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Tellurian Inc.Annual Report 2013
WorleyParsons is a leading provider of professional
services to the resources & energy sectors and complex
process industries.
Our services cover the full asset spectrum both in size
and lifecycle – from the creation of new assets
to services that sustain and enhance operating assets.
OuR VISION
WorleyParsons will be the preferred global provider of technical, project and operational support services to our
customers, using the distinctive WorleyParsons’ culture to create value for them and prosperity for our people.
OuR VALuES
Performance
• Zero harm
Leadership
• Committed, empowered and rewarded people
• Results for our customers and employees
• EcoNomics™ – Delivering profitable sustainability
• Creating wealth for our shareholders
• Integrity in all aspects of business
• World class resources, capability and experience
• Energy and excitement
Relationships
• Rapport with all stakeholders
• Open and respectful
• Collaborative approach to business
• Minimum bureaucracy
Agility
• Smallest assignment to world scale development
• Local capability with global leverage
• Responsive to customer preferences
• Optimum solutions customized to needs
Annual General Meeting
WorleyParsons’ 2013 Annual General Meeting will be held on
Wednesday, 9 October 2013 commencing at 2.00pm (AEDT)
at The Westin Sydney, 1 Martin Place, Sydney.
We have created our 2013 shareholder results microsite,
which offers our 2013 results documents and detailed
information on our business operations.
Visit us online
annualreport2013.worleyparsons.com
Contents
Group Financial Highlights
Chairman’s Review
Global Operations and Significant
Awards for 2013
Business Summary
Chief Executive Officer’s Report
Board of Directors
Operating and Financial Review
Corporate Governance
Corporate Responsibility
Directors’ Report
Remuneration Report
Financial Statements
Shareholder Information
Corporate Information
Glossary
1
2
4
6
10
16
18
25
35
41
46
60
98
100
101
GROUP FINANCIAL
HIGHLIGHTS
FIVE YEAR PERFORMANCE AT A GLANCE
$m
2009
2010
2011
2012
2013
% change
Aggregated revenue1
6,219.4
4,967.1
5,903.5
7,362.6
7,627.0
EBIT
EBIT margin
Net profit after tax
Net profit margin
Cash flow from operations
Return on equity
Basic EPS normalized (cents)2
Basic EPS (cents)
Dividends (cents)
605.3
9.7%
390.5
6.3%
546.4
25.4%
172.8
161.1
93.0
427.4
8.6%
291.1
5.9%
279.6
16.7%
127.9
118.5
75.5
539.9
9.1%
364.2
6.2%
293.8
19.8%
159.4
148.3
86.0
537.9
7.3%
353.2
4.8%
437.5
18.0%
152.7
143.7
91.0
527.0
6.9%
322.1
4.2%
443.5
16.2%
137.8
130.8
92.5
3.6
(2.0)
(8.8)
1.4
(9.8)
(9.0)
1.6
1 Aggregated revenue is defined as statutory revenue and other income plus share of revenue from associates less procurement services revenue at nil margin, interest
income and net gain on revaluation of investments previously accounted for as equity accounted associates. The directors believe the disclosure of revenue attributable
to associates provides additional information in relation to the financial performance of the Group.
2 Before amortization of intangibles including tax effect of amortization expense.
Aggregated revenue
EBIT
Net profit after tax
Cash flow from operations
$7,627.0m
$527.0m
$322.1m
$443.5m
.
.
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The result was earned
on aggregated revenue
of $7,627.0 million, an
increase of 3.6% on the
$7,362.6 million reported in
m
m
2012.
3
3
4
4
4
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,
EBIT for the year was
$527.0 million, a decrease
of 2% on the $537.9 million
(including fair value gains of
$7.6 million) reported in 2012.
The full year result for 2013
was $322.1 million, a decrease
of 8.8% on the $353.2 million
(including fair value gains
of $7.6 million) net profit
reported in 2012.
Cash flow from operations was
$443.5 million, an increase
of 1.4% on the $437.5 million
reported in 2012.
.
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7
WorleyParsons Annual Report 2013 1
$
$
CHAIRMAN’S
REVIEW
The Group reported a solid performance, despite a challenging year, with
strong cash flow, and is well positioned to take advantage of future
opportunities. We are continuing to see good momentum in new contract
wins for the Group across a number of geographies and industries.
WorleyParsons continued to expand its global
footprint, aided by two substantial acquisitions;
being the South African business, TWP, and
Rosenberg in Norway. TWP enables WorleyParsons
to provide its global customers with access to
engineering and project delivery capabilities for
underground mining and precious metals, while the
acquisition of Rosenberg provides WorleyParsons
with an ideal platform to expand its presence in the
fast growing Norwegian Continental Shelf market.
With a network of 165 offices, WorleyParsons
is one of the most global companies in our
international peer group. This global diversification
has been an important factor in the ability of
WorleyParsons to offset challenging conditions
in a number of key markets, particularly South
Africa and Western Australia, by capitalizing on
opportunities in better performing markets.
We have been pleased by the strong performance
by our Chemicals sector, and by the continuing
strength of our Hydrocarbons sector, particularly in
Australia and the Improve market in Canada.
The Group reported net profit after tax of
$322 million, down 7% on our 2012 underlying
result. Even in the current market conditions,
the Company delivered a solid performance. It
is pleasing to note that the Group delivered a
strong operating cash flow of $444 million. Margin
performance remains a concern, particularly in the
Power and Infrastructure & Environment sectors.
The Board has resolved to pay a final dividend of
51.0 cents per share unfranked, taking the total
dividend for the year to 92.5 cents per share, up
2% from 91 cents last year.
As the 2013 financial result was below the
threshold for vesting, no combined incentive will
be awarded to Executives. Non–Executive Director
fees and Executive fixed pay and remuneration
structure have been reviewed on both an
Australian and global basis, but will not increase
in 2014.
Health, Safety and Environment
There is nothing more important to WorleyParsons
than the safety of our people. To this end, the
Board and Management continue to strive to
achieve the goal of Zero Harm across all countries
in which we operate.
During the period, the Health, Safety and
Environment Committee of the Board commenced
meeting. This Committee, chaired by Dr Haynes,
has been responsible for making recommendations
to the Board on issues such as the Group’s
performance with respect to health, safety and
the environment and the effectiveness of the
resources and processes that the Group uses to
manage risks in these areas. To provide visible
leadership in this area, there has been an increase
in the number of visits made to WorleyParsons’
sites by both members of the Board and by senior
members of the leadership team.
People
We have always been, and remain, fundamentally
a people business, we rely on our people to meet
our customers’ needs. Our people continue to grow
and adapt to respond to the changing needs of
our customers and the dynamics of our markets.
By retaining a deep focus on our people and our
culture we continue to serve our customers and
respond to our markets in challenging times.
Central to our People strategy is our empowered
and entrepreneurial spirit and our local/global
organizational model. It is inspiring to hear
stories of our people achieving extraordinary
results through their technical expertise, focus
on customer relationships and passion for
collaboration. This combination of culture and
capability augurs well for even greater success for
WorleyParsons in the future.
I would like to express the Board’s appreciation and
admiration for the commitment and contribution to
WorleyParsons by our people over this past year.
2 WorleyParsons Annual Report 2013
In February this year I was honoured to accept
the invitation of the non-executive directors to
re-join the WorleyParsons Board as non-executive
Chairman. In doing so, I took over as Chairman
from Ron McNeilly, who has been a member of the
WorleyParsons Board since November 2002 and
Chairman since November 2004. Ron continues to
serve on the Board as the Deputy Chairman and
Lead Independent Director.
I would like to acknowledge the outstanding job
that Ron has done as Chairman over the past 9
years. I look forward to continuing to work with
Ron and am confident that the Company will
continue to benefit from his knowledge and insight.
Conclusion
I would like to thank the WorleyParsons leadership
team, and my fellow directors, for their excellent
work in what has been a challenging year for
WorleyParsons. I believe that the hard work that
has been done over this period means that the
Group is well positioned to take advantage of the
growth opportunities that we continue to see in
the market.
John Grill
Chairman and
Non-Executive Director
Ethics and Corporate Responsibility
The Board recognises that WorleyParsons’
reputation for honesty, integrity and ethical
dealings is one of its key business assets and a
critical factor in ensuring the Company’s continued
success. All of WorleyParsons’ people continue to
strive to maintain the standard of ethical behaviour
expected by our people, customers, suppliers
and shareholders.
During the period the Company has issued an
updated Code of Conduct that emphasizes the
importance of a culture in which ethical issues
and concerns can be discussed freely and openly
without any fear of retribution. The Company
has also acted to ensure that those who we
engage with, or partner with in business, share
WorleyParsons’ ethical values and act in accordance
with those values.
The Company continues to refine its corporate
responsibility efforts across all the parts of
the world in which we do business, in an effort
to ensure that our programs are as effective
and efficient as possible in delivering value to
the communities we support. The Corporate
Responsibility section of this Annual Report
provides greater detail on these activities.
Corporate Governance
The Board remains confident that the Company has
in place a strong corporate governance system, and
that this system is well maintained, reviewed and
updated. Our governance policies and procedures
are benchmarked against other comparable
companies to ensure that the appropriate
standards are maintained.
The Group maintains a comprehensive,
independent, internal audit program that reports
directly to the Audit and Risk Committee. This
function not only focuses on specific areas of
interest, but provides an annual assurance to the
Audit and Risk Committee of the adequacy and
effectiveness of the Group’s internal controls.
Board and management changes
On 23 October 2012 Andrew Wood took up the
position of Chief Executive Officer, and became a
member of the WorleyParsons Board. I have been
very pleased with the leadership that Andrew has
provided to the Group in these challenging times
and would also like to acknowledge the exceptional
support that Andrew continues to receive from his
leadership team.
WorleyParsons Annual Report 2013 3
GLOBAL OPERATIONS &
SIGNIFICANT AWARDS
FOR 2013
United States Anchorage
18
15
14
13
11
8
17
10
23
1
21
20 19
3
4
16
2
5
2 5 4
1 3
6 8
9 10 11
12 13
6
12
22
9
7
7
14
Local Office
Global Hub
Kitimat
Grande
Prairie
Burnaby
Victoria
Richland
Vancouver, WA
Bellevue
Portland
Seattle
Sacramento
Azusa
Arcadia
Fountain Valley
Fort McMurray
Cold Lake
Fort St John
Edmonton
Lloydminster
Canada
Blackfalds
Calgary
Billings
Saskatoon
Bismarck
Markham
Sarnia
Chicoutimi
Trois-Riviere
Sudbury
Tiverton
Alma
Fermont
Quebec City
Sept-lles
Montreal
Brossard
Farnham
Mississauga
Denver
Phoenix
Tulsa
Dallas
Nanticoke
Reading
Philadelphia
Chattanooga
Monrovia
Houston
Bayport
St. John's
United Kingdom
Norway Stavanger
Aberdeen
Manchester
Teesside
London
Leeds
Gloucester
Farnborough
Bristol
Woking
Netherlands Delft
Czech Republic Plzen
Russia Moscow
Poland Warsaw
Kazakhstan Aksay
Spain Madrid
Bulgaria Sofia
Bulgaria Stara Zagora
Turkey Istanbul
Kazakhstan Astana
Kazakhstan Tengiz
Kazakhstan Almaty
Kazakhstan Atyrau
Kazakhstan Aktau
Uzbekistan Tashkent
Libya Tripoli
Egypt Cairo
Saudi Arabia Al Khobar
Saudi Arabia Yanbu
Saudi Arabia Riyadh
Iraq Basrah
Kuwait Ahmadi
Bahrain Manama
UAE Dubai
Oman Muscat
Qatar Doha
Oman Sohar
UAE Abu Dhabi
Vietnam Hanoi
India Mumbai
India Hyderabad
HYDROCARBONS
Chevron
FEED for the Rosebank field
BP Iraq NV, PetroChina
and the State Oil
Marketing Organisation
of the Republic of Iraq
Saudi Arabian Oil
Company
LukOil Mid-East Limited
Maersk
Singapore LNG
Corporation
Pte Ltd
CNOOC and Shell
Petrochemicals
Company Limited
Canadian National
Resources Limited
Inpex
Talisman
Husky
Engineering, procurement and
management services for the
Rumaila oilfield
General engineering and project
management service contract
Project management, technical
and construction supervision
services.
Detailed design of Phase 2 with
NIPIneftegas
Expansion of the LNG Terminal
send out and storage capacities
Detail design, site engineering
services and home office
engineering services.
Engineering services, bitumen
production department
Integrity and maintenance
contract
EPMS
Engineering and procurement
ConocoPhillips
Engineering services
Suncor
Suncor
Talisman
Shell
Suncor Energy, Total
E&P Canada Ltd. and
Teck Resources Ltd.
Total
19
Maersk
Saudi Arabian Oil
Company
Samsung Heavy
Industries
Chevron
EP on SSP Firebag Plant 91,92
and 93
EP on SSP Base Plant
Engineering and procurement
Project management, technical
and construction services
Detailed engineering services
for the Fort Hills Oil Sands
Project
Significant change order for
Joslyn North Mine Extraction
Project
General Design Contract for
engineering support to the
offshore asset
Engineering and project
management services for
offshore green and brownfields
projects
Detailed design and engineering
for the topsides process
modules of the Total Egina
FPSO vessel
Brownfield engineering services
Addax Petroleum
Global alliance agreement
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
20
21
22
23
4 WorleyParsons Annual Report 2013
17 7
19
17
15
34
28 32
Trinidad & Tobago
Port of Spain
Colombia Bogota
MINERALS, METALS & CHEMICALS
BHP Biliton
Project management and engineering
services for the Escondida Mine
Peru Lima
Brazil Altamira
Brazil Itaituba
Brazil Brasilia
Chile Calama
Chile Santiago
Brazil Bauru
Brazil Araçatuba
Brazil Belo Horizonte
Brazil Rio de Janeiro
Brazil Sao Paulo
10
8
20
30
10
27
5
1
8
7
25
33
24
Pacific Aluminium
Pipeline and gas conversion
Ma’aden Phosphate
Improve services
Emirates Aluminium
PMC services
Votorantim Metals
Detailed engineering services
Nyrstar
Replacement study for sinter plant
Ressources d’Arriane
Feasibility services
Alderon Iron Ore
Corporation
Preliminary engineering services for
Alderon Kami Iron Ore Project
Dynasol
EPCM
Potash Corporation of
Saskatchewan
Underground expansion construction
management
MEC Global
Invista
Momentive
Honeywell
Production of Ingot/Wafers for Solar Cells
Engineering services
Basic engineering package and
preliminary design package
EPCM
Stepan Chemical
Chemicals plant sustaining capital EPCM
Newcrest
Xstrata
EPCM
Master services agreement
Ma'aden Phosphate
Engineering services
Boyne Smelters
EPCM
BASF
BASF
BASF
BASF
Front end engineering for EOCG plant
Front end engineering for NPG plant
FEED for the greenfield resin plant
Front end engineering
Anglo American
Companhia Siderúrgica
Nacional
First Quantum Metals Ltd
PFS for expansion of Phosphate
Fertilizer Plants
Scoping study for the expansion of the
Casa de Pedra Mine
Kansanshi Copper Smelter Project
Noranda Jamaica Bauxite
Partners
Celanese
St. Ann’s Bauxite Production and Export
Improvement Program
EPCM
PT Vale Indonesia
Indonesian growth project
Vale
BHP Billiton
Sasol
Vale
Iowa Fertilizer Company
Overflow engineering services
Olympic Dam Definition Phase Study for
the Acid Plant Expansion
Integrated program management team
services for the FEED phase
Detailed design of the ore processing
facilities
Technical PMC and detailed design
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
Nigeria Lagos
Ghana Accra
Angola Luanda
11
18
4
18
11
3
Mozambique Maputo
Namibia Swakopmund
Namibia Windhoek
Kimberley
Bloemfontein
Cape Town
Polokwane
Pretoria
Johannesburg
Secunda
Durban
East London
Port Elizabeth
South Africa
26
Mongolia Ulaanbaatar
China
Beijing
Tianjin
Shenyang
Nanjing
Chengdu
Shanghai
Hong Kong
Shenzhen
Thailand Bangkok
Thailand Sriracha
India Chennai
Kuantan
Kerteh
Malacca
Kuala Lumpur
Vietnam Ho Chi Minh City
Brunei Kuala Belait
Kota Kinabalu
Malaysia
Duri
Miri
Bintulu
Indonesia Balikpapan
Indonesia Jakarta
Darwin
Australia
Adelaide
Townsville
Mackay
Gladstone
Brisbane
Singleton
Newcastle
Sydney
Geelong
Melbourne
New Caledonia Noumea
Auckland
Blenheim
New Plymouth
Hastings
Wellington
Christchurch
New Zealand
Port Hedland
Perth
Bunbury
1
2
6
9
12
13
14
15
16
12
29
14
9
22
23
31
13
21
20
2 6
16
19
18
15
14
13
11
8
17
10
23
1
21
20 19
3
4
16
2
5
2 5 4
1 3
6 8
9 10 11
12 13
United Kingdom
Norway Stavanger
Aberdeen
Manchester
Teesside
London
Leeds
Gloucester
Netherlands Delft
Poland Warsaw
Russia Moscow
Kazakhstan Aksay
St. John's
Farnborough
Bristol
Woking
Czech Republic Plzen
Kazakhstan Atyrau
Spain Madrid
Bulgaria Sofia
Bulgaria Stara Zagora
Turkey Istanbul
Kazakhstan Aktau
Uzbekistan Tashkent
Kazakhstan Astana
Kazakhstan Tengiz
Kazakhstan Almaty
United States Anchorage
Local Office
Global Hub
Kitimat
Grande
Prairie
Burnaby
Victoria
Richland
Vancouver, WA
Bellevue
Portland
Seattle
Sacramento
Azusa
Arcadia
Fountain Valley
Monrovia
Fort McMurray
Cold Lake
Fort St John
Edmonton
Lloydminster
Canada
Saskatoon
Bismarck
Markham
Sarnia
Blackfalds
Calgary
Billings
Chicoutimi
Trois-Riviere
Sudbury
Tiverton
Alma
Fermont
Quebec City
Sept-lles
Montreal
Brossard
Farnham
Denver
Phoenix
Tulsa
Dallas
Mississauga
Nanticoke
Reading
Philadelphia
Chattanooga
Houston
Bayport
6
12
22
9
7
7
14
Mongolia Ulaanbaatar
China
Beijing
Tianjin
Shenyang
Nanjing
Chengdu
Shanghai
Libya Tripoli
Egypt Cairo
Saudi Arabia Al Khobar
Saudi Arabia Yanbu
Saudi Arabia Riyadh
Iraq Basrah
Kuwait Ahmadi
Bahrain Manama
UAE Dubai
Oman Muscat
Qatar Doha
Oman Sohar
UAE Abu Dhabi
17 7
19
17
15
34
28 32
Trinidad & Tobago
Port of Spain
Colombia Bogota
Brazil Altamira
Brazil Itaituba
Peru Lima
Brazil Brasilia
Nigeria Lagos
Ghana Accra
Angola Luanda
Chile Calama
Chile Santiago
Brazil Bauru
Brazil Araçatuba
Brazil Belo Horizonte
Brazil Rio de Janeiro
Brazil Sao Paulo
Namibia Swakopmund
Namibia Windhoek
Kimberley
Bloemfontein
Cape Town
11
18
4
18
11
3
Mozambique Maputo
Polokwane
Pretoria
Johannesburg
Secunda
Durban
East London
Port Elizabeth
South Africa
26
10
8
20
INFRASTRUCTURE & ENVIRONMENT
India Mumbai
Vietnam Hanoi
Hong Kong
Shenzhen
India Hyderabad
India Chennai
Kuantan
Kerteh
Malacca
Kuala Lumpur
Thailand Bangkok
Thailand Sriracha
Vietnam Ho Chi Minh City
Malaysia
Duri
Brunei Kuala Belait
Kota Kinabalu
Miri
Bintulu
Indonesia Balikpapan
Indonesia Jakarta
30
10
27
5
1
8
7
25
33
24
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Chevron
Woodside
BP
BP
Tullow Oil
Water Corporation
Alderon Mining
Consórcio Complexo Tapajós
Caltex
Ecopetrol
Environmental panel contract
Environmental services panel
Lighthouse – global remediation
management framework agreement
Atlas – global remediation management
contract
Environment, Safety and Health Impact
Assessment (ESHIA) Global Framework
Infrastructure panel contract
Rail and terminal expansion
pre-feasibility
Environmental impact assessment for Sao
Luiz do Tapajos dam
Kurnell port and berthing project
Refineria del Pacifico port and marine
pre-FEED
Wafra Joint Operations
Integrated master plan
Rio Tinto
Enbridge
Chevron
Koodaiderie hydrology studies
Remediation program
Onslow water infrastructure upgrade project
Australia Pacific LNG
Receiving environment monitoring program
Government of Timor-Leste
Tasi Mane Project
Port of Los Angeles
Contaminated soil remediation
ASTAD Project Management/
Economic Zone Company
Master planning and engineering consultancy
BP
Windmill framework agreement
Norte Energia S.A
Coordinate and deploy environmental socio-
economic plans for Belo Monte Hydroelectric
Power Plant
Darwin
Australia
Adelaide
Townsville
Mackay
Gladstone
Brisbane
Singleton
Newcastle
Sydney
Geelong
Melbourne
Blenheim
New Zealand
12
29
14
9
22
2 6
16
19
New Caledonia Noumea
Auckland
New Plymouth
Hastings
Wellington
Christchurch
Port Hedland
Perth
Bunbury
1
2
6
9
12
13
14
15
16
31
13
23
21
20
POWER
1
2
3
4
5
6
7
8
9
10
11
12
13
14
US Government - Department of Energy
(DOE) - National Nuclear Security
Administration (NNSA)
Technical and engineering services
Los Angeles Department of
Water and Power
Owners engineering services for repowering
projects
Calpine Corporation
Alliance engineering services
Arizona Public Service
Alliance engineering services
Southern California Edison
Owner's engineering and design services,
provision of techical support of electrical
transmission and distribution systems
Tennessee Valley Authority
Plant outage and support
Fortescue Metals Group
Southern Co
Polska Arupa Energetyczna
Solomon Mine Power Station
operations and maintenance
Detailed engineering
Site characterization and licensing/permitting
services
Kozlody Nuclear Power Plant
Operational safety review
Akkuyu NGS Elektrik Üretim Anonim
Sirketi
Consultancy services for Akkuyu Nuclear
Power Plant
Saudi Electric Company
Master services agreement
Saudi Electricity Company
Integrated EPCM services contract
BHP Billiton
Operations and maintenance
WorleyParsons Annual Report 2013 5
BUSINESS
SUMMARY
HYDROCARBONS
We deliver a range of services to the hydrocarbons
market. Those services span the upstream,
mid-stream and downstream sectors, from early
conceptual studies to the execution of mega
projects, and include asset management and
enhancement programs.
