Robin Watson - Chief Executive David Kemp - Group CFO

Phillip Lindsay - Credit Suisse Jamie Maddock - Deutsche Bank Research James Evans - Exane BNP Paribas Alex Brooks - Canaccord Genuity Amy Wong - UBS Mark Wilson - Jefferies Maria-Laura Adurno - Goldman Sachs David Farrell - Macquarie Rob Pulleyn - Morgan Stanley James Hubbard - Numis Securities

Well, good morning, everyone. Welcome to our full-year results presentation. I'm joined today by David Kemp, Group CFO, our Investor Relations team, and we've also got Dave Stewart here Dave's the CEO of our asset lifecycles solutions business in the Eastern Hemisphere. Hopefully, some of you will get a chance to have a chat with Dave after the presentation. A year ago, I set out my vision for Wood Group, which was a really simple one to be recognized as the best technical services company to work with, work for and invest in, with a relentless focus on excellence. In 2016, we were engaged in the short-term challenges of cost efficiency and utilization. And also, positioning ourselves through a prolonged period of reduced oil prices. At the half-year, we talked about our flexibility, our focus on controlling what we can control and maintaining our leading positions, themes which have endured throughout the year. Later today, I'll take you through some of the implications of our reorganization as One Wood Group. I'll do that in the context of our positioning and that's positioning, with regard to the breadth and range of our services, our customer relationships and what we feel is a differentiated regional capability.

Thank you, Robin and good morning everyone. The Group performed in line with expectations in 2016. We delivered EBITA of $363 million, down 23% against a backdrop of challenging markets and pressure on pricing and volumes. Total revenue was down 16%. We continued our robust and decisive management of utilization and overhead costs which has partly offset the impact of the challenges in the market. We reduced overhead costs by a further $96 million, in addition to the savings of $148 million in 2015. Headcount has also reduced by 36% over the two-year period. EBITA margin fell by 0.6%. As we flagged at the trading update, this includes the impact of one-off benefits, mainly commercial closeouts of $29 million. Adjusted EPS reduced by 24% reflecting reduced earnings. The Board has recommended a final dividend of $0.225 per share, which makes a total distribution for the year of $0.333, an increase of 10%. This is in line with previously stated intentions. The dividend cover ratio was 1.9 times. Following success of 10% annual increases in the dividend against a backdrop of falling earnings, we intend to pursue a progressive dividend policy going forward, taking into account cash flows and earnings. We talked in August, about our flexibility in a challenging market, particularly in respect of robust management of utilization and overhead cost reduction. These themes are reflected in the relative resilience of our EBITA margins. Operating profit pre-exceptional items was down 28% at $259 million, reflecting the trading challenges and the relatively fixed nature of amortization. The effective tax rate reduced to 25.3% as legacy issues were resolved. We focus not just on the short-term challenge of cost efficiency and utilization, but also our longer-term positioning. In addition to the One Wood Group reorganization, this included the delayering and rationalization of back office functions and these actions are reflected in the exceptional cost of $51 million. The exceptional cost also includes the cost of excess property in our major centers as we consolidated our footprint. We also recognized a further $89 million charge in relation to the restructuring and impairment in the carrying value of our investment in EthosEnergy, the majority of which is non-cash. We're actively pursuing our longer-term strategic options for Ethos that include a possible disposal of our interest. It's worth bridging from 2015 to 2016 margin to highlight the impact of some of the themes affecting our results and the trading challenge that we faced. In February, last year, I took you through a similar bridge covering 2014 to 2015, which flagged a reported margin of 8%, which we didn't feel was indicative of a sustainable margin in 2016. As you can see, this year, it's difficult to fully offset the impact of sustained volume and pricing pressure through management of utilization and overhead cost reduction. Despite generating further overhead cost savings of $96 million, the contribution from M&A completed in 2015 and one-off EBITA impact of commercial close-out on significant legacy projects of $29 million, the combined benefit was not sufficient to fully offset the trading challenge that we faced. The look-ahead points are, firstly, we believe the one-off benefits will not be repeated in 2017. But, the cumulative cost savings of over $240 million are sustainable into 2017. I will now turn to our segmental performance, which reflects the revised reporting segments that we shared with you first in August. In asset life cycle solutions, west, revenues were broadly flat compared to 2015. Contributions from acquisitions made late in 2015 offset a reduction in underlying revenues that we estimate to be over 15%. EBITA reduced by 16%, but EBITA margin was only down by 1.6%, due to the benefit of further significant cost reductions. In operations and maintenance, the U.S. onshore business is the largest contributor, and was significantly impacted by tough market conditions. We see some early signs of improvement in the core U.S. onshore market, both from macro-indicators, such as the rate count; and also, from modest increases in headcount and bidding activity. However, this is only having a small impact on activity, at this stage. We saw significantly improved performance in East Canada, as our hook-up and commissioning scope continues on the Hebron topsides. 2016 revenue in projects and modifications was down on 2015, as a number of projects reached conclusion, including the Flint Hills refinery project. However, we continued work on ETC Dakota access pipeline, and we commenced work on the FEED and detailed scope for Noble Leviathan; detailed design work on Statoil Peregrino phase 2 field; and detailed engineering work for Kiewit on the BP South Pass project. Our FEED activity for Anadarko Shenandoah and follow on work on Hess Stampede continued in 2016. In our Eastern region asset life cycle business, revenue fell by 26% in 2015, primarily due to the significant reduction in Brownfield modifications in the North Sea. That remain subdued. Against this backdrop, EBITA margin remained fairly constant, as a result of commercial contract close outs of $15 million and overhead cost savings. The impact of the tough North Sea market was seen in our operations and maintenance business. We secured renewals of the majority of our contracts over the last 18 months. Whilst these renewals reflect the tough pricing conditions, we believe they secure our access to work, in the longer term, as activity recovers. The decline in the North Sea was partially mitigated by robust industrial services activity in the UK. We have adapted to new entrants in the North Sea market, applying our duty holder capability and broad range of services to act as a strategic partner to new customers, including Antin and Ancala for the operation of the CATS and SAGE gas pipelines and terminals respectively. Projects and modifications work was down on 2015. Brownfield modifications in the UK declined significantly. The pace of activity on work with Exxon in Iraq and BP in Azerbaijan has been slower than expected. Activity on our Saudi Aramco projects and with NCOC grew, and we renewed our frame agreement with Saudi Aramco in the second half of 2016. We also completed the later stage follow on engineering and construction support for Det Norske Ivar Aasen project. Turbine activity was down on 2015, due to weaker than expected performance in our EthosEnergy joint venture. As I discussed earlier, this has led to a restructuring and impairment charge in relation to EthosEnergy. Revenue in specialist technical solutions was down 17% on 2015. The margin increased slightly, as a result of commercial close outs and overhead cost reduction initiatives. Activity in subsea has reduced significantly with minimal large projects coming to the market. Our relationships with customers remain strong and we've secured a number of master service agreements with key customers, including Statoil, Apache, BP and Chevron, albeit the revised contracts are at lower margins. Robin will talk in more detail later about automation, but this is an area where we've seen robust activity in 2016, in part due to the acquisition of ATG in 2015, and the commencement of the TCO project in Kazakhstan. We have also secured the main automation contract on Exxonmobil's polyethylene plant in Texas. Turning to cash. Cash generated from operations was $245 million, and cash conversion, versus EBITDA, was 68%. The fall in cash generated from operations primarily reflects the reduced trading [EBITDA]; provision movements; and the impact of an increase in DSO from 63 days to 74 days, as customers took longer to pay. Despite the increase in DSO, bad debts remain low. In this difficult market, our balance sheet remains strong with net debt of $331 million, and net debt to EBITDA of 0.8 times within our preferred range of 0.5 to 1.5 times. The Group is in a strong financial position. Our balance sheet gives us the flexibility to reinvest in our business. Our preferred uses of cash remain the progressive dividend, organic investment and acquisitions. Before I hand over to Robin, I'll just summarize the key financial points. We delivered an EBITA of $363 million in line with expectations, with our actions on cost and utilization helping to offset volume and pricing pressure. Performance did benefit from commercial close-out on significant and legacy projects. This isn't something we anticipate will repeat in 2017. As I just covered, our financing position remains very strong, and we increased the dividend by 10%. Going forward, we intend to pursue a progressive policy, which considered cash flows and earnings. I'll now hand over to Robin.

