Wood Group (WG.) shares are volatile following its results announcement and are down over 7% as I write. They are still however the thick end of ten percent above the low point for the year...which goes to show you the material natural level of fluctuations in the oil services space. Still, with the oil price heading north again year-to-date I would have expected more especially - as I last recounted HERE - Wood Group has plenty of self-help scope resulting from the Amec Foster Wheeler deal of a little over a year ago.
Any deal though has the capability of blurring the short-term numbers. In Wood Group's case the revenue growth line includes a pro forma adjustment, the operating profit line has to be amended by exceptional and non-cash amortisation charges and there is even an overall loss for the period impacted by 'exceptional costs of $183m related to synergy delivery, restructuring, impairment of EthosEnergy and guaranteed minimum pensions'. I get why the purists may not like either the space or the company's numbers. However I do not think any of this has induced the latest share price fall and the company's comment about anticipating more growth in 2019 is clearly helpful too. Certainly ebita (earnings before interest, tax and amortisation) growth is guided to be near 10%. I think the issue lays with deleveraging.
Wood Group has been fairly successful at getting synergies from the deal and this has manifested itself in not just helping drive up the earnings capability but deleveraging too as per the comment that 'Net debt reduced to $1.5bn in line with guidance at December trading update. Total facilities headroom of $1.3bn. Net debt : Adjusted EBITDA reduced to 2.2x (2017: 2.4x)'. All good stuff...however anything above x2 times should induce a raise of the analytical eyebrows. Wood Group knows this too and hence wants to get down to around x1.5 times net debt to ebitda. But the statement indicates this is taking a little more time, hence the comment: 'Deleveraging to 1.5x Net debt to Adjusted EBITDA will be more gradual than originally anticipated due to impact of slower sector recovery in oil & gas since completion, working capital commitments on the legacy AEGIS contract and slower progress on non-core asset disposals due to our focus on value'.
So far from ideal, more a delay in the plan of action...and so the share takes a hit. For me though this is no huge disaster. A prospective rating of x10 EV/ebit (on clean numbers admittedly), a dividend yield of well over 4% (pushed up in the numbers) and low/mixed hopes already embedded in about the sector outlook is a workable backdrop and I would worry more if some progress has not been made already in a sector well known for being lumpy. Debt is the most pain when you struggle to find self-help capability – and at least Wood Group has this. My guess is that firmer energy sector prices will start to filter through into sector spending too – and certainly recent comments from mega cap integrated names such as ExxonMobil support the view that more sector capex spend is a-coming. Pull it all together, I would buy the share here if you don't own it...and if you have a decent stake like me then chill and write down the circa five quid level to add another slug.
Filed under: Wood Group, WG., Bearcast, IQE, Highlands Natural Resources, Surface Transforms, TomCo, Kingfisher
RISK WARNING & DISCLAIMER - FiveFreeShareTips.com tips are provided by independent authors via a common carrier platform and do not represent the opinions of FiveFreeShareTips.com. FiveFreeShareTips.com does not accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at FiveFreeShareTips.com and via emails you receive from [email protected] are for your general information and use and are not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by the tipsters or FiveFreeShareTips.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Trading shares involves the risk of loss. The tipsters and FiveFreeShareTips.com shall not be liable for any losses or other damages incurred. The value of investments can go up or down and the past is not necessarily a guide of future performance.
Well actually it will be six. One every week day and one on Sunday, each landing with you at 11 AM sharp.
Unlike other services (which may always have a vested interest) we pride ourselves on our impartiality and cover all small caps including AIM. the Standard List, The Wider Main Market and NEX.
We cover small caps, penny shares, FTSE 350 stocks and blue chips. We look for red hot penny shares, Warren Buffett style value investments with yield and growth stocks. There is no technical analysis in our work just solid fundamental analysis from a team of experts with decades of stockmarket experience.
You will not agree with all we publish but if you are interested in small caps you cannot afford to ignore it either. Yo'll never be charged for the free share tips from Five Free Share Tips and given the star writers involved you know that they will move share prices.
There's no telephone number or postal address required and there is no charge, ever, for your Five Free Share Tips membership. Just free shares tips every day apart from Saturday And each day's share tip will not just be a few thoughts cobbled together but will be detailed analysis from experts.
Our experts do not just earn their living from writing. All own shares. If they own shares in a stock they cover they will declare it and will not sell until after advising a sell to our readers. And why not our tips are so good that why shouldn't our readers put their money where their mouth is?
Don't just take our word for it! Judge us on the calibre of our free share tips and join today to start receiving them from September 1 2017. If you don't like what you get delivered to your inbox unsubscribe and you will never hear from us again. So why not give it a go? Sign Up Now
We've put together a panel of top tipsters, including:
Tom Winnifrith, in his 27th year writing about shares, noted fraudbuster & dubbed "The maverick Tipster"
Chris Bailey, City whizz kid turned financial guru, rated as one of the top 50 commentators on shares on twitter, founder of Financial Orbit
Steve Moore, has worked with Tom Winnifrith for all bar 3 weeks of his working life - a noted commentator on value stocks
Malcolm Stacey, The Grandfather of Share Blogging, the founder of ShareCrazy & a best selling autthor of stockmarket books
Lucian Miers, the Bard of the Boleyn, one of the UK's best known short sellers
Gary Newman, writes about value investing on AIM, speciality is in share tips on oil and mining companies
Nigel Somerville, The Deputy Sheriff of AIM, an expert in forensic analysis a skill used to bust frauds but also to tip true value investments
The team from HotStockRockets, specialising in AIM and small cap shares which will fly on a three month view
Remember to book your place at the UK Investor Show 2018. The UK’s top investment show taking place on Saturday 21 April 2018 at the Queen Elizabeth II Conference Centre in Westminster, London. The show will feature a unique line-up of top speakers including Nigel Wray, tech queen Vin Murria, Dave Lenigas, Mark Slater, Tom Winnifrith, Adam Reynolds, Ed, Croft, Nick Leslau Luke Johnson and Dr Johnny Hon as well as 135 exhibiting small cap companies.
The hot share tips given here are of necessity, general. They cannot relate to the individual circumstances of investors. Anyone considering following the share tips contained here should seek independent advice from a Financial Conduct Authority authorised Stockbroker or Financial Adviser. We cannot be held liable if individuals suffer losses through following share tips contained on this site or emailed out as free share tips. The value of investments can go down as well as up. The past is not necessarily a guide to future performance. Investing in shares can lose you part or all of your capital although the potential returns are theoretically unlimited. The difference between the buy share price and the sell share price for smaller company shares (penny shares) can be significant. Profits from dealing in shares may be liable to tax - the level of tax and bases of relief from tax are subject to change. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Some of the shares recommended on this site will be smaller company shares. By their nature such investments can be relatively illiquid and thus hard to trade. And that makes such investments more of a high risk than larger company shares (or 'small caps'/'penny shares'). FiveFreeShareTips.com & its sister site ShareProphets.com defines a smaller company share as any stock traded on AIM or NEX or which has a market capitalisation of less than £300 million.