John Wood Group PLC Benefits From Strong US Shale Activity

John Wood Group PLC (LON:WG) says full year earnings will be up on 2013.

The Motley Fool Staff

Published 19 August, 2014 1:22 pm BST

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John Wood Group (LSE: WG), the international energy services company, has seen its share price jump 6% so far today, following release of its interim results for the first half of 2014, which it said had benefitted from “strong US shale activity”.

Profit from continuing operations on an equity accounting basis, before tax and exceptional items, increased by 15%, to $182.4m, from total group revenue that was up 10%, to $3,801.2m. However, the two main divisions of the group — Wood Group Engineering and Wood Group PSN — reported widely differing performance.

There was “strong growth” at Wood Group PSN, where earnings before interest, tax and amortisation (EBITA) was up 47%, driven by its production services business in the US shale market. But that was offset by a 9% drop in EBITA in Wood Group Engineering, which was attributed to a lower contribution from its Upstream business.

Overall, group EBITA was barely changed from H1 2013, up just 0.3%, at $243.9m. However, the company says that EBITA for the full year should be up on 2013 and in line with previously advised expectations.

Basic earnings per share (EPS) dropped 11.5%, to 38.5 cents, and adjusted diluted EPS were essentially the same as H1 2013, at 44.4 cents (they were 44.5 last year). But the board is recommending a interim dividend increase of 25%, up to 8.9 cents per share from 2013’s 7.1 cents, and went on to say that it intends to increase the US dollar value of dividend per share by a double digit percentage from 2015 onwards.

Commenting on the results, CEO Bob Keiller said:

“We have seen strong performance in our PSN Production Services activities in the US shale market, offset by an anticipated lower contribution from Upstream Engineering and weaker than expected performance in our Turbine Activities.

“Overall, the outlook for the Group for the year remains unchanged from the position outlined at our December 2013 trading update; we continue to anticipate full year EBITA to be in line with expectations and up on 2013, led by growth in PSN Production Services.“

Despite today’s rise, Wood Group’s share price is down 11.6% so far this year, versus a FTSE All-Share index that’s risen 5% in that time. However, over the past five years, Wood Group’s share price has left the index trailing, with a increase of 174%, compared to a 50% gain by the FTSE All-Share.