Good, thank you, David. I want to talk about our performance against the objectives I set out in February, and the strong position we've achieved around our breadth and visibility of our services, our customer relationships, and undifferentiated regional capability. In 2016, we focused on positioning the Group for a prolonged period of lower oil prices; and, going into 2017, the market continues to present us with challenges. But I do want to provide you with the assurance that Wood Group is well positioned to support our customers in the longer term. 2016 has been a difficult year in our core oil & gas markets, and I'm pleased that Wood Group has delivered financial performance in line with our communication last May. We refined our operating structure to enhance customer delivery, increasing effectiveness by enabling easier customer engagement, and generate an efficiency gains as a simpler business with less internal barriers. This better positions us to develop smart solutions, and the benefits have been seen in live bids and awards. Our decisive action on overheads meant that difficult decisions have been made, but have not been taken lightly. As expected, the pace of saving has slowed, although we believe our savings over the past two years are largely sustainable. Emerging from the downturn as a stronger business is about taking a balanced approach. It's not just about reducing cost and conserving cash. We invested in back office initiatives, principally in our ERP systems; and we also develop -- invested in developing some innovative solutions, which help differentiate our position. There's no change to our appetite for acquisitions. We focus on opportunities which consolidate our offering or accelerate delivery of our strategy. In 2016, high-quality opportunities were scarce, and we have remained very disciplined. Looking ahead, we're confident that the decisive actions we took in 2016 have positioned us well for the longer-term recovery, but we do remain cautious in the near-term outlook. Our core oil & gas market continues to present challenges. The modest recovery we do see in 2017 is limited to certain markets. Capital discipline remains at the top of the agenda for our customers. However, we have secured a number of renewals and new awards. This gives us confidence that our reorganized business is well placed to support them in this lower-for-longer environment. You're now familiar with the reorganized business consisting of asset lifecycle solutions and specialist technical solutions. This change has been delivered in-house over the past 18 months, and simplicity and innovation have been key drivers for us as we went through the implementation. We haven't fundamentally changed what we do, or how we look to grow. We design, modify, construct and operate industrial facilities, mainly in the oil & gas sector. We've retained our asset-light operating model under enduring long-term, through-cycle focus. We also continue to provide all the services we are known for, and that you will each identify with. It's the improved visibility and connectivity across the service lines that is important. That ensures the breadth of our capabilities are better understood by our customers. We've announced a number of contract wins across all services and sectors in 2016. It's particularly worth highlighting automation as a key emergent service line for us. This is an area we are seeing increased activity. Despite the challenging environment, we're comfortable with our positioning with customers. We've maintained longstanding customer relationships, broadened our reach by development relationships with new entrants into our core markets, and extended our capability in newer markets. In North America, a relationship with BP is one that's really benefited from the visibility of a full service offering in a reorganized business. Our most recent awards, including work on South Pass and Mad Dog covered a real breadth of our offering, and leveraged longstanding relationships with BP in the North Sea, in Trinidad, and actually across the globe. We've adapted our duty-holder capability to engage with new entrants to the North Sea, such as Antin, to operate the CATS system, and Ancala on the cage the SAGE system. These two systems account for a significant proportion of the UK's offshore gas supply. We see, we're seeing the long-term investment in the North Sea from these new entrants, working with us in innovative contracting models. And in both instances, we're delighted to be the chosen strategic operating partner. At the same time, we've maintained a strong relationship with existing North Sea customers. We've extended contracts with Shell, TAQA, Nexen, Chevron and others. Despite the competitive rates and generally suppressed activity levels, this positions us well for the future. Our industrial services offering also continues to perform robustly in the North Sea, under the in the defense and industrial sectors in the UK. In the Caspian, the automation detailed design scope for Tengizchevroil and Kazakhstan is a large project for us, at over 1 million man-hours. It covers the entire process automation system, with both Greenfield and Brownfield scope. We also mobilized our team to deliver the MMO work in Baku with BP, in the course of 2016. In Malaysia, we recently announced a five-year operations and maintenance contract for Hess, Malaysia's fixed and floating offshore facilities, extending a 15-year global relationship into a new geography. In Australia, we secured our $145 million extension to our contract with Melbourne Water, and continue to deliver a full range of technical services to their water treatment facilities. In the Middle East, we've increased our stake in our Saudi Aramco engineering business, and have significant activity in the kingdom. We also benefit from a five-year framework agreement extension, which we achieved in January 2007 with Saudi Aramco. Our work to provide engineering design and procurement services to Statoil's Peregrino field in Brazil demonstrates the strength of our long-term customer relationships. Our activity with Statoil covers a broad range of services under framework agreements secured over the past couple of years; and feedback on our differentiated approach around topsides engineering and MMO work has been very positive. The creation of specialist technical solutions is a great example of how we think about positioning with regard to the breadth and visibility of our services. This is a smaller, but global, discrete business unit that pulls together specialist, innovative, and largely technology-orientated offerings, designed to solve complex technical challenges across the energy and industrial sectors. Managing this in a discrete business helps us nurture a lot of these emerging services, which ensures they receive the appropriate executive attention, investment, and strategic direction. This is particularly relevant in mature markets, such as oil and gas, which are increasingly focused on developing more efficient and innovative solutions. STS covers our offerings in subsea and technology, and our growing automation and control offering, which I will now discuss in a little more detail. So, what is automation? In short, we integrate and optimize a control systems in process and manufacturing industries. You can think of it in the same vein as many of our other services. It's a specialist, independent, engineering design and commissioning business. In industry terminology, we integrate the supervisory control and data acquisition systems that are used to manage process and manufacturing facilities, with the complex field instrumentation and associated control devices. Whilst automation is very much in the technology arena, it's not a new service line for Wood Group. We've actually got a 20-year track record which started with refinery work in the U.S. and has since expanded to upstream assets and other industrial sectors, including the automotive industry. Currently, our automation business contributes just over half of STS revenues. In addition to oil and gas, the chemicals, automotive and power generation sectors comprise the largest potential markets for this offering and we see significant potential for long-term growth. Track record, technical competence and experience are absolutely key and, as such, we think this is a market with relatively high barriers to entry, which is another attractive factor. In the last two years, we've invested in our capability. In August 2015, we acquired the Automated Technology Group in the UK, giving us access to the automotive industry. We see a positive outlook for automation and control in 2017. Finally, I want to talk about our positioning with regard to our differentiated regional capability. U.S. onshore is an area where we have a strong position with services aimed at simplifying our customers' field activities, with a well-differentiated regional capability across civils; construction; fabrication; pipeline; E&I; and, ops and maintenance. Over the past couple of years, we've consolidated our shale operations, which allows us to best utilize our relatively mobile capability in a very efficient manner. Our current focus is in the Permian basin where we see a good stock of drilled uncompleted wells, increases in drilling activity and typically lower break-evens. We're confident there's room to grow and estimate we're currently capturing a relatively modest portion of available spend in that particular region. We're seeing increased bidding in our construction and pipelines offering for work on infrastructure, principally central collection gathering facilities and smaller pipelines, as a result of essentially newly developed acreage, which will come on stream. As always, strong relationships at both the corporate and local level are key to success. It's worth noting that the discussions on pricing remain competitive and we do continue to focus on rebuilding our backlog from our strong regional market position. So, in summary, 2016 has been a difficult year in our core oil and gas markets. We're pleased to have delivered financial performance, in line with our expectations. The One Wood Group reorganization has been a significant milestone for the business and we're encouraged by the value we've leveraged from it, both internally and in customer positioning and delivery. This reorganization will also ensure our efficiency gains and cost savings are largely enduring, as we are now a simpler business with less internal complexity and an enhanced focus on technology and innovation. Looking ahead, we remain cautious as to the near-term outlook for the Group and we are confident that the decisive actions, we took in 2016, have positioned us well to support customers over the longer term. So thank you. That concludes the presentation. And I will now open the floor for any questions. Q - Phillip Lindsay: Phil Lindsay, Credit Suisse. Three questions if you don't mind. The first one just on this issue of cash collection. Just want to understand how widespread the issue is. We've already seen examples of it from other players through this reporting season. Just to get a sense for what the very current trends are. Is it getting worse, extracting cash from your customers? That's the first question. The second question is on the contingency release. If I look at note 18, the provisions, it's suggested that there is 34 million release to the income statement. Can you just explain how that corresponds, if at all, to the 29 million of one-offs that you're talking about? And then the third question is about, I suppose it's just, really, I want to understand how customer acceptance is to the new look Wood Group. What push back if any have you received and how you're dealing with that? Thank you.

