Worley Limited (WOR)
HOLD

Confidence is key

 24 Aug 2022
Sector: Energy

FY22 RESULT

Need To Know

  • Earnings beat driven by margin improvement (+0.7% margin growth). 
  • Operating cash flow large miss ($316m vs $460m market), on higher working capital.
  • No formal guidance however management is “very confident that revenue will improve” and EBITA margins will remain elevated at 6% for FY23. 

Investment Implications

WOR FY22 Result: Positive result. EBITA ahead of consensus, predominantly driven by margin improvement despite the EBITA met exit from Russian operations. NPATA was flat on consensus. Operating cash flow came in considerably below consensus although is not a disaster. Strong signs of improvement seen in 2H vs 1H, final dividend ahead of market. Labour force grew to ~51.3k vs 47.7k pcp with 2H22 EBITA/person also increasing to $11.1k vs $10.7k 2H21.

Result Details: Revenue $9.0bn vs $9.3bn market. Underlying EBITA $547m vs $541m market. EBITA margin 6%, up from 5.3% pcp. NPATA $329m vs $331m market. Operating cash flow $316m vs $460m market. Final DPS of 25cps vs 22cps market. Backlog $15.5bn vs 14.7bn at Dec 21. 

Outlook: No specific formal guidance was given however management indicated they expect FY22 underlying EBITA margins (excluding the impact of procurement) to be sustained into FY23. 

The market has FY23 NPATA growth at ~30%, at flat margin growth this leaves places the heavy lifting on revenue growth. Management suggests they’re “very confident that they will see revenue growth for FY23, 1H and 2H” despite geopolitical, inflation and supply chain risks.  

Summary: Overall a positive result. The growing backlog remains encouraging, with the management suggesting it could have been even higher if it wasn’t for timing. 

Management not too concerned with inflationary impacts as 80% of their operations can be reimbursed so confident any pressures can flow through. European winter and geopolitical risk seen as an opportunity due to increased short-term demand and focus on energy infrastructure. 

The strong tone on the results call from management has reassured the market of the positive result/outlook. Despite the positive result, we reiterate our Hold rating.

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Stock Overview

Share Price

Company Overview

Worley is an Australia-based provides professional project and asset services in the energy, chemicals and resources sectors.

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