Worley Limited

Thank you for standing by, and welcome to the Worldly Half-Year Results 2020 . This will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. Depending on the number of questions, we may need to restrict each person to asking one initial question or one follow-up question. The session will conclude on the hour. I would now like to hand the conference over to Mr. Chris Ashton, Chief Executive Officer. Please go ahead.

Thank you, and welcome, everyone, and thanks for joining Worley's half-year results for FY23. I'm going to be presenting these today with Tina O'Rourke, our CFO. Just moving straight on to slide two, I want to acknowledge the Gallagher people of the Eora Nation as the traditional custodians of the land on which we meet today. We acknowledge and we recognize their continuing connection to the land and waters and thank them for protecting this coastline and its ecosystem since time immemorial and for their unique ability to care for country and their deep spiritual connection to it. We pay our respects to the elders past, present and extend that. all First Nations people present today whose knowledge and wisdom has ensured the continuation of culture and traditional practices. Moving to slide three, I just remind you to review our disclaimer shown here. Moving on to slide four. In terms of the agenda for the day, first I'll provide an overview of our business performance and strategic progress over the period as we move further toward achieving our ambition. Here, we'll then add further detail on our half-year results. And finally, I'll provide a market update and our outlook statement before opening for Q&A. Moving on to slide five. Look, I want to leave you with three key messages. First, we've delivered on the growth outlook we provided at FY22, and with momentum building strongly, we see a clear path to increasing revenue and margins in the medium term. Second, we're delivering on our strategy and benefiting from the increasing customer investment across all of our sectors. And finally, as a high-value and trusted provider of sustainability solutions, we're successfully unlocking long-term value from our diversified markets. Moving on to slide six. I'm going to take you through our business performance, illustrating the progress we're making against our strategy. Just moving on to slide seven. Look, we've got a clear purpose, a clear ambition, and a clear strategy which guides us towards our business of the future. And as you'll hear today, we're delivering the benefits of having the right strategy, the right skills, and the right leaders. Our customers look to us as a trusted partner to bring solutions they need based on our leading position in the markets we serve. We have a strong and long track record of delivering complex integrated projects which enable the energy transition. And we deploy scarce resources at a time when there is growing demand, which gives us significant competitive advantage. Moving on to slide eight. From a health and safety point of view, our values guide us as we support our people to live healthy lives, to respect one another, and to feel included. Keeping our people safe has and will remain our highest priority. We continue to enhance the way we work. In this half, we've embedded psychosocial factors into our life programs. We're developing our people through skills and capability building. In November, we launched our Appreciate program, which facilitates peer-to-peer recognition, which has really been well embraced by our people. We're placing particular emphasis on fostering inclusive leadership. We have many active global people networks. to support the communities in which we work. We were recognized recently for our work by the Canadian Council of Aboriginal Business. Moving on to slide nine. We continue to deliver on our ESG business commitments. We're pleased with the level of external recognition we're achieving, and we retained our AAA rating by MSCI for the seventh consecutive year, and our gold rating with EcoVardis ISS upgraded our ESG corporate rating to prime, which means our tradable bonds and shares qualify for responsible investment. And we received the best in class descriptor in relation to our S&P rating as a Dow Jones Sustainability Index leader. These ESG ratings highlight why we're increasingly being included in sustainability focused investment funds. Modern slavery, Risks remain a focus area for the business, and we continue to undertake a high level of due diligence checks of supplies and customers, and we're committed to increasing our level of transparency through our recently issued third modern slavery statement. More than half of our global workforce have internal accreditations in sustainability, helping us bring sustainable solutions to all that we do. 48% of our graduate intake in the Hartford women as we continue to make progress on our diversity commitments. And finally, cybersecurity remains a focus, and we retained our certification with ISO 27001. Turning to slide 10. Our first half-year results reflect our customers' confidence in our capabilities and experience in delivering integrated solutions which accelerate their We've continued to see improvement in key metrics as momentum in our markets continues to build. Aggregated revenue is up 19% on the prior corresponding period. This reflects growing demand for our services as customers look to us to help them develop their traditional