Let me take the cash collection first. There's, obviously, lots of good points in our presentation, but the cash conversion has been disappointing. In terms of the movements, trading is obviously down. But the major movement was in working capital. As you'll have seen in the presentation, our DSO was down 11 days, or was increased by 11 days this year. There's no one single reason for that, but if you actually factor that 11 days up that's over $100 million of cash for us and starts to get our cash conversion towards the 100%. So, it has a significant impact on our cash conversion. I think there's a contextual thing around the environment. What we've seen is, it's much more difficult to get our customers to pay on time, generally. There's this general point that our customers are holding on to their cash longer. We've also had a couple of specific issues that are administrative in nature rather than any fundamental liquidity concern, that's had a factor at the end of the year for us. We'd expect these to be resolved in the first quarter of this year. In terms of other factors, we've had a couple of IOCs, not across all of their contracts, but across a few contracts that have increased their terms from 30 days to 60 days. That partly reflects the environment we're in and the ability to do that. So, there's really a combination of all of these factors that's led to increasing the 63 days to the 74 days. In terms of the provisions point and the commercial close-out on contracts, there's an overlap but it's not a perfect overlap. What we've tried to bring out in terms of the commercial close-out contracts is really the things we don't think will get repeated in 2017. So, why have those arisen? We've -- as you'll have seen, we've had a number contracts that have come to a close in 2016, or are about to close. We carry contingencies, for example, on those contracts, but we also carry provisions as well.

Okay. So, that incremental $5 million, so the $34 million less the $29 million, has that gone through the P&L above the line?

Yes, it will have gone through the P&L. But what we were really trying to flag is that $29 million, we just don't see that repeating in 2017. We tried to give you a helpful guidance on that.