Performance overview
Future
We are encouraged by the growth in the US gas, downstream
and petrochemicals market, opportunities in Norway and in the
developing world. Potential market slowdown in Australia is
expected to be offset by our continued global growth.
The continued global diversification, together with ongoing
strengthening of key customer relationships, gives us
confidence that the Hydrocarbons sector will continue to grow
in the medium and long term.
We expect improved earnings for the Hydrocarbons sector in
FY2014.
The Hydrocarbons sector reported aggregated revenue
of $5,344 million, an increase of 7% from the previous
corresponding period. Hydrocarbons’ contribution to the
Group’s aggregated revenue was 70%. Segment EBIT was
$634 million with a reported segment margin of 11.9%
(FY2012: EBIT $598 million; margin 11.9%). The Hydrocarbons
sector grew in both revenue and EBIT. The professional
services margin within the sector improved from 12.3%
to 13.1%.
Growth in the Hydrocarbons sector was underpinned by an
increase in average customer capital expenditure during
FY2013 when compared with that for FY2012, with continued
demand for oil and gas and robust commodity prices creating
favorable market conditions. WorleyParsons’ exposure to
the downstream petrochemicals market increased with new
projects awarded in FY2013, including the Integrated Program
Management Team project for Sasol in the United States.
The acquisition of Bergen Group Rosenberg AG with effect
from January 2013 complements and extends WorleyParsons’
current hydrocarbons services offering and provides access to
the Norwegian Continental Shelf offshore oil and gas market.
Aggregated
Revenue
Contribution to Group
aggregated revenue
$m
Growth%
2013
5,344.3
2012
5,015.1
2011
4,043.9
6.6
24.0
18.1
%
70
68
68
6 WorleyParsons Annual Report 2013
EBIT
$m
Growth%
633.7
598.4
554.3
5.9
8.0
10.5
EBIT
Margin
%
11.9
11.9
13.7
AGGREGATED REVENUE
$5,344.3m
$5,015.1m
$4,043.9m
$561.3m
$581.3m
$513.7m
2013
2012
2011
2013
2012
2011
2013
2012
2011
2013
2012
2011
$937.6m
$895.4m
$643.8m
$783.8m
$870.8m
$702.1m
2013
2012
2011
$937.6m
$895.4m
$643.8m
m
3
.
4
4
3
,
5
$
m
1
.
5
1
0
,
5
$
m
9
.
3
4
0
,
4
$
m
6
.
7
3
9
$
m
4
.
5
9
8
$
m
8
.
3
4
6
$
m
3
.
1
8
5
$
m
3
.
1
6
5
$
m
7
.
3
1
5
$
m
8
.
0
7
8
$
m
8
.
3
8
7
$
m
1
.
2
0
7
$
MINERALS, METALS
& CHEMICALS
We deliver a range of services to the minerals,
metals and chemicals markets, encompassing
alumina, base metals, precious metals, coal, iron
ore and chemicals. The services we offer include
preparing conceptual and feasibility studies, front–end
engineering design, project–delivery services and
Improve services.
Performance overview
The Minerals, Metals & Chemicals sector reported aggregated
revenue of $938 million, an increase of 5% from the
previous corresponding period. Minerals, Metals & Chemicals’
contribution to the Group’s aggregated revenue was 12%.
Segment EBIT was $136 million with a reported segment
margin of 14.5% (FY2012: EBIT $134 million; margin 15.0%).
The performance of the Minerals, Metals & Chemicals sector
was underpinned by the strength of the global chemicals
market, notwithstanding a significant slowdown of investment
in major capital projects by our minerals and metals customers
over the period, particularly in Western Australia.
The current market dynamics have seen our mining customers
looking for improvements in efficiency and cost of production,
particularly in mature, high cost regions. This has resulted in a
greater emphasis on sustaining capital activities. To assist our
customers with these activities, we are continuing the ongoing
development of our Improve offering.
The acquisition of TWP Holdings Proprietary Ltd in March 2013
has further increased the geographic reach of WorleyParsons’
Minerals, Metals & Chemicals sector and enables us to offer our
customers project delivery capabilities for underground mining
and precious metals.
Future
We will continue to globalize our Minerals, Metals & Chemicals
offering and develop our long term relationships with major
customers. We expect that asset optimization will continue
to be a key concern in the year ahead. Project activity will
predominantly be in early phase study work.
The global chemicals market continues to support strong
investment in new developments and provides a high growth
opportunity for WorleyParsons. We will continue to directly
address this market particularly in the Middle East and the
US, leveraging our strength in China, to benefit our customers
across the globe.
We expect improved earnings in the Minerals, Metals &
Chemicals sector in FY2014.
Aggregated Revenue
$m
Growth%
2013
937.6
2012
895.4
2011
643.8
4.7
39.1
14.5
Contribution to Group
aggregated revenue
EBIT
EBIT
Margin
AGGREGATED REVENUE
%
12
12
11
2013
$m
Growth%
$5,344.3m
%
2012
135.5
1.1
$5,015.1m
14.5
2011
134.1
30.6
$4,043.9m
15.0
102.7
(2.9)
16.0
2013
2012
2011
$561.3m
$581.3m
$513.7m
2013
2012
2011
2013
2012
2011
$937.6m
$895.4m
$643.8m
2013
2012
2011
$937.6m
$895.4m
$643.8m
WorleyParsons Annual Report 2013 7
$783.8m
$870.8m
$702.1m
m
3
.
4
4
3
,
5
$
m
1
.
5
1
0
,
5
$
m
9
.
3
4
0
,
4
$
m
6
.
7
3
9
$
m
4
.
5
9
8
$
m
8
.
3
4
6
$
m
3
.
1
8
5
$
m
3
.
1
6
5
$
m
7
.
3
1
5
$
m
8
.
0
7
8
$
m
8
.
3
8
7
$
m
1
.
2
0
7
$
BUSINESS SUMMARY CONTINUED
INFRASTRUCTURE &
ENVIRONMENT
Our Infrastructure & Environment sector offers a range
of services in water, environment, transport, ports and
marine terminals, restoration, geosciences, master
planning and advanced analysis. When providing
those services, we manage approvals, stakeholder
engagement, project delivery, logistics, cost and
schedule for our customers.
Performance overview
The Infrastructure & Environment sector reported aggregated
revenue of $784 million, a decrease of 10% from the previous
corresponding period. Infrastructure & Environment’s
contribution to the Group’s aggregated revenue was 10%.
Segment EBIT was $86 million with a reported segment
margin of 11.0% (FY2012: EBIT $118 million; margin 13.6%).
The performance of the Infrastructure & Environment sector
was adversely impacted by the downturn in the Australian
resources sector and the South African government sector.
Given the adverse markets in Australia and South Africa,
it is pleasing that we secured Improve opportunities with
government, resource and energy customers. We have
delivered environment and water services to unconventional
oil and gas customers and expanded our geographic footprint
by delivering restoration services under several global
services agreements.
Future
The growth of unconventional oil and gas globally offers
significant opportunity as customers seek an integrated
approach to environment, community and water management.
Resource infrastructure has a strong outlook in Sub-Saharan
Africa and Latin America, particularly relating to significant gas
discoveries in East Africa and mineral developments in Latin
America. Our Restoration offering is positioned to service our
customers’ growing need for support in liability management
and remediation, demolition and decommissioning and
resilience preparedness across their asset portfolios.
We expect improved earnings in the Infrastructure &
Environment sector in FY2014.
2013
2012
2011
$5,344.3m
$5,015.1m
$4,043.9m
Contribution to Group
aggregated revenue
EBIT
%
10
12
12
$m
Growth%
2013
85.9
2012
118.4
2011
101.0
$561.3m
(27.4)
$581.3m
17.2
$513.7m
25.5
EBIT
Margin
%
11.0
13.6
14.4
2013
2012
2011
2013
2012
2011
$937.6m
$895.4m
$643.8m
AGGREGATED REVENUE
$783.8m
$870.8m
$702.1m
Aggregated Revenue
$m
Growth%
2013
783.8
(10.0)
2012
870.8
2011
702.1
24.0
49.4
8 WorleyParsons Annual Report 2013
2013
2012
2011
$937.6m
$895.4m
$643.8m
m
3
.
4
4
3
,
5
$
m
1
.
5
1
0
,
5
$
m
9
.
3
4
0
,
4
$
m
6
.
7
3
9
$
m
4
.
5
9
8
$
m
8
.
3
4
6
$
m
3
.
1
8
5
$
m
3
.
1
6
5
$
m
7
.
3
1
5
$
m
8
.
0
7
8
$
m
8
.
3
8
7
$
m
1
.
2
0
7
$
POWER
We offer a range of services across the power
generation, transmission and distribution value chain,
from conventional technologies such as fossil fuel
and nuclear power generation through to renewable
energy and advanced coal-fired generation and smart
grid transmission and distribution. We work with our
customers on all stages of the asset lifecycle, including
early planning, project delivery, facility start-up and
asset management, operation and maintenance.
Performance overview
Future
The Power sector reported aggregated revenue of
$561 million, a decrease of 3% on the previous corresponding
period. Segment EBIT was $49 million with a reported segment
margin of 8.8% (FY2012: EBIT $61 million; margin 10.6%)
Our Power sector performance was materially impacted by
impacted by increased costs on a lump sum procurement
project in Brazil and the cancellation of a key project in both
Europe and Canada.
Our customers in the developed world have been engaging
in asset improvement, while our customers in the
developing world have been building new generation and
network capacity.
In the United States, Australia and Canada, we provided a
range of Improve services in assets optimization and operation
and maintenance, such as for the Tennessee Valley Authority
in the United States.
In the developing world, WorleyParsons was awarded a
number of projects in nuclear, conventional power generation
and networks.
While there is some uncertainty in the global economy, we
expect to continue to grow our support to resource and
industry customers leveraging our Hydrocarbons and Minerals,
Metals & Chemicals customer sector groups. In the developing
world we expect demand for new capacity to continue to
provide opportunities in power generation and networks.
We anticipate further demand for our services in the nuclear
sector, given the expected expansion of nuclear programs
in developing countries and increases in safety upgrades to
existing reactors.
In order to strengthen our service offering to resource
customers, we are combining our Power and Infrastructure &
Environment sectors into a single customer sector group.
We expect improved earnings in the Power sector and the
combined group in FY2014.
Aggregated
Revenue
Contribution to Group
aggregated revenue
$m
Growth%
2013
561.3
(3.4)
2012
581.3
2011
513.7
13.2
0.8
%
8
8
9
EBIT
$m
Growth%
49.4
61.4
65.3
(19.5)
(6.0)
12.2
EBIT
Margin
%
8.8
10.6
12.7
2013
2012
2011
2013
2012
2011
$5,344.3m
$5,015.1m
$4,043.9m
AGGREGATED REVENUE
$561.3m
$581.3m
$513.7m
2013
2012
2011
2013
2012
2011
$937.6m
$895.4m
$643.8m
$783.8m
$870.8m
$702.1m
WorleyParsons Annual Report 2013 9
2013
2012
2011
$937.6m
$895.4m
$643.8m
m
3
.
4
4
3
,
5
$
m
1
.
5
1
0
,
5
$
m
9
.
3
4
0
,
4
$
m
6
.
7
3
9
$
m
4
.
5
9
8
$
m
8
.
3
4
6
$
m
3
.
1
8
5
$
m
3
.
1
6
5
$
m
7
.
3
1
5
$
m
8
.
0
7
8
$
m
8
.
3
8
7
$
m
1
.
2
0
7
$
CHIEF EXECUTIVE
OFFICER’S REPORT
Iain Ross
Randy Karren
Barry Bloch
David Steele
Stuart Bradie
Andrew Wood
Group Managing
Director - Improve
Group Managing
Director - People
Randy is responsible
for the strategy
and growth of our
Improve business
across all customer
sector groups.
Barry is responsible
for leading the
delivery of all
People-related
services and
support across the
Group.
Group Managing
Director –
Development
Iain is responsible
for Strategy for
the Group, leading
the customer
sector groups,
mergers and
acquisitions,
investor relations
and innovation
incubation.
Group Managing
Director -
New Ventures
From 1 July
2013, David is
responsible for the
establishment and
ongoing operation of
a small group set
up to successfully
launch new business
for WorleyParsons,
and responsible
for information
management within
the Company.
Group Managing
Director - Operations
Chief Executive
Officer
Stuart is responsible
for leading the
Group’s global
operations with
a focus on our
customers and
locations.
Andrew was
appointed as
Chief Executive
Officer effective
23 October 2012.
With tenure of
19 years with
WorleyParsons,
and over 30 years’
experience in the
resources and
energy industry.
10 WorleyParsons Annual Report 2013
The 2013 financial year saw challenging conditions for our industry in a
number of our key markets. However, the geographic and sector diversification
of WorleyParsons’ operations enabled us to largely offset these challenges
and allowed us to deliver what we believe is a solid financial result.
Introduction – highlights
The Hydrocarbons sector has continued to grow
both revenue and EBIT, with good results coming
from Australia, the US gas and downstream market
and the Improve sector in Canada. The second half
did see lower demand and higher costs adversely
impacting WorleyParsonsCord, the Group’s Canadian
construction and fabrication business. Even with
the significant downturn in the Western Australia
market, the Minerals, Metals & Chemicals sector still
delivered overall growth. This growth has occurred
largely in the chemicals market in locations such as
China, Brazil and the US.
The reduced demand for the Group’s resource
infrastructure services, particularly in the once
buoyant Western Australia market impacted the
Group’s Infrastructure & Environment sector. This
sector was also adversely impacted by a reduction
in Government spending in South Africa and the US.
The Power sector was impacted by the cancellation
of a key project in both Europe and Canada
and increased material costs on a substantially
complete lump sum procurement project in Brazil.
The Group’s decline in earnings has been further
impacted by restructuring costs incurred as a result
of a reduction in the number of people we employ.
We have approximately 39,800 people operating
out of 165 offices across 43 countries, 87% of
whom are based outside Australia, which is a
testament to the success of our strategic global
expansion over many years.
The Group made two acquisitions during the period,
being the TWP business in South Africa and the
Rosenberg business in Norway. These acquisitions
demonstrate the Group’s commitment to not
only growing organically but also via strategic
acquisitions.
We were pleased to be ranked the number one
international design firm by Engineering News
Record for the year ended 31 December 2012.
For customers in each of our sectors, we provide
Consult, Deliver, Improve and Advisory services.
Our Consulting Practices provide technical
consulting services to customers across all of
our sectors. While we have seen some impact on
this business from project delays in places such
as Western Australia, we believe that they will
increasingly play a key role in enabling the Group to
respond to our customer’s needs and provide entry
points into new markets.
Project Delivery remains at the heart of our
business, and demand for these services remains
robust in most parts of the world. During the
period we continued to see the impacts of the
Group’s change in product mix. As we continue our
move toward a full project delivery organization,
we have seen an increase in reimbursable EPC work
including a significant increase in procurement
at nil margin and an increase in revenue from
construction activities.
Improve continues to be an important part of our
strategy going forward. We expect an increased
demand for our Improve services driven by a
global trend of aging assets, greater regulatory
requirements and new assets coming on line.
There is increasing demand for the project and
business solutions provided by our Advisory
services to customers who develop, operate and
maintain physical assets in the infrastructure and
resources sectors.
We put the customer at the center of everything
that we do and to reflect this we have reorganized
our Customer Sector Group (“CSG”) structure.
