Wood Group targets nearly £50m yearly savings in efficiency drive

The oil and gas engineering business said the ‘simplification programme’ has allowed it to lift its profit outlook for the year.

Oil and gas engineering firm John Wood Group has seen its shares jump higher after revealing it has decided to “engage” with its US private equity suitor to firm up an offer after a £1.7 billion takeover approach. (Alamy/PA)

Wood Group has revealed plans to shave about 60 million US dollars (£47.4 million) off its yearly costs as part of an efficiency drive to boost profitability.

The Aberdeen-headquartered oil and gas engineering business said the “simplification programme” has allowed it to lift its profit outlook for the year.

The plans will involve reducing the number of roles in its central functions, which it said will put greater accountability on individual business units.

Sky News reported last week that about 200 roles could be cut. This represents a small proportion of the group’s roughly 35,000-strong global workforce.

Wood Group did not specify how many roles are likely to be affected.

The programme is also set to simplify the group’s ways of working, and save on IT and property costs.

To build on this early success and further enhance our strategic delivery, we have launched a simplification programme to drive efficiency and support further margin expansion

Ken Gilmartin, Wood Group chief executive

The combined efficiencies are expected to generate annual savings of around 60 million US dollars (£47.4 million) from 2025, the group said.

Implementing the programme will lead to one-off costs of about 70 million US dollars (£55.3 million), which will mostly be felt during the first half of this financial year.

Meanwhile, the company’s annual financial results show revenues lifted by 8% last year to about 5.9 billion US dollars (£4.7 billion) compared with the previous year.

This was driven by a strong performance from its consulting division

It recorded a loss for the period of 105 million US dollars (£83 million), down from the 352 million US dollar (£278 million) loss reported the previous year.

Looking ahead, Wood Group said it had upgraded its outlook for the year and now expects earnings, on an adjusted basis and before one-off costs like tax and interest, to be towards the higher end of its previous target.

Chief executive Ken Gilmartin said: “It is encouraging that the fastest growing parts of Wood are the higher-margin consulting business, and our sustainable solutions across all areas.

“To build on this early success and further enhance our strategic delivery, we have launched a simplification programme to drive efficiency and support further margin expansion.

“We are therefore upgrading our outlook, with 2024 guidance now towards the top end of our medium-term targets and 2025 expected to exceed those targets.”

The firm’s shares were down by nearly 6% on Tuesday morning.