TIDMWG.
RNS Number : 9931J
Wood Group (John) PLC
22 August 2023
Half year results for the six months ended 30 June 2023
22 August 2023
This announcement contains inside information
Clear strategic progress , strong growth and increasing full
year guidance
HY23 Movement
At constant
HY22 restated currency
Notes $m $m % %
HEADLINE RESULTS 1,2,3
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Revenue (pre-exceptional) Continuing 4 2,986 2,571 16.2% 19.7%
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Adjusted EBITDA Continuing 5 202 186 8.5% 12.3%
Adjusted EBITDA margin Continuing 6 6.8% 7.2% (0.4)ppts (0.4)ppts
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Adjusted EBIT Continuing 7 89 82 9.2%
Adjusted EBIT margin Continuing 8 3.0% 3.2% (0.2)ppts
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Total
Adjusted diluted EPS group 9 1.1c 5.7c (80.7)%
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Adjusted operating cash Total
flow group 10 39 (82) n/a
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Total
Free cash flow group 11 (219) (352) (37.8)%
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Total
Net debt including leases group 980 2,156 54.5%
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Total
Net debt excluding leases group 654 1,756 62.8%
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Net debt / adjusted
EBITDA Continuing 12 2.0x 4.0x n/a
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Order book Continuing 13 5,991 6,424 (6.7)% (4.3)%
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Headcount Continuing 14 35,636 34,079 4.7%
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STATUTORY RESULTS
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16.5
Revenue Continuing 4 2,986 2,563 %
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Operating profit Continuing 23 31 (25.7)%
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(Loss) / profit for Total
the period group (27) 89 n/a
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Total
Basic EPS group (4.3)c 13.0c n/a
=========================== ============ ======= ======= ============== ========== =============
Cash flow from operating Total
activities group (7) (117) 93.9%
=========================== ============ ======= ======= ============== ========== =============
Built Environment Consulting (sold in September 2022) is treated
as a discontinued operation and its results are included within the
"Total group" measures. Continuing results exclude its results.
HY22 results have been restated to include Built Environment Saudi
Arabia. See notes on page 4.
Ken Gilmartin, CEO, said:
"When we announced our growth strategy in November last year, we
set out a plan for Wood to deliver on its significant potential,
and I am delighted that our results show the clear progress we are
making. We have made a good start to the year, delivering growth in
revenue, EBITDA, headcount and our pipeline, all while furthering
our inspiring culture, as evidenced by our highest-ever employee
net promoter score.
"As we look ahead, we are confident that our actions, the
business model we have implemented and the market growth
opportunities to which we have aligned, support the momentum we are
building in our business. As such, we are increasing our full year
guidance for the year for revenue and EBITDA."
Delivering on our profitable growth strategy
-- Well-positioned for growth across energy and materials
o Market growth opportunity of c.5% CAGR with addressable market
of c.$235bn in 2025
o Double-digit revenue and pipeline growth in HY23 across
majority of our key markets
o Excellent growth across Carbon Capture and Hydrogen
o Order book of $6 billion, up 5% compared to December 2022 (at
constant currency and excluding the divested Gulf of Mexico labour
operations business)
o Significant contract wins across energy and materials
-- Growing and improving our pipeline
o Right business model in place, predominantly services-based
cost reimbursable business
o Double-digit growth in the 24-month factored pipeline versus
December 2022, following strategic clean up last year that removed
lump sum turnkey (LSTK) and largescale lump sum EPC work
o This pipeline growth reflects the strength of our markets and
our client offering
o Positive trends in pipeline gross margin reflecting
selectivity of our bidding, and market conditions
-- Engaged and energised people
o Headcount up 5% to around 36,000 people
o Highest recorded employee net promoter score scores to
date
-- Growing our sustainable business (see note 15)
o Over $600 million of sustainable solutions revenue in HY23, up
20% on last year
o Represented 20% of Group revenue
o 33% of sales pipeline from sustainable solutions, up from 31%
at year end
Headline financial highlights
-- Revenue and adjusted EBITDA ahead of expectations set out in HY23 trading update on 13 July
-- Revenue of $3.0 billion was up 16% (+20% at constant
currency) with growth in all business units
o c.$160 million increase in pass-through revenue, which
generates only a small or nil margin
o This increase in pass-through revenue represented around a
third of the revenue growth
-- Adjusted EBITDA of $202 million was up 9% on last year (+12% at constant currency)
-- Adjusted EBITDA margin of 6.8%, down 0.4ppts on last year,
reflecting increased low margin pass-through revenue and our
previously guided opex investments across the Group to deliver
future growth
-- Adjusted EBIT up 9% to $89 million following the EBITDA growth
-- Adjusted diluted EPS of 1.1c was down 81% on last year,
mainly reflecting the absence of Built Environment Consulting (sold
in 2022) which contributed $57 million of adjusted profit after tax
in HY22
-- Adjusted operating cash flow of $39 million was significantly
improved on last year, with improved working capital and lower
utilisation of provisions more than offsetting the sale of Built
Environment Consulting
-- Free cash flow of $(219) million reflects phasing of
exceptional cash outflows ($99 million vs.
c.$140 million expected for FY23) as well as the typical working
capital seasonality of our business
-- Net debt (excl. leases) at 30 June 2023 was $654 million,
significantly down on last year following the reset of our
business, but higher than December 2022 ($393 million) given the
free cash outflow and the payment of $62 million of tax on the sale
of Built Environment Consulting
Statutory results
-- Operating profit of $23 million was down 26%, mainly
reflecting exceptional items of $31 million which include around $5
million of Apollo-related costs and a $20 million receivables
write-down in the Power and Industrial EPC business which was
closed in 2022
-- Loss for the period of $27 million reflects the lower level
of profit from discontinued operations (Built Environment
Consulting), the exceptional items and the tax charge in the
period
-- Basic EPS of (4.3)c reflects the loss in the period
Full year guidance
-- Revenue is expected to continue to grow in the second half,
albeit at a lower rate than the first half, which included the
benefits of higher pass-through activity and a weak 2022
comparator. Overall, revenue for FY23 is now expected to be around
$6 billion
-- Our adjusted EBITDA margin is expected to be flat in the
nearer term at around 7%, partly reflecting investments being made
in the business and the level of low margin pass-through revenue
activity
-- As such, adjusted EBITDA for FY23 is expected to be ahead of
our previous expectations and within our medium-term target of mid
to high single digit growth
-- Free cash flow is expected to be positive in the second half,
with no change to our expectations for net debt at the end of the
year and no change to legacy liability cash outflows, which mostly
end in 2024
CFO succession
We announced today that David Kemp, Chief Financial Officer
(CFO), has advised the Board of his intention to retire as CFO. The
process to appoint his successor is now underway and David will
remain in his role until a successful candidate is in place.
Presentation
A virtual meeting for investors and analysts will be held today
at 8:00am (UK time) with Ken Gilmartin (CEO) and David Kemp (CFO).
The webcast will be live at
https://edge.media-server.com/mmc/p/ynic2uvs .
To join the conference call, and ask any questions, please
register via:
https://register.vevent.com/register/BI45bf1976d92d431483dd798b9be6d546
.
The webcast and transcript will be available after the event at
www.woodplc.com/investors .
For further information:
Simon McGough, President, Investor
Relations +44 (0)7850 978 741
Vikas Gujadhur, Senior Manager, Investor
Relations +44 (0)7855 987 399
Alex Le May, Ariadna Peretz, FTI
Consulting +44 (0)20 3727 1340
FTI_Wood@FTIconsulting.com
The person responsible for arranging the release of this
announcement on behalf of Wood is Martin McIntyre, Group General
Counsel and Company Secretary.
NOTES
Adjustments between statutory and underlying information
The Group uses various alternative performance measures (APMs)
to enable users to better understand the performance of the Group.
The Directors believe the APMs provide a consistent measure of
business performance year-to-year and they are used by management
to measure operating performance and for forecasting and
decision-making. The Group believes they are used by investors in
analysing business performance. These APMs are not defined by IFRS
and there is a level of judgement involved in identifying the
adjustments required to calculate them. As the APMs used are not
defined under IFRS, they may not be comparable to similar measures
used by other companies. They are not a substitute for measures
defined under IFRS.
Note 1: HY22 results are restated to include the results of
Built Environment Consulting Saudi Arabia, which was previously
classified as held for sale. For HY22, this business contributed
$10 million of revenue and $1 million of adjusted EBITDA. For FY22,
this business contributed $27 million of revenue and $3 million of
adjusted EBITDA.
Note 2 : Percentage growth rates are calculated on actuals and
not the rounded figures shown throughout this statement. Growth
rates shown at constant currency are calculated by comparing HY23
to HY22 restated at HY23 currency rates.
Note 3: Built Environment Consulting (sold in September 2022) is
treated as a discontinued operation and its results are included
within the "Total group" measures. Continuing results exclude its
results.
Note 4: Revenue includes an exceptional item in HY22 of $(8.0)
million related to contract losses in respect of the closure of the
Power and Industrials EPC business. Revenue (pre-exceptional items)
is an APM that is used throughout this Report as the Group believes
it provides a more useful measure of performance.
Note 5: A reconciliation of adjusted EBITDA to operating profit
is shown in note 2 to the financial statements.
Note 6: Adjusted EBITDA margin is adjusted EBITDA shown as a
percentage of revenue. This measure is used by management to
measure the performance of business, and is one of our medium term
targets.
Note 7: Adjusted EBIT shows the Group's adjusted EBITDA after
depreciation and amortisation. This measure excludes amortisation
of acquired intangibles and is therefore aligned with our measure
of adjusted EPS. A reconciliation of adjusted EBIT to operating
profit/loss is shown in the Financial Review on page 12.
Note 8: Adjusted EBIT margin is adjusted EBIT shown as a
percentage of revenue. This measure is used by management to
measure the performance of business.
Note 9: A reconciliation of adjusted diluted EPS to basic EPS is
shown in note 7 of the financial statements.
Note 10 : Adjusted operating cash flow refers to adjusted cash
generated from operations excluding leases, as shown on page 19 of
the Financial Review.
Note 11: Free cash flow is defined as all cash flows before
acquisitions, disposals and dividends. It includes all mandatory
payments the Group makes such as interest and tax, and all
exceptional cash flows. It excludes the impacts of IFRS 16 (Leases)
accounting and FX. A reconciliation of free cash flow to our
statutory cash flow statement is shown on page 19.
Note 12: Net debt / adjusted EBITDA ratio (covenant basis) is
calculated on the existing basis prior to the adoption of IFRS 16
in 2019 and is based on net debt excluding leases. It includes a
series of covenant adjustments to both net debt and EBITDA. The
calculation is shown in the Financial Review on page 23.
Note 13: Order book comprises revenue that is supported by a
signed contract or written purchase order for work secured under a
single contract award or frame agreements. Work under multi-year
agreements is recognised in order book according to anticipated
activity supported by purchase orders, customer plans or management
estimates. Where contracts have optional extension periods, only
the confirmed term is included. Order book disclosure is aligned
with the IFRS definition of revenue and does not include Wood's
proportional share of joint venture order book. Order book is
presented as an indicator of the visibility of future revenue.
Note 14 : Headcount is a measure of total employees working for
Wood, including Wood employees and contractors. This measure
excludes employees in our joint ventures.
Note 15 : Estimated share of revenue as defined by Wood. This
figure is referred to across this document. Sustainable solutions
consist of activities related to: renewable energy, hydrogen,
carbon capture & storage, electrification and electricity
transmission & distribution, LNG, waste to energy, sustainable
fuels & feedstocks and recycling, processing of energy
transition minerals, life sciences, and decarbonisation in oil
& gas, refining & chemicals, minerals processing and other
industrial processes. In the case of mixed scopes including a
decarbonisation element, these are only included in decarbonisation
if 75% or more of the scope relates to that element, in which case
the total revenue is recorded in decarbonisation.
CEO STATEMENT
We made a good start to the year, with growth in revenue and
EBITDA, and clear momentum across our business. We grew our
headcount and our pipeline, and have made great progress in
building our inspiring culture. The cash performance in the half
reflects the turnaround journey we are on, and we remain on track
to be free cash flow positive in the second half of this year, and
in 2024 as a whole.
Good financial performance in the first half
Revenue growth across all businesses
Group revenue of $3.0 billion was up 16% on last year (up 20% at
constant currency) with good growth across all of our business
units and demonstrating that our strategy is delivering. Revenue
growth benefited from increased low margin pass-through activity.
This increase in pass-through revenue represented around a third of
the revenue growth.
Profitability in line with expectations
Our adjusted EBITDA of $202 million was up 9% on last year, and
up 12% at constant currency. This reflects the strong revenue
growth combined with a lower margin, partly reflecting increased
low margin pass-through revenue but also reflecting the opex
investments we are making in our business.
Our adjusted EBIT was up 9% on last year at $89 million,
reflecting the growth in EBITDA. Our adjusted diluted EPS was 1.1
cents, down 81% on last year. This mainly reflects the absence of
Built Environment Consulting which was sold in September 2022 and
contributed $57 million of adjusted profit after tax in the first
half of 2022. Our adjusted diluted EPS also reflects a high
adjusted tax rate, covered in detail in the Financial Review.
Statutory results
Our operating profit was down 26% to $23 million with the
reduction mainly reflecting two exceptional items in the period.
Firstly, we incurred around $5 million of costs related to
unsolicited bids from Apollo Management Holdings, L.P which
ultimately ended with its decision to not move forward. Secondly,
we recognised a non-cash receivable impairment of $20 million in
relation to one large Power and Industrial EPC contract, a business
area we was closed in 2022.
The loss for the period was $27 million and reflects the
exceptional items and the high tax charge in the period. Given
this, our basic loss per share was 4.3 cents.
Cash performance reflects our turnaround
We saw a significant improvement in our adjusted operating cash
flow, generating $39 million, despite a typical seasonal working
capital outflow in our business. We expect our adjusted operating
cash flow to be stronger in the second half.
Our free cash outflow of $219 million includes $99 million of
outflows related to legacy liabilities. The movement in net debt
also includes an adverse FX movement and the payment of $62 million
of tax on the sale of the Built Environment business.
Looking ahead, the cash outflows from legacy liabilities will
continue to reduce as previously described, and we expect positive
free cash flow in the second half of this year, and into 2024 as a
whole.
Delivering on our profitable growth strategy
We set out our profitable growth strategy in November 2022 and
we are delivering on each of the three pillars: inspired culture,
performance excellence, and profitable growth.
Engaged and energised people
We are very pleased that employee engagement continues to
increase, with our employee net promoter score (NPS) now at its
highest recorded level. Our headcount at June 2023 was around
36,000 people, up 5% on last year. This is an important growth
metric with our focus on a services-led business model and we
expect to continue growing into the second half. We also continue
to grow our Global Execution Centres, with more than 3,000 skilled
employees in India and Colombia.
Well-positioned for growth across energy and materials
Wood holds an exciting position across our key markets, with a
total addressable market of around $235 billion in 2025 and a
market growth opportunity that remains at around a 5% CAGR, that we
expect to outperform. We saw double-digit revenue growth in HY23
across the majority of our key markets, with excellent growth
across Carbon Capture and Hydrogen (together around 1.5% of Group
revenue). Wood is a leading global player in both of these areas,
having performed over 175 carbon capture studies and designed over
130 hydrogen plants.
Growing our pipeline and improving commercial focus
In line with our strategy, in 2022 we cleaned up our pipeline of
opportunities to remove LSTK and large EPC work. Since then, we
have seen consistent pipeline growth, with the 24-month factored
pipeline up over 20% at June 2023 compared to December 2022.
Encouragingly, we are seeing positive trends in pipeline gross
margin reflecting our new selectivity around our bidding process,
as well as improved market conditions.
Growing our sustainable business
Wood is an enabler of net zero, providing solutions across
decarbonisation, energy transition, and materials for a net zero
world. In addition, our life sciences solutions are aligned to the
UN Sustainable Development goal of ensuring good health and
well-being. Wood has an AA MSCI rating, in the top quartile of
peers.
We had over $600 million of sustainable solutions revenue in
HY23, up 20% on last year and representing around 20% of Group
revenue . Furthermore, 33% of our sales pipeline is now from
sustainable solutions, up from 31% at December 2022.
Right business model in place
We are now a services-led business with the majority of our
contracts cost reimbursable (c.80% of revenue, c.85% of order
book), with the remainder mostly fixed price services (c.20% of
revenue, c.15% of order book).
This contract mix represents our risk-appetite following our
strategic move away from LSTK activity (now only around 3% of
revenue and around 1% of our order book).
Optimising our portfolio
As outlined in March 2023, we are evaluating our portfolio and
have identified underperforming businesses that do not fit with our
focused strategy and generate negative margin, representing around
4% of Group revenue. We continue to consider options in respect of
these businesses.
In March 2023, we completed the sale of the Gulf of Mexico
labour operations business for a cash consideration of $17
million.
Momentum across our business
The first half continued the positive momentum we saw at the end
of 2022, including strong trading across both quarters. Our order
book at June 2023 was around $6 billion, up 5% compared to December
2022 at constant currency and excluding the Gulf of Mexico labour
operations business which was sold in the period.
Significant contract wins across Energy in the year
included:
-- c.$250 million contract extension in Southeast Asia for
operations and brownfield engineering services
-- New global framework agreement with Shell for Wood to deploy
our expertise in decarbonisation, digitalisation and asset life
extension to enhance Shell's assets worldwide
-- Pre-FEED for blue ammonia and carbon capture for a confidential client in the Middle East
Significant contract wins in the year in Materials included:
-- Large engineering services contract with Euro Manganese for sustainable mineral processing
-- c.$50 million life sciences engineering contract in the USA with GSK
-- FEED and EPCm contract for Clean Planet Energy's plastics
recycling facilities across the USA
Full year guidance ahead of previous expectations
Revenue is expected to continue to grow in the second half,
albeit at a lower rate than the first half, which included the
benefits of higher pass-through activity and a weak 2022
comparator. Overall, revenue for FY23 is now expected to be around
$6 billion.
Our adjusted EBITDA margin is expected to be flat in the nearer
term at around 7%, partly reflecting investments being made in the
business and the level of low margin pass-through revenue activity.
As such, adjusted EBITDA for FY23 is expected to be ahead of our
previous expectations and within our medium-term target of mid to
high single digit growth.
Free cash flow is expected to be positive in the second half,
with no change to our expectations for net debt at the end of the
year, and no change to legacy liability cash outflows, which we
expect to mostly end in 2024.
On track for our medium-term targets: margin expansion and
stronger cash flow
When we announced our profitable growth strategy in November
2022, we set out our medium financial targets:
-- Adjusted EBITDA margins to be flat in the nearer term ,
partly as we reinvest in the business to secure growth. In the
medium term, we see opportunity for margin improvement
-- Adjusted EBITDA to grow at mid to high single digit CAGR over
the medium term , with momentum building over time as our strategy
delivers
-- Return to positive free cash flow from 2024 as strong
underlying cash flows offset reducing legacy liabilities
We expect to expand our margin in the medium term, supported
by:
-- Improved pricing expectations across our markets, reflecting
the selectivity of work undertaken and the significant demand for
our services
-- The continued shift to our services-led model
-- Addressing the small remaining number of underperforming businesses in our portfolio
-- Delivering on the IT and property savings previously announced:
o Annualised property savings of $15 million to $20 million by
the end of 2025, with benefits accruing from 2024. EBIT will
benefit by $10 million to $15 million per year
o IT cost savings of $10 million to $15 million from licence
rationalisation and other efficiency measures, with material
benefit accruing from 2024 onwards
BUSINESS REVIEWS
CONSULTING
Our Consulting business provides technical consulting, digital
consulting, energy asset and technology solutions. It also provides
a range of decarbonisation solutions and opens opportunities across
our other business units.
