Worley Limited · ASX:WOR
Worley — WorleyParsons — FY2016 Earnings Presentation
45 slides from Worley's earnings presentation, Aug 24, 2016
Slide 1: Full year results 2016
For personal use only Full year results 2016 Andrew Wood, CEO WorleyParsons
Slide 2: Disclaimer
Disclaimer The information in this presentation about the WorleyParsons Group and its activities is For personal use only current as at 24 August 2016 and should be read in conjunction with the Company’s Appendix 4E and Annual Report for the full year ended 30 June 2016. It is in summary form and is
Slide 3: Overview: FY2016 – Delivering what we promised
Overview FY2016 – Delivering what we promised, despite declining revenue For personal use only • Progress on cost reduction is driving performance improvement Financial • Focus on cash is improving debt metrics results • Realize our future transformation program on track • No final dividend • Total
Slide 4: Our priorities
Our priorities For personal use only FY2016 achievements FY2017 priority areas Reduce • Delivered $200m annualized savings • Targeting a further $150 million in vs $120m target annualized savings internal costs • Utilization 83.4% up 0.4pp • Utilization >85% • Launched Advisian as global advisory •
Slide 5: Key financials
Key financials Cost reduction initiatives supporting underlying margin For personal use only Statutory result FY2016 FY2015 vs. FY2015 ► Aggregated revenue Total revenue ($m) 7,790.1 8,757.5 (11.0%) down 19%, 23% on EBIT ($m) 128.9 87.1 48.0% Net Profit After Tax ($m) 23.5 (54.9) - constant currency
Slide 6: OneWay to Zero Harm
OneWay™ to Zero Harm We aim for Zero Harm For personal use only ►Our safety performance is among the best in the industry ● Employee Total Recordable Case Frequency Rate (TRCFR) for FY2016 was 0.07 (FY2015: 0.12) ● Achieved an 8% reduction in frequency rate for all employees and managed contractors
Slide 7: Reducing internal costs
Reducing internal costs Actions taken to reduce overhead costs For personal use only Local presence, global delivery ►Closed 30 offices, 73,000 sqm ►Staff levels reduced by 6900 or 22% ►Improving trend in utilization ►Maintained presence in 42 countries 24,500 118 42 people offices countries Utiliza
Slide 8: Significant awards
Significant awards1 Continuing to win work For personal use only FY2016 Significant awards FY2015 Significant awards Revenue $535+ Revenue $1.9+ Revenue $2.5+ million billion billion Revenue $310+ 16 41 21 61 61 85 105 million 28 23 Revenue $370+ million Revenue $390+ million $2.8+ billion in signif
Slide 9: Significant awards: award highlights
Significant awards Award highlights For personal use only ►ASX announcements ● Cutback Ridge awards for WorleyParsonsCord ● Canadian E&P Master Services Agreement ● Johan Sverdrup award for Rosenberg WorleyParsons ● Tengizchevroil project passed FID (early July) ● Caspian region Improve contract wit
Slide 10: Full year results 2016 – Tom Honan, CFO
For personal use only Full year results 2016 Tom Honan, GMD Finance, CFO 10
Slide 11: Statutory Statement of Financial Performance
Statutory Statement of Financial Performance For personal use only 30 Jun 2016 ($m) 30 Jun 2015 ($m) REVENUE AND OTHER INCOME Professional services revenue 4,641.8 5,517.9 Procurement revenue 2,571.7 2,370.9 Construction and fabrication revenue 561.6 857.9 Interest income 8.8 6.6 Other income 6.2 4.
Slide 12: Reconciliation of Statutory to Underlying NPAT result
Reconciliation of Statutory to Underlying NPAT result Adjusted for non-trading items For personal use only FY2016 ($m) FY2015 ($m) Statutory result 23.5 (54.9) Additions (pre-tax) Staff restructuring costs 76.8 38.3 Onerous lease contracts 86.4 20.2 Onerous engineering software licences 14.3 - Other
Slide 13: Underlying Group EBIT evolution
Underlying Group EBIT evolution Overhead savings benefit commenced – more to come For personal use only (334.3) 170.0 418.0 49.0 302.7 13
Slide 14: Segment result by business line
Segment result By business line For personal use only FY2016 FY2015 Restated vs. FY2015 ► Overhead reductions mitigating Aggregated revenue ($m) 5,892.9 7,227.5 (18.5%) the impact of declining revenue Services 3,436.5 4,336.2 (20.7%) Major Project 1,281.4 1,610.4 (20.4%) ► Services Middle East busin
Slide 15: Segment result by region
Segment By region For personal use only FY2016 FY2015 Restated vs. FY2015 ► APAC margins held due to Aggregated revenue ($m) 5,892.9 7,227.5 (18.5%) Services APAC overhead APAC 1,366.7 1,599.0 (14.5%) reductions and turnaround in Americas 2,466.8 3,273.3 (24.6%) EMEA 2,059.4 2,355.2 (12.6%) performa
Slide 16: Segment result by sector
Segment result By sector For personal use only FY2016 FY2015 Restated vs. FY2015 ► Hydrocarbons sector impacted by Aggregated revenue ($m) 5,892.9 7,227.5 (18.5%) reduced capital and operating Hydrocarbons 4,266.9 5,332.1 (20.0%) expenditure by customers in this Professional services1 3,705.3 4,474.
Slide 17: Realize our future
For personal use only Full year results 2016 Realize our future 17
Slide 18: Overhead cost reduction: $200m annualized savings
Overhead cost reduction Delivered $200m in annualized savings For personal use only Overhead reductions 2016 actual in year savings annualized savings Eliminated overhead roles $63m $115m Property savings $38m $60m Engineering software licenses savings $5m $10m Additional reductions $64m $15m Total
Slide 19: Overhead cost reduction: increased target to $350m
Overhead cost reduction Increased target to $350m annualized savings For personal use only 120 80 150 1,450 1,330 1,250 1,100 ►Targeting a further $150m in annualized savings with $100m expected in FY2017 result ►Now targeting total of $350m in annualized savings compared with FY2015 exit run rate 1
Slide 20: Strengthening the balance sheet: setting up for success
Strengthening the balance sheet Setting up for success For personal use only DELIVERED – Improved balance sheet metrics ►Cash conservation measures delivered $255m ● Lowered capital expenditure ● Reduced dividend payments ● Reduced M&A spend ►Additional cash generation of $90m ● DSO reduced by 4 day
Slide 21: Working capital focus
Working capital focus WorleyParsons DSO Leaderboard – 15 of 26 improved For personal use only DSO at December 2015 Best in class Average Locations performers 0 50 100+ 21
Slide 22: Strengthening the balance sheet: targets
Strengthening the balance sheet Making progress – still more to do For personal use only TARGETS ►DSO in line with industry average of 65 days ►Aiming for $300m improvement in cash ►Sell selected non-core assets ►Net debt/EBITDA range of 1.5 – 2.0 times ►Gearing <30% ►Dividend capacity 22
Slide 23: Realize our future: key indicators
Realize our future Key indicators For personal use only Overhead cost index 40% Gearing ratio (%) 35% HY2014 FY2014 HY2015 FY2015 HY2016 FY2016 30% 0 -5 25% -10 20% -15 15% -20 10% -25 -30 5% Gearing ratio = net debt/net debt + equity -35 0% -40 HY2014 FY2014 HY2015 FY2015 HY2016 FY2016 Gross margin
Slide 24: Capital management
For personal use only Full year results 2016 Capital management 24
Slide 25: Cash flow
Cash flow Positive cash flow For personal use only $m FY2016 FY2015 Underlying EBIT 302.7 418.0 Add: Depreciation, amortization 90.1 110.0 Less: Interest and tax paid (118.4) (208.1) Less: Working capital/other (82.4) (68.6) Net cash inflow from operating 192.0 251.3 activities Cash restructuring co
Slide 26: Gearing metrics
Gearing metrics Current balance sheet metrics For personal use only FY2016 HY2016 ► Actions to strengthen balance sheet Gearing ratio1 % 29.2% 32.4% starting to deliver Facility utilization2% 57.0% 63.4% ► $115m improvement in net debt position Average cost of debt % 4.8% 4.7% Average maturity (year
Slide 27: Liquidity and debt maturity profile
Liquidity Liquidity and debt maturity profile For personal use only Liquidity summary $m FY2016 FY2015 vs. ► Gross debt flat, includes FY2016 $27 million impact of Loan, finance lease & overdraft foreign exchange 2,182 2,087 4.6% facilities Less: facilities utilized (1,244) (1,240) (0.3%) ► Bonding
Slide 28: Backlog
For personal use only Full year results 2016 Backlog 28
Slide 29: Backlog as at June 2016
Backlog1 as at 30 June 2016 For personal use only 36 months backlog ($B) Approximate timing of backlog ($m) Backlog Soft backlog Total 4.6 4.5 4.2 0.5 0.6 0.3 4.1 3.9 3.9 2.7 0.5 1.0 31-Dec-15 31-Mar-16 30-Jun-16 FY2017 FY2018 FY2019 ►Current view of split of backlog across FY2017 – 2019 ►Conversion
Slide 30: Outlook
For personal use only Full year results 2016 Outlook 30
Slide 31: Group outlook
Group outlook For personal use only The Company expects trading conditions to remain challenging, leading to continued pressure on aggregated revenue. The Company is focused on protecting revenue and gross margin, achieving further overhead reductions and strengthening the balance sheet. The benefit
Slide 32: Q&A
For personal use only Full year results 2016 Q&A 32
Slide 33: Supplementary information
For personal use only Full year results 2016 Supplementary information 33
Slide 34: Underlying NPAT by business line
Underlying NPAT ($m) By business line (restated) For personal use only Reflects changes in contribution to EBIT at constant currency (11.5) (109.4) 42.1 (4.7) (10.8) 7.0 (2.7) 243.1 153.1 34
Slide 35: Underlying NPAT by sector
Underlying NPAT ($m) By sector (restated) For personal use only Reflects changes in contribution to EBIT at constant currency (162.4) 42.1 7.0 (2.7) 243.1 35.5 (9.5) 153.1 35
Slide 36: Underlying earnings profile
Underlying earnings profile For personal use only Group underlying EBIT $m 530.3 527.0 452.2 418.0 282.0 275.1 302.7 274.0 237.2 152.5 1H prior years 248.3 251.9 178.2 180.8 150.2 2H prior years 1H current year FY2012 FY2013 FY2014 FY2015 Restated FY2016 2H current year Group underlying NPAT $m 345.
Slide 37: Underlying earnings profile: margin profile
Underlying earnings profile Margin profile For personal use only Operational Underlying EBIT % 7.3% 7.1% 7.2% 7.3% 7.6% 6.5% 6.9% 6.5% 6.1% 5.8% 5.6% 4.7% 5.0% 4.7% 5.1% 1H FY2012 FY2013 FY2014 FY2015 FY2016 2H Operational Underlying NPAT % FY 4.9% 4.7% 4.5% 4.5% 4.2% 4.5% 4.0% 3.8% 3.6% 3.4% 2.7% 2
Slide 38: Regional revenue split
Regional revenue split Understanding the business For personal use only Contribution to aggregated revenue (%) FY2013 FY2016 29% 22% 21% 16% 15% 16% 15% 15% 8% 7% 8% 10% 9% 9% ANZ Asia Canada USA Middle East Europe Other ► Australia impacted by decline in resources and energy investment boom ► Decli
Slide 39: Revenue reconciliation
Revenue reconciliation For personal use only $m FY2016 FY2015 vs FY2015 Revenue and other income 7,790.1 8,757.5 (11.0%) Less: Procurement revenue at nil margin (2,226.4) (2,038.0) 9.2% Plus: Share of revenue from associates 342.5 514.6 (33.4%) Less: Interest income (8.8) (6.6) 33.3% Less: Net gain
Slide 40: Reconciliation
Reconciliation For personal use only $m FY2016 FY2015 EBIT 128.9 87.1 Add: impairment of goodwill - 198.6 Add: Arkutun-Dagi project settlement costs - 70.0 Less: net gain on revaluation of investments previously accounted for as joint (4.5) - operations Add: staff restructuring costs 76.8 38.3 Add:
Slide 41: Foreign Exchange
Foreign Exchange Effects of different currencies offset each other For personal use only Currency Average exchange Spot exchange rate movement rate movement BRL 20.63% (1.09%) CAD (1.24%) 1.10% CNY (9.44%) 3.25% EUR (5.65%) (2.83%) GBP (7.41%) 13.85% KZT 42.84% 75.36% NOK 2.96% 3.04% SGD (7.59%) (3.
Slide 42: FX translation impact
FX translation impact For personal use only Movement in major currencies against AUD Group EBIT FX Translation impact FY2012 FY2013 FY2014 FY2015 FY2016 50 25 41 A$m 4 11 12 0 -18 -25 Currency AUD $m NPAT translation Currency FY16 FY15 FY∆ impact of 1c ∆ AUD:USD 0.3 AUD:USD 72.8 83.7 (13.0%) AUD:GBP
Slide 43: Backlog definition from June 2016
Backlog definition from 30 June 2016 For personal use only ► Represents 3 years/36 months view ► Includes total dollar value of the amount of revenues we expect to record in the future as a result of work performed under contracts or purchase/work orders awarded to WorleyParsons. ► With respect to l
Slide 44: Acronyms
Acronyms For personal use only DSO – Day Sales Outstanding EDS – Engineering and Design Services E&P – Engineering and Procurement EPC – Engineering, Procurement and Construction EPCM – Engineering, Procurement and Construction Management ESA – Engineering Services Agreement ESP – Engineering Servic
Slide 45: WorleyParsons resources & energy
WorleyParsons resources & energy