We have combined the existing Power and
Infrastructure & Environment groups into a
single CSG, to be referred to in the future as
‘Infrastructure’. These changes will enable us to
better meet the continuing needs of our customers
both locally and globally.
We are constantly challenging ourselves to develop
new opportunities for growth and, to this end, have
formed a ‘New Ventures’ group, led by David Steele,
responsible for exploring opportunities that are
aligned with but additional to our traditional areas
of activity.
WorleyParsons Annual Report 2013 11
CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
Screens
from our
Road Safety
Initiative
awareness
videos.
In further developing the Local/global model we
have sought to ensure that the Group structure is
efficient but flexible enough to meet the changing
demands of our customers. This has driven a
number of initiatives including the combining of
regions and the re-alignment of CSGs described
above, resulting in a reduction in overheads in
the second half. In addition, we have refined our
business development efforts to focus not just on
winning work, but on winning work that we can
execute well and that will provide good outcomes
for both the customer and for WorleyParsons.
While there is more work to be done in some of
these areas, we believe that the Group is in good
shape to take advantage of the opportunities that
are in front of us.
As we move into FY2014, we are continuing to
see some uncertainty in the markets for our
services and many customers still have expenditure
constraints. Our key resource customers are
increasingly looking for a smaller number of
suppliers, and for suppliers who can meet their
needs both locally and globally. We believe that
the geographic diversity of WorleyParsons, as well
as our continued emphasis on key global customer
relationships, will mean that we remain well placed
to continue to service these customers.
12 WorleyParsons Annual Report 2013
Safety performance
Travel remains one of the most hazardous
activities for our people. As signatories to the UN
Decade of Action for Road Safety, we continued
our Group-wide emphasis on road safety this
year which included the introduction of new
requirements for driver training, vehicle standards
and journey management. In addition, we are
taking actions to drive a step-change in our on-site
safety performance.
WorleyParsons uses the United States Occupational
Safety and Health Administration reporting
protocol for our global operations, including the
calculation of our Total Recordable Case Frequency
Rate (“TRCFR”) and Lost Workday Case Frequency
Rate (“LWCFR”).
The TRCFR for our personnel for the FY2013 was
0.13 (0.12 in FY2012) and the LWCFR was 0.03
which was the same as last year. We continue
to strive to improve the safe performance of
our work, both in field and office environments.
While the TRCFR for our own personnel was flat,
we are pleased that there has been an almost
20% reduction in the TRCFR for combined
WorleyParsons personnel and our contractors for
whom we are responsible.
People
Our people are the fundamental reason why we
have been able to respond successfully to volatile
markets in the past financial year. We have had to
make some very difficult people decisions in some
of our locations. This has been done with care and
respect but was necessary to ensure that these
locations remain sustainable and profitable for the
long term.
I am pleased that our people’s wide range of skills
and expertise, spread across so many countries
and offices, has enabled us to respond quickly and
competently to our customers’ changing needs.
I am appreciative of all of our people who continue
to provide support and commitment to both their
customers and to WorleyParsons. I welcome the
many people who have joined our organization,
both in our growing locations and through the
acquisitions of TWP in Africa and Latin America
and Rosenberg in Norway.
Our people and our culture remain two of the
fundamental competitive differentiators for
WorleyParsons.
Management changes
During the period Randy Karren was appointed to
the Executive Committee with responsibility for the
Group’s Improve activities. Randy was formerly the
Managing Director of our Canadian operations and
his appointment reinforces our commitment to the
growth of our Improve offering.
On my taking up of the Chief Executive Officer role,
Simon Holt took up the position of Chief Financial
Officer. Simon had previously been the Deputy
Chief Financial Officer and had led many of the
significant improvements in the Group’s finance
function over the past seven years. He will be
joining the Executive Committee from September.
Financial performance
After excluding for fair value gains on acquisition
of associates in FY2012, aggregated revenue of
$7,627 million was up 4% on the prior year. EBIT of
$527 million was down 1% against the prior year,
while NPAT of $322 million was down 7% and in
line with guidance. The EBIT margin of 6.9% was
down from 7.2% in the prior period. EBIT margin
rose from 6.5% in the first half to 7.3% in the
second half.
Operating cash flow for the period was $444
million, compared to $438 million in the previous
corresponding period. The Group invested $347
million in the business in FY2013 (FY2012: $106
million) for acquisitions, property, plant and
equipment and computer software. Our balance
sheet metrics remain strong. The Group’s gearing
ratio at 30 June 2013 was 25% and cash interest
cover remains high at 10.6 times.
The effective tax rate for the half year was 27.3%
being higher than the tax rate for the previous
corresponding period of 24.1%. The previous
year’s tax rate was favorably impacted by a refund
received in Canada.
Exchange rate movements in the year to 30 June
2013 compared to FY2012 had a favorable impact
on net profit of only approximately $3m. The
contribution from associates represented 7% of the
Group’s net profit for the year (FY2012: 8%).
The Chief Executive Officer’s
Committee (CEOC) acts as an advisory
group to the CEO and Executive
Committee. The CEOC comprises
the leaders of our regions, customer
sector groups and key functional
areas.
WorleyParsons Annual Report 2013 13
CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
SEGMENT PERFORMANCE
Hydrocarbons
The Hydrocarbons sector reported aggregated
revenue of $5,344 million an increase of 7% from
the previous corresponding period. Hydrocarbons’
contribution to the group’s aggregated revenue
was 70%. Segment EBIT was $634 million with a
reported segment margin of 11.9% (FY2012: EBIT
$598 million; margin 11.9%). The Hydrocarbons
sector grew in both revenue and EBIT. The
professional services margin within the sector
improved from 12.3% to 13.1%.
Continued demand growth for oil and gas,
together with robust commodity prices led to
an increased level of capital expenditure in
upstream developments. New greenfield assets
coming on line led to increased spend on Improve
asset management and enhancement programs.
The lower cost of natural gas in the US drove
development of the downstream market, with a
focus on petrochemicals and other gas monetization
opportunities.
Unconventional oil and gas development has
escalated, with program management and project
delivery for developments in the US, Canada,
Australia and the Middle East being undertaken
during the period. The acquisition of Rosenberg,
which provides fully-integrated engineering,
fabrication and construction solutions to the
Norwegian offshore oil and gas sector, will extend
WorleyParsons’ current hydrocarbons offering into
the Norwegian market.
Outlook for Hydrocarbons
We are encouraged by the growth in the US
gas, downstream and petrochemicals market,
opportunities in Norway and in the developing
world. Potential market slowdown in Australia is
expected to be offset by our continued global
growth.
The continued global diversification, together
with ongoing strengthening of key customer
relationships, gives us confidence that the
Hydrocarbons sector will continue to grow in the
medium and long term.
We expect improved earnings for the Hydrocarbons
sector in FY2014.
Minerals, Metals & Chemicals
The Minerals, Metals & Chemicals sector reported
aggregated revenue of $938 million, an increase
of 5% from the previous corresponding period.
Minerals, Metals & Chemicals’ contribution to the
group’s aggregated revenue was 12%. Segment
EBIT was $136 million with a reported segment
margin of 14.5% (FY2012: EBIT $134 million; margin
15.0%).
The performance of the Minerals, Metals &
Chemicals sector was underpinned by the strength
of the global chemicals market notwithstanding the
significant slowdown of investment in major capital
projects by our minerals and metals customers over
the period, particularly in Western Australia.
The current market dynamics has seen our mining
customers looking for improvements in efficiency
and cost of production, particularly in mature, high
cost regions. This has resulted in a greater emphasis
on sustaining capital activities and we are focused
on the ongoing development of our integrated
Improve offering.
The acquisition of TWP in March 2013 has further
increased our geographic diversification bringing
approximately 1,100 additional people to our
operations in Africa and Latin America. We are now
one of the largest specialized EPCM companies in
Africa. TWP also enables WorleyParsons to provide
its global customers with access to engineering and
project delivery capabilities for underground mining
and precious metals.
Outlook for Minerals, Metals & Chemicals
We will continue to globalize our Minerals, Metals
& Chemicals offering and develop our long term
relationships with major customers. We expect
that asset optimization will continue to be a key
concern in the year ahead. Project activity will
predominately be in early phase study work.
The global chemicals market continues to
support strong investment in new developments
and provides a high growth opportunity for
WorleyParsons. We will continue to directly address
this market particularly in the Middle East and the
US, leveraging our strength in China, to benefit our
customers across the globe.
We expect improved earnings in the Minerals,
Metals & Chemicals sector in 2014.
14 WorleyParsons Annual Report 2013
Infrastructure & Environment
The Infrastructure & Environment sector reported
aggregated revenue of $784 million, a decrease
of 10% from the previous corresponding period.
Infrastructure & Environment’s contribution to the
group’s aggregated revenue was 10%. Segment
EBIT was $86 million with a reported segment
margin of 11.0% (FY2012: EBIT $118 million; margin
13.6%).
The performance of the Infrastructure &
Environment sector was impacted by major project
deferrals and customer cost management initiatives
in Western Australia. Reduction in South African
government spend has further impacted the
business.
Given the adverse markets in Australia and South
Africa, it is pleasing that our enhanced Improve
capability platform has enabled us to secure
opportunities with Government, resource and
energy customers. We have delivered integrated
environment and total water solutions to
unconventional oil and gas customers and expanded
our geographic presence in Restoration services.
Outlook for Infrastructure & Environment
The growth of unconventional oil and gas globally
offers significant opportunity as customers seek
an integrated approach to environment, community
and water management. Resource infrastructure
has a strong outlook in Sub-Saharan Africa and
Latin America, particularly relating to significant gas
discoveries in East Africa and mineral developments
in Latin America. Our Restoration offering is
positioned to service our customers’ growing need
for support in liability management and remediation,
demolition and decommissioning and resilience
preparedness across their asset portfolios.
We expect improved earnings in the Infrastructure
& Environment sector in FY2014.
Power
The Power sector reported aggregated revenue
of $561 million, a decrease of 3% on the previous
corresponding period. Segment EBIT was $49
million with a reported segment margin of 8.8%
(FY2012: EBIT $61 million; margin 10.6%)
The fall in earnings is largely driven by increased
material costs on a substantially complete lump sum
procurement project in Brazil and the cancellation of
a key project in both Europe and Canada.
In the developed world, customers have been
looking for support services in asset optimization,
operation and maintenance, energy efficiency and
environmental compliance. This has led to demand
for our Improve asset management services in these
geographies.
In the developing world, increased capacity demand
led to the Group being awarded a number of key
projects in nuclear, conventional power generation
and networks.
We continue to support resource and industrial
customers in securing and managing critical power
needs for their operations in both developed and
developing markets.
Outlook for Power
Whilst there is some uncertainty in the global
economy, we expect to continue to grow our
support to resource and industry customers
leveraging our Hydrocarbons and Minerals,
Metals & Chemicals customer sector groups. In
the developing world we expect demand for new
capacity to continue to provide opportunities in
power generation and networks.
We anticipate further demand for our services to
the nuclear sector, given the expected expansion
of nuclear programs in developing countries and
increases in safety upgrades to existing reactors.
In order to strengthen our service offering to
resource customers, we are combining our Power
and Infrastructure & Environments sectors into a
single customer sector group.
We expect improved in earnings in the Power sector
and the combined group in FY2014.
Outlook for the group
While recognizing the uncertainties in world
markets, we expect our geographic and sector
diversification to provide a solid foundation to
deliver increased earnings in FY2014.
We have a clear growth strategy in place which
includes developing our skill set and geographic
footprint across our customer sectors. This will
be achieved through organic growth as well as by
taking advantage of acquisition opportunities that
provide value for shareholders.
We are confident that our medium and long term
prospects remain positive based on our competitive
position, our diversified operations and strong
financial capacity.
WorleyParsons Annual Report 2013 15
BOARD OF
DIRECTORS
John Grill
Chairman and
Non-Executive Director
Andrew Wood
Chief Executive Officer
John M Green
Non-Executive Director
Catherine Livingstone, AO
Non-Executive Director
Wang Xiao Bin
Non-Executive Director
Erich Fraunschiel
Non-Executive Director
16 WorleyParsons Annual Report 2013
Erich Fraunschiel
Non-Executive Director
Christopher Haynes, OBE
Non-Executive Director
JB McNeil
Non-Executive Director
Ron McNeilly
Deputy Chairman and Lead
Independent Director
Larry Benke
Non-Executive Director
Peter Janu
Company Secretary &
General Counsel Corporate
WorleyParsons Annual Report 2013 17
OPERATING AND
FINANCIAL REVIEW
1 Operations
1.1 Overview
WorleyParsons is a professional services provider to the
resources, energy and industrial sectors.
During the year ended 30 June 2013 (FY2013), our business
was reported in four customer sector groups which focused on
customers involved in the following activities:
• Hydrocarbons – the extraction and processing of oil and gas;
• Minerals, Metals & Chemicals – the extraction and processing
of mineral resources and the manufacture of chemicals;
• Infrastructure & Environment – projects related to water,
the environment, transport, ports and site remediation and
decommissioning; and
• Power – all forms of power generation, transmission and
distribution.
From 1 July 2013, we combined our Power and Infrastructure
& Environment sectors into one sector referred to as
Infrastructure.
For customers in each of these sectors, we provide Consult,
Deliver, Improve and Advisory services:
• Consult – assisting with project viability, assessment and
selection. Consult services can include undertaking feasibility
studies, providing conceptual designs, being involved in cost
estimating and contract planning and providing technical
advice;
• Deliver – converting projects from concept into fully defined
and executed projects. Defining a project can include
undertaking cost estimates and preparing preliminary
engineering designs. Executing a project can include
preparing detailed engineering designs, procuring specialist
materials and components required for the project and
managing and executing the project’s construction;
• Improve – maintaining and improving existing assets such
as a gas processing plant or power station. This can involve
us in reducing the costs involved in operating an asset or
increasing the revenue earned from an asset; and
18 WorleyParsons Annual Report 2013
• Advisory – providing project and business solutions to
customers who develop, operate and maintain physical
assets in the infrastructure and resources sectors. This can
involve us in bringing our commercial and technical insights
and experience to the complex problems they face and
working alongside them to solve those problems.
These services range from small studies bringing in thousands
of dollars in revenue to the delivery of major projects bringing
in hundreds of millions of dollars in revenue.
Our customers range from multi-national oil and gas, resources
and chemicals companies to more locally focused companies,
national oil companies and government utilities operating in
the sectors described above.
In order to provide local delivery to our customers, with global
support, we employ around 39,800 people, in 165 offices
located in 43 countries.
Our competitive position was most recently assessed
when, in July 2013, the Engineering News-Record’s Top
225 International Design Firms ranked WorleyParsons as
the number one International Design Firm, number one for
Petroleum Design and number two for Power Design.
1.2 Business model
We are a people business. We empower our people to deliver
services to our customers at a local level, but with the
benefit of globalized support. We support our people with our
systems and other infrastructure and charge their time spent
performing professional services to our customers.
Aggregated revenue and profit: Our sources of revenue and
profit are diversified and our revenue and profit are generated
from a large number of customers. As a result, we are not
dependent on any one of our customers for a significant
portion of our revenue and profit. We believe the disclosure
of revenue attributable to associates provides additional
information in relation to the financial performance of the
Group and include this within Aggregated revenue.
Costs: Other than costs reimbursed by our customers, our two
largest costs are: staff costs; and administration costs, which
includes office lease costs.
Assets and liabilities: The significant items on our balance
sheet are mainly project related, such as trade receivables
(e.g. payments due from our customers), and provisions (e.g.
amounts we have set aside for potential future liabilities,
particularly those related to our employees), and borrowings
(eg. bank debt). We also hold a number of intangible assets
generated through previous acquisitions.
Our business is not capital intensive. However, our contract
terms typically require our customers to pay us within 30 days
of receiving our invoice, while, in a number of our locations,
we must pay expenses (e.g. staff salaries) at shorter intervals.
This time differential makes up the majority of our capital
requirements.
WorleyParsons Annual Report 2013 19
FY2013 AGGREGATED REVENUE BY GEOGRAPHIC REGION 70% 8% 10% FY2013 AGGREGATED REVENUE BY CUSTOMER SECTOR GROUP HydrocarbonsPowerMinerals, Metals & Chemicals Infrastructure & Environment Middle East, North Africa & IndiaAustralia & New ZealandCanadaSub-Saharan AfricaAsia & ChinaLatin AmericaEuropeUnited States & Carribean8% 23% 29% 9% 4% 5% 15% 7% 12% OPERATING AND FINANCIAL REVIEW CONTINUED
1.3 Review of operations
A review of WorleyParsons’ operations for FY2013 can be found in the section headed “Business Summary” on pages 6 to 9 of
the Annual Report. That section is incorporated into, and forms part of this Operating and Financial Review.
There are three measures that are key to understanding our results:
1. Aggregated revenue;
2. EBIT (earnings before interest and tax); and
3. NPAT (net profit after tax), attributable to shareholders
1. Aggregated
revenue
FY2013
FY2012*
$’M
$’M Comments
7,627.0
7,362.6 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,
interest income, and net gain on
revaluation of investments previously
accounted for as equity accounted
associates.
Movement
Our aggregated revenue increased by
4% in FY2013 when compared with
that for FY2012 due to increased
construction activities and contribution
from acquired entities.
2. EBIT
527.0
530.3 EBIT means earnings before interest
and tax.
Our EBIT is in line with that for
FY2012.
3. NPAT,
322.1
345.6 NPAT means net profit after tax.
attributable to
shareholders
Our NPAT decreased by 7% in FY2013
when compared with that for FY2012
due to a higher effective tax rate
(27.3% v 24.1%) and additional interest
costs from the US debt raised to fund
acquisitions and working capital.
*We have calculated the numbers set out above so that they do not take into account the effect of the net gain of $7.6 million
on revaluation of investments already held, as required under the accounting standards, that occurred during FY2012, but for
which there were no corresponding gains during FY2013.
1.4 Significant changes in operations during FY2013
With effect from the conclusion of our 2012 Annual General Meeting on 23 October 2012, John Grill retired as our Chief
Executive Officer and Andrew Wood was appointed to that role.
20 WorleyParsons Annual Report 2013
2 Financial Position and Cashflow
2.1 Matters relevant to understanding WorleyParsons’ financial position
There are four items that are key to understanding our financial position:
1. Operating cash flow;
2. Gearing ratio;
3. Debt facility utilization; and
4. Loan and overdraft facilities
1. Operating
cash flow
FY2013
$’M
FY2012
$’M Comments
443.5
437.5 Our operating cash flow comprises the
payments we receive from our customers
less the amount we pay our suppliers plus
related interest and tax paid. In our financial
statements, operating cash flow is called
“net cash inflow from operating activities”.
2. Gearing
ratio
25.3%
19.9% Our gearing ratio is our net debt divided
by the sum of our net debt and our total
equity, at the end of the financial year.
Movement
Our operating cash flow increased by 1% in
FY2013.
Our gearing ratio increased by 5.4
percentage points in FY2013 when
compared with that for FY2012 because
we funded acquisitions.
This ratio is at the lower end of our gearing
target of 25% to 35%.
