Wood Group’s FY24 trading update reveals financial challenges amidst independent review and refinancing plans

John Wood Group PLC has released its FY24 trading update, offering insight into its financial performance, the ongoing independent financial review, and an updated business outlook for 2025. While the company continues to execute its transformation strategy, persistent financial difficulties, including weaker-than-expected trading in Q4 and the impact of the independent review, are shaping its future direction. Despite delivering on its FY24 guidance, Wood Group is facing challenges in cash generation and profitability, prompting additional cost-cutting measures and a renewed focus on refinancing its debt, which is set to mature in October 2026. The company has initiated discussions with lenders to explore all available refinancing options.

How did Wood Group perform in FY24?

The FY24 trading update confirms that Wood Group met its adjusted financial guidance, but its Q4 performance was weaker than anticipated. Adjusted EBITDA for the year is expected to be between $450 million and $460 million, while adjusted EBIT is projected between $205 million and $215 million. In response to underwhelming trading results in Q4, the company took swift action, canceling executive and employee bonuses and implementing tighter working capital management to offset the shortfall.

Revenue for 2024 stood at approximately $5.7 billion, reflecting solid growth in the Operations division but lower-than-expected performance in Consulting and Projects. Net debt, excluding leases, was around $690 million as of December 31, 2024, nearly unchanged from the $694 million reported the previous year. However, the company’s average net debt throughout 2024 remained at approximately $1.1 billion, reinforcing the need for a comprehensive financial restructuring strategy.

Wood Group successfully completed the sale of EthosEnergy in Q4, securing $138 million in net cash proceeds. The company also strengthened its order book, which increased from $5.4 billion in September 2024 to $6.2 billion by the end of the year. This growth was driven by key project wins, including major agreements with BP, OMV Petrom, and Esso Australia.

What are the preliminary findings of the independent review?

The independent financial review, led by Deloitte, was initiated following significant contract write-offs associated with Wood Group’s exit from lump sum turnkey (LSTK) contracts and large-scale engineering, procurement, and construction (EPC) projects. Although the review is ongoing, initial findings suggest that while prior-year adjustments will be necessary, there will be no material impact on the company’s cash position or ability to generate cash in the future.

Wood Group is currently assessing the extent of the required prior-year adjustments, particularly within its Projects business unit, which could affect previously reported financial results, including FY23 adjusted EBITDA. In response, the company is implementing stricter financial governance, reinforcing internal controls, and addressing structural weaknesses to improve transparency and accountability.

What steps is Wood Group taking to strengthen its financial position?

As part of its long-term business transformation, Wood Group has fully removed LSTK contracts from its revenue streams, order book, and project pipeline. While this move has significantly reduced business risk, it has also contributed to a decline in revenue and left the company with unresolved legacy claims liabilities that must be addressed.

To counteract these financial pressures, Wood Group is expanding its cost-reduction initiatives. The company’s Simplification Programme, launched in March 2024, is on track to deliver $60 million in annual savings by FY25, with associated completion costs estimated at $15 million. To further strengthen its financial position, Wood has extended the programme to target an additional $85 million in annual savings from FY26 onward, bringing the total expected cost reductions to $145 million from 2023 to 2026.

Despite these efforts, cash generation remains weak. The company acknowledges that while its operational efficiency is improving, substantial financial strengthening is still needed to achieve long-term stability.

How does Wood Group’s updated business outlook impact 2025?

Wood Group maintains its expectation of double-digit adjusted EBITDA and EBIT growth in 2025, excluding the impact of recent asset disposals. However, due to ongoing cash flow constraints, the company now forecasts negative free cash flow of between $(150) million and $(200) million in 2025. Several factors are contributing to this downward revision, including lower-than-expected EBITDA growth, a one-off working capital unwind of approximately $70 million, and delayed realization of pension surplus cash inflows amounting to $50 million.

Professional costs related to the independent financial review are projected at $10 million, while legacy claims liabilities will require an estimated $50 million in cash payments. In response to these financial pressures, Wood Group is pursuing asset disposals and expects to raise between $150 million and $200 million through business sales in 2025. If these divestments proceed as planned, they will help offset the negative cash flow and stabilize debt levels.

When will Wood Group achieve positive free cash flow?

Despite the challenges facing its 2025 outlook, Wood Group remains confident that it will achieve positive free cash flow by 2026. Improvements in operating cash flow, which has increased from $(66) million in FY22 to approximately $275 million in FY24, support this expectation.

Additional contributors to positive free cash flow in 2026 include growth in adjusted EBITDA and EBIT, incremental cost savings of approximately $25 million, and a reduction in exceptional cash costs, which are projected to decline from $100 million in FY25 to $40 million in FY26. Although legacy claims liabilities will continue to result in annual cash outflows of around $50 million, Wood Group expects these payments to remain manageable within its broader financial restructuring strategy.

What are Wood Group’s refinancing plans?

With the majority of its debt facilities maturing in October 2026, Wood Group is actively evaluating refinancing options to ensure financial stability. The company has already begun discussions with its lenders to assess available opportunities, particularly in light of the potential financial restatements stemming from the independent review.

CEO Ken Gilmartin acknowledged the financial headwinds but emphasized that the company’s fundamentals remain strong. He reiterated that while Wood Group’s financial performance in 2024 was disappointing, management has taken decisive action to position the company for future success. He remains confident that the business will benefit from growing demand for energy services, strong client relationships, and in-demand engineering expertise, providing a foundation for long-term recovery.

Wood Group’s FY24 trading update, independent financial review, and updated business outlook reveal both progress and ongoing financial difficulties. While the company has successfully strengthened its order book, eliminated high-risk LSTK contracts, and implemented aggressive cost-cutting measures, negative free cash flow in 2025 remains a significant concern. However, with strategic asset disposals, continued cost reductions, and an effective refinancing strategy, Wood aims to stabilize its financial position and achieve positive free cash flow by 2026.