Wood Group sells built environment consulting business to WSP for $1.9bn as FTSE 250 energy services firm slashes debt
- Wood Group’s net debt stood at $1.4billion by 31 December 2021
- But the sale of the consulting unit will move Wood to a net cash position
- The deal also gives Wood ‘enhanced financial flexibility’
Wood Group has agreed to sell its built environment consulting business to Toronto-based WSP for $1.9billion (£1.5billion).
The sale follows a recent strategic review by the FTSE 250 energy services provider, which is working to raise funds and slash its debt pile.
While the transaction is expected to cost Wood Group about $50million, in addition to tax losses of $60million, the firm told investors on Wednesday the deal will result in a net cash position compared to net debt of around three-times earnings as previously reported.
The deal ‘marks a new chapter’ for Wood Group, according to outgoing boss Robin Watson
Wood Group, which employs 5,500 consultants serving the government and clients across a variety of sectors, said the deal would also give the firm ‘enhanced financial flexibility’ to consider its options on how to use the cash.
‘These include measures to improve the future sustainable cash flow of the ongoing group through the removal of certain liabilities, investment to accelerate our strategy and shareholder returns, for example through the restoration of an ordinary dividend,’ it added.
The transaction, which is subject to Wood shareholder approval and certain regulatory approvals, is expected to complete in the second half of this year.
It was announced in April that Wood Group boss Robin Watson will soon retire, following a tough trading year for the firm.
FTSE 250-listed Wood Group saw like-for-like revenue drop 14 per cent in the past year, with growth in consulting and operations offset by a hefty decline in its projects arm.
Wood Group’s losses stood at $136million for the last financial year, while its net debt position was $1.4billion by 31 December 2021.
Watson said the sale of Wood’s built environment consulting business to WSP will ‘deliver significant value’ for shareholders and ‘marks a new chapter’ for the firm.
Wood Group shares were down 1.8 per cent in early trading at 234.3p, bringing year-to-date gains to 16.2 per cent.
Watson said: ‘[The sale] enables us to move onto our next strategic phase with the financial flexibility to accelerate our strategy to capture the growth opportunities ahead across both energy security and sustainability.
‘We are focused now on the steps to complete this deal and in further developing our strategy, which we will outline in detail at a capital markets day, when my successor as chief executive is in place.’