Financial review
HY23 HY22 Movement
$m Restated(1) $m % At constant currency %
----------------------- ------ ---------------- --------- ------------------------
Revenue 356 312 13.9% 17.3%
Adjusted EBITDA(2) 3 8 4 0 (5.6)% (3.3)%
Adjusted EBITDA margin 10.6% 12.8% (2.2)ppts (2.3)ppts
----------------------- ------ ---------------- --------- ------------------------
Adjusted EBIT 28 27 3.0%
Adjusted EBIT margin 7.8% 8.7% (0.9)ppts
----------------------- ------ ---------------- --------- ------------------------
Order book 584 554 5.4% 8.1%
----------------------- ------ ---------------- --------- ------------------------
Headcount 3,938 3,637 8.3%
----------------------- ------ ---------------- --------- ------------------------
1. Restated to include the Built Environment Consulting Saudi
Arabia business, see note on page 4.
2. Adjusted EBITDA includes $nil from JVs (HY22: $nil). Revenue
does not include any contribution from JVs.
Revenue of $356 million was 14% higher than last year, with
growth led by technical consulting across energy and continued
growth in digital consulting. We continue to see high growth across
hydrogen and carbon capture.
Adjusted EBITDA of $38 million was 6% lower than last year and
3% lower on a constant currency basis, reflecting the revenue
growth offset by a lower margin. This lower margin of 10.6% partly
reflects the exit of high-margin work in Russia in 2022, as well as
the opex investments we have made to secure future growth. In
addition to this, the performance of our energy assets development
business within Consulting is weighted to the second half in
2023.
The order book at 30 June 2023 was $584 million, up 5% on last
year and up 8% at constant currency.
Operational review
Following the sale of the Built Environment business, the
business unit completed an internal restructure in the period to
better align with the growth trends across technical consulting,
digital consulting and decarbonisation.
Business growth was led by energy, with solutions addressing
both energy security and energy transition, as well as growth
across digital consulting. Encouragingly, we continue to see
significant increases in demand for our consulting offering across
hydrogen, carbon capture and other decarbonisation activities. Key
awards in the period across Consulting included:
-- Digital consulting services for National Grid in the UK
-- Supporting Chevron Renewable Energy Group's Biorefinery
-- Feasibility, FEED and supply of Coking Technology for a SOCAR refinery expansion
Sustainable solutions revenue was c.$90 million, up 21% and
representing around 24% of Consulting revenue.
Outlook for 2023
We expect to see continued revenue growth in the second half and
a stronger margin, helped by the performance of the energy assets
development business.
PROJECTS
Our Projects business mainly provides complex engineering design
and project management across energy and materials markets
including oil and gas, chemicals, metals and minerals and life
sciences.
Financial review
HY23 HY22 Movement
$m $m % At constant currency %
----------------------- ------- ------ --------- ------------------------
Revenue(1) 1,245 990 25.8% 29.6%
Adjusted EBITDA(2) 9 2 8 1 12.6% 21.6%
Adjusted EBITDA margin 7.4% 8.2% (0.8)ppts (0.4)ppts
----------------------- ------- ------ --------- ------------------------
Adjusted EBIT 47 35 36.5%
Adjusted EBIT margin 3.8% 3.5% 0.3ppts
----------------------- ------- ------ --------- ------------------------
Order book 2,131 2,128 0.1% 2.4%
----------------------- ------- ------ --------- ------------------------
Headcount 14,138 13,097 7.9%
----------------------- ------- ------ --------- ------------------------
1. Pass-through revenue, which generates only a small or nil
margin, increased from c.$90 million in HY22 to c.$220 million in
HY23.
2. Adjusted EBITDA includes $2 million from JVs (HY22: $2
million). Revenue does not include any contribution from JVs.
Revenue of $1,245 million was 26% higher than last year, and 30%
higher on a constant currency basis, with strong growth across oil
and gas and chemicals offsetting the run-down of our LSTK
activities. Around half of the revenue growth came from the
increase in pass-through revenue from higher activity on certain
contracts. Revenue growth also reflects the recovery in the
business, especially compared to a weak first half in 2022.
Adjusted EBITDA of $92 million was 13% higher than last year,
and 22% higher on a constant currency basis. This reflected the
revenue increase combined with a lower margin, which decreased to
7.4%. The main driver for this lower margin was the increased
low-margin pass-through revenue, combined with higher operating
expenses as we invest for growth. The margin also benefited from
the gradual roll-off of our LSTK portfolio.
In addition to these headline results, a $20 million exceptional
charge was taken in relation to the impairment of a receivable from
one large EPC Power and Industrial contract, see details in the
Financial Review.
The order book at 30 June 2023 was $2,131 million, flat on last
year and up 2% at constant currency.
Operational review
The strategic move away from large lump sum work is now mostly
complete. The business continues to make excellent progress in
growing across our services-led business model including expanding
our presence across metals and minerals, and life sciences.
Business growth was balanced across both energy and materials
market. Key awards in the period included:
-- Large engineering services contract with Euro Manganese for sustainable mineral processing
-- Significant life sciences engineering contract in the USA with GSK worth c.$50 million
Sustainable solutions revenue was c.$350 million, up 16% and
representing c.30% of Projects revenue.
Outlook for 2023
We continue to expect strong growth for the year, though growth
in the second half is expected to be at a significantly lower
level, mainly reflecting the strong comparator in 2022. Revenue
growth will also be subject to the level of low margin pass-through
activity. The adjusted EBITDA margin is expected to be broadly
similar in the second half.
OPERATIONS
Our Operations business manages and optimises our customers'
assets including decarbonisation, maintenance, modifications,
brownfield engineering, and asset management through to
decommissioning.
Financial review
HY23 HY22 Movement
$m $m % At constant currency %
----------------------- ------- ------ --------- ------------------------
Revenue(1,2) 1,244 1,177 5.7% 9.2%
Adjusted EBITDA(3) 77 76 1.0% 2.8%
Adjusted EBITDA margin 6.2% 6.4% (0.2)ppts (0.3)ppts
----------------------- ------- ------ --------- ------------------------
Adjusted EBIT 49 48 3.4%
Adjusted EBIT margin 3.9% 4.0% (0.1)ppts
----------------------- ------- ------ --------- ------------------------
Order book 3,129 3,584 (12.7)% (10.2)%
----------------------- ------- ------ --------- ------------------------
Headcount 15,135 15,836 (4.4)%
----------------------- ------- ------ --------- ------------------------
1. Pass-through revenue, which generates only a small or nil
margin, increased from c.$250 million in HY22 to c.$280 million in
HY23.
2. Includes the results of the Gulf of Mexico labour operations
business that was sold in March 2022. In HY23, this business
contributed $21 million of revenue (HY22: $49 million) and $2
million of adjusted EBITDA (HY22: $2 million).
3. Adjusted EBITDA includes $6 million from JVs (HY22: $7
million). Revenue does not include any contribution from JVs.
Revenue of $1,244 million was 6% higher than last year, and 9%
higher at constant currency. This reflects continued increases in
activity levels in oil and gas across our geographies. Revenue
growth also includes an increased level of pass-through revenue and
the impact of the sale of the Gulf of Mexico labour operations
business in the period.
Adjusted EBITDA of $77 million was 1% higher than last year, and
3% higher at constant currency, reflecting the revenue growth and a
reduction in margin to 6.2%. This lower margin mainly reflects the
increased pass-through revenue.
The order book at 30 June 2023 was $3,129 million, 13% lower
than last year. Excluding the Gulf of Mexico offshore labour
operations business, the order book was down 7% at constant
currency, reflecting the phasing of large multi-year awards.
Operational review
The Operations business continued to benefit from higher
activity levels across geographies. Key awards in the period
included:
-- c.$250 million contract extension in SE Asia for operations
and brownfield engineering services
-- Renewal of brownfield engineering contract with BP in Iraq
-- Brownfield EPCm contract with Woodside in Australia
Sustainable solutions revenue was c.$140 million, up 29% and
representing around 11% of Operations revenue.
Outlook for 2023
We expect continued growth in the second half of the year
combined with an improved margin, driven by lower pass-through
revenue and good operational performance
INVESTMENT SERVICES
Our Investment Services business unit manages a number of legacy
activities and includes our Turbines joint ventures. The most
notable areas are activities in industrial power and heavy civil
engineering.
Financial review
HY23 HY22 Movement
At constant
currency
$m $m % %
----------------------- ------ ----- ---------- -------------
Revenue 141 91 54.2% 54.9%
Adjusted EBITDA(1) 26 27 (2.6)% (3.2)%
Adjusted EBITDA margin 18.5% 29.3% (10.8)ppts (11.1)ppts
----------------------- ------ ----- ---------- -------------
Adjusted EBIT 15 24 (37.2)%
Adjusted EBIT margin 10.7% 26.2% (15.5)ppts
----------------------- ------ ----- ---------- -------------
Order book 148 157 (6.1)% (6.1)%
----------------------- ------ ----- ---------- -------------
Headcount 845 500 69.0%
----------------------- ------ ----- ---------- -------------
1. Includes results from our two Turbines joint ventures.
Adjusted EBITDA from these JVs was $25 million in HY23 and $18
million in HY22. Revenue does not include any contribution from
JVs.
Revenue of $141 million was 54% higher than last year, and 55%
higher at constant currency. This growth primarily reflects strong
activity growth in our heavy civils business and the transfer of a
facilities business into Investment Services in 2023 from
Projects.
Adjusted EBITDA of $26 million almost entirely represents the
share of results from our Turbines joint ventures of $25 million,
up significantly on last year with a strong performance across both
Ethos and RWG. Excluding these Turbine JVs, adjusted EBITDA was
down significantly due to contract provisions taken.
The order book at 30 June 2023 was $148 million, down 6% on last
year.
Outlook for 2023
As is typical, performance in our Turbines joint ventures is
weighted to the second half of the year.
CENTRAL COSTS
HY23 HY22 Movement
At constant
currency
$m $m % %
---------------- ----- ---- --------- -------------
Adjusted EBITDA (31) (38) (19.8)% (15.4)%
---------------- ----- ---- --------- -------------
Adjusted EBIT (50) (51) (2.7)%
---------------- ----- ---- --------- -------------
Central costs, not allocated to business units, decreased to $31
million, partly reflecting the benefits of our cost reduction
programme in 2022.
Outlook for 2023
We expect central costs included within adjusted EBITDA for FY23
to be higher than the level in FY22 ($74 million) due in part to
inflationary pressures on salaries and costs. The phasing between
the first and second half includes the phasing of bonus and
share-based payments charges.
FINANCIAL REVIEW
Trading performance
Trading performance is presented on the basis used by management
to run the business with adjusted EBITDA including the contribution
from joint ventures. A reconciliation of operating profit to
adjusted EBITDA is included in note 2 to the financial statements.
A calculation of adjusted diluted EPS is shown on page 42.
HY23 HY22 FY22
(restated) (restated)
$m $m $m
-------------------------------------------------------------------------- ------- ----------- -----------
Continuing operations
Revenue (pre-exceptionals) 2,986.2 2,570.7 5,469.3
-------------------------------------------------------------------------- ------- ----------- -----------
Adjusted EBITDA(1) 201.7 185.8 388.2
-------------------------------------------------------------------------- ------- ----------- -----------
Adjusted EBITDA margin % 6.8% 7.2% 7.1%
Depreciation (PPE) (15.1) (14.2) (29.3)
Depreciation on right of use asset (IFRS 16) (44.8) (43.6) (90.5)
Impairment of joint venture investments and property, plant and equipment (0.4) (0.4) (2.4)
Amortisation - software and system development (52.0) (45.7) (89.0)
Adjusted EBIT 89.4 81.9 177.0
Amortisation - intangible assets from acquisitions (27.2) (35.0) (64.4)
Tax and interest charges on joint ventures (8.3) (5.2) (14.3)
Exceptional items (31.1) (11.0) (121.2)
Impairment of goodwill and intangible assets - - (542.3)
Operating profit/(loss) 22.8 30.7 (565.2)
Net finance expense (40.3) (53.7) (109.8)
Interest charge on lease liability (8.5) (7.5) (16.4)
Loss before taxation from continuing operations (26.0) (30.5) (691.4)
Tax (charge)/credit (30.4) 32.0 (10.9)
(Loss)/profit for the period from continuing operations (56.4) 1.5 (702.3)
Profit from discontinued operations, net of tax 29.4 87.4 350.6
(Loss)/profit for the period (27.0) 88.9 (351.7)
Non-controlling interest (2.3) (0.4) (4.6)
(Loss)/profit attributable to owners of parent (29.3) 88.5 (356.3)
Number of shares (basic) 684.9 678.8 680.4
-------------------------------------------------------------------------- ------- ----------- -----------
Basic (loss)/earnings per share (cents) (4.3) 13.0 (52.4)
-------------------------------------------------------------------------- ------- ----------- -----------
In the table above depreciation and amortisation include the
contribution from joint ventures. The comparative information has
been restated due to the reclassification of Built Environment
Consulting Saudi Arabia from discontinued into continuing
operations. This relates to the sale of a subsidiary, previously
classified as held for sale, which did not complete during the
first half of 2023 and will now be retained by the Group. The
revenue of this business for the period to 30 June 2022 was $9.8
million (December 2022: $27.1 million) and Adjusted EBITDA was $1.0
million (December 2022: $3.1 million).
Revenue for periods to June 2022 and December 2022 includes an
exceptional item of $(8.0) million related to contract losses in
respect of the closure of the Power and Industrials EPC business.
Revenue (pre-exceptional items) is an APM that is used throughout
this Report as the Group believes it provides a more useful measure
of performance. There are no exceptional revenue items during the
first half of 2023.
During the period, Adjusted EBITDA increased by $15.9 million to
$201.7 million primarily due to increased activity levels. Adjusted
EBITDA margin decreased from 7.2% to 6.8% due in part to increased
low margin pass-through revenue in Projects. Operating profit of
$22.8 million (June 2022: $30.7 million) has reduced mainly due to
higher exceptional items of $31.1 million (June 2022: $11.0
million). The $29.4 million profit from discontinued operations,
net of tax includes the final proceeds from the Built Environment
Consulting business following agreement of the completion balance
sheet between the Group and WSP. The increase in the tax charge to
$30.4 million (June 2022: $32.0 million credit) is primarily driven
by actuarial movements in the UK pension scheme and largely
explains the loss for the period of $27.0 million, compared with a
profit of $88.9 million in the period to 30 June 2022.
The review of our trading performance is contained on pages 5 to
7.
Reconciliation of Adjusted EBIT to Adjusted diluted EPS
HY23 HY22 FY22
(restated) (restated)
$m $m $m
--------------------------------------------------------- ------ ----------- -----------
Adjusted EBIT 89.4 81.9 177.0
Tax and interest charges on joint ventures (8.3) (5.2) (14.3)
Adjusted net finance expense (34.8) (50.9) (103.9)
Interest charge on lease liability (8.5) (7.5) (16.4)
--------------------------------------------------------- ------ ----------- -----------
Adjusted profit before tax 37.8 18.3 42.4
Adjusted tax charge (28.3) (34.0) (59.2)
Adjusted profit from discontinued operations, net of tax - 56.5 60.2
Adjusted profit for the period 9.5 40.8 43.4
Non-controlling interest (2.3) (0.4) (4.6)
--------------------------------------------------------- ------ ----------- -----------
Adjusted earnings 7.2 40.4 38.8
--------------------------------------------------------- ------ ----------- -----------
Number of shares (m) - diluted 684.9 706.1 680.4
Adjusted diluted EPS (cents)(2) 1.1 5.7 5.7
--------------------------------------------------------- ------ ----------- -----------
See notes on page 24
Reconciliation to GAAP measures
HY23 HY22 FY22
(restated) (restated)
$m $m $m
--------------------------------------------------------- ------ ----------- -----------
Loss before tax from continuing operations (26.0) (30.5) ( 691.4)
Impairment of goodwill and intangible assets - - 542.3
Exceptional items 31.1 11.0 121.2
Exceptional items - net finance expense 5.5 2.8 5.9
Amortisation - intangible assets from acquisitions 27.2 35.0 64.4
--------------------------------------------------------- ------ ----------- -----------
Adjusted profit before tax 37.8 18.3 42.4
--------------------------------------------------------- ------ ----------- -----------
Tax charge/(credit) 30.4 (32.0) 10.9
Tax in relation to acquisition amortisation 2.5 1.8 11.9
Tax on exceptional items (4.6) 64.2 36.4
--------------------------------------------------------- ------ ----------- -----------
Adjusted tax charge 28.3 34.0 59.2
--------------------------------------------------------- ------ ----------- -----------
Profit from discontinued operations, net of tax 29.4 87.4 350.6
Discontinued operations, gain on disposal (29.4) - (297.1)
Discontinued items, exceptional items - (30.9) 6.7
Adjusted profit from discontinued operations, net of tax - 56.5 60.2
--------------------------------------------------------- ------ ----------- -----------
The reconciliation from Adjusted EBIT of $89.4 million (June
2022: $81.9 million) to Adjusted earnings of $7.2 million (June
2022: $40.4 million) has been provided to show a clear
reconciliation to Adjusted diluted EPS, which is a key performance
measure of the Group. The reconciliation to GAAP measures
highlights that the adjusted measures remove exceptional items,
including impairment charges against goodwill and intangible
assets, the exceptional items on discontinued operations and the
associated tax charges on the basis that these are disclosed
separately due to their size and nature to enable a full
understanding of the Group's performance. Please refer to
commentary on exceptional items and associated tax charges on pages
15 and 16. In addition, amortisation on intangible assets from
acquisitions and the associated tax credit has been excluded to
allow a more useful comparison to Wood's peer group.
Amortisation, depreciation and other impairments for continuing
operations
Total amortisation for the first half of 2023 of $79.2 million
(June 2022: $80.7 million) includes $27.2 million of amortisation
of intangibles recognised on the acquisition of Amec Foster Wheeler
("AFW") (June 2022: $35.0 million). Amortisation in respect of
software and development costs was $52.0 million (June 2022: $45.7
million) and this largely relates to engineering software and ERP
system development. Included in the amortisation charge for the
year is $0.7 million (June 2022: $0.8 million) in respect of joint
ventures.
The total depreciation charge in the first half of 2023 amounted
to $59.9 million (June 2022: $57.8 million) and includes
depreciation on right of use assets of $44.8 million (June 2022:
$43.6 million). Included in the depreciation charge for the period
is $5.4 million (June 2022: $5.5 million) in respect of joint
ventures.
Net finance expense and debt
HY23 HY22 FY22
$m $m $m
-------------------------------------------------------------------------------------- ----- ----- -----
Interest on bank borrowings 27.5 22.9 47.2
Interest on US Private Placement debt 8.2 26.1 40.3
Discounting relating to asbestos, deferred consideration and other liabilities 6.9 3.6 6.8
Other interest, fees and charges 11.0 4.0 22.4
Total finance expense excluding joint ventures and interest charge on lease liability 53.6 56.6 116.7
Finance income relating to defined benefit pension schemes (9.7) (0.4) (2.4)
Other finance income (3.6) (2.5) (4.5)
Net finance expense 40.3 53.7 109.8
-------------------------------------------------------------------------------------- ----- ----- -----
Interest charge on lease liability 8.5 7.5 16.4
Net finance charges in respect of joint ventures 3.5 2.1 4.4
-------------------------------------------------------------------------------------- ----- ----- -----
Net finance expense including joint ventures, continuing Group 52.3 63.3 130.6
-------------------------------------------------------------------------------------- ----- ----- -----
Interest on bank borrowings of $27.5 million (June 2022: $22.9
million) primarily relates to interest charged on borrowings under
the $1.2 billion Revolving Credit Facility ('RCF') which matures in
October 2026 and the United Kingdom Export Facility ('UKEF') term
loan which is now expected to be repaid in September 2024. Despite
the reduction in average net debt during the period, there was a
$4.6 million increase in interest on bank borrowings. The increase
in the interest expense is driven by higher interest rates due to a
combination of higher margin and higher floating interest rates.
The higher margin, which is driven by the net debt excluding leases
to adjusted EBITDA (excluding leases) ratio, was in effect
throughout the first quarter of the year until the year-end
covenant certificate was submitted.
