Worley Limited · ASX:WOR
Worley — WorleyParsons — Investor Day (May 2015)
92 slides from Worley's investor day presentation, May 21, 2015
Slide 1: 2015 Sydney Investor Day Presentation
Level 12, 141 Walker Street North Sydney NSW 2060 Australia Telephone: +61 2 8923 6866 Facsimile: +61 2 8923 6877 worleyparsons.com WorleyParsons Limited ABN 17 096 090 158 For personal use only 21 May 2015 ASX Release WORLEYPARSONS LIMITED (ASX: WOR) 2015 Sydney Investor Day Presentation WorleyPars
Slide 2: Realize our future
-Realize our future (or = LL
Slide 3: Disclaimer
Disclaimer For personal use only The information in this presentation about the WorleyParsons Group and its activities is current as at 31 March 2015 and should be read in conjunction with the Company’s Appendix 4D and Interim Financial Report for the half year ended 31 December 2014. It is in summa
Slide 4: Sydney Investor Day 2015
For personal use only Sydney Investor Day 2015 Andrew Wood
Slide 5: OneWay Elements
For personal use only OneWay 12 Elements 4
Slide 6: Agenda
Agenda For personal use only ► Trading update Context ► Strategic framework Corporate ► Purpose strategy ► Realize our future ► 5 strategic themes, 5 projects ► Hydrocarbons Sector ► Minerals, metals and chemicals strategies ► Infrastructure ► Financial risk management ► Financial framework Financia
Slide 7: Trading update – YTD March
Trading update – YTD March Modest decline in revenue, margins holding For personal use only YTD March YTD March vs. YTD Unaudited result1 2015 2014 March 2014 Aggregated revenue2 ($m) 5,321.0 5,604.0 (5.0%) Underlying EBIT3 ($m) 251.3 263.6 (4.7%) Underlying EBIT margin 4.7% 4.7% - Underlying Net Pr
Slide 8: Trading update – Third Quarter
Trading update – Third Quarter Modest decline in revenue, margins deteriorated For personal use only 3Q unaudited result1 3Q2015 3Q2014 vs. 3Q2014 Aggregated revenue2($m) 1707.3 1811.4 (5.7%) Underlying EBIT3($m) 70.5 85.4 (17.5%) Underlying EBIT margin 4.1% 4.7% (0.6%) Underlying Net Profit After T
Slide 9: Trading update – Taking steps to preserve margin
Trading update – Taking steps to preserve margin 6 Year total headcount and monthly movements For personal use only Global headcount Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Headcount Change to Prior Month 8
Slide 10: Trading update – Adjusting headcount
Trading update – Adjusting headcount Headcount versus revenue For personal use only 4500 45000 4000 40000 Aggregated revenue (Mil) 3500 35000 Average headcount 3000 30000 2500 25000 2000 20000 1500 15000 1000 10000 500 5000 0 0 Agreggated revenue Avg Headcount RHS Close correlation between headcount
Slide 11: Trading update – Utilization trending upwards
Trading update – Utilization trending upwards Monthly hours charged versus utilization rate For personal use only 1500000 Hours Charged Utilization rate 84 1400000 1300000 82 1200000 80 1100000 78 1000000 900000 76 800000 74 700000 72 600000 500000 70 10
Slide 12: Trading update – Taking action
Trading update – Taking action Other cost reduction measures For personal use only ► Transferring selected operations to lower cost execution centers ► Transitioning IT costs from fixed to variable ► Releasing excess floor space ► Increasing occupancy levels in offices ► Lowering average cost of deb
Slide 13: Trading update – Earnings security profile
Trading update – Earnings security profile Certainty increases as the year progresses For personal use only Typical earnings security profile through the year % 5.0% 10.0% 5.0% 15.0% 10.0% 10.0% 15.0% 15.0% Blue sky Prospect 20.0% Proposal 95.0% Secured 80.0% 65.0% 50.0% Q1 Q2 Q3 Q4 12
Slide 14: Trading update - 3Q significant awards
Trading update - 3Q significant awards Approximately $1 billion in new awards For personal use only Revenue Revenue $30+ million $950+ million 2 18 22 2 Significant awards have over $1 million EBIT over the contract life. ASX announcements are contracts with over $5 mil EBIT over the contract life o
