Worley Limited · ASX:WOR
Worley — WorleyParsons — H1 2016 Earnings Presentation
48 slides from Worley's earnings presentation, Feb 24, 2016
Slide 1: Half year results 2016
For personal use only Half year results 2016 Andrew Wood, CEO WorleyParsons
Slide 2: Disclaimer
Disclaimer The information in this presentation about the WorleyParsons Group and its activities is current as at 24 February 2016 and should be For personal use only read in conjunction with the Company’s Appendix 4D and Interim Financial Report for the half year ended 31 December 2015. It is in su
Slide 3: Overview HY2016
Overview HY2016 For personal use only • Underlying result in line with expectations Financial • Statutory result impacted by overhead reduction charges results • No interim dividend • $120 million ongoing annualized overhead savings Delivering • Reducing overhead staffing levels $120 Million • Conso
Slide 4: Priorities for next 6-18 months
Priorities for next 6 - 18 months For personal use only • Targeting a further $180 million of ongoing annual overhead savings Reduce • Maintain utilization > 85% internal costs • Integrated team driving cost out program includes external advisors • Deliver enhanced value for the customer through tar
Slide 5: Key financials
Key financials Cost reduction initiatives supporting underlying margin For personal use only Statutory result HY2016 HY2015 vs. HY2015 ► Total revenue down 5% assisted by Total revenue ($m) 4,189.4 4,418.9 (5%) $366 million FX uplift EBIT ($m) 79.3 180.8 (56%) Net Profit After Tax ($m) 23.1 104.3 (7
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 HY2016 was 0.11 (FY2015: 0.12) ● Achieved a 16% reduction in employee and managed contractors frequency rate ►The Worl
Slide 7: Operational highlights
Operational highlights Continuing to adjust global headcount Local presence, global delivery For personal use only Headcount Change to Prior Month Economic downturn Mining Crude price during GFC downturn decline 28,300 134 44 people offices countries Utilization trend Chargeable hours Utilization ra
Slide 8: Significant awards
Significant awards1 Similar significant awards flow For personal use only HY2016 Significant awards HY2015 Significant awards Revenue $1.0+ Revenue $1.5+ billion billion 8 24 10 31 Revenue $405+ million 46 Revenue $145+ million 50 14 9 Revenue $165+ million Revenue $150+ million $1.6+ billion in sig
Slide 9: Sample significant awards
Sample significant awards Awards continue to flow For personal use only HYDROCARBONS MINERALS, METALS & CHEMICALS INFRASTRUCTURE PTTGC PMC Phase 2, PTT Global Wagerup Improve Contract Renewal, Design Engineering Services, Large Chemicals, Alcoa Canadian Utility Cheecham Terminal Expansion, Wesizwe -
Slide 10: Strategy update
Strategy update Realize our future – 5 strategic themes, 5 projects For personal use only Technical Capability & Local Presence ►Continuing to build out Advisian capabilities ►Significant PMC contract win in EMEA with BAPCo ►Key renewal in the Improve Power O&M offering ►Local businesses delivering
Slide 11: Half year results 2016 - Tom Honan, CFO
For personal use only Half year results 2016 Tom Honan, GMD Finance, CFO 100MW KaXu parabolic trough solar thermal project 1111
Slide 12: Statutory Statement of Financial Performance
Statutory Statement of Financial Performance 31 Dec 2015 ($m) 31 Dec 2014 ($m) For personal use only REVENUE AND OTHER INCOME Professional services revenue 2,522.4 2,759.3 Procurement revenue 1,358.1 1,215.9 Construction and fabrication revenue 298.8 438.9 Interest income 3.2 3.3 Other income 6.9 1.
