John Wood Group PLC

Well, good morning, everyone, and thank you for joining us today for our first half results presentation. We hope you're all staying healthy during this difficult time, and we do look forward to meeting you all in person, as and when circumstances allow. As always, our CFO, David Kemp, will take you through our financial performance shortly, and I'll be bookending David's presentation focused on three major themes running through our business. Firstly, how we've responded to the needs of today with resilience. Secondly, how well we are positioned in the right markets. And thirdly, how fit we are for the future, leading the pack on ESG. So my three themes will then be resilience, positioning and the future fit nature of our business. We're facing unprecedented challenges in this time of a global health pandemic that is really affecting people's lives and livelihoods across the world. Since the start of April, over 40,000 of our people have been successfully working remotely, with many others continuing to work safely at customer sites supporting vital services. It's their effectiveness in delivering for clients that supports continued demand for our services. We've maintained a regular ongoing dialogue with our people throughout this challenging period, and I'm really encouraged by the extensive positive feedback to our recent staff survey around our approach to people's health, wellbeing and support for flexible working. This informs our cautious approach to returning to the workplace. Resilience is a hallmark of any successful business, but absolutely fundamental in today's environment. And I'm very proud of how Wood has risen to the challenge so far. The personal resilience of our people across the globe to keep delivering for our clients. Financial resilience, providing a solid set of first half results thanks to deliberate actions taken to control what we can control. And enduring resilience as a result of a broader business as well positioned for future growth as the world recovers. The resilience we've built in the business is by design, and it's allowing us to move forward with confidence in an uncertain period. Looking at how we're responding to the world in which we find ourselves today, benefiting from the breadth of our end market exposure, we've seen relative resilience in around 65% of our end markets. We took early and decisive actions in response to the impact of COVID on oil price volatility and our ability to leverage our asset-light model has obviously been key. We've successfully protected margin and delivered first half EBITDA of $305 million. We also completed the actions required to deliver overhead savings of over $200 million in the year. We made excellent progress in portfolio optimisation and completed the disposals of our industrial services and nuclear businesses, and the steps taken to protect cash flow and ensure balance reach strength have helped deliver the reduction in net debt of over $200 million. Looking ahead, crucially, we continue to win work in the first half, securing new orders and scope increases of over $3 billion, and we are seeing encouraging early signs of markets stabilising. In our capital markets event last November, we set out our strategy and our repositioning across three differentiated service lines and two end markets. Throughout today's presentation, we will demonstrate how the delivery of that strategy and our position across the right markets with the right service offering has underpinned our first half performance. Sustainable growth is delivered by embracing a culture which retains talent, customer relationships and our shareholder confidence. Our objective is to be recognised as leaders in sustainability underpinned by our membership of the UN Global Compact. In the first half of 2020, we extended our diversity and inclusion programmes through the modern slavery and human trafficking statement, continued to uphold the Universal Declaration of Human Rights and strengthened our governance in wood. We also announced our pledge to reduce greenhouse gas emissions by 40% by 2030. We're also very well-placed to be responding to the energy transition Decarbonisation is one of the most important opportunities for our business and I'll walk you through some of our expertise in that later. I'm very proud that our differentiated performance is recognised by the leading ratings agencies. Sustainalytics rank as 6th out of 137. 6th. of 137 in the energy services sector and ahead of E&C peers, and MSCI have awarded us a consistent AA rating over the past five years. Further detail about our sustainability performance can be found in our latest sustainability report, which is published later this month. I'll now hand over to David to discuss our detailed financial performance.