I think, according to the organization, the only thing I would add with the cash collection is, if we go back two years, we were concerned about bad debt; we really were. I think credit to the teams, we've really managed that situation well and that's involved, on occasions, stopping work and making sure that we recovered the monies that we were due in certain instances. So, I think there's another piece there that we do feel, whilst it's slipped, it could have been a worse situation that we found ourself in, had we not been proactive in managing cash. In terms of the reorganization, Phil, really the customer feedback's been very positive. That relates to the fact that, sometimes, it was a bit mixed before we reorganized, in terms of how complex a business we actually were. I think there's probably three main thrusts of it. I think we position and highlight the service range we've got better, which I think is helpful to customers as they're making their investment decisions, project decisions or operating decisions themselves. I think the second part is, we've really unlocked innovation in the business. I think keeping specialist technical solutions discrete it has allowed us to nurture. We've created a seed fund and we've invested actively in innovative technical solutions which we feel in 2016, has really worked well with us. We've actually commercialized some of these innovative technical approaches to our business, which has been great. That's also helped cross-business collaboration significantly, and there's an element of pull through that we get on the back of it. I think the third bit is we now have for the 90% of our business that's asset lifecycle solutions, we've got a very discrete regional leadership that allows us to deliver cradle to grave services for customers in any given geography. Previously, that wasn't the case, where we had very much one global center depending on the branded on the part of Wood Group you were engaging with. Again, we think that's an enhancement where we look at that global and local balance much better with the reorganization.

Great, thank you.

Good morning it's Jamie from Deutsche Bank. First question has there been any change in the early stage tendering activity, with respect to your upstream clients, in the sense of these proposed bundled solutions, or integrated solutions? Have you seen any evidence of that having any impact on the type of activity you're being expect to bid on?

There might be two questions in there, Jamie. What we have seen is we're doing more conceptual design work on projects that are generally smaller in terms of their individual size. But is there a different way to unlock that project? Do we phase it? Do we have a floating solution rather than a fixed solution? There's a technology aspect to attempt to unlock projects that are uneconomical. Mad Dog 2 and the pre-engineering work that we've done there along with BP and others has been really helpful in unlocking a project that previously would have been uneconomic which there's an economic pathway forward for that project, and there are others there. We've certainly seen us doing more small scale, small scope, smart engineering, conceptual, early feed type activities. I think that's encouraging, because it does actually innovative in terms of different ways to unlock projects. I think, in terms of integrated solutions, it's probably a bit mixed. At a time where we've went through such a reduction in volume across upstream oil and gas, consolidating or integrating services is counterintuitive. It's actually easier to discretely break them down. We've probably seen supply chain attitudes a bit more in let's break it into five component parts, and then commoditize each component part has generally been a thrust rather than to be consolidated together and buy a full package. Again, like everything else, there's a bit of variety on that, there's a bit of a continuum; it's neither one thing nor the other. But I would have it on the general side of it's been a commoditized, de-bundle and commoditize has been the approach to supply chain over the last couple of years. Are we seeing much evidence of that shifting? Probably not in the short term in upstream oil and gas.

Thank you. And just one other question could you help me understand what you provide the client that might be differentiated against, well, your peers in North America specifically. It seems quite a commoditized market. I'm just trying to understand where your potentially high tech, if at all, can be utilized, technical solutions can be utilized in U.S. onshore. Thank you.

Yes, I think we, so we differentiate. If we look at onshore in particular, I think having the capability locally is a big persuading factor. As a result, it's a fairly fragmented shale market. It's quite a different competitor set we get, depending on the shale basin that we're in. It's different competitors in the Bakken than it is in Eagle Ford than it is in the Permian than it is in the Marcellus. I think what we've done, a good example, recently we won a very small piece of EPC work for Oxy. It's the first EPC work we have won in the Permian. It's very modest in terms of the scale of it, but it is engineering procurement and construction service, cradle to grave. We're really quite encouraged by that and we have tried to position ourself, particularly at the leadership level in our customer group, to have a differentiated service, where we can actually give them security, start, middle and end, and take the appropriate risk in terms, giving them the return that they need for it. I think we are seeing a more sophisticated set of customer discussions in shale than perhaps we did have between 2010 and 2014, where it was, actually, a rush to get produced hydrocarbons. I think there's a range of technical differentiation we have, be it deep water, shallow water, onshore and offshore. I'll not bore you looking through the list of them, but we do think there's a good mix of the quality of people we have; the qualifications they have; the type of engineers they are; the systems that we use; some of the technology systems that we have; the software that we use; and how we implement it is highly differentiated. Some of the modeling and analysis that we do, we're one of the one or two players globally that do it, the rise of analysis, for example, in subsea. There's quite a broad spectrum of areas where we feel we're differentiated.

Hi. This is James Evans from Exane. Just following up a little bit on your answer, actually, Robin. Just within the U.S. onshore, if I go back over your acquisitions over the last two or three years, I'd probably say the Permian looks a little bit further down the list and maybe it doesn't occur on rig count. Is that a fair characterization, which would be fair to say you may be marginally underweight and what can you do about it? Following on from that, you just mentioned EPC for Oxy. I know some other UK listed competitors are thinking about fixed price work in the U.S.. Is that something you're contemplating? Can you talk about risk appetite maybe, David? A second question, just the old one. What's the M&A pipeline look like, buyer/seller expectations, et cetera? Thanks.