Slide 13: Reconciliation of Statutory to Underlying NPAT result
Reconciliation of Statutory to Underlying NPAT result Adjusted for non-trading items For personal use only HY2016 HY2015 ($m) ($m) Statutory result 23.1 104.3 Additions (pre-tax) Redundancies 30.9 - Onerous lease contracts 36.2 Onerous engineering software licences 19.7 - Sub-total additions 86.8 -
Slide 14: Underlying Group EBIT evolution
Underlying Group EBIT evolution Overhead savings benefit commenced – more to come For personal use only (87.7) 9.0 13.3 15.6 19.2 180.8 150.2 Professional services 14
Slide 15: Segment result by business line
Segment result By business line For personal use only HY2016 HY2015 Restated vs. HY2015 ► Services aggregated revenue declined Aggregated revenue ($m) 3,167.6 3,613.7 (12%) across all regions. Segment result Services 1,876.7 2,230.7 (16%) impacted primarily by Americas Major Project 677.0 712.4 (5%)
Slide 16: Segment result by sector
Segment result By sector For personal use only HY2015 HY2016 Restated vs. HY2015 ► Hydrocarbons declined across all Aggregated revenue ($m) 3,167.6 3,613.7 (12%) subsectors. Hydrocarbons 2,282.0 2,696.9 (15%) ● Upstream onshore, particularly Professional services1 1,983.2 2,258.0 (12%) unconventiona
Slide 17: Segment by region
Segment By region For personal use only ► APAC margin improved through overhead HY2015 HY2016 vs. HY2015 Restated Aggregated revenue ($m) 3,167.6 3,613.7 (12%) reductions in Services and turnaround in APAC 716.9 863.9 (17%) performance of an Improve contract Americas 1,382.2 1,667.6 (17%) EMEA 1,068
Slide 18: Capital management
For personal use only Half year results 2016 Capital management 18
Slide 19: Cash flow
Cash flow Positive cash flow For personal use only $m HY2016 HY2015 Underlying EBIT 150 181 Add: Depreciation and amortization 50 53 Less: Interest and tax paid (71) (104) Less: Working capital/other (85) (52) Net cash inflow from operating activities 44 78 Cash restructuring costs paid 38 6 Underly
Slide 20: Gearing metrics
Gearing metrics Current balance sheet metrics For personal use only HY2016 FY2015 Gearing ratio1 % 32.4% 28.0% Facility utilization2% 63.4% 59.4% Average cost of debt % 4.7% 4.7% Average maturity (years) 3.1 3.5 Interest cover(times)3 5.9x 7.3x Net Debt/EBITDA (times)3 2.5x 1.9x ► Comfortably within
Slide 21: Liquidity
Liquidity Liquidity and debt maturity profile For personal use only Liquidity summary $m HY2016 FY2015 vs. ► Liquidity available FY2015 Loan, finance lease & overdraft facilities 2,242 2,087 7% ► Increase in gross debt includes Less: facilities utilized (1,421) (1,240) 15% $80 million due to the imp
Slide 22: Improving financial performance
For personal use only Improving financial performance Tom Honan Lake Turkana Wind Farm 22 22
Slide 23: Overhead costs
Overhead costs Delivered $120m annualized savings, targeting a further $180m For personal use only DELIVERED - $120 million ongoing annualized savings ► Eliminated overhead roles - $75 million ► Property - $35 million ► Engineering software licenses – $10 million ► One off costs of delivering saving
Slide 24: Underlying overhead reduction
Underlying overhead reduction Targeting overhead reduction of $300 million For personal use only 17 60 43 180 1,450 $120 million in annualized overhead savings 1,330 1,150 24
Slide 25: Strengthening the balance sheet
Strengthening the balance sheet SHORT TERM ACTIONS – Next 6 months For personal use only ►Lower capital expenditure ►Tighter invoicing and cash collection processes ►No interim dividend paid MEDIUM TERM ACTIONS – Next 18 months ►Continue work to improve invoicing and cash collection ►Sell selected n
Slide 26: Outlook
For personal use only Half year results 2016 Outlook TANAP Pipeline. 26
Slide 27: Sector outlook
Sector outlook Mixed outlook For personal use only ► Hydrocarbons – Uncertain ● Low activity levels expected to continue through 2016 ● Project delays making activity levels difficult to predict ● Actions taken and further overhead reductions expected to temper effect on earnings ► Minerals, Metals
Slide 28: Group FY2016 outlook
Group FY2016 outlook For personal use only While WorleyParsons anticipates trading conditions to remain challenging in the short term, making forecasting difficult, WorleyParsons expects FY2016: ● Aggregated revenue to be flat half on half ● Overhead reductions to support second half underlying earn
Slide 29: Q&A
For personal use only Half year results 2016 Q&A 29
Slide 30: WorleyParsons resources & energy
WorleyParsons resources & energy
Slide 31: Supplementary information
For personal use only Half year results 2016 Supplementary information 31
Slide 32: Underlying NPAT by business line
Underlying NPAT ($m) By business line (restated) For personal use only Reflects changes in contribution to EBIT at constant currency 15.4 (57.3) 7.5 (10.8) 18.7 (3.4) (0.4) 5.5 (5.6) 104.3 73.9 32
