Worley Limited · ASX:WOR
Worley — WorleyParsons — H1 FY2017 Earnings Presentation
43 slides from Worley's earnings presentation, Feb 20, 2017
Slide 1: Half year results 2017
For personal use only Half year results 2017 Andrew Wood, CEO WorleyParsons
Slide 2: Disclaimer
Disclaimer For personal use only The information in this presentation about the WorleyParsons Group and its activities is current as at 20 February 2017 and should be read in conjunction with the Company’s Appendix 4D and Interim Financial Report for the half year ended 31 December 2016. It is in su
Slide 3: Overview: HY2017 – Making progress
Overview HY2017 – Making progress For personal use only • Revenue down in line with overall market contraction • Underlying result supported by management action on costs • Gross margin, underlying EBIT and NPAT margins improved Financial • Statutory result impacted by significant restructuring char
Slide 4: Our priorities
Our priorities For personal use only Full Year priority areas HY2017 achievements • Delivered $220m in annualized overhead Reduce • Targeting $150m annualized savings in H1 FY2017. improvement in overhead costs internal costs • Overall target increased to $450m • Staff utilization >85% • Staff utili
Slide 5: Some context to the result
Some context to the result Some encouraging signs For personal use only ► After contractions of ~30% in 2016, oil major capex announcements for 2017 are indicating flat to slight growth Select O&G Majors - Global Capex YoY Growth (%) ► Backlog has increased during the period. 10% ► The Company has u
Slide 6: Key financials
Key financials Margins improving, cash can do better For personal use only ► Aggregated Revenue down 30% ► Statutory results impacted by planned restructuring charges ► Overhead savings driving improved underlying EBIT and NPAT margins. ► Small operating cash outflow 1 Refer to slide 37 of the Suppl
Slide 7: Reducing internal costs
Reducing internal costs Headcount stabilizing For personal use only ► Headcount stabilizing ► Business is right sized for current market ► Staff utilization on target ► South Africa public infrastructure and WorleyParsons Cegertec businesses divested ► Maintained presence in 42 countries * Headcount
Slide 8: Significant awards
Significant awards1 Continuing to win work For personal use only HY2017 Significant awards Revenue $130+ Revenue $1.0+ million billion 6 31 48 11 Installation of the accommodation module on the Hebron topsides, Bull Arm, Newfoundland and Labrador (NL) Revenue $190+ million $1.3+ billion in significa
Slide 9: Backlog as at December 2016
Backlog1 as at 31 December 2016 Backlog is increasing For personal use only 36 months backlog ($B) Approximate timing of backlog ($B) 4.7 1.Refer to slide 41 for the definition of backlog. Timing of conversion to revenue varies from project to project, depending on project schedule, Company scope of
Slide 10: OneWay to Zero Harm
OneWay™ to Zero Harm We aim for Zero Harm For personal use only ► Our safety performance is among the best in the industry - and improving ● Employee Total Recordable Case Frequency Rate (TRCFR) for HY2017 was 0.05 (FY2016: 0.07) ● Achieved an 18% reduction in frequency rate for all employees and ma
Slide 11: Half year results 2017 – Tom Honan, CFO
For personal use only Half year results 2017 Tom Honan, GMD Finance, CFO 11
Slide 12: Statutory Statement of Financial Performance
Statutory Statement of Financial Performance For personal use only 31 December 2016 31 December 2015 ($m) ($m) REVENUE AND OTHER INCOME Professional services revenue 1,774.2 2,522.4 Procurement revenue 723.1 1,358.1 Construction and fabrication revenue 218.3 298.8 Interest income 3.2 3.2 Other incom
Slide 13: Reconciliation of Statutory to Underlying NPAT result
Reconciliation of Statutory to Underlying NPAT result Adjusted for non-trading items For personal use only HY2017($m) HY2016 ($m) Statutory result (2.4) 23.1 Additions (pre-tax) Staff restructuring costs 32.8 30.9 Onerous lease contracts 22.6 36.2 Onerous engineering software licenses - 19.7 Other r
