Worley Limited

Good day and thank you for standing by. Welcome to the WIRELY's half-year 2025 results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chief Executive Officer, Chris Ashton. Please go ahead.

Thank you. Welcome, everyone, and thank you for joining Wall-E's half-year results for the 2025 financial year. As usual, I've got 10 in a row with me, Wall-E CFO. Look, today I'm going to provide an overview of our business performance and strategic progress over the period. And as usual, Tina will add further detail on our half-year results before I conclude with our outlook. Then we'll open for questions. So just turning to slide two and reminding everyone of the disclaimer shown here. Before I begin, I want to acknowledge the Gadigal people of the Eora Nation and the traditional custodians of the land on which we meet today. We value the strength, determination, and resilience of all First Nation peoples and communities around the world, and we're committed to the ongoing journey of listening and learning. And I extend that respect to any First Nation people joining us today. Moving on to our performance highlights on slide three. Today I want to leave you with three key messages. First, we've delivered a strong result in what has been a more challenging operating environment. And while the market is still shifting, this more challenging environment is in line with that which we flagged in our investor day in May last year. Despite this, we remain on track to achieve our FY25 outlook. We've continued to deliver solid earnings growth at a higher rate than revenue through a deliberate focus on margin expansion. We've maintained a strong cash result, supporting our target to deliver low double-digit EBITDA growth. The second point is that our results are supported by the strong foundations we've built for the business, enabling execution of our strategy to meet our ongoing customer needs. We've built a highly diversified business, and the resilience this brings underpins the strength of our results, with the agility, flexibility, and breadth of capability to support our customers across geographies and across each of the energy, chemicals, and resource sectors. as they rebalance their own investment portfolios. We also continue to invest in the transformation of the organization to build cost scalability and process effectiveness to underpin future growth. And thirdly, we remain resolutely confident in our long-term growth. Our markets are positively leveraged to global trends and we expect investment momentum to continue to build over the medium to long term. This supports our aim to continue delivering high single-digit EBITDA margins and targeting a double-digit EBITDA compound annual growth rate. For the half year to December 31, 2024, we've delivered 6.8% growth in aggregated revenue, 9% growth in our underlying EBITDA, and our efforts to drive margin improvement have resulted in an uplift in EBITDA margin, excluding procurement, to 8.4%. The proportion of revenue from sustainability related work is now at 58%. And importantly, we retain our longstanding heritage and capability across traditional markets, which contributed 42% of our total revenue for the period. And the Worley board is determined to pay a interim dividend of 25 cents per share, which will be unfranked. And finally, Worley has announced today its intention to undertake a share buyback of up to $500 million. The initiative reflects the board's confidence in the company's financial position and growth outlook. Importantly, the buyback forms one component of a wider strategy to enhance shareholder value. Turning to slide four. I'll now take you through our business performance and strategic project, beginning on slide five. Our success is thanks to our energized and talented people. Keeping us safe remains our highest priority and our dedication to a diverse and inclusive workforce is unwavering. Our total recordable frequency rate was 0.12 across the group, remaining steady from the end of FY24. We invest in our people and their ability to attract and retain talent remains a focus and remains strong. This is a key part of our agility and is essential to deliver on our ambition in a resource constrained environment where customer demand will span both sustainability related and traditional work. Moving on to slide six. We're again proud to deliver a strong set of results for our investors. We've now consistently delivered growth across aggregated revenue, EBITDA, and EBITDA margin since 2022. That's seven periods delivering consistent growth and is reflective of a more resilient business model. We continue to deliver these results as the world faces evolving and challenging geopolitical dynamics. We recognize some of our customers are actively reassessing capital investments as the economics of sustainability projects undergo increased scrutiny. And while the pace of energy transition tempers were uniquely positioned to work with our customers across the spectrum of sustainable, transitional, and traditional segments. We'll also continue to invest in our company to make it more efficient, more resilient to cyclicality, and better able to cope with the demands of growth. The cost of these programs is already embedded in our earnings, providing the opportunity for further efficiency gains in the future. I'm pleased with our continued progress across our business's ESG commitments. We published our fourth modern slavery statement and we continue to take a proactive