Engineering and consultancy giant Wood said today that its revenues fell by more than a fifth in 2020 due to challenging trading conditions.
But the Aberdeen-headquartered company took a £290 million bite out of its net debts, which totalled £755m at year end.
In a full-year trading update, bosses said firm enjoyed “considerable financial headroom” of £1.3 billion.
They also said certain markets appeared to be “stabilising” despite the ongoing Covid pandemic.
The “built environment” and renewables markets continue to show strength, but short-term headwinds still exist in other areas.
Wood highlighted delays to large project awards in upstream oil and gas and deferrals of investment decisions in the chemicals and downstream sectors.
The London-listed firm’s diversification drive of recent years has made it less vulnerable to oil price volatility.
About 90% of Wood’s revenues came from the upstream oil and gas sector as recently as five years ago, but that percentage has been reduced to around a third.
Only about 5% of total revenue is generated in the North Sea.
Wood now feels it is positioned for “significant medium-term growth opportunities”.
Growth was out of reach in 2020, a period which yielded revenues of £5.5bn, down by about 22% on 2019 levels.
Wood’s order book shrank by more than a fifth to £4.5bn between December 2019 and November 2020, reflecting market conditions and the firm’s “measured risk appetite”.
Operating profit before exceptional items came to £160-170m, against £300m in 2019.
Wood is encouraged by its 8.2 – 8.4% Ebitda margin, which it put down to the flexibility of its business model, making overhead reductions of £170m possible.
The firm said its debt reductions were achieved thanks to voluntary salary cuts by directors and senior leaders, the withdrawal of dividend payments, spending reductions and improved working capital performance.
In August, Wood announced it had reduced its headcount by around 10,000 since the start of 2020 due to divestments and its response to the Covid-19 pandemic and lower oil prices.
Cash generation included proceeds of £340m from the disposal of its nuclear and industrial services businesses and interests in Trans Canada Turbines.
Chief executive Robin Watson said Wood’s “resilient” financial performance in 2020 was underpinned by its “broad” market exposure and “flexible business model”.
Mr Watson said: “While near term headwinds remain in 2021, we see significant opportunities from the accelerating pace of energy transition and will optimise our operating model to unlock stronger medium term growth.”
Stuart Lamont, investment manager at Brewin Dolphin Aberdeen, said Wood was continuing to prove its resilience through the many challenges of the pandemic.
Mr Lamont said: “The company has traditionally seen much of its fortunes tied to the direction of the oil price, but it is telling that there are several mentions of its ‘broad market exposure’ in today’s statement.
“The experience of Covid-19 and its impact on the global economy has underlined the importance of diversification for a business like Wood and the company has made significant progress on that front, also shoring up its balance sheet through cash generation and its divestment programme.
“Debt being reduced to almost $1bn (£730m) is an important marker on that road and, while there are undoubtedly still challenges ahead, Wood is in a good position to weather oncoming storms.”