John Wood Group PLC 17420 Katy Freeway 15 Justice Mill Lane Suite 300 Aberdeen Houston AB11 6EQ TX 77094 John Wood Group PLC UK USA Annual Report and Accounts 2012 Tel +44 1224 851000 Tel +1 281 828 3500 John Wood Group PLC Group John Wood Visit our website at “I believe Wood Group makes a positive www.woodgroup.com contribution by improving the quality of life of those that we do business with. I believe this effect is far reaching. It affects not only our clients, but our clients’ clients.” Annual Report and Accounts 2012 Shareholder value is very important and we need to continue“ to do a good job so that we continue to put this at the forefront. The little things we do, however, hold great value too. I am so very proud to work for a “It’s refreshing to be designing company with such amazing Core Values where people not plants that contribute more directly to people’s lives in only talk the talk, they also walk the talk.” ways they understand.” “If you work for Wood Group and put a bit of effort in, you will be rewarded which is a great feeling. Worldwide, employees are part of the same team, which encourages people to continue working with Wood Group.” Wood Group is very good “about encouraging growth and allowing companies to thrive.” “With a company like ours anything is possible if you really want it.” “Getting people energy in all forms is what we do.” John Wood Group PLC Annual Report 2012 Who we are Wood Group is an international energy services company with $6.8 billion sales, employing around 43,000 people worldwide and operating in 50 countries. The Group has three businesses – Wood Group Engineering, Wood Group PSN and Wood Group GTS – providing a range of engineering, production support, maintenance management and industrial gas turbine overhaul and repair services to the oil & gas, and power generation industries worldwide. Our Core Values “Wood Group’s Core Values define who we are, how we work, what we believe in and what we stand for. They set out how we act and expect to be treated as part of Wood Group and provide a sound basis on which to make decisions. Our Core Values strip was inspired by DNA fingerprinting – our seven Core Values represent our very own DNA fingerprint and make us who we are. Each of the bars in the strip has a different colour to help people remember them and identify them – so every time we talk about our Social Responsibility Value we use green for instance. At either end are Safety & Assurance Printed by Pureprint Group who are certified to the ISO 14001 Environmental and Integrity – the Core Values that hold them all together Management standard and FSC® Chain of Custody standard. – and right in the middle, in the heart of our business is This report is printed on stocks which are manufactured under strict environmental the gold one: our People Core Value. management systems. The cover stock and pages 1-48 are printed on Symbol Freelife Satin which contains a minimum of 25% recycled pulp, helping divert Last year we launched our Living our Values Awards waste from landfill. Pages 49-108 are printed on Offenbach Bible, a lightweight programme which recognises our people from around TCF (Totally Chlorine Free) paper. Both stocks are certified in accordance with the FSC® (Forest Stewardship Council). the world. Throughout this report you will see featured the stories behind the awards finalists who bring our Core Values to life and demonstrate that they are at the very heart of our business.” Our Values Visit our website to learn more Designed and produced by aka:design www.akadesignltd.co.uk about our Core Values and the Living our Values Awards programme. Bob Keiller, CEO http://www.woodgroup.com/about-us/our-values/ pages/default.aspx Contents 01 Highlights of 2012 Our business An overview of Wood Group, our key highlights Financial summary and how we have performed this year. • Revenue from continuing operations of $6,821.3 million 01 Highlights of 2012 Our business (2011: $5,666.8 million) up 20% 02 Our results and how we measure our performance 1 • EBITA from continuing operations of $461.1 million 04 Understanding our business in 2012 (2011: $341.6 million) up 35% Operational review • Profit from continuing operations before tax and exceptional This section gives detail on our operations and items of $362.7 million (2011: $254.1 million) up 43% how we have performed during 2012. • Adjusted diluted EPS of 85.2 cents (2011: 60.2 cents) up 42% 08 Chairman’s statement • Total dividend of 17 cents per share (2011: 13.5 cents) up 26% 09 CEO’s review 11 Wood Group Engineering 12 Wood Group PSN Operational review Group highlights 13 Wood Group GTS 14 Financial review • Leadership changes position Wood Group for the next 18 Principal risks and uncertainties