approach to managing this risk in our business and looking after our people. Moving on to slide seven. Delivering on our strategy is a key part of our success and measuring our strategic performance helps us to keep both our executive and I accountable for our growth. Put simply, Once again, we delivered on what we said we'd do. Our focus on using various levers identified within the business to drive earnings and margins growth is delivering the intended outcome. Our strategic investment in growth areas is delivering accretive returns. Confidence in our ability to drive investment returns continues to grow as we successfully scale new businesses like carbon capture, utilization and storage, and direct air capture and win work in new areas of capability, such as blue hydrogen. Our capital management position remains strong, and Tina will provide more detail. However, I'd like to emphasize the strength of our debt and bonding facilities, which provide our customers with confidence to award worldly large-scale projects, something our peers are finding increasingly more difficult to do. Moving on to slide eight. As I mentioned earlier, our business model delivers us strategic diversification across sectors and geographies, as well as across traditional, transitional, and sustainable segments. This diversification coupled with our agility and flexibility to move people where our customers need them has been key to resilience in earnings and margin growth. We retain deep domain expertise in mature markets, such as oil and gas, and maintain leading positions in growth markets. Our people have interchangeable skills across our globally diverse portfolio, which we believe is important. A great example of this is our recent win with ExxonMobil as they planned their first world scale blue hydrogen project in the US. We're aligned with our existing customers and continue to attract work with new customers. We're a trusted partner to our customers and maintain long term relationships and contracts. We maintain a low risk business with a focus on risk adjusted returns. The majority of our work remains reimbursable, and we have no competitively bid lump sum turnkey EPC work. We never have pursued this market, we don't now, and we won't in the future. Turning to slide nine. We've announced a number of important wins over the half. Bookings remain healthy despite the headwinds noted earlier, and we continue to focus on winning work across our three key growth areas. We're strengthening our market presence in the ECR sectors, where we have a strong level of expertise, expanding into attractive adjacencies and growth markets, and focusing on unlocking high growth opportunities through innovation. Importantly, our project wins continue to outpace work delivered, which is a key measure of our activity across our business. Our book to burn is greater than one. Our continued emphasis on project delivery excellence has supported our bookings, which are up on half one 2024 and steady on half two FY24. The strength of our customer relationships is also resulting in an increase in sole source wins, which are now at 45% of total wins. Our backlog is showing a slight decline on the last half, however, still supports our FY25 outlook and Tiernan will provide more detail on the movement in our backlog later. However, I know that much of the change in the backlog since the last half is due to the cancellation of the Norfolk Battery Materials Project, which has previously been advised to the market. Turning to slide 10, we remain confident in our long-term growth with the agility, flexibility, and capability to support our customers' shifting portfolios. Our pipeline remains consistent with our view that FY25 will be a moderated year, albeit we are seeing some positive trends emerging. And while our factored sales pipeline has seen a marginal decline in the six-month period to January, it remains broadly in line with the same as last year, and we're confident in high-quality work we continue to win. Our work on venture global CP2 LNG export facilities continues under a limited notice to proceed, and the majority of our CP2 scope remains in our factored sales pipeline. We expect to fully mobilize the site under a full notice to proceed mid-calendar year 2025 once FID is granted, at which point the full scope of work will shift from our pipeline into our backlog. Reflecting market sentiment, we've seen a shift in near-term opportunities to traditional and traditional projects, as demonstrated by the chart on the lower right of this slide, which shows the change in customers' capital allocation between segments. Moving on to slide 11. While the energy transition rightfully creates headlines, it's important to note that broader global trends are continuing to drive momentum across the energy, chemicals, and resource sectors. We're positively leveraged to these trends, and with focus on key growth markets, we remain confident in our ability to deliver on our medium and long-term ambitions. Additionally, with recent announcements regarding tariffs across a range of key materials, we're committed to helping our global customers successfully adapt to this evolving landscape. Our diversification, value chain, and industry expertise provide us with a unique vantage point to help navigate the rapidly changing global policy environment. Turning to slide 12. I'm now gonna hand over to Tiernan, who's gonna take us through further details on our half-year results. Tiernan, over to you.

