John Wood Group PLC

Good day and thank you for standing by. Welcome to the Wood Group half-year results call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone, and you will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1, 1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ian Torrens, Group CFO. Please go ahead.

Thank you, and good morning, everybody, and welcome to the WID Group Happier 25 announcement. So just to begin, this past year has been one of significant challenge and transition for the group. That said, we're pleased to have published our full year 24 annual report and accounts and H125 interim results together with the supplementary circular for the Sedara acquisition. I would like to thank our shareholders, employees and clients for their continued support and patience during what has been an extremely difficult period. I also believe yesterday represented an important milestone for Wood in moving forward. providing stability for the business and delivering some value for shareholders through the proposed SEDARA acquisition. The preparation of financial statements and the subsequent completion of the audit process has taken longer than anticipated, reflecting the complexity of the issues identified and the extensive work required to ensure the integrity of the financial statements and appropriate safeguarding their preparation. Due to the passage of time, the departure of key personnel and the inherent limitations in applying retrospective knowledge to historic events, it was not possible to determine with precision the appropriate financial periods for certain adjustments. Accordingly, our focus in the first instance has been to ensure that the 31 December 2024 balance sheet reflects an accurate and reliable position with allocations to financial periods undertaken on an estimated basis. This approach provides a clear and definitive starting point for the group as it moves forward. It also satisfies certain of the exceptional conditions related to the Sudara offer, enabling us to move forward with the shareholder vote for the Sudara acquisition. In response to these challenges, we have taken and are continuing to take decisive action to reinforce governance and financial discipline. This has included leadership changes within the finance function, the engagement of external technical accounting experts and the implementation of enhanced controls. But through a statement of priority results and the adjustments identified through our auditor's challenge and the independent review have been significant, they represent an important step in restoring confidence ensuring compliance with accounting standards and maintaining the integrity of the group's financial records and financial statements. Against this backdrop, I will today provide some high-level context in the financial statements and take any questions at the end you may have, recognising that the full detail, including the impact of your statements, is set out in the published documents. Looking ahead, now that the financial statements have been published, our focus is on embedding these improvements strengthening our operating model and delivering sustainable value for the business. We are also seeking the readmission of shares as soon as possible to the resumption of training. If we look first at 2024, revenue of $5.5 billion in 24 was down 1% compared to 23, with growth in operations upset by a significant decline in consulting and a small decline in projects. Adjusted EBIT at $81 million in 24 was 52% lower than 23, despite benefiting from the cancellation of the year's employee annual bonus originally planned to be $36 million. Included within adjusted EBIT are $55 million of independent review charges that will not repeat in future periods. To help explain our results, we have shown this as a separate line item. Even excluding this, we saw an underlying decline in profitability across all business units. Consulting saw 68% reduction in adjusted EBIT to $20 million. This mostly relates to $22 million of losses on one contract in our system integration business within digital consulting, where we recognised a $16 million loss provision and de-recognised $6 million of revenue. In projects, we saw an adjusted EBIT of $38 million, though this includes $46 million of charges related to the independent review. Excluding this, so adjusted EBIT for projects at 84 million and up 19% compared to last year. An improvement driven by the completion of a number of contracts and cost savings made. Operations saw revenue growth but a reduction in adjusted EBIT to $94 million as revenue growth and some improved pricing was offset by $24 million of charges recognised across three contracts. The largest loss here relates to one contract where our client trades under Chapter 11 and is currently going through a complex sale process. We expect to recover some of these losses in the future as we establish a relationship with the new owner. Group performance was lower than previously reported in our trading update on the 14th of February 25 with actual 2024 adjusted EBIT of 81 million versus previously reported 205 to 215 million. And this difference was driven by $55 million of non-exceptional independent review charges, $46 million of losses related to the consulting and operations BUs, in part due to the extended timeline of the results process, which led to further assessment of contracts in 2025, and a revised assessment of the classification of some charges between exceptional and adjusted results. Whilst operating cash flow improved, we saw a