3. Debt
55.5%
51.2% Our debt facility utilization is the
facility
utilization
4. Loan and
overdraft
facilities
percentage of our debt facilities that we
were using at the end of the financial year.
1,912.4 1,444.6 Our loan and overdraft facilities are the
amount of our debt facilities at the end of
the financial year.
Our debt facility utilization increased
4.3 percentage points in FY2013 when
compared with that for FY2012 because of
funding required for acquisitions.
The amount of our loan and overdraft
facilities increased during FY2013 given
the US debt raising referred to above and
the change in foreign exchange rates
from the beginning of the year to the
end of the year.
Our financial capacity remains strong given our cash, gearing and debt positions.
WorleyParsons Annual Report 2013 21
OPERATING AND FINANCIAL REVIEW CONTINUED
2.2 Dividends
Our practise has been that in the order of 60% to 70% of
WorleyParsons’ full year net profit after tax will be available
for distribution as dividends, with the balance being retained
for funding ongoing growth. Dividends are franked to the
extent franking credits are available.
In line with this practise, our directors have resolved to pay
a final dividend of 51.0 cents per fully paid ordinary share
unfranked. As a result, 70.8% of our full year net profit
after tax for FY2013 will be distributed to shareholders as a
dividend. This compares with distributing 64.7% of our full
year net profit after tax for FY2012.
2.3 Significant changes in WorleyParsons’ Statement
of Financial Position during FY2013
There were no significant changes in WorleyParsons’
Statement of Financial Position during FY2013.
2.4 Future commitments
There are two types of future commitments which do not
appear on our balance sheet and are relevant to understanding
our financial position:
1. operating leases; and
2. operating expenditure commitments.
In general, we lease the various office buildings from which
we operate, rather than owning those buildings. “Operating
leases” refers to those leases.
In addition, we are generally licensed to use software
(e.g. engineering software) and also lease various items of
computer hardware (e.g. laptops, monitors and keyboards)
that we use in operating our business, rather than owning the
software or computer hardware ourselves. We refer to our
commitments to pay software license and equipment lease
fees as “operating expenditure commitments”.
These future commitments represent approximately 10% of
our expenses.
3 Business Strategy, Outlook and Risks
3.1 Business Strategy
We develop strategy at an overall group level, within our
sectors and for our locations and functions. Our process is
intended to be one that is iterative and that remains alive and
is updated and adjusted to suit the changing competitive and
economic landscape.
Our strategy includes building our project delivery capability
and as a result, doing more reimbursable EPC and full scope
EPCM for greenfield projects and expanding the scope
of support we offer for existing assets as a part of our
Improve offering.
We see growth potential in Improve, which includes services in
engineering, procurement and construction across a portfolio
of minor capital projects and maintenance, asset integrity and
operations support.
Equally, we see benefit in continuing to develop our EPCM,
PMC and largely reimbursable EPC capabilities in the major
project arena. Core to this is our Consult capability, along with
front-end engineering design and detailed engineering.
Our EcoNomics™ offering is a differentiated way of helping
customers build sustainability into their operations and make
increasingly difficult economic decisions around social license
to operate and other traditionally intangible areas.
22 WorleyParsons Annual Report 2013
We continue to move into new locations, particularly in the
developing world and to refine and leverage our customer
relationships both globally and locally.
Strategy cycle: We have a mature, structured approach to
strategy which includes development of:
1.
a five year aspirational vision for our organization;
2. a three year global strategy, which is refreshed on an
annual basis;
3. three year sector strategies, which are refreshed on an
annual basis; and
4. functional and location annual business plans that reflect
the sector and global strategies.
Our annual strategy workshops are followed by a series of
communications across our business.
Strategy focus: The annual strategy process includes
consideration of the following three factors and how they
can best be combined to deliver value to our customers and
returns to our shareholders:
1. market conditions;
2. customer needs; and
3. our capability.
Strategy review: While a detailed strategy provides us with
direction, it is also designed to be sufficiently flexible to
adapt to changing market and customer demands. We monitor
progress against our strategy throughout the year and we
make adjustments where appropriate.
3.2 Outlook
While recognizing the uncertainties in world markets, we
expect our geographic and sector diversification to provide a
solid foundation to deliver increased earnings in FY2014.
We have a clear growth strategy in place which includes
developing our skill set and geographic footprint across our
customer sectors. This will be achieved through organic
growth as well as by taking advantage of acquisition
opportunities that provide value for shareholders.
We are confident our medium and long term prospects remain
positive based on our competitive position, our diversified
operations and strong financial capacity.
3.3 Risks
Achievement of our medium and long term prospects could
be impacted by a number of risks, some of which are beyond
our control. Those risks could, individually or together, have an
adverse effect on achievement of those prospects.
Set out below is an overview of a number of key risks that
we face in seeking to achieve our medium and long term
prospects. The risks are not set out in any particular order and
do not comprise every risk we face in conducting our business
or every risk that may affect the achievement of those
prospects. Rather, they are the most significant of the risks
that we believe we should be monitoring and seeking to
mitigate or otherwise manage at this point in time.
Health and safety risk: Our business sometimes requires our
people to be in high risk geographies, travel long distances by
road, be in close proximity to complex operating equipment
and be engaged in construction and operating activities.
There is the risk of injury to, or the loss of life of, our people.
To seek to mitigate this risk, we have a OneWay™ framework
which includes the expectations that every one of our people
must meet with respect to health and safety. OneWay™
expectations are supported by our business processes and
we use them in assessing our performance; however, the
risk exists that the failure to comply with such processes,
customer health and safety requirements and applicable
regulations could expose us to losses and liability.
Reputation risk: We rely on the strength of our reputation to
help win and retain work, attract and retain employees, secure
lines of credit and gain access to capital. Reputation can be
damaged in a number of ways including through unethical
business practises, poor project outcomes, negative media
and not meeting the market’s expectation of our financial
performance. We use a range of strategies and actions to seek
to mitigate this risk including training on our Code of Conduct
for our people globally, an ethics helpline and our enterprise
management systems.
Strategy risk: Strategy risk is the risk of failing to develop
and implement an effective business strategy. Failure to do so
may over time lead to a loss of market share, damage to our
reputation and negatively impact our financial performance.
To mitigate this risk, we have an annual strategy development
process which is discussed under the heading “Business
strategy” on page 22 of this Operating and Financial Review.
We develop and implement strategic initiatives and review our
strategy during each year, making adjustments to it where
appropriate.
People risk: Our ability to attract and retain top talent and
industry leaders is a risk that, if not effectively managed,
could have a negative impact on our reputation, technical
performance and longer term financial performance. We seek
to mitigate this risk by seeking to offer market competitive
remuneration, training and career development opportunities
and by seeking to be an attractive and engaging employer.
Project delivery risk: Our execution of projects and
assignments involves professional judgment regarding the
planning, design, development, construction and operation
of often complex operating facilities. While our customers
generally retain liability for consequential damages and while
we have adopted a range of insurance, risk management and
mitigation programs designed to seek to reduce potential
liabilities, a catastrophic event resulting from the services
we have provided could result in significant professional or
product liability, warranty or other claims against us, as well as
reputational damage.
WorleyParsons Annual Report 2013 23
OPERATING AND FINANCIAL REVIEW CONTINUED
Contract pricing risk: We have a relatively low level of
exposure to fixed price contracts with the majority of our
revenue derived on a reimbursable basis. However, if we
materially underestimate the cost of providing equipment,
plant and/or services, there is a risk of a material negative
impact on financial performance. Where we do enter into
fixed price contracts, we mitigate the pricing risk by using our
estimating systems, knowledge and experience to seek to
price them appropriately.
Competition risk: Our markets are highly competitive and
this competition can place downward pressure on prices
and margins. If we are unable to compete effectively in our
markets, we run the risk of losing market share. We mitigate
this risk by seeking to target the projects in relation to
which we have a competitive advantage, manage our costs
and margins and use low cost delivery centers to execute
certain aspects of our work.
Demand risk: The volatile and cyclical nature of commodity
prices and demand for our customers’ goods and services
means that the demand for our services can likewise be
cyclical and may sometimes vary markedly over relatively
short periods. We have a number of strategies and processes
in place to mitigate this risk including retaining a proportion
of personnel on short notice contracts, seeking contractual
protection for project demobilization, particularly for projects
that require a significant in-country mobilization of our people,
and sharing work across locations.
Legal and contractual risk: We are, from time to time,
engaged in disputes with third parties, some of which involve
litigation and disputes over contractual terms. The outcomes
of these disputes can be difficult to predict and may cause
a material negative impact on any one year’s financial
performance. We manage this risk through our contract review
and risk screening processes and active dispute management.
Finance market risk: Finance market risk is the risk that
changes in market prices, such as foreign exchange rates
and interest rates, will affect our income or the value of our
balance sheet items. We use risk management techniques
to seek to contain finance market risk exposures within
acceptable parameters. We enter into derivatives, and also
incur financial liabilities, in order to mitigate that risk and
reduce volatility in earnings. In the ordinary course of business,
we structure our contracts to be paid in the currency of the
country in which the costs are incurred.
24 WorleyParsons Annual Report 2013
Liquidity risk: Liquidity risk is the risk that we will not be able
to meet our financial obligations as they fall due. Our approach
to managing liquidity is to seek to ensure that we will always
have sufficient liquidity to meet our liabilities when due,
under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to our reputation.
In addition, we seek to ensure that we have efficient cash
management processes and carry sufficient cash and credit
lines to meet expected operational expenses, including
obligations to our lenders.
Business interruption risk: As a global company, we are
heavily reliant on computer, information and communications
technology and related systems to operate efficiently and
securely. We also operate at times in locations subject to
natural disasters, civil unrest and military conflict. We seek
to manage this risk through business continuity and disaster
recovery systems and planning using a Ready, Response and
Recovery (R3) methodology.
Partner risk: We operate through a number of joint ventures
and partnering arrangements. The success of these businesses
depends on the satisfactory performance by our partners
of their obligations. The failure of our partners to meet
these obligations could impose on us additional financial and
performance obligations that could cause significant impact
on our reputation and financial results. We mitigate this risk by
conducting due diligence in relation to potential partners and
by undertaking compliance reviews and regularly monitoring
the performance of our joint ventures.
3.4 Unreasonable prejudice
We have omitted information regarding: (1) our internal
budgets and internal forecasts; and (2) details of our business
strategy, on the basis that if we had included that information,
doing so would have been likely to result in unreasonable
prejudice to us.
CORPORATE GOVERNANCE
INTRODUCTION
The Board of Directors of WorleyParsons Limited (Board) strives
to ensure that WorleyParsons Limited (Company) and the entities
it controls (Group) meet high standards of safety, performance
and governance. The Group recognizes that it has responsibilities
to its shareholders, customers, personnel and suppliers as well
as to the communities in which it operates.
The Board has ultimate authority over, and oversight of, the
Group and regards corporate governance as a critical element in
the drive to improve the Group’s performance and achieve the
Group’s vision of being the preferred global provider of technical,
project and operational support services. Accordingly, the Board
has adopted appropriate charters, codes and policies and
established a number of Committees to discharge its duties.
The Corporate Governance page in the Investor Relations section
of the Group’s website (www.worleyparsons.com) contains most
of the charters, codes and policies which are referred to in this
statement (or a summary of them). These documents are
periodically reviewed and enhanced where necessary to take
account of changes in the law and governance practices.
The Group’s governance systems meet the requirements of the
Corporations Act 2001 (Act) and the Listing Rules of the
Australian Securities Exchange (ASX Listing Rules and ASX
respectively).
As required by the ASX Listing Rules, this statement discloses
the extent to which the Company has followed the Corporate
Governance Principles and Recommendations with 2010
Amendments (2nd Edition) released in June 2010 by the ASX
Corporate Governance Council (ASX Recommendations) during
the reporting period comprising the year ended 30 June 2013
(Reporting Period). Except where otherwise explained, the
Company followed all of the ASX Recommendations during the
Reporting Period.
The following table indicates where specific ASX Recommendations are dealt with in this statement:
PRINCIPLES AND RECOMMENDATIONS
Principle 1: Lay solid foundations for management and oversight
1.1 Companies should establish the functions reserved to the board and those delegated to senior executives
and disclose those functions.
1.2 Companies should disclose the process for evaluating the performance of senior executives.
1.3 Companies should provide the information indicated in the Guide to reporting on Principle 1.
Principle 2: Structure the board to add value
2.1 A majority of the board should be independent directors.
2.2 The chair should be an independent director.
2.3 The roles of chair and chief executive officer should not be exercised by the same individual.
2.4 The board should establish a nomination committee (according to the commentary set out in the ASX
Principles, it should consist of a minimum of three members, the majority being independent directors and
have an independent chair).
SECTION
2.1
1.7
1.7, 2.1
1.1, 1.2, 1.4
1.1, 1.2, 1.4
1.1, 1.2
1.3, 1.4, 2.3
2.5 Companies should disclose the process for evaluating the performance of the board, its committees and
1.7
individual directors.
2.6 Companies should provide the information indicated in the Guide to reporting on Principle 2.
1.2, 1.3, 1.4,
1.6, 1.7, 2.3
Principle 3: Promote ethical and responsible decision making
3.1 Companies should establish a code of conduct and disclose the code or a summary of the code as to:
•
•
•
the practices necessary to maintain confidence in the company’s integrity;
the practices necessary to take into account their legal obligations and the reasonable expectations of
their stakeholders; and
the responsibility and accountability of individuals for reporting and investigating reports of
unethical practices.
1.5, 2.4, 3.1
3.2 Companies should establish a policy concerning diversity and disclose the policy or a summary of that
policy. The policy should include requirements for the board to establish measurable objectives for achieving
gender diversity for the board to assess annually both the objectives and progress in achieving them.
3.3 Companies should disclose in each annual report the measurable objectives for achieving gender diversity
set by the board in accordance with the diversity policy and progress towards achieving them.
3.4 Companies should disclose in each annual report the proportion of women employees in the whole
organization, women in senior executive positions and women on the board.
3.8
3.8
3.8
3.5 Companies should provide the information indicated in the Guide to reporting on Principle 3.
3.1, 3.2
WorleyParsons Annual Report 2013 25
Principle 4: Safeguard integrity in financial reporting
4.1 The board should establish an audit committee.
4.2 The audit committee should be structured so that it:
•
•
•
•
consists of only non-executive directors;
consists of a majority of independent directors;
is chaired by an independent chair who is not chair of the board; and
has at least three members.
4.3 The audit committee should have a formal charter.
4.4 Companies should provide the information indicated in the Guide to reporting on Principle 4.
Principle 5: Make timely and balanced disclosure
2.3
2.3
2.3
2.3
5.1 Companies should establish written policies designed to ensure compliance with ASX Listing Rule
2.4, 3.5
disclosure requirements and to ensure accountability at a senior executive level for that compliance
and disclose those policies or a summary of those policies.
5.2 Companies should provide the information indicated in the Guide to reporting on Principle 5.
Principle 6: Respect the rights of shareholders
6.1 Companies should design a communications policy for promoting effective communication with
shareholders and encouraging their participation at general meetings and disclose their policy or a
summary of the policy.
6.2 Companies should provide the information indicated in the Guide to reporting on Principle 6.
3.5
3.6
3.6
Principle 7: Recognize and manage risk
7.1 Companies should establish policies for the oversight and management of material business risks and
2.3, 3.3, 3.4
disclose a summary of those policies.
7.2 The board should require management to design and implement the risk management and internal control
system to manage the company’s material business risks and report to it on whether those risks are being
managed effectively. The board should disclose that management has reported to it as to the effectiveness
of the company’s management of its material business risks.
7.3 The board should disclose whether it has received assurance from the chief executive officer (or equivalent)
and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A
of the Corporations Act is founded on a sound system of risk management and internal control and that the
system is operating effectively in all material respects in relation to financial reporting risks.
7.4 Companies should provide the information indicated in the Guide to reporting on Principle 7.
Principle 8: Remunerate fairly and responsibly
8.1 The board should establish a remuneration committee.
8.2 The remuneration committee should be structured so that it:
•
•
•
consists of a majority of independent directors;
is chaired by an independent chair; and
has at least three members.
8.3 Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of
executive directors and senior executives.
3.3
3.3
3.3
2.3
2.3
3.7
8.4 Companies should provide the information indicated in the Guide to reporting on Principle 8.
2.3, 3.2
The Group recognizes that responsible, sustainable corporate performance is essential to the long term success of its business and
desirable to all of its stakeholders. The Group’s Corporate Responsibility statement can be found on page 35 of the Annual Report.
26 WorleyParsons Annual Report 2013
CORPORATE GOVERNANCE CONTINUED PART 1 – COMPOSITION AND GOVERNANCE
POLICIES OF THE BOARD
Relevant policies and charters (see www.worleyparsons.com)
- Board Charter
1.1 COMPOSITION PRINCIPLES
The Board’s composition is determined in accordance with the
following principles, the Company’s Constitution and relevant
governance requirements:
•
•
•
•
•
•
the Board should comprise at least three members and
maintain a majority of independent directors;
the positions of Chairman and Chief Executive Officer (CEO)
must be held by separate persons;
the Chairman must always be a non-executive director;
the Board should comprise directors with an appropriate
range and mix of skills, experience, expertise and diversity;
the performance of the Board, its Committees and its
members should be reviewed annually and objectively; and
all directors (except the CEO) must submit themselves
for re-election at regular intervals, and at least every
three years.
1.2 MEMBERSHIP
The membership of the Board complies with the composition
principles outlined above. The directors of the Company during
the Reporting Period were:
NAME
John Grill
Ron McNeilly
Larry Benke
Erich Fraunschiel
John M Green
POSITION
Chief Executive Officer and
Executive Director
(until 23 October 2012)
Chairman and Non-Executive
Director (from 1 March 2013)
Chairman and Non-Executive
Director (until 1 March 2013)
Deputy Chairman and Lead
Independent Director
(from 1 March 2013)
Non-Executive Director
Non-Executive Director
Non-Executive Director
Christopher Haynes, OBE
Non-Executive Director
Catherine Livingstone, AO
Non-Executive Director
JB McNeil
Wang Xiao Bin
Andrew Wood
Non-Executive Director
Non-Executive Director
Chief Executive Officer and
Executive Director
(from 23 October 2012)
Details of each director’s qualifications, special responsibilities,
skills, expertise and experience (including the period of office
held by each director) are contained in the profiles included on
pages 43–45 in the Directors’ Report.
During the Reporting Period:
•
•
•
•
John Grill retired as Chief Executive Officer and Executive
Director on 23 October 2012. On 1 March 2013, he rejoined
the Board as Chairman and Non-Executive Director;
Ron McNeilly retired as Chairman and Non-Executive Director
on 1 March 2013 and was appointed Deputy Chairman and
Lead Independent Director on 1 March 2013;
Andrew Wood was appointed as Chief Executive Officer and
Executive Director on 23 October 2012; and
all other directors served as directors for the entire
Reporting Period.
1.3 APPOINTMENT, INDUCTION AND TRAINING
The Board’s Nominations Committee sets and reviews the
criteria for new director appointments having regard to the
overall composition of the Board.
