A UK engineering firm has been fined almost £13m for failures in financial reporting and failing in its systems of controls.

The Financial Conduct Authority (FCA) imposed the penalty this week, which had been reduced from £18.5m as a result of John Wood Group PLC’s cooperation.

The fines relate to the 2022 and 2023 results and became public late in 2024. Over the course of the following six months, the company’s share price fell 75% and it was finally suspended in May last year.

Steve Smart, the FCA’s executive director of enforcement and market oversight, said: “Investors rely on accurate information to make decisions. Wood Group failed to provide this and fell well short of the high standard we expect of listed companies.”

The FCA’s report says that Wood Group operated a “poor financial culture”.

“This resulted in poor practices” around accounting judgements in the company’s Projects Business Unit.

“Wood Group’s control framework was insufficiently robust to ensure that, where accounting judgements needed to be made in relation to its projects, they were made appropriately and in compliance with applicable accounting standards.”

‘Lack of transparency’

The FCA says the “inappropriate” accounting judgements were accompanied by a “lack of transparency” with auditors and with its own audit, risk and ethics committee.

In one instance, known as Project A, Wood Group overstated operating profit by $26m. In another, Project B, there were two overstatements of $22.9M and $20m.

Other issues related to failing to release provisions allocated “without proper regard” and a failure to write off “unsupportable debt” which led to an overstatement of $25m in the company EBITDA and operating profit. This happened despite concerns raised by staff.

Accounting errors in some instances were not disclosed to auditors until they had “insufficient time” to review the issues.

In a reform stemming from reviews carried out following the collapse of Carillion, the UK Corporate Governance Code now asks boards to monitor company risk management and their controls frameworks, and conduct an annual review of their effectiveness. Boards must now issue a report on controls in annual reports.

Campaigners had called for the controls reporting to be legislated for but the then government moved to include them in the code under the “comply or explain” principle.

Provision 29, as it is known, applies to financial years beginning on or after 1 January this year.