Thank you, Robin. As Robin noted, our first half results reflect relative resilience together with our focus on reducing cost, protecting margins and cash flow, and ensuring balance sheet strength. Revenue of 4.1 billion benefited from our broad end market exposure, with 65% of activity derived from chemicals and downstream, renewables and other energy, and the built environment. Oil price volatility impacted upstream oil and gas activity, which accounted for 35% of revenue. We delivered EBITDA of £305 million at the upper end of guidance and ahead of consensus. Our ability to leverage our asset-light model together with our differentiated services has been key to protecting margins. We took early and decisive action on cost, maintaining operational utilisation at high levels and reducing overheads in anticipation of lower activity. EBITDA margin was down only half a percent on H1 2019. In the first half, we completed actions to deliver full year overhead savings of over 200 million, with around 70 million recognised in the first half. This supports our confidence in delivering stronger second half margins and our objective of maintaining full year margins at the 2019 level of 8.6%. The savings include the synergies relating to the creation of TCS and previously announced margin improvement initiatives. Our actions took effect quickly and typically incurred a low cost. Actions included voluntary salary reductions of 10% from 1st of April until the end of the year for the board, executive directors and senior leaders. Temporary and regrettably permanent headcount reductions and lower discretionary spend. Around half of the $200 million will endure beyond 2020, which supports our medium-term margin improvement strategy. Looking at performance on a light-for-light basis, we delivered margin improvement in two of our three business units. In the Americas, lower revenues reflected market conditions in upstream, where activity was down as expected. And this was partially offset by continued strength in capital projects activity in chemicals and downstream, where the YCI and GCGV projects continued to progress well. We also saw higher activity in both solar and wind. EBITDA margins reflect lower activity and cost overruns of around 30 million on legacy projects, which we expect to complete in Q3. And this was partially offset by action on cost. In EAAA, we saw lower upstream work, partly offset by robust activity on capital projects work in chemicals and downstream. EBITDA margins remain strong and were up in 2019, reflecting excellent execution and action on cost. In TCS, lower revenue reflects progress on the TCO automation project and a reduced appetite for low margin construction work. Built environment activity accounted for 55% of TCS and was pretty resilient. EBITDA margins were up significantly, benefiting from good execution, synergies from the creation of TCS in Q4 2019, and maintaining good operational utilisation. It's helpful to bridge the H1 2019 to H1 2020 EBITDA. The earnings impact of lower volumes was partially mitigated by our focus on maintaining good operational utilisation. There was no material impact from pricing. We further offset this with early impact of our overhead cost savings of £70 million. The EBITDA impact of businesses disposed, principally the nuclear and industrial services businesses, was £17 million. Despite the impact of overruns on legacy projects in Americas, we delivered EBITDA of $305 million, representing a margin of 7.5%, just 0.5% down on the first half of 2019. Actions to preserve cash and maintain balance sheet strength are reflected in the first half cash performance. We delivered a reduction in net debt to £1.22 billion from £1.77 billion in June 2019 and £1.42 billion in December 2019. Cash generated pre-working capital of £135 million is stated after provisions of £75 million and this compares to provisions movement of £114 million previously. As expected, we are seeing a lower impact from legacy items and we expect a significant reduction in the future. As previously guided, the working capital outflow was driven by the expected unwind of advance payments, principally related to the large US contract due to complete in H2. We saw an inflow from receivables and delivered an improvement in DSO days from 71 in the first half of 2019 to 62 days. A reduction in payables reflected lower activity and the temporary benefit of government payment deferral schemes. Further details are included in the appendix. Cash generated pre-exceptionals was £68 million. And cash exceptional costs of £62 million included restructuring and redundancy costs of £41 million. We made excellent progress with portfolio optimisation and completed the disposals of both industrial services and nuclear in Q1. And as you know, the Board withdrew its recommendation to pay the final 2019 dividend of £160 million. An asset-like cash generative model continues to underpin the basis of our investment case. In the first half, we saw a drag on cash generation from the impact of provision movements on legacy items, exceptional levels of advanced payments unwind, and cost incurred as we took action in response to COVID-19 and oil price volatility. Although