In considering the nominations and appointments of directors,
the Board seeks to ensure that its membership is such that each
director:
•
•
is a person of integrity who will observe the Group’s
Code of Conduct;
has sufficient abilities and time available to perform their
role effectively;
• brings an independent and questioning mind to their role;
•
•
enhances the breadth and depth of skills and knowledge of
the Board as a whole; and
enhances the experience and diversity of the Board as
a whole.
While recognizing that each director will not necessarily have
experience in each of the following areas, the Board seeks to
ensure that its membership includes an appropriate mix of
directors with experience in engineering, relevant customer
sector groups, general management and finance.
Each non-executive director receives a letter formalizing their
appointment and that letter outlines the key terms and
conditions of their appointment. Executive directors each have a
written position description and a service contract.
Director induction processes are incorporated into the Board
program. Directors are encouraged, and are given the
opportunity, to broaden their knowledge of the Group’s business
by visiting offices in different locations and to remain abreast of
developments impacting the business.
During the Reporting Period, the Board visited offices in the USA
and South Africa. In addition, each non-executive director
conducted safety-awareness visits to at least two of the
Company’s project sites during the Reporting Period and in total
32 such non-executive director visits took place in the Reporting
Period. Non-executive directors visited project sites in Australia,
the USA, Canada, South Africa and Saudi Arabia. In addition, the
current CEO visited eight project sites in six countries in the
period since his appointment to the role in October 2012 until
the end of the Reporting Period.
WorleyParsons Annual Report 2013 27
Company’s founders and a substantial shareholder, which aligns
him with the interests of all shareholders.
Consistent with the ASX Recommendations, with Mr Grill’s
appointment as Chairman, the Board created the role of Lead
Independent Director. Ron McNeilly, the former Chairman, was
appointed Deputy Chairman and Lead Independent Director from
1 March 2013.
Appointing a Lead Independent Director seeks to ensure that the
views of independent directors are effectively raised and
considered by the Board in accordance with the spirit of the ASX
Recommendations.
The Lead Independent Director provides leadership and support
to the other independent directors in relation to matters that
uniquely concern them as independent directors. The Lead
Independent Director also, together with the Chairman, ensures
that conflicts of interest on the Board (whether actual or
potential) are identified and managed appropriately. The Lead
Independent Director will call and chair at least four meetings
of independent directors each calendar year (at which neither
the Chairman nor members of senior management are present)
for the purposes of discussing matters relevant to the Board’s
business and responsibilities and two such meetings have
been held during the Reporting Period since Mr Grill was
appointed Chairman.
Dr Haynes, the Chairman of the Company’s Health, Safety and
Environment Committee, is a non-executive director of Woodside
Petroleum Limited (Woodside), which is a customer of the Group.
Mr Fraunschiel, the Chairman of the Company’s Audit and Risk
Committee, was also a non-executive director of Woodside, until
28 February 2013. The Board considers each of Dr Haynes and
Mr Fraunschiel to be independent after applying the principles
stated above, given the percentage of total revenue and total
gross margin the Group earned from Woodside was less than the
5% threshold stated above, during the Reporting Period.
In the Board’s opinion, the judgment of each of Dr Haynes and
Mr Fraunschiel is not impaired or conflicted even though Dr
Haynes is, and Mr Fraunschiel was, a non-executive director of
Woodside. The Board also notes that as a practical matter, both
of those directors exercise independent judgment in the best
interests of the Company without direction from Woodside and
neither of them receives or received any remuneration other
than directors’ fees from either the Company or Woodside.
Mr Benke was appointed a non-executive director on the day
after resigning as an executive of the Group on 30 June 2010.
The Board has determined that from 1 July 2013 Mr Benke
should be regarded as independent on the basis of the time that
has elapsed since he ceased employment with the Group, his
relatively short period of employment with the Group prior to
his appointment to the Board and the Board’s assessment of
the extent to which Mr Benke’s previous employment with
the Group has impacted on, or could be perceived to impact on,
his independence.
1.4 DIRECTOR INDEPENDENCE
The Board recognizes that, while various principles and factors
are relevant in determining independence, true independence is
a matter of judgment having regard to the particular
circumstances. Accordingly, when the Board exercises its
judgment in determining independence, it has regard to
relationships between a director and the Group or between
a director and third parties that may compromise the
director’s independence.
The Nominations Committee monitors and undertakes an annual
assessment of each non-executive director’s independence. This
assessment applies the ASX Recommendations, the Act and
current corporate governance practice and adopts the
definition of independence set out in the ASX Recommendations.
Further, the Nominations Committee has regard to the
materiality and type of interest (e.g. as shareholder,
advisor, supplier or customer).
In addition, at each Board meeting, the Board reviews each non-
executive director’s independence. This maintains the integrity
of the Board’s ongoing assessment as to the independence of
each non-executive director.
The Board recognizes that the accounting standards provide a
useful guide as to what is or is not material in a quantitative
sense. The accounting standards define materiality as an
interest of more than 10% of the relevant base (whether
revenue, equity or expenses). Any interests between 5% and
10% of the base are treated as potentially material, depending
on the circumstances. Any interests below 5% are treated as
being immaterial. However, the Board also applies a qualitative
assessment to seek to ensure that a solely quantitative
approach does not result in inappropriate decisions. The Board
considers whether there are any circumstances which may affect
the director’s interest and could, or could reasonably be
perceived to, materially interfere with the director’s ability to act
in the Company’s best interests.
The Board has considered the positions and relationships of each
of the nine non-executive directors and has formed the view
that eight of the nine non-executive directors in office at the
conclusion of the Reporting Period are independent. The Board is
of the opinion that therefore a majority of the Board is
independent of the Group’s management and is free of any
interest that may affect its free and unfettered judgment.
Mr Grill was appointed Chairman of the Board on 1 March 2013.
Mr Grill was Chief Executive Officer of the entity that ultimately
became WorleyParsons Limited from 1971 and held the position
of Chief Executive Officer until 23 October 2012. Mr Grill is also
a substantial shareholder of the Company. Accordingly, Mr Grill is
not regarded as independent.
While the ASX Recommendations provide that the Chairman
should be independent, the Board carefully assessed Mr Grill’s
appointment as Chairman and considered that there were a
number of unique circumstances that made Mr Grill’s
appointment appropriate. Almost every one of the Group’s global
industry peers is chaired by a former Chief Executive Officer
demonstrating the ongoing importance of strong industry and
customer relationships in the Group’s industry. The Board wished
to retain the benefit of Mr Grill’s close relationships with major
global customers and his extensive industry experience. The
Board also considered the fact that Mr Grill is one of the
28 WorleyParsons Annual Report 2013
CORPORATE GOVERNANCE CONTINUED 1.5 NOTIFICATION OF INTERESTS AND TREATMENT
OF CONFLICTS
Directors are required to notify the Chairman of any contracts,
offices (including other directorships) held, and interests in other
companies or transactions which might involve a real or potential
conflict and at each Board meeting directors declare any conflicts
or changes to their independence. In the event of such a conflict,
the Board acts appropriately and takes minutes of its actions.
The Board Charter sets out the process that the Company
applies if a conflict arises for one or more of its directors. In
particular, a director who has a conflict with respect to a matter
will not, without the Chairman’s approval, receive relevant Board
papers, or be present during any discussion or vote on that
matter. In the event that the Chairman has a conflict, the Lead
Independent Director’s approval is required.
Neither Dr Haynes nor Mr Fraunschiel has received any relevant
Board papers, been present during any discussion nor voted on
any matter concerning Woodside.
1.6 INDEPENDENT ADVICE
Each director is entitled to take independent professional advice
at the Company’s expense, with the prior approval of the
Chairman. In the case of the Chairman, the approval of the Lead
Independent Director is required.
1.7 PERFORMANCE REVIEW
The Group encourages excellence from all its personnel and the
directors recognize that the performance of all personnel,
including directors, is enhanced by a structured performance
review process.
Review of Board performance
There is a review of Board and Committee performance, policies
and practice every 12 months.
The review includes:
•
comparing performance against agreed relevant criteria; and
• examining the Board’s effectiveness and composition.
changes to the programs of the Board and Committees to adjust
their focus on particular areas.
In addition, the Nominations Committee evaluates the
performance of individual directors as those directors become
eligible for election and re-election.
Review of the performance of senior management
The Board establishes performance criteria for the CEO and
conducts a performance review of the CEO at least
annually. The Board is advised on these matters by the
Nominations Committee.
In turn, the CEO conducts annual performance reviews of senior
executives, which inform senior executives’ remuneration
packages, and reports on their performance to the
Remuneration Committee.
Each senior executive, including the CEO, has a written position
description and a service contract.
The relevant criteria against which the performance of the CEO
and the senior executives is assessed include:
•
•
financial criteria relevant to the individual’s responsibilities
and influence; and
personal performance indicators referable to achieving the
objectives of their role.
The performance and remuneration of the CEO and the senior
executives were reviewed in this manner during the
Reporting Period.
PART 2 – OPERATION AND RESPONSIBILITIES OF
THE BOARD AND BOARD COMMITTEES
Relevant policies and charters (see www.worleyparsons.com)
- Board Charter
- Audit and Risk Committee Charter
- Nominations Committee Charter
- Remuneration Committee Charter
The relevant criteria against which the performance of the Board
and its Committees is assessed include the following:
-
-
Health, Safety and Environment Committee Charter
Continuous Disclosure Policy
• monitoring of business performance;
2.1 BOARD RESPONSIBILITIES AND DELEGATION TO SENIOR
•
regulatory compliance;
• strategy formulation; and
• succession planning.
In addition, informal reviews are conducted as necessary and any
director may suggest that the Board conduct an additional formal
review earlier than the regular annual review.
From time to time, the Board engages external consultants to
undertake an independent review of the Board and individual
directors’ performance and effectiveness.
A Board and Committee evaluation took place during the
Reporting Period in accordance with this process with each
director conducting an individual evaluation of the performance
of the Board and Committees as well as the structure and
administration of the Board and Committees. The outcomes of
the evaluations were discussed by the Board as well as
measures to be taken to improve the effectiveness and
efficiency of the Board and Committees, including improvements
to certain reporting and analysis received by the Board and
MANAGEMENT
The Board’s key responsibilities are set out in the Board Charter.
The Board is responsible for approving the Group’s strategic
direction and objectives. It monitors all aspects of the Group’s
performance. The Board works with senior executives to
formulate strategic direction, to set goals, budgets, plans and
policies and to identify and mitigate risk.
Directors’ deliberations in Board meetings and the application
of the Group’s policies seek to facilitate the Board’s critical and
objective review of management’s performance and enable
the Board to align senior executives’ activities with
shareholder expectations.
The Board has given the CEO a written delegation to manage
the Group’s operations and it states that he must exercise his
delegation always wholly for the benefit of the Company and in
accordance with the Group’s Code of Conduct and other Group
policies. The CEO has given a written delegation to his direct
reports and similarly, his direct reports must exercise their
delegation always wholly for the benefit of the Company and in
accordance with the Group’s Code of Conduct and other Group
WorleyParsons Annual Report 2013 29
policies. This gives the CEO and his management team a framework within which to drive the Group’s strategic direction and meet
the goals determined by the Board.
2.2 BOARD MEETINGS
The Board meets in person at least six times a year, with additional meetings and briefings held as required, usually by telephone.
Senior executives are invited to attend certain Board meetings, even if they are not Board members. This provides a direct line of
communication between the directors and management. Non-executive directors also meet at least six times a year without
management. Details of the Board and Committee meetings held during the Reporting Period and attendances at those meetings are
set out below.
In addition to those meetings, eight special purpose Board Committee meetings were held during the Reporting Period. The Board
also met informally during the Reporting Period by way of a Board briefing on seven occasions.
All non-executive directors who are not members of the standing Board Committees are invited to, and generally attend, the standing
Board Committee meetings.
BOARD
AUDIT AND RISK
COMMITTEE
NOMINATIONS
COMMITTEE
REMUNERATION
COMMITTEE
HEALTH, SAFETY AND
ENVIRONMENT COMMITTEE
DIRECTOR
John Grill
Ron McNeilly
Larry Benke
Erich Fraunschiel
John M Green
Christopher Haynes, OBE
Catherine Livingstone, AO
JB McNeil
Wang Xiao Bin
Andrew Wood
MEETINGS
HELD
WHILE A
DIRECTOR
MEETINGS
HELD
WHILE A
MEMBER
NUMBER
ATTENDED
MEETINGS
HELD
WHILE A
MEMBER
MEETINGS
HELD
WHILE A
MEMBER
NUMBER
ATTENDED
MEETINGS
HELD
WHILE A
MEMBER
NUMBER
ATTENDED
NUMBER
ATTENDED
NUMBER
ATTENDED
8
11
11
11
11
11
11
11
11
7
8
11
11
11
11
11
11
11
11
7
1
6
6
6
6
2
5
5
5
5
5
5
5
5
1
6
6
6
6
1
6
6
6
2
5
5
5
5
5
5
5
5
1
6
6
6
1
6
6
6
1
6
6
6
The Audit and Risk Committee also reviews and makes
recommendations on the strategic direction, objectives and
effectiveness of the Group’s financial and operational risk
management processes. This includes considering the
effectiveness of risk management processes, and compliance
and internal control systems.
The Chairman of the Committee is an independent director
who is not the Chairman of the Board. The following directors
were members of the Audit and Risk Committee during the
Reporting Period:
NAME
DURATION
Erich Fraunschiel (Chairman)
Whole Reporting Period
Catherine Livingstone, AO
Whole Reporting Period
JB McNeil
Wang Xiao Bin
Ron McNeilly
Whole Reporting Period
Whole Reporting Period
From 10 April 2013
2.3 BOARD COMMITTEES
The Board has established four standing Committees to ensure
that it is well equipped to discharge its responsibilities and to
assist the Board in carrying out its responsibilities: the Audit and
Risk Committee; the Nominations Committee; the Remuneration
Committee; and the Health, Safety and Environment Committee.
Each of the Committees has a formal charter in place.
Each Committee is comprised of:
•
•
a non-executive director as Chairman;
only non-executive directors, the majority of whom are
independent; and
•
at least three members.
Senior executives may attend Committee meetings upon
invitation from the relevant Chairman.
Audit and Risk Committee
The Audit and Risk Committee assists the Board in overseeing
the integrity of the Group’s financial reporting, risk management
framework and internal controls. The Committee has an
important role in supervising and monitoring the progress of
both the Internal Audit and Risk Management functions. In
addition, it manages the Group’s relationship with the external
auditor, including the auditor’s appointment, and removal and
evaluation and approval of the auditor’s engagement terms, fees
and audit plan.
30 WorleyParsons Annual Report 2013
CORPORATE GOVERNANCE CONTINUED Details of the qualifications of the members of the Audit and
Risk Committee are set out in the Directors’ Report on pages
43–45. Details of the Audit and Risk Committee meetings held
and attendances at those meetings are set out in this statement
on page 30.
The Nominations Committee and the Board consider the
composition of the Board at least twice annually: when
assessing the Board’s performance and when considering
director election and re-election. In addition, it also considers
Board composition before appointing any new director.
The Audit and Risk Committee is responsible for establishing
procedures for the selection and recommendation to the Board
of the external auditor. Those procedures involve obtaining
detailed written submissions from the proposed external auditor,
including a detailed resumé for the proposed senior audit
engagement partner. The Committee then interviews that
partner and seeks references from third parties as to their
suitability before making any recommendation to the Board in
that regard.
The Committee is also responsible for establishing procedures
for the rotation of the external audit engagement partner. The
Committee monitors that partner during their period of
appointment and may recommend to the Board that that partner
rotate earlier than is required by law if the Committee is of the
view that this is appropriate in all the circumstances.
The Committee, on behalf of the Board, also monitors the
integrity of the external audit function by not permitting:
•
•
the partner managing the audit for the external auditor to
serve for more than five consecutive years; and/or
the external auditor to be retained for non-audit work where
such retainer may detract, or be perceived to detract, from
the auditor’s independence or impartiality.
Fees paid to the external auditor for non-audit work are
disclosed in the financial statements.
Nominations Committee
The Nominations Committee assists and advises the Board on
matters relating to Board composition and performance,
including director independence, and the CEO’s appointment,
performance review and remuneration. The Committee reviews,
assesses and advises the Board in relation to the necessary and
desirable competencies of directors. It also oversees director
selection and appointment.
All non-executive directors are members of the
Nominations Committee.
NAME
DURATION
Ron McNeilly (Chairman)
To 8 April 2013
Ron McNeilly
Whole Reporting Period
John Grill (Chairman)
From 8 April 2013
Larry Benke
Erich Fraunschiel
John M Green
Whole Reporting Period
Whole Reporting Period
Whole Reporting Period
Christopher Haynes, OBE
Whole Reporting Period
Catherine Livingstone, AO
Whole Reporting Period
JB McNeil
Wang Xiao Bin
Whole Reporting Period
Whole Reporting Period
In considering whether the Board will support the re-election of
incumbent directors, the Nominations Committee considers the
skills, experience, expertise, diversity and contribution made to
the Board by the incumbent director and the contribution that
the director is likely to make if re-elected.
Following this assessment, the Nominations Committee will
make a recommendation to the Board as to whether or not the
Board should support the re-election of the incumbent director.
When considering appointing new directors, the Nominations
Committee assesses the range of skills, experience, expertise,
diversity and other attributes from which the Board would
benefit and the extent to which current directors possess such
attributes. This assessment allows the Nominations Committee
to provide the Board with a recommendation concerning the
attributes for a new director, such that they balance those of
existing directors. The Board considers the Nominations
Committee’s recommendation and determines the attributes for
which it is searching.
Candidates are assessed through interviews, meetings and
background and reference checks (which may be conducted
both by external consultants and by directors) as appropriate.
Following this assessment, the Nominations Committee will
make a recommendation to the Board concerning the
proposed appointment.
If the Board decides to continue the process, as a final step, all
directors will meet with the proposed director. The Board will
then make its final decision with regard to the appointment.
Remuneration Committee
The Remuneration Committee assists and advises the Board on
matters relating to Board remuneration, and the performance
and remuneration of the CEO’s direct reports. The Committee is
responsible for ensuring that the Group has and observes
coherent remuneration policies and practices which enable it to:
•
attract and retain executives, directors and other personnel
who will create value for shareholders;
• generate sustained business performance; and
• support the Group’s objectives, goals and values.
Further details on the operation of the Committee are set out in
the Remuneration Report on page 48 of the Annual Report.
The following directors were members of the Remuneration
Committee during the Reporting Period:
NAME
DURATION
John M Green (Chairman)
Whole Reporting Period
JB McNeil
Ron McNeilly
John Grill
Whole Reporting Period
Whole Reporting Period
From 10 April 2013
Details of the Nominations Committee meetings held and
attendances at those meetings are set out in this statement on
page 30.
Details of the Remuneration Committee meetings held and
attendances at those meetings are set out in this statement on
page 30.
WorleyParsons Annual Report 2013 31
Health, Safety and Environment Committee
3.1 ETHICAL DECISION MAKING – THE CODE OF CONDUCT
The Health, Safety and Environment Committee assists the
Board to fulfill its responsibility to oversee health, safety and
environmental matters arising out of the Group’s activities.