Slide 15: Trading update – Top Group contracts
Trading update – Top 10 Group contracts Diverse earnings base supports resilience For personal use only Top 10 Group contracts, YTD March revenue ($mil) 200 Services Major Projects Improve 150 100 50 0 Top 10 Group contracts account for only 15% of revenue . Majority of earnings come from smaller co
Slide 16: Trading update – Customer view
Trading update – Customer view Continue to be regarded by Hydrocarbons customers For personal use only as the market leader Source: AlphaWise, Morgan Stanley Research, 20 March 2015, WorleyParsons Ltd. Asia Insight: Franchise discount unwarranted 15 15
Slide 17: Agenda
Agenda For personal use only ► Trading update Context ► Strategic framework Corporate ► Purpose strategy ► Realize our future ► 5 strategic themes, 5 projects ► Hydrocarbons Sector ► Minerals, metals and chemicals strategies ► Infrastructure ► Financial risk management ► Financial framework Financia
Slide 18: Strategic framework
Strategic frameworkThe scope of presentation Corporate and global sector strategies For personal use only The strategy pyramid shows how the various layers of strategic effort fit together. The 4 levels are 1. Corporate Strategy 2. Global Sector Strategy 3. “Regional” Strategy 4. “Location” Strategy
Slide 19: Purpose
For personal use only Purpose 18
Slide 20: Realize our future
Realize our future Many stories For personal use only NPAT Context: External changes Technical time Capability & Local Presence A company that… Five Strategic Themes Five projects Vision & Purpose 19
Slide 21: Realize our future – External challenges
Realize our future – External challenges For personal use only STRATEGY WEDGE Willingness to Pay X Quantity 1 2 3 Costs 20
Slide 22: Long term strategy based on unstoppable trends
Long term strategy based on unstoppable trends OPPORTUNITIES FOR WORLEYPARSONS For personal use only Growth of renewables Climate Power Plant Retrofits, Decoms and Advisory service Change Carbon Capture & Storage Continued investment in new and existing developments Urbanisation Access to water with
Slide 23: Near term, business also positioning for recent market shifts
Near term, business also positioning for recent market shifts For personal use only OPPORTUNITIES FOR WORLEYPARSONS • Asset productivity enhancement focus Oil Price Shock • Enhanced Oil Recovery • Refining industry margins uptick • Increase in Chemicals activity in SE Asia and ME Low Gas Price • Che
Slide 24: Entering a period of transition
That have impacted WorleyParsons’ revenue and earnings Entering a period of transition For personal use only Historical revenue and underlying EBITDA (A$m) MM Crude Transition into a Post GFC Investment Price Capex wave in MMC and O&G GFC stopped Decline publically listed company Investment 9,000 1,
Slide 25: Realize our future – through the strategy for growth
Realize our future – through the strategy for growth For personal use only Strategy for growth NPAT Minor adjustments Do nothing time 24
Slide 26: Realize our future - Vision
Realize our future - Vision For personal use only A company that… 25
Slide 27: Realize our future – based on our key differentiator
Realize our future – based on our key differentiator For personal use only Technical Capability & Local Presence 26
Slide 28: Focus on front end and Improve
Focus on front end and Improve Selective delivery offerings For personal use only 27
Slide 29: Strategic themes, projects
5 strategic themes, 5 projects For personal use only 28
Slide 30: Project – Build world class advisory business
Project 1 - Build world class advisory business and 1 2 3 For personal use only dominate the early project phases 29
