Wood Group Battles to Stay Afloat as Deloitte Flags Material Weaknesses

Wood Group just took a financial gut punch, and Wall Street wasn’t having it. The Group underperformed in Q4 2024, adding fuel to investor concerns. As if things weren’t bad enough, the London-listed engineering giant saw its shares crater 31% in a single day after an independent Deloitte-led review flagged “material weaknesses and failures” in the company’s financial controls. Adding to the turmoil, CFO Arvind Balan abruptly resigned after admitting to misstating his professional qualifications. This wasn’t just a minor accounting hiccup, it exposed deep-rooted governance issues, cash flow problems, and a confidence crisis among investors. Let’s break it down.

Cash Flow Gone South

Wood Group is now forecasting negative free cash flow of up to $200 million in 2025, completely flipping the script from previous projections of “significant” positive cash flow. Translation: The company is bleeding more cash than it’s bringing in. That’s a red flag for investors, especially considering Wood’s past struggles with high debt and costly project write-offs. The firm is also evaluating potential prior-year financial adjustments, hinting at deeper accounting inconsistencies that could further rattle the books.

Cutting Costs Like There’s No Tomorrow

With its financial health in intensive care, Wood Group is doubling down on cost-cutting. The company has already axed $60 million in 2024, but now it’s going into full damage control mode, aiming to slash an additional $85 million in 2025, bringing total savings to $145 million by 2026.

How’s Wood Group Tightening the Belt?

• Employee Bonuses: Gone. Even top execs won’t see a dime.
• Potential Job Cuts: The company isn’t confirming, but analysts suspect it’s on the table.
• Asset Fire Sale: Plans to sell off up to $200 million worth of assets to patch up the balance sheet.
• Debt Management: With $1.1 billion in net debt, Wood is exploring “all refinancing options” before its debt matures in 2026.

CEO Ken Gilmartin is feeling the heat. “This is a difficult announcement,” he admitted, calling the company’s financial performance “disappointing” while emphasizing the urgent need to improve governance, financial culture, and internal controls.

The Stock’s in Freefall

Investors wasted no time jumping ship. Wood Group’s 31% plunge is just the latest blow in a brutal run, its stock has already been on a downward spiral, crashing over 90% in the past five years.

And this isn’t the first time the company has been in hot water:

• November 2024: Shares plummeted 50% in a single day after the Deloitte probe was first announced.
• August 2023:  A potential £1.6 billion buyout from Dubai-based Sidara collapsed, citing “geopolitical risks”.
• 2023-2024: The company wrote off nearly $1 billion in losses from failed projects.
• Since 2013: The stock has lost 95% of its value, with its market capitalization now down to just £297 million from a previous valuation of £1.6 billion.

At this point, Wood is scrambling to reassure investors, but skepticism is high. The market isn’t convinced the turnaround strategy will be enough to offset years of financial missteps.

The $1.1 Billion Question

Wood Group’s financial troubles didn’t start overnight. A major culprit? The 2017 £2.2 billion takeover of Amec Foster Wheeler, saddled the company with high debt and legal liabilities. That misstep continues to haunt Wood today, forcing it to offload assets and aggressively cut costs just to stay afloat. With $1.1 billion in net debt, Wood is also evaluating all potential refinancing options ahead of its 2026 debt maturity deadline. The clock is ticking, and securing favorable refinancing terms could be a challenge given its battered financials.

Can Wood Group Pull Off a Comeback?

The engineering giant's ability to recover depends on its capacity to halt financial decline and restore investor trust. The company is placing its hopes on a combination of governance reforms, strategic pivots toward profitable markets such as oil and gas, and aggressive cost-cutting measures aimed at stabilizing cash flow by 2026. Additionally, asset sales and debt restructuring are being pursued to alleviate liquidity pressures. However, the path forward remains uncertain. With substantial debt, shaken investor confidence, and deep-seated financial weaknesses, Wood Group requires more than quick fixes, it needs a fundamental transformation. Whether these efforts will be enough to reverse its fortunes or merely delay the inevitable remains to be seen. The next few quarters will be critical in determining the company's fate. Enjoying our stories so far? Then don't forget to subscribe to our weekly newsletter for industry insights delivered to your inbox every week!