1.3 Review of operations

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WorleyParsons is a professional services provider to the resources, energy and industrial sectors.

The statutory result for FY2016 was a profit of $23.5 million, compared with a $54.9 million loss in FY2015 that included the recognition of a non-cash impairment of goodwill of $198.6 million (approximately 10% of total goodwill). Underlying net profit after tax (NPAT) was $153.1 million for FY2016, down 37.0% on the previous corresponding period.

Aggregated revenue declined by 18.5%, against a backdrop of ongoing declines in market activity. Sustained low commodity prices and the fall in oil prices have resulted in our customers continuing to reduce capital and operating expenditure.

Aggregated revenue declined across all of our business lines and geographies. Our Infrastructure sector performed well with aggregated revenue essentially flat year on year.

We have been taking action since 2013 to reshape the business to align it with market activity. During FY2016, the low oil price and generally subdued commodity prices across the energy and resources sectors resulted in a further contraction of our customers’ capital and operating budgets, project cancellations and deferrals. In that environment, during the financial year we announced a program to reduce our overhead costs by a further $300 million and to strengthen the balance sheet by $300 million. After having taken action to deliver $120 million of annualized savings by February 2016, we commenced the Realize our future transformation program to deliver on our objectives to improve our financial performance. Through this program we achieved a further $80 million of annualized savings taking the total by the end of FY2016 to $200 million of annualized savings.

The actions taken in FY2016 resulted in the recognition of a series of charges related to redundancy, onerous leases, onerous contracts and other restructuring costs in the statutory result.

We now employ 24,500 people and still maintain a presence across 42 countries, compared with 31,400 people across 148 offices at 30 June 2015.

We have secured 85 significant awards this year compared with 105 in FY2015. Backlog at 30 June 2016 is $4.2 billion including $300 million of soft backlog with $2.7 billion relating to FY2017.

Our financial position remains sound with the Company’s gearing ratio at 30 June 2016 of 29.2%, in the middle of the target range of 25% to 35%.

The FY2015 segment result and segment margins shown in sections 1.3.1 and 1.3.2 of this review have been restated to reflect the organization of the Group into four business lines, a change to the allocation of information technology charges and treatment of restructuring expenses and associated changed reporting effective 1 July 2015.

The reconciliation of the underlying earnings before interest and tax (EBIT) and underlying NPAT results to the EBIT and NPAT attributable to members of WorleyParsons Limited is shown in the following table. 

There are three measures that are key to understanding our results: 
  1. Aggregated revenue
  2. EBIT (earnings before interest and tax)
  3. NPAT (net profit after tax) attributable to shareholders.
 
FY2016
$'M
FY2015
$'M
Comments
Movement

1. Aggregated revenue

5,892.9

7,227.5

We define aggregated revenue as:

  • Our revenue and income calculated in accordance with relevant accounting standards;
  • Plus our share of revenue earned by our associates; and
  • less procurement at nil margin, net gain on revaluation of investments previously reported as joint operations and interest income.

Our aggregated revenue decreased by 18.5% in FY2016 when compared with that for FY2015, due to several large projects progressing to completion, while potential new project work was cancelled or deferred.

2. EBIT

128.9

87.1

EBIT means earnings before interest and tax.

Our EBIT increased by 48.0% in FY2016 when compared with that for FY2015, due primarily to the benefit of no impairment charge recurring, but offset by higher restructuring charges in FY2016.

3. NPAT attributable to shareholders

23.5

(54.9)

NPAT means net profit after tax.

Our NPAT increased to $23.5 million in FY2016, compared with a loss of $54.9 million for FY2015, due primarily to the benefit of no impairment charge recurring but offset by higher restructuring charges in FY2016.