Wood Group – the Aberdeen-based oilfield services conglomerate – suffered a 26.3% fall in earnings in the first half of this year as sluggish demand from its oil and gas exploration clients fed downwards through the supply chain.
Earnings before interest, tax and amortisation (EBITA) fell to $166.4 million, from $225.9 million this time last year.
Robin Watson, Chief Executive, said: “We have continued to focus on what we can control and what we can manage during a period where lower oil prices have endured and activity has fallen.
“Our focus remains on managing costs, improving efficiency and maintaining capability. We are working with our customers to work smarter, streamlining work processes while increasing quality and efficiency.
“In 2015 we delivered sustainable overhead cost reductions of $148 million and in the first half of 2016 we have delivered around $50 million of additional sustainable overhead savings through ongoing reorganisation, delayering and back office rationalisation.
“We expect to deliver a further significant overhead cost saving in 2016, although the pace of saving will slow significantly in the second half of 2016. Management of utilisation remains a priority at all levels of the business and this has resulted in a further 10% fall in headcount in the first half of the year.”
Wood Group’s cost efficiency and reorganisation initiatives resulted in an exceptional charge of $30 million net of tax.
Nevertheless, the Group is in a strong financial position and its balance sheet has the flexibility to reinvest in the business through acquisition and organic investment. In April 2016 the Group extended its $950 million bilateral bank facilities for a further year until 2021 at the same competitive rate.
Watson added: “Bolt-on M&A remains a focus and is our preferred use of cash. In the first half of the year, we completed two small acquisitions in the Engineering business and acquired a further non-controlling interest in our Saudi Arabian engineering business.
“Our overall outlook remains unchanged; full year EBITA for 2016 is anticipated to be around 20% lower than 2015, in line with expectations.”