Slide 31: Build a world class advisory business and dominate early project phase
Project 1 For personal use only Build a world class advisory business and dominate early project phase Strategic Consulting High end strategic advice to boards, CEOs and senior management across top tier firms Management Consulting Policy, commercial and financial, asset management, operational and
Slide 32: Advisian + WorleyParsons: 1+1 is greater than
Project 1 Advisian + WorleyParsons: 1+1 is greater than 3 For personal use only Case study ► North American refiner ► Combining technical capability added: • 4% savings in power spend through salvage of equipment not being utilized • 6.7% savings through managing billing demand • 9.4% savings throug
Slide 33: Project – Be the global PMC provider of choice
Project 2 1 2 3 - Be the global PMC provider of choice For personal use only 32
Slide 34: Be the global PMC provider of choice – context and response
Project 2 - Be the global PMC provider of choice For personal use only CONTEXT RESPONSE Owners looking to transfer ► Move away from more risk to EPC/EPCm commodity services into Customers seeking PMC roles projects with less ► Complement EPCm intensive engineering ► Focus on advances in standard
Slide 35: Project – Be the global PMC provider of choice: Potential market
Project 2 – Be the global PMC provider of choice Potential market For personal use only 34
Slide 36: Be the global PMC provider of choice – Priorities
Project 2 – Be the global PMC provider of choice Priorities For personal use only ► Focus on the key capabilities initially: • Identification and recruitment of skilled project managers and engineers • Implement integrated systems • Improve capabilities • Greater customer focus ► Develop step out ca
Slide 37: Project – Build a leading Improve business
Project 3 1 2 3 - Build a leading Improve business For personal use only 36
Slide 38: Build a leading Improve business – context and response
Project 3 - Build a leading Improve business For personal use only CONTEXT RESPONSE Customers in some ► Follow full asset life regions increasingly want ► Capex and opex an integrated offering ► Dominate selected basins, Access more Opex spend that allow us to leverage our existing strengths ► S
Slide 39: Improve Full asset lifecycle
Improve Full asset lifecycle Access opex spend… For personal use only Example 5 key customer ExxonMobil BHP 2013 CAPEX 2013 OPEX Chevron $117 B $247 B BP Rio Tinto …in our specialist areas of LNG, power, water and UCOG… …in basins where we have a strong position 38
Slide 40: Project – Be the smartest, most agile local service provider
Project 4 - Be the smartest, most agile local service provider 1 2 3 For personal use only X Quantity 39
Slide 41: Be the smartest, most agile local service provider – context and response
Project 4 - Be the smartest, most agile local service provider For personal use only CONTEXT RESPONSE Our strong local ► Focus on improving our relationships and wide customer’s willingness to geographic coverage pay remain a key differentiator ► Focus on efficient service Our global businesses
Slide 42: Be the smartest, most agile local service provider – Priorities
Project 4 – Be the smartest, most agile local service provider Priorities For personal use only ► Address immediate financial priorities (utilization, overhead, cash collection) ► Improve ROIC of bottom 10 locations ► Focus on growing locations where we can be No 1 of 3 ► Simplify our business 41
Slide 43: Project – Leapfrog the competition with global delivery centres and digital
Project 5 - A company that leapfrogs the competition in the 1 2 3 use of global delivery centres and applies digital For personal use only technology to revolutionize the delivery of our services 42
Slide 44: Leapfrog competition with global delivery centres – context and response