The interest charge on US Private Placement debt decreased by
$17.9 million to $8.2 million primarily due to the total repayment
of around $450 million to the USPP noteholders during the second
half of 2022, which was comprised of the early settlement of notes
following the disposal of the Built Environment Consulting business
and the $35 million tranche which fell due in July 2022. The Group
had $352.5 million (December 2022: $352.0 million) of unsecured
loan notes outstanding at 30 June 2023, maturing between 2024 and
2031 with around 75% due in 2025 or later.
Other interest, fees and charges amount to $11.0 million (June
2022: $4.0 million) and principally relates to the interest on bank
overdrafts and interest on the receivables factoring facilities
totalling $9.1 million and amortisation of bank facility costs of
$1.9 million (June 2022: $2.1 million). The increase in interest on
other facilities is driven by an increase in floating rates.
In total, the Group had undrawn facilities of $1,040.1 million
as at 30 June 2023, of which $899.1 million related to the
revolving credit facility.
The Group recognised interest costs in relation to lease
liabilities of $8.5 million (June 2022: $7.5 million) which relates
to the unwinding of discount on the lease liability.
Included within the discounting balance of $6.9 million (June
2022: $3.6 million) is the unwinding of discount on the asbestos
provision of $5.5 million (June 2022: $2.8 million).
Net debt excluding leases to adjusted EBITDA (excluding the
impact of IFRS 16) at 30 June was 2.0 times on a covenant basis
(December 2022: 1.3 times) against our covenants of 3.5 times. This
is calculated pre IFRS 16 as our covenants are calculated on a
frozen GAAP basis, see note 4 on page 23.
Interest cover (see note 5 on page 24) was 4.3 times on a
covenant basis (December 2022: 4.2 times) against our covenant of
3.5 times.
Exceptional items
HY23 HY22 FY22
$m $m $m
----------------------------------------------------------------------------- ----- ------ ------
Power and Industrial EPC losses (revenue) - 8.0 8.0
Power and Industrial EPC losses (cost of sales) 1.2 12.3 17.0
Impairment of Power and Industrial EPC receivables 20.0 - -
Impairment of goodwill and intangible assets - - 542.3
Apollo related costs 4.6 - -
Redundancy, restructuring and integration costs - 15.3 30.1
Investigation support costs and provisions - (2.8) (4.2)
Enterprise settlement - - 35.6
Asbestos yield curve and costs 5.3 (21.8) 21.5
Russia exit costs and charges - - 13.2
Exceptional items included in continuing operations, before interest and tax 31.1 11.0 663.5
Unwinding of discount on asbestos provision 5.5 2.8 5.9
Tax (credit)/charge in relation to exceptional items (5.2) (4.6) 5.2
Release of uncertain tax provision (7.4) - -
Recognition of deferred tax assets due to UK pension actuarial movements 17.2 (59.6) (41.6)
Exceptional items included in continuing operations, net of interest and tax 41.2 (50.4) 633.0
----------------------------------------------------------------------------- ----- ------ ------
Exceptional items are those significant items which are
separately disclosed by virtue of their size or incidence to enable
a full understanding of the Group's financial performance.
Power and Industrial EPC losses
Additional costs on a fixed price EPC contract of $1.2 million
were recorded as an exceptional charge through cost of sales on the
basis that the Group no longer operates within this sector. This
follows previous write downs made during 2022 following the
strategic decision to exit this market.
Impairment of Power and Industrial EPC receivables
The non-cash charge of $20.0 million relates to a write down of
receivable balances arising from a fixed price contract in the
Power and Industrial EPC business. The Group had expected to
recover these balances but these have since been disputed by the
client and will likely progress to a legal or commercial
negotiation. By virtue of its size and nature of these projects
being within a sector that the Group no longer operates, this was
recorded as an exceptional charge through impairment losses on
trade receivables in the income statement.
Apollo related costs
During the period to 30 June 2023, $4.6 million was incurred in
relation to legal and advisor costs incurred in relation to
Apollo's preliminary approach to potentially acquire the ordinary
share capital of the Group, which did not ultimately lead to an
offer.
Asbestos
All asbestos costs have been treated as exceptional on the basis
that movements in the provision are non-trading and can be large
and driven by market conditions which are out with the Group's
control. Excluding these charges from the trading results improves
the understandability of the underlying trading performance of the
Group.
The charge before interest and tax of $5.3 million (June 2022:
$21.8 million credit) in 2023 comprises of a $2.0 million yield
curve charge (June 2022: $23.8 million credit) and $3.3 million
(June 2022: $2.0 million) of costs in relation to managing the
claims. The 30-year US Treasury rate has decreased to 3.85% from
3.97% at the end of December 2022, and led to the income statement
charge.
$5.5 million of interest costs which relate to the unwinding of
discount on the asbestos provision over time are shown as
exceptional (June 2022: $2.8 million).
Tax
An exceptional tax charge of $4.6 million (June 2022: $64.2
million credit) has been recorded during the period. It consists of
a $5.2 million tax credit on exceptional items (June 2022: $4.6
million credit), a $7.4 million credit in relation to the release
of an uncertain tax provision created through exceptional items on
the disposal of the Well Support business in 2011, offset by an
exceptional charge of $17.2 million recognised due to the actuarial
loss in relation to the UK defined benefit pension scheme. As
deferred tax liabilities support the recognition of deferred tax
assets, the reduction of $17.2 million of deferred tax assets has
been charged through exceptional items based on its size.
Taxation
The effective tax rate on profit before tax, exceptional items
and amortisation and including Wood's share of joint venture profit
on a proportionally consolidated basis is set out below, together
with a reconciliation to the tax charge in the income
statement.
HY23 HY22 FY22
(restated) (restated)
$m $m $m
------------------------------------------------------------------------------------ ------ ----------- -----------
Loss from continuing operations before tax (26.0) (30.5) (691.4)
Profit from discontinued operations, net of tax and before exceptional items - 56.5 60.2
Tax charge in relation to joint ventures 4.8 3.1 9.9
Amortisation (note 11) 78.5 79.9 151.9
Exceptional items (continuing operations) 36.6 13.8 669.4
Tax charge in relation to discontinued operations - 6.5 7.9
Profit before tax, exceptional items and amortisation 93.9 129.3 207.9
Effective tax rate on continuing operations (excluding tax on exceptional items and
amortisation) 36.00% 33.70% 36.84%
Tax charge (excluding tax on exceptional items and amortisation) 33.8 43.6 76.6
Tax charge in relation to joint ventures (4.8) (3.1) (9.9)
Tax (credit)/charge in relation to exceptional items (continuing operations) (12.6) (4.6) 5.2
Derecognition/(recognition) of deferred tax assets due to UK pension actuarial
movements 17.2 (59.6) (41.6)
Tax credit in relation to amortisation (3.2) (1.8) (11.5)
Tax charge on discontinued operations - (6.5) (7.9)
Tax charge/(credit) from continuing operations per the income statement 30.4 (32.0) 10.9
------------------------------------------------------------------------------------ ------ ----------- -----------
The effective tax rate reflects the rate of tax applicable in
the jurisdictions in which the Group operates and is adjusted for
permanent differences between accounting and taxable profit and the
recognition of deferred tax assets. Key adjustments impacting on
the rate in 2023 are withholding taxes suffered on which full
double tax relief is not available, controlled foreign company
charges and the impact of the accounting expense for share based
payments being in excess of the tax deduction, less the release of
uncertain tax provisions reflecting the positive outcomes in
relation to specific risks.
We anticipate that the tax rate on profit before exceptional
items and amortisation will be 34% to 36% going forward reflecting
the tax rates of the countries the Group operates in along with the
withholding taxes in excess of double tax relief. There are factors
that would impact on this on an annual basis such as changes in
deferred tax asset recognition and uncertain tax provisions.
In addition to the effective tax rate, the total tax charge in
the income statement reflects the impact of exceptional items and
amortisation which by their nature tend to be expenses that are
more likely to be not deductible than those incurred in ongoing
trading profits. The income statement tax charge excludes tax in
relation to joint ventures. The increase in the tax charge for the
first half of 2023 when compared to June 2022 is largely a result
of the exceptional tax charge of $17.2 million (June 2022: $59.6
million credit) on deferred tax assets as a result of actuarial
movements on the UK pension scheme.
Earnings per share
The calculation of basic earnings per share is based on the
earnings attributable to owners of the parent divided by the
weighted average number of ordinary shares in issue during the year
excluding shares held by the Group's employee share trusts. For the
calculation of adjusted diluted earnings per share, the weighted
average number of ordinary shares in issue is adjusted to assume
conversion of dilutive potential ordinary shares, only when there
is a profit per share. Adjusted diluted earnings per share is
disclosed to show the results excluding the impact of exceptional
items and amortisation related to acquisitions, net of tax.
For the period ended 30 June 2023, the Group reported a basic
loss (December 2022: loss) per ordinary share, therefore the effect
of dilutive ordinary shares are excluded (December 2022: excluded)
in the calculation of diluted earnings per share. Where profits
have been made when disaggregating discontinued and continuing
operations, the calculation of diluted earnings per share was
performed on the same basis as the whole Group.
HY23 HY22 FY22
Dis- Continuing Discontinued Continuing Discontinued
Continuing continued operations operations operations operations
operations operations Total (restated) (restated) Total (restated) (restated) Total
$m $m $m $m $m $m $m $m $m
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
(Losses)/earnings
attributable to equity
shareholders (basic
pre-exceptional) (17.5) - (17.5) (49.3) 56.5 7.2 (73.9) 60.2 (13.7)
Exceptional items, net
of tax (41.2) 29.4 (11.8) 50.4 30.9 81.3 (633.0) 290.4 (342.6)
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
(Losses)/earnings
attributable
to equity shareholders
(basic) (58.7) 29.4 (29.3) 1.1 87.4 88.5 (706.9) 350.6 (356.3)
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
Number of shares (basic) 684.9 684.9 684.9 678.8 678.8 678.8 680.4 680.4 680.4
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
Number of shares
(diluted) 684.9 684.9 684.9 706.1 706.1 706.1 680.4 680.4 680.4
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
Basic (losses)/earnings
per share (cents) (8.6) 4.3 (4.3) 0.0 13.0 13.0 (103.9) 51.5 (52.4)
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
Diluted
(losses)/earnings per
share (cents) (8.6) 4.3 (4.3) 0.0 12.5 12.5 (103.9) 51.5 (52.4)
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
(Losses)/earnings
attributable
to equity shareholders
(diluted) (58.7) 29.4 (29.3) 1.1 87.4 88.5 (706.9) 350.6 (356.3)
Exceptional items, net
of tax 41.2 (29.4) 11.8 (50.4) (30.9) (81.3) 633.0 (290.4) 342.6
Amortisation of
intangibles on
acquisition,
net of tax 24.7 - 24.7 33.2 - 33.2 52.5 - 52.5
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
Earnings/(losses)
attributable
to equity shareholders
(adjusted diluted) 7.2 - 7.2 (16.1) 56.5 40.4 (21.4) 60.2 38.8
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
Earnings/(losses)
attributable
to equity shareholders
(adjusted basic) 7.2 - 7.2 (16.1) 56.5 40.4 (21.4) 60.2 38.8
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
Number of shares
(diluted) 684.9 684.9 684.9 706.1 706.1 706.1 680.4 680.4 680.4
Number of shares (basic) 684.9 684.9 684.9 678.8 678.8 678.8 680.4 680.4 680.4
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
Adjusted diluted (cents) 1.1 - 1.1 (2.3) 8.0 5.7 (3.1) 8.8 5.7
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
Adjusted basic (cents) 1.1 - 1.1 (2.4) 8.4 6.0 (3.1) 8.8 5.7
------------------------- ----------- ----------- ------- ----------- ------------- ------- ----------- ------------- --------
Basic loss per share for the year was (4.3) cents (June 2022:
earnings 13.0 cents). The reduction in earnings per share is driven
by the increase in exceptional items, the higher tax charge in the
period and the reduction in profit from discontinued operations,
net of tax to $29.4 million as a result of the disposal completing
during the second half of 2022.
Capital allocation
Our capital allocation policy remains unchanged and starts with
having a strong balance sheet. We look to manage our target
leverage over the medium term within a range of around 0.5 to 1.5
times net debt (excluding leases) to adjusted EBITDA (pre-IFRS 16).
Beyond this, we consider how best to create value for our
shareholders from dividends, share buybacks or attractive
acquisitions.
Given the free cash outflow in the period, the Board decided not
to recommend any dividends in relation to the period.
Cash flow and net debt
The cash flow for the year is set out below and includes both
continuing and discontinued operations:
Impact of
Excluding leases Leases Total Excluding leases Impact of Leases Total Total
HY23 HY23 HY23 HY22 HY22 HY22 FY22
$m $m $m $m $m $m $m
------------------------- ---------------- --------- -------- ---------------- ---------------- --------- ---------
Adjusted EBITDA 151.3 50.4 201.7 189.5 60.5 250.0 458.0
Less JV EBITDA (25.2) (3.6) (28.8) (19.5) (2.9) (22.4) (58.5)
JV Dividends 8.0 - 8.0 15.6 - 15.6 30.1
Adjusted decrease in
provisions (note 6) (11.9) - (11.9) (73.7) - (73.7) (43.7)
Other 10.8 - 10.8 14.6 1.2 15.8 28.1
------------------------- ---------------- --------- -------- ---------------- ---------------- --------- ---------
Cash flow generated from
operations pre working
capital 133.0 46.8 179.8 126.5 58.8 185.3 414.0
------------------------- ---------------- --------- -------- ---------------- ---------------- --------- ---------
Increase in receivables (164.4) - (164.4) (31.7) - (31.7) (97.5)
Adjusted
increase/(decrease) in
payables (note 7) 68.7 - 68.7 (169.6) - (169.6) (267.6)
Decrease/(increase) in
inventory 1.9 - 1.9 (6.9) - (6.9) (1.6)
------------------------- ---------------- --------- -------- ---------------- ---------------- --------- ---------
Adjusted working capital
movements (93.8) - (93.8) (208.2) - (208.2) (366.7)
------------------------- ---------------- --------- -------- ---------------- ---------------- --------- ---------
Adjusted cash generated
/(outflow) from
operations (note 6) 39.2 46.8 86.0 (81.7) 58.8 (22.9) 47.3
Purchase of property,
plant and equipment (9.2) - (9.2) (9.5) - (9.5) (27.6)
Proceeds from sale of
property, plant and
equipment 1.4 - 1.4 1.4 - 1.4 7.1
Purchase of intangible
assets (68.0) - (68.0) (49.1) - (49.1) (109.2)
Interest received 3.6 - 3.6 2.5 - 2.5 4.5
Interest paid (44.8) - (44.8) (53.3) - (53.3) (98.1)
Adjusted tax paid (43.0) - (43.0) (29.2) - (29.2) (81.9)
Non-cash movement in
leases - (27.7) (27.7) - (40.7) (40.7) (14.7)
Other 0.2 - 0.2 (30.2) - (30.2) (20.4)
Free cash flow (excluding
exceptionals) (120.6) 19.1 (101.5) (249.1) 18.1 (231.0) (293.0)
Cash exceptionals (98.7) 5.6 (93.1) (102.4) 8.0 (94.4) (304.2)
Free cash flow (219.3) 24.7 (194.6) (351.5) 26.1 (325.4) (597.2)
FX movements on cash and
debt facilities (21.9) (7.5) (29.4) (11.8) 24.1 12.3 (25.5)
Divestments (19.8) - (19.8) - - - 1,729.4
(Increase)/decrease in
net debt (261.0) 17.2 (243.8) (363.3) 50.2 (313.1) 1,106.7
------------------------- ---------------- --------- -------- ---------------- ---------------- --------- ---------
Opening net debt (393.2) (342.9) (736.1) (1,393.0) (449.8) (1,842.8) (1,842.8)
Closing net debt (654.2) (325.7) (979.9) (1,756.3) (399.6) (2,155.9) (736.1)
Closing net debt at 30 June 2023 including leases was $979.9
million (December 2022: $736.1 million). Included within closing
net debt is the IFRS 16 lease liability which is the net present
value of the lease payments that are not paid at the commencement
date of the lease and subsequently increased by the interest cost
and reduced by the lease payment made. The lease liability as at 30
June 2023 was $325.7 million (December 2022: $342.9 million). All
covenants on the debt facilities are measured on a pre-IFRS 16
basis.
Closing net debt excluding leases as at 30 June 2023 was $654.2
million (December 2022: $393.2 million). The monthly average net
debt excluding leases in H1 2023 was $820.9 million (December 2022:
$1,489.1 million). The cash balance and undrawn portion of the
Group's committed banking facilities can fluctuate throughout the
year. Around the covenant remeasurement dates of 30 June and 31
December the Group's net debt excluding leases is typically lower
than the monthly averages due mainly to a strong focus on
collection of receipts from customers.
Cash generated from operations pre-working capital reduced by
$5.5 million to $179.8 million from $185.3 million in the period to
June 2022. The movement in provisions in 2023 includes utilisations
of the provision of around $15 million partially offset by the net
non-cash charge to EBITDA compared to a credit in 2022. The net
non-cash charge of around $3 million in 2023 is driven by the Group
recognising some additional project related provisions. The other
movement of $10.8 million (June 2022: $15.8 million) is principally
comprised of non-cash movements through EBITDA including
share-based charges of $9.8 million (June 2022: $8.5 million), FX
movements of $2.8 million (June 2022: $6.3 million), partially
offset by a gain on disposal of the Gulf of Mexico business of $1.9
million.
There was a working capital outflow of $93.8 million (June 2022:
$208.2 million). The outflow in receivables of $164.4 million was
driven by an increase to revenue in the first half of 2023 and
higher closing DSO. The adverse movement in receivables was
partially offset by an inflow in the year due to payables of $68.7
million. The payables inflow is driven by increasing activity
levels during 2023 following the normalisation of payables in
December 2022.
The Group has receivables financing facilities totalling $200.0
million. The amount utilised at 30 June 2023 was $200.0 million
(June 2022: $198.4 million, December 2022: $200.0 million). The
facilities are non-recourse to the Group and are not included in
our net debt.
Cash exceptionals of $93.1 million are broadly in line with the
first half of 2022 and mainly relates to the settlement of known
legal claims and asbestos payments, including the historic SFO
investigation payments of around $38 million which were provided
for in FY20 and asbestos payments of around $28 million. The
remaining cash exceptional mainly relates to the legacy Aegis
contract of $15 million and other legacy contracts of around $10
million.
The free cash outflow of $194.6 million (June 2022: $325.4
million) has reduced by $130.8 million, largely due to the $108.9
million improvement in adjusted cash generated from operations. The
remaining movement of $21.9 million in free cash flow is mainly
explained by:
-- Other net debt movements reduced by $30.4 million to a $0.2
million inflow mainly due to movements on prepaid debt fees and
accrued interest charges totalling $0.2 million (June 2022: $30.0
million).
-- An increase of $18.9 million related to the purchase of
intangible assets, including software and investment in ERP
improvements throughout the Group.
-- An increase in tax payments during 2023 of $13.8 million
which was mainly due to the settlement of various withholding tax
liabilities and uncertain tax provisions ("UTPs"), which had been
provided for in previous periods.
-- A reduction in cash interest paid of $8.5 million due to
lower average net debt during the period.
-- A reduction in the non-cash movement in leases totalling
$13.0 million due to continued rationalisation of the lease
portfolio.
Net cash from divestments of $19.8 million includes final
proceeds from the disposal of the Built Environment Consulting ($23
million) and proceeds from the sale of the Gulf of Mexico business
($17 million). These are offset by taxes paid on the Built
Environment Consulting disposal.
Cash conversion, calculated as cash generated from operations as
a percentage of adjusted EBITDA (less JV EBITDA) increased to 49.7%
(June 2022: -10.1%, December 2022: 11.8%) primarily due improved
working capital performance.
