Wood orders investigation into contract write-offs

Wood (LON:WG) has announced a review of its books following write-offs of large scale contracts prompting another share price collapse for the beleaguered energy services group.

Shares fell by over 40% in early trading as markets digested the firm’s admission that actions taken to write off contracts acquired in its £2.2 billion takeover of Amec Foster Wheeler in 2017 are still impacting the firm’s bottom line.

The surprise announcement comes as the firm unveiled “disappointing” results in its third quarter as it attempts to deliver a three-year turnaround strategy.

The firm has faced a number of key challenges since it rebuffed a series of takeover bids, including that from Sidara which caused its shares to slump dramatically in August.

This latest challenge for the Aberdeen-headquartered firm comes following the arrival of chief financial officer Arvind Balan, who joined the firm in April.

Speaking to analysts, Wood chief executive Ken Gilmartin was reluctant to discuss details of the investigation beyond what was revealed in the firm’s third quarter trading update.

© Supplied by Wood

Wood confirmed it has commissioned big four auditor Deloitte to conduct an independent review to determine if the firm needs to restate accounts from prior years.

The review will focus on “reported positions on contracts in projects, accounting, governance and controls” related to a series of “exceptional contract write-offs” the firm announced in its half year in which it unveiled a massive near-$1 billion loss.

The firm said it was sticking to its full year guidance that it would achieve “high single digit growth in EBITDA and net debt to be broadly flat compared to last year”.

However this outlook only stands “before any potential impacts from the independent review”.

Meeting its guidance also depends on completing the sale of EthosEnergy by year end. Wood had initially announced it was selling its “non-core” joint venture with Siemens which it has set up in 2014 to become a “gas turbines giant”. It launched a for-sale sign over the business in January, and agreed a $137 million deal to sell its stake in the Aberdeen-headquartered firm to US-based private equity firm, One Equity Partners.

Wood confirmed the sale of another business, CEC Controls, completed in the quarter raising net proceeds of $30 million.

© Supplied by EthosEnergy

In its statement the firm said: “Following the exceptional contract write-offs relating to the exit from lump sum turnkey and large-scale EPC reported at the half year 2024 results, and in conjunction with the auditor’s ongoing work, the board, in response to dialogue with its auditor, has agreed to commission an independent review to be performed by Deloitte.

“This review will focus on reported positions on contracts in projects, accounting, governance and controls, including whether any prior year restatement may be required.

“An update will be provided as appropriate following its conclusion.

“The results presented in this trading update, and our full year outlook, are before any potential impacts from the independent review.”