John Wood Group PLC Annual Report and Accounts 2017 Contents
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John Wood Group PLC Annual Report and Accounts 2017 Contents Strategic report Group financial statements Our operations, strategy and business The audited financial statements of Wood model and how we have performed for the year ended 31 December 2017 during 2017 68 Independent auditors' report 01 Highlights 76 Consolidated income statement 02 Our vision and values 77 Consolidated statement of 03 At a glance comprehensive income/expense 04 Our business 78 Consolidated balance sheet 06 Key performance indicators 79 Consolidated statement of 07 Chair’s statement changes in equity To view and download our 08 Chief Executive review 80 Consolidated cash flow statement Annual Report online: www.woodplc.com/ar17 11 Segmental review 81 Notes to the financial statements 20 Financial review 24 Building a sustainable business Company financial statements 32 Principal risks and uncertainties 146 Company balance sheet 147 Statement of changes in equity Governance 148 Notes to the Company financial Our approach to corporate governance statements and how we have applied this in 2017 157 Five year summary 35 Letter from the Chair of the Board 158 Information for shareholders 36 Directors’ report 38 Board of Directors 40 Corporate governance 50 Directors’ Remuneration Report Wood is a global leader in the delivery of project, engineering and technical services to energy and industrial markets. We operate in more than 60 countries, employing over 55,000 people, with revenues of around $10 billion. We provide performance-driven solutions throughout the asset life cycle, from concept to decommissioning across a broad range of industrial markets including the upstream, midstream and downstream oil & gas, chemicals, environment and infrastructure, power & process, clean energy, mining and general industrial sectors. www.woodplc.com Highlights Financial Summary1 Operational Highlights Total Revenue2 • Financial results for 2017 ahead of guidance on a report Strategic reported basis and in line on a proforma basis $6,169m 25% (2016: $4,934m) • Relatively resilient performance despite continued challenging conditions in core oil and gas markets • Integration progressing at pace. Annualised cost Total EBITA2 synergies delivery of greater than $40m to date, earlier than plan. Remain confident of delivering at $372m 2.5% (2016: $363m) least $170m in three years • Net debt of $1.65bn and 12 month proforma Net debt to EBITDA of 2.4x EBITA Margin • Deleveraging plan underpinned by confidence in earnings quality, synergies delivery and planned Governance 6.0% 1.4% (2016: 7.4%) disposal of non core assets of at least $200m • Progressive dividend retained. Proposed final Revenue from continuing operations dividend of 23.2c, up 3% on an equity accounting basis • Proforma results in 2017 establish the base for Wood going forward and benefit from a dispute $5,394m 30.9% (2016: $4,121m) settlement in legacy Amec Foster Wheeler (AFW), partially offset by cost overruns on certain fixed price, non-oil and gas contracts Operating Profit before exceptional items • Operating profit before exceptional items is stated after non cash amortisation charges of $141m, including $32m of amortisation of intangibles $212m 13.1% (2016: $244m) statements Financial arising on the acquisition of AFW • Loss for the period is stated after exceptional (Loss)/profit for the year costs of $165m, including $67m in respect of the acquisition of Amec Foster Wheeler and restructuring & integration costs of $51m $(30.0)m 187% (2016: $34.4m) • Anticipate modest EBITA growth in 2018 reflecting early stage recovery in certain oil & gas markets, Basic EPS good momentum in broader energy and industrial contract awards and delivery of cost synergies (7.4) cents 199% (2016: 7.5 cents) Adjusted diluted EPS 53.3 cents 16.8% (2016: 64.1 cents) Total Dividend cents 34.3 per share 3.0% (2016: 33.3 cents) Notes: 1. Figures shown are reported full year actual results which comprise the Net debt (excluding joint ventures) legacy Wood Group business and a contribution from AFW for the period from completion of the acquisition on 6 October 2017 to 31 December 2017. $1,646.1m (2016: $322.6m) 2. Total Revenue and Total EBITA are presented based on proportionally consolidated numbers, which is the basis used by management to run the business and includes the contribution from joint ventures (JVs). A reconciliation to statutory numbers is provided in note 1 to the accounts. John Wood Group PLC Annual Report and Accounts 2017 01 Strategic report Our vision and values Our vision is to: Inspire with ingenuity, partner with agility, create new possibilities... Our values are: Care Commitment Courage Working safely, with integrity, Consistently delivering to Pushing the boundaries respecting and valuing each all our stakeholders to create smarter, more other and our communities sustainable solutions 02 John Wood Group PLC Annual Report and Accounts 2017 At a glance The acquisition of Amec Foster Wheeler (“AFW”) by Wood Group brought together three brands and two companies to create Wood, a global leader in project, engineering and report Strategic technical services delivery. We look to grow by developing our full service capability across energy and industrial markets. Revenue: Countries: Sector breakdown: Oil & Gas 6% Upstream 31% 3% Downstream 26% c.