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Wood Group (LSE:WG), a global leader in engineering and consulting services, has announced further progress in its ongoing disposal program of non-core assets. The company has signed agreements to sell its stake in two businesses—Ethos Energy Group Limited and CEC Controls Company Inc —which are together expected to generate net proceeds of approximately $165 million in 2024.
Strategic Divestment of Non-Core Assets
The divestment of these businesses aligns with Wood's strategy to streamline its operations and focus on its core areas of expertise. The sale of its stake in EthosEnergy, a joint venture specializing in rotating equipment services, and CEC Controls, a company known for its industrial and process control systems in the automotive sector, marks a significant step in Wood's broader initiative to shed non-core assets.
EthosEnergy and CEC Controls collectively contributed $41 million to Wood's adjusted EBITDA in 2023. The sale of these entities will not only simplify Wood's portfolio but also provide the company with substantial financial flexibility to invest in its core businesses.
Financial Impact and Future Proceeds
The transactions are expected to be finalized later in 2024, resulting in net cash proceeds of around $125 million for Wood Group. In addition to the immediate cash influx, Wood will receive loan notes from EthosEnergy, which are expected to generate up to $42 million in proceeds upon repayment, along with accrued interest. These loan notes are structured to be repaid approximately five years after the completion of the sale, adding further financial benefits for Wood Group in the medium term.
This strategic move not only strengthens Wood's balance sheet but also supports its ongoing efforts to optimize its business operations and focus on areas with higher growth potential. The company’s management is confident that these disposals will contribute positively to its financial performance and strategic goals.
