlier this year, it announced plans to work with CMG work to advance carbon capture storage solutions and British Gas owner Centrica on hydrogen storage facilities.
Wood rebounds from Apollo takeover attempt
The company has brushed off Apollo’s failed multiple takeover attempts this year with a raft of new deals across its business, including a $250m contract extension in Southeast Asia for operations and brownfield engineering services.
It has also signed an agreement with Shell for Wood to deploy expertise in decarbonisation, digitalisation and asset life extension, and a $50m life sciences engineering contract in the USA with GSK.
The company’s statutory results show operating profits of $23m – down 26 per cent – with the company swallowing $5m of Apollo-related costs after its failed takeover attampt, and a $20m receivables write-down in the power and industrial EPC business which was closed in 2022.
Wood has also announced David Kemp will be stepping down as chief financial officer after eight years at the helm.
The process to appoint his successor is now underway and Kemp will remain in his role until a new candidate is in place.
Alex Smith, research analyst at Investec, believed the company was showing “strong signs of progress on its growth strategy it outlined in November last year.”
“Importantly, the company is winning significant contracts in its key growth markets and is confident in delivering its medium-term ambitions, including returning to positive free cash flow in 2024.” he said.
Investec has kept its buy stance with a target price of 245p per share.
John Moore, senior investment manager at RBC Brewin Dolphin argued that while Wood’s results reflected a genuine rebound, but that it needed to do more to manage its debts.
He said: “The well-publicised bid by Apollo was arguably a costly and ultimately distracting exercise with the outcome heightening pressure on the board to lay out a vision for the years ahead. Key tasks for the incoming chief financial officer will be reducing debt further, improving cash generation and profit margins and the continued streamlining of the business.”
The company’s shares are up 4.7 per cent in today’s trading today at 155p per share on the FTSE 250 this afternoon.