Wood Group (John) PLC (LON:WG.) moved to the top of the FTSE 250 on Wednesday after the oilfield services group revealed “significant growth” in profits so far this year.
Shares were up 6% to 443p in afternoon trading.
The Aberdeen-based company has benefitted from a pick-up in oil and gas activity in the Middle East, particularly Iraq, as well as in Australia and Papua New Guinea.
Wood, which also provides a range of engineering and technical support to mining, infrastructure and other firms in the industrial sector, added that performance was helped by spending increases from the US government as well.
As a result, the group remains on track to hit analysts’ full-year forecasts, with revenue expected to grow 5% and underlying earnings (adjusted EBITDA), including the impact of new accounting measures, to rise to US$927mln.
That growth is expected to come despite the impact of a number of disposals in the first half which contributed EBITDA of over US$20mln in 2018.
‘Modest reduction’ in net debt
Net debt, which at US$1.6bn remains a key concern for investors, is due to come down as well, with bosses expecting a “modest reduction” come year-end.
“Our first half performance is ahead of prior year,” said chief executive Robin Watson. “We have delivered significant growth in operating profit together with EBITDA margin improvement.”
He added: “This has been led by our activities in energy markets in the eastern hemisphere and our environment and infrastructure operations in North America, together with the delivery of further cost synergies.”
Oil price rise helping the shares, too
Helal Miah, investment research analyst at The Share Centre, commented: “The news has been received well on the back of a share price that has drifted lower in recent months, hindered by knowledge of a slower delivery of its debt reduction plan.
“The shares this morning are up by around 5-6%, partly helped by the near 2% rise in oil prices.
“We have longed believed that Wood Group, given its recent acquisitions is well placed to benefit from increased spending in the energy sector to expand capacity and resources. It is also now a more diversified business with exposure to other areas such as nuclear and renewable energy.
“With an attractive dividend yield of roughly 6%, we maintain our ‘buy’ recommendation for investors willing to accept a medium to higher level of risk.”
--Adds analyst comment and share price--