EBITDA is at a depressed level in H1, our underlying operational cash flow, excluding these legacy and temporary items, remains strong. For 2020, we have provided guidance for cash outflows in respect of provisions, exceptional items and capex. We expect to benefit from a significant reduction in provision movements relating to projects, asbestos and disposed businesses. particularly as legacy FW items close out and complete. Compared to previous expectations, exceptional items in 2020 will be higher as a result of costs to deliver overhead savings, and this is heavily weighted to H1. The timing of any settlements on regulatory investigations is uncertain and could impact on the outlook on exceptionals. CAPEX includes ongoing costs on engineering software licences. And we've pulled back the pace of the next phase of our ERP implementation, resulting in a lower than expected cash outflow for full year 2020. As you know, risks to second half activity persist and the full year working capital movement will be dependent on activity and the general trading environment. We currently expect a further unwind of the balance of advances on EPC work in H2 to be more than offset by improved working capital performance. Our capital allocation policy is focused on maintaining a strong balance sheet and we remain committed to achieving our target leverage of 1.5 times net debt to EBITDA on a pre-IFRS 16 basis. We have considerable levels of liquidity, with undrawn facilities of over £1.6 billion, with no near-term maturities. Given the levels of global economic uncertainty, the Board considered it prudent not to pay an interim dividend. The Board remains committed to reviewing the future policy once there is greater clarity on the impact of both COVID-19 and oil price volatility. Our success in diversifying our end market exposure is evident in the breadth of work secured in H1. We booked new orders of 3.3 billion in H1, of which 1.7 billion were booked since early March. And these illustrate the breadth of our business and include EPC work for GSK in Europe, onshore and solar EPC wards in the US, an EPCM scope in Iraq, upstream contract extensions in the UK, and an LNG renewal in the Asia Pacific. We also secured a five-year agreement with the US Navy for engineering, design, and maintenance of fuel installations. Order book was $7 billion, down 16% on June 2019 on a light-for-light basis, with $3.1 billion due to be delivered in 2020. we continue to see lower levels of short cycle work coming to market, although our order book gives us higher visibility than is typical at this point. In 2019, we had around 90% either delivered or secured at this point in the year. Whilst we're starting to see early indications of trading conditions stabilising, the risks of downward scope variations, deferrals and cancellation of secured work persist. and we're prepared for a wide range of outcomes. A focus on margin has been at the heart of our actions in the first half. As I outlined earlier, our objective in 2020 is to maintain EBITDA margins at the 2019 level of 8.6% and we're confident of delivering a stronger second half margin. At the Capital Markets Day, we set a specific medium term goal for margin expansion. Delivering on this objective will involve being in the right markets, winning work at the right margin that reflects the value we add, delivering exceptional execution consistently and by being more efficient. The strategic goal remains very much in focus and our delivery in H1 supports this. We remain committed to delivering our medium term EBITDA margin target of over 100 basis points improvement on 2019. Looking to the full year, we'll continue to benefit from the breadth of our activities and see relative strength across chemicals and downstream and built environment, together with a significant increase in renewables activity. We're starting to see early signs of market stabilising and have 3.1 billion due to be delivered in H2. In prior years, we've had circa 90% of revenue delivered or secured at this point. Our focus remains on controlling what we can control. We will maintain high operational utilisation and benefit from the full year impact of over 200 million overhead reductions already completed. These actions and the completion of the legacy energy projects in Americas will deliver a stronger second half margin and our objective is to maintain EBITDA margin at the 2019 level of 8.6%. The benefit of our focus on working capital management, together with lower outflows and non-trading related items, and the decision taken on the interim dividend to protect the balance sheet, will lead to a further reduction in net debt in the second half. In summary, first half results reflect the benefit of our broad end market exposure. and our early and decisive action on cost in response to tough market conditions. We delivered EBITDA at the upper end of guidance and successfully protected margins, and we delivered a significant reduction in net debt. Looking at the full year, we are focused on maintaining our aim of maintaining margins at the 2019 level. and delivering strong cash flow to reduce net debt further in the second half. I will now hand over to Robin.

