John Wood Group PLC (LON:WG) shares climb after profits increase by 43%.
John Wood Group (LSE: WG) saw its shares rise 5% to 800p this morning after a well-received set of results.
Wood Group is an engineering business focussed on the energy sector, and it is still seeing activity bounce back a little from the financial crisis. Its sales rose by 20% to $6.8bn in 2012, but underlying profit growth was much higher at 43%.
All three of the company's divisions saw growth last year, but the largest increase came from Wood Group Engineering, which provides services to the upstream, subsea & pipelines, downstream & industrial and clean energy sectors. This division's profit margins are twice that of the other two parts of the business, so this helped Wood Group's overall profit margins rise from 6% to 6.8%.
The annual dividend was raised by 26% to 17 cents per share, although Wood Group currently pays less than a quarter of its profits out to shareholders. Net debt rose from $4m last year to $155m, mostly due to spending on acquisitions.
Wood Group has reshuffled its management team in the past year, with Sir Ian Wood departing as chairman and the previous CEO, Allister Langlands, taking his place. The current CEO, Bob Keiller, was previously head of Wood Group's PSN division.
This company is certainly benefiting from industry tailwinds at the moment. It reckons global spend on oil exploration and production rose 9% last year, and a further 7% increase is expected in 2013. Shale gas production in the US is a key driver, as is the increased complexity of finding and developing new oil fields.
Looking ahead, Wood Group is valued at about 13 times forecast profits for this year, although these figures may be revised after these latest results. At £3bn, it is one of the smaller companies in the FTSE 100 right now, but looks well placed to progress in the years ahead.
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> Stuart does not own shares in Wood Group.