Summary balance sheet
HY23 HY22 FY22
$m $m $m
---------------------------------------------------------- --------- --------- ---------
Goodwill and intangible assets 4,356.7 4,905.7 4,309.1
Right of use assets 258.4 282.0 276.0
Other non-current assets 890.3 1,047.1 918.0
Trade and other receivables 1,699.6 1,490.2 1,545.0
Net held for sale assets and liabilities (excluding cash) - 1,099.3 0.4
Trade and other payables (1,797.6) (1,630.2) (1,687.6)
Net debt excluding leases (654.2) (1,756.3) (393.2)
Lease liabilities (325.7) (339.5) (342.9)
Asbestos related litigation (302.2) (302.7) (311.4)
Provisions (129.2) (225.0) (148.3)
Other net liabilities (295.1) (383.0) (435.6)
---------------------------------------------------------- --------- --------- ---------
Net assets 3,701.0 4,187.6 3,729.5
---------------------------------------------------------- --------- --------- ---------
Net current (liabilities) / assets (111.7) 801.2 (235.0)
---------------------------------------------------------- --------- --------- ---------
At 30 June 2023, the Group had net current liabilities of $111.7
million (June 2022: $801.2 million assets). The net current asset
position in June 2022 was impacted by the classification of the
total assets and liabilities of the Built Environment Consulting
business to held for sale. Following the sale, the proceeds
received have been used to repay long term debt.
Goodwill and intangible assets include $2,514.5 million
(December 2022: $2,523.5 million) of goodwill and intangibles
relating to the acquisition of Amec Foster Wheeler. The reduction
of $9.0 million is principally related to the amortisation charge
of $27.2 million offset by FX movements of $18.2 million.
Right of use assets and lease liabilities amount to $258.4
million (December 2022: $276.0 million) and $325.7 million
(December 2022: $342.9 million) respectively.
Trade and other receivables increased to $1,699.6 million
partially reflecting the increased revenues in H1'23 compared with
H1'22 and higher DSO. Trade and other payables increased to
$1,797.6 million reflecting the increasing activity levels and
follows the normalisation of the balance as at December 2022.
Largely as a result of the acquisition of AFW, the Group is
subject to claims by individuals who allege that they have suffered
personal injury from exposure to asbestos primarily in connection
with equipment allegedly manufactured by certain subsidiaries
during the 1970s or earlier. The overwhelming majority of claims
that have been made and are expected to be made are in the USA. The
asbestos related litigation provision amounts to $302.2 million
(December 2022: $311.4 million).
The net asbestos liability at 30 June 2023 amounted to $317.3m
(December 2022: $335.4m) and comprised $302.2m in provisions
(December 2022: $311.4m) and $49.6m in trade and other payables
(December 2022: $59.5m) less $25.5m in long term receivables
(December 2022: $24.4m) and $9.0m in trade and other receivables
(December 2022: $11.1m).
The Group expects to have net cash outflows of around $38
million as a result of asbestos liability indemnity and defence
payments in excess of insurance proceeds during 2023. The Group has
worked with its independent asbestos valuation experts to estimate
the amount of asbestos related indemnity and defence costs at each
year end based on a forecast to 2050.
Other provisions as at June 2023 were $129.2 million (December
2022: $148.3 million) and comprise of project related provisions of
$57.3 million (December 2022: $63.3 million), insurance provisions
of $43.0 million (December 2022: $46.2 million), property
provisions of $26.7 million (December 2022: $26.0 million) and
litigation related provisions of $2.2 million (December 2022: $12.8
million).
Full details of provisions are provided in note 12 to the Group
financial statements.
Pensions
The Group operates a number of defined benefit pension schemes
in the UK and US, alongside a number of defined contribution plans.
At 30 June 2023, the UK defined benefit pension plan had a surplus
of $393.1 million (December 2022: $432.4 million) and other schemes
had deficits totalling $70.4 million (December 2022: $73.2
million).
The Group's largest pension scheme, the UK Pension Plan, has
total scheme assets of $2,697.5 million (December 2022: $2,690.1
million) and pension scheme obligations of $2,304.4 million
(December 2022: $2,257.7 million) and is therefore 117% (December
2022: 119%) funded on an IAS 19 basis. There was a reduction in
scheme liabilities arising from a higher discount rate used in the
actuarial assumptions, however this was offset by a larger foreign
exchange movement.
In assessing the potential liabilities, judgement is required to
determine the assumptions for inflation, discount rate and member
longevity. The assumptions at 30 June 2023 showed an increase in
the discount rate which results in lower scheme liabilities.
However, this was outweighed by poor investment performance on
scheme assets resulting in an overall decrease to the surplus
compared to December 2022. Full details of pension assets and
liabilities are provided in note 9 to the Group financial
statements.
The UK defined benefit pension plan is estimated to have a
surplus on a Technical Provisions basis at 31 March 2023, subject
to finalisation of the scheme accounts during 2023 and consistent
with the assumptions used at the last triennial actuarial
valuation. The Group is currently working closely with the Trustee
to agree a preferred direction regarding the future of the plan.
Options being assessed include moving to a buy-in insured basis and
eventual buy-out with a third party as soon as is reasonably
practical, or to continue to run the WPP on for a limited number of
years to potentially generate further surplus. Any surplus could
benefit both the Group and pension members, ensuring that
appropriate safeguards for both the funding position and members'
interests are taken into account at all times.
Contingent liabilities
Details of the Group's contingent liabilities are set out in
note 18 to the financial statements.
Divestments
The final proceeds from the disposal of the Built Environmental
Consulting business were agreed during the first half of 2023 upon
agreement of the completion balance sheet between the Group and
WSP. This has resulted in an additional gain of $34.6 million,
comprising largely of $23.1 million of cash proceeds being and the
release of completion accruals, being recognised in discontinued
operations.
Notes
1. A reconciliation of operating profit/(loss) to adjusted
EBITDA is presented in table below and is a key unit of measurement
used by the Group in the management of its business.
HY23 HY22 FY22
(restated) (restated)
$m $m $m
----------------------------------------------- ----- ---------- ----------
Operating profit/(loss) per income statement 22.8 30.7 (565.2)
Share of joint venture finance expense and tax 8.3 5.2 14.3
Exceptional items (note 4) 31.1 11.0 663.5
Amortisation (including joint ventures) 79.2 80.7 153.4
Depreciation (including joint ventures) 15.1 14.2 29.3
Depreciation of right of use assets 44.8 43.6 90.5
Impairment of PP&E and right of use assets 0.4 0.4 2.4
----------------------------------------------- ----- ---------- ----------
Adjusted EBITDA (continuing operations) 201.7 185.8 388.2
----------------------------------------------- ----- ---------- ----------
Discontinued operation
Operating profit (discontinued) - 42.1 63.1
Exceptional items (note 6) - 22.1 6.7
Adjusted EBITDA (discontinued operation) - 64.2 69.8
----------------------------------------------- ----- ---------- ----------
Total Group Adjusted EBITDA 201.7 250.0 458.0
----------------------------------------------- ----- ---------- ----------
2. Adjusted diluted earnings per share ("AEPS") is calculated by
dividing earnings attributable to owners before exceptional items
and amortisation relating to acquisitions, net of tax, by the
weighted average number of ordinary shares in issue during the
period, excluding shares held by the Group's employee share
ownership trusts and is adjusted to assume conversion of all
potentially dilutive ordinary shares. In the period to 30 June
2023, AEPS was not adjusted to assume conversion of all potentially
dilutive ordinary shares because the unadjusted result is a
loss.
3. Number of people includes both employees and contractors at 30 June 2023.
4. Net Debt to Adjusted EBITDA cover on a covenant basis is presented in the table below:
HY23 HY22 FY22
$m $m $m
Net debt excluding lease liabilities (reported basis) (note 14) 654.2 1,756.3 393.2
Covenant adjustments 15.7 11.9 16.2
---------------------------------------------------------------- ----- ------- -----
Net debt (covenant basis) 669.9 1,768.2 409.4
---------------------------------------------------------------- ----- ------- -----
Adjusted EBITDA (covenant basis) 329.4 445.8 315.1
---------------------------------------------------------------- ----- ------- -----
Net debt to Adjusted EBITDA (covenant basis) - times 2.03 3.97 1.30
---------------------------------------------------------------- ----- ------- -----
Adjusted EBITDA (covenant basis) is on a rolling 12 month period
and excludes Adjusted EBITDA from the discontinued operation and
the impact of applying IFRS 16. The funding agreements require that
covenants are calculated by applying IAS 17 rather than IFRS 16.
The covenant adjustment to net debt relates to finance leases which
would be on the balance sheet if applying IAS 17. Note: the
covenant basis shown above refers to the measure as calculated for
our RCF. The measure used for our USPP and UKEF is not materially
different from the covenant measure shown above.
5. Interest cover on a covenant basis is presented in the table below:
HY23 HY22 FY22
$m $m $m
---------------------------------------- ------ ----- ------
Net finance expense 96.4 107.4 109.8
Covenant adjustments (5.2) (6.5) (4.4)
Non-recurring net finance expense (21.7) - (37.5)
Net finance expense (covenant basis) 69.5 100.9 67.9
Adjusted EBITA (covenant basis) 299.9 412.2 285.9
---------------------------------------- ------ ----- ------
Interest cover (covenant basis) - times 4.3 4.1 4.2
---------------------------------------- ------ ----- ------
The difference between Adjusted EBITDA (covenant basis) and
Adjusted EBITA (covenant basis) is $29.5 million (June 2022: $33.6
million) and is mainly explained by 12-month rolling pre-IFRS 16
depreciation charges of $30.2 million (June 2022: $32.0
million).
6. Reconciliation to GAAP measures between consolidated cash
flow statement and cash flow and net debt reconciliation
HY23 HY22 FY22
$m $m $m
---------------------------------------------- ------- ------- -------
Decrease in provisions (11.9) (73.7) (123.1)
Prior year cash exceptionals - - 79.4
---------------------------------------------- ------- ------- -------
Adjusted movement in provisions (11.9) (73.7) (43.7)
---------------------------------------------- ------- ------- -------
Decrease in payables (19.3) (235.4) (398.9)
Prior year cash exceptionals 88.0 65.8 131.3
---------------------------------------------- ------- ------- -------
Adjusted increase/(decrease) in payables 68.7 (169.6) (267.6)
---------------------------------------------- ------- ------- -------
Tax paid (105.1) (29.2) (103.9)
Tax paid on disposal of business 62.1 - 22.0
---------------------------------------------- ------- ------- -------
Adjusted tax paid (43.0) (29.2) (81.9)
---------------------------------------------- ------- ------- -------
Disposal of businesses (net of cash disposed) 42.3 - 1,751.4
Tax paid on disposal of business (62.1) - (22.0)
---------------------------------------------- ------- ------- -------
Divestments (19.8) - 1,729.4
---------------------------------------------- ------- ------- -------
Adjusted cash generated/(outflow) from operations 86.0 (22.9) 47.3
Cash exceptionals (93.1) (94.4) (304.2)
---------------------------------------------------- ------- ------- -------
Cash outflow from operations (7.1) (117.3) (256.9)
Purchase of property, plant and equipment (9.2) (9.5) (27.6)
Proceeds from sale of property, plant and equipment 1.4 1.4 7.1
Purchase of intangible assets (68.0) (49.1) (109.2)
Interest received 3.6 2.5 4.5
Interest paid (44.8) (53.3) (98.1)
Adjusted tax paid (43.0) (29.2) (81.9)
Non-cash movement in leases (27.7) (40.7) (14.7)
Other 0.2 (30.2) (20.4)
Free cash flow (194.6) (325.4) (597.2)
---------------------------------------------------- ------- ------- -------
Decreases in provisions and payables, cash generated from
operations and tax paid have been adjusted to show exceptional
items separately, in order to present significant items separately
from the rest of the cash flow either by virtue of size or nature
and reflects how the Group evaluates cash performance of the
business.
Prior year cash exceptionals is defined as cash payments made in
the current period in respect of amounts provided for in prior
periods.
John Wood Group PLC
Interim Financial Statements 2023
Group income statement
for the six month period to 30 June 2023
Unaudited Interim Unaudited Interim Audited Full Year
June 2023 June 2022 (restated*) December 2022 (restated*)
Exceptional Exceptional Exceptional
items items items
Pre- Pre- Pre-
exceptional (note exceptional (note exceptional (note
items 4) Total items 4) Total items 4) Total
Note $m $m $m $m $m $m $m $m $m
---------------- ----- ----------- ------------ --------- ----------- ----------- --------- ----------- ----------- ---------
Continuing
operations
Revenue 2,3 2,986.2 - 2,986.2 2,570.7 (8.0) 2,562.7 5,469.3 (8.0) 5,461.3
Cost of sales (2,639.5) (1.2) (2,640.7) (2,266.8) (12.3) (2,279.1) (4,800.6) (17.0) (4,817.6)
---------------- ----- ----------- ------------ --------- ----------- ----------- --------- ----------- ----------- ---------
Gross profit 346.7 (1.2) 345.5 303.9 (20.3) 283.6 668.7 (25.0) 643.7
Administrative
expenses (300.2) (9.9) (310.1) (273.2) 9.3 (263.9) (600.8) (96.2) (697.0)
Impairment
loss on trade
receivables
and contract
assets 4 (7.0) (20.0) (27.0) - - - - - -
Impairment
of goodwill
and intangible
assets - - - - - - - (542.3) (542.3)
Share of
post-tax
profit from
joint ventures 14.4 - 14.4 11.0 - 11.0 30.4 - 30.4
---------------- ----- -----------
Operating
profit/(loss) 2 53.9 (31.1) 22.8 41.7 (11.0) 30.7 98.3 (663.5) (565.2)
Finance income 13.3 - 13.3 2.9 - 2.9 6.9 - 6.9
Finance expense (56.6) (5.5) (62.1) (61.3) (2.8) (64.1) (127.2) (5.9) (133.1)
---------------- ----- ----------- ------------ --------- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss)
before tax
from continuing
operations 10.6 (36.6) (26.0) (16.7) (13.8) (30.5) (22.0) (669.4) (691.4)
Taxation 8 (25.8) (4.6) (30.4) (32.2) 64.2 32.0 (47.3) 36.4 (10.9)
---------------- ----- ----------- ------------ --------- ----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit
from continuing
operations (15.2) (41.2) (56.4) (48.9) 50.4 1.5 (69.3) (633.0) (702.3)
Discontinued
operation
Profit from
discontinued
operations,
net of tax 6 - 29.4 29.4 56.5 30.9 87.4 60.2 290.4 350.6
---------------- ----- ----------- ------------ --------- ----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit
for the period (15.2) (11.8) (27.0) 7.6 81.3 88.9 (9.1) (342.6) (351.7)
---------------- ----- ----------- ------------ --------- ----------- ----------- --------- ----------- ----------- ---------
(Loss)/profit
attributable
to:
Owners of
the parent (17.5) (11.8) (29.3) 7.2 81.3 88.5 (13.7) (342.6) (356.3)
Non-controlling
interests 2.3 - 2.3 0.4 - 0.4 4.6 - 4.6
---------------- ----- ----------- ------------ --------- ----------- ----------- --------- ----------- ----------- ---------
(15.2) (11.8) (27.0) 7.6 81.3 88.9 (9.1) (342.6) (351.7)
---------------- ----- ----------- ------------ --------- ----------- ----------- --------- ----------- ----------- ---------
Earnings
per share
(expressed
in cents per
share)
Basic 7 (4.3) 13.0 (52.4)
Diluted 7 (4.3) 12.5 (52.4)
Earnings
per share
- continuing
operations
(expressed
in cents per
share)
Basic 7 (8.6) 0.0 (103.9)
Diluted 7 (8.6) 0.0 (103.9)
---------------- ----- ----------- ------------ --------- ----------- ----------- --------- ----------- ----------- ---------
The notes on pages 33 to 54 are an integral part of the interim
financial statements.
* The comparative information has been restated in line with the
requirements of IFRS 5, paragraph 36, due to the reclassification
of Built Environment Consulting Saudi Arabia from discontinued into
continuing operations following a decision not to dispose of that
business (note 6).
Group statement of comprehensive income
for the six month period to 30 June 2023
Unaudited Unaudited Audited
Interim Interim Full Year
June June December
2023 2022 2022
$m $m $m
-------------------------------------------------- --------- --------- ----------
(Loss)/profit for the period (27.0) 88.9 (351.7)
Other comprehensive (expense)/income from
continuing operations
Items that will not be reclassified to
profit or loss
Re-measurement (losses)/gains on retirement
benefit schemes (65.5) 231.9 168.0
Movement in deferred tax relating to retirement
benefit schemes 17.2 (57.9) (41.6)
-------------------------------------------------- --------- --------- ----------
Total items that will not be reclassified
to profit or loss (48.3) 174.0 126.4
-------------------------------------------------- --------- --------- ----------
Items that may be reclassified subsequently
to profit or loss
Cash flow hedges (0.1) 8.4 5.1
Tax on derivative financial instruments - (2.0) (1.7)
Exchange movements on retranslation of
foreign operations 36.7 (158.8) (165.1)
Total items that may be reclassified subsequently
to profit or loss 36.6 (152.4) (161.7)
-------------------------------------------------- ---------
Other comprehensive (expense)/income from
continuing operations for the period, net
of tax (11.7) 21.6 (35.3)
-------------------------------------------------- --------- --------- ----------
Other comprehensive (expense)/income from
discontinued operations
Re-measurement (losses)/gains on retirement
benefit schemes - (1.1) 2.9
Movement in deferred tax relating to retirement
benefit schemes - 5.3 -
Exchange movements on retranslation of
foreign operations - (32.2) (57.9)
Other comprehensive expense from discontinued
operations for the period, net of tax - (28.0) (55.0)
-------------------------------------------------- --------- --------- ----------
Total comprehensive (expense)/income for
the period (38.7) 82.5 (442.0)
-------------------------------------------------- ---------
Total comprehensive (expense)/income for
the period is attributable to:
Owners of the parent (41.0) 82.1 (446.6)
Non-controlling interests 2.3 0.4 4.6
-------------------------------------------------- --------- --------- ----------
(38.7) 82.5 (442.0)
-------------------------------------------------- --------- --------- ----------
Exchange movements on the retranslation of foreign currency net
assets would only be subsequently reclassified through profit or
loss in the event of the disposal of a business.
The notes on pages 33 to 54 are an integral part of the interim
financial statements.
Group balance sheet
as at 30 June 2023
Unaudited Unaudited Audited
Interim Interim Full Year
June June December
2023 2022 2022
Note $m $m $m
------------------------------------- ---- --------- --------- ----------
Assets
Non-current assets
Goodwill and other intangible assets 11 4,356.7 4,905.7 4,309.1
Property plant and equipment 79.6 82.6 82.4
Right of use assets 258.4 282.0 276.0
Investment in joint ventures 166.9 154.2 156.5
Other investments 52.8 62.6 56.0
Long term receivables 155.8 111.8 129.5
Retirement benefit scheme surplus 9 393.1 474.8 432.4
Deferred tax assets 42.1 161.1 61.2
------------------------------------- ---- --------- --------- ----------
5,505.4 6,234.8 5,503.1
------------------------------------- ---- --------- ---------
Current assets
Inventories 15.7 21.0 11.1
Trade and other receivables 1,699.6 1,490.2 1,545.0
Financial assets 1.2 5.8 10.8
Income tax receivable 56.9 66.3 40.7
Assets held for sale - 1,420.8 21.0
Cash and cash equivalents 14 450.2 404.5 536.7
------------------------------------- ----
2,223.6 3,408.6 2,165.3
------------------------------------- ---- --------- --------- ----------
Total assets 7,729.0 9,643.4 7,668.4
Liabilities
Current liabilities
Borrowings 14 261.2 321.5 345.9
Trade and other payables 1,797.6 1,630.2 1,687.6
Income tax liabilities 149.5 224.3 218.1
Lease liabilities 14 90.8 88.2 83.2
Provisions 12 36.2 30.2 44.9
Liabilities held for sale - 313.0 20.6
------------------------------------- ---- ---------
2,335.3 2,607.4 2,400.3
------------------------------------- ---- --------- --------- ----------
Net current (liabilities)/assets (111.7) 801.2 (235.0)
------------------------------------- ---- --------- --------- ----------
Non-current liabilities
Borrowings 14 843.2 1,847.8 584.0
Deferred tax liabilities 75.5 57.0 100.1
Retirement benefit scheme deficit 9 70.4 76.8 73.2
Lease liabilities 14 234.9 251.3 259.7
Other non-current liabilities 10 73.5 118.0 106.8
Asbestos related litigation 12 302.2 302.7 311.4
Provisions 12 93.0 194.8 103.4
------------------------------------- ---- --------- --------- ----------
1,692.7 2,848.4 1,538.6
------------------------------------- ---- --------- --------- ----------
Total liabilities 4,028.0 5,455.8 3,938.9
------------------------------------- ---- --------- --------- ----------
Net assets 3,701.0 4,187.6 3,729.5
------------------------------------- ---- --------- --------- ----------
Equity attributable to owners of
the parent
Share capital 41.3 41.3 41.3
Share premium 63.9 63.9 63.9
Retained earnings 1,407.4 1,701.8 1,224.4
Merger reserve 2,290.8 2,540.8 2,540.8
Other reserves (105.8) (163.6) (142.4)
------------------------------------- ---- ---------
3,697.6 4,184.2 3,728.0
Non-controlling interests 3.4 3.4 1.5
------------------------------------- ---- --------- --------- ----------
Total equity 3,701.0 4,187.6 3,729.5
------------------------------------- ---- --------- --------- ----------
The notes on pages 33 to 54 are an integral part of the interim
financial statements.