Thank you, David. As you've heard today, aspects of our investment case have been key to navigating the unique and unparalleled challenges facing the engineering and consultancy market. The breadth of our market exposure has been crucial. If I look back, even as recently as 2014, around 90% of our business was related to upstream oil and gas, compared to 35% today. We also have a balance of CAPEX and OPEX activity in the circa 40-60 ratio, and this really demonstrates the progress we've made to diversify our business. David's outlined how a flexible asset-like model has been crucial to managing overhead costs and utilisation and our ability to maintain agile and position for success. We've an unrivaled track record of controlling what we can control to protect margin in response to changing and challenging market conditions. The early and decisive actions we have taken are a strong example of that. The mixed quality and distribution of our clients is also important to us, We've a high degree of loyalty within our broad, blue-chip client base and around 90% of what we do is repeat business. These strong relationships mean that our client interactions are focused on partnering rather than purely transactional. They also position us well to unlock the significant opportunities in helping our clients achieve their own ambitions in the energy transition and achieving more sustainable infrastructure. As the world recovers from the downturn, we will need engineers to create the right solutions to the world's most critical challenges, not least across energy and the built environment. When it comes to energy transition, we're not simply positioning or building capability like some of our competitors. We're already delivering and earning significant revenue today. This snapshot of what we've delivered to date illustrates the point very clearly. with over 650 projects in wind, 100 plus of which were offshore. 200 plus solar projects over the last 13 years. 30 years of experience in carbon capture and storage, including establishing the best practice model for the UK through our engineering work for the OGCI on their flagship carbon capture and storage transport project. and leading-edge solutions in both blue and green hydrogen, pioneering modular hydrogen units and designing and delivering over 120 units to date. There's a lot of excitement around hydrogen and carbon capture, and to reiterate, they're not just a big part of the future, they're actually part of our past. Our technology and our track record of delivering projects at an industrial and commercial scale unequivocally differentiates us. Our playbook is unrivaled. I'm also very encouraged by the momentum we're seeing in renewables, which really helps to cement our position in the wider energy services market. I'll now share with you just a few examples of the great work we're doing. As discussed, a renewable business is both diverse and growing. In wind, we've supported over 600 projects, totalling 120 gigawatts. To put that in context, that's 20% of the total installed global wind capacity. In 2020, higher activity in solar and wind work will double the size of our renewable revenue stream in the Americas. Our solar business alone will deliver $500 million worth of revenue in 2020. In hydrogen, we're actively advising several clients on innovative solutions and recently completed work on a world's first project with SGN to use green hydrogen in homes. Of course, energy transition will also create opportunities that expand beyond our renewables business. It's also about helping our traditional clients get ready for the future. While the relative proportion of what we do in the oil and gas sector will reduce over time, oil and gas will remain an important part of our energy mix and will remain committed to that sector. Our focus is on engineering solutions for a net zero world, and enhancing the way we partner with clients. Decarbonisation is one of the most important opportunities for our business and the breadth of capabilities that ideally position us as a partner of choice for oil and gas and industrial clients looking to achieve their own net zero goals. We're already delivering some great projects with Equinor. We're integrating offshore wind to electrify the Snow and Goldfax platforms. With Ithaca, we're introducing an industry-first solution to make decommissioning of the offshore Jackie platform carbon neutral. Some of the biggest decarbonisation opportunities will come in retrofitting existing industrial clusters. I've talked about the work with the OGCI Humber Zero, the UK's largest and most ambitious project in terms of the volume of CO2 emissions avoided. And it's another fantastic example of energy transition in action. We're delivering concept and early design to integrate carbon capture technology with industrial sites, treating up to 8 million tonnes of CO2 per annum and then storing it under the North Sea. We're applying a range of technologies, renewable power to generate green hydrogen through electrolysis and blue hydrogen generation with integrated carbon capture. With our trusted clients, we're also moving to more collaborative strategic partnerships and innovative commercial models that offer greater reward for delivery. This is a big shift in the sector that is part of what we mean when we talk about building a premium differentiated business. A good example is a work with BP where we co-identified over 200 opportunities to improve the way we execute work both onshore and offshore. Since