Okay, in terms of U.S. onshore, so the acquisitive activates that we've, that we had in 2012 to 2014. We think it positions us well. We took, we acquired Kelchner in 2015, largely because it was a fairly compelling deal that we had. It gave us a Marcellus/Utica footprint, but it was also cross sector, so it wasn't a just shale focus, so that's part of the answer to that, James. We've got a fairly mobile workforce, so actually because the business has traditionally delivered in Colorado doesn't mean that you're limited to Colorado, in terms of what you're able to do from a field services perspective. It is a mobile workforce and shale generally has a mobile workforce attached to it. There is something around don't look at where the business was based when we bought it, Elkhorn, for example, and think that's the only regional area that they can operate within. I think from a Permian perspective, about half of shale headcount is in and around the Permian area. We've mobilized the capability we've got through some of the acquired businesses, particularly Elkhorn. That was probably the most mature and the most mature mechanical piping business, and they've been mobile as has the civils business. The civils business was always a mobile proposition, and as I think we talked about at the time we acquired it. So I think we're well positioned from a Permian perspective. There's also New Mexico. Again, I think having an appreciation of the scale of the U.S. geography is a key part here. It's New Mexico and the Permian is where a lot of the new acreage actually is. So, following a dot on the map that gives you a town, a city, a county, that really works for all the shale plays is almost impossible. We think we're well positioned. We feel we're well positioned for the Permian play. I think I'll take up the fixed price question. Have we got an appetite to do fixed price work? We certainly have. Have we got capacity to take more risk in the business? We have. We're very thoughtful. We've done a lot of fixed price work in shale; it was part of the enhanced margins that we're able to achieve. So, we've got a business that's capable of doing fixed price work; has a track record of delivering fixed price work, with good outcomes. We would be thoughtful in the scale of it. There's a scale part within it, and our certainty of delivery. If we feel we had control over the delivery of it and influence over the delivery of it, that we could take the fixed price risk, we would take it. If we felt we couldn't, we wouldn't.

I don't think that's any different than where we were, back in 2014. I think as we flagged at the time, particularly with Elkhorn in terms of that acquisition, they did a lot of lump sum project work very successfully. It's not in the scale of, for those of you who remember the Dorad, it's not of that scale. We're talking very small value, lump sum projects that they're very successful at executing. In terms of our risk profile just now, it's not different than it has been over the last couple of years. We're still the vast majority is reimbursable.

On the M&A outlook?

M&A outlook. Do you want to --?

So our M&A, it's undiminished our appetite for doing M&A. It's been a big part of the Wood Group growth story that predates myself and David. It remains a big part of it. We always look for good quality acquisitions. They have to be strategically aligned. There has to be a reason for doing the acquisition. We're very disciplined in what we pay for it, and it has to give our shareholders value. We've always seen that as being part of the strategic growth plans of the business. And as you know we've done a broad range of acquisitions in terms of scale. So, if it hits that criteria of is it a good quality business? Does it accelerate our strategy, and does it add value to our shareholders? We will look at it and we'll try and chase it to ground. If we can't, because the deal doesn't make sense for us, we will be disciplined and walk away from it. In '16, we did walk away from a couple of relatively mature acquisitions. And we do have an active acquisitive pipeline.

I think as we flagged in August, and in December, we saw less good opportunities in our pipeline for acquisitions. We've not traditionally been turnaround specialists, so we're not generally looking at distressed businesses. We typically look for good quality businesses and there's just less of them. As Robin said, we got quite close with a couple during the year. But there's stuff we found in diligence, so we walked away.

Alex Brooks, Canaccord. You've mentioned, a couple of times, the ability to grow market share in US onshore. Obviously, that's been part of the strategy since day one. But it would be useful to elaborate a bit, particularly in the light of customer acceptance of the offering, because you are offering something that is quite different from -- or at least you've aspired to offer something that is quite different from what the rest of the market's been offering.

I think we do and we don't, Alex. Actually, always sell your customers what they want to buy is a good rule from a service perspective. We are seeing a range of customer attitudes to how they tender and how they put work into the marketplace. We would like to do more EPC onshore and shale. But it's not a default position of our customer base to EPC, the type of construction work that we have. So, I think if I kind of back up and just look at the shale footprint, we've still got a significant shale business. It isn't where it was in 2014, but it's still a significant shale footprint. What does that give us? I think it allows us to reflect the fact that, yes, the Permian has got the best break-evens. I think you'll recognize yourself most of the commentaries that there's, generally, a more positive outlook in the Permian than other regions, probably followed by Eagle Ford and the Bakken, in terms of the economics. We've got a good footprint in these areas. There's no doubt about that. The Infinity acquisition we did to get into the downstream market what we've then seen in downstream is a significant capital project, significant upgrades across the US petrochemical business, in particular. Actually, that augers well, I think, in the longer term for Marcellus and Utica, which is largely gas players. Again, we've got that regional footprint there. I think the stuff we can differentiate and we do provide better and different solutions is applicable to the shale onshore market. What we've deliberately done in the second half of 2016 is engage myself, Michele McNichol, our senior team at a corporate level with our US customers in a way that previously we probably focused much more on the local relationships. Again, as the markets contracted a lot of the decision-making has moved back to Houston. I think our reorganization really positions us well in Houston. We've got all the upstream offshore mature relationships that we always had. From a shale perspective, we've developed really good relationships in terms of the leadership within the ConocoPhillips, Exxonmobil's around the Houston decision-making, if you like, because our customers are a bit more deliberate, in terms of how they're approaching shale, in 2017, than they perhaps were in 2012, 2013, 2014. So, we think we're able to differentiate and we're able to offer something new and different, and a complete cradle to grave. The tendering activity, however, has a bit of a range on it. Some of that is -- like the Oxy, is relatively modest in scale, but it is an EPC approach. Other customers are still going to the market that's pretty commoditized. Here's the engineer and design, you need to construct it; this is what you need to operate, and we'd like to operate in these are ways. So, there's quite a range there. I think the encouraging thing for us is, top to bottom in the customer organization, we've been much more tactical, in terms of how we've approached our customers over 2016, which we're hopeful will reap some dividends as activity picks up.

Can I ask a question on the margin exposure as that activity does start to pick up, because obviously when you bought these businesses they were very high margin I assume that they're less so today. But should we expect, can we realistically expect a significant margin pickup as volume picks up? What's the structure that will make that work?

I'll cover it broadly. Then I think there's a deeper dive in margin that's helpful to have. I think in broad terms, it will be volume before margin. I would view it that way. I think the certain exception to that is if we do EPC, and if we do EPC lump sum, even in a modest scale, obviously the margin will be, we can make higher margin if we deliver really well internally, which we've got confidence that we're capable of doing. Generally, shale has been at a better margin than the rest of our blue-collar-orientated business. If you broke shale down into the construction bit and the O&M bit, the O&M bit is very, very, competitive, and it has been very, very, competitive. Actually, over the course of 2016 it's been largely about retaining our market share rather than retaining the margin.

