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Wood Group pushes cost-cutting drive and upgrades 2024 outlook

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The company currently employs around 6,500 in the UK, most of whom are in Aberdeen.
The company currently employs around 6,500 in the UK, most of whom are in Aberdeen.

Scottish engineering firm Wood Group has said it is targeting a $60m (£47m) cost-cutting programme to bring up its margins.

For the period ending 31 December, the group posted revenue of $5.9bn (£4.6bn), up 8.8 per cent year-on-year, while earnings before interest, taxes, depreciation and amortisartion (EBITDA) swelled nine per cent to $423m (£334m)

The company posted an operating profit of $38m (£30m) in 2023, compared to $565m (£446m) last year but overall losses for the period fell to $105m (£82.9m) against a $352m (£278m) loss in 2022.

Ken Gilmartin, Wood Group chief executive, hailed “significant progress” towards the company’s three-year growth strategy citing the EBITDA gains and a strong operating cash flow.

The first glimpses of this strategy have come in the form of headcount reductions, which by their conclusion Wood says will incur a cash cost of around $70m (£55.2m).

Total company headcount reduced across the company by 0.1 per cent in 2023, falling from 35,573 staff to 35,335 and a potential 200 more jobs are at immediate risk following a report from Sky News last week.

An initial cut of around $10m (£7.8m) of central costs will be cut during the 2024 financial year, the company said.

Gilmartin said: “We continue to see clear business momentum, with a higher order book, double-digit growth in our pipeline and positive pricing trends in both pipeline and order book,” he said.

“To build on this early success and further enhance our strategic delivery, we have launched a simplification programme to drive efficiency and support further margin expansion.

“We are therefore upgrading our outlook, with 2024 guidance now towards the top end of our medium-term targets and 2025 expected to exceed those targets. Ultimately, our priority remains sustainable cash generation and we expect to deliver significant free cash flow from 2025.”

Jeffries analyst Mark Wilson drew attention to Wood’s net debt being $13m (£10.2m) higher than the guided $680m (£537m) but remained bullish on the firm’s potential to deliver savings to improve both EBITDA and future cash generation.