John Wood share price slumps more than 50 per cent after chief executive announces major review into property write-offs
Shares in John Wood Group have fallen by more than 50%, after chief executive Robin Watson announced plans to reassess the value of property assets following a review into writedowns
The FTSE 250 company saw its shares drop from 139p to 69p on Friday morning, with investors reacting to the news that Wood would impair the carrying value of its property, plant and equipment (PP&E) and right-of-use assets by £122m.
The oil and gas services business outlined plans to reassess its PP&E in a trading update covering the first half of the year to June 30, with the board deciding to take a more prudent approach to the carrying value of group assets amid the deteriorating economic outlook.
Wood said the writedowns will impact its statutory financial position but will not affect the group's operations or its underlying cash generation
"During the first half of 2023, we have seen a marked deterioration in the global economic outlook,
The writedowns and impairments will see the carrying value of PP&E on the balance sheet fall from £1.09bn to £967m.
The carrying value of right-of-use assets will fall by £25m to £145m.
The group added that the writedowns will not affect underlying cash generation or its operations
The news comes after a difficult period for the company, which has seen its share price fall by more than half in the past year.
Following the announcement, analysts at Liberum said they believe the writedowns are 'prudent' but that they will lead to a 'reset of earnings'.
Liberum said: "We believe the writedowns are prudent and reflect the challenging economic outlook and the board's desire to take a more conservative approach to asset valuations.
"However, it will lead to a reset of earnings and we reduce our forecasts accordingly.
Peel Hunt analysts said the writedowns were 'a sensible move' and that the company's long-term prospects remain positive.
Peel Hunt said: "We believe this is a sensible move and that the company's long-term prospects remain positive.
"We maintain our Buy recommendation.