Group statement of changes in equity
for the six month period to 30 June 2023
Equity
attributable
to owners
Share Share Retained Merger Other of the Non-controlling Total
Capital Premium Earnings Reserve reserves parent interests equity
Note $m $m $m $m $m $m $m $m
At 1 January 2022 41.3 63.9 1,415.0 2,540.8 21.0 4,082.0 3.3 4,085.3
Profit for the
period - - 88.5 - - 88.5 0.4 88.9
Other
comprehensive
income/(expense):
Re-measurement
gains
on retirement
benefit
schemes - - 231.9 - - 231.9 - 231.9
Movement in
deferred
tax relating to
retirement
benefit schemes - - (57.9) - - (57.9) (57.9)
Re-measurement
losses
on retirement
benefit
schemes
(discontinued) - - (1.1) - - (1.1) - (1.1)
Movement in
deferred
tax relating to
retirement
benefit schemes
(discontinued) - - 5.3 - - 5.3 - 5.3
Cash flow hedges - - - - 8.4 8.4 - 8.4
Tax on derivative
financial
instruments - - - - (2.0) (2.0) - (2.0)
Net exchange
movements
on retranslation
of
foreign currency
operations - - - - (158.8) (158.8) - (158.8)
Net exchange
movements
on retranslation
of
foreign currency
operations
(discontinued) - - - - (32.2) (32.2) - (32.2)
------------------ ---- -------- -------- --------- -------- --------- ------------ ---------------- --------
Total
comprehensive
income/(expense) - - 266.7 - (184.6) 82.1 0.4 82.5
------------------ ---- -------- -------- --------- -------- --------- ------------ ---------------- --------
Transactions with
owners:
Dividends paid 5 - - - - - - (0.8) (0.8)
Share based
charges 15 - - 8.5 - - 8.5 - 8.5
Purchase of
company
shares by
Employee
Share Trust for
the
Share Incentive
Plan
(SIP) 15 - - 0.6 - - 0.6 - 0.6
Exchange movements
in respect of
shares
held by employee
share
trusts - - 11.0 - - 11.0 - 11.0
Transactions with
non-controlling
interests - - - - - - 0.5 0.5
------------------ ---- --------
At 30 June 2022 41.3 63.9 1,701.8 2,540.8 (163.6) 4,184.2 3.4 4,187.6
------------------ ---- -------- -------- --------- -------- --------- ------------ ---------------- --------
At 1 January 2023 41.3 63.9 1,224.4 2,540.8 (142.4) 3,728.0 1.5 3,729.5
(Loss)/profit for
the
period - - (29.3) - - (29.3) 2.3 (27.0)
Other
comprehensive
income/(expense):
Re-measurement
losses
on retirement
benefit
schemes - - (65.5) - - (65.5) - (65.5)
Movement in
deferred
tax relating to
retirement
benefit schemes - - 17.2 - - 17.2 - 17.2
Cash flow hedges - - - - (0.1) (0.1) - (0.1)
Tax on derivative
financial
instruments - - - - - - - -
Net exchange
movements
on retranslation
of
foreign currency
operations - - - - 36.7 36.7 - 36.7
Total
comprehensive
(expense)/income - - (77.6) - 36.6 (41.0) 2.3 (38.7)
------------------ ---- -------- -------- --------- -------- --------- ------------ ---------------- --------
Transactions with
owners:
Dividends paid 5 - - - - - - (0.8) (0.8)
Share based
charges 15 - - 9.8 - - 9.8 - 9.8
Purchase of
company
shares by
Employee
Share Trust for
the
Share Incentive
Plan
(SIP) 15 - - 0.8 - - 0.8 - 0.8
Transfer from
merger
reserve to
retained
earnings - - 250.0 (250.0) - - - -
Transactions with
non-controlling
interests - - - - - - 0.4 0.4
------------------ ---- --------
At 30 June 2023 41.3 63.9 1,407.4 2,290.8 (105.8) 3,697.6 3.4 3,701.0
------------------ ---- -------- -------- --------- -------- --------- ------------ ---------------- --------
The figures presented in the above tables are unaudited.
In June 2023, John Wood Group Holdings Limited paid $250.0m to
John Wood Group PLC in a partial settlement of the promissory note,
which was put in place during 2019. The repayment represented
qualifying consideration and as a result the Company transferred an
equivalent portion of the merger reserve to retained earnings.
Other reserves include the capital redemption reserve, capital
reduction reserve, currency translation reserve and the hedging
reserve. The notes on pages 33 to 54 are an integral part of the
interim financial statements.
Group cash flow statement
for the six month period to 30 June 2023
Unaudited Unaudited Audited
Interim Interim Full Year
June 2023 June 2022 Dec 2022
Note $m $m $m
-------------------------------------------- ---- ---------- ---------- ----------
Reconciliation of loss before tax to
cash used in operating activities:
(Loss)/profit for the period (27.0) 88.9 (351.7)
Adjustments (excluding share of joint
ventures)
Depreciation 13.6 12.1 25.2
Depreciation on the right of use assets 40.9 40.2 82.3
Loss/(gain) on disposal of property
plant and equipment 0.1 0.9 (1.6)
Impairment of goodwill and intangible
assets - - 542.3
Impairment of property plant and equipment 0.4 0.4 0.4
Impairment of joint ventures - - 2.0
Amortisation of intangible assets 11 78.5 79.9 151.9
Share of post-tax profit from joint
ventures (14.4) (11.0) (30.4)
Gain on disposal of business (36.5) - (514.5)
Net finance costs 48.8 62.4 127.9
Share based charges 15 9.8 8.5 20.7
Decrease in provisions (11.9) (73.7) (123.1)
Dividends from joint ventures 8.0 15.6 30.1
Other exceptional items - non-cash impact 26.0 4.7 35.3
Tax charge/(credit) 8 35.6 (78.5) 236.2
Changes in working capital (excluding
effect of acquisition and divestment
of subsidiaries)
Decrease/(increase) in inventories 1.9 (6.9) (1.6)
Increase in receivables (164.4) (31.7) (97.5)
Decrease in payables (19.3) (235.4) (398.9)
Exchange movements 2.8 6.3 8.1
Cash outflow from operating activities (7.1) (117.3) (256.9)
Tax paid (105.1) (29.2) (103.9)
-------------------------------------------- ---- ---------- ---------- ----------
Net cash used in operating activities (112.2) (146.5) (360.8)
-------------------------------------------- ---- ---------- ---------- ----------
Cash flows from investing activities
Disposal of businesses (net of cash
disposed) 42.3 - 1,751.4
Purchase of property plant and equipment (9.2) (9.5) (27.6)
Proceeds from sale of property plant
and equipment 1.4 1.4 7.1
Purchase of intangible assets (68.0) (49.1) (109.2)
Interest received 3.6 2.5 4.5
Net cash used in investing activities (29.9) (54.7) 1,626.2
-------------------------------------------- ---- ---------- ---------- ----------
Cash flows from financing activities
Repayment of short-term borrowings 14 (105.5) 12.9 (35.0)
Proceeds from short-term borrowings - - 88.0
Proceeds from long-term borrowings 14 257.0 231.4 -
Repayment of long-term borrowings - - (1,039.1)
Payment of lease liabilities 14 (52.4) (66.8) (121.6)
Proceeds from SIP shares 0.8 0.6 1.7
Interest paid (44.8) (53.3) (98.1)
Dividends paid to non-controlling interests (0.8) (0.8) (1.1)
Net cash generated from/(used in) financing
activities 54.3 124.0 (1,205.2)
-------------------------------------------- ---- ---------- ---------- ----------
Net (decrease)/increase in cash and
cash equivalents 14 (87.8) (77.2) 60.2
Effect of exchange rate changes on cash
and cash equivalents 14 1.3 (12.8) (26.5)
-------------------------------------------- ---- ----------
Opening cash and cash equivalents 536.7 503.0 503.0
Closing cash and cash equivalents 450.2 413.0 536.7
-------------------------------------------- ---- ---------- ---------- ----------
Cash at bank and in hand at 30 June 2023 includes $243.5m
(December 2022: $328.4m) that is part of the Group's cash pooling
arrangements. For internal reporting and for the purposes of the
calculation of interest by the bank, this amount is netted with
short-term overdrafts. However, in preparing these financial
statements, the Group is required to gross up both its cash and
short-term borrowings figures by this amount. Movement in
short-term overdrafts are presented as part of the cash flows from
financing activities as the overdraft facilities form part of the
Group's financing.
The proceeds of long-term borrowings of $257.0m includes
additional borrowings under the Revolving Credit Facility.
Payment of lease liabilities includes the cash payments for the
principal portion of lease payments of $43.9m (June 2022: $58.2m)
and for the interest portion of $8.5m (June 2022: $8.6m). The
classification of interest paid within financing activities is in
line with the Group accounting policy.
The Group has elected to present a cash flow statement that
includes an analysis of all cash flows in total, including both
continuing and discontinued operations. Amounts related to the
discontinued operation by operating, investing and financing
activities are disclosed in note 6.
The cash and cash equivalents balance of $413.0m at 30 June 2022
included cash held for sale of $8.5m.
The notes on pages 33 to 54 are an integral part of the interim
financial statements
Notes to the interim financial statements
for the six month period to 30 June 2023
1. Basis of preparation
This condensed set of financial statements for the six months
ended 30 June 2023 have been prepared in accordance with IAS 34
Interim Financial Reporting as adopted for use in the UK. The
interim report and condensed consolidated financial statements
should be read in conjunction with the Group's 2022 Annual Report
and Accounts which have been prepared in accordance with UK-adopted
international accounting standards and delivered to the Registrar
of Companies. The audit opinion contained within the 2022 financial
statements is unqualified.
As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, the interim report and condensed
consolidated financial statements have been prepared applying the
accounting policies that were applied in the preparation of the
Group's Annual Report and Accounts for the year ended 31 December
2022. The interim report and condensed consolidated financial
statements do not comprise statutory accounts within the meaning of
section 434 of the Companies Act 2006. The results for the six
months to 30 June 2023 and the comparative results for the six
months to 30 June 2022 are unaudited. The comparative figures for
the year ended 31 December 2022 do not constitute the statutory
financial statements for that year.
The interim condensed financial statements were approved by the
board of directors on 21 August 2023.
Going concern
The directors have undertaken a rigorous assessment of going
concern and liquidity over a period of at least 12 months from the
date of approval of these interim financial statements (the going
concern period), which includes financial forecasts up to the end
of 2024 including severe, but plausible scenarios. The directors
have considered as part of this assessment the impact of the events
that happened post balance sheet date and up to the date of issue
of these financial statements.
In order to satisfy themselves that they have adequate resources
for the going concern assessment period, the directors have
reviewed the Group's existing debt levels, the forecast compliance
with debt covenants and the Group's ability to generate cash from
trading activities. As of 30 June 2023, the Group's principal debt
facilities comprise a $1,200.0m revolving credit facility maturing
in October 2026; a $200.0m term loan which is now expected to be
repaid in September 2024 following agreement with UKEF, but subject
to final agreement on repayment terms with the syndicate, and
$352.5m of US private placement debt repayable in various tranches
between July 2024 and July 2031, with around 75% due in 2025 or
later. At 30 June 2023, the Group had headroom of $899.1m under its
principal debt facilities and a further $141.0m of other undrawn
borrowing facilities. The Group also expect to have sufficient
levels of headroom in the severe but plausible downside scenario
modelled.
At 30 June 2023, the Group had net current liabilities of
$111.7m (June 2022: $801.2m assets). The net current asset position
in June 2022 was impacted by the classification of the total assets
and liabilities of the Bult Environment Consulting business to held
for sale. Following the sale, the proceeds received have been used
to repay long term debt.
The directors have considered a range of scenarios on the
Group's future financial performance and cash flows. These
scenarios reflect our outlook for the broad range of end markets
that the Group operates in, whilst also considering the order book
visibility and the financial strength of the Group's balance sheet.
The Group anticipates growth in priority markets and geographies
including conventional energy, which the directors have increased
confidence in due to the current market focus on energy security.
In addition, the process and chemicals business have strong growth
drivers including decarbonisation of facilities and population
growth, which facilitates increased demand for chemicals products.
The performance during the first half of 2023 and order book as at
30 June 2023 together provide 90% revenue coverage of the 2023 base
board approved scenario and give the directors confidence in
achieving the underlying forecasts.
The directors have also considered severe, but plausible
downside scenarios which reflect material reductions in H2 2023 and
2024 revenue of between 4% and 10% and material reductions of
between 0.5% and 1% in gross margin percentage from the base board
approved scenario. This could result from a worsening economic
climate which could lead to deferrals or cancellations of contracts
by our clients. In the severe, but plausible downside scenario the
interest cover ratio has lower headroom at the June and December
2024 test dates with a ratio closer to the covenant limit of 3.5
times. There are mitigations available to management due to the
asset light model to respond to adverse changes in activity levels
of the Group, which could protect cash flow and profitability. In
addition, the directors considered a further extreme downside
sensitivity which assumes the removal of the receivables financing
facilities (which are not committed) of $200m and adverse movements
in working capital. The Group still had sufficient liquidity
headroom to meet its liabilities as they fall due, even with these
additional sensitivities.
Consequently, the directors are confident that the Group and
company will have sufficient funds to continue to meet its
liabilities as they fall due for at least 12 months from the date
of approval of the financial statements and therefore have prepared
the financial statements on a going concern basis.
Significant accounting policies
The Group's significant accounting policies adopted in the
preparation of these financial statements are set out in the
Group's 2022 Annual Report. Updates since the 2022 Annual Report
are noted below. These policies have been consistently applied to
all the periods presented.
Discontinued operations
The Group classified its Built Environment Consulting business
as a discontinued operation for the reporting period ending 30 June
2022. A discontinued operation is a component of the Group's
business, the operations and cash flows of which can be clearly
distinguished from the rest of the Group and which:
- represents a separate major line of business or geographic area of operations;
- is part of a single co-ordinated plan to dispose of a separate
major line of business or geographic area of operations; or
- is a subsidiary acquired exclusively with a view to resale.
During 2022 a separate management team and reporting structure
was put in place to manage the Built Environment Consulting
business and financial information showing the performance of the
Built Environment Consulting business was shared with the directors
on a monthly basis. The Built Environment Consulting business was
therefore considered a separate, major line of business which was
disposed of during 2022 and therefore met the definition of a
discontinued operation.
As per the terms of the agreement, the Group had a residual
element of the transaction classified as held for sale in the 2022
Annual Report. The sale of the remaining underlying subsidiary,
residing in Saudi Arabia, did not complete during the first half of
2023 and will now be retained by the Group. The results in the
comparative periods arising from discontinued operations have been
restated in note 6, with the performance of this subsidiary now
showing within the Group income statement as part of continuing
operations.
Classification as a discontinued operation occurs at the earlier
of disposal or when the operation meets criteria to be classified
as held for sale. When an operation is classified as a discontinued
operation, the comparative income statement and statement of
comprehensive income are presented as if the operation had been
discontinued from the start of the comparative period.
Taxation
The tax charged in relation to pre-exceptional profits for the
six months ended 30 June 2023 has been calculated by applying the
effective rate of tax which is expected to apply to the Group for
the year ending 31 December 2023, using rates substantively enacted
by 30 June 2023 as required by IAS 34 'Interim Financial
Reporting'. Tax in relation to exceptional items and movements
through Other Comprehensive Income is calculated based on the
actual results for the six months ended 30 June 2023. Policies in
relation to tax are applied consistently with those outlined in the
2022 Group Annual Report and Accounts when calculating the
effective tax rate and exceptional tax charge.
The Group has applied the exception in the Amendments to IAS 12
issued in May 2023 and has neither recognised nor disclosed
information about deferred tax assets or liabilities relating to
Pillar Two income taxes.
Judgements and Estimates
In preparing these interim condensed financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
are the same as those applied to the consolidated financial
statements for the year ended 31 December 2022.
Functional currency
The Group's earnings stream is primarily US dollars and the
principal functional currency is the US dollar, being the most
representative currency of the Group. The Group's financial
statements are therefore prepared in US dollars.
The following exchange rates have been used in the preparation
of these accounts:
December
June 2023 June 2022 2022
---------------------- --------- --------- --------
Average rate GBP1 = $ 1.2327 1.2952 1.2324
Closing rate GBP1 = $ 1.2713 1.2145 1.2029
---------------------- --------- --------- --------
Disclosure of impact of new and future accounting standards
The Group is required to comply with the requirements of IFRS 17
Insurance Contracts for reporting periods beginning on or after 1
January 2023. The new accounting standard sets out the requirements
that the Group should apply in reporting information about
insurance contracts it issues and reinsurance contracts it holds.
The Group has undertaken an assessment of its insurance contracts
including those held under its captive insurance company, Garlan
Insurance Limited. The impact of the accounting standard does not
have any material impact on the Group financial statements.
The Group has early adopted the amendments to IAS 1 -
Classification of Liabilities as Current or Non-current and
Non-current Liabilities with Covenants which are required to be
effective from 01 January 2024. The impact of the amendments does
not have any material impact on the Group financial statements.
Amendments to other existing standards do not have a material
impact on the financial statements.
2. Segmental reporting
The Group monitors activity and performance through four
operating segments; Projects, Operations, Consulting, Investment
Services ('IVS') plus the legacy Built Environment Consulting
segment (divested in September 2022).
Under IFRS 11 'Joint arrangements', the Group is required to
account for joint ventures using equity accounting. Adjusted EBITDA
as shown in the table below includes our share of joint venture
profits and excludes exceptional items, which is consistent with
the way management review the performance of the business
units.
