SHARES in Wood Group plunged yesterday after the engineering and consultancy group warned investors it would not return to positive free cashflow next year.

In a statement yesterday, the Londonlisted group said its cashflow would return to the black from 2024 onwards, with recent exchange rate movements carving out a revenue loss of around $200m (£166.3m).

Volatile markets have also spelled an around $10m loss in ebitda for the company.

Bosses at the group now expect adjusted ebitda to be "flat in the nearer term" as the company reinvests its cash to "secure growth".

Shares sank more than 16 per cent yesterday afternoon on the news. The group has lost a third of its stock price in the year to date.

Wood said it would seek to improve its margins in the medium term after "historical underperformance", citing project discipline and low-risk contract work as areas of focus.

CEO Ken Gilmartin said the group's turnaround was "progressing well" nonetheless, and added that the $1.8bn sale of Wood's built environment consultancy business in September had accelerated the rebound.

"We have addressed legacy issues and our strong balance sheet will allow us to deal with the defined schedule of resulting cash outflows," Gilmartin said.

"Our strategy will deliver returns for our shareholders and today we have set out new financial targets, including to grow ebitda by mid to high single digit constant annual growth rate over the medium term, with momentum building over time as our strategy delivers."

On top of cashflow woes and the financial impacts of the economic downturn sweeping the globe, Wood and subsidiary company Amec Foster Wheeler Energy (AFWE) were ordered to fork out $115m to settle a legacy litigation case with US energy services provider Enterprise earlier this month.

Enterprise filed a lawsuit against London--headquartered AWFE in 2016 over alleged cost increases and delays on a Texas-based contract signed in 2013.

Wood inherited the litigation when it bought AFWE for £2.2bn in 2017.

(c) 2022 City A.M., source Newspaper