free cash outflow of 153 million in the year despite the benefit of actively managing working capital at the year end. Net debt excluding leases remain broadly flat after business disposals and at 31 December 24 was 683 million. The prior year was 694 million. After combined disposal proceeds in 2024 of 170 million. However, average net debt excluding leases was around $8 billion throughout the year, and the prior year was about $800 million. Our statutory results show a loss of $2.8 billion, with the largest impacts being at $267 million, reflecting revised revenue recognition on a legacy AFW project, reflecting the stringent requirements of IFRS 15. $158 million of other exceptional items included in continuing operations related to further charges related to LSTK and large scale EPC contracts, asbestos related charges, the cost of our simplification program, costs related to implementing the SAS ERP system and charges related to the independent review. And finally, a 2.2 billion impairment of goodwill and intangible assets, reflecting the impact of higher discount rates and an increase in the risk factors, particularly around the project business unit, leading to significant downward revisions to forecasts used. Turning to the H125 results, our results for the first half of 25 reflected the challenges we had faced. Whilst our order book grew overall, helped by some large EPCM opportunities in projects and big renewals in operations, revenue was down 13% compared to last year at $2.4 billion. Adjusted EBIT of $63 million was 38% lower than the last year when we exclude independent review charges. We faced some delays in key client programs in projects and a slower than expected ramp up in operations. Our trading was also impacted by the difficult situation we faced, with a backdrop of uncertainty related to the independent review, the delays of publication of our 2024 audited accounts, and the tightening of liquidity as the period progressed, given that we had to postpone our planned refinancing. In particular, access to our uncommitted financing facilities was restricted, including bonding and receivable facilities, making it more difficult for us to win new business and begin work on new projects we had previously won, as well as creating a significant working capital unwind. Our trading in this period was reflective of these pressures. However, despite these challenges, our clients have continued to award us significant work during this period. And this is testament to the excellent work our people do every day and of our deep technical expertise. Given the continued uncertainty at this point, we are not providing financial guidance, having previously removed our profit forecast in the Sedara scheme document published in September 25. Wood remains well-placed to benefit from significant long-term growth drivers across the energy and material markets. supported by our technical expertise and long-term client relationships. The company has continued over the last 18 months to receive strong support, including new awards from our client base, with business wins during the year, including from BP, Shell, Total Energies, Woodside's Triton Project, OMV, Petrom, and Antofagasta. Our order book at the 30th of June 25 was around $6.5 billion, significantly improved from the $5.8 billion position at 31 December 24. The publication of our financial statements yesterday satisfies certain of the conditions relating to Sudara's offer and a supplementary circular to the scheme document has been sent to shareholders. The Sudara offer represents the best through this difficult period and provides a clear pathway to secure the long-term future of the company to enable us to continue serving our clients around the world. The Board of Wood continues to recommend that shareholders vote in favour of the transaction. To ensure shareholders have sufficient time with the supplementary circular prior to the vote, we have delayed the shareholder vote to 17 November, 2025 at three o'clock. Shareholder approval of the transaction will enable the extension of our debt facilities to 2028 to become effective and facilitate the receipt of the initial $250 million capital injection from Sedara, which will significantly reduce uncertainty and improve our liquidity position. creating a path to stability for the business, our clients and our employees. Subject to the approval of our shareholders, the transaction is expected to complete in the first half of 2026. I would like to thank the employees at Wood for working tirelessly through 2025, continuing to deliver for our clients and for helping us to deliver on the orders of clients. As previously announced, Ken Gilmartin will step down the shareholder vote on the Sedara acquisition, and I will take over as group CEO. Since joining Wood, I have developed a strong belief in the underlying strength of the business, our client relationships, and the quality of our people. We are now focused on improving the execution of the company's strategy for our clients and employees, while delivering an outcome that delivers some value for our shareholders. I appreciate that there is a huge amount to digest across yesterday's announcements. I would be happy to take any questions. Thank you very much.

Thank you. If you would like to ask a question, you'll need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 1 1 again. Once again, if you would like to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. Thank you. We will now take our first question. This is from Alex Patterson at Peel Hunt. Please go ahead.