and sustainability-related projects. Our underlying EBITDA of $283 million is up 13% compared to the prior corresponding period. In line with our expectations, Patients margins excluding procurements have been sustained period on period at 6.1%, including investment in areas such as global software platforms for which we will see the benefit in FY24 and beyond. Sustainability revenue now accounts for 39% of our total aggregated revenue. This includes integrated gas at 8% of total revenue, which we regard as a transitional market. We'll continue to assess how we define our sustainability work in consideration of the evolving global standards. Sustainability-related work is now 66% of our factored sales pipeline. Our backlog has grown 9% in the past year, illustrating historical growth in our factored sales pipeline, is now moving into backlog and revenue. And the Walling Board is determined to pay a final dividend of 25 cents per share unfranced. The group continuously reviews the business portfolio to align with its strategy and ambition, and it's important we focus our energy on businesses which deliver our strategy. Today, we announced the sale of a turnaround and maintenance business in North America, the details of which can be found in our separate air sex announcement this morning. These assets are treated as a disposal group held for sale in the balance sheet. After selling costs and the allocation of intangibles and before tax, A non-cash post-tax loss of $196 million has been recognized. The transaction supports our strategy to deliver high-value solutions in growth markets and our ambition to grow our revenue from sustainability-related business across the portfolio. Moving on to slide 11. The charts on this slide show our half-and-half trends and growth rates compared with the prior corresponding period. I'm pleased with the positive momentum across our key metrics. The true sign of progress is in our underlying earnings, which was up 13%. Earnings this half were almost as high as the second half of FY22, which, considering our usual half and half seasonality impact, further demonstrates our growth. Our headcount is at 9% over the last year. Our ability to ramp up quickly in response to customer demand is aided by our global integrated delivery team in India, which has grown 23% across the same period. And we have the framework and capability to place and hire 3,000 people per month, and our time to hire has remained relatively steady throughout Part 1 of 23. Our other leading indicator metrics suggest strong future growth. Backlog is up 9%. and factored sales pipeline is up 34% over the past 12 months. Moving on to slide 12. Our growing pipeline, bookings, and backlogs show a clear path to increasing earnings in the near to medium term. Our factored sales pipeline provides a snapshot in time of all open opportunities factored for the likelihood of the project proceeding and being awarded to warning. Our pipeline continues to grow, up 16% in the half. Our role in 12-month bookings represent the value of all project wins from the prior 12 months at specific points in time. This chart shows our project wins are clearly trending upwards. They're up 23% in the half to almost $14 billion. Bookings are added to backlog, never any revaluations. We've seen backlog grow by 7% in the half. Clearly, the trend across all these three charts is increasing the proportion of sustainably related work which now contributes 40% of our backlog, just up from 28% just six months ago. These factors are very positive for growth in the years ahead. Moving on to slide 13. Our bookings are up across all of our sectors. Our $6.9 billion worth of revenue won in the first half marks a 32% increase on the prior corresponding period. Our average sustainability-related project size is increasing, indicating sustainability projects are increasingly moving into subsequent phases. Our global scale and diversified business is highlighted by the selection of significant project wins, which are listed here on the right. These range from strategic awards and early phase works, such as the Woodsmith Project for Anglo-American in the UK, to the EPCM Fertilizer Project with Martin in Saudi Arabia, to our ongoing work with BP in the Gulf of Mexico. Our traditional work continues to be an important part of our future, although we are seeing our sustainability work growing at a higher rate. We remain committed to our critical role in supporting our traditional customers move toward a low-carbon future, helping them become cleaner, more efficient, and digitally enabled. Turning to slide 14. Worley has unrivaled experience in shaping the global energy transition. Our first half result reflects the confidence our customers have in our capabilities and experience to deliver integrated solutions which accelerate their transition to a sustainable future. This trust has been well earned. As you can see here, we're developing and managing some of the world's largest and most innovative assets. Internationally, we're a global leader in nuclear power technology design and project management delivery, as well as a global leader in solar, onshore and offshore wind, hydroelectric generation facilities, and we own the technology and deliver about 80% of the world's sulfur removal facilities. Our breadth of capabilities is unique, and when coupled with our global experiences, experience puts us at the center of some of the planet's biggest