He started out in the family business in Aberdeen but now Sir Ian Wood has operations in 25 countries. And, as Financial Editor Ian Fraser discovers, he hasn’t finished yet.
AS the granite city’s very own J.R. Ewing, Sir Ian Wood could easily be written off as someone so steeped in the ways of the “old economy” that he would be out of his depth in the “new”. But an hour’s conversation with Wood proves it would be an unfair assumption to make.
For the past couple of years, Wood has been quietly reinventing his company — energy services business the Wood Group, which provides engineering and support services to the oil and gas industries in 25 countries worldwide — to ensure it thinks globally, acts locally and is at ease on the web.
At 57, he’s nearing conventional retirement age but shows no sign of slowing down. Ian Wood is determined his company, which grew out of the North Sea oil boom in the 1970s, will capitalise on the skills it learnt there to become an international major player capable of seeing eye-to-eye with Schlumberger, Halliburton and Baker Hughes.
Wood Group had been steadily becoming more international since the mid-1980s. But in 1995,Ian Wood realised a new way of thinking was required.
“It was at our first international conference in Kuala Lumpur,” he said. “Seven of us from the UK sat down with more than 20 of our new colleagues from Malaysia, Thailand, Vietnam, China and Australia. It was a mindset change for me. The previous model I had of Wood Group being Scottish or even UK-based was no longer correct. These guys were no less the Wood Group than the Wood Group in Aberdeen.”
The company now employs 5,500 people in 25 countries and is currently experimenting with new structures to accommodate the new approach. It is, for example, trying out its first regional managing director, Bert Daly, in the Middle East.
Last year, it appointed a local president for Wood Group de Venezuela, where the company has secured a £500 million, 16-year contract with the state-owned oil company to manage water injections on Lake Maracaibo.
Wood Group is also embracing the internet. “I don’t pretend to know where this [internet] revolution is taking us,” said Ian Wood, “but I know we must be part of it or we’ll be out of business.
“It isn’t a question of just buying and selling things on the internet. It’s realising you are part of an international, global market.”
Live auctions on the internet are already becoming the norm in the oilfield services sector, with companies such as Wood Group tendering online for new work, especially in the US.
Ian Wood explained how it works: “GE Power Systems might lay down the requirements for a $5m package. We then connect to the website using a codename and participate in a live auction with three other companies. The first bid might come in at $6.2m. You are given 10 minutes to respond or you’re out.” He also believes it will not be long before Wood Group’s own suppliers tender for work in this way.
The group is also examining a system that will enable distant customers to follow the company’s progress as it overhauls large gas turbines, a task that which can cost more than £1m apiece, without leaving their offices. “Traditionally a customer likes to come and crawl all over his turbine to see what’s wrong,” said Ian Wood. “Our system will enable them to dial in at any time during the repair process and see their turbine on the shopfloor using mini-cameras.”
The downward turn in oil price and North Sea production in the early 1990s saw Wood Group hit a sticky patch. However, Ian Wood believes the company boosted its know how following partnership deals it established with leading oil companies at this time: “They took us inside their businesses and we learnt a huge amount. We began to understand reservoirs and production. Until then, we had been more interested in engineering, maintenance and process. It also enabled us to understand performance contracting, where reward depends on performance.”
One of its shrewdest acquisitions was the Texas-based Electric Submersible Pumps, which was bought for around £3.75m in 1990. Through a combination of bolt-on acquisitions and organic growth, this specialised business has expanded from a turnover of around £6m to more than £75m today. It offers a process by which production companies can pump more oil out of a well, almost down to the last drop.
Half of Wood Group’s revenues are now derived from the gas turbine market, where it has a joint venture with Roll Royce and a reputation for quality of service. It has built a world-class gas turbine business which does everything from the repair and overhaul of jet engines to maintaining the turbines that pump oil along the 800-mile trans-Alaskan pipeline.
Wood Group’s presence in this business has shielded the company from some of the worst fluctuations in the oil price. This week, the group is expected to release estimated pre-tax profits for 1999 of £32m on sales of £610m. It has targeted a turnover of £1 billion by 2002. “Most companies in the industry are well, well, well down. We’ve outperformed the sector considerably.”
Ian Wood remains pragmatic about future fluctuations in the oil price. He sits on the government’s oil and gas task force, which has already concluded it would be “a complete waste of time” to try to predict the oil price five years hence.
“What we need is stability,” said Wood. “If they could get oil at between $20 and $25 [around £12.50 and £16] a barrel in the next five years that would be fantastic. $30 [£19] is an unhealthy price. At that price, everyone will push production up, which will make the price come back down again. We don’t want the high cycle.”
But what of the future? Sir Ian Wood and his family currently control 73% of Wood Group’s equity. Between them, 15 Scottish financial institutions own around 15%, while the management owns the remaining 10%.
However, despite owning the majority of shares, Ian Wood is keen that the group is not seen as a family business: “There’s a very good professional management team and they will take the company ahead, not the Wood family.
“The whole team is extremely good, talented and committed. I’ve got no reservations at all about the future of the group.”
Although exploration in the North Sea is on the wane, Wood does not believe Aberdeen will decline as an oil centre. Indeed, he has argued it has the potential to become the Houston of Europe. “It’s as good a centre as any,” he said. “But this is a defining moment when Aberdeen needs to change radically. It’s a time for the council, Grampian Enterprise and the Chamber of Commerce to be adventurous. We have to persuade other companies to start investing in the city.”
Last October, Allister Langlands, the group’s former finance director, stepped up to the position of deputy managing director, effectively becoming second in command to Wood. As none of Wood’s three sons have shown much inclination to join the business, it is being assumed that it is Langlands, a former partner with Coopers & Lybrand, who will take over the reins when Wood retires.
Langlands has even attended the prestigious advanced management programme at Harvard University, a course generally reserved for those expected to take the role of chief executive.
But Ian Wood says that were any of his three sons to want to go into business, their starting point would be the “family” fishing, fish-processing and fish farming operation, JW Holdings. “I see that as the family business and that’s where any of my sons would go.”
A FAMILY AFFAIR
As an undergraduate at Aberdeen University, Sir Ian Wood had “no intention whatsoever” of going into the family business – a fish-processing and farming operation. But when his father took ill in the summer of 1964, Wood agreed to help manage the company, whose fleet of eight fishing boats was struggling.
By the early 1970s, Ian Wood had transformed the business into one of Aberdeen’s biggest companies. It was also active in ship repair, sheet metal and other traditional businesses. Then, in 1972, Wood realised oil might be the future and paid a visit to Houston, Texas, eager to find out more about the industry.
“My mind was blown by it,” he recalls. “I realised this wasn’t just a small interaction, this was something totally different and new that would change Aberdeen, the business and my life.”
He came back fired up. “I had enough bravado and annoyance at patronising Americans to say, ‘we’ll invest in this and make it work’.” In 1981, the traditional and oil services businesses were demerged as JW Holdings and Wood Group.
A collector of Impressionist paintings who was ranked as the ninth wealthiest Scot in the latest The Sunday Times’ rich list, Ian Wood, 57, recently switched from squash to raquetball because “it’s a bit slower”. He says: “I play with the local heart surgeon so I’ve got a good insurance in case anything goes wrong.”
This article was published in the Sunday Herald under the headline ‘Man of the World’ o n2 April 2000
Copyright SMG Sunday Newspapers Ltd 2000
This profile of Sir Ian Wood was published in the Sunday Herald on 2 April 2000