LONDON, UK: John Wood Group has signed an agreement for the sale of its Built Environment consulting business (Built Environment Consulting) to WSP Global Inc. for gross proceeds of approximately $1.9 billion.

Robin Watson, Chief Executive, said: “We are very pleased to have agreed this sale with WSP. This transaction will deliver significant value for our shareholders and marks a new chapter for Wood. It enables us to move onto our next strategic phase with the financial flexibility to accelerate our strategy to capture the growth opportunities ahead across both energy security and sustainability.

“We are focused now on the steps to complete this deal and in further developing our strategy, which we will outline in detail at a capital markets day, when my successor as Chief Executive is in place”.

Alexandre L’Heureux, President and Chief Executive Officer of WSP, said: “The addition of the Built Environment Consulting business will allow us to expand our Earth and Environment leadership across our key markets and geographies. We share a common purpose of making the world a better place and our united forces will only further our expertise to create a more sustainable and resilient world”.

Use of proceeds

The primary and immediate use of the net cash proceeds from the transaction will be a reduction in the Group’s net debt to strengthen our balance sheet and provide financial flexibility to deliver our strategy.

At 31 December 2021, the Group’s net debt (excluding leases) was $1.4 billion and our net debt to adjusted EBITDA (excluding leases and on a pre-IFRS 16 basis) ratio was 3.3 times. The pro forma position at 31 December 2021 including the proceeds of this disposal would have been a net cash position.

Capital allocation

From this stronger balance sheet position, we will consider options for the best use of capital to maximise shareholder value, including:

●	Ways of improving the future sustainable free cash flow of the ongoing Group through early settlement of liabilities, for example removing the Group’s asbestos liability and accelerating existing regulatory payments
●	Organic and inorganic investment to accelerate our strategy
●	Shareholder returns, for example through the restoration of an ordinary dividend

The Group’s target leverage is a ratio of net debt to adjusted EBITDA of 0.5 to 1.5 times over time. We expect that the net cash proceeds will reduce the Group’s leverage on completion and that our leverage will remain within the target range after some capital is applied to the options above.

Lender consent and debt covenant amendment

As part of the sale process and Circular requirements, Wood has agreed lender consent for the sale and a temporary amendment of the net debt to EBITDA covenant for its revolving credit facility, UKEF and USPP notes from 3.5x to 4.5x for both the June 2022 and December 2022 measurement dates.

Outlook

The Group’s outlook for this financial year remains unchanged from that set out in our 2021 full year results announcement on 20 April 2022. Excluding the impact of this sale, we expect higher revenue in 2022 across our business supported by the growth in our order book.

Excluding the proceeds from the sale of our Built Environment business, we expect no improvement in net debt in 2022 compared to 2021. The typical working capital outflow in our business in the first half is expected to lead to net debt being higher at 30 June 2022 than at 31 December 2021.

Built Environment Consulting is a leading environmental consulting and engineering services business that provides critical activities in a complex regulatory context, providing solutions for environmental risks, increased climate resilience, helping to build more sustainable infrastructure and improving mobility. It operates across the government, industrial, infrastructure, power, water, energy and mining markets, servicing clients along the whole asset life cycle, and helping them realise opportunities to make their assets safer and more productive. Built Environment Consulting has a track record of attractive growth including resilient performance through the Covid-19 pandemic.

Built Environment Consulting has over 100 offices predominantly in North America, with locations in the UK and elsewhere in Europe. The business faces end markets exposed to high growth trends, including greater ESG focus, the drive for sustainability and climate resilience, increasingly stringent regulatory standards and growth in infrastructure expenditure.

The business employs around 5,500 consultants and technicians and is led by a longstanding and experienced management team. Built Environment Consulting enjoys strong relationships with its customer base with around 80% of revenue from customers purchasing multiple service lines and around 90% of revenue being repeat business.

For the year ended 31 December 2021 Built Environment Consulting had revenue of $1,236 million, operating profit of $120 million, profit before tax of $112 million and adjusted EBITDA of $149 million, or $121 million pre-IFRS 16.

As at 31 December 2021, Built Environment Consulting’s gross assets were $1,072 million.