We previously talked about our US shale business probably back in 2014, as being a 10%-plus EBITA business. We've had significant pricing pressure over the last two years. But we've also done a lot, in terms of our cost base we now see that between 5% and 10%. It's still above our average margin, so it's still a good margin business for us. As Robin said, how we look at it in the short term we don't think we're going to get pickup in pricing in the short term. But where we potentially can grow our margin is through the volume impact so making our cost base work harder. One of our big focuses is keeping disciplined on our cost base, and that's not just in US shale, that's across our business.

Thank you.

Amy Wong, UBS. I had two questions please. The first one is just a follow-up on your comment about the shale, in terms of pricing just not picking up. If we look across and what the commentary we're hearing from the US though is they're talking about well costs having bottomed. There are certain parts of the supply chain where they are seeing some tightness. Could you please characterize your services and the supply and demand backdrop, and maybe your competitive landscape in your specific segments to help us reconcile those comments about some places that are tighter and for you guys it's really more volume over price? The second question is going to be around the dividend. You make reference that it's going to be looking at earnings and cash flows. Can you put some framework around that cash flow, whether it's pre or post-working capital, and what other considerations we should think about when we think about your dividend policy? Thanks.

I'll take the shale question, and I'll let David elaborate on the dividend discussion. In terms of shale, there's two or three degrees of complexity around it. Firstly, there's the basin itself, so which basins are we considering. If we focus on the basins at the higher end of the break evens, that is where the rig count's modestly increasingly. There's a couple of things to be thoughtful of, in terms of the well cost bottoming, so well costs are discretely different from infrastructure costs. Starting with the well cost, a lot of wells were drilled and uncompleted. The only thing you then need to do is gather the well, complete the well, probably re-stimulate the well, or stimulate the well, and then get it flowing. Actually, you're well intervention cost is significantly less, because you've already put a lot of the hardware into the well. The infrastructure, that can be dependent on a couple of things, how much existing infrastructure is there? Who has the acreage, where is the acreage, and what infrastructure is around that acreage? Some of the Permian is well served with infrastructure, you've got pipelines; you've got gathering stations. It's well served. Some of the permeant is not well served at all, you're into more virgin land, more virgin wells, and more drilling the wells from scratch. If you drill the well from scratch, your well costs will be less than they were to drill a well from scratch three years ago. That's largely as much to do with just a supply/demand to your own point, as anything else. Also, the technology and the knowledge base of having drilled, and they reckon in a basin 1,000 wells is a breakpoint that you've got real good geological confidence, petrophysical confidence, as to what you need to maximize the production of the well base. I think whilst there's something in that, it's very dependent on who the customer is, what acreage they have, what they then need to do? Do they need to go in and just complete a well, stimulate it, and then watch it flow into an existing infrastructure? If so, there's very limited work to be done, other than maybe re-commissioning some of the infrastructure, et cetera. If you're into New Mexico acreage, which will still be in the Permian basin, it's you're actually doing civils work to make roads, to take you to well pads; you need to get gathering stations, et cetera. There's just more activity there inevitably because there's more infrastructure that requires to be invested in. As regards with what comes first, volume or price, we think the volume comes first, because the logic is then even if you put in new infrastructure, you have a supply/demand disconnect. You've got more capability to put the infrastructure in than you have demand for new infrastructure. We do think it will be volume related first, and then once that gets towards a saturation, for want of a better expression, obviously, the price versus volume metric may well change. The variation in that is just how you contract it. If you do take, for example, EPC lump sum on new infrastructure, obviously, you're in charge of your destiny more and you can make enhanced margin, but it is with a higher degree of risk. There is a genuine complexity around it. But I think, fundamentally, and just to keep it as simple as possible, I think it will be volume orientated before price.

On the dividend, we obviously have grown the dividend by 10% over the last two years, that was based on an intention we set out in 2014, which was to bring our payout ratio up. I think as we flagged, well, pretty much over the last two years, this will be the last year of that. Going forward, the intention is relatively straightforward, we want to grow our dividend, and that will be more closely linked to underlying earnings. The cash flow point is really around that ability to pay and, clearly, we're in a strong financial situation.

Mark Wilson, Jefferies. So does that mean there's a floor under the dividend, will be the first question? And the second one is can you give more clarity of the Gulf of Mexico claims that are coming to court orders in 2015. Is there any cash out for that this year. Thank you.

Okay. And in terms of dividend, and just to be clear our intention is to grow the dividend and there is not an absolute to that, but that’s our intention to maintain a progressive dividend. And I'll cover the financial element of Gulf of Mexico and some of the rest even we provided this for back in 2015. So, there is not an earnings impact of that, clearly if we have pay fines in the future that would be a cash flow impact to that.

Yeah. I mean I think it’s the Gulf of Mexico claims its very deep enter into both of them and it diminish the challenge for us. We do feel that the one Wood Group reorganization and our emphasis system assure them to controls as well help to mitigate the likelihood of that type of incident recurring within the business and that’s part of our restructure and reimplementation and change in terms of the operating model for the business. We have perhaps it was a bit more and formal in the past and certainly our own in 2012, 2011, 2012 these incidents are cubed. Maria-Laura Adurno: Hi. This is Maria Laura from Goldman Sachs. I have three questions. The first one is around cost savings, particularly as you mentioned that 2017 is likely to remain slightly challenging in terms of market conditions. How much more room do you have to cut cost. And if you could potentially simplify by some of the additional measures that could be implemented. Second question is with respect to US sales, so you mentioned the modest pickup, but I was just wondering if you could potentially specify a little bit around the labor inflation. And what you’re currently seeing in the US market as activity picks up. And then the final question is more with respect to offshore related type of activity. If you could potentially just discuss the pricing dynamics that you’re seeing there and whether we should anticipate margin pressure versus 2016 this year? Thanks.

Yeah. In terms of the room to cut cost, we’ve obviously done a lot of in terms of our overhead cost base. We started 2014, with about 650 million of overhead cost and we’ve taken out 240 million. So, we’re little surprise here and taking that out, we’ve obviously got an less of an opportunity in the future. We’ve not given any guidance for 2017, so we’ve not set out any cost targets for 2017. In terms of where we are and in terms of our structural programs, we’re quite a long way through in terms of implementing common systems and moving to shared services in our back office. But there is still as work to do that, but there is still as a bit of running road in terms of activities are running that as an example. We’re also going through some of outsourcing in terms of IT&A this was another example where we expect to get some benefits for that in 2017 as an example. In terms of labor inflation, today we haven't seen that. Going forward, out of the market tighten we obviously might be exclusive to that just to date, we haven't seen that.