Slide 14: Underlying Group EBIT Evolution
Underlying Group EBIT Evolution Internal improvements not able to offset market For personal use only contraction (108.2) 50.0 152.5 23.6 117.9 H2 2016 Volume impact Gross margin % impact Overhead H1 2017 savings/Reductions 14
Slide 15: Segment result by business line
Segment result By business line For personal use only HY2016 vs. HY2016 ► Revenue down due to HY2017 (Restated) (Restated) market contractions and Aggregated Revenue ($m) 2,165.7 3,107.4 (30.3%) project completions Services 1,358.7 1,986.0 (31.6%) ► Overall EBIT margin Major Projects & Integrated im
Slide 16: Segment by region
Segment By region For personal use only HY2016 vs. HY2016 ► Revenue declines in all HY2017 (Restated) (Restated) regions – driven by Aggregated Revenue ($m) 2,165.7 3,107.4 (30.3%) projects completing and slow ramp up of new APAC 528.8 716.9 (26.2%) work EMEA 770.8 1,008.3 (23.6%) ► EBIT growth in E
Slide 17: Segment result by sector
Segment result By sector For personal use only HY2017 HY2016 vs. HY2016 ► Upstream Oil and Gas (Restated) (Restated) remains the largest segment Aggregated Revenue ($m) 2,165.7 3,107.4 (30.3%) in Hydrocarbons sector Hydrocarbons 1,482.9 2,221.8 (33.3%) Professional Services1 1,264.6 1,923.0 (34.2%)
Slide 18: Realize our future
For personal use only Half year results 2017 Realize our future 18
Slide 19: Overhead cost reduction
Overhead cost reduction Increased total cost reduction target to $450m For personal use only 120 80 1,450 220 1,330 1,250 30 1,030 1,000 ► Secured $220m of annualised overhead savings in H1 FY2017 ► Annual target has increased by $100m since June 2017 ► Savings generated in IT and third party spend,
Slide 20: Strengthening the balance sheet: movement in net debt
Strengthening the balance sheet Movement in net debt For personal use only Net debt increased to $920m ►$77.6m in cash restructuring costs ►$230m receivables from four slow paying state owned customers ►Slow progress in reducing DSO on other receivables 20
Slide 21: Strengthening the balance sheet: critical for success
Strengthening the balance sheet Critical for success For personal use only Clear focus to improve balance sheet metrics ►Cash conservation measures ● Lowered capital expenditure ● No dividend payments ● Reduced M&A spend ►Cash performance needs to improve ● Three senior executives allocated to the k
Slide 22: Key indicators
Realize our future Key indicators For personal use only Overhead Cost Index Gearing Ratio % 35.0% HY2014 FY2014 HY2015 FY2015 HY2016 FY2016 HY2017 30.0% -10 25.0% -20 20.0% -30 15.0% Gearing ratio = net debt/net debt + equity -40 10.0% FY14 HY15 FY15 HY16 FY16 HY17 -50 Gross Margin (%) 3.0 Covenant
Slide 23: Capital management
For personal use only Half year results 2017 Capital management 23
Slide 24: Cash flow
Cash flow Unwavering focus to improve cash flow For personal use only $m HY2017 HY2016 EBIT 36.4 79.3 Add: Depreciation, amortization 40.3 49.9 Less: Interest and tax paid (30.8) (71.3) Less: Working capital/other (130.7) (13.8) Net cash (outflow)/ inflow from operating (84.8) 44.1 activities Cash r
Slide 25: Cash Flow: impact of restructuring
Cash Flow Impact of restructuring For personal use only Cash restructuring costs paid - 77.8 Underlying operating cashflow - (7.0) Operating Activities – (84.8) ► Cash flow below target ► Significant non-recurring items funded during the period ► $53.1m of cash out due to timing of procurement inflo
Slide 26: Gearing metrics
Gearing metrics Current balance sheet metrics For personal use only HY2017 FY2016 ► Gearing within band of 25% to 35%. Gearing ratio1 % 32.9% 29.2% Target remains <30% Facility utilization2 % 56.7% 57.0% ► Other metrics within limits Average cost of debt % 5.0% 4.8% Average maturity (years) 2.4 2.7
Slide 27: Liquidity and debt maturity profile
