Companies
Wood Group Financial Review Uncovers 'Cultural Failings' in Projects Business
The report comes as UK-based Wood Group plc is facing a possible buyout by design firm Sidara, located in Dubai.
Logo courtesy Wood Group
U.K. engineer-contractor Wood Group plc says a financial review uncovered “material weaknesses and failures” in the financial culture of its projects business unit. As a result, the Aberdeen, Scotland-based firm says it will likely not release its year-end 2024 financial report in April as previously scheduled and that it expects to suspend trading of its stock during the delay.
Wood announced last November that it would undergo an independent financial review by financial consultant Deloitte. On March 31, Wood shared some of those preliminary findings, including that auditors found issues with some contracts and accounting standards in its projects unit. The uncovered issues included “inappropriate management pressure and override to maintain previously reported positions” and over-optimism, it says.
The company did not disclose the names, locations, costs or scopes of those projects. Wood specializes primarily in the global energy sector, but also does work for the pharmaceutical and mineral refining industries.
Wood says it expects to make some prior year adjustments to its income statement and balance sheet for 2022, 2023 and the first half of 2024. But given the timing and the work needed to conclude the review, the company expects to not publish its annual financial report April 30 and will suspend share trading from then until the review is complete.
“We are committed to implementing a detailed remediation plan … to continue to strengthen the group's financial culture, governance and controls,” the company says in a statement.
Auditors identified no material issues with Wood’s consulting or operations business units, according to the engineer.
There has been “significant change” within the company since the period covered by the review, Wood contends. In February, former corporate CFO Arvind Balan resigned after less than a year in the role following discovery of “incorrect description of his professional qualifications.” The company appointed Iain Torrens as interim CFO shortly after.
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“This is a critical period for Wood and Iain is a seasoned CFO with the necessary capital markets experience and proven leadership in refinancing and financial reporting, as well as risk management, audit and compliance,” Wood CEO Ken Gilmartin said in a statement at the time.
Wood, which ranks No. 10 on ENR’s Top 225 International Design Firms, operates in more than 60 countries and has about 35,000 staff in total, with its U.S. operations based in Houston and a total of 25 offices across the country.
The preliminary financial review findings come as Wood is facing a possible buyout by Dubai-based engineering firm Sidara, which ranks No. 9 on ENR’s international design firms list. After making multiple bids to take over Wood, Sidara withdrew a $2.03-billion offer last August.
But in February, the companies announced that Sidara was renewing its effort for a possible cash offer to acquire Wood. On March 24, the companies said discussions were still underway, and they extended the deadline for Sidara to make an offer until April 17.
Wood previously sold its environmental business to Montreal-based WSP Global Inc. for $1.8 billion in 2022.