challenges. This has put us at the forefront, leading the way in shaping the energy transition both in the global arena and also here in Australia. Moving to slide 15. If we look to some of our home market here in Australia, we work across all aspects of the energy sector, major resource projects and infrastructure development and management. Let me take a moment to put that into context. We operate about a third of Australia's power generation fleet, and we're one of the largest independent wind farm operators. We're the NGO record for many of Australia's major iron ore, offshore and onshore oil and natural gas facilities. We're a major enabler of Australia's small, medium, large businesses into the energy, chemicals and resources industries around the world. And we're Australia's largest exporter of high value services. For this reason, we believe we're well placed to support Australia's decarbonisation agenda and protect its critical infrastructure. The growth in our sustainability-related work demonstrates our capabilities and networks are becoming increasingly important and valuable to both the global and Australian customers with which we work. I'm now going to provide you with a deeper picture of the work we do by looking at a few specific wins from the HOT. Moving to slide 16. Norvolt is developing a lithium-ion battery gigafactory in Sweden. supply batteries for about a million costs. Whilst we're involved across most of the battery materials value chain, the development of active materials is one of our key strengths. Moving on to slide 70. Our work with ENOA, a subsidiary of NEON, supports the creation of a circular economy. This award highlights the strength of our end-to-end offering, which starts with our expert consultants in the early phase of the project, who bring an innovation mindset to help tackle complex challenges. By delivering on such early-phase scopes, we are often able to secure the latter-phase work. Moving on to slide 18. Our strong relationship with BP, spanning both traditional and sustainability-related work, is highlighted through the Quinana and Kazan Gas Project Award. We've been working for now for over 25 years, and now we're completing the feed on its conversion to a renewable fuels facility. Part of a larger program of decarbonization work, we're executing for BP across their global portfolio. Turning to slide 19. We've been working with the QA Oil Company for over 20 years, and this award continues that relationship. In addition to the extension of our traditional services, We'll be implementing projects to drive efficiencies and new technology solutions to develop solar, power, and water projects. Turning to slide 20, I'm going to hand over to Tiernan, who's going to provide further detail on our half-year results. Tiernan, over to you.

Thanks, Chris, and good morning, everyone. My section today will focus on three key areas. First, what drives our results. Second, our revenue and margins and where they're both going in the near to medium term. And finally, an update on our strategic investments. Turning to slide 21. Our financial performance, as Chris has already outlined, improved again this half consistent with our outlook last August, with aggregated revenue of 19% supported by both of our regions. Revenue in the Americas is up 21% compared to the prior corresponding period. Customers continue to spend, especially in relation to sustainability projects. The Inflation Reduction Act is providing tax incentives, leading to a noticeable increase in new opportunities, particularly in low-carbon hydrogen and carbon capture-inducing storage. In the NAPAC, investment continues to focus on energy security, building resilience into the supply chain and accelerating the sustainability shift as a long-term thematic. We're building trust and partnerships with our key customers as a result of our ability to support them with their decarbonization goals, technology, standardization, and replication. The growth in our revenue and margins is reflecting this shift in sentiment. For me at GroupCoffit, we've delivered an underlying EBITDA of $283 million and a half of 13% over the prior period. On cash, our underlying net operating cash flow is $129 million, a 17% increase compared to the first half of FY22, albeit last year was a somewhat disrupted period. Cash outflows in this current first half were impacted by the planned movements in working capital, the fund growth, and at the corporate level, the cost of company-wide multi-year software license renewals, which were negotiated early and paid up front, to maximize available discounts and avoid further inflationary impacts. Cash collection at the half is at 67% of online EBITDA, consistent with phasing and growth, with day sales outstanding steady at around 63 days. We expect cash collection to be within our target range of 85% to 95% of EBITDA, leverage is at 2.4 times, and within our covenant definitions. We've now delivered $367 million in annualized savings through our cost savings initiatives, which are delivering long-term benefits. And we are now very close to our target run rate of $375 million. Moving to slide 22. In the top EBITDA award, we are comparing second half last year with first half and so it's a good test of our momentum. You can see that while earnings are growing from volume, there is a mixed impact, the result of procurement revenue increasing substantially as we expected. Also, most