The segment information provided to the Group's Chief Executive
for the reportable operating segments for the period included the
following:
Reportable operating segments
Adjusted EBITDA
Revenue (1) Operating profit/(loss)
Unaudited Unaudited Audited Unaudited Unaudited Audited Unaudited Unaudited Audited
Interim Interim Full Interim Interim Full Interim Interim Full
June June Year June June Year June June Year
2023 2022 2022 2023 2022 2022 2023 2022 2022
$m $m $m $m $m $m $m $m $m
---------------- ---------- ------------ -------- ---------- ---------- ---------- ---------- ---------- --------
Projects 1,245.3 990.0 2,211.2 91.6 81.3 168.7 11.4 (5.1) (125.3)
Operations 1,244.3 1,176.9 2,406.9 76.7 76.0 147.6 33.3 47.6 (344.3)
Consulting
(4) 355.8 312.5 652.4 37.8 40.1 76.2 23.4 20.6 (3.1)
Built
Environment
Consulting
(discontinued)
(4) - 586.5 854.0 - 64.2 69.8 - 42.1 63.1
Investment
Services 140.8 91.3 198.8 26.2 26.6 69.3 8.3 5.1 46.2
Central costs
(2) - - - (30.6) (38.2) (73.6) (53.6) (37.5) (138.7)
---------------- ---------- ------------ -------- ---------- ---------- ---------- ---------- ---------- --------
Total Group 2,986.2 3,157.2 6,323.3 201.7 250.0 458.0 22.8 72.8 (502.1)
Elimination
of
discontinued
operation
(4) - (586.5) (854.0) - (64.2) (69.8) - (42.1) (63.1)
---------------- ---------- ------------ -------- ---------- ---------- ---------- ---------- ---------- --------
Total
(continuing
operations) 2,986.2 2,570.7 5,469.3 201.7 185.8 388.2 22.8 30.7 (565.2)
---------------- ---------- ------------ -------- ---------- ---------- ----------
Finance income 13.3 2.9 6.9
Finance expense (62.1) (64.1) (133.1)
---------- ---------- --------
Loss before taxation from continuing operations (26.0) (30.5) (691.4)
Taxation (30.4) 32.0 (10.9)
---------- ---------- --------
(Loss)/profit for the period from continuing
operations (56.4) 1.5 (702.3)
Profit from discontinued operation,
net of tax 29.4 87.4 350.6
---------- ---------- --------
(Loss)/profit for the period (27.0) 88.9 (351.7)
---------- ---------- --------
Notes
1. A reconciliation of operating profit/(loss) to Adjusted
EBITDA is provided in the table below. Adjusted EBITDA is provided
as it is a unit of measurement used by the Group in the management
of its business. Adjusted EBITDA is stated before exceptional items
(see note 4).
2. Central includes the costs of certain Group management
personnel, along with an element of Group infrastructure costs.
3. Revenue arising from sales between segments is not material
and does not include the impact of the exceptional item disclosed
on the face of the income statement of $nil (December 2022: $8.0m)
which is in respect of revenue for the Projects operating
segment.
4. The comparative periods have been restated due to a
reclassification of a business operation from discontinued into
continuing operations for the period ending 30 June 2023 (see note
6). The revenue of this business for the period to 30 June 2022 was
$9.8m (December 2022: $27.1m) and Adjusted EBITDA was $1.0m
(December 2022: $3.1m).
Reconciliation of Alternative Performance Measures
Unaudited Audited
Unaudited Interim Full Year
Interim June 2022 December
June 2023 (restated) 2022 (restated)
$m $m $m
--------------------------------------------- ---------- ------------ ----------------
Operating profit/(loss) per income statement 22.8 30.7 (565.2)
Share of joint venture finance expense and
tax 8.3 5.2 14.3
Exceptional items (note 4) 31.1 11.0 663.5
Amortisation (including joint ventures) 79.2 80.7 153.4
Depreciation (including joint ventures) 15.1 14.2 29.3
Depreciation of right of use assets 44.8 43.6 90.5
Impairment of joint venture investments,
PP&E and right of use assets 0.4 0.4 2.4
--------------------------------------------- ---------- ------------ ----------------
Adjusted EBITDA (continuing operations) 201.7 185.8 388.2
--------------------------------------------- ---------- ------------ ----------------
Discontinued operation
Operating profit (discontinued) - 42.1 63.1
Exceptional items (note 6) - 22.1 6.7
--------------------------------------------- ---------- ------------ ----------------
Adjusted EBITDA (discontinued operation) - 64.2 69.8
--------------------------------------------- ---------- ------------ ----------------
Total Group Adjusted EBITDA 201.7 250.0 458.0
--------------------------------------------- ---------- ------------ ----------------
Depreciation in respect of joint ventures totals $1.5m (June
2022: $2.1m), depreciation in respect of joint venture right of use
assets totals $3.9m (June 2022: $3.4m) and joint venture
amortisation amounts to $0.7m (June 2022: $0.8m).
Analysis of joint venture
profits by segment Adjusted EBITDA Operating profit
Unaudited Unaudited Audited Unaudited Unaudited Audited
---------------------------
Interim Interim Full Interim Interim Full
June June Year June June Year
2023 2022 2022 2023 2022 2022
$m $m $m $m $m $m
--------------------------- ---------- ---------- -------- ---------- ---------- --------
Projects 1.8 2.2 3.9 1.6 2.0 3.5
Operations 6.2 6.6 15.2 5.4 6.0 13.0
Investment Services 20.8 13.6 39.4 15.7 8.1 28.2
Total 28.8 22.4 58.5 22.7 16.1 44.7
--------------------------- ---------- ---------- -------- ---------- ---------- --------
The turbines business was reclassified during 2022 to be
reported under Investment Services.
3. Revenue
In the following table, revenue is disaggregated by primary
geographical market and major service line. The tables provided
below analyses total revenue excluding our share of joint venture
revenue.
Built Built
Environment Environment
Consulting Consulting
Projects Projects Operations Operations Consulting Consulting (discontinued) (discontinued) IVS IVS Total Total
Unaudited Unaudited
Primary Unaudited Unaudited Unaudited Unaudited Unaudited Interim Unaudited Interim Unaudited Unaudited Unaudited Unaudited
geographical Interim Interim Interim Interim Interim June 2022 Interim June 2022 Interim Interim Interim Interim
market June 2023 June 2022 June 2023 June 2022 June 2023 (restated) June 2023 (restated) June 2023 June 2022 June 2023 June 2022
$m $m $m $m $m $m $m $m $m $m $m $m
-------------- ---------- ---------- ----------- ----------- ----------- ----------- --------------- --------------- ---------- ---------- ---------- ----------
US 292.8 261.6 209.9 223.1 138.1 116.5 - 369.9 118.8 124.9 759.6 1,096.0
Europe 206.4 193.0 424.0 410.4 92.5 83.4 - 54.3 2.4 (44.0) 725.3 697.1
Rest of the
world 746.1 535.4 610.4 543.4 125.2 112.6 - 162.3 19.6 10.4 1,501.3 1,364.1
-------------- ---------- ---------- ----------- ----------- ----------- ----------- --------------- --------------- ---------- ---------- ---------- ----------
Total revenue 1,245.3 990.0 1,244.3 1,176.9 355.8 312.5 - 586.5 140.8 91.3 2,986.2 3,157.2
-------------- ---------- ---------- ----------- ----------- ----------- ----------- --------------- --------------- ---------- ---------- ---------- ----------
Major service
lines
Energy
Oil & Gas 423.4 331.0 1,050.5 952.0 176.6 167.6 - - 16.0 - 1,666.5 1,450.6
Power,
Renewables,
Hydrogen and
Carbon
Capture 75.6 99.3 64.8 63.5 45.9 35.6 - - 25.8 18.5 212.1 216.9
Materials
Refining &
Chemicals 467.6 343.8 108.8 110.4 44.0 32.2 - - - 0.1 620.4 486.5
Minerals,
Processing
and Life
Sciences 188.4 193.9 10.1 9.7 15.5 20.0 - - 15.5 14.5 229.5 238.1
Other
Built
Environment 3.6 2.5 6.7 35.9 26.2 7.0 - 586.5 67.8 58.2 104.3 690.1
Industrial
Processes 86.7 19.5 3.4 5.4 46.6 47.1 - - 15.7 - 152.4 72.0
Other - - - - 1.0 3.0 - - - - 1.0 3.0
Total revenue 1,245.3 990.0 1,244.3 1,176.9 355.8 312.5 - 586.5 140.8 91.3 2,986.2 3,157.2
-------------- ---------- ---------- ----------- ----------- ----------- ----------- --------------- --------------- ---------- ---------- ---------- ----------
Sustainable
solutions 350.1 301.1 138.7 107.6 86.3 71.5 - n/a 25.7 18.5 600.8 498.7
-------------- ---------- ---------- ----------- ----------- ----------- ----------- --------------- --------------- ---------- ---------- ---------- ----------
Sustainable solutions consist of activities related to renewable
energy, hydrogen, carbon capture & storage, electrification and
electricity transmission & distribution, LNG, waste to energy,
sustainable fuels & feedstocks and recycling, processing of
energy transition minerals, life sciences, decarbonisation in oil
& gas, refining & chemicals, minerals processing and other
industrial processes. In the case of mixed scopes including a
decarbonisation element, these are only included in decarbonisation
if 75% or more of the scope relates to that element, in which case
the total revenue is recorded in decarbonisation. Sustainable
solutions with respect to the discontinued operation has not been
captured.
The Group's revenue is largely derived from the provision of
services over time.
For the 6 months to 30 June 2023, 78% (June 2022: 78%) of the
Group's total revenue (including discontinued operations) came from
reimbursable contracts and 22% (June 2022: 22%) from lump sum
contracts. The calculation of revenue from lump sum contracts is
based on estimates and the amount recognised could increase or
decrease.
Continuing operations Discontinued operations Total
Unaudited Unaudited Audited Unaudited Unaudited Audited Unaudited Unaudited Audited
---------
Interim Interim Full Interim Interim Full Interim Interim Full
June June Year June June Year June June Year
2022 2022 2022 2022
2023 (restated) (restated) 2023 (restated) (restated) 2023 2022 2022
$m $m $m $m $m $m $m $m $m
--------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- ---------- --------
Total
revenue 2,986.2 2,570.7 5,469.3 - 586.5 854.0 2,986.2 3,157.2 6,323.3
--------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- ---------- --------
Total revenue at June 2022 and December 2022 does not reflect
the $8.0m exceptional item as disclosed on the Income Statement.
This exceptional item is relating to the Projects business
unit.
Contract assets and liabilities
The following table provides a summary of receivables, contract
assets and contract liabilities arising from the Group's contracts
with customers, which are not held for sale at 30 June 2023:
Unaudited Unaudited Audited
Interim Interim Full Year
June 2023 June 2022 December 2022
$m $m $m
--------------------------------- ----------- ----------- ---------------
Trade receivables 754.7 594.1 679.6
Non-current contract assets 121.2 74.6 97.0
Gross amounts due from customers 593.0 489.8 556.9
Gross amounts due to customers (136.6) (115.2) (113.0)
1,332.3 1,043.3 1,220.5
--------------------------------- ----------- ----------- ---------------
The contract asset balances include amounts the Group has
invoiced to customers (trade receivables) as well as amounts where
the Group has the right to receive consideration for work completed
which has not been billed at the reporting date (gross amounts due
from customers). Gross amounts due from customers are transferred
to trade receivables when the rights become unconditional which
usually occurs when the customer is invoiced. Gross amounts due to
customers primarily relates to advance consideration received from
customers, for which revenue is recognised over time.
Trade receivables increased by $75.1m since December 2022 and
this is primarily due to the increasing activity levels during the
first half of 2023 and higher closing DSO. Gross amounts due from
customers has increased by $36.1m to $593.0m. The increase is
largely explained by the increase in activity levels during the
first half of 2023.
Non-current contract assets of $121.2m (December 2022: $97.0m)
includes $82.0m of gross amounts due from customers and $16.5m of
trade receivables, both of which are in relation to the Aegis
contract. Refer to note 12 for further details.
Trade receivables and gross amounts due from customers are
included within the 'Trade and other receivables' heading in the
Group balance sheet. Gross amounts due to customers and deferred
income is included within the 'Trade and other payables' heading in
the Group balance sheet.
Revenue recognised in 2023 which was included in gross amounts
due to customers and deferred income at the beginning of the year
of $117.5m represents amounts included within contract liabilities,
including $20.6m previously disclosed within held for sale
liabilities, at 1 January 2023. Revenue recognised from performance
obligations satisfied in previous periods of $5.6m (June 2022:
$10.6m) represents revenue recognised in 2023 for performance
obligations which were considered operationally complete at 31
December 2022.
As at 30 June 2023, the Group had received $200.0m (June 2022:
$198.4m) of cash relating to non-recourse financing arrangements
with its banks. An equivalent amount of trade receivables was
derecognised on receipt of the cash.
Transaction price allocated to the remaining performance
obligations
The transaction price allocated to the remaining performance
obligations (unsatisfied or partially unsatisfied) as at 30 June
2023 was as follows:
$m Year 1 Year 2 Year 3 Total
-------------------------------- -------- -------- -------- -------
Revenue (continuing operations) 2,027.6 2,013.2 1,020.6 5,061.4
-------------------------------- -------- -------- -------- -------
The Group has not adopted the practical expedients permitted by
IFRS 15, therefore all contracts which have an original expected
duration of one year or less have been included in the table above.
The estimate of the transaction price does not include any amounts
of variable consideration which are constrained. Amounts disclosed
above include continuing operations only.
4. Exceptional items
Exceptional items are those significant items which are
separately disclosed by virtue of their size or incidence to enable
a full understanding of the Group's financial performance.
Audited
Unaudited Unaudited Full Year
Interim Interim December
June 2023 June 2022 2022
$m $m $m
--------------------------------------------------- ---------- ---------- ----------
Exceptional items included in continuing
operations
Power and Industrial EPC losses (revenue) - 8.0 8.0
Power and Industrial EPC losses (cost of
sales) 1.2 12.3 17.0
Impairment of Power and Industrial EPC receivables 20.0 - -
Impairment of goodwill and intangible assets - - 542.3
Apollo related costs 4.6 - -
Redundancy, restructuring and integration
costs - 15.3 30.1
Investigation support costs and provisions - (2.8) (4.2)
Enterprise settlement - - 35.6
Asbestos yield curve and costs 5.3 (21.8) 21.5
Russia exit costs and charges - - 13.2
Exceptional items included in continuing
operations, before interest and tax 31.1 11.0 663.5
Unwinding of discount on asbestos provision 5.5 2.8 5.9
Tax (credit)/charge in relation to exceptional
items (5.2) (4.6) 5.2
Release of uncertain tax provision (7.4) - -
Recognition of deferred tax assets due to
UK pension actuarial movements 17.2 (59.6) (41.6)
--------------------------------------------------- ---------- ---------- ----------
Exceptional items included in continuing
operations, net of interest and tax 41.2 (50.4) 633.0
--------------------------------------------------- ---------- ---------- ----------
Power and Industrial EPC losses
Additional costs on a fixed price EPC contract of $1.2m were
recorded as an exceptional charge through cost of sales on the
basis that the Group no longer operates within this sector. This
follows previous write downs made during 2022 following the
strategic decision to exit this market.
Impairment of Power and Industrial EPC receivables
The non-cash charge of $20.0m relates to a write down of
receivable balances arising from a fixed price contract in the
Power and Industrial EPC business. The Group had expected to
recover these balances but these have since been disputed by the
client and will likely progress to a legal or commercial
negotiation. By virtue of its size and nature of these projects
being within a sector that the Group no longer operates, this was
recorded as an exceptional charge through impairment losses on
trade receivables in the income statement.
Apollo related costs
During the period to 30 June 2023, $4.6m was incurred in
relation to legal and advisor costs incurred in relation to
Apollo's preliminary approach to potentially acquire the ordinary
share capital of the Group, which did not ultimately lead to an
offer.
Asbestos
All asbestos costs have been treated as exceptional on the basis
that movements in the provision are non-trading and can be large
and driven by market conditions which are out with the Group's
control. Excluding these charges from the trading results improves
the understandability of the underlying trading performance of the
Group. The charge of $5.3m (June 2022: $21.8m credit) in 2023
comprises of a $2.0m yield curve charge (June 2022: $23.8m credit)
and $3.3m (June 2022: $2.0m) of costs in relation to managing the
claims. The 30-year US Treasury rate has decreased to 3.85% from
3.97% at the end of December 2022, and led to the income statement
charge. $5.5m of interest costs which relate to the unwinding of
the discount on the asbestos provision over time are shown as
exceptional.
Tax
An exceptional tax charge of $4.6m (June 2022: $64.2m credit)
has been recorded during the period. It consists of a tax credit of
$5.2m on exceptional items (June 2022: $4.6m), a $7.4m credit in
relation to the release of an uncertain tax provision created
through exceptional items on the disposal of the Well Support
business in 2011, offset by an exceptional charge of $17.2m
recognised due to the actuarial loss in relation to the UK defined
benefit pension scheme. As deferred tax liabilities support the
recognition of deferred tax assets, the reduction of $17.2m of
deferred tax assets have been recognised through exceptional items
based on its size.
5. Dividends
Our capital allocation policy remains unchanged and starts with
having a strong balance sheet. We look to manage our target
leverage over the medium term within a range of around 0.5 to 1.5
times net debt (excluding leases) to adjusted EBITDA (pre-IFRS 16).
Beyond this, we consider how best to create value for our
shareholders from dividends, share buybacks or attractive
acquisitions.
6. Discontinued operation
In September 2022, the Group announced it had completed an
agreement to sell the Built Environment Consulting business, which
is included within the Built Environment Consulting operating
segment. The Built Environment Consulting business was classified
as a discontinued operation from 1 January 2022, at which point the
conditions under IFRS 5 were met. The Group income statement and
statement of comprehensive income were restated to show the
discontinued operation separately from continuing operations.
As per the terms of the agreement, the Group had a residual
element of the transaction classified as held for sale in the 2022
Annual Report. The sale of the remaining underlying subsidiary,
residing in Saudi Arabia, did not complete during the first half of
2023 and will now be retained by the Group. The results in the
comparative periods arising from discontinued operations have been
restated in the table below, with the performance of this
subsidiary now showing within the Group income statement as part of
continuing operations. This restatement is in accordance with the
requirements of IFRS 5 paragraph 36.
(i) Results of discontinued operation
Unaudited Audited
Unaudited Interim Full Year
Interim June 2022 December
June 2023 (restated) 2022 (restated)
Note $m $m $m
--------------------------------------- ----- ----------- ------------ -----------------
External revenue - 586.5 854.0
Cost of sales - (494.8) (735.8)
Gross profit - 91.7 118.2
Administrative expenses - (27.5) (48.4)
Exceptional items - administrative
expenses - (22.1) (6.7)
--------------------------------------- ----- ----------- ------------ -----------------
Operating profit - 42.1 63.1
Finance expense - (1.2) (1.7)
--------------------------------------- ----- ----------- ------------ -----------------
Profit before tax - 40.9 61.4
Taxation - (6.5) (7.9)
Exceptional items - taxation - 53.0 -
--------------------------------------- ----- ----------- ------------ -----------------
Results from operating activities,
net of tax - 87.4 53.5
--------------------------------------- ----- ----------- ------------ -----------------
Gain on sale of discontinued
operation 34.6 - 514.5
Income tax on gain on sale of
discontinued operation (exceptional) (5.2) - (217.4)
--------------------------------------- ----- ----------- ------------ -----------------
Profit from discontinued operation,
net of tax 29.4 87.4 350.6
--------------------------------------- ----- ----------- ------------ -----------------
Earnings per share (cents)
Basic 7 4.3 13.0 51.5
Diluted 7 4.3 12.5 51.5
The profit from the discontinued operation, net of tax of $29.4m
(June 2022: $87.4m) is attributable entirely to the owners of the
Company.
The final proceeds from the disposal of the Built Environmental
Consulting business were agreed during the first half of 2023 upon
agreement of the completion balance sheet between the Group and
WSP. This has resulted in an additional gain of $34.6m, comprising
$23.1m of cash proceeds and the release of completion accruals,
being recognised in discontinued operations.
(ii) Cash flows from / (used in) discontinued operation
Unaudited Unaudited Audited
Interim Interim Full Year
June 2023 June 2022 December 2022
Note $m $m $m
Net cash used in operating activities (62.1) (6.2) (6.0)
Net cash generated from/(used in) investing activities 23.1 (3.3) 1,748.4
Net cash flows for the period (39.0) (9.5) 1,742.4
The net cash used in operating activities for the period to June
2023 includes $62.1m of tax paid on the sale of the Built
Environment Consulting business which completed in September
2022.