It is responsible for making recommendations to the
Board regarding:
•
•
•
the effectiveness of the resources and processes that the
Group uses to manage health, safety and environmental risks
and to comply with health, safety and environmental laws;
the Group’s and management’s respective performance with
respect to health, safety and environment; and
the identity of independent third parties to be appointed to
verify the effectiveness of the Group’s resources, process
and performance with respect to health, safety and
environment, along with the scope of their role and how
frequently verification will be undertaken.
The following directors were members of the Health, Safety and
Environment Committee during the Reporting Period:
NAME
DURATION
Christopher Haynes, OBE
(Chairman)
Ron McNeilly
Larry Benke
John Grill
Whole Reporting Period
Whole Reporting Period
Whole Reporting Period
From 10 April 2013
Details of the Health, Safety and Environment Committee
meetings held and attendances at those meetings are set out in
this statement on page 30.
2.4 DISCLOSURE COMMITTEE
The Continuous Disclosure Policy establishes a Disclosure
Committee. The role of the Disclosure Committee is to consider
matters which are potentially material and price sensitive and to
determine whether those matters are required to be disclosed to
the market.
The Disclosure Committee comprises the CEO or the Chief
Financial Officer (CFO), the Company Secretary and at least one
non-executive director. The Board considers any major disclosure
matters such as results, profit guidance and major acquisitions.
PART 3 – GOVERNANCE POLICIES APPLYING TO
THE GROUP
Relevant policies and charters (see www.worleyparsons.com)
– Board Charter
– Audit and Risk Committee Charter
– Nominations Committee Charter
– Remuneration Committee Charter
– Health, Safety and Environment Committee Charter
– Code of Conduct
– Securities Dealing Policy
– Continuous Disclosure Policy
– Corporate Risk Management Policy
– Global Diversity and Inclusion Policy
– Corporate Responsibility Statement
32 WorleyParsons Annual Report 2013
The Board has published various policies and codes to promote
the Group’s approach to ethical and responsible decision making.
The Group’s Code of Conduct (Code) guides the Group’s
personnel, including directors, as to the standards of behavior
expected of them. The Code has been translated into Arabic,
Bahasa Indonesian, Bahasa Malay, Bulgarian, French, Hindi,
Kazakh, Mandarin, Norwegian, Portuguese, Russian, Spanish,
Tagalog, Thai and Vietnamese.
The Code was updated during the Reporting Period to reflect
changes in legislation and corporate governance standards.
While the Code seeks to prescribe standards of behavior for all
Group personnel to observe, it does not, and understandably
cannot, identify every ethical issue that an individual might face.
The Code’s objective is to provide a benchmark for professional
and personal behavior throughout the Group, to safeguard the
Group’s reputation and to make clear the consequences of
breaching the Code.
The Code deals with many ethical issues, including:
•
the Group’s commitment to a safe and harassment-free
workplace;
• good corporate citizenship and compliance with laws;
•
•
acting with professional integrity (including avoiding conflicts
of interest); and
protecting the Group’s reputation, assets, resources,
information and records.
The Group provides the Code and training in relation to it to all
Group personnel when they start with the Group and provides all
Group personnel with annual refresher training. All Group
personnel can access the Code from the Group’s intranet or
request a copy from their local People group representative.
3.2 SECURITIES DEALING POLICY
The Board has approved a Securities Dealing Policy that applies
to all the Group’s personnel, including directors. The policy is
designed to:
•
•
explain the type of conduct in relation to dealings in
securities that is prohibited under the relevant law and by
the Group, including insider trading; and
establish a procedure for buying, selling or otherwise dealing
in the Company’s securities that prohibits dealing by
personnel and their associates during specified closed
periods without prior approval from the Chairman of the
Audit and Risk Committee, Chairman of the Board, CEO or
Company Secretary, as appropriate. Such approval will only be
granted in exceptional circumstances.
The Act prohibits members of the Group’s key management
personnel and their closely related parties from hedging any
performance rights that they have been granted under the
WorleyParsons Performance Rights Plan. Under the Group’s
Securities Dealing Policy, all personnel and their associates are
prohibited from hedging any performance rights that they hold
and they are also prohibited from hedging any shares that they
hold that are subject to transfer restrictions or any minimum
holding requirements.
Hedging includes entering into any transaction or arrangement
in financial products which operates to limit the economic risk of
a security holding in the Company, including equity swaps and
contracts for difference.
CORPORATE GOVERNANCE CONTINUED 3.3 MANAGEMENT OF MATERIAL BUSINESS RISKS
The Group has a Corporate Risk Management Policy and Risk and
Assurance framework. The Board requires management to
design and implement risk management and internal control
systems to identify, assess and manage the Group’s material
business risks and report to it on whether those risks are being
managed effectively. The Risk and Assurance framework
describes the objectives, strategies, resources and
responsibilities for managing risk and how assurance is
provided to the Board and management in relation to
compliance and effectiveness.
The Group’s risk management approach is based on the
International Standard ISO 31000:2009 Risk management –
Principles and guidelines. This approach adopts best practice in
risk management insofar as it relates to the Group’s
requirements. The Group’s Risk Management systems are mature
and embedded throughout the operations via the Group’s
Enterprise Management System.
The Group has processes to systematically identify, assess, and
report on both financial and non-financial material business risks.
Part of this process requires the Internal Audit group to report to
the Board as to the effectiveness of the Group’s management of
its material business risks and internal controls. A strategic and
operational Corporate Risk Management report is prepared and
analyzed by both management and the Board on a biannual
basis. The Board received reports from management on the
effectiveness of the Group’s management of material business
risks during the Reporting Period.
This process enables the Board to consider the effectiveness of
the Group’s management of its material business risks. The
Board has also received a written assurance from the CEO and
the CFO that the declarations provided by them, in accordance
with section 295A of the Act and ASX Recommendation 7.3, are
founded on a sound system of risk management and internal
control and that the system is functioning effectively in relation
to financial reporting and material business risks.
3.4 INTERNAL AUDIT
The Internal Audit function is independent of management and
is overseen by the Audit and Risk Committee. It provides
assurance that the Group’s financial and operational risks are
being managed appropriately and that its internal control
framework is operating effectively. In addition to his ongoing
audit reports, the Director of Internal Audit provides an annual
assessment to the Audit and Risk Committee of the adequacy
and effectiveness of the Group’s control processes and risk
management procedures in light of the nature, function and size
of the Group’s operations.
3.5 CONTINUOUS DISCLOSURE
The Board is committed to ensuring that the Company complies
with its continuous disclosure obligations and has approved a
Continuous Disclosure Policy that applies to all Group personnel,
including directors. The Board seeks to promote investor
confidence by ensuring that trading in the Company’s shares
takes place in an informed market.
The Continuous Disclosure Policy is designed to ensure that all
Group personnel are aware of the Company’s obligations and to
ensure accountability at a senior executive level for timely
disclosure of material information. This policy aims to ensure
that shareholders and the market in general are kept properly
informed of material price sensitive information affecting the
Company, on a timely basis. The Company discharges this
obligation by releasing material price sensitive information to
the ASX in ASX announcements and other documents distributed
to shareholders, such as the annual report.
3.6 COMMUNICATING WITH SHAREHOLDERS
The Board aims to ensure that shareholders are informed of all
material information relating to the Company by communicating
to shareholders through:
•
•
•
continuous disclosure reporting to the ASX;
the annual report; and
media releases and other investor relations publications on
the Group’s website.
The Board encourages the full participation of shareholders at
the annual general meeting to seek to ensure a high level of
accountability and discussion of the Group’s performance and
goals. The Chairman encourages questions and comments from
shareholders and seeks to ensure that shareholders are given
ample opportunity to participate.
The CEO, the Group Managing Director – Development and/or the
CFO and occasionally other senior executives, meet with
analysts and investors from time to time. Any presentations
made to these persons are released to the market via the ASX
and published in the Investor Relations section of the Group’s
website. Further, the CEO, Group Managing Director –
Development and/or the CFO endeavor to respond to queries
from investors and analysts for information in relation to the
Group, provided the information requested is already publicly
available or is not information which is price sensitive.
The external auditor attends the annual general meeting and is
available to answer shareholder questions about the conduct of
the audit and the preparation and content of the auditor’s report.
3.7 REMUNERATION OF DIRECTORS AND SENIOR EXECUTIVES
The Group seeks to attract and retain directors and senior
executives with the appropriate expertise and ability to create
value for shareholders.
The remuneration structure for the non-executive directors is
not related to performance. Non-executive directors receive fees
which reflect their skills, responsibilities and the time
commitments required to discharge their duties. The Company
does not pay retirement benefits to non-executive directors
(other than superannuation contributions in accordance with its
statutory superannuation obligations).
The remuneration structure for senior executives reflects the
Group’s performance culture: there is a direct correlation
between the executive’s reward and individual and Group
performance so as to seek to ensure that the Group’s
remuneration policy is aligned with its long term business
objectives and the interests of shareholders and other
stakeholders.
Further details of the remuneration policies and practices of the
Group and the remuneration paid to directors and senior
executives are set out in the Remuneration Report on pages
46 to 59 of the Annual Report.
3.8 DIVERSITY AND INCLUSION
The touchstone of the Group’s success is recognizing all its
personnel for their performance, competence, collaboration and
sense of professional accountability. The Group welcomes a very
diverse population of personnel that reflects the range of
WorleyParsons Annual Report 2013 33
3.8.2 THE GROUP’S MEASURABLE OBJECTIVE AND CURRENT
GENDER PROFILE
The Group’s measurable objective for increasing gender diversity
is to increase the representation of women at all levels of its
organization over time. The Group’s progress towards achieving
that objective, along with the proportion of women employees
within the Group, women in senior executive positions and
women non-executive directors, is set out in the table below:
MEASURES
Women employees1
Women senior executives2
Women non-executive directors3
2013
~25%
~15%
~22%
2012
~26%
~11%
~25%
1
2
3
This includes both employees and contractors engaged by the Group.
Senior executives includes all members of the Group’s Executive
Committee and all executives reporting directly to a member of that
Committee, including the CEO.
The Company has chosen to report the percentage of women non-
executive directors rather than the percentage of women Board
members, because it has only one executive director, the CEO, who is
counted at the senior executive level.
countries, cultures and contexts spanned by the Group’s
operations. The Group considers this diversity to be one of its
strengths.
The diversity of the Group’s personnel includes factors such as
race, ethnicity, gender, sexual orientation, socio–economic status,
culture, age, physical ability, education, skill levels, family status,
religious, political and other beliefs and work styles. The Group
knows from experience that differences in ideas, backgrounds,
patterns of thinking and approaches to work can generate value
for the Group’s stakeholders: its customers, shareholders,
personnel and the communities in which it operates. It is
therefore the Group’s policy to appreciate the distinctiveness of
all of its personnel and to harness these differences within a
productive, inclusive, talent and performance based environment,
in which everybody feels valued, their skills are fully utilized,
their performance is recognized, professional accountability is
expected and organizational goals are met.
3.8.1 THE GROUP’S GLOBAL DIVERSITY AND
INCLUSION POLICY
The Group’s Global Diversity and Inclusion Policy is available on
the Group’s website.
The Group’s approach to diversity and inclusion is based on the
following objectives, being to:
•
•
•
•
•
•
retain, promote and hire the best people the Group can,
focusing on actual and potential contribution in terms of
their performance, competence, collaboration and
professional accountability;
foster an inclusive culture and ensure that current and future
opportunities for all Group personnel are based on
competence and performance irrespective of race, ethnicity,
gender, sexual orientation, socio–economic status, culture,
age, physical ability, education, family status, religious,
political and other beliefs and work styles. This includes
being intolerant of behaviors that denigrate or otherwise
diminish such attributes or that discriminate on the basis of
such attributes;
create ways to improve talent management, cultural diversity
and inclusion – including where the under-representation of
an available population group is preventing the Group from
taking full advantage of the diversity of the talent pool;
create and manage a strong and diverse talent pipeline
which takes a unified and talent based approach to
recruitment, training and development, performance
management, retention and succession planning;
provide a fair level of reward in order to attract and retain
high caliber people – and build a culture of achievement by
providing a transparent link between reward and
performance; and
be compliant with all mandatory diversity reporting
requirements. In accordance with the Australian Workplace
Gender Equality Act 2012, the Group has submitted a
Workplace Gender Equality Report for the 2012/2013
reporting period and the submission is available on the
Group’s website.
34 WorleyParsons Annual Report 2013
CORPORATE GOVERNANCE CONTINUED CORPORATE RESPONSIBILITY
INTRODUCTION
The Group recognizes the importance of our communities as
stakeholders and influencers in the areas in which we operate.
The Group aims to be recognized as an industry leader in
Corporate Responsibility and to this end has embarked on a
journey of continuous improvement.
The Group is committed to contribute to the development of
local communities through local employment and Corporate
Responsibility projects. The key drivers for success in these
projects have been the Group’s overarching support and the
willingness of the Group’s personnel to volunteer their time
and make donations in support of their local Corporate
Responsibility activities.
A broad range of projects were delivered across the business
such as pro-bono projects, sponsorships, education programs,
fundraising for not-for-profit organizations and programs to
reduce the Group’s impact on the environment.
The Group will be launching a WorleyParsons Foundation in the
next financial year in addition to its locally executed Corporate
Responsibility program.
1. CORPORATE RESPONSIBILITY STATEMENT
In 2012, the Group revised and updated its Corporate
Responsibility Statement to clearly articulate the Group’s
commitment to, and aspirations of, Corporate Responsibility
leadership.
The Group adheres to the following commitments:
WorleyParsons is committed to working with our customers and
suppliers to achieve results that grow our company, reward our
shareholders and our people and contribute to our communities.
We acknowledge our responsibilities to the communities in
which we operate.
1.1 Governance, Ethics and Transparency
We maintain the highest standards of corporate governance and
ethics, and report our governance performance annually.
We conduct our business in an open, honest and ethical
manner as described in our Code of Conduct and our integrity
framework, OneWay™.
We integrate corporate responsibility in our business planning
and decision making and measure, monitor and report our
corporate responsibility performance on a regular basis.
1.2 Our People
Our people are our greatest asset and we support them by
providing a work environment that is positive and safe and by
committing to their ongoing development.
We promote a diverse and inclusive workplace as outlined in our
Diversity and Inclusion Policy.
We are committed to being recognized as a leader in health and
safety performance and have a goal of Zero Harm.
We apply fair labor practices and comply with applicable
national and local labor laws of the countries and
communities we work in.
We do not employ or condone the employment of forced
or child labor.
1.3 Human Rights
We will respect the basic rights of the people we deal with and
will not be complicit or engage in activities that solicit or
encourage human rights abuse.
1.4 Community
We are committed to making a positive impact in the
communities and environments in which we operate. Our people
will be involved in community based initiatives, creating benefits
for both the community and our people.
Our locations will support programs and initiatives specific to
their locations, and wherever possible, in conjunction with our
customers. We will support local businesses, train and employ
local people, and utilize other local resources wherever we can.
1.5 Fair Operating Practices and Supply Chain
We will actively strive to implement socially responsible supply
chain practices and anti-corruption practices working closely
with our customers and suppliers as partners.
We expect our suppliers to operate with similar values as ours
and will encourage them, where necessary, to adopt similar
corporate responsibility policies as our own.
1.6 Environment
We recognize the importance of operating sustainably and
commit to continually identify opportunities for improving our
environmental performance.
We believe that all our people are responsible for performing
their work in an environmentally sustainable manner. We will
continue to deliver profitable sustainability to our customers
through our EcoNomicsTM service offering.
2. MILESTONES
During the Reporting Period, the Group reached a number of
Corporate Responsibility milestones, including:
•
•
•
•
•
•
granted approval by the Executive Committee to establish a
WorleyParsons Foundation that will provide support for the
execution of strategic community projects;
revised the WorleyParsons Code of Conduct that reaffirms
the Group’s Corporate Responsibility expectations;
developed and introduced the Group’s Human Rights Policy
that is aligned to the United Nations Human Rights Council’s
“Protect, Respect and Remedy Framework” which states the
Group’s business principles and confirms the Group’s
commitment to human rights;
published the Group’s first Supply Chain Code of Conduct
which sets the minimum and preferred requirements for the
Group’s suppliers and contractors, and reflects the best
practice and continuous improvement in sustainability of the
Group’s business and projects;
achieved global Chartered Institute of Purchasing & Supply
(CIPS) Certification for the Group procurement policies,
strategies, procedures and processes as part of the Group
commitment to be the best in class in procurement policies;
hosted Corporate Responsibility alignment meetings with a
number of the Group’s Tier 1 customers to identify any real
or perceived gaps and to share lessons learnt and best
practices; and
WorleyParsons Annual Report 2013 35
•
fulfilled the Group’s first year obligations as a signatory to
the United Nations Global Compact, a strategic policy
initiative for businesses that are committed to aligning their
operations and strategies with 10 universally accepted
principles in the areas of human rights, labor, environment
and anti-corruption.
During the year ending 30 June 2014, the Group intends to:
•
•
•
•
establish a WorleyParsons Foundation Council to
provide governance and oversight to the new
WorleyParsons Foundation;
undertake ongoing continuous improvement of external
reporting commitments using the internationally recognized
Global Reporting Initiative framework;
further assess Corporate Responsibility targets, objectives
and collaboration with various Group functions; and
further integrate awareness and importance of road safety
within the Group and the communities in which it operates.
3. AWARDS
•
•
•
•
•
•
WorleyParsons was a Top 50 finalist in the 2012 Social
Investment Pioneer Awards. The inaugural global award is an
initiative of the Principles for Social Investment Secretariat,
United Nations Global Compact Initiative and recognizes the
importance of private sector engagement in sustainable
community development.
WorleyParsons China was recognized as one of the Top 100
Best Enterprises with an Award for Excellence in Corporate
Social Responsibility in the fourth China Corporate Social
Responsibility Annual Summit in Beijing.
WorleyParsons received an Honorable Mention in the 2013
Asia-Pacific Enterprise Leadership Awards for its educational
service and commitment to philanthropy.
WorleyParsons Europe was recognized for its approach to
occupational safety and health in an awards scheme run by
the safety charity, the Royal Society for the Prevention of
Accidents. 2013 is the fourth consecutive year that
WorleyParsons Europe has attained the GOLD Award and
once again illustrates our commitment to industry leadership
in Health, Safety and Environmental performance.
WorleyParsons was recognized as the Most Improved
Purchasing Operation – Step Change at the CIPS Middle East
Awards in recognition of its detailed strategy and clear
objectives in sustainable project procurement and delivery. It
was also recognized as a finalist in the Best Contribution to
the Reputation of the Procurement Profession category.
WorleyParsons was awarded the Chairman’s Award for
outstanding commitment, participation and leadership at an
executive level, in supporting CareerTrackers internships for
Australian Indigenous university students.
