Wood, the energy services group, will offload its nuclear business for £250m as part of a drive to cut down its debt levels.
The unit — which designs and maintains nuclear assets, almost entirely in the UK — will be sold to US group Jacobs. Wood expects the deal to allow it to deleverage to close to its targets, after the 2017 acquisition of rival Amec Foster Wheeler saddled it with high debt levels.
The purchase of AFW, in a £2.2bn deal, came as Wood looked to diversify beyond its traditional market of oil and gas — cutting its exposure to the sector from 85 to 60 per cent — but pushed its net debt up to $2bn, or 2.4 times earnings before interest, tax, depreciation and amortisation at the end of 2017.
“I guess the whole rationale of AFW was around strategic diversification of the business,” said Robin Watson, Wood’s chief executive, citing the “megatrend” of a shift towards sustainability. “The trade-off we made with the deal was a higher debt position.”
By December 2018, its debt had fallen to $1.5bn, or 2.2 times ebitda, but its progress in deleveraging was hit earlier this year by a slower than expected recovery in the oil and gas sector, and delays selling some assets.
In March, Wood said it would look to sell $200-$300m worth of assets. It disposed of its TNT materials handling business in May for $41m. The sale of the nuclear business is expected to cut debt to close to its target of 1.5 times ebitda.
The unit is highly concentrated, both geographically — it is 90 per cent focused on the UK — and around a small number of customers — the Sellafield nuclear facility in Cumbria is by far its largest contract.
“It became quite clear to us that the nuclear business, good a business as it is . . . from our perspective we found it was difficult to strategically unlock value,” said Mr Watson. “Jacobs has a much broader nuclear commitment globally.”
Victoria McCulloch, an analyst at RBC Capital Markets, said that “the disposal proceeds exceeded our expectations and provide a clearer route to management’s deleveraging target, which we expect to be welcomed by investors”. Shares rose 2 per cent in morning trading.
The sale is expected to be completed in the first quarter of 2020, subject to approvals.
On Tuesday, Wood also reported revenue for the six months to June of $4.8bn, down 2.6 per cent from the previous year. Net profit of $13m was up from a loss of $52m last year. It left its full-year guidance for revenue growth of 5 per cent unchanged, which it said will require a strong second half.
Wood provides services to the energy, industrial and infrastructure sectors across 60 countries and employs around 60,000 people.
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