7. Earnings per share
Unaudited Interim Unaudited Interim Audited Full Year
June 2023 June 2022 December 2022
(Losses)/ Earnings (Losses)/
earnings /(losses) earnings
attributable Earnings attributable Number Earnings attributable Number Earnings
to equity Number per to equity of per to equity of per
shareholders of shares share shareholders shares share shareholders shares share
($m) (millions) (cents) ($m) (millions) (cents) ($m) (millions) (cents)
Basic
pre-exceptional (17.5) 684.9 (2.6) 7.2 678.8 1.1 (13.7) 680.4 (2.0)
Exceptional
items,
net of tax (11.8) - (1.7) 81.3 - 11.9 (342.6) - (50.4)
Basic (29.3) 684.9 (4.3) 88.5 678.8 13.0 (356.3) 680.4 (52.4)
Effect of
dilutive
ordinary shares - - - - 27.3 (0.5) - - -
Diluted (29.3) 684.9 (4.3) 88.5 706.1 12.5 (356.3) 680.4 (52.4)
Adjusted diluted
earnings per
share
calculation
Basic (29.3) 684.9 (4.3) 88.5 678.8 13.0 (356.3) 680.4 (52.4)
Effect of
dilutive
ordinary shares - - - - 27.3 (0.5) - - -
Diluted (29.3) 684.9 (4.3) 88.5 706.1 12.5 (356.3) 680.4 (52.4)
Exceptional
items,
net of tax 11.8 - 1.8 (81.3) - (11.5) 342.6 - 50.4
Amortisation of
intangibles on
acquisition,
net
of tax 24.7 - 3.6 33.2 - 4.7 52.5 - 7.7
Adjusted diluted 7.2 684.9 1.1 40.4 706.1 5.7 38.8 680.4 5.7
Adjusted basic 7.2 684.9 1.1 40.4 678.8 6.0 38.8 680.4 5.7
i) (Losses)/earnings attributable to equity shareholders
Unaudited Interim Unaudited Interim Audited Full Year
June 2023 June 2022 December 2022
Continuing Discontinued operations Continuing operations Discontinued operations
operations Discontinued operations Total Continuing operations (restated) (restated) Total (restated) (restated) Total
$m $m $m $m $m $m $m $m $m
------------------------
Earnings/(losses)
attributable to equity
shareholders (basic
pre-exceptional) (17.5) - (17.5) (49.3) 56.5 7.2 (73.9) 60.2 (13.7)
Exceptional items, net
of tax (41.2) 29.4 (11.8) 50.4 30.9 81.3 (633.0) 290.4 (342.6)
------------------------
Earnings/(losses)
attributable
to equity shareholders (58.7) 29.4 (29.3) 1.1 87.4 88.5 (706.9) 350.6 (356.3)
------------------------
Number of shares (basic) 684.9 684.9 684.9 678.8 678.8 678.8 680.4 680.4 680.4
------------------------
Number of shares
(diluted) 684.9 684.9 684.9 706.1 706.1 706.1 680.4 680.4 680.4
------------------------
Basic earnings per share
(cents) (8.6) 4.3 (4.3) 0.0 13.0 13.0 (103.9) 51.5 (52.4)
------------------------
Diluted earnings per
share (cents) (8.6) 4.3 (4.3) 0.0 12.5 12.5 (103.9) 51.5 (52.4)
------------------------
Earnings/(losses)
attributable
to equity shareholders
(diluted) (58.7) 29.4 (29.3) 1.1 87.4 88.5 (706.9) 350.6 (356.3)
Exceptional items, net
of tax 41.2 (29.4) 11.8 (50.4) (30.9) (81.3) 633.0 (290.4) 342.6
Amortisation of
intangibles on
acquisition,
net of tax 24.7 - 24.7 33.2 - 33.2 52.5 - 52.5
------------------------
Earnings/(losses)
attributable
to equity shareholders
(adjusted diluted) 7.2 - 7.2 (16.1) 56.5 40.4 (21.4) 60.2 38.8
------------------------
Earnings/(losses)
attributable
to equity shareholders
(adjusted basic) 7.2 - 7.2 (16.1) 56.5 40.4 (21.4) 60.2 38.8
------------------------
Number of shares
(diluted) 684.9 684.9 684.9 706.1 706.1 706.1 680.4 680.4 680.4
Number of shares (basic) 684.9 684.9 684.9 678.8 678.8 678.8 680.4 680.4 680.4
------------------------
Adjusted diluted (cents) 1.1 - 1.1 (2.3) 8.0 5.7 (3.1) 8.8 5.7
------------------------
Adjusted basic (cents) 1.1 - 1.1 (2.4) 8.4 6.0 (3.1) 8.8 5.7
------------------------
The calculation of basic earnings per share is based on the
earnings attributable to owners of the parent divided by the
weighted average number of ordinary shares in issue during the year
excluding shares held by the Group's employee share trusts. For the
calculation of diluted earnings per share, the weighted average
number of ordinary shares in issue is adjusted to assume conversion
of dilutive potential ordinary shares, only when there is a profit
per share. The Group's dilutive ordinary shares comprise share
options granted to employees under Executive Share Option Schemes
and the Long Term Retention Plan, shares and share options awarded
under the Group's Long Term Plan and shares awarded under the
Group's Employee Share Plan. Adjusted basic and adjusted diluted
earnings per share are disclosed to show the results excluding the
impact of exceptional items and acquisition related amortisation,
net of tax.
For the period ended 30 June 2023, the Group reported a basic
loss (December 2022: loss) per ordinary share, therefore the effect
of dilutive ordinary shares are excluded (December 2022: excluded)
in the calculation of diluted earnings per share. Where profits
have been made when disaggregating discontinued and continuing
operations, the calculation of diluted earnings per share was
performed on the same basis as the whole Group. Had the result been
a profit, an additional 17.6m of dilutive potential shares would
have been used in the calculation of diluted EPS metrics, which
would have reduced the adjusted diluted EPS by 0.1 cents.
8. Taxation
Audited
Unaudited Interim Unaudited Full Year
June 2023 Interim December
June 2022 (restated) 2022 (restated)
Reconciliation of applicable tax charge at statutory rates to tax charge $m $m $m
Loss before taxation from continuing operations (26.0) (30.5) (691.4)
Profit before taxation from discontinued operations (note 6) - 40.9 61.4
Gain on sale of discontinued operation (note 6) 34.6 - 514.5
Less: Share of post-tax profit from joint ventures (14.4) (11.0) (30.4)
Loss before taxation from total operations (excluding profits from joint
ventures) (5.8) (0.6) (145.9)
Applicable tax charge at statutory rates 2.1 6.3 36.5
Effects of:
Non-deductible expenses 2.4 3.2 8.2
Non-taxable income (0.4) (1.5) (1.0)
Non-deductible expenses - exceptional - 3.0 332.8
Non-taxable income - exceptional 0.3 - (0.3)
Deferred tax recognition:
Recognition of deferred tax assets not previously recognised (0.7) (55.0) (4.3)
Utilisation of tax assets not previously recognised (2.1) (5.2) (12.4)
Current year deferred tax assets not recognised 17.9 22.0 37.7
Write off of previously recognised deferred tax assets - 0.1 5.2
Recognition due to UK pension actuarial loss/(gain) 17.2 (59.6) (41.6)
Utilisation of unrecognised deferred tax assets due to the Built
Environment Consulting disposal - - (145.5)
Irrecoverable withholding tax 6.5 6.7 20.4
US Base Erosion and Anti-abuse Tax - - 6.7
CFC charges 1.1 0.5 2.3
Uncertain tax provisions (0.5) 0.8 7.5
Uncertain tax provisions prior year adjustments (0.7) (1.0) (26.7)
Uncertain tax provisions prior year adjustments - exceptional (7.4) - 1.5
Prior year adjustments (0.9) - 7.7
Prior year adjustments - exceptional - - 2.5
Impact of change in rates on deferred tax 0.8 1.2 (1.0)
Total tax charge/(credit) 35.6 (78.5) 236.2
Comprising
Tax charge/(credit) on continuing operations 30.4 (32.0) 10.9
Tax charge/(credit) on discontinued operations 5.2 (46.5) 225.3
Total tax charge/(credit) 35.6 (78.5) 236.2
Factors affecting the current tax charge
The weighted average of statutory tax rates is (36.2%) in 2023.
The negative tax rate reflects the overall profit before tax being
a small loss, and the geographical split resulting in tax on
profits exceeding credits on losses.
The actuarial loss in relation to the UK defined benefit pension
scheme has resulted in a decrease in deferred tax liabilities of
$17.2m through Other Comprehensive Income. As deferred tax
liabilities support the recognition of deferred tax assets, a
reduction of $17.2m of deferred tax assets recognition has been
recognised through exceptional items in the Income Statement. A
credit of $41.6m (June 2022: $59.6m) of the same nature as a result
of an actuarial gain was included within exceptional items in
2022.
Additional deferred tax has been recognised in the period
reflecting forecast profits of the US business for one year in
excess of assets supported by deferred tax liabilities. The impact
on the half year results of the additional recognition of $3.1m.
The US business is expected to be profitable in 2023, but for the
disposal of the Built Environment business it has been loss making
in recent years.
Factors affecting future tax charges
There are a number of factors that may affect the Group's future
tax charge including the resolution of open issues with the tax
authorities, corporate acquisitions and disposals, the use of
brought forward losses and changes in tax legislation and rates.
The following outlines key factors that may impact on future tax
charges.
On 20 June 2023 the UK Finance Bill was substantively enacted in
the UK, including legislation to implement the OECD Pillar Two
income taxes for periods beginning on or after 1 January 2024. The
Group has applied the exception in the Amendments to IAS 12 issued
in May 2023 and has neither recognised nor disclosed information
about deferred tax assets or liabilities relating to Pillar Two
income taxes. Based on forecast profits for 2023 we anticipate an
additional tax charge of $2.1m for future years as a result of the
minimum 15% tax rate applicable under Pillar 2.
Actuarial valuations of the UK defined benefit pension scheme
create volatility in the tax charge due to revaluations of the net
pension asset impacting on the related deferred tax liability. This
is because the movement in the deferred tax liability in respect of
the pension surplus is taken to Other Comprehensive Income whilst
the corresponding movement in deferred tax asset recognition is
taken to the income statement.
9. Retirement benefit obligations
The Group operates a number of defined benefit pension schemes
which are largely closed to future accrual. The surplus or deficit
recognised in respect of each scheme represents the difference
between the present value of the defined benefit obligations and
the fair value of the scheme assets. The assets of these schemes
are held in separate trustee administered funds. As at 30 June
2023, 97.2% (December 2022: 113.7%) of total scheme assets in the
principal schemes have quoted prices in active markets.
At 30 June 2023, the largest schemes were the Wood Pension Plan
('WPP'), the Foster Wheeler Inc Salaried Employees Pension Plan
('FW Inc SEPP') and the Foster Wheeler Inc Pension Plan for Certain
Employees ('FW Inc PPCE'). An interim revaluation of these schemes
has been carried out at 30 June 2023 and the related actuarial
losses of $65.5m (June 2022: gains $230.8m) are recorded in the
Group statement of comprehensive income. The losses are largely as
result of a reduction in the market value of assets outweighing the
increase in the discount rate in the period. The discount rate is
outlined in the table below. The discount rate is determined by the
scheme actuaries and reflects the return on high quality corporate
bonds. An increase in the discount rate will decrease the defined
benefit obligation.
No changes to future contribution levels have been agreed for
the Wood Pension Plan.
The principal assumptions used in calculating the Group's
defined benefit pension schemes are as follows:
June June June June June June December December December
2023 2023 2023 2022 2022 2022 2022 2022 2022
Wood FW FW Wood FW FW Wood
Pension Inc Inc Pension Inc Inc Pension FW Inc FW Inc
Plan SEPP PPCE Plan SEPP PPCE Plan SEPP PPCE
% % % % % % % % %
Discount rate 5.3 5.1 5.1 3.8 4.6 4.6 5.0 5.2 5.2
Rate of retail
price index inflation 3.2 N/A N/A 3.1 N/A N/A 3.1 N/A N/A
Rate of consumer
price index inflation 2.7 N/A N/A 2.6 N/A N/A 2.6 N/A N/A
Sensitivity to discount rate and inflation rate
The impact of changes to the key assumptions on the retirement
benefit obligation is shown below. The sensitivity is based on a
change in an assumption whilst holding all other assumptions
constant. In practice, this is unlikely to occur, and changes in
some of the assumptions may be correlated. When calculating the
sensitivity of the defined benefit obligation to significant
actuarial assumptions, the same method has been applied as when
calculating the pension obligation recognised in the Group balance
sheet.
June June June June June June December December December
2023 2023 2023 2022 2022 2022 2022 2022 2022
Wood FW FW Wood FW FW Wood FW FW
Pension Inc Inc Pension Inc Inc Pension Inc Inc
Plan SEPP PPCE Plan SEPP PPCE Plan SEPP PPCE
$m $m $m $m $m $m $m $m $m
Discount
rate
Plus 0.5% (129.6) (3.3) (5.4) (184.6) (3.3) (6.4) (134.0) (3.2) (5.4)
Minus 0.5% 143.9 3.5 5.7 206.4 3.6 6.9 151.5 3.5 5.7
Inflation
Plus 0.1% 13.3 N/A N/A 22.8 N/A N/A 13.3 N/A N/A
Minus 0.1% (13.3) N/A N/A (22.6) N/A N/A (13.2) N/A N/A
10. Other non-current liabilities
Audited
Unaudited Unaudited Full Year
Interim Interim December
June 2023 June 2022 2022
$m $m $m
------------------------------ ----------
Other payables 73.5 118.0 106.8
------------------------------ ----------
Other non-current liabilities 73.5 118.0 106.8
------------------------------ ----------
Other payables mainly relate to the US SERP pension arrangement
and amount to $52.7m (December 2022: $55.6m). At December 2022,
other payables also included $33.6m relating to penalties agreed
and payable after 1 year to the various authorities as described in
note 12.
11. Goodwill and other intangible assets
Customer
Software and development contracts and Order
Goodwill costs relationships backlog Brands Total
$m $m $m $m $m $m
Cost
At 1 January 2023 4,277.4 343.2 656.1 157.0 479.4 5,913.1
Exchange movements 35.3 22.5 2.6 1.0 4.5 65.9
Additions - 100.6 - - - 100.6
Disposals (15.0) (1.0) - - - (16.0)
At 30 June 2023 4,297.7 465.3 658.7 158 .0 483.9 6,063.6
Amortisation and
impairment
At 1 January 2023 488.8 239.4 547.7 157.0 171.1 1,604.0
Exchange movements 5.3 16.8 0.9 1.0 1.4 25.4
Amortisation charge - 51.3 13.1 - 14.1 78.5
Disposals - (1.0) - - - (1.0)
At 30 June 2023 494.1 306.5 561.7 158.0 186.6 1,706.9
Net book value at 30 June
2023 3,803.6 158.8 97.0 - 297.3 4,356.7
Customer
Software and development contracts and Order
Goodwill costs relationships backlog Brands Total
$m $m $m $m $m $m
Cost
At 1 January 2022 5,226.2 288.8 815.7 183.9 661.0 7,175.6
Exchange movements (138.5) (39.2) (13.3) (2.3) (10.6) (203.9)
Additions - 83.0 - - - 83.0
Disposals - (0.8) - - - (0.8)
Reclassification to
assets held for sale (792.2) (17.5) (127.9) (25.6) (178.6) (1,141.8)
At 30 June 2022 4,295.5 314.3 674.5 156 .0 471.8 5,912 .1
Amortisation and
impairment
At 1 January 2022 0.8 205.7 581.2 171.7 140.9 1,100.3
Exchange movements - (32.2) (8.2) (2.2) (2.4) (45.0)
Amortisation charge - 44.9 10.6 8.0 16.4 79.9
Reclassification to
assets held for sale - (16.6) (47.8) (25.6) (38.0) (128.0)
Disposals - (0.8) - - - (0.8)
At 30 June 2022 0.8 201.0 535.8 151.9 116.9 1,006.4
Net book value at 30
June 2022 4,294.7 113.3 138.7 4.1 354.9 4,905.7
In accordance with IAS 36 'Impairment of assets,' goodwill and
other non-current assets were reviewed for indicators of impairment
at 30 June 2023. The Group has five CGUs (December 2022: five) and
goodwill is monitored by management at the CGU level. The
impairment testing that was performed at December 2022 highlighted
that a reasonable change in assumptions would have resulted in an
additional impairment for the Projects and Operations CGUs, as well
as the central Group test. The key assumptions used in the
impairment model for these CGUs were discount rate, long-term
growth rate and revenue growth.
During the first half of 2023, the Group completed the mid-year
forecast ("MYF") update, which highlighted that revenues and EBITDA
were expected to remain in line with or above the original budget.
Trading performance in the first half of 2023 is also ahead of
budget. The medium-term forecasts also remain supported by a
strengthening pipeline since the year end and good momentum in work
won and so the Group's view of the markets remain unchanged.
Therefore, the Group remain confident in the cash flow forecasts
that underpinned the impairment testing performed at year end.
Management considered the impact of market volatility on the
discount rates used in the impairment test. An increase in the
discount rates, particularly for the Projects and Operations CGUs
and the overall Group position could lead to further impairment
charges. The discount rates remain broadly unchanged since the year
end impairment test and reflects that the risks within the medium
term forecasts have not changed significantly since the year
end.
Management also considered the impact of the revocation of the
conditional offer made by Apollo during the first half of 2023,
which did not significantly change the market capitalisation of the
Group as at 31 December compared with 30 June. The Group is
performing in line with the forecasts underpinning the 2022
impairment test; 2023 year to date performance is ahead of the
budget; and the latest MYF highlights that 2023 revenue and EBITDA
performance is expected to be in line or above the original budget.
Hence, combined with broadly unchanged discount rates this
indicates that a full impairment review would not be required at
this time, and that no impairment charge should be recognised at
June 2023.
The disposal of $15.0m of goodwill relates to the Gulf of Mexico
business that completed during the first half of 2023.
12. Provisions
Asbestos related Litigation related Project related
litigation Insurance Property provisions provisions Total
2023 $m $m $m $m $m $m
At 1 January 2023 311.4 46.2 26.0 12.8 63.3 459.7
Reclassifications 10.5 1.2 (0.2) (0.2) (1.7) 9.6
Utilised (37.9) - (0.3) (10.9) (10.4) (59.5)
Charge to income
statement 17.5 6.5 0.8 0.2 13.7 38.7
Released to income
statement (0.4) (10.9) (0.1) - (7.8) (19.2)
Exchange movements 1.1 - 0.5 0.3 0.2 2.1
At 30 June 2023 302.2 43.0 26.7 2.2 57.3 431.4
Presented as
Current - - 2.4 0.2 33.6 36.2
Non-current 302.2 43.0 24.3 2.0 23.7 395.2
Asbestos related Litigation related Project related
litigation Insurance Property provisions provisions Total
2022 $m $m $m $m $m $m
At 1 January 2022 342.1 55.3 32.3 93.3 112.2 635.2
Reclassifications 10.3 - 0.2 - 1.3 11.8
Utilised (23.5) (3.1) (1.1) (7.0) (34.9) (69.6)
Charge to income
statement 2.9 - (0.1) 0.1 3.3 6.2
Released to income
statement (25.4) (8.1) (0.3) - (14.1) (47.9)
Exchange movements (3.7) - (1.0) (0.1) (3.2) (8.0)
At 30 June 2022 302.7 44.1 30.0 86.3 64.6 527.7
Presented as
Current - - 5.0 0.3 24.9 30.2
Non-current 302.7 44.1 25.0 86.0 39.7 497.5
Asbestos related litigation
The Group assumed the majority of its asbestos-related
liabilities when it acquired Amec Foster Wheeler in October 2017.
Whilst some of the asbestos claims have been and are expected to be
made in the United Kingdom, the overwhelming majority have been and
are expected to be made in the United States.
Some of Amec Foster Wheeler's US subsidiaries are defendants in
numerous asbestos-related lawsuits and out-of-court informal claims
pending. Plaintiffs claim damages for personal injury alleged to
have arisen from exposure to, or use of, asbestos in connection
with work allegedly performed during the 1970s and earlier. The
estimates and averages presented have been calculated on the basis
of the historical US asbestos claims since the initiation of claims
filed against these entities.