of the benefits from our cost savings initiatives have already been realized in previous years, and we've spent approximately the same amount on our strategic investment as in the prior half. In the bottom EBITDA margin wall, we show underlying EBITDA margins without the impact of procurement revenue. Overall, the reduction in margin compared to the previous half is explained by our typical half-on-half phasing impacts, particularly caused by the European and North American summer, and seasonality in maintenance activities. Leading me, the first half professional services margin is up 0.5 of the percentage point on the previous year's second half margin, as better pricing flows through. We've also been adjusting some of our costs to accommodate the growth into mentioned earlier, that are required to drive future activity in the business. These company-wide multi-year deals were signed in the first half to take advantage of discounts and started to be expensed in FY23, at the same time as we are still decommissioning old and unsupported applications. These old apps are still licensed in FY23. This creates short-term extra costs which has lowered the first half margin somewhat. This increase, though, will normalize in FY24 when the transition process is complete. Importantly, cost increases are not linear as we grow, but we have very good visibility and control over them. With disciplined pricing, rate increases are already in the backlog and delivering aggregated revenue at higher margins. This margin expansion trend is mirrored in the factory sales pipeline. Moving to slide 23, there are three main areas which indicate we'll benefit from margin improvement in the near to medium term, each of which is additive. First, competitive advantage. Our global scale and our leading position in sustainability markets, combined with our strong track record in delivering large-scale projects, is only increasing importance to our customers as the quantity, scale of their sustainability and traditional investments increase. Higher margins are being seen in the increasing number of sustainability projects progressing to EPC and EPCM phases. As you know, we are reporting on a quarterly basis on the volume of small contract wins, many of which will progress to larger EPC and EPCM contracts. Growth in these contract volumes has been consistent this year, as you've seen from our analysis. Second, supply and demand dynamics are facilitating gross margin improvement across our traditional and sustainability professional services contracts. Growing market demand is contributing to higher margins and a higher volume of sole sourcing of contracts, due mainly to increased urgency of delivery, further improving the profitability of sustainability contracts. There is an increasing demand for Worley's experienced resources, And third, we expect it to benefit from further operating leverage in the medium term. We've almost reached our target run rate, as I mentioned. Other than the timing of the transition costs that I noted earlier, costs are being optimized as we grow. We're seeing the impact of our competitive advantage and disciplined approach to pricing come through in our backlog. Our average gross margin excluding procurement in backlog increased. Furthermore, our backlog is being converted to revenue at a in FY22. Much of the current backlog will translate into aggregate revenue, therefore, in FY24. Our factored sales pipeline has seen a similar rate of increase in average gross margin, but placing particular focus on eliminating low-margin contracts, to either boost the margins to market levels or to cease undertaking the work and reallocating scarce resources into higher-margin work. Evidence of this is that contracts with low margin in the funnel have been managed 2% in the last 12 months. And that's half of what it was 12 months ago. We're maintaining strong win rates across both sustainability and traditional work, even as we increase our prices, and are focusing on optimizing this advantage as the market evolves. In summary, beyond FY23, we expect to deliver an underlying EBITDA margin higher than the last two years' average margin before procurement, and we estimate FY24 average margins to be 7% plus, coupled with revenue increases as well. Lastly, on slide 24, from the start of FY22, we committed to an investment of $100 million over three years to help accelerate our organic growth in targeted sustainability-related markets. On the left of the slide, you can see some of the areas we're targeting with this investment and the emerging value we're creating. The growing pipelines and the value of the wins demonstrate we're investing and succeeding. On the right, we've provided information on where the investment is being spent in FY23. This half, we focused on planning, capability building, and digital enablement and solutions. The second half will further focus on advisory capabilities, new solution development, and partnerships. This current commitment will be completed by the end of FY24, and unless there are further gains to be made from continuing investment, this cost will cease from then. I note for completeness that there has been no change in how we define above and below the line items, nor to our reimbursable contract focus, the details for both of which are outlined as usual in the appendices. In summary, as the CFO I can say, this I'll now hand back to Chris to complete the presentation.