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‘Strategy delivering, market strengthening’ for WorleyParsons

Logo - Worley Parsons

The Australian engineering and consulting heavyweight has released results for the year ending 30 June 2018 showing an 8.5% increase in revenues to A$4.7bn (US$3.5bn), representing the first full year-on-year increase following four successive years of decline since the onset of the global commodities downturn. Underlying net profit after tax (NPAT) was also up 39% to A$171m (US$127m) – marking the best result in five years - on the back of lower overheads.

Publicly-quoted WorleyParsons claims the results demonstrate its strategy is delivering against a wider backdrop of strengthening markets. CEO Andrew Wood said: "We have exited FY2018 as a strong business, poised for a very exciting future. We have all our operational and financial metrics in target zones. We have continued to make strategic progress to position the business as the market returns. We have successfully completed a transformational acquisition with associated capital raising."

"Last year we noted that we were at an inflexion point in the energy and resources markets. This year we can look backwards and say that we have moved past that inflexion point and are now seeing increased activity," he added.

Revenue growth was driven by the acquisition of UK-based North Sea oil & gas business, AFW UK (EA 10-Oct-17) - which has since been renamed UK Integrated Solutions (IS) and is described as "exceeding targets" - as well as continued cost reduction and improving margins. The results also include the smaller acquisition of M+W Group’s chemicals engineering business in Germany.

Operating profit (EBIT) jumped 103% to A$264m and bottom line profit (after tax) was up 86% to A$62.2m. There was also a marked increase in backlog, notably across the hydrocarbons sector, at the year-end to A$6.4bn up from A$5.1bn, twelve months previously, while net debt was reduced year-on-year to A$663m from A$767m.

Employee numbers stood at 26,280 (compared with 22,800 twelve months earlier), with staff based across 116 offices in 42 countries. The acquired AFW UK business contributed c3,000 of these.

‘Clients will increase investment’

"It is an exciting time for WorleyParsons with the past twelve months being one of the most dynamic in recent years. We believe the changes we have made as a company have us very well positioned as one of the most future-ready players at a very exciting time to be in the energy and resources industries. The energy and resources industries continue to change and evolve as they undergo one of the biggest transitions of the past few decades. This transition brings with it some challenges but for WorleyParsons it brings many opportunities," said Wood.

"Our customers have now returned to financial health. We expect increased investment to follow. While the demand for oil and gas continues to grow, this year is the year that fossil-based power generation globally starts to decline as renewables move into the mainstream, creating opportunities for our New Energy team [EA 03-Jul-18]. We are looking at strong market fundamentals in the medium term, and WorleyParsons is positioned well for the future with the right know how and market strategy."

Geographically, WorleyParsons' FY18 revenue is split by region as follows - ANZ: 17%; Asia: 6%; Canada: 17%; Europe: 29%; ME/Africa: 16%; USA & LAM: 15%. And by industry sector - hydrocarbons: 76%; minerals, metals & chemicals: 9%; and infrastructure: 15%.

Housing its environmental consultancy operations and one of three group business segments - alongside major projects & integrated solutions and services - the firm’s standalone advisory arm Advisian saw a distinct improvement on the previous year’s market-constrained performance (EA 13-Sep-17), with growth across all sectors, notably in APAC. Segmental revenues were up 7.8% to A$520m, contributing 11% to group total (which is unchanged year-on-year), with a 42% jump in EBIT to A$17.7m. This gives Advisian an EBIT margin of 3.4%, up 0.8 of a percentage point on last year.

Having restarted dividends at the H1 point in February this year - the first since FY15 due to the impact of the commodities sector crash - the firm announced a final dividend per share of A$0.15.

Middle Eastern backer

There was little reference by the company of its biggest shareholder, Dubai’s Dar Group, which recently increased its stake in the firm to 26% (EA 6-Aug-18). However, in a recent interview in the Australian press, Wood intimated that Dar was not "deeply engaged" with the firm.

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