Oil and gas engineering giant Wood Group has cancelled employee bonuses and declined to rule out job cuts, after saying it needs to significantly extend a cost reduction plan.
The company, which employs more than 6,000 people in the UK, mostly in Aberdeen, said a recent review of the business carried out by consultants at Deloitte had found “material weaknesses and failures” at the firm.
Wood Group operates across 60 countries and has about 35,000 staff in total, and carries out engineering and consulting work on oil rigs, among other things.
It also carries out engineering work on facilities for the pharmaceutical and mineral refining industries, and is listed on the FTSE 250.
Shares plunged 33% on Friday after revealing that its cash flow in 2024 was negative by as much as 200 million dollars (£159 million).
Negative free cash flow means a company is spending more money than it is generating.
Wood Group had previously forecast “significant” positive free cash flow for the year.
As a result, it is extending a cost-cutting programme which already stripped out 60 million dollars (£48 million) from its outgoings in 2024, to save another 85 million dollars (£68 million) this year.
Eventually, it hopes to have saved 145 million dollars (£115 million) by 2026, compared with what it would have spent without the plan.
When approached on whether this would include job cuts, the company declined to comment.
The cost cuts include cancelling bonuses for all employees, including top executives, and “actively managing working capital at year end”.
In November, Wood Group announced that Deloitte would carry out a review of the company after it had to write off several large projects.
In the Friday update, the company said that following the review, it will try to “strengthen significantly the group’s financial culture, governance and controls in light of material identified weaknesses and failures”.
“Following these actions, the business will be on a firmer operational footing, but cash generation has yet to materialise and financial strength needs significant improvement,” the trading update said.
Chief executive Ken Gilmartin said it was a “difficult announcement” and said the company’s financial performance was “disappointing”.
Wood Group will look to focus more on its most profitable markets, such as oil and gas to improve its finances. It already has significant operations in the US and the Middle East fossil fuel industries.
Mr Gilmartin said the Deloitte review “clearly gives us areas to focus on and we are initiating steps now to further improve our financial culture, governance and controls”.
“We have announced further actions to address the cost base of the business to right size Wood for the future, and have laid out a very clear route to positive free cash flow in 2026.”
While Wood has not finalised its financial results for 2024 yet, it said it expects profit growth to have slowed, projecting earnings of 450 million dollars (£358 million) to 460 million dollars (£366 million).
It marks the latest blow for the FTSE 250-listed group after a Dubai suitor walked away from a £1.56 billion proposed takeover last summer.
Rival Sidara abandoned plans for a deal, blaming global market turmoil and geopolitical risks, having put forward four takeover proposals.
Just weeks later, Wood Group also revealed it slumped to a 961.7 million US dollars (£745.3 million) loss after booking write-downs on large-scale projects.
Separately, it said in early January that it had sold EthosEnergy, a subsidiary business, which brought in about 138 million dollars (£110 million).
