Shares in Wood Group have tumbled by 31% this morning following revelations from a Deloitte review that uncovered "material weaknesses and failures" within the company.
The firm has acknowledged the need to "significantly" bolster its financial culture, governance, and controls after the review's findings, as reported by .
In a trading update, the London-listed engineering behemoth also disclosed intentions to expand its extensive cost-reduction strategy and now anticipates negative free cash flow in 2025.
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Wood Group had previously initiated a Deloitte-led inquiry in November due to substantial project write-offs, which resulted in a dramatic share price drop of over 50% in a single day.
Despite this, on Friday, the company stated it does not foresee the inquiry’s outcomes having a "material impact" on its overall position or future cash-generating capabilities.
Nevertheless, it is currently assessing the scale of prior-year adjustments and their effect on adjusted pre-tax earnings.
"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 company communicated to the markets.
Wood Group has also announced an escalation in its cost-saving measures for the coming year, with annual savings now projected to reach around $85m (£67.6m), a considerable increase from the $60m estimated last March.
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The engineering institution communicated a forecast of negative free cash flow ranging from $150m to $200m in 2025 while planning a one-off disposal of assets valued at around $70m.
They anticipate that the full-year pre-tax profit outcomes will be consistent with market conjectures, yet the firm alerted to expectations of diminished underlying EBITDA.
Chief Executive Ken Gilmartin expressed disappointment over the financial outcomes amidst ongoing changes: "This is a difficult announcement amid our transformation. While we have made progress, I am disappointed in our financial performance," he commented.
Moreover, Gilmartin spoke of adopting forceful measures to capitalise on growth opportunities, particularly in the energy sector: "Consequently, we are taking decisive actions to ensure we can meet the opportunities we have in growing markets, principally energy."
He also touched upon the anticipated consequences of an independent review, reassuring about its impact: "While the likely findings from the independent review are expected to have no material impact on the Group’s cash position and future cash generation, it clearly gives us areas to focus on and we are initiating steps now to further improve our financial culture, governance and controls."
Furthermore, Gilmartin unveiled additional strategies for streamlining the company's expenditure to set the stage for future viability: "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."