$10bn 60+ 4% Power and process 57% Environment and 4% infrastructure 14% Governance People: Mining Automation Clean energy 12% c.57,000 Other industrial Our operating structure The integration of AFW required only minor modification to our operating structure with many of AFW’s operations being incorporated into our existing Asset Solutions and Specialist Technical Solutions business units and with the addition of Environment & Infrastructure Solutions. Investment Services will continue to operate as a separate business unit. Financial statements Financial Asset Specialist Environment & Solutions (AS) Technical Infrastructure Solutions (STS) Solutions (E&IS) Focused on increasing production, improving efficiency, Provides a range of Provides consulting, reducing cost and extending asset life. Services range specialist services. engineering, project and from initial feasibility and design, through construction, Focused on solving complex construction management operation, maintenance and decommissioning. AS is technological challenges, services. Covers a range split into two regional business groupings; Americas and such as systems integration, of sectors including Europe, Africa, Asia & Australia (EAAA). across a broad range government, water, of energy and industrial transport, energy and sectors. pharmaceuticals. Americas EAAA* Service breakdown: Service breakdown: Service breakdown: Service breakdown: 70% 30% 70% 30% 65% 35% 60% 40% Customer capex driven Customer capex driven Customer capex driven Customer capex driven capital projects capital projects capital projects capital projects Customer opex driven Customer opex driven Customer opex driven Customer opex driven operations services operations services operations services operations services * Excluding Turbines John Wood Group PLC Annual Report and Accounts 2017 03 Strategic report Our business Inputs How we create and sustain value Our people deliver project, Vision and values underpinned by engineering and technical Care, Commitment services across a broad range and Courage of industrial markets See page 02 Project, engineering Our services and technical improve the Feasibility Construct Maintain capability across performance of broad industrial our customers' > > > > > markets industrial assets Design Operate Decommission across the asset life cycle Talented, flexible and motivated workforce See page 29 We are differentiated by the capabilities People: of our people, track record of delivery, Performance driven know-how and range and innovative 57,400 solutions of services Flexible commercial model with a We employ an measured risk asset light, flexible Reimbursable Smaller Lump sum appetite and predominantly lump sum/ EPC reimbursable model incentivised >$100m with a measured risk appetite Operating structure optimised for sustainability, agility and future growth See page 03 In our core oil & gas Proforma total revenue from oil & gas: market we have a strong offering across upstream, Efficient capital midstream and 57% allocation downstream 04 John Wood Group PLC Annual Report and Accounts 2017 Strategic report Strategic Revenue analysis Outputs % of proforma total Proforma total Strong shareholder Asset revenue: revenue: returns and progressive Solutions Americas Americas dividend policy (AS) 32% $3.2bn People Reduced cyclicality Governance 42,500 through broad EAAA EAAA industry exposure Americas 16,800 38% EAAA 25,700 $3.7bn Leading technical % of proforma total Proforma total revenue: revenue: services and smarter, Specialist more sustainable Technical solutions Solutions $1.3bn (STS) 13% statements Financial People Track record on industry leading 7,600 projects % of proforma total Proforma total Environment & revenue: revenue: Global reach with Infrastructure balanced portfolio Solutions 13% $1.3bn of long term partner (E&IS) relationships with customers People 7,300 Significant contribution to local employment % of proforma total Proforma total and communities Investment revenue: revenue: See page 31 Services 4% $0.4bn Rewarding careers and focus on retention See page 29 John Wood Group PLC Annual Report and Accounts 2017 05 Strategic report Key performance indicators To help the Group assess