Project 5 - A company that leapfrogs the competition in the use of global delivery centres and applies digital technology to revolutionize the delivery of our services For personal use only CONTEXT RESPONSE In the short term the ► Immediately boost our economic environment competitiveness through
Slide 45: Five strategic themes, one differentiated strategy
Five strategic themes, one differentiated strategy Synergies realized through combination of connected strategies For personal use only 44
Slide 46: Agenda
Agenda For personal use only ► Trading update Context ► Strategic framework Corporate ► Purpose strategy ► Realize our future ► 5 strategic themes, 5 projects ► Hydrocarbons Sector ► Minerals, metals and chemicals strategies ► Infrastructure ► Financial risk management ► Financial framework Financia
Slide 47: Sector Strategies
For personal use only Sector Strategies Andy Cole
Slide 48: Sector intent
Sector intent For personal use only HYDROCARBONS • Provide the platform for earnings diversification • Balanced revenue from upstream, midstream and downstream MINERALS, METALS & CHEMICALS • Grow Chemicals into a standalone sector • Broaden the revenue gained across the entire Minerals & Metals valu
Slide 49: FY16 Sector strategies
FY16 Sector strategies For personal use only HYDROCARBONS • Strengthen via diversification by • Balanced focus on upstream, midstream and downstream • Access both CAPEX and OPEX over the asset life cycle • Maintain current T1 relationships and diversify into emerging customer base MINERALS, METALS &
Slide 50: Sector strategies: Hydrocarbons
For personal use only Sector strategies Hydrocarbons
Slide 51: Our Hydrocarbons business in FY15
Our Hydrocarbons business in FY15 Dominated by exposure to upstream, greenfields and Tier 1s For personal use only Upstream Sector growth has underpinned much of our growth over the last decade Midstream Downstream Upstream Greenfields developments have dominated as our customers strived to meet dem
Slide 52: Recent customer trends
Recent customer trends ► Prior to the oil price shock: Oil company profits were already being eroded by the For personal use only increasing level of investment required to produce incremental barrels of oil ► Margins already ► T1 Procurement Tier 1 squeezed prior to oil departments have price shock
Slide 53: Strengthen by diversification
Strengthen by diversification For personal use only (1) (2) (3) 52
Slide 54: Grow in midstream and downstream
Grow in midstream and downstream Earnings growth channel 1: Stream For personal use only Head room for growth available in Midstream and Downstream Midstream Pipelines Downstream Midstream LNG Upstream Upstream Refining Downstream Petrochemicals ► Peg the gains we have made over the last 2 decades i
Slide 55: Grow OPEX exposure
Grow OPEX exposure Earnings growth channel 2: Expenditure For personal use only Access both CAPEX and OPEX over the asset lifecycle Greenfields (CAPEX) Greenfields Brownfields Brownfields (CAPEX + OPEX) Differentiator: Advisory level engagement enabling identification of scopes for outsourcing & “Ow
Slide 56: Diversify customer base
Diversify customer base Earnings growth channel 3: Customer For personal use only Maintain current Tier 1 relationships and develop Tier 2, NOC and Asian EPC customer base Tier 2 Tier 1 Tier 2 Tier 1 Tier 1 Tier 3 Tier 3 Asian EPC NOC Asian EPC NOC ► Maintain and leverage current Tier 1 customer rel
Slide 57: Strategic areas of focus: Hydrocarbons
Strategic areas of focus Hydrocarbons For personal use only = Primary Focus Global Delivery = Supporting Focus Advisian Major Projects Improve Services Centres High growth available Lower growth available 56
Slide 58: Sector strategies: Minerals, Metals & Chemicals
For personal use only Sector strategies Minerals, Metals & Chemicals
Slide 59: Where is our business now?
