John Wood Group trimmed its earnings guidance on Friday morning, cutting its adjusted EBITDA margin to between 8.5% and 8.7%, from the 8.7% to 8.9% it pencilled in at its half-year results in August.
It also cut its revenue guidance to about $6.4bn, from a previous $6.6bn to $6.8bn, as it initiated a strategic review of the part of its consulting business facing the built environment end market.
The FTSE 250 company said the scope of the review would consider a “range of options” to best unlock value from that part of the business for shareholders, which Wood believed was not currently being recognised in its market capitalisation.
It would also assess how best to take advantage of the positive trends and investment opportunities in energy transition and industrial decarbonisation where the company was already a “global leader”.
“The built environment business provides consulting and engineering solutions that address environmental risks, increase climate resilience, help to build more sustainable infrastructure and improve mobility,” the Wood Group board said in its statement.
“It operates across government, transportation, water, industrial, energy and mining markets and has a track record of attractive growth and resilient performance through Covid-19.
“A growing order book and exposure to both government stimulus for infrastructure development and the drive for sustainability and climate resilience, most notably in North America and the UK, positions the business well for future growth.”
In 2021, the part of the business that services the built environment end market was expected to account for about $1.3bn of gross revenue within Wood’s consulting business unit.
It had around 7,000 professionals, with 6,000 in the United States and Canada, and the rest largely in the UK.
Wood said the review was taking place against the backdrop of improving momentum in many of its markets, following the challenging market conditions created by the impact of Covid-19.
“Overall, we expect to deliver improved revenue and earnings in the second half of 2021 relative to the first half.
“While we are seeing robust activity in consulting and operations, the rate of recovery in projects has been slower than anticipated largely due to the deferral of activity and awards into 2022.”
Wood said it had maintained strength in its order book which was up 18% at the end of September, compared to December, with growth in consulting and operations, and representing a book-to-bill of 1.3x.
While that also included improvement in the projects order book, which was up 3% compared to June 2021, it reflected lower-than-anticipated lump sum engineering, procurement and construction (EPC) awards offset by higher reimbursable project awards.
“The working capital impact of lower than anticipated EPC awards together with deferred activity will result in higher than previously anticipated full year net debt, which we expect to be broadly in line with the first half of 2021.”
Full year revenue was expected to be around $6.4bn, and the adjusted EBITDA margin was pencilled in for between 8.5% and 8.7%.
Wood Group said its next update would be a full year 2021 trading update on 13 January.
At 0846 GMT, shares in John Wood Group were down 8.41% at 184p.
