Wood Group considers selling consultancy after profit warning

WOOD GROUP, the FTSE 250 energy services firm, is mulling a sale of its infrastructure engineering consultancy as it warned annual profits will be lower than expected.

The company has launched a strategic review of the business, thought to be worth up to $2.5bn (£2.2bn), which helps plan and build roads, mines, water facilities and other infrastructure projects.

Wood Group, which is based in Aberdeen, said it did not believe the business was being valued properly as part of the group and that the review will “consider a range of options to best unlock value”.

The division employs 7,000 people, about 6,000 of whom are in the US with the rest largely in the UK. It is expected to bring in $1.3bn in sales this year.

“A growing order book and exposure to both government stimulus for infrastructure development and the drive for sustainability and climate resilience, most notably in North America and the UK, positions the business well for future growth,” Wood Group said.

In a trading update yesterday, the company said markets were improving after the pandemic and it expects the second half of this year to be better than the first.

But it flagged “slower than anticipated” recovery in projects, with activity deferred to next year.

It now expects full-year sales to come in at roughly $6.4bn, compared with previous expectations of $6.6bn to $6.8bn. Forecast profit margin is now 8.5pc to 8.7pc, compared with 8.7pc to 8.9pc previously. It also expects debt of $1.25bn to be flat instead of falling.

Having started out working on oil and gas projects in the North Sea, Wood Group is now one of the world’s largest engineering groups, with about 40,000 people working in 60 countries, and sales of $7.6bn in 2020.

In 2017 it paid £2.2bn for rival Amec Foster Wheeler to try and tap into the US onshore shale oil and gas sector. It has been diversifying into sectors such as renewables which made up about a quarter of its market last year.

Michael Alsford, analyst at Citi, said the review of the consulting division “could unlock meaningful value”, while an outright sale could help it cut debt. He estimates it could fetch $1.9bn to $2.5bn.

Shares fell by 4.5pc to close at 191.9p, their lowest level for more than a year.