Thanks, Chris. Good morning, everyone. Let me start by echoing Chris's earlier comments that we've delivered a strong result for the half, and despite a challenging operating environment, we remain on track to deliver our FY25 outlook. Our financial performance has improved again, as Chris has mentioned, and something that sets us apart from our competition is how well we're managing our cash flow and applying a disciplined approach to capital management, which continues to underpin our growth strategy. So turning to slide 13 first. Our aggregated revenue of $6 billion for the half is up 6.8% on the prior corresponding period. This result has been driven by the Americas and EMEA regions and through our work in the energy and resources sectors. During the period, we also had an increase in construction and fabrication, as well as in procurement. This was anticipated and is reflective of us moving into the execution phase for several large projects as we start to do more end-to-end EPC work. Importantly, the current level of activity in the market is as we expected when we provided our FY25 outlook in August 2024. Looking at group profits, we've delivered an underlying EBITDA of $376 million, which represents a 9% growth on the prior corresponding period. Importantly, and consistent with our last few reporting periods, our growth in earnings is higher than the rate of growth in revenue due to our continued focus on improving margins. Underlying EBITDA margin, including procurement, increased to 6.3% from 6.1% at 31 December 23. Underlying EBITDA margin, excluding procurement, is 8.4%, up from 7.5% in the prior corresponding period. This half-year progress is also consistent with us achieving the outlook we provided for full-year EBITDA margin, excluding procurement, in the range of 8% to 8.5%. Our underlying NPATA is $216 million, up 14.9% on the prior corresponding period. And importantly, there are no one-off items excluded from this result. Moving on to slide 14. These EBITDA margin walks show our progress towards raising margins to high single digits, excluding procurement in the medium term. We continue to see sustained benefits from our deliberate strategic actions, which are driving further margin improvements. In the top EBITDA walk, we are comparing the first half of last financial year to the first half of this year. You can see that there's been a slight impact from project mix, but the key driver of the margin improvement has been rate increases. Notably, professional services, construction and fabrication, and procurement have all delivered higher margins on the comparative period. In the bottom EBITDAO margin walk on this slide, we see the margin excluding procurement for the half is flat on the second half of last financial year. The second half margin is usually stronger in our business, but ongoing improvement in margins together with mixed changes means the margins that this half is particularly strong, due mainly to slightly different phasing. This sets us up well, though, to deliver our full-year margin outlook. Moving to slide 15. We're focused on maintaining high single-digit EBITDA margins, excluding procurement, and targeting double-digit EBITDA CAGR. During periods of moderated growth, like we're in now, the building blocks of our strategy remain fundamental to support the process of margin improvement. First, our strategy has been delivering high value solutions and sharing in the value we bring to our customers. The trend towards increasing gross margins in our factored sales pipeline and backlog has continued, and we see this flowing through to revenue. Second, a key driver of margin expansion is maintaining operational leverage and improving business productivity. Our focus on project assurance and cost scalability through the life cycle of all of our projects is also ensuring that as sole margins are delivered effectively. Third, we continue to invest in areas that we believe will yield accretive returns and I'll share an update on this shortly. We're also investing in process improvement to continue to drive cost efficiency across the group in readiness for further future growth at scale. Finally, we're focused on risk adjusted returns and maintaining attractive contract terms and conditions. From all of this, the takeaway message is the successes achieved from executing our strategy, as well as broad market and customer understanding is what gives us confidence in our ability to achieve further margin expansion. Turning to slide 16. Looking at our backlog, which remains healthy and continues to support our outlook for FY25, whilst the backlog, as Chris mentioned, is down over the half, we remain confident in our ability to win work to support our growth outlook. What this chart shows you is that our wins and scope increases have been greater than our backlog delivered, which is a positive indicator that there is still a lot of activity in the prevailing market. However, the total backlog is down due in large part to the cancellation of the Northvolt Battery Materials project in Sweden, which we did announce at the November AGM. Such project changes occur from time