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Wood reported wrong profits after ‘inappropriate management pressure’

The Aberdeen firm's share price has plummeted after an independent review found information was withheld from auditors.

Wood Group HQ in Aberdeen. Image: Kenny Elrick/DC Thomson
Wood Group HQ in Aberdeen. Image: Kenny Elrick/DC Thomson

Aberdeen firm Wood’s share price collapsed almost 30% this morning after revealing mistakes in its accounts for the past three years.

The engineering firm is undergoing an independent review by Deloitte following a collapse of share price, profits and takeover deals.

An alarming update to investors today said a number of adjustments are expected to be required on its income statements and balance sheets for the past three years.

The review also highlighted “inappropriate management pressure” as well as issues with project contracts.

Wood’s share price dropped from Friday’s closing price of 40p to 28.8p.

The group is in talks with Dubai firm Sidara over a potential takeover bid, less than a year after pulling out of a deal.

Information withheld from auditors

Wood said the review revealed gaps and deficiencies which relate to the monitoring and reporting of project positions.

It also showcased issues with the application of its accounting standards, such as holding specific amounts which should’ve been written off.

Wood said it has identified “material weaknesses and failures” in the group’s financial culture.

The group said: “This included inappropriate management pressure and override to maintain previously reported positions.

The latest update in the Wood review has revealed mistakes in previous years’ accounts. Image: Kenny Elrick/DC Thomson

“Including through unsupported dispensations and over-optimism and/or lack of evidence in respect of accounting judgements.

“The cultural failings appear to have led to instances of information being inappropriately withheld from, and unreliable information being provided to, Wood’s auditors.”

No material issues have been identified in Wood’s consulting, operations and investment services units.

What are the implications?

As a result of the findings, profit and loss and balance sheet adjustments are expected for the full year results of 2022 and 2023 as well as the half-year results for 2024.

It will predominantly impact the reported performance of the projects business unit.

It is also expected the full year accounts for 2024 will not be published by April 30.

If so, shares of the crisis-hit company will be suspended from trading from that time while the accounts are completed.

Temporary waivers have been obtained under committed debt facilities for Wood’s “historical non-compliance with prior period financial covenants”.

Wood review brings on ‘significant change’

Wood said there has been significant change within the group as well as steps taken since the period covered by the review.

This includes changes in key roles in finance and external expert assistance in applying account standards.

Wood said: “We are committed to implementing a detailed remediation plan, including necessary follow-on actions from the review, to continue to strengthen the group’s financial culture, governance and controls.

Aberdeen-based Wood Group is in takeover talks. Image: Kenny Elrick/DC Thomson

“This will include actions on culture, controls and organisational structure.”

Discussions with Sidara are continuing as it contemplates an offer for the entire of issued shares.

The Dubai firm has until April 17 to announce whether it has any intention to make an offer.

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