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Petrofac warns of further Covid disruption as projects take a hit

© PetrofacPetrofac

Petrofac (LON: PFC) has warned that its financial results for 2021 will be impacted by Covid-19 as project schedules and costs take a hit.

Revenues from its engineering and construction business are expected to be $1.9billion (£1.4bn) , down from $3.1billion (£2.3bn) in 2020, the London-listed firm said in a pre-close trading update for the year ending December 31.

The impact of Covid-19 on project progress, as well as low intake in previous years was blamed.

Revenue for the year is expected to be around $3bn (£2.2bn) , down from $4.1bn (£3bn) last year but broadly inline with market expectations.

Full-year net income is expected to be consistent with market expectations of $45.5m (£34m), helped by the release of $52m (£39m) in unused tax provisions and $250m of targeted cost savings.

However, new order intakes in the year to date stands at $2billion, up from $500,000 in the first half of the year, and chief executive Sami Iskander said it is “time to rebuild” the order backlog.

Meanwhile Petrofac also noted that it has completed a refinancing following a Serious Fraud Office Investigation to pay for a £77m fine.

Mr Iskander said: “We secured US$1.5 billion of new awards in the second half to date and the outlook for awards is improving in a more supportive macro environment. Petrofac’s cost competitive model and strong client relationships mean that we are well positioned with a healthy pipeline of opportunities scheduled for award in 2022.”

“While challenges will persist in 2022, I remain confident about the prospects for Petrofac over the medium-term as we capitalise on our strong positions in attractive and growing markets and accelerate our progress in New Energies, where we see significant near and long-term growth in exciting areas such as offshore wind, carbon capture, waste to value and hydrogen.”

Shares were up 2.2% following the announcement to 111.05pence.

Laura Hoy, Equity Analyst at Hargreaves Lansdown: “Petrofac’s expecting full year revenue to come in significantly below last year’s as low order intake and coronavirus-related troubles continued to weigh on the business. While the Securities and Fraud Office investigation into bribery claims has finally been settled, the group will be feeling the impact of the ordeal for some time to come.

“Not only was it dealt a £77m pound fine, but the group was unable to do business in some of the most lucrative oil and gas markets which has had a significant impact on this year’s results.

“Today’s update suggests the group’s hit the ground running as it rebuilds its order backlog under new CEO Sami Iskander. But there’s a long road ahead and covid-related headwinds aren’t helping matters. With revenue and profits expected to remain significantly below 2019 levels for the foreseeable.”


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