to time in our business, but are more evident during periods of uncertainty. The pie charts on this slide show the diversification of our backlog across regions, sectors, and traditional, transitional, and sustainable work. This diversification continues to deliver strength to the underlying business even with some large project changes. It's also important to note that the majority, as Chris has said, of Venture Global's CP2 project remains in the factored sales pipeline, with only a much smaller scope under a limited notice to proceed booked in the backlog. When we receive full notice to proceed after FID, the full project will be booked to backlog. Venture Global published a prospectus late last year which contained a significant amount of information about the scale of this project and their approach to using contractors like Worley. This information indicates this will be a very significant project for us. The project is moving towards receiving final FERC approval. And again, as Chris has said, we expect mobilization to be lightly mid-calendar year. Moving on to slide 17. Worley's strong capital management position supports the company's growth plans and reflects the focus on prudent free cash flow management, capital allocations, and enduring balance sheet strength. The reported cash conversion ratio for the half is 97.5% of underlying EBITDA compared to 141.4% on PCP. We've continued to secure improved terms and conditions, including some increased advanced billings on a number of contracts. And due to this, we've also been providing an underlying cash conversion over the last couple of periods, which shows the normalization of cash. This shows this time that the impact of the effect of advanced payments has resulted in the cash conversion ratio this period being 116.2% compared to 95.7% on PCP. This reflects the variation, this movement reflects the variation in the timing of advanced billings from one period into the next. Similar to cash conversion ratio, we normalize our day sales outstanding, which continues to move in a positive direction down to 56.3 days from 65.7 days. We've maintained, therefore, DSO lower than our target range. We retain good liquidity. We've maintained our strong credit rating, and we have access to flexible competitively priced debt. Our balance sheet strength is supported by leverage of 1.5 times, which remains unchanged from 30th of June, 2024. This is indicative of the prudent use of free cash flow to reduce risk, increase liquidity, maintain a solid dividend payout ratio within its target range, and continue to provide appropriate capacity to invest in business growth. This strong balance sheet positions the company with the option to pursue a variety of capital management initiatives. At 31st of December, 24, our weighted average cost of debt was 4.3%, down from 4.7% in June last year. Our underlying effective tax rate, excluding the amortization of acquired intangibles, was 33% at the first half versus 33.8% at the first half last year. This is in the middle of our target range, and we expect this to be similar for the remainder of FY25. As I said, our discipline capital management is a differentiator for us. It positions us with future capacity, including substantial bank guarantees and surety bonds essential for success in large-scale project delivery. Customers are increasingly looking to use contractors who have the financial strength to see large-scale project delivery through to commissioning and beyond. Turning now to slide 18. As I've noted, the benefit of our strong capital management position provides us with a broad range of options to continue to invest and grow. Today, we announced our intention to undertake an on-market share buyback of up to $500 million. Of course, the timing and value of shares purchased will be dependent upon prevailing market conditions on the share price and other relevant factors. This initiative reflects the board's confidence in the company's financial position and growth outlook. We recognize the importance of making investments now that will drive shareholder returns in the future. This is particularly true for digital and AI, although these investments are not expected to materially contribute to earnings growth and margin expansion immediately. In the first half, we've invested $23 million, which is a combination of both CapEx and OpEx, including $14 million in strategic costs, And over the second half, we're expecting to invest a further circa $58 million. This is a substantial increase in investment over previous years. In addition to our investment in generative AI development, we've also been investing in business improvement initiatives and growing our consulting business. It's early days in some of these investments, and we plan to report back to you on time in time over how these investments are contributing to value creation. To conclude, I'm happy to report that Worley's financial position is sound. We're immensely proud of this result and the efforts and dedication of all of us here at Worley who have delivered it. I'll now hand back to Chris to take us through the outlook for the rest of 25. Chris?