I'll cover that, the offshore, I mean I think we are really pleased what the offshore engineering work that we’ve won. Just to put it in context, Peregrino 2, BP South Pass, Leviathan, these are significant contract wins. We're doing work as well in Shenadoah, Mad Dog 2, and some others. So, there's a real good piece of positioning that our team has done, over the course of 2016. As these contracts have come to market, our relationship, not just with our customers, but also with the Kiewit's and the Samsung's of the world, has really stood us in good stead, and it's been reputation that's won that business. We're really pleased to have done that. Are the margins tighter than they have been in the past? Yes, they are. There's no doubt that they are. Are they still good quality margins for us if we deliver? They are. They're in a reasonable place for us. We haven't attempted to buy work at any point over the last two years. We've remained very disciplined and been, of course, sensible in terms of how we price things. But equally, we do value our own capability, our own people, and our own reputation. Blended margins will be lower than they have been in the past. I think another thing, if you're doing analysis of our engineering business, obviously, we've come to the end, as David touched on, some of the larger pre-2014 negotiated contracts, and Ivar Aasen and Hess Stampede, etc. There's an end to a set of projects that were won in a commercial environment that's different than the current commercial environment. So, the portfolio moving forwards, tighter margins than we have had in the past.

Yes, maybe just to add a couple of points, just to build on that. From 2014, you've obviously seen the work that we've won, in a different world, drop off. In 2015, that was still quite a significant element, particularly with projects like Ivar Aasen and Stampede. 2016, these were both into follow-on engineering. Flint Hills has ended this year. ETC Dakota access pipeline will go on 'til next year. When you look to 2017, it's much less of an impact. So, there has been that tailing off across 2015, 2016, and then into 2017. Maybe just one other point to pick up. A lot of the projects we've seen coming to market, and ones we think might come to market, in terms of the bigger offshore projects, are the projects that have been recycling over the last 18 months, where people have been looking for better break-evens. In working with those with our customers, we've obviously established really good relationships, and have been part of the solution of those projects as well. We see there's no time boom time, in terms of these projects coming, but we do see other opportunities. It's not the end of the road.

Thanks, it's David Farrell from Macquarie. I had three questions, please. You've obviously alluded to U.S. onshore and automation growing this year. Are there any other areas of the Group that may increase this year? Secondly, in terms of cash conversion. Would you care to put forward a range that we could see this year, in terms of going forward, and where you think net debt might end? And then, a strategy question. I think, relative to other Western E&C companies, you have a lot more upstream oil and gas exposure. Do you think it's time to start thinking about M&A into renewables, as the world changes?

So let me take a couple of them, and then maybe get David to cover cash conversion. In terms of the growth areas in 2017. Yes, as we've said David, we've got onshore Permian is a growth area for us. We see upstream offshore as a growth area for us, and we've secured a number of contracts that would be evidence of that. In the eastern hemisphere, Australia and Asia-Pac again we've won contracts so we'll see an uplift in activity levels in that region over the course of 2017 as these contracts are mobilized and come through. Actually the Middle East and Saudi, we're well positioned there. We've got a good stake. We increased our stake actually in our Saudi joint venture in 2016. That was part of our investment decision-making, in 2016. We're well positioned. We've secured frame agreements and we've still got the offshore maintained potential work and a heightened level of activity in Kingdom. So the Middle East and Saudi, we see as being an area that would increase in terms of activity 2016 to 2017. In STS, probably the poster boy of the STS world is the automation business. That's a business that we talk very little about I guess as a Company. I think in this forum, whilst it's 5% of Wood Group's business, we do see some great potential there. That's why we wanted to highlight it in terms of our results presentation. The growth in automation is largely driven by the TCO contract as that's probably one of the largest Greenfield brownfield projects in the world just now, and we are the main automation contractor. I think in terms of the strategy, if I went back say 2.5 years, we were 95% oil and gas. This year, we estimate we're about 85% oil and gas, so we have actually rebalanced. We do see oil and gas as the remaining core market for Wood Group, but we are very thoughtful about making sure we've got the right balance. Within that, and as ever, there's a level of complexity. I think we were very clear this time last year one of the reasons we bought Infinity was to get into downstream and have a better position in South Texas. Again, you draw a 200-mile radius around Clute and Freeport, Texas and you've got 60% 70% of the UK downstream market and we're right in the middle of it. So, we wanted to shift some of our oil and gas exposure from upstream to midstream and downstream, and we've done that quite successfully. Also in automation, a good example was ATG. I touched on it but that's in the automotive sector. We're very thoughtful. We don't step out too much, because it is a bit broadening rather than doing something that's two or three steps away from our core. Again, we've picked the right geographies we've picked the right services. Then, we are thoughtful if it goes cross-sector, industrial services goes cross-sector in the UK and we're very glad to have that cross-sector capability, marine and industrial as well as oil and gas. Automation's very similar. Some of our dynamic analysis, etc., you know the asset integrity management goes cross-sector. So, we will balance it. It will be quite gradual, we think is the best approach for us to take. But I think you could reserve engineer the acquisitions we've done over the last two years and there's a clear broadening there, partly due to the lack of quality acquisitions in oil and gas as well. Would we have, what would be the perfect balance for us? We'd have liked to have had a better oil and gas acquisition in 2016. But, as we've talked about earlier, we just didn't see the quality opportunities out there.

So just to be clear, there's no pressure from your integrated client base to transfer your capabilities into more renewables?

No, our customer base is fairly agnostic as to the sectors that we operate within. Our customer base is much more interested in the services we provide. I think it's for us to determine what type of customers do we want to broaden that customer base by. ATG is a great example. We ended up with Jaguar Land Rover as a customer. What's not to like? If you're going to have an automotive customer, have one of the most reputable best-performing automotive customers that you can get. So, it's blue, if we're going to do automation, and we're very thoughtful about this, if we rebalance a business, is it a blue-chip customer set for the business that we acquire.

