Wood Group said it is initiating steps to “significantly” strengthen its financial culture, governance and controls after a review identified “material weaknesses and failures.”
In a trading update, the London-listed engineering giant also announced plans to extend a wide-reaching cost-cutting programme and said it now expects negative free cash flow in 2025.
Wood Group announced in November a Deloitte-led inquiry into the company in response to large-scale project write-offs, sparking a share price sell-off that saw the stock tank over 50 per cent in one day.
The company said on Friday it did not expect the inquiry’s findings to have a “material impact” on the group’s position or its ability to generate cash in the future. However, it is currently evaluating the extent of prior-year adjustments and their impact on adjusted pre-tax earnings.
“Following these actions, the business will be on a firmer operational footing, but cash generation has yet to materialise and financial strength needs significant improvement,” it said in a statement to markets.
Wood Group starts cutting costs
Wood Group on Friday unveiled a significant ramp-up of its cost-cutting plans for the next year. Annual savings are now expected to be around $85m (£67.6m), up from $60m last March.
The group also forecast negative free cash flow of between $150m and $200m in 2025 and said it intended to undertake a one-time sell-off of assets worth around $70m.
The outlook for full-year pre-tax earnings is expected to align with market forecasts, although the engineering firm warned of lower expected underlying EBITDA.
“This is a difficult announcement amid our transformation. While we have made progress, I am disappointed in our financial performance,” chief executive Ken Gilmartin said.
“Consequently, we are taking decisive actions to ensure we can meet the opportunities we have in growing markets, principally energy.”
He added: “While the likely findings from the independent review are expected to have no material impact on the Group’s cash position and future cash generation, it clearly gives us areas to focus on and we are initiating steps now to further improve our financial culture, governance and controls.
“We have announced further actions to address the cost base of the business to right size Wood for the future, and have laid out a very clear route to positive free cash flow in 2026.