Aberdeen's Wood Group, which has been fending off takeover attempts from a Middle Eastern rival, has reiterated its faith in its stand-alone prospects despite a decline in interim revenues.
In an update on trading for the first half of the year, Scotland's biggest offshore services company said its growth strategy is delivering with a 4% increase in earnings to approximately $210 million, driven by better pricing and cost control. The group also noted that its order book increased by 2% to roughly £6.1 billion.
However, revenues for the first half fell by 6% to around $2.8bn, with strong growth in its operations division offset by a poorer performance in projects. In particular, Wood cited continuing weakness in its minerals business.
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Directors at Wood have to date rebuffed three takeover approaches by Dubai-based Sidara, the first of which in May was based on a 205p per share purchase price.
Sidara's current pitch at 230p per share values Wood at approximately £1.6bn. It was announced last week that Sidara has been given a four-week extension that expires on July 31 to complete its due diligence and decide whether to make a firm offer or walk away.
Wood's "simplification" programme, led by chief executive Ken Gilmartin, has achieved $25m in annual savings to date. Mr Gilmartin said the company remains on course to meet full-year expectations of high single digit growth in adjusted earnings, with performance to improve in the second half of the year in line with the seasonality of the sector.
"Our growth strategy continues to deliver, with further growth in EBITDA and order book," he said. "Crucially, we are now seeing the improving quality of our business coming through with margin expansion as we focus on engineering services and consulting and move away from EPC [engineering, procurement and construction] work.
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"As we look ahead, we remain focused on delivering our potential, including generating significant free cash flow next year. We are winning exciting and complex work across our businesses whilst progressing both our simplification and disposal programmes."
Wood employs around 4,500 people in Aberdeen and its North Sea operations. It has a global workforce of 35,000.
Zoe Gillespie, investment manager at RBC Brewin Dolphin, said the group's prospects are improving but "clear evidence of more is needed" to reject another takeover bid.
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“Speculation continues around Wood’s future, with Sidara having to make an improved offer or drop its bid to buy the company by July 31. The most recent bid valued Wood at a 52% premium to its current share price, putting pressure on the management team to deliver on plans to reverse the engineering group’s fortunes, after the share price fell to levels last seen in 2009.
"Wood’s simplification programme is delivering results and its prospects are improving, but there is still some way to go to close the gap between its current valuation and the offers made for the company. Shareholders will want to see clear evidence that will be made up if another bid is going to be rejected.”
Wood is due to publish its interim results on August 20. The company's shares closed yesterday's trading 2.6p lower at 204.6p, a decline of 1.25%.
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