then, a dedicated team has been developing solutions aimed at increasing efficiency, productivity and reducing costs. The success of this project in the UK has led to a more extensive rollout of similar projects globally by BP. We also continue to grow in sustainable infrastructure development, including in the planning, design, build and operation of connected and resilient infrastructure across the world. In transportation, we're supporting Metrolink's and Toronto's transit system expansion and upgrade programme. This will improve mobility for the people who live and work in the city and in the wider Ontario region. Our flood risk management solutions are helping improve the resilience of existing infrastructure in coastal areas across the US, the UK and the British Virgin Islands. We're future proofing utilities by delivering innovative digital solutions to clients like Northumbrian Water to help optimise their water and wastewater infrastructure and improve reliability of water supply. We also have world leading capability in creating cleaner environments through remediation and other technical solutions. As the momentum to a cleaner planet continues to gather pace, we see even greater opportunity in the high-margin consultancy work in this field. This work, largely undertaken by the TCS business, remains a core focus of our efforts in 2020 and beyond. I'm really encouraged by the breadth of our portfolio, and it positions us well for growth in the medium to longer term. The outlook for renewables and other energy is positive. CAPEX budgets will be less affected by the impacts of COVID as clients seek to deliver their lower carbon strategies. Pockets of growth in solar and wind in the US that are driving and doubling the renewable revenue in 2020 are expected to continue. Longer term, we expect investment of new technology and government initiatives to support demand. Uncertainty over global growth and demand is pushing some investment decisions in chemicals and downstream to the right. In the near term, we expect increased capital projects activity in asset solutions AAA, but reduced activity in the Americas as existing projects such as YCI progress to completion. The combination of oil price volatility and impact of COVID has translated into significant cuts in upstream CapEx budgets and continued constraints on midstream investment. As a result, we expect upstream activity to continue to be subdued, with projects being initiated to smaller scopes and concept pre-feedback. The longer-term outlook will be dependent on the rate at which global demand recovers. Relative resilience in the built environment in the first half is expected to continue. While there is some risk in the near term that government contract deferrals, our opportunity pipeline is robust. And looking further ahead, we're well positioned for growth opportunities from fiscal stimulus packages, if approved, as well as opportunities from public and private sector bodies seeking to achieve their own sustainability goals. In summary, whilst the uncertainty around the impact of COVID and oil price volatility continue to feature in the near term, the breadth of our end market exposure is expected to continue to deliver relative resilience in two thirds of our business. Longer term, we see good growth prospects as the energy transition continues to gather pace and the world seeks solutions to more sustainable infrastructure and a more sustainable future. We've remained very agile and active and managed the shape of our business. We feel that through this journey, the platform which delivers today and positions as well for the future has been created. We're well-placed to grow as markets recover and benefit from opportunities to engineer solutions to achieve lower carbon energy systems and sustainable infrastructure. The chart on the far right gives an indication of the shape of our business in terms of markets and services we're establishing over the period to 2023. This is a business with a highly differentiated consultancy and project management capability combined with an enduring operational platform. This is a business that will serve the key energy and built environment markets whose growth is very much aligned to climate change imperatives. As energy transition gathers pace, we expect to increase the proportion of revenue derived from renewables, alternative energies and the built environment through the strategic cycle and to reduce the relative proportion of revenue derived from traditional upstream oil and gas markets. So in conclusion, We've talked to you about our resilience and our response to the challenging markets we find ourselves into today. We've also talked about the success of our strategy in delivering a breadth of end market exposure, which is driving revenue resilience and our early and decisive actions on cost. So these steps have really protected our business. They've ensured delivery, provided strength on our balance sheet and helped us win work, even in these most challenging of times. We've highlighted the strength of our strategic position and how our extensive track record and capability set differentiates us in delivering energy transition solutions. And finally, we've shared our thoughts on the future, pivoting towards growth in renewables and built environment and leading the pack on ESG. We have built resilience into the business by design, and this is allowing us to move forward with confidence in an uncertain world. We'll now take questions. Thank you.