Shares in John Wood Group have risen after the oilfield services provider said it expects higher core earnings for 2019, with a strong performance from its engineering services unit offsetting slowing onshore drilling demand in the US.
In an update to the stock exchange on Thursday, the firm said it expects adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to between $850 million (£652m) and $860 million for the year ending 31 December, compared with $693.8 million a year earlier.
Wood Group shares rose as much as 9.19 per cent in morning trading to 404.4p following the trading update.
“Our full year 2019 results will demonstrate earnings growth, margin improvement and strong operational cash generation, resulting in a reduction in net debt,” said chief executive Robin Watson.
Wood said it expects revenue of around $10bn for 2019, in line with the previous year, reflecting “generally robust activity”, with better than anticipated cash generation in the second half helping reduce net debt to below $1.5bn.
Watson said the company “continue[s] to make good progress on portfolio rationalisation. Looking ahead, our business is well positioned across its energy and built environment markets and we expect to deliver earnings growth in 2020.”
Wood also announced this morning that Birgitte Brinch Madsen would join the company as a non-executive director.
“It’s been a challenging 12 months for Wood, with a volatile oil and gas environment seeing the company – along with other services firms – squeezed by some of the larger operators,” said Brewin Dolphin senior investment manager David Barclay.
“While Wood has taken steps to broaden its business, the levels of debt it incurred in the process have weighed on the shares – they have fallen around one-third since the beginning of 2019,” he added.
“There’s a slight reduction in debt in today’s update, but the market would have been looking for more concrete progress.”