Where is our business now? Minerals, Metals and Chemicals sector For personal use only MINERALS & METALS CHEMICALS • Subdued commodity • Buoyant demand prices • Strong capex • Low capex environment • New low cost feedstock • Cost focus Revenue breakdown 58
Slide 60: Minerals & Metals customer trends
Minerals & Metals customer trends For personal use only ► Pressure to “sweat the assets” and for responsible capital management ► Big miners have financial capacity to invest in innovation / new technology (eg IROC, Process Centres, Mines of the Future) Tier 1’s ► Divesting non core assets (eg BHPB
Slide 61: Minerals & Metals strategy
Minerals & Metals strategy For personal use only Services across the full Strong subsector Global business Customer base operating Mining value chain and offerings, enabled by deep underpinned by the four across multiple asset lifecycle industry knowledge sustainable regions geographies The Mining V
Slide 62: Minerals & Metals strategy – value chain extension
Minerals & Metals strategy For personal use only Services across the full Strong subsector Global business Customer base operating Mining value chain and offerings, enabled by deep underpinned by the four across multiple asset lifecycle industry knowledge sustainable regions geographies The Mining V
Slide 63: Minerals & Metals strategy – strength through diversity
Minerals & Metals strategy For personal use only Services across the full Strong subsector Global business Customer base operating Mining value chain and offerings, enabled by deep underpinned by the four across multiple asset lifecycle industry knowledge sustainable regions geographies The Mining V
Slide 64: Minerals & Metals strategy – focused geographies
Minerals & Metals strategy For personal use only Services across the full Strong subsector Global business Customer base operating Mining value chain and offerings, enabled by deep underpinned by the four across multiple asset lifecycle industry knowledge sustainable regions geographies The Mining V
Slide 65: Minerals & Metals strategy – customer drivers
Minerals & Metals strategy For personal use only Services across the full Strong subsector Global business Customer base operating Mining value chain and offerings, enabled by deep underpinned by the four across multiple asset lifecycle industry knowledge sustainable regions geographies The Mining V
Slide 66: Chemicals market trends
Chemicals market trends For personal use only ► Chemicals customer portfolios continue to grow to meet consumer demand Tier 1 customer ► Complexities of feedstock change impacting investment priorities focus • Investments strategies re-visited • Feedstock supply/demand and pricing (oil vs gas) uncer
Slide 67: Chemicals strategy
Chemicals strategy For personal use only Service offering across full asset lifecycle in Chemicals and Petrochemicals Strong position in Nth America, Middle East and SE Asia / China Multiple global relationships with targeted Tier 1 customers 66
Slide 68: Chemicals strategy
Chemicals strategy For personal use only Service offering across full asset lifecycle in Chemicals and Petrochemicals Strong position in Nth America, Middle East and SE Asia / China Multiple global relationships with targeted Tier 1 customers Source: BHP Billiton presentation, Maximising value and s
Slide 69: Chemicals strategy
Chemicals strategy For personal use only Service offering across full asset lifecycle in Chemicals and Petrochemicals Strong position in Nth America, Middle East and SE Asia / China Multiple global relationships with targeted Tier 1 customers 68
Slide 70: Chemicals strategy
Chemicals strategy For personal use only Service offering across full asset lifecycle in Chemicals and Petrochemicals Strong position in Nth America, Middle East and SE Asia / China Multiple global relationships with targeted Tier 1 customers 69
Slide 71: Strategic areas of focus: Minerals, Metals & Chemicals
Strategic areas of focus Minerals, Metals & Chemicals For personal use only = Primary focus = Supporting focus Advisian Major Projects Improve Services GDCs Underground Mining Chemicals Mined Fertilizers Productivity Enhancement 70 70
Slide 72: Sector strategies: Infrastructure
For personal use only Sector strategies Infrastructure
Slide 73: Infrastructure – Where is our business now?
