British oil industry services group John Wood reported a better than expected 16 per cent rise in full-year profits, helped by a strong performance at its core engineering unit where it expects to see further growth this year.
The company, which designs, builds and maintains oil and gas facilities and pipelines, said increased exploration and production (E&P) activity drove sales at its engineering unit, and it expects further growth at the divison.
“We are forecasting strong growth in Engineering driven by increased E&P capex spend and have good visibility in our Wood Group GTS Power Solutions business into 2012,” the company said in a statement.
Last year’s earnings before interest, tax and amortisation (EBITA) were up 15.6 per cent at $398.7 million, ahead of a consensus market forecast of $364 million according to a company-supplied survey of analysts’ estimates.
The Engineering division’s EBITA rose 33 per cent, the company said, accounting for nearly half of group earnings.
“During 2011, we saw E&P spend growing at around 10 per cent on a global basis,” Chief Executive Allister Langlands told a conference call. “We see an increase in the range of 5-10 per cent in 2012. It could well be that spending ultimately grows towards the top of that range.”
Analysts at Collins Stewart said the Engineering order book was healthy at 8 months, and added that the unit would likely see likely to see 10 per cent plus growth.
Profits last year were held back, however, by a poor performance at the company’s PSN oil industry production services business.
Wood Group had warned in December that the business - which it boiught last year for close to $1 billion - would be below expectations due to loss-making contracts and a slower than expected start to a contract in Oman.
“Losses in Oman will continue to impact in 2012, although we anticipate that this will be at a reduced level compared to 2011,” Wood Group said on Tuesday.
Investec Securities analyst Keith Morris said PSN was “the disappointment in 2011,” holding back underlying progress.
Shares in the company, tipped to join Britain’s blue-chip FTSE index later this month, were down nearly 4 per cent at 733 pence by 1030 GMT.