Wood Group has reported a full-year operating loss of $568m, primarily reflecting previously-flagged impairment charges of $542m.
The engineering consultancy's results for the year ended 31 December 2022 also showed that the $352m loss during this period is after a gain on sale of its built environment business of $515m.
Meanwhile, revenue of $5.4bn was up 4%, with growth in consulting (up 4%) and operations (15%) being offset by the expected decline in projects (down 6%). At constant currency, overall group revenue was up 8%.
Adjusted earnings before tax of $385m was flat on last year, at a constant currency basis, putting it at the top end of the guidance range given in a January trading update.
An adjusted earnings margin of 7.1% includes the impact of the previously guided lower margin in operations, and a lower margin in consulting, partly reflecting the impact of Wood's decision to exit Russia following the invasion of Ukraine.
Free cash flow of $730m reflects a significant working capital outflow of $367m, including a decision to exit lump sum turnkey and major lump sum work, as well as the decision to normalise payables.
Cash exceptionals came in at $319m, reflecting the impact of addressing legacy issues, including settling the Enterprise litigation claim; which was settled in November.
Net debt, excluding leases, at the end of 2022 was $393m, which includes a negative currency impact and the impairment of $6m of cash balances in Russia.
During the year, Wood launched a new strategy, focusing on energy and materials markets. It also installed a new leadership team.
Around 20% of group revenue now comes from sustainable solutions, including work across hydrogen and carbon capture.
More than 90% of the group's pipeline now relates to its six focus markets: oil and gas, chemicals, hydrogen, carbon capture, minerals and life sciences.
The sale of offshore labour supply operations in Gulf of Mexico completed in March, for a cash consideration of $17m, further aligning the portfolio.
"We are currently evaluating our portfolio and have identified underperforming businesses that do not fit with our focused strategy, generate negative margin and represent around 4% of revenue," read the stock exchange statement. "We are considering options in respect of these businesses."
Wood's order book is currently worth around $6bn, up 4% at constant currency. The order book for delivery in 2023 is worth $3.9bn, up 10% on last year.
The group's headcount also rose 8% to more than 35,500 people.
Adjusted earnings margins are expected to be flat in the nearer term, partly as Wood reinvests in the business to secure growth. Earnings are expected to grow at mid to high single digit compound annual growth rate over the medium term, with momentum building over time as the strategy delivers.
Wood also expects a 'material improvement' in cash flow, with a significant improvement in operating cash flow, reflecting improved working capital performance.
However, significantly lower exceptional cash flows are expected during 2023, at around $135m. This, plus the remaining tax payable on the sale of built environment consulting of around $60m, should be partially offset by disposal proceeds of around $25m, leading to higher net debt.
As outlined at the recent Capital Markets Day, there will be continued rationalisation of the property portfolio as leases expire, reflecting post-Covid working patterns.
Wood anticipates annualised savings of up to $20m by the end of 2025. IT cost savings of up to $15m are also expected from licence rationalisation and other efficiency measures.
The group's main UK defined benefit scheme was 119% funded and had a surplus of $432m at the end of the year, meaning work is being undertaken with the trustee to potentially move to a buy-in insured basis, or eventual buy-out with a third party, as soon as is practical.
Chief executive Ken Gilmartin said: "We are pleased to have delivered results in line with expectations for 2022, including a return to revenue growth - with 8% growth at constant currency.
"This was achieved in a year of major change for the group, under new leadership, as we addressed legacy issues, transformed our balance sheet and launched a new strategy.
"We started 2023 with good momentum - our order book for delivery in 2023 is up 10%, headcount is up 8% and financial guidance for 2023 is in line with our medium-term financial targets of adjusted EBITDA growth at mid to high single digit CAGR, with momentum building as our strategy delivers."
Stuart Lamont, investment manager at RBC Brewin Dolphin, commented: "While most of the attention in the build up to these results was about recent bids for Wood, the operational story for the company has not changed dramatically.
"Wood has continued on its transformation programme and looks to be making reasonable progress – particularly on debt, which is down significantly on previous levels.
"Apollo’s bid of 237p is substantially higher than Wood’s current share price and, while today’s results show the company still has some work ahead of it, they also underline why potential suitors can see value in the business."
Don't miss the latest headlines with our twice-daily newsletter - sign up here for free.