And I'll just add, Robin's bought a Range Rover recently. In terms of your comments about cash conversion and net debt, we've not given out any quantitative guidance. We're not going to give out a target for net debt and cash conversion. But, clearly, under normal circumstances, the business is cash generative. What do we spend that cash on? Obviously, organic investment; we would expect that to be at broadly the same levels as it's been in 2016, and then there's M&A. So, where we end up from a net debt perspective is largely determined by how much we spend on acquisitions. What we have said, we have a target net debt range of 0.5 to 1.5 times that we'll target, we target staying in.

Thanks.

Can I just ask about the North Sea? A lot on the U.S. shale. In the North Sea, you say there's no Brownfield. Have you seen any signs of people starting to inquire about it? And on the big frame agreements you've set up in the North Sea, you said they were squeezed. Can you give us an order of magnitude?

So, I think there's probably three components to the North Sea story, Mick. I think the new entrants were quite encouraged by and, I think, we're well positioned for. I think in terms of the O&M business in the North Sea, it's actually been fairly steady. In terms of the mods business, however, it really has been just literally pulling up the drawbridge in terms of budget approvals for modifications work. In terms of scale, it's probably halved; it's that order of magnitude. This is not 10% down in terms of activity level; it's quite significant. I think part of our positioning has been working with our customers to see if we can retain what we had. I think what I would say is even the contracts we've retained, there's just less volume going through them, particularly in the mods and construction space offset a little bit. The O&M story is, actually, I wouldn't say encouraging, but it's at least pretty flat from an O&M perspective; you just need technicians to be going through the work that you do on a day-to-day basis. Actually, I'm really encouraged by the new entrants coming in, and where Dave and his team have positioned the Wood Group; we've got a great reputation in that space. I think the summary would be, however the new entrants coming in, even if you had all that work, it doesn't offset the volume decline and some of the pricing pressures that have, came off, in terms of what was our North Sea business, in let's say 2012, 2013 and 2014.

You've mentioned automation a few times, sorry, I don't know much about robots. Are there other contracts out there the size of TCO, $700 million contracts, or is that a one off?

I think it's probably the exception to the rule. Our general automation contracts are not in that order of magnitude. I think it depends what you do. The good thing about automation it's a bit like subsea, you can be the complete integrator and then have a very large contract; of the $700 million about $250 million is procurement, straight procurement. So, it's a good example of it's not all kind of engineering effort and commissioning effort, if you like. It's probably the I wouldn't base it on there'll always been one of these size of projects, because that traditionally, our automation business, hasn't been about that. But we do think the range and scale, so you don't need to be the complete automation contractor, you can be the company representatives, you can part integrate. Interestingly, our relationships with Honeywell and Emerson, and the kind of SCADA system providers, in TCO the mix with Honeywell, we're partly a customer of them, because we're procuring Honeywell equipment, and we're partly a supplier to them, because we're integrating to their system when we commission it. So, there is a general kind of complexity when you're the complete automation contractor. Also, there's been three years of FEED and pre work already on that contract, so you can picture the kind of runway you have for that scale of project is seven/eight years, and, just by definition, there's a lot less of them around.

Rob Pulleyn, Morgan Stanley. Just a quick one to finish up from me. On the headcount, you mentioned some modest rehiring; could you just clarify, is that just in U.S. shale or are you rehiring in any other basins? And if not, what can we expect with headcount this year? Thank you.

Yes, it wouldn't be just U.S. shale. The headcount does fluctuate up and down, Rob, but it's a net outflow; for the year, it's just under 6,500 people in our business, is the net reduction across all our basins.

Sorry, my question is 2017?

We've not given it any again, it's back to the guidance; we're not giving out headcount guidance. But I think what we've said qualitatively about the business is what you could expect, in terms of headcount, because we are principally a headcount business. If you look at offshore engineering in the U.S., we've been hiring successfully there as projects are ramping up. In U.S. shale, as we flagged, we're starting to see modest uptick in our numbers, which is great. They would be the two main areas we would flag just now. Equally, we're not in big redundancy programs just now either.

James Hubbard, Numis Securities. I saw in the press release something about there was a couple of near misses, maybe you used slightly different language, but I think that's what it meant, which I don't think were related to the Gulf of Mexico issues touched on earlier. It kind of makes sense, if you get rid of 30%/35% of your people alone and then maybe the remaining people, the morale is somewhat damaged that near misses will increase. I'm wondering how do you balance the desire for cost control against creating an environment where a complete disaster happens and people die, et cetera.

Actually, even in this challenging environment, and it may be a glib statement, but it's very true; safety is our number one priority. We work in a hazardous industry. We are dissatisfied that our actually, through the downturn, our safety performance has largely been static, actually; our lagging indicators recordable work cases lost time incidents has largely been static. We're disappointed we're static, never mind increasing trends. The point that we made in our results' statement has been around actually high-potential incidents. We've encouraged more reporting of high potential incidents. We've taken a bit of a lead from Exxon Mobil, in terms of trying to pull out high-potential near misses and make sure they're properly reported rather than fall into a lull of it's all -- the lagging indicators are going the right way, therefore there are no potential incidents out there. Yes, we're very thoughtful, when you do reduce headcount it does have an effect on morale, there's no doubt at all. People's job security is less going into 2017 than it was, perhaps, going from 2013 to 2014 when the market's grown. We don't take anything for granted; we are very active in terms of our safety conversations with our people. I've physically been on site; Dave Stewart's been on site; Michele McNicol; our leadership team all get on site. We've actually started 2017 with a [stand up] for safety big conversation around the business, and we've then put globally into our plans and programs for 2017. We're encouraged. Touch wood, January and February, funnily enough, are usually months that we do get a number of incidents and high-potential near misses. We're encouraged that, with being much more active and on a front foot this year, we think we've certainly addressed that trend. We just need to make sure it doesn't happen in March and April, and the like. We're very thoughtful about active safety management, take nothing for granted, and recognize in these challenging times, there's a lot of distractions for our work force, and we try and manage it as responsibly as we can.

We've probably reached about the end of our time; we've probably got time for one last question, if there is one, otherwise we'll wrap it up. Okay, well, thank you very much for your time and patience.

Thank you.