Chief Executive Officer’s Review
Chief Executive Officer
This financial year we have made great progress on delivering on our commitment to become the leading service provider to the energy, chemicals and resources sectors. Our dedicated team have continued to deliver good project outcomes for our customers and strong financial results for our shareholders.
The acquisition of ECRClick for definitionGlossary DefinitionVIEW FULL GLOSSARY ECREnergy, Chemicals and Resources division acquired from Jacobs Engineering Group Inc in the financial year 2019. has transformed our position in the energy, chemicals and resources sectors. It has created a step change in exposure for the business to the stable and expanding chemicals market, coupled with increasing our position to the DownstreamClick for definitionGlossary DefinitionVIEW FULL GLOSSARY DownstreamThe refining of petroleum crude oil and the processing and purifying of raw natural gas, as well as the marketing and distribution of products derived from crude oil and natural gas. refining markets. This has balanced out our exposure to the UpstreamClick for definitionGlossary DefinitionVIEW FULL GLOSSARY UpstreamThe searching for potential underground or underwater crude oil and natural gas fields, drilling of exploratory wells, and the subsequent drilling and operation of the wells that recover and bring the crude oil and/or raw natural gas to the surface. hydrocarbons sector, while also maintaining our industry leading position in this space.
Last year we noted that we were seeing increased activity across the energy, chemicals and resources markets. This year we can look back and say that this increased activity has transitioned into sustainable growth, and increased opportunities in new and emerging markets.
The global energy transition is also gaining pace including a shift towards low carbon intensity electrification of the world energy supply. The resultant direction of the future energy mix is clear, however the pace of change is not, nor is how each country will react. Oil and gas are expected to increase annual sanctioned investment through to 2025 and there are significant opportunities for Worley to strongly support the energy transition across our core sectors. Specifically, the shift towards gas and lighter fuels, coupled with the rapid growth in petrochemicals are both areas where Worley is well placed to support our customers as they move into the future.
As fossil-based power generation globally continues to decline, we are also seeing increased activity in renewables particularly offshore wind, distributed energy solutions, new energy applications of hydrogen, and an increased focus on energy efficiency programs across existing facilities. Worley is well positioned to support its customers in leading and navigating this change.
Acquisition Transition Progress
In October 2018 we established the Transition Management Office (TMO) as a dedicated team to manage the integration of ECR with WorleyParsons to create Worley. The TMO team have been working tirelessly since the acquisition was completed in April this year. The program is on schedule, with system integration, synergy realization, culture and people, customer engagement and organizational transformation progressing to plan. Cost synergy projections have increased from $130 to $150 million, while further margin synergies have been developed through increased Global Integrated Delivery (GID) uptake and shared services. Revenue synergies continue to be developed across the breadth of markets we serve.
The TMO team has been focused on ensuring the strong culture of both organizations are reflected in Worley. The team has made it a priority to ensure the Worley culture continues to evolve and grow as the Group moves from transition to transformation.
Figure 1: Chemicals Capital Expenditure – Trend and Outlook
Source: IHS Markit (2019)
In FY2019Click for definitionGlossary DefinitionVIEW FULL GLOSSARY FY2019Financial year 2019., our aggregated revenue grew to $6,439.1 million (up 35.6% on prior corresponding period) and underlying NPATA was up 42.7% to $259.8 million. NPATA margins have improved, BacklogClick for definitionGlossary DefinitionVIEW FULL GLOSSARY BacklogBacklog is the total dollar value of the amount of revenues expected to be recorded for the next 36 months as a result of work performed under contracts or purchase/work orders awarded to the Group. With respect to long term agreements and framework agreements, an amount is included for the work expected to be received over the period under consideration. The view of backlog is sensitive to timing of awards and as such a conservative view of timing has been adopted. is up 10% during the year and our staff utilization remains on target. We delivered cash flow of $236.3 million, compared to $259.7 million in FY2018Click for definitionGlossary DefinitionVIEW FULL GLOSSARY FY2018Financial year 2018.. Our Backlog has increased across all sectors with a strong increase in the AmericasClick for definitionGlossary DefinitionVIEW FULL GLOSSARY AmericasServices business line region encompassing sub-regions of North America and Latin America., largely on the back of the ECR acquisition. Worley’s operational and financial metrics are all sound.
Our focus on safety is unwavering. Both of our organizations have strong safety cultures. This will underpin our shared vision for safety as Worley moves forward. This continues to deliver industry leading results. As outlined in the Chairman’s Report, we have maintained a stable safety performance across our Group recording a TRCFR of 0.14 which remains one of the best performing ratings across the industry. In our pursuit of improvement our focus areas for FY2020Click for definitionGlossary DefinitionVIEW FULL GLOSSARY FY2020Financial year 2020. include the launch and embedment of a new Assurance system, continued focus on our Field HSEClick for definitionGlossary DefinitionVIEW FULL GLOSSARY HSEHealth, Safety and Environment., and evolving the heritage OneWay™Click for definitionGlossary DefinitionVIEW FULL GLOSSARY OneWay™WorleyParsons’ enterprise-wide integrity management framework which establishes our corporate expectations for Zero Harm to our business. and Jacobs ECR BeyondZERO® programs.
We continue to support our customers and suppliers to deliver sustained economic, social and environmental progress via their projects, and our people to deliver community-based initiatives that make a real difference. Our corporate responsibility champions network and the Worley Foundation continue to drive positive impact via corporate responsibility projects in communities. Our Company is a staunch advocate of Science, Technology, Engineering and Mathematics (STEM) education and we have held events to encourage the next generation to embrace STEM education across our global operations.
As a leading provider of technical services to the energy, chemicals and resources sectors we have a key role to support our customers to navigate the global energy transition and continue to invest in our New Energy business. Worley has considerable experience in this regard, gained from working on more than 1,350 New Energy projects globally.
Our immediate focus is completing the integration of the ECR acquisition and realizing the cost and revenue synergies. During this period, we will develop a transformation strategy for the new Worley that will enhance our leadership position in energy, chemicals and resources, capture the opportunities presented by the global energy transition, and change the way we work by leveraging automation and the use of digital products.
The culture of Worley will leverage the best of both organizations whilst continuing to evolve and grow as the Company moves from transition to transformation.
Meeting the challenges ahead
The successful integration of ECR and WorleyParsons remains a priority, including delivering the identified cost, margin and revenue synergies. Foundations have been established to ensure that we build on the best of both organizations, unlocking long-term sustainable value.
We are well positioned to navigate the challenges posed by the global energy transition. We have identified growth potential in our core markets.
Our people are our most important asset and the culture of Worley will leverage the best of both organizations whilst continuing to evolve and grow as the Company moves from transition to transformation.
I closed my statement last year talking about the exciting opportunities I saw in the industry in the year ahead. And it has indeed been an exciting year. In April 2019, WorleyParsons and ECR, two global leaders in engineering, technical and professional services, came together under our new brand, Worley. I am pleased to see our people from both organizations approaching the new organization with curiosity and excitement, discovering new ways of working together.
Worley has a remarkable group of people who have brought us to this position where we see a bright future. We have transformed the business over a number of difficult years and are now poised for a very exciting future. I thank each and every one of our people for their hard work.
To our shareholders, your support is appreciated, and I look forward to working with you to create an exciting future for your Company.
Chief Executive Officer