Wood Group’s share price lifted after trading update

Diversification of operations factors into strong performance.

Article updated: 26 June 2019 10:00am Author: Helal Miah

  • Earnings growth and margin expansion led by energy activities and cost synergies.
  • The group is well placed to benefit from increased energy sector spending.
  • Attractive dividend yield, and more diversified operations means we maintain our Buy recommendation for medium to high risk investors.

We have seen a fairly upbeat half year pre-close update from Wood Group, the oil and energy infrastructure services company. Revenues for the first half were in-line with the prior year, while earnings growth and margin improvement have been led by the group’s relative strength in energy related activities and further cost synergies. EBITDA is projected to increase by 7% with operating profits before exceptionals to be up by 25%. They expect revenues to be weighted towards the second half and 5% higher than the prior period with further cost synergies of around $60m.

The news has been received well on the back of a share price that has drifted lower in recent months, hindered by knowledge of a slower delivery of its debt reduction plan. The shares this morning are up by around 5-6%, partly helped by the near 2% rise in oil prices.

We have longed believed that Wood Group, given its recent acquisitions is well placed to benefit from increased spending in the energy sector to expand capacity and resources. It is also now a more diversified business with exposure to other areas such as nuclear and renewable energy. With an attractive dividend yield of roughly 6%, we maintain our Buy recommendation for investors willing to accept a medium to higher level of risk.

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Helal Miah portrait photo
Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment.