Worley Limited · ASX:WOR
Worley — Investor Day (February 2016)
92 slides from Worley's investor day presentation, Feb 11, 2016
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 21 May 2015 ASX Release WORLEYPARSONS LIMITED (ASX: WOR) 2015 Sydney Investor Day Presentation WorleyParsons Limited will make
Slide 2: Realize our future
Realize our Tuture
Slide 3: Disclaimer
Disclaimer 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 summary form and is not nec
Slide 4: Sydney Investor Day 2015
Sydney Investor Day 2015 Andrew Wood
Slide 5: 12 Elements
OneWay 12 Elements OneWay™ Framework Scope and Inten' The breadth and coverage of OneWay™ Elements The twelve business areas within which specific activities need to take place in order to attain the vision of zero harm ..for each Element: intent High level objectives or outcomes for the business ar
Slide 6: Agenda
Agenda ► 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 Financials ► Available funding
Slide 7: Trading update – YTD March
Trading update – YTD March Modest decline in revenue, margins holding 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 Profit After Tax3 ($m) 1
Slide 8: Trading update – Third Quarter
Trading update – Third Quarter Modest decline in revenue, margins deteriorated 3Q unaudited result1 3Q2015 3Q2014 vs. 3Q2014 Aggregated revenue2($m) 1707.3 1811.4 (5.7%) Underlying EBIT3($m) 70.5 85.4 (17.5%) Underlying EBIT margin 4.1% 4.7% (0.6%) Underlying Net Profit After Tax3 ($m) 35.6 43.9 (18
Slide 9: Trading update – Taking steps to preserve margin
Trading update – Taking steps to preserve margin 6 Year total headcount and monthly movements 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 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 and revenue after adj
Slide 11: Trading update – Utilization trending upwards
Trading update – Utilization trending upwards Monthly hours charged versus utilization rate 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 ► 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 debt 6.0% Cost of debt (%
Slide 13: Trading update – Earnings security profile
Trading update – Earnings security profile Certainty increases as the year progresses 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 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 $5 mil EBIT over the contract life or strategic Revenue aw
Slide 15: Trading update – Top Group contracts
Trading update – Top 10 Group contracts Diverse earnings base supports resilience Top 10 Group contracts, YTD March revenue ($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 contracts. 14
Slide 16: Trading update – Customer view
Trading update – Customer view Continue to be regarded by Hydrocarbons customers 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 ► 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 Financials ► Available funding
Slide 18: Strategic framework – Corporate and global sector strategies
Strategic frameworkThe scope of presentation Corporate and global sector strategies 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 Each level builds on
Slide 19: Purpose
Purpose 18
Slide 20: Realize our future
Realize our future Many stories 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 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 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 90% of pop growth in
Slide 23: Near term, business also positioning for recent market shifts
Near term, business also positioning for recent market shifts 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 • Chemicals and Petrochemic
Slide 24: Entering a period of transition
That have impacted WorleyParsons’ revenue and earnings Entering a period of transition 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 1,500 8,000 7,627 7,363
Slide 25: Realize our future – through the strategy for growth
Realize our future – through the strategy for growth Strategy for growth NPAT Minor adjustments Do nothing time 24
Slide 26: Realize our future - Vision
Realize our future - Vision A company that… 25
Slide 27: Realize our future – based on our key differentiator
Realize our future – based on our key differentiator Technical Capability & Local Presence 26
Slide 28: Selective delivery offerings
Focus on front end and Improve Selective delivery offerings 27
Slide 29: 5 strategic themes, 5 projects
5 strategic themes, 5 projects 28
Slide 30: Project 1 - Build world class advisory business
Project 1 - Build world class advisory business and 1 2 3 dominate the early project phases 29
Slide 31: Project 1 - Build a world class advisory business
Project 1 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 project advice to seni
Slide 32: Advisian + WorleyParsons: 1+1 is greater than 3
Project 1 Advisian + WorleyParsons: 1+1 is greater than 3 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 through managing system and
Slide 33: Project 2 - Be the global PMC provider of choice
Project 2 1 2 3 - Be the global PMC provider of choice 32
Slide 34: Project 2 - Context and response
Project 2 - Be the global PMC provider of choice 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 standardization and cost contr
Slide 35: Potential market
Project 2 – Be the global PMC provider of choice Potential market 34
Slide 36: Project 2 - Priorities
Project 2 – Be the global PMC provider of choice Priorities ► 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 capabilities • Global fi
Slide 37: Project 3 - Build a leading Improve business
Project 3 1 2 3 - Build a leading Improve business 36
Slide 38: Project 3 - Context and response
Project 3 - Build a leading Improve business 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 ► Selected specialization
Slide 39: Access opex spend
Improve Full asset lifecycle Access opex spend… 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 4 - Be the smartest, most agile local service provider
Project 4 - Be the smartest, most agile local service provider 1 2 3 X Quantity 39
Slide 41: Project 4 - Context and response
Project 4 - Be the smartest, most agile local service provider 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 deliver including GDC
Slide 42: Project 4 - Priorities
Project 4 – Be the smartest, most agile local service provider Priorities ► 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 5 - Leapfrog 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 technology to revolutionize the delivery of our services 42
Slide 44: Project 5 - 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 CONTEXT RESPONSE In the short term the ► Immediately boost our economic environment competitiveness through has changed our use of
Slide 45: Five strategic themes, one differentiated strategy
Five strategic themes, one differentiated strategy Synergies realized through combination of connected strategies 44
Slide 46: Agenda
Agenda ► 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 Financials ► Available funding
Slide 47: Sector Strategies
WorleyParsons resources & energy
Slide 48: Sector intent
Sector intent 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 value- chain (Select > Del
Slide 49: FY16 Sector strategies
FY16 Sector strategies 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 & CHEMICALS • Services
Slide 50: Sector strategies: Hydrocarbons
Sector strategies Hydrocarbons
Slide 51: Our Hydrocarbons business in FY15
Our Hydrocarbons business in FY15 Dominated by exposure to upstream, greenfields and Tier 1s 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 demand Brownfields Greenf
Slide 52: Recent customer trends
Recent customer trends ► Prior to the oil price shock: Oil company profits were already being eroded by the 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 “squeezed” the supply
Slide 53: Strengthen by diversification
Strengthen by diversification (1) (2) (3) 52
Slide 54: Earnings growth channel 1: Stream
Grow in midstream and downstream Earnings growth channel 1: Stream 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 in the Upstream market
Slide 55: Earnings growth channel 2: Expenditure
Grow OPEX exposure Earnings growth channel 2: Expenditure 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 & “Owning” specific basins
Slide 56: Earnings growth channel 3: Customer
Diversify customer base Earnings growth channel 3: Customer 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 relationships ► Bring an
Slide 57: Hydrocarbons strategic areas of focus
Strategic areas of focus Hydrocarbons = 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
Sector strategies Minerals, Metals & Chemicals
Slide 59: Where is our business now?
Where is our business now? Minerals, Metals and Chemicals sector 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 ► 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 demerger) ► Move to pr
Slide 61: Minerals & Metals strategy
Minerals & Metals strategy 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 Value Chain 60
Slide 62: Minerals & Metals strategy
Minerals & Metals strategy 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 Value Chain VALUE CHAIN
Slide 63: Minerals & Metals strategy
Minerals & Metals strategy 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 Value Chain STRENGTH TH
Slide 64: Minerals & Metals strategy
Minerals & Metals strategy 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 Value Chain FOCUSED GEO
Slide 65: Minerals & Metals strategy
Minerals & Metals strategy 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 Value Chain CUSTOMER DR
Slide 66: Chemicals market trends
Chemicals market trends ► 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) uncertainty ► Seeking susta
Slide 67: Chemicals strategy
Chemicals strategy 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 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 shareholder returns, 24
Slide 69: Chemicals strategy
Chemicals strategy 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 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: Minerals, Metals & Chemicals strategic areas of focus
Strategic areas of focus Minerals, Metals & Chemicals = Primary focus = Supporting focus Advisian Major Projects Improve Services GDCs Underground Mining Chemicals Mined Fertilizers Productivity Enhancement 70 70
Slide 72: Sector strategies: Infrastructure
Sector strategies Infrastructure
Slide 73: Infrastructure: Where is our business now?
Infrastructure Where is our business now? 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 Sector Geographic Footp
Slide 74: Customer trends
Customer trends ► 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 power and water assets) ►
Slide 75: Power: Energy demand forecast to grow circa 20% to 2030
Power Energy demand forecast to grow circa 20% to 2030 Source: BHP Billiton, 24 Nov 2014 74
Slide 76: Water: Opportunities in advisory, sourcing, treatment and disposal
Water Opportunities in advisory, sourcing, treatment and disposal 75
Slide 77: Ports: Seaborne trade rising 4.1% this year
Ports Seaborne trade rising 4.1% this year 76
Slide 78: Rail: Global rail travel is projected to double by 2050
Rail Global rail travel is projected to double by 2050 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 Long-term Customer Type Public Sector Brownfields Undifferentiated Resource ► Target HC & MMC customers Gree
Slide 80: Infrastructure strategic focus areas
Strategic focus areas Infrastructure = 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 ► 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 Financials ► Available funding
Slide 82: Financial
WorleyParsons resources & energy Financial Simon Holt
Slide 83: Financial risk management
Financial risk management Managing 4 key financial risks ► 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 ► Interest rate risk • 95% of
Slide 84: Available funding: Gearing ratio within target range
Available funding Gearing ratio within target range 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 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 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 Utilized Not utilized 85
Slide 87: Financial framework
Financial framework Current priorities – maintain capacity to fund growth ► 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 ► 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, the average multiple
Slide 89: Returning capital to shareholders, stable dividend history
Strategy funding requirements Returning capital to shareholders, stable dividend history 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 35.5 36 40 41.5 34 34
Slide 90: Summary
WorleyParsons resources & energy
Slide 91: Summary: Writing our own story
Summary Writing our own story ► 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 strategies ► Financial capac
Slide 92: Realize our future
Realize our future