phase of growth 20 Living our Values • Increasing contribution from oil-producing US shale regions Governance • Overall market conditions expected to remain favourable Our approach to corporate governance and how we have applied this in 2012. • Anticipate progress in all divisions in 2013 27 Letter from the Chairman of the Board 28 Board of directors and biographies Governance 30 Report of the directors Wood Group Engineering 31 Corporate governance • Second consecutive year of 30%+ EBITA growth 38 Directors’ remuneration report • Strength in upstream and subsea & pipelines Financial statements • Revenue growth and margin improvement anticipated in 2013 The audited financial statements of Wood Group for the year ended 31 December 2012. 50 Independent auditor’s report Wood Group PSN 51 Consolidated income statement 52 Consolidated statement of • Good performance in the North Sea and strong growth comprehensive income Financial statements in North America 53 Consolidated balance sheet • Progress in Oman; confident of a significant improvement in 2013 54 Consolidated statement of changes in equity • Well placed to deliver strong performance in 2013 55 Consolidated cash flow statement 56 Notes to the financial statements 95 Company Financial statements Wood Group GTS 96 Independent auditor’s report 97 Company balance sheet • Increased revenues in Maintenance and EBITA up around 10% 98 Notes to the Company financial statements • Power Solutions EBITA slightly up on 2011 107 Five-year summary 108 Information for shareholders • Anticipate improvement in Maintenance in 2013 The footnotes to pages 01 to 25 can be found on page 17 02 John Wood Group PLC Annual Report 2012 Our results and how we measure our performance Revenue Revenue from continuing Progress in the year Revenue earned from continuing operations $m Revenue increased in all three operations is derived from the divisions in 2012, leading to price and volume of services growth in revenue from continuing and products we provide to operations of 20%. customers. 6,821 5,667 4,085 up 2010 2011 2012 20% Earnings before interest, tax and EBITA from continuing Growth in 2012 includes a full amortisation (EBITA) operations $m year contribution from the PSN EBITA is a key profit measure and business acquired in 2011. EBITA excludes exceptional items. increased in all three divisions. 461 342 219 up 2010 2011 2012 35% EBITA margin EBITA margin from EBITA margin increased EBITA margin demonstrates continuing operations % by 0.8% points in 2012. our ability to convert revenue Margin increased in into profit. Wood Group Engineering and 6.8 Wood Group PSN, and remained 6.0 flat in Wood Group GTS. 5.6 up 2010 2011 2012 0.8% pts Adjusted diluted EPS (AEPS) Adjusted diluted EPS2 Cents The increase in AEPS for 2012 Earnings before exceptional reflects the increase in underlying items and amortisation, net of profitability and a reduction in the tax, divided by the weighted average number of fully diluted average number of ordinary shares shares in the period subsequent to in issue during the year. AEPS 85.2 our return of capital in 2011. demonstrates the value we create on a per share basis. 60.2 up 39.8 2010 2011 2012 42% Return on capital employed (ROCE) ROCE6 % The increase in ROCE reflects EBITA divided by average an increase in Wood Group capital employed measures our Engineering due to higher ability to generate profits relative to profitability, offset to some 19.5 19.3 the capital required to support our 18.4 extent by lower ROCE in business. Wood Group PSN, which in 2012 included the full year impact of higher goodwill and intangible up assets arising on acquisition. 2010 2011 2012 0.9% pts Further reading 03 p14 Financial review p18 Principal risks and uncertainties p31 Risk management p17 Footnotes Operating capital employed to revenue OCER7 % Progress in the year (OCER) OCER worsened in 2012 due Our business Average operating capital principally to an increase in employed divided by revenue average receivable days in measures the efficiency of our 14.0 Wood Group Engineering. operating capital relative to our 12.5 revenue. 10.6 up 2010 2011 2012 1.9% pts Dividend per ordinary share Dividend per ordinary share Cents The Group adopts a progressive The share of AEPS distributed to dividend policy taking into account Operational review shareholders. its capital requirements, cash flows and earnings. Dividend per share has increased by a 17.0 compound annual growth rate 13.5 of 19% between 2002 and 2012. 11.0 up 2010 2011 2012 26% Cash generated from Cash generated from operations $m Cash generated from operations operations increased mainly due to higher Governance Cash inflows which we use to EBITA in the period. maintain and grow our operations.