Aberdeen’s Wood faces Polish contract loss and results delay

ENGINERING giant Wood has seen its shares plunge around 16 per cent after announcing it is facing a $222m loss on a contract to build a US anti-missile facility in Poland and delaying publication of its annual results.

The announcement by Aberdeen-based Wood underlined the scale of the challenges it has faced on the Aegis Poland contract, which it has been working on for years.

The contract covers work on buildings to house the Aegis Ashore anti-missile defence facility for the United States Army Corps of Engineers.

Wood inherited the contract with a portfolio of work in progress it acquired through the £2.2bn takeover of Amec Foster Wheeler, which completed in October 2017.

This was a landmark move in chief executive Robin Watson’s campaign to take Wood into new engineering markets to help reduce its reliance on the North Sea oil services business in which it made its name.

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However, Wood has faced complications following the acquisition.

In June Wood said it had agreed to pay $177m following investigations into legacy Amec Foster Wheeler companies which were conducted by authorities in the UK, the US and Brazil.

The fixed price Aegis Poland contract was originally awarded to Amec Foster Wheeler in 2016 with a reported value of $183m.

Wood said yesterday that following a review of the carrying value of contracts as part of its year-end processes, it expects to report an exceptional charge of c. $100m in respect of the legacy project in its 2021 accounts.

It noted: “In order to finalise the Company’s reported results … [an] external investigation and review is being undertaken, principally in relation to the historical carrying value of the Aegis Poland project contract.”

This will “necessitate a delay “to the announcement of Wood’s 2021results, previously scheduled for March 8.

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Wood recorded around $130m total losses in respect of Aegis Poland in its accounts for 2018 and subsequent periods.

Wood said yesterday its underlying results for 2021 are expected to remain unchanged. The outlook for the current year is unchanged.

Wood shares closed down 36.55p at 188.85p.

The fall reduced the company’s stock market capitalisation to around £1.3bn from £1.55bn.

In June Wood said it had reached agreements with the UK Serious Fraud Office, the Department of Justice and Securities and Exchange Commission in the US, and the Ministério Público Federal, the Comptroller General’s Office and the Solicitor General in Brazil, to resolve their respective bribery and corruption investigations into the past use of third parties in the legacy Amec Foster Wheeler business. 

The company said that under the terms of the agreements it would  pay compensation, disgorgement and prejudgment interest, fines and penalties totalling $177m.

The company noted the resolutions it reached with the authorities related to “historical conduct which occurred before Amec plc acquired Foster Wheeler AG in November 2014 and prior to the combined firm’s acquisition by Wood in October 2017”.

It added: “Wood cooperated fully with all authorities in their investigations.”

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