Takeover bid will not push Wood Group chief off course

The chief executive of John Wood Group has said that he will not be pushed into changing strategy even as the engineering consultancy faces its second takeover attempt in a year. Ken Gilmartin was speaking as Wood unveiled a 6 per cent drop in first-quarter revenue to $1.4 billion.

The company rejected a £1.4 billion approach, worth 205p per share, by Sidara, a privately owned smaller rival, on Wednesday. Brokers believe Sidara will have to increase its offer substantially to convince Wood to open its books.

Gilmartin, who took over the top job in the summer of 2022, has been pushing Wood into higher margin areas, trimming costs and refining what type of projects it bids on.

He reiterated Wood’s stance that the proposal from Sidara was unsolicited and said: “The board carefully considered the proposal along with our financial advisers and we concluded it fundamentally undervalued Wood and our future prospects. Accordingly the board rejected the proposal unanimously.”

Gilmartin said the company was in the second year of a three-year strategic turnaround and had generated significant momentum in the business.

He said: “We continue to be very robust in driving what has been really strong performance in growing the business, growing the margin profile, continuing to be very selective in the areas we work and by doing that demonstrating consistent superior value to our clients.

“That is going to be the focus for all of us as we go through this period. Continue to grow the business and return to significant free cash flow in 2025.”

The value of Wood’s order book was up 9 per cent year-on-year to $6.2 billion at the end of March with the company reiterating that it is on course to hit its targets in 2024 and 2025.

In May last year Apollo Global Management decided to walk away from a potential £1.7 billion deal for Wood, worth 240p per share, following several approaches. Wood has also been under pressure recently from Sparta Capital, an activist investor, to improve its share price or explore a sale of the company.

Wood employs about 35,000 people and is best known for oilfield services but has been transitioning into other areas such as energy, chemicals, life sciences, minerals and infrastructure.

Sidara was founded by engineering professors from the American University of Beirut in 1956 as Dar Al-Handasah. Last year the Dar group was rebranded as Sidara, although it remains owned by shareholders who work within it. The design and engineering firm has 20,500 staff across 60 countries and booked revenue of $2.8 billion in 2023.

Sidara is believed to see opportunities to grow its revenue and presence in the United States through a combination with Wood. Analysts believe Sidara may have to go higher than Apollo did to convince the Wood board to sell.

Ashley Kelty, at Panmure Gordon, suggested investors should not be concerned by the drop in first-quarter revenue as Wood’s turnaround plan does appear to be delivering on longer term goals.

He said: “We are not surprised that the bid was rejected after the Apollo overtures last year where multiple bids were rejected up to 235p per share. We think Sidara will have to top that to get the board interested given the improved position of the business over the last year.”

Barclays analysts echoed that stance and said: “Unlike Apollo, absorption into the Sidara group would be a merger into a corporate peer and likely come with cost savings potential, rather than being just a financial transaction. It could therefore hold more appeal to the board.

“Valuation-wise, we would expect 240p [per] share to be a floor that the board would positively consider, given last year’s rejection.”

Harbour Energy expects cash flow growth

The UK’s largest independent oil and gas company has said it expects to generate “significantly higher” free cash flow next year, as new projects boost production.

Harbour Energy reiterated guidance for free cashflow to be “marginally positive” this year after cutting its forecast for gas prices to 70p a therm, down from 100p in January, but anticipates that it will move into a net cash position by the end of next year.

The FTSE 250 group has previously said it would scale back investment in the North Sea on the back of windfall taxes, which were extended for another year to 2029 in the government’s most recent budget.

Linda Z Cook, chief executive at Harbour Energy, said the group had made “significant progress” towards completing its acquisition of most of Wintershall Dea’s oil and has production assets, which will diversify the group’s exposure away from the North Sea.

Shareholders with an aggregate 35 per cent stake in the group have already lent their support to the deal. The acquisition has already been cleared by the German Federal Ministry of Economics and Climate Action, one of two foreign direct investment approvals required, as well as consent from the Norwegian Ministry of Energy.

The shares rose 21½p, or 7.7 per cent, to 301p.