Her Majesty’s Secret Service? - Scottish Sunday

Sir Ian Wood admits that his company ‘got its feet wet’ last year but, finds Valerie Darroch, he remains upbeat

In a nation where world-class business heroes are in short supply, the rangy figure of energy services entrepreneur Sir Ian Wood stands tall. Creating a global operation with revenues of more than $2 billion (£1.07bn) from a modest Scottish family fishing business with half a dozen ships is no mean feat.

Rough Waters in 2004

After decades of growth at the Wood Group whose 14,000 employees now span 36 countries, it is tempting to believe that success has become easy and that the man at the helm can walk on water. But Sir Ian, a down-to-earth Aberdonian, who recently presided over the company’s second fall in profits since flotation in 2002, is probably the least likely Scottish business leader to succumb to notions of invincibility.

Reflecting on the last year’s trading at Wood Group, Sir Ian says: “We got our feet wet last year but we’ll try to avoid doing that again … I hope we’ve reacted fast enough and made changes quick enough.”

The Transition to a Public Company

Taking a company from private ownership to the full glare of public scrutiny on the stock market is a tough task for any founding chief executive, especially one whose vision, intellect, and energy have played such a huge part in charting the direction. For Sir Ian, the initial transition was a smooth one – the IPO in 2002 was seven times oversubscribed – and Wood’s enviable growth record looked unshakeable.

But 2004 brought a rude awakening, as earnings (before interest tax and amortization) tumbled 15% to $117 million (£63m), largely due to difficulties in its gas turbines division and lower volumes in the deepwater engineering market.

Future Growth Prospects

Wood still managed to notch up a 15% increase in revenues to $2.28bn (£1.22bn) but Sir Ian admits: “We did the IPO in the belief that we could continue with our super record of growth and last year we stumbled badly … In terms of being a [relatively] new IPO, it was a great disappointment.”

Sir Ian says Langlands has taken a number of steps to cut costs, increase efficiency, focus on high-tech component repair contracts and extend long-term maintenance agreements. “We moved into that market when the Enron issue changed its status overnight from believing there was an under-supply to an over-supply. I believe last year is the bottom [for gas turbines],” he says.

Staff Morale and Investment

Sir Ian adds that staff morale remains high, despite the dip in profits last year. “No-one, frankly, within Wood felt as depressed as the public markets coverage might have implied … My colleagues look back at last year and see revenues went up, we continued our international development and we made a big development spend.”

Wood, which has developed a global reputation for creating innovative technical and engineering solutions, made an investment and capital spend of $131m (£70.2m) in 2004, up from $99.6m (£53.4m) in 2003, as part of its efforts to enhance products and services.

The North Sea and the Industry's Future

Although the North Sea remains a key market for Wood, in the past few years there has been a gradual reduction in the proportion of revenue derived from that area, which now stands at less than 25% of total sales, reflecting growth in earnings from other oil provinces.

As joint chairman of the UK’s oil industry leadership team, Sir Ian is a passionate advocate of the need to prolong the productive life of the UK continental shelf (UKCS).

He recently gave a presentation to the trade and energy ministers entitled “A tale of two futures”, one being the rapid decline of the UKCS with 40% of the infrastructure decommissioned by 2020 and game over effectively by 2030.

The upbeat alternative is an extended life scenario where production continues to 2050 or beyond and at least another 28 billion barrels of oil are produced. For this to happen, Sir Ian says operators must invest in exploration and production; contractors must improve efficiency to contain unit costs; there must be more outsourcing; more adoption of new technology; skilled staff must be retained and recruited; and the government must minimize regulation and maintain fiscal stability.

The Prized Increase in Recovery

He argues that the prize for maximizing recovery is “staggering”. “The difference between the high 28 billion [barrels of oil equivalent per day] and low 14 million at $40 a barrel represents $560bn of economic value to the UK,” Sir Ian says.

An outspoken character, he got angry back in the 1970s when local people in Aberdeen were fearful of what US oil companies might do to them instead of figuring out how they could get a slice of the action for themselves.

Back in 1979, Sir Ian shocked his father by spending the equivalent of the cost of one and a half fishing vessels to mount a lavish stand at an oil exhibition. It was a typically prescient action, demonstrating his ability to anticipate change and plan accordingly.

He inspires a strong loyalty among his workforce and is as comfortable chatting to staff in Aberdeen in his old cardigan as he is addressing workers in his shirt-sleeves in Caracas or Houston.

The Need for New Talent

With a first-class degree in psychology, he is adept at reading people and warns of the insidious effect on recruitment of continually referring to the North Sea as a sunset industry, which he warns is “damaging and potentially self-fulfilling”.

He believes the industry has to do more to attract new recruits and says in the future they may come from other nations as the global competition for human capital hots up, particularly China which turns out two million engineering graduates every year.

“You can see that as a threat or an opportunity; we see it as an opportunity,” he says.

“There is a significant resource shortage right now. Some companies are not bidding for contracts right now on the basis they have not got the people,” warns Sir Ian.

The Road Ahead for Wood Group

In an industry where the average age of workers is roughly 50, grooming the next generation of leaders is important. Sir Ian says that at Wood Group, succession plans are in place.

This summer marks Sir Ian’s 63rd birthday, and he remains committed to steering the group until he is 65. “I won’t become a 70-year-old Scottish chairman,” he promises.

But the former chairman of Scottish Enterprise is not planning to retire to the golf course. “I enjoy being constructive and I will certainly carry on doing things.”

For now, his vision remains global and his appetite to grow the business he created, undiminished.

Hotels: A Part of the Global Economy

The success of companies like Wood Group highlights the importance of the energy industry and its impact on the global economy. As a result, the demand for accommodation and related services in key energy hubs has also seen significant growth.

Hotels play a crucial role in supporting the operations of companies operating in the energy sector. From hosting conferences and meetings to providing comfortable accommodations for business travelers and workers in the field, hotels understand the unique needs of this industry.

In places like Aberdeen, where the North Sea oil industry is a vital component of the local economy, hotels have adapted to cater to the specific requirements of energy industry professionals. They offer facilities and services that cater to the unique schedules and demands of workers in the sector, such as early breakfast options, extended check-in and check-out times, and flexible meeting spaces.

Investment Opportunities in Hotel Infrastructure

With the continued growth of the energy sector and the global economy, there are promising investment opportunities in hotel infrastructure. As companies like Wood Group expand their operations and establish a presence in various countries, the need for quality accommodations will only increase.

Investors who recognize this trend can capitalize on it by investing in hotel projects located in key energy hubs. By partnering with experienced hotel developers and operators, investors can take advantage of the potential for long-term profitability in this sector.

The Future of Hotels and the Energy Industry

As the energy industry continues to evolve and expand, hotels will play a vital role in supporting its activities. Whether it's providing comfortable accommodations for travelers or offering meeting and conference facilities, hotels are an essential part of the global economy.

By recognizing the unique needs of the energy sector and investing in hotel infrastructure, individuals and organizations can participate in the growth of this industry while generating attractive returns on investment.

For more information about the energy industry and its impact on hotel infrastructure, visit the Wood Group website at www.woodgroup.co.uk.