The number and cost of current and future asbestos claims in the
US could be substantially higher than estimated and the timing of
payment of claims could be sooner than estimated, which could
adversely affect the Group's financial position, its results and
its cash flows.
The Group expects these subsidiaries to be named as defendants
in similar suits and that new claims will be filed in the future.
For purposes of these financial statements, management have
estimated the indemnity and defence costs to be incurred in
resolving pending and forecasted claims through to 2050. Although
we believe that these estimates are reasonable, the actual number
of future claims brought against these subsidiaries and the cost of
resolving these claims could be higher.
Some of the factors that may result in the costs of asbestos
claims being higher than the current estimates include:
-- an increase in the rate at which new claims are filed and an
increase in the number of new claimants;
-- increases in legal fees or other defence costs associated with asbestos claims; and
-- increases in indemnity payments, decreases in the proportion
of claims dismissed with zero payment and payments being required
to be made sooner than expected.
The Group has worked with its advisors with respect to
projecting asbestos liabilities and to estimate the amount of
asbestos-related indemnity and defence costs at each year-end
through to 2050. Each year the Group records its estimated asbestos
liability at a level consistent with the advisors' reasonable best
estimate. The Group's advisors perform a quarterly and annual
review of asbestos indemnity payments, defence costs and claims
activity and compare them to the forecast prepared at the previous
year-end. Based on its review, they may recommend that the
assumptions used to estimate future asbestos liabilities are
updated, as appropriate.
The total liability recorded in the Group's balance sheet at 30
June 2023 is based on estimated indemnity and defence costs
expected to be incurred to 2050. Management believe that any new
claims filed after 2050 will be minimal.
A net interest charge of $5.5m for the time value of money (June
2022: $2.8m) and a yield curve charge of $2.0m (June 2022: $23.8m
credit), which is driven by the reduction in the 30-year US
Treasury Bond rate in the first half of 2023, is included within
exceptional items on the basis that movements in the provision are
non-trading and driven by market conditions out with the Group's
control. An additional $10.0m increase in the provision, offset by
a corresponding increase in the insurance receivable has been
recorded to reflect amounts receivable in the first half of the
year from insurance providers. Asbestos related receivables
represents management's best estimate of insurance recoveries
relating to liabilities for pending and estimated future asbestos
claims through to 2050. The receivables are only recognised when it
is virtually certain that the claim will be paid. The Group's
asbestos-related assets have been discounted at an appropriate rate
of interest.
The net asbestos liability at 30 June 2023 amounted to $317.3m
(December 2022: $335.4m) and comprised $302.2m in provisions
(December 2022: $311.4m) and $49.6m in trade and other payables
(December 2022: $59.5m) less $25.5m in long term receivables
(December 2022: $24.4m) and $9.0m in trade and other receivables
(December 2022: $11.1m).
Insurance provisions
The Group has liabilities in relation to its captive insurance
companies of $43.0m (December 2022: $46.2m).
The Group currently has one captive insurance company, Garlan
Insurance Limited, which is active and is based in Guernsey. The
company provides insurance solely to other Group companies and does
not provide any insurance to third parties. The provisions recorded
represent amounts payable to external parties in respect of claims,
the value of which is based on actuarial reports which assess the
likelihood and value of these claims. These are reassessed
annually, with movements in claim reserves being recorded in the
income statement.
Property provisions
Property provisions total $26.7m (December 2022: $26.0m).
Property provisions mainly comprise of dilapidations relating to
the cost of restoring leased property back into its original,
pre-let condition. The estimate of costs is the greatest area of
uncertainty and the timing of future cash outflows is linked to the
term dates of numerous individual leases.
Litigation related provisions
The Group is party to litigation involving clients and
sub-contractors arising from its contracting activities. Management
has taken internal and external legal advice in considering known
or reasonably likely legal claims and actions by and against the
Group. Where a known or likely claim or action is identified,
management carefully assesses the likelihood of success of the
claim or action. A provision is recognised only in respect of those
claims or actions where management consider it is probable that a
cash outflow will be required.
Provision is made for management's best estimate of the likely
settlement costs and/or damages to be awarded for those claims and
actions that management considers are likely to be successful. Due
to the inherent commercial, legal and technical uncertainties in
estimating project claims, the amounts ultimately paid or realised
by the Group could differ from the amounts that are recognised in
the financial statements.
Investigations
Under the terms of the investigation resolutions concluded in
2021, the Group paid approximately $38m in compensation,
disgorgement and prejudgment interest, fines and penalties in
instalments, including its final payment to the Crown Office and
Procurator Fiscal Service in Scotland in the first half of 2023.
The Group will pay the remaining amounts due to the SFO in
2024.
At 30 June 2023, the Group continues to recognise the final
instalment of outstanding penalties of $35.3m (December 2022:
$37.3m) within Trade and other payables. The non-current portion at
30 June 2023 is now $nil (December 2022: $33.6m).
Other litigations
Other items relating to litigation are included within the
overall provision, none of which are individually material.
Project related provisions
The Group has numerous provisions relating to the projects it
undertakes for its customers. The value of these provisions relies
on specific judgements in areas such as the estimate of future
costs or the outcome of disputes and litigation. Whether or not
each of these provisions will be required, the exact amount that
will require to be paid and the timing of any payment will depend
on the actual outcomes.
Aegis Poland
This legacy AFW project involves the construction of various
buildings to house the Aegis Ashore anti-missile defence facility
for the United States Army Corps of Engineers ("USACE"). Wood's
construction scope is now complete and has been formally handed
over to USACE. There has been no change in management's assessment
of the loss at completion which remains at $222m. The full amount
of this loss has been recognised to date.
The Group's assessment of the ultimate loss includes change
orders which have not been approved by the customer. They are
estimated based on the amount that is deemed to be highly probable
to be recovered. That estimation is made considering the risks and
likelihood of recovery of change orders. The Group's assessment of
liquidated damages involves an expectation of relief from possible
obligations linked to delays on the contract. These liquidated
damages and relief assumptions are estimates prepared in
conjunction with the change orders estimates noted above. The range
of possible outcomes in respect to the change orders that are
highly likely to be recoverable and the liquidated damages for
which a relief will be obtained is material. The Group has
classified the receivable balances as non-current due to the
element of uncertainty surrounding the timing of the receipt of
these balances. The ultimate loss also includes the Group's
assessment of the total legal costs necessary to achieve recovery
of the amounts believed to be recoverable and defend our position
on liquidated damages. At this point in time this is an estimate
based on a weighted average of several possible outcomes and the
actual costs could be materially higher or lower depending on
actual route to settlement.
If the amounts agreed are different to the assumptions made,
then the ultimate loss could be materially different. At 30 June
2023, provisions of $8.8m (December 2022: $15.6m) are recognised
which represent the element of the full contract loss which has
been recognised through the income statement to date but for which
revenue has not yet been recognised or costs incurred. In reaching
its assessment of the ultimate loss, management have made certain
estimates and assumptions relating to the recovery of costs from
USACE and the final costs to complete. If the actual outcome
differs from these estimates and assumptions, the ultimate loss
will be different.
Other project related provisions
Certain of the jurisdictions in which the Group operates, in
particular the US and the EU, have environmental laws under which
current and past owners or operators of property may be jointly and
severally liable for the costs of removal or remediation of toxic
or hazardous substances on or under their property, regardless of
whether such materials were released in violation of law and
whether the operator or owner knew of, or was responsible for, the
presence of such substances. Largely as a consequence of the
acquisition of Amec Foster Wheeler, the Group currently owns and
operates, or owned and operated, industrial facilities. It is
likely that, as a result of the Group's current or former
operations, hazardous substances have affected the property on
which those facilities are or were situated.
In the past the Group has received and may continue to receive
claims pursuant to indemnity obligations from the present owners of
facilities we have transferred, which may require us to incur costs
for investigation, remediation and monitoring. As at 30 June 2023,
the Group has a $0.2m provision (December 2022: $6.9m) for the
currently understood cost of monitoring and estimated environmental
clean-up costs in relation to industrial facilities that it no
longer operates.
As described in note 18, the Group agreed to indemnify certain
third parties relating to businesses and/or assets that were
previously owned by the Group and were sold to them. These
principally relate to businesses that were sold by Amec Foster
Wheeler prior to its acquisition by the Group. The Group had
recognised legacy provisions which comprised many individually
immaterial provisions relating to a large number of contracts and
exposures. The Group manages its exposure to these liabilities
within Investment Services and the provision was increased during
the first half of 2023 based on our latest assessment of the
probable outflow required to settle the exposures.
The balance of project related provisions relates to a number of
provisions which are not individually material or significant.
13. Related party transactions
The following transactions were carried out with the Group's
joint ventures in the six months to 30 June. These transactions
comprise sales and purchase of goods and services in the ordinary
course of business. The receivables include loans to certain joint
venture companies.
Audited
Unaudited Unaudited Full Year
Interim Interim December
June 2023 June 2022 2022
$m $m $m
---------------------------------------------- ----------
Sales of goods and services to joint ventures 0.4 7.3 12.2
Purchase of goods and services from joint
ventures 1.8 0.1 4.3
Receivables from joint ventures 7.6 9.9 8.9
Payables to joint ventures 0.1 1.3 0.3
---------------------------------------------- ----------
The Group operates a number of defined benefit pension
arrangements and seeks to fund these arrangements to ensure that
all benefits can be paid as and when they fall due. The Group has
an agreed schedule of contributions with the UK plan's trustees
where amounts payable by the Group are dependent on the funding
level of the respective scheme. The US plans are funded to ensure
that statutory obligations are met and contributions are generally
payable to at least minimum funding requirements. Note 9 sets out
details of the Group's pension obligations under these
arrangements.
14. Analysis of net debt
Unaudited
Cash at 30 June
At 1 January 2023 flow Other Exchange movements 2023
$m $m $m $m $m
Short term borrowings (345.9) 105.5 2.1 (22.9) (261.2)
Long term borrowings (584.0) (257.0) (1.9) (0.3) (843.2)
(929.9) (151.5) 0.2 (23.2) (1,104.4)
Cash and cash equivalents 536.7 (87.8) - 1.3 450.2
Net debt before leases (393.2) (239.3) 0.2 (21.9) (654.2)
Leases (342.9) 52.4 (27.7) (7.5) (325.7)
Net debt including leases (736.1) (186.9) (27.5) (29.4) (979.9)
Unaudited
Cash at 30 June
At 1 January 2022 flow Other Exchange movements 2022
$m $m $m $m $m
Short term borrowings (281.9) (12.9) (27.9) 1.2 (321.5)
Long term borrowings (1,614.1) (231.4) (2.1) (0.2) (1,847.8)
(1,896.0) (244.3) (30.0) 1.0 (2,169.3)
Cash and cash equivalents 503.0 (85.7) - (12.8) 404.5
Cash and cash equivalents included in assets held
for sale - 8.5 - - 8.5
Net debt before leases (1,393.0) (321.5) (30.0) (11.8) (1,756.3)
Leases (449.8) 66.8 (40.7) 24.1 (399.6)
Net debt including leases (1,842.8) (254.7) (70.7) 12.3 (2,155.9)
Cash at bank and in hand at 30 June 2023 includes $243.5m
(December 2022: $328.4m) that is part of the Group's cash pooling
arrangements. For internal reporting and the calculation of
interest, this amount is netted with short-term overdrafts and is
presented as a net figure on the Group's balance sheet. In
preparing these financial statements, the Group is required to
gross up both its cash and short-term borrowings figures by this
amount.
The cash and cash equivalents balance includes amounts
classified as restricted cash totalling $11.5m (June 2022: $18.0m
and December 2022: $15.0m). $9.3m of the balance represents cash
held in jurisdictions where there is insufficient liquidity in the
local market to allow for immediate repatriation (December 2022:
$10.0m). The remaining $2.3m (June 2022: $7.6m and December 2022:
$5.0m) relates to balances held within Russia that are potentially
exposed to the sanctions associated with Russia's invasion of
Ukraine but are expected to be used to settle in-country
liabilities. Management considers it appropriate to include the
restricted cash balance in the Group's net debt figure on the basis
that it meets the definition of cash, albeit is not readily
available to the Group.
The lease liability at 30 June is made up of long term leases of
$234.9m (June 2022: $251.3m) short term leases of $90.8m (June
2022: $88.2m) and held for sale lease liabilities of $nil (June
2022: $60.1m).
The other movement of $27.5m (June 2022: $70.7m) in the above
table represents new leases entered into of $23.1m (June 2022:
$32.1m) and disposals of $3.9m (June 2022: $nil) during the first
half, interest expense of $8.5m (June 2022: $8.6m), amortisation of
bank facility fees of $1.9m (June 2022: $2.1m) partially offset by
a reduction in accrued interest on short-term borrowings of $2.1m
(June 2022: $27.9m increase).
As at 30 June 2023, the Group had received $200.0m (December
2022: $200.0m) of cash relating to non-recourse financing
arrangements. An equivalent amount of trade receivables was
derecognised on receipt of the cash. At 30 June 2023, $76.1m
(December 2022: $113.6m) had been received from customers in the
normal course of business in relation to the same amounts received
from the factors. This $76.1m (December 2022: $113.6m) is due to be
paid over to the factors and is included in trade payables. The
impact of both the cash received from the facility and the cash
received from customers is included within cash generated from
operations.
15. Share based payment arrangements
Share based charges for the period of $9.8m (June 2022: $8.5m)
relate to options granted under the Group's executive share option
schemes and awards under the Long-Term Plan. The charge is included
in administrative expenses in the income statement.
For the period to 30 June 2023, $0.8m (June 2022: $0.6m) of
shares have been acquired by employee share trusts in the open
market using funds provided by the Group to meet obligations under
the Share Incentive Plan ('SIP').
16. Financial risk management and financial instruments
Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (including foreign exchange and cash flow
interest rate risk), credit risk and liquidity risk. The condensed
interim financial statements do not include all financial risk
management information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's 2022 Annual Report and Accounts.
There have been no material changes in the risk management
function or in any risk management policies since 31 December
2022.
Fair value of non-derivative financial assets and financial
liabilities
The fair value of short-term borrowings, trade and other
payables, trade and other receivables, short-term deposits and cash
at bank and in hand approximates to the carrying amount because of
the short maturity of interest rates in respect of these
instruments.
Derivative financial assets and liabilities
The Group enters into forward contracts to hedge foreign
exchange exposures arising in the normal course of business. The
Group also hedges against changes in interest rates by entering
into interest rate swaps. The fair values of these derivative
financial instruments are included in financial assets and trade
and other payables in the Group balance sheet. The fair values at
30 June 2023 are not significant.
17. Capital commitments
At 30 June 2023, the Group has entered into contracts for future
capital expenditure amounting to $53.8m relating to property plant
and equipment and intangible assets. These capital commitments
mainly relate to various existing software packages which are
subsequently amortised over their useful lives. These capital
commitments have not been provided for in the financial
statements.
18. Contingent liabilities
Cross guarantees
At the balance sheet date, the Group had cross guarantees
without limit extended to its principal bankers in respect of sums
advanced to subsidiaries.
Legal Claims
From time to time, the Group is notified of claims in respect of
work carried out. For a number of these claims the potential
exposure is material. Where management believes we are in a strong
position to defend these claims no provision is made. This includes
a civil administrative determination, made by the Contraloría
General de la República de Colombia against two Amec Foster Wheeler
subsidiaries, along with 22 others, in relation to work carried out
for Refineria de Cartagena, S.A ("Reficar") between 2009 and 2016.
We are continuing to vigorously challenge this determination and we
are confident in our ability to prevail.
At any point in time there are a number of claims where it is
too early to assess the merit of the claim, and hence it is not
possible to make a reliable estimate of the potential financial
impact.
The group carries insurance coverage and in the event of future
economic outflow arising with respect to any of these
contingencies, an element of reimbursement may occur, subject to
any excess or other policy restrictions and limits.
Investigations
Following the settlement of the various regulatory
investigations in 2021, it remains possible that there may be other
adverse consequences for the Group's business including actions by
authorities in other jurisdictions. At this time, however, these
consequences and likelihood of potential further investigations
cannot be reliably estimated, and therefore no provision has been
made in respect of them in the financial statements.
Employment claims
The Group received assessments from HMRC into the historical
application of employer's National Insurance Contributions to
workers on the UK Continental Shelf. The assessments have been
appealed and our case is stayed pending the outcome of a similar
case with another Group. We believe it is more likely than not that
we will be able to defend this challenge and therefore as a result
do not expect that it is probable a liability will arise. The
maximum potential exposure to the Group in relation to tax and
interest should we be unsuccessful in our position is approximately
$30m.
Indemnities and retained obligations
The Group has agreed to indemnify certain third parties relating
to businesses and/or assets that were previously owned by the Group
and were sold to them. Such indemnifications relate primarily to
breach of covenants, breach of representations and warranties, as
well as potential exposure for retained liabilities, environmental
matters and third party claims for activities conducted by the
Group prior to the sale of such businesses and/or assets. We have
established provisions for those indemnities in respect of which we
consider it probable that there will be a successful claim, to the
extent such claim is quantifiable. The Group sold its Built
Environment Consulting business to WSP in late 2022 and the share
purchase agreement provided an indemnity for losses on three
specified contracts. No provisions were considered necessary for
these contracts as at 30 June 2023.
Tax planning
HMRC have challenged the deductibility of certain interest
expenses previously considered as part of the EU State Aid
investigation into the UK controlled foreign company regime. HMRC
are currently at the information gathering stage. We believe that
the interest deductions have been appropriately taken in line with
tax legislation and guidance and therefore do not expect any
outflow as a result, however we continue to monitor case law in the
area and will consider the challenges of HMRC when raised. The
maximum potential exposure to the Group including interest in
relation to the interest deductions is approximately $39m and in
the event of any amount ultimately being payable there is no
prospect of any reimbursement.
19. Post balance sheet events
The directors have reviewed the position of the Group, up to the
date authorised for issue of these financial statements and have
not identified any events arising after the reporting period which
require disclosure.
Statement of directors' responsibilities
for the six month period to 30 June 2023
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
for use in the UK;
-- the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The directors of John Wood Group PLC are listed in the Group's
2022 Annual Report and Accounts.
K Gilmartin
Chief Executive
D Kemp
Chief Financial Officer
21 August 2023
Independent review report to John Wood Group PLC
Conclusion
We have been engaged by John Wood Group plc ("the Company") to
review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 which
comprises the Group income statement, the Group statement of
comprehensive income, the Group balance sheet, the Group statement
of changes in equity, the Group cash flow statement and the related
explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2023 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK and the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. We
read the other information contained in the half-yearly financial
report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of conclusion
section of this report, nothing has come to our attention that
causes us to believe that the directors have inappropriately
adopted the going concern basis of accounting, or that the
directors have identified material uncertainties relating to going
concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with UK-adopted international
accounting standards.
The directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the
directors are responsible for assessing the group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion section of this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Paul Glendenning
for and on behalf of KPMG LLP
Chartered Accountants
1 Marischal Square
Aberdeen
AB10 1DD
21 August 2023
Shareholder information
Officers and advisers
Secretary and Registered Registrars
Office
M McIntyre Equiniti
John Wood Group PLC Aspect House
15 Justice Mill Lane Spencer Road
Aberdeen Lancing
AB11 6EQ West Sussex
BN99 6DA
Tel: 01224 851000 Tel: 0371 384 2649
Stockbrokers Independent Auditor
JPMorgan Cazenove Limited KPMG LLP
Morgan Stanley Chartered Accountants
and Statutory Auditors
1 Marischal Square
Company solicitors Aberdeen
Slaughter and May AB10 1DD
The Group's Investor Relations website can be accessed at
www.woodplc.com.
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END
IR NKDBQKBKBAFB
(END) Dow Jones Newswires
August 22, 2023 02:00 ET (06:00 GMT)
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