Boards often face challenges in fulfilling their stated promises, but John Wood Group, led by chairman Roy Franklin and chief executive Ken Gilmartin, faces particularly difficult times under the claim of being home to “Brilliant minds.”

How are they proving this assertion? One notable way is by allowing two significant acquisition offers to slip away: first, last year’s bid from buyout firm Apollo at £1.66 billion, valuing shares at 240p, and then this year’s approach from private engineering firm Sidara at a reduced price of 230p. Adding to this, the announcement of an accounting review has resulted in shares plummeting by 60 percent to just 49.84p.

This situation becomes even more perplexing when considering that it took Apollo five attempts to engage with Wood due to Franklin’s belief in the company’s value and his trust in Gilmartin’s operational turnaround. Sidara had to make four attempts, and both firms ultimately withdrew their offers, citing concerns over “geopolitical risks and financial market uncertainty” after evaluating Wood’s financials.

Despite the doom and gloom, the board expressed optimism during the half-year results in August, noting a $6.2 billion order book and suggesting that Gilmartin was poised to deliver the “significant” free cash flow investors seek by the following year. However, following engagements with auditor KPMG, they have now enlisted Deloitte for an “independent review” of their accounting practices. Meanwhile, their recent third-quarter update has rendered their cash flow projections murky, with only vague forecasts for 2025 being offered in the upcoming fiscal reports.

Deloitte’s review follows the revelation of half-year losses totaling £983 million, largely attributed to new finance chief Arvind Balan’s write-down of $815 million in goodwill, followed by an additional $140 million loss linked to exiting large-scale projects.

Deloitte’s investigation will concentrate on the reported positions of ongoing projects and address issues concerning “accounting, governance, and controls,” raising questions about potential previous-year restatements. This adds pressure as KPMG withheld approval on the half-year results, suggesting problems within the company’s accounting methods, particularly in their underperforming projects division, which has seen a decrease in sales and EBITDA year-to-date.

No board member was prepared to elaborate on the concerning updates, while investors were also faced with two unwelcome pieces of information. Firstly, a disappointing order book value of $5.4 billion. Secondly, a forecast indicating that net debt, excluding leases, would remain at levels comparable to last year’s $694 million, despite anticipated proceeds from asset disposals, hinting that cash flow issues persist.

Consequently, shareholder reactions were understandably negative. Gilmartin maintains, however, that “we continue to make progress on our turnaround,” projecting a “high single-digit growth” in underlying adjusted EBITDA for the year. Yet, analysts from Panmure Liberum have pointed out that the potential for additional write-downs may continue to severely impact share values.

This situation illustrates that either Franklin or Gilmartin must take responsibility for the ongoing crisis, as the Wood board’s current performance suggests that their brilliance has limits.

BT Struggles with Competition

The pace of change at BT remains challenging to interpret. The company’s new CEO, Allison Kirkby, claims that she has “accelerated the modernization” of the telecoms giant during the first half of the year. However, this initiative has coincided with a 4 percent tumble in share value to 137p, driven by investor concerns over unmet revenue projections, the absence of announcements regarding asset sales, and competition from alternative network providers.

These competitors are successfully acquiring BT’s customer base while the company continues to transition from its outdated copper infrastructure to high-speed fiber. Kirkby highlighted that the broadband rollout from their Openreach division had achieved record numbers, reaching 16 million premises in total, with 446,000 new customers added in the latest quarter.

Nevertheless, this data doesn’t paint a complete picture. Most new subscribers are merely migrating from copper services, resulting in BT losing 377,000 broadband customers during the last half—a decline of 2 percent in its broadband base. While Kirkby emphasizes Ofcom’s goal to bolster competition, BT’s ambition of establishing the UK’s largest fiber network, which aims to connect 25 million homes by the end of 2026, may come off as a struggle to maintain momentum in a backward-sliding environment.

Adding to the challenges, revenues are projected to decline by 1 to 2 percent this year, with Kirkby acknowledging that the market is not fond of surprises. This downturn is largely attributed to low-margin activities, such as supplying equipment to international clients. While free cash flow improved by 57 percent over the last half to £715 million and BT aims for an adjusted EBITDA of £8.2 billion this year, Kirkby’s target of achieving annual free cash flows of £3 billion by 2030 still faces significant challenges ahead.

Budget Pressures Heightened

The financial landscape is becoming increasingly burdened, with Sainsbury’s facing a £140 million expense, BT incurring £100 million, and both Wetherspoon and Marks & Spencer forecasting £60 million in costs each, among numerous other obligations across corporate Britain. Companies are warning that Rachel Reeves’s budget introduction, which holds higher national insurance and minimum wage obligations for UK businesses, may compel them to implement cost reductions, elevate prices, and limit employment opportunities.

Additionally, the inflationary effects of the budget, compounded by possible trade conflicts, are leading the Bank of England to suggest that maintaining the interest rate cut to 4.75 percent is a sufficient strategy for the time being. The Chancellor’s claims that these adjustments would not adversely impact “working people” are increasingly being called into question.

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