ABERDEEN-BASED Wood Group, which provides engineering design, production support and gas-turbine services to the oil and gas and power-generation industries delivers its pre-close trading update for this year on Thursday.
Since its integration into the group from April, the contribution from PSN has improved since the first-half results, but margin progression has been held up by start-up delays in Oman and Australia.
Wood’s gas-turbine service division had been suffering from similar problems, having won large contracts in the US and Israel last year, but these are now on the cusp of making profit contributions.
Cash flow is traditionally seasonally better in the second half and this year will be boosted by the one-off working-capital adjustment relating to the sale of the group’s well-support division in February to General Electric for £1.7billion.
Wood’s third-quarter trading update in October reiterated the same positive message at the interim results. The commodity price backdrop appeared to be supporting customer investment plans, particularly in the engineering division which was benefiting from strong demand from the subsea and pipeline sub-sectors. These areas feature strongly in the capital expenditure budgets of the major oil companies.
Turnover for the current year is estimated to increase 11% to £3.5billion, with profits before tax up 15% to £190million. The shares currently yield a dividend of about 1.2%.
By Barry Shepherd, an investment manager at financial-planning and wealth-management specialist Brewin Dolphin in Aberdeen.