Wood Group Hit with £13m Fine for Inaccurate Financial Reporting
Aberdeen-based Wood Group, an engineering and consulting firm specialising in oil rigs, has been fined nearly £13m by the Financial Conduct Authority for repeatedly publishing inaccurate financial results. The penalty follows an investigation into the company's reporting practices between January 2023 and November 2024.
Regulator Cites Cultural Failings and Inappropriate Influence
The Financial Conduct Authority stated that Wood Group's accounting judgments were inappropriately influenced by a desire to maintain previously stated financial results, particularly after poor performance on certain projects. The watchdog highlighted that the company lacked adequate systems, controls, or procedures to prevent such inaccuracies.
Originally facing a fine of £18.5m, Wood Group received a 30% reduction after cooperating with the investigation and agreeing to the findings. The firm has admitted to cultural failings that led to information being withheld from auditors.
Accounting Fallout and Independent Review
Since 2024, Wood Group has been grappling with accounting issues, prompting an independent review by Deloitte. This review uncovered inappropriate management pressure to adhere to existing financial reports despite problems in legacy lump-sum turnkey projects, where contractors handle everything from design to construction.
The turmoil escalated last year when Chief Financial Officer Arvind Balan resigned abruptly after it was revealed he had misstated his professional qualifications.
Impact on Acquisition and Market Value
During this period, Sidara, a Middle Eastern engineering company, significantly reduced its offers for Wood Group, citing market turmoil. The eventual deal, set to finalise next week, values Wood Group at just £216m, a sharp decline from Sidara's initial £1.58bn approach in 2024.
This acquisition will result in Wood Group leaving the London Stock Exchange, joining other firms like Flutter Entertainment, Ashtead, and Indivior. As of Wednesday, Wood Group's market value stood at £199m, with shares plummeting 91% over the past five years.
Regulatory and Company Responses
Steve Smart, the FCA's enforcement director, emphasised that investors rely on accurate information for decision-making, stating Wood Group fell short of expected standards. In response, Wood Group issued a statement acknowledging the regulator's findings, which align with Deloitte's review.
The company noted it cooperated fully with the FCA and has developed a remediation and governance action plan to address the identified issues, with steps already underway to implement changes.
