Shares in Wood Group fell 11 per cent on Tuesday after the UK energy services company announced a $100mn charge on a US anti-missile defence project in Poland and delayed publication of its annual results.
The Aberdeen-based group said it now expected to lose $222mn, revised up from $133mn, on the Aegis Poland project, inherited from its £2.2bn takeover of Amec Foster Wheeler in 2017.
It would recover less than expected from the customer at a greater legal cost, and completing the project would incur an increased cash outflow of $20mn, the FTSE 250 group said.
An external investigation and review, primarily into “the historical carrying value” of the Aegis Poland project contract, would need to be undertaken to conclude the year-end audit process, it said, delaying the release of its annual results, which had been scheduled for March 8.
The charge is the latest setback for company, which issued a profit warning in November. Its shares have lost almost three-quarters of their value since 2018.
“This Aegis situation is just the latest in a multiyear sequence of cash leakage from the business,” said Mark Wilson, an analyst at Jefferies, adding that Wood had chalked up $874mn of exceptional charges since 2015.
The fixed-price engineering, procurement and construction contract, which involves constructing buildings for the Aegis Ashore anti-missile defence facility for the US Army Corps of Engineers, was won by Amec Foster Wheeler in 2016.
Wood said that the project was 90 per cent complete at the end of 2021 and was expected to be operationally complete by the second half of this year.
Other energy services groups have struggled in recent months, with Italy’s Saipem issuing a profit warning at the end of January as rising costs hit its margins, particularly on wind power projects.
Wood is pinning its hopes on diversifying to bring in more revenues from clean energy projects such as wind farms and hydrogen, and reducing its reliance on engineering services for oil and gas production.
It is undertaking a strategic review of its infrastructure engineering consultancy, which it may spin off or sell and which could help to reduce the company’s high debt levels.
The company said that the underlying results for its 2021 financial year and the outlook for the following year remained unchanged.
Wood Group shares slide on $100mn charge and delayed results
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