Almost £270 million was wiped off the value of Scottish energy services giant Wood Group on Tuesday after the company warned of a possible profits shortfall in its engineering arm.
The Aberdeen firm said the division continued to “perform well” but revised down its financial forecast for the division from a previous estimate of around 15% growth to a new figure of between 10% and 15% EBITA (earnings before interest, taxation and amortisation.)
The move was enough to unsettle investors and shares in the company fell by 7.97% during trading yesterday, knocking £268.5m off the company’s market value during the single session.
The engineering division produced revenues of £626m in the first half an increase of 12.7% on the 2012 figure and 400 extra staff were recruited in the period taking the overall workforce to 10,500.
The company said engineering had continued to benefit from an increase in onshore work in the US shale gas market, while the subsea category saw “good activity” across its principal operational hubs in the UK, US and Asia Pacific regions.
The firm also said its upstream business which accounts for 40% of engineering revenues had picked up a number of new contracts in the Gulf of Mexico in the first half of the year and was expected to complete operations on the Mafumeira Sul and Icthys projects by the end of the year.
However, Wood said the major weakspot in its engineering operations was in Western Canada where the market had weakened and it said its downward earnings revision also reflected some project delays.
“These factors, and the expected completion of the Mafumeira Sul and Icthys projects by the year end, are challenges to growth in 2014,” the firm said.
“Looking further ahead, global exploration activity continues at a healthy level, which we believe should provide opportunities.”
The company has two other major divisions PSN which provides support services for field developments and gas turbine maintenance and overhaul operator GTS.
PSN saw turnover increase by 7.9% to £1.2bn and earnings increase by 23.4% to £70.8m.
GTS where a likely lowering of revenues from the power solutions category is expected to be offset by an improvement in the performance of the maintenance business saw revenues dropped back by more than a fifth to £350m but earnings move 6.6% ahead to £25.9m.
Chief executive Bob Keiller said he was confident the company, which employs around 43,000 staff in 50 countries worldwide, was well positioned.
“We have achieved good growth in the first half and remain confident of achieving full year performance in line with expectations,” Mr Keiller said.
“In March, I talked about our focus on increasing collaboration across Wood Group this is progressing well and we have already seen new business opportunities driven by people working more closely together.
“Activity levels generally remain healthy and we believe the group is well positioned for future growth.”