Slide 33: Underlying NPAT by sector
Underlying NPAT ($m) By sector (restated) For personal use only Reflects changes in contribution to EBIT at constant currency (79.1) 7.5 18.7 (3.4) 5.5 (0.4) 104.3 28.5 (7.7) 73.9 33
Slide 34: Underlying earnings profile
Underlying earnings profile For personal use only Group underlying EBIT $m 530.3 527.0 452.2 355.7 282.0 275.1 274.0 174.9 248.3 251.9 178.2 180.8 150.2 FY2012 FY2013 FY2014 FY2015 FY2016 1H prior years Group underlying NPAT $m 2H prior years 345.6 322.1 1H current year 263.4 193.7 167.0 198.6 162.7
Slide 35: Underlying margin profile
Underlying margin profile Cost reductions support margins in difficult market For personal use only Group underlying EBIT margin % 7.2% 6.9% 6.1% 4.9% 7.1% 7.3% 7.6% 4.8% 7.3% 6.5% 5.0% 4.7% 4.7% FY2012 FY2013 FY2014 FY2015 FY2016 1H prior years Group underlying NPAT margin % 2H prior years 4.7% 4.2
Slide 36: Services
Services Middle East operations continue to perform well For personal use only HY2016 HY2015 vs. HY2015 Aggregated revenue $m 1,876.7 2,230.7 (16%) Professional services $m 1,700.6 1,973.5 (14%) Construction and fabrication $m 38.7 104.1 (63%) Procurement revenue with margin $m 135.0 151.6 (11%) Oth
Slide 37: Major Projects
Major Projects WorleyParsonsCord performance continues to improve For personal use only HY2016 HY2015 vs. HY2015 Aggregated revenue $m 677.0 712.4 (5%) Professional services $m 403.4 360.4 12% Construction and fabrication $m 260.1 334.8 (22%) Procurement revenue with margin $m 13.5 17.2 (22%) Segmen
Slide 38: Improve
Improve Market downturn affecting Canadian customers For personal use only HY2016 HY2015 vs. HY2015 Aggregated revenue $m 267.7 322.6 (17%) Professional services $m 267.2 321.8 (17%) Procurement revenue with margin $m 0.5 0.8 (38%) Segment result $m 11.9 21.3 (44%) Segment margin % 4.4% 6.6% (2.2pp)
Slide 39: Advisian
Advisian Combined management and technical consulting For personal use only HY2016 HY2015 vs. HY2015 Aggregated revenue $m 346.2 348.0 (1%) Professional services $m 314.9 335.4 (6%) Procurement revenue with margin $m 31.3 12.6 (148%) Segment result $m 33.0 36.2 (9%) Segment margin % 9.5% 10.4% (0.9p
Slide 40: Hydrocarbons
Hydrocarbons Upstream onshore is best performer For personal use only HY2016 HY2015 vs. HY2015 Aggregated revenue $m 2,282.0 2,696.9 (15%) Professional services $m 1,845.0 2,118.8 (13%) Construction and fabrication $m 298.8 438.9 (32%) Procurement revenue with margin $m 136.8 138.9 (2%) Other income
Slide 41: Minerals, Metals & Chemicals
Minerals, Metals & Chemicals Strategy for growth of Chemicals gaining traction For personal use only HY2016 HY2015 vs. HY2015 Aggregated revenue $m 373.5 447.4 (17%) Professional services $m 368.8 441.5 (16%) Procurement revenue with margin $m 4.7 5.8 (19%) Other income $m - 0.1 N/A Segment result $
Slide 42: Infrastructure
Infrastructure Turnaround in performance For personal use only HY2016 HY2015 vs. HY2015 Aggregated revenue $m 512.1 469.4 9% Professional services $m 472.3 430.8 10% Procurement revenue with margin $m 38.8 37.5 3% Other income $m 1.0 1.1 (9%) Segment result $m 30.1 (2.5) N/A Segment margin % 5.9% (0
Slide 43: Revenue reconciliation
Revenue reconciliation For personal use only $m HY2016 HY2015 vs HY2015 Revenue and other income 4,189.4 4,418.9 (5%) Less: Procurement revenue at nil margin (1,186.3) (1,057.3) 12% Plus: Share of revenue from associates 172.2 255.4 (33%) Less: Interest income (3.2) (3.3) (3%) Less: Net gain on reva
Slide 44: Foreign Exchange
Foreign Exchange Effects of different currencies offset each other For personal use only Impact total EBIT Currency Average exchange rate Spot exchange rate movement movement USD BRL 24.34% 17.92% BRL Pegged AUD CAD (3.59%) 5.17% CAD CNY (16.49%) (2.33%) USD EUR (5.21%) (3.98%) GBP (13.95%) (0.92%)
Slide 45: FX translation impact
FX translation impact For personal use only Movement in major currencies against AUD Group EBIT FX Translation impact FY2012 FY2013 FY2014 FY2015 HY2016 50 25 41 A$m 4 11 9 0 -18 -25 Currency AUD $m NPAT translation impact Currency HY16 HY15 HY∆ of 1c ∆ AUD:USD 0.1 AUD:USD 72.3 89.2 (19.0%) AUD:GBP
Slide 46: Hydrocarbons Oil Majors Capital Investment
Hydrocarbons Oil Majors Capital Investment Still investing significant capital For personal use only 46
Slide 47: Global Chemical Industry Capital Investment
Global Chemical Industry Capital Investment Growth projected to 2020 For personal use only Source: American Chemistry Council, Year-End 2015 Chemical Industry Situation and Outlook, December 2015 Source: HIS Chemical, Chemical Industry Capital Costs: A Global Spending Outlook/Special Report Prospect
Slide 48: Contractual acronyms
Contractual acronyms For personal use only CY – Calendar year 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 Ser