Liquidity Liquidity and debt maturity profile For personal use only Liquidity Summary $m HY2017 FY2016 vs FY2016 ► Sufficient liquidity, bonding and debt facilities Loan, finance lease & overdraft facilities 2,235 2,182 2.4% ► Average maturity >2 years Less: facilities utilized (1,268) (1,244) 1.9%
Slide 28: Outlook
For personal use only Half year results 2017 Outlook 28
Slide 29: Concluding remarks
Concluding remarks Progress in last six months For personal use only ► Staff numbers are stabilizing ► Back log has increased ► Positive customer feedback ► Gross margin % is holding due to project performance ► Cost reduction target now increased to $450m and largely complete ► Cash result disappoi
Slide 30: Group outlook
Group outlook For personal use only Notwithstanding that market conditions remain challenging, customers’ sentiment is improving and they inform the Company that their activity levels are not expected to deteriorate further. In some areas, they are beginning to increase activity, which the Company i
Slide 31: Q&A
For personal use only Half year results 2017 Q&A 31
Slide 32: Supplementary information
For personal use only Half year results 2017 Supplementary information 32
Slide 33: Local Presence, Global Delivery
Local Presence, Global Delivery For personal use only 23,200 112 42 people offices countries ► 6 offices closed ► 2 businesses divested ► First office in Germany opened to be close to our global Chemicals customers 33
Slide 34: Underlying earnings profile
Underlying earnings profile Group Underlying EBIT $m For personal use only 527.0 452.2 418.0 275.1 302.7 274.0 237.2 152.5 251.9 178.2 180.8 150.2 117.9 FY2013 FY2014 FY2015 FY2016 FY2017 1H prior years 2H prior years 1H current year Group Underlying NPAT $m 322.1 263.4 243.1 167.0 153.1 162.7 138.8
Slide 35: Underlying earnings profile: margin profile
Underlying earnings profile Margin profile For personal use only Operational Underlying EBIT % 7.6% 6.5% 6.9% 6.5% 6.1% 5.8% 5.0% 5.3% 5.4% 4.7% 4.8% 5.8% 7.3% FY2013 FY2014 FY2015 FY2016 FY2017 1H Operational Underlying NPAT % 2H FY 4.5% 4.2% 4.5% 4.0% 3.8% 3.6% 3.4% 2.7% 2.9% 3.0% 2.7% 2.4% 2.6% F
Slide 36: Regional revenue split
Regional revenue split Understanding the business For personal use only Contribution to aggregated revenue (%) Other, 7% ANZ, 17% Europe, 16% Asia, 6% Middle East, 17% Canada, 21% USA, 16% ► Canada impacted by decline in oil sands activity, offset by increase of Cord market share ► Contribution from
Slide 37: Revenue reconciliation
Revenue reconciliation For personal use only $m HY2017 HY2016 vs HY2016 Revenue and other income 2,722.1 4,189.4 (35.0%) Less: Procurement revenue at nil margin (572.2) (1,186.3) (51.8%) Less: Pass-through revenue at nil margin (100.3) (60.2) 66.6% Plus: Share of revenue from associates 119.3 172.2
Slide 38: EBIT reconciliation
EBIT reconciliation For personal use only $m HY2017 HY2016 EBIT 36.4 79.3 Less: net gain on revaluation of investments previously accounted - (4.5) for as joint operations Add: staff restructuring costs 32.8 30.9 Add: onerous lease contracts 22.6 36.2 Add: onerous engineering software licences - 19.
Slide 39: FX translation impact
FX translation impact For personal use only Movement in major currencies against AUD (indexed) Average exchange Spot exchange Currency rate movement rate movement BRL (7.3%) (1.5%) CAD 4.3% 1.4% CNY 11.0% 1.5% EUR 4.9% 3.0% GBP 25.5% 5.6% NOK 4.2% 0.7% SGD 3.0% 4.5% USD 4.4% (2.8%) KZT 37.5% (4.5%)
Slide 40: Foreign Exchange
Foreign Exchange Effects of different currencies offset each other For personal use only Impact total EBIT 1.0 0.5 - Millions -0.5 -1.0 -1.5 -2.0 BRL CAD CNY EUR GBP KZT SGD USD MZN Group EBIT FX Translation impact 45 35 A $m 25 41 15 5 11 12 4 -2.8 -5 FY13 FY14 FY15 FY16 HY17 40
Slide 41: 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 lo
Slide 42: 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 43: WorleyParsons resources & energy
WorleyParsons resources & energy