36 WorleyParsons Annual Report 2013
36 WorleyParsons Annual Report 2013
CORPORATE RESPONSIBILITY CONTINUED 4. CORPORATE RESPONSIBILITY INDICATORS
5. ACTIVITY HIGHLIGHTS
The Group undertook various community engagement and
environmental activities over this Reporting Period, including:
•
•
•
•
•
•
•
•
•
•
participating directly in over 365 community based and
environmental projects across 26 countries via ongoing
participation in the Group’s own programs: DeltaAfrik
Foundation in Nigeria, We Care program in Canada and other
location Corporate Responsibility committees;
contributing over $200,000 and 450 volunteer hours
towards educational programs and sponsorships across 20
location programs in the USA, Australia, Canada, Thailand,
Bulgaria and South Africa;
providing 1,400 pro-bono hours towards project management
and engineering services in Australia, Canada and the
United Kingdom;
matching $480,000 of Group personnel
fundraising programs;
training 743 people in leadership development programs,
representing 61 nationalities, speaking 21 primary languages
and 38 secondary languages;
expanding the Women of WorleyParsons professional
women’s global network to 970 members across 30
locations. Over 100 events were hosted to celebrate and
promote diversity and inclusion across the Group;
providing ongoing support to the Australian Indigenous
community by hosting Indigenous business forums,
internships, art exhibitions and cultural festivals;
providing sponsorship to organizations who champion
women in science and technology;
engaging in recycling, bush regeneration, tree planting and
beach clean-up activities across a number of countries; and
continuing to deliver sustainability-enhancing services to
the Group’s customers through the Group’s EcoNomicsTM
service offering.
The Group measures and focuses on those areas that are
important to the long term success of its business and are
desirable to all of its stakeholders.
Contributions by Group personnel and the Group’s business
operations are measured in terms of cash and volunteer
time contributions.
The Group completed a response for the Carbon Disclosure
Project in 2013. The Group’s energy consumption and
greenhouse gas emissions were recorded to assist the Group to
measure and reduce its energy consumption and to reduce its
greenhouse gas emissions.
The Group uses the US OSHA (United States Occupational Safety
& Health Administration) reporting requirements for Total
Recordable Case Frequency Rate (TRCFR) and Lost Workday Case
Frequency Rate (LWCFR).
The Group’s Corporate Responsibility indicators for the Reporting
Period and the year ended 30 June 2012 are:
INDICATORS
2013
2012
Contributions by operations
$2.25 million
$2.67 million
Contributions by personnel members $1.90 million
$1.95 million
Volunteer hours by personnel
members
TRCFR
LWCFR
10,473 hours
23,748 hours
0.13
0.03
0.12
0.03
The Group’s Corporate Responsibility program has achieved
positive results and maintains the levels of employee fundraising
and company contribution.
As data for greenhouse gas emissions and energy consumption
is not available until the October after the end of financial year,
the table below shows those indicators for the year ended
30 June 2012 and the year ended 30 June 2011:
2012
2011
PER
PERSONNEL
MEMBER1
PER
PERSONNEL
TOTAL2 MEMBER1
TOTAL
INDICATORS
Greenhouse gas
emissions tCO2-e
Energy consumption MWh
2.36
96,168
6.78 276,650
2.80
97,840
7.54 263,949
1 Personnel includes employees and contractors.
2 Totals include gas emissions from, and energy consumed by, the
Exmouth Power Station, Australia.
WorleyParsons Annual Report 2013 37
YOUTH MENTORING, CANADA
A group of 23 volunteers from the Edmonton office donated
their time, on a weekly basis, to help and mentor children
from the Boys and Girls Club Big Brothers Big Sisters in
Calgary (BGCBigs) in navigating the challenges in their lives
such as peer pressure, puberty and self-esteem issues.
Every week, mentors and their protégés spent time together
in a casual environment with a focus on having fun and
self-development.
“ My big sister is someone I can look up to. We talk about my
future and what is important to me. When I talk to her, it
reminds me that no matter how tough life seems right now,
everything will turn out OK at the end.”
Former mentee of BGCBigs, Calgary.
HELPING ORPHANS, KAZAKHSTAN
In September 2012, WorleyParsons Kazakhstan (WPK) began
fundraising efforts to raise money for orphaned children in
the village of Geolog, near Atyrau. There are over 80,000
orphans currently living in state-run homes across
Kazakhstan and many of these homes depend on donations
to supplement limited government funding.
The event collected a total of KZT621,500 ($4,000) which
was used to purchase much needed winter clothing for 49
orphans, festival costumes and musical instruments. The
goods were delivered to the orphanage in November 2012.
“ We were very glad to see so many smiles yesterday on kids’
faces ... it must go on.”
Dina Gabdesheva, Human Resources Manager WPK and member of
WPK Corporate Responsibility committee.
TRANSPORT SYSTEM DESIGN, AUSTRALIA
WorleyParsons Perth provided pro-bono engineering work to
Royal Flying Doctor Service (RFDS) to identify and implement
a solution to the difficulties presented to RFDS in
transporting larger patients. WorleyParsons was involved in
the conceptual study, organization of tender documents, and
working with RFDS in interviewing and selecting the
preferred suppliers.
The goal from the collaboration was an integrated bariatric
transport system, which will be adaptable from the aircraft to
ambulance ground support. In May 2013, WorleyParsons
Perth and RFDS achieved a significant milestone in the
delivery of a new aeromedical stretcher and loading system
to cope with larger patients.
“ Obviously, the size of our aircraft means that it can be a
challenge to transport these (larger) patients so we had to
be innovative in how we manage this and the expertise
of WorleyParsons engineers has been invaluable in
finding a solution.”
Dr Stephen Langford, RFDS Medical Director.
38 WorleyParsons Annual Report 2013
WorleyParsons Edmonton mentor Lydia Fernandez with her protégé, Taylor
(Photo credit: United Way of the Alberta Capital Region, WE Magazine 2013)
WorleyParsons personnel with Geolog orphanage children
Royal Flying Doctor Service aircraft in Western Australia
CORPORATE RESPONSIBILITY CONTINUED MUSEUM REFURBISHMENT, UNITED KINGDOM
Graduates, with support and guidance from senior
management from the WorleyParsons London office, have
undertaken pro-bono work with the Kew Bridge Steam
Museum, a nationally significant museum with the world’s
largest collection of Cornish Beam Engines.
The first phase of the project includes design work to be
incorporated into the museum’s GBP2.5 million refurbishment
program. The Group’s graduates have been working on the
design for a support structure for a gas engine and
re-engineering the water pump to the entrance of the
museum. Plans to incorporate this design are scheduled and
construction is underway at the museum.
“ The services provided to date have been of the highest
professional quality throughout and have helped the
museum make significant financial savings. We are very
grateful to the WorleyParsons teams.”
Richard Albanese, Project Coordinator for Project Aquarius, Kew
Bridge Steam Museum.
UNITED WAY CAMPAIGN,
CANADA/UNITED STATES OF AMERICA
United Way is a community based charity which focuses on
working with the local community to find effective solutions
to social issues using a combination of employee fundraising
and corporate matching.
In FY2013, WorleyParsons Canada as well as the Group’s
Houston and Tulsa offices had their most successful United
Way campaign to date. Two of the largest campaigns were
from the Calgary and Edmonton offices with a total
contribution of CAD1,175,000 ($1,133,000).
“ For more than 30 years, WorleyParsons has been a
wonderful partner to the United Way and to the city
of Calgary. At WorleyParsons, employees have a good
understanding that they have an opportunity to make a
difference in the world and they are committed to that as
individuals and as an organization.”
Dr Lucy Miller, President and Chief Executive Officer of the United
Way of Calgary and area.
ENTERPRISE DEVELOPMENT PROGRAM, SOUTH AFRICA
An Enterprise Development (ED) Program is funded by
WorleyParsons TWP. An ED business center was
established in Johannesburg consisting of nine
promising small businesses.
WorleyParsons TWP contributes ZAR150,000 ($15,000) per
month by supplying these small businesses with office
space, computers, telephones and printing facilities at no
cost to the businesses. The business owners have access
to technical mentorship and technical skills transfer from
the local WorleyParsons knowledge base. Further, these
businesses have been incorporated into the Group’s
supply chain.
Additional assistance in marketing, financial advice, tender
preparation, human resources and business processes has
also been provided to the business owners.
“ Our business has grown exponentially since our
involvement with WorleyParsons TWP. Gridbow is now a
force to be reckoned with in the engineering sector.”
Evans Farai Chabata, Managing Director, Gridbow Engineering.
Graduates inspecting control equipment at Kew Bridge Steam Museum,
United Kingdom
United Way campaign kick-off in WorleyParsons Calgary
WorleyParsons TWP Enterprise Development Program participants,
South Africa
WorleyParsons Annual Report 2013 39
Financial Report
For the financial year ended 30 June 2013
Directors’ Report
Statement of Financial Performance
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Members of WorleyParsons Limited
Shareholder Information
Corporate Information
NOTES TO THE FINANCIAL STATEMENTS
1 Corporate Information
2 Summary of Significant Accounting Policies
3 Financial Risk Management
4 Expenses and Losses/(Gains)
5 Other Income
6 Income Tax
7 Current Assets – Cash and Cash Equivalents
8 Current Assets – Trade and Other Receivables
9 Non-Current Assets – Property, Plant and Equipment
10 Non-Current Assets – Intangible Assets
11 Non-Current Assets – Deferred Tax Assets
12 Current Liabilities – Trade and Other Payables
13 Current Liabilities – Interest Bearing Loans and Borrowings
14 Current Liabilities – Provisions
15 Non-Current Liabilities – Interest Bearing Loans and Borrowings
16 Non-Current Liabilities – Deferred Tax Liabilities
17 Non-Current Liabilities – Provisions
18 Issued Capital
19 Reserves
20 Retained Profits
WORLEYPARSONS LIMITED
ACN 096 090 158
40 WorleyParsons Annual Report 2013
65
65
71
72
72
72
73
73
74
75
76
76
76
77
77
78
78
79
80
80
21 Earnings Per Share
22 Dividends
23 Investments in Controlled Entities
24 Equity Accounted Investments
25 Interests in Jointly Controlled Operations and Assets
26 Notes to the Statement of Cash Flows
27 Finance Lease Receivable
28 Procurement
29 Commitments for Expenditure
30 Contingent Liabilities
31 Remuneration of Auditors
32 Related Parties
33 Key Management Personnel Disclosures
34 Segment Information
35 Credit Risk
36 Liquidity Risk
37 Currency Risk
38 Interest Rate Risk
39 Fair Values
40 Subsequent Events
41
60
61
62
63
64
65
95
96
98
100
80
80
81
83
83
84
84
84
85
85
85
85
86
87
89
90
90
93
94
94
DIRECTORS’ REPORT
The directors present their report on the consolidated entity consisting of
WorleyParsons Limited (Company) and the entities it controlled (Group or
consolidated entity) at the end of, or during, the year ended 30 June 2013.
DIVIDENDS – WORLEYPARSONS LIMITED
Details of dividends paid in respect of the current financial year and previous
financial year are as follows:
DIRECTORS
The following persons were directors of the Company during the financial
year and, unless noted, were directors for the full financial year and until the
date of this report:
Interim ordinary dividend for 2013 of 41.5 cents per
ordinary share paid on 22 March 2013 (41.5 cents franked)
John Grill (Chief Executive Officer and Executive Director until 23 October
2012, Chairman and Non-Executive Director from 1 March 2013)
Final ordinary dividend for 2012 of 51.0 cents per ordinary
share paid on 28 September 2012 (31.3 cents franked)
Ron McNeilly (Chairman and Non-Executive Director until 1 March 2013,
Deputy Chairman and Lead Independent Director from 1 March 2013)
Interim ordinary dividend for 2012 of 40.0 cents per ordinary
share paid on 30 March 2012 (31.7 cents franked)
Larry Benke
Erich Fraunschiel
John M Green
Christopher Haynes, OBE
Catherine Livingstone, AO
JB McNeil
Wang Xiao Bin
Andrew Wood (Chief Executive Officer and Executive Director from
23 October 2012).
The number of Board and Committee meetings held during the financial year
and the number of meetings attended by each of the Company’s directors is
set out on page 30 in the Corporate Governance statement.
DIRECTORS’ NUMBER OF SHARES AND PERFORMANCE RIGHTS
As at the date of this report, the relevant interests of the directors in the
shares and performance rights of the Company were:
Final ordinary dividend for 2011 of 50.0 cents per ordinary
share paid on 27 September 2011 (12.9 cents franked)
Total dividends paid
Since the end of the financial year, the directors have resolved to pay a
dividend of 51.0 cents per fully paid ordinary share, including exchangeable
shares, unfranked (2012: 51.0 cents per share, partially franked at 61.3%). In
accordance with AASB 137 Provisions, Contingent Liabilities and Contingent
Assets, the aggregate amount of the proposed final dividend of
$125.7 million is not recognized as a liability as at 30 June 2013.
REVIEW OF OPERATIONS
A detailed review of the Group’s operations for the financial year and the
results of those operations is contained in the Operating and Financial
Review, which is incorporated into, and forms part of, this directors’ report.
A summary of the consolidated revenue and results in respect of the current
financial year and previous financial year are as follows:
2013
$’M
2012
$’M
102.4
125.3
–
–
227.7
–
–
98.3
122.8
221.1
DIRECTORS
John Grill
Ron McNeilly
Larry Benke
Erich Fraunschiel
John M Green
Christopher Haynes, OBE
Catherine Livingstone, AO
JB McNeil
Wang Xiao Bin
Andrew Wood
NUMBER OF SHARES
NUMBER OF
PERFORMANCE
RIGHTS
25,372,173
53,6081
Revenue and other income
387,484
1,133,383
168,755
891,869
6,055
13,000
10,800
11,000
-
-
-
-
-
-
-
-
828,171
108,067
Depreciation
Amortization
Earnings before interest and tax (EBIT)
Net interest expense
Profit before income tax expense
Income tax expense
Profit after income tax expense
1 Excludes cash settled performance rights.
Further details in relation to the rights issued by the Company are set out in
the Remuneration Report, note 18 (c) and note 33.
PRINCIPAL ACTIVITIES
During the financial year, the principal activities of the Group consisted of
providing engineering design and project delivery services, including providing
maintenance and reliability support services to the following sectors:
Net gain on revaluation of investments previously
accounted for as equity accounted associates attributable
to members of WorleyParsons Limited
CONSOLIDATED
2013
$’M
2012
$’M
8,831.5
7,408.4
(21.0)
(81.3)
527.0
(53.4)
473.6
(19.1)
(83.9)
537.9
(44.1)
493.8
(129.4)
(117.3)
344.2
376.5
• Hydrocarbons;
• Minerals, Metals & Chemicals;
•
•
Infrastructure & Environment; and
Power.
Less: net gain on revaluation of investments previously
accounted for as equity accounted associates
–
(7.6)
Net profit excluding net gain on revaluation of investments
previously accounted for as equity accounted investments
344.2
368.9
Profit after income tax expense attributable to:
Members of WorleyParsons Limited
322.1
353.2
–
(7.6)
322.1
22.1
345.6
23.3
Non-controlling interests
Revenue and other income
8,831.5
7,408.4
Less: procurement services revenue at nil margin
(1,747.7)
(696.2)
Add: share of revenue from associates
549.2
665.0
Less: net gain on revaluation of investments previously
accounted for as equity accounted associates
Less: interest income
Aggregated revenue1
–
(6.0)
(7.6)
(7.0)
7,627.0
7,362.6
1
Aggregated revenue is defined as statutory revenue and other income plus
share of revenue from associates less procurement services revenue at nil
margin, interest income and net gain on revaluation of investments previously
accounted for as equity accounted associates. The directors of the Company
believe the disclosure of revenue attributable to associates provides additional
information in relation to the financial performance of the Group.
WorleyParsons Annual Report 2013 41
DIRECTORS’ REPORT CONTINUED
AGGREGATED REVENUE
EBIT
EBIT MARGIN
ACQUISITIONS
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
2013
$’M
2012
$’M
2013
$’M
2012
$’M
2013
%
2012
%
Hydrocarbons
5,344.3 5,015.1
633.7
598.4
11.9
11.9
Minerals, Metals
& Chemicals
Infrastructure
and Environment
Power
937.6
895.4
135.5
134.1
14.5
15.0
783.8
561.3
870.8
581.3
85.9
49.4
118.4
61.4
7,627.0 7,362.6
904.5
912.3
11.0
8.8
11.9
13.6
10.6
12.4
Global support costs
(342.7)
(336.7)
Interest and tax
for associates
Amortization of
acquired intangible
assets
EBIT excluding
the net gain on
revaluation of
investments previously
accounted for as equity
accounted associates
(11.1)
(13.8)
(23.7)
(31.5)
527.0
530.3
6.9
7.2
Aggregated revenue was $7,627.0 million, an increase of 3.6% on the prior
financial year. EBIT, excluding net gain on revaluation of investments
previously accounted for as equity accounted associates, of $527.0 million,
was down 0.6% from the prior financial year result of $530.3 million.
The EBIT margin on aggregated revenue for the Group, excluding net gain on
revaluation of investments previously accounted for as equity accounted
associates, decreased to 6.9% compared with 7.2% in 2012. After tax, the
members of WorleyParsons Limited earned a net margin, excluding net gain
on revaluation of investments previously accounted for as equity accounted
associates, on aggregated revenue of 4.2%, compared to the 2012 net margin
of 4.7%.
The effective tax rate was 27.3% compared with 24.1%, excluding net gain
on revaluation of investments previously accounted for as equity accounted
associates, in 2012.
The Group retains a strong cash position and low level of gearing with (net
debt/net debt plus total equity) at financial year end of 25.3% (2012: 19.9%).
Cash as at 30 June 2013 was $320.0 million (2012: $247.3 million). Earnings
before interest, tax, depreciation and amortization (EBITDA) interest cover for
2013 was 10.6 times (2012: 12.5 times). EBITDA interest cover, excluding
net gain on revaluation of investments previously accounted for as equity
accounted associates, for 2013 was 10.6 times (2012: 12.4 times).
Operating cash inflow for the period was $443.5 million, compared to
$437.5 million in 2012. Cash outflow from investing activities was $346.7
million (2012: $106.3 million).
EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share excluding net acquisition gains
Diluted earnings per share
2013
CENTS
130.8
130.8
129.9
Diluted earnings per share excluding net acquisition gains
129.9
2012
CENTS
143.7
140.6
142.5
139.5
Basic earnings per share, excluding net gain on revaluation of investments
previously accounted for as equity accounted associates, were 130.8 cents
per share, a decrease of 7.0% from the previous financial year result of
140.6 cents per share.
Effective from 1 January 2013, the Group acquired Bergen Group Rosenberg
AS, currently known as Rosenberg WorleyParsons AS (Rosenberg) and its
controlled entities in Norway. Rosenberg is a major supplier of engineering
solutions to the Norwegian oil and gas industry.
Effective from 1 March 2013, the Group acquired TWP Holdings Proprietary
Limited (TWP) and its controlled entities in South Africa and Peru. TWP
provides engineering design, procurement, construction management and
asset planning services to the mining sector.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Since the end of the financial year, the directors have resolved to pay a
dividend of 51.0 cents per fully paid ordinary share, including exchangeable
shares, unfranked (2012: 51.0 cents per share, partially franked at 61.3%). In
accordance with AASB 137 Provisions, Contingent Liabilities and Contingent
Assets, the aggregate amount of the proposed final dividend of
$125.7 million is not recognized as a liability as at 30 June 2013.