Infrastructure Where is our business now? For personal use only Customers: Even split between public and resource Scope: Focus has been on Greenfields Long-term customers Public Sector Undifferentiated Public & Brownfields Resource Utilities Sector Resource Greenfields Long-term Public & Utilities S
Slide 74: Customer trends
Customer trends For personal use only ► Pressure to “sweat” assets given low commodity prices ► Downsizing overheads and personnel Resources ► Cutting CAPEX and delaying new projects customers ► Continuing with enabling studies to position for finance ► Divesting non core assets (Tier 1s selling pow
Slide 75: Power
Power Energy demand forecast to grow circa 20% to 2030 For personal use only Source: BHP Billiton, 24 Nov 2014 74
Slide 76: Water
Water Opportunities in advisory, sourcing, treatment and disposal For personal use only 75
Slide 77: Ports
Ports Seaborne trade rising 4.1% this year For personal use only 76
Slide 78: Rail
Rail Global rail travel is projected to double by 2050 For personal use only Railway Projections (thousand track‐km) Source: International Energy Agency 77
Slide 79: FY16 Infrastructure Strategy
FY16 Infrastructure Infrastructure strategy Strategy Shift from undifferentiated public sector to resource and long-term public customers Balanced greenfield and brownfield customer portfolio For personal use only Long-term Customer Type Public Sector Brownfields Undifferentiated Resource ► Target H
Slide 80: Strategic focus areas: Infrastructure
Strategic focus areas Infrastructure For personal use only = Primary focus = Supporting focus Advisian Major Projects Improve Services GDCs Enabling Capabilities Productivity Enhancement New Energy China Focus Water Sourcing 79
Slide 81: Agenda
Agenda For personal use only ► Trading update Context ► Strategic framework Corporate ► Purpose strategy ► Realize our future ► 5 strategic themes, 5 projects ► Hydrocarbons Sector ► Minerals, metals and chemicals strategies ► Infrastructure ► Financial risk management ► Financial framework Financia
Slide 82: Financial
For personal use only Financial Simon Holt
Slide 83: Financial risk management
Financial risk management Managing 4 key financial risks For personal use only ► Currency risk • Matching of currency of payment to the currency of costs • Negotiated rate adjustments based on exchange rate fluctuations • Cross currency swaps • Translation risk for currencies other than AUD ► Intere
Slide 84: Available funding – Gearing ratio within target range
Available funding Gearing ratio within target range For personal use only Gearing ratio (%) 40% 35% 30% Target range 25% 20% 15% FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 HY2015 Gearing ratio = net debt/net debt + equity 83
Slide 85: Available funding – Maintaining headroom
Available funding Maintaining headroom For personal use only 2 Net debt/EBITDA (times) 20 Interest cover (times) 1.5 15 1 10 0.5 5 0 0 Key financial covenant are Interest cover and Net debt/EBITDA 84
Slide 86: Available funding – Long dated debt
Available funding Long dated debt For personal use only Facility type profile $m 600 400 200 0 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Bilateral Syndicated USPP Debt facility utilization profile $m 600 400 200 0 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Ut
Slide 87: Financial framework
Financial framework Current priorities – maintain capacity to fund growth For personal use only ► Existing business needs circa $70 – 80 mil ► Organic growth ► Inorganic growth ► Return capital to shareholders (dividends, share buybacks) 86
Slide 88: Strategy funding requirements – Growing the business
Strategy funding requirements Growing the business For personal use only ► Organic growth • Requires working capital investment of circa 3 months salary per employee ► Inorganic growth • Debt fund approximately $500 mil • Can fund bolt-ons of $100 to $200 mil per annum from cash flow • Historically,
Slide 89: Returning capital to shareholders, stable dividend history
Strategy funding requirements Returning capital to shareholders, stable dividend history For personal use only Dividend history 200 90.0% 180 79.6% 80.6% 80.0% 160 70.8% 70.8% Cents per share 70.0% 140 64.7% Payout ratio % 63.6% 120 57.8% 60.0% 100 50.0% 80 55 51 51 60 50 51 40 40.0% 40 30.0% 20 38
Slide 90: Summary
For personal use only Summary Andrew Wood
Slide 91: Summary – Writing our own story
Summary Writing our own story For personal use only ► Story commenced with our restructure in 2014 ► Clear vision for the company ► Period of transition ► Responding to current market conditions ► Adapting to unstoppable trends ► Corporate strategy delivered through 5 projects ► Robust sector strate
Slide 92: Realize our future
-Realize our future ©, — LL