No other matter or circumstance has arisen since 30 June 2013 that has
significantly affected, or may significantly affect:
•
•
•
the consolidated entity’s operations in future financial years;
the results of those operations in future financial years; or
the consolidated entity’s state of affairs in future financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
While recognizing the uncertainties in world markets, we expect our
geographic and sector diversification to provide a solid foundation to deliver
increased earnings in FY2014. We have a clear growth strategy in place which
includes developing our skill set and geographic footprint across our customer
sectors. This will be achieved through organic growth as well as by taking
advantage of acquisition opportunities that provide value for shareholders.
We are confident that our medium and long term prospects remain positive
based on our competitive position, our diversified operations and strong
financial capacity.
ENVIRONMENTAL REGULATION
In the majority of the Group’s business operations, it does not have
responsibility for obtaining environmental licenses. The Group typically
assists its customers, who usually own or operate plant and equipment, with
the management of their environmental responsibilities, rather than having
those responsibilities itself. However, the Group has environmental
responsibilities in terms of compliance with environmental controls and in
exercising reasonable care and skill in its design, construction management,
operation and supervising activities. The risks associated with environmental
issues are managed through the Group’s risk management and quality
assurance systems.
It is the Group’s policy to comply with all environmental regulations applicable
to it. The Company confirms, for the purposes of section 299(1)(f) of the
Corporations Act 2001 (Act) that it is not aware of any breaches by the Group
of any environmental regulations under the laws of the Commonwealth of
Australia, or of a State or Territory of Australia.
CARBON AND ENERGY EMISSIONS AND CONSUMPTION
PERFORMANCE
The Group recognizes that responsible, sustainable corporate performance is
essential to the long term success of its business. The Company again
completed a response for the Carbon Disclosure Project (CDP) in 2013,
detailing its energy consumption and measures implemented to assist both
the Group to reduce its energy consumption and the Group’s customers to
achieve more sustainable project solutions utilizing methodologies under the
Group’s EcoNomics™ initiative. The data collection and analysis under the CDP
have stimulated energy and carbon reduction measures in many of the
Group’s offices around the world. The Company also completed a CDP
response in respect of its water use for 2013.
42 WorleyParsons Annual Report 2013
The Company is registered under the National Greenhouse and Energy
Reporting Act 2007 (NGER Act) as the controlling corporation for the Group as
prescribed by section 12 of the NGER Act. The Company lodged its National
Greenhouse Energy Report (NGER Report) for the period 2011/2012 in
October 2012. This NGER Report contained information in relation to the
greenhouse gas emissions, energy production and energy consumption from
the operation of facilities under the operational control of the Group. The
Company intends to lodge its NGER Report for the Group for the period
2012/2013 in October 2013.
NON-AUDIT SERVICES
During the financial year, Ernst & Young, the Group’s auditor, performed
certain other services in addition to its statutory audit duties. Total non-audit
services provided by the external auditor amounted to $1,481,658.
The Board has adopted a policy outlining the provision of non-audit services
by the external auditor. The Board has considered the position and, in
accordance with the advice received from the Audit and Risk Committee, is
satisfied that the provision of the non-audit services is compatible with the
general standard of independence for auditors imposed by the Act. The
directors are satisfied that the provision of non-audit services by the auditor
did not compromise the auditor independence requirements of the Act for the
following reasons:
•
•
all non-audit services have been reviewed by the Audit and Risk
Committee to ensure they do not impact the integrity and objectivity of
the auditor; and
none of the services undermines the general principles relating to auditor
independence as set out in APES 110 Code of Ethics for Professional
Accountants, including reviewing and auditing the auditor’s own work,
acting in a management or decision making capacity for the Group, acting
as advocate for the Group or jointly sharing economic risk and rewards.
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
A copy of the auditor’s independence declaration as required under section
307C of the Act is as follows:
Auditor's Independence Declaration to the Directors of WorleyParsons Limited
In relation to our audit of the financial report of WorleyParsons Limited for the year ended 30 June
2013, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional
conduct.
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Ernst & Young
Auditor's Independence Declaration to the Directors of WorleyParsons Limited
In relation to our audit of the financial report of WorleyParsons Limited for the year ended 30 June
Bruce Meehan
2013, to the best of my knowledge and belief, there have been no contraventions of the auditor
Partner
independence requirements of the Corporations Act 2001 or any applicable code of professional
Sydney
conduct.
14 August 2013
Ernst & Young
Bruce Meehan
Partner
Sydney
14 August 2013
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
INFORMATION ON DIRECTORS AND COMPANY SECRETARY
JOHN GRILL BSC, BENG (HONS), HON DENG (SYDNEY)
CHAIRMAN AND NON-EXECUTIVE DIRECTOR – CHIEF EXECUTIVE OFFICER
AND DIRECTOR FROM LISTING IN NOVEMBER 2002 UNTIL OCTOBER 2012
AND DIRECTOR OF THE COMPANY BEFORE LISTING AND ITS PREDECESSOR
ENTITIES FROM 1971
COUNTRY OF RESIDENCE – AUSTRALIA
John is Chairman of the Board and Chairman of the Nominations Committee
and a member of the Remuneration Committee and Health, Safety and
Environment Committee. He has over 40 years’ experience in the resources
and energy industry, starting his career with Esso Australia. In 1971, he
became Chief Executive of Wholohan Grill and Partners, the entity that
ultimately became WorleyParsons Limited. This specialized consulting practice
acquired the business of Worley Engineering Pty Limited in Australia in 1987.
It listed on the Australian Securities Exchange in 2002 as Worley Group
Limited following a restructuring of the company. In 2004, Worley Group
Limited acquired Parsons E&C Corporation, a US-based global project services
company, and changed its name to WorleyParsons Limited. The Group then
acquired the Colt Group in Canada in 2007, substantially increasing its
capability in the upstream and downstream components of oil sands. John has
personal expertise in every aspect of project delivery in the resources and
energy industry. He has strong relationships with WorleyParsons’ major
customers and was closely involved at board level with the Group’s joint
ventures. John was awarded an honorary doctorate by The University of
Sydney in 2010 in recognition of his contribution to the engineering
profession. He is the Chairman of the National Precincts Board and is also
on the board of Neuroscience Research Australia and the Australian
Chamber Orchestra.
RON MCNEILLY BCOM, MBA, FCPA, FAICD
DEPUTY CHAIRMAN AND LEAD INDEPENDENT DIRECTOR – DIRECTOR SINCE
LISTING IN NOVEMBER 2002
COUNTRY OF RESIDENCE – AUSTRALIA
Ron is Deputy Chairman and Lead Independent Director of the Board and was
previously Chairman of the Board. He is a member of the Audit and Risk
Committee, Nominations Committee, Remuneration Committee and Health,
Safety and Environment Committee. Ron is currently the Deputy Chairman of
BlueScope Steel Limited (previously BHP Steel) and has over 30 years’
experience in the resources industry. He joined BHP Billiton Limited in 1962
and held positions with that company including executive director and
President BHP Minerals, Chief Operating Officer, Executive General Manager
and Chief Executive Officer BHP Steel, General Manager Transport, General
Manager Long Products Division and General Manager Whyalla Works. Ron is a
former Chairman of Ausmelt Limited and Melbourne Business School Limited
and is a former director of Alumina Limited, BHP and BHP Billiton,
QCT Resources and Tubemakers of Australia.
Australian listed company directorships
LISTED COMPANY NAME
NATURE OF
DIRECTORSHIP
DATE OF COMMENCEMENT DATE OF CESSATION
BlueScope Steel
Limited
Deputy Chairman
and non-executive
director
10 May 2002
n/a
LARRY BENKE BSC ENG (HONS)
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE JULY 2010
COUNTRY OF RESIDENCE – CANADA
Larry joined the Board as a non-executive director on 1 July 2010 and is a
member of the Nominations Committee and the Health, Safety and
Environment Committee. He was appointed an alternate director for Bill Hall
from March 2007, following the Company’s acquisition of the Colt Group, until
his retirement as Managing Director Canada on 30 June 2010. Larry has
extensive experience in the engineering and construction industries including
roles in engineering design, project management and general management
including President/CEO of the Colt Group and Managing Director of
WorleyParsons Canada. He successfully led Colt through a period of
substantial growth and expansion which continued with the integration of
the company into the WorleyParsons Canada business. Larry is a director of
the board of The Calgary Airport Authority, a not for profit responsible for the
operation and development of the Calgary International and Springbank
airports. He is a director of CEDA International, an Ontario Municipal
Employees Retirement System owned corporation providing specialty
WorleyParsons Annual Report 2013 43
LISTED COMPANY NAME
NATURE OF
DIRECTORSHIP
Woodside
Petroleum Limited director
Non-executive
DATE OF COMMENCEMENT DATE OF CESSATION
1 December 2002 28 February 2013
Australian listed company directorships
DIRECTORS’ REPORT CONTINUED
maintenance and turnaround services to industry. Larry is also a director of
Cervus Equipment Corporation, a Toronto Stock Exchange listed company in
the business of acquiring and operating agricultural, industrial and
construction equipment dealerships. Larry graduated from the University of
Alberta in 1973 with a Bachelor of Science in Electrical Engineering (Honors).
ERICH FRAUNSCHIEL BCOM (HONS), FCPA, FAICD
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE MARCH 2003
COUNTRY OF RESIDENCE – AUSTRALIA
Erich is Chairman of the Audit and Risk Committee and a member of the
Nominations Committee. He is Chairman of Wesfarmers General Insurance
Limited and Wesfarmers Insurance Pty Limited and was a non-executive
director of Woodside Petroleum Limited until February 2013. Erich’s early
business career was in the petroleum marketing and management consulting
industries. In 1981, he joined the Australian Industry Development
Corporation where he was involved in project lending, investment banking and
venture capital investment. In 1984, he joined Wesfarmers to start the
company’s projects and business development function. In 1988, he became
General Manager of Wesfarmers’ Commercial Division and from 1992 until his
retirement in July 2002 was an executive director and Chief Financial Officer
of Wesfarmers.
Australian listed company directorships
JOHN M GREEN BJURIS/LLB, FAICD, SFFIN
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE LISTING IN NOVEMBER 2002
COUNTRY OF RESIDENCE – AUSTRALIA
John is Chairman of the Remuneration Committee and a member of the
Nominations Committee. He is a company director, a business writer and a
novelist. John is a non-executive director of QBE Insurance Group Limited, a
member of the Australian Government Takeovers Panel and a member of the
Council of the National Library of Australia. John is co-founder of book
publisher, Pantera Press. He was previously an investment banker at
Macquarie Bank, as an executive director. His career before banking was in
law, including as a partner at two major law firms.
Australian listed company directorships
LISTED COMPANY NAME
NATURE OF
DIRECTORSHIP
DATE OF COMMENCEMENT DATE OF CESSATION
QBE Insurance
Group Limited
Non-executive
director
1 March 2010
n/a
CHRISTOPHER HAYNES OBE BSC (HONS), DPHIL, CENG, FIMECHE
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE JANUARY 2012
COUNTRY OF RESIDENCE – UNITED KINGDOM
Chris was appointed to the Board effective 1 January 2012. He is Chairman of
the Health, Safety and Environment Committee and a member of the
Nominations Committee. He is a non-executive director of Woodside
Petroleum Limited. His appointment followed a 39 year career with the Shell
Group of Companies and their affiliates. He has lived in a large number of
countries, working in the oil and gas exploration and production, LNG and
chemicals businesses, primarily in project development and delivery and in
operations. Chris was seconded to Woodside from 1999 to 2002, where he
was General Manager of the North West Shelf Venture and was subsequently
Managing Director of Shell’s operations in Syria and of Nigeria LNG Limited. In
2008, Chris assumed responsibility for the delivery of Shell’s major upstream
projects worldwide. He retired from Shell in August 2011. Chris graduated
from The University of Manchester with a Bachelor of Science with Honors in
Mechanical Engineering and obtained a Doctor of Philosophy degree in
Applied Sciences from the University of Sussex. He is a Chartered Engineer
and Fellow of the Institution of Mechanical Engineers in the United Kingdom
and was appointed to the Order of the British Empire in June 2009 for his
services to the British oil and gas industry in Nigeria.
Australian listed company directorships
LISTED COMPANY NAME
NATURE OF
DIRECTORSHIP
DATE OF COMMENCEMENT DATE OF CESSATION
Woodside
Petroleum Limited director
Non-executive
1 June 2011
n/a
44 WorleyParsons Annual Report 2013
CATHERINE LIVINGSTONE AO BA (HONS), HON DBUS (MACQUARIE),
HON DSC (MURDOCH), FCA, FAICD, FTSE
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE JULY 2007
COUNTRY OF RESIDENCE – AUSTRALIA
Catherine joined the Board on 1 July 2007 and is a member of the Audit and
Risk Committee and the Nominations Committee. She is Chairman and a
director of Telstra Corporation Limited and was formerly a director of
Macquarie Bank Limited and Macquarie Group Limited. Catherine is also a
director of Saluda Medical Pty Ltd and The George Institute for Global Health
and is a member of the Advisory Board of the John Grill Centre for Project
Leadership at The University of Sydney. She was Chairman of CSIRO from
2001 to 2006 and has also served on the boards of Goodman Fielder Limited
and Rural Press Limited. Catherine was the Managing Director of Cochlear
Limited from 1994 to 2000, taking it through to an initial public offer in
1995. In 2000, Catherine received the Chartered Accountant in Business
Award for that year and in 2002 was elected a Fellow of the Australian
Academy of Technological Sciences and Engineering. She was further
awarded in 2003 the Centenary Medal for service to Australian Society in
Business Leadership and the 2006 Macquarie University Alumni Award for
Distinguished Service (Professional). In 2008, Catherine was appointed an
Officer of the Order of Australia for service to the development of Australian
science, technology and innovation policies to the business sector. She has
a Bachelor of Arts (Honors) in Accounting, is a Chartered Accountant and
was the Eisenhower Fellow for Australia in 1999.
LISTED COMPANY NAME
NATURE OF
DIRECTORSHIP
Macquarie Bank
Limited
Non-executive
director
Macquarie Group
Limited
Non-executive
director
Telstra
Corporation
Limited
Non-executive
director
Chairman
DATE OF COMMENCEMENT DATE OF CESSATION
19 November 2003 25 July 2013
30 August 2007
25 July 2013
30 November 2000 n/a
8 May 2009
n/a
JB MCNEIL BSC (MONT), MSC (CAL), SPE, ASME
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE MAY 2010
COUNTRY OF RESIDENCE – UNITED STATES OF AMERICA
JB was appointed to the Board on 1 May 2010 and is a member of the Audit
and Risk Committee, the Nominations Committee and the Remuneration
Committee. His appointment followed a 34 year career with ExxonMobil
Corporation. He began with Exxon in 1974 and over the next two decades he
was involved in a variety of engineering and operations assignments in the
Middle East and in the USA. In 1994, JB was appointed Offshore Division
Manager responsible for production in the South China Sea. In 1996, he was
appointed Director General for the Sakhalin 1 Project in Russia and in
2001, Vice President for Deep Water Development in Angola and Equatorial
Guinea. Between 2003 and 2005, JB held project development
responsibilities for Russia and the Caspian region and in 2005 was appointed
Vice President of Arctic Projects (Russia, Canada and Alaska). JB retired from
ExxonMobil in 2008.
WANG XIAO BIN BCOM, CPA, GDIP APPLIED FINANCE AND INVESTMENT
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE DECEMBER 2011
COUNTRY OF RESIDENCE – HONG KONG
Xiao Bin was appointed to the Board on 1 December 2011 and is a member
of the Audit and Risk Committee and the Nominations Committee. She is an
executive director and Chief Financial Officer of China Resources Power
Holdings Company Limited. Prior to joining China Resources Power in July
2003, she was a Director of Corporate Finance at ING Investment Banking,
responsible for execution of capital markets and merger and acquisition
transactions in the Asia Pacific region. Xiao Bin worked for Price Waterhouse
in Australia in the Audit and Business Advisory Division for five years before
joining ING. She is a member of CPA Australia and holds a graduate diploma in
Applied Finance and Investment from Securities Institute of Australia (now
Finsia) and a Bachelor of Commerce from Murdoch University in Australia.
ANDREW WOOD BENG, GDIP FIN MGMT, GDIP LAB RELATIONS, FIE AUST
CHIEF EXECUTIVE OFFICER – EXECUTIVE DIRECTOR SINCE OCTOBER 2012
COUNTRY OF RESIDENCE – AUSTRALIA
Andrew was appointed as Chief Executive Officer effective 23 October 2012.
With tenure of 19 years with the Group, and over 30 years’ experience in
the resources and energy industry, Andrew has extensive knowledge
across the Group. His previous roles include Group Managing Director –
Finance/CFO responsible for Group-wide direction and support to the business
functions of finance, information management, internal procurement and
communications, legal and risk; Managing Director for the Australia/New
Zealand region; and Managing Director of Mergers and Acquisitions,
overseeing 15 business acquisitions including Parsons E&C Corporation in
November 2004 and the Colt Group in March 2007. He was also responsible
for WorleyParsons’ early expansion into Thailand and into the Middle East,
Canada and Chile in his capacity as Managing Director for International
Operations. Andrew holds a Bachelor of Engineering and graduate diplomas in
Financial Management and Labour Management Relations. He is also a Fellow
of the Institution of Engineers, Australia.
PETER JANU BEC, LLB, CA, FCIS
COMPANY SECRETARY AND GENERAL COUNSEL CORPORATE – APPOINTED
OCTOBER 2008
Peter has broad experience across a range of disciplines including company
secretarial, governance, legal, remuneration, project finance and corporate
taxation. Peter has degrees in Law and Economics from The University of
Sydney and is a Chartered Accountant and a Chartered Secretary.
INDEMNITIES AND INSURANCE
Under the Company’s Constitution, the Company indemnifies each current and
former officer of the Group against certain liabilities and costs incurred by
them as an officer of the Group. The Company also indemnifies each current
and former officer of the Group against certain liabilities and costs incurred
when the officer acts as an officer of another body corporate at the
Company’s request and the liability or cost is incurred in that capacity. Neither
indemnity extends to liabilities or costs from which the Company is prohibited
from indemnifying current or former officers under the Act.
In addition, the Company has entered into Deeds of Access, Indemnity and
Insurance with certain officers of the Group. Under those deeds, the Company
agrees (among other things) to:
•
indemnify the officer to the extent permitted by law and the
Company’s Constitution;
• maintain a directors’ and officers’ insurance policy; and
•
provide officers with access to Board papers.
The Company maintains a directors’ and officers’ insurance policy that, subject
to certain exemptions, provides insurance cover to former and current
officers of the Group. During the financial year, the Company paid insurance
premiums to insure those officers of the Group. The contracts of insurance
prohibit the disclosure of the amounts of premiums paid and the nature of
the liability covered.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in Class Order 98/0100 issued by the
Australian Securities and Investments Commission, relating to the “rounding
off” of amounts in the Directors’ Report and financial statements. Unless
otherwise expressly stated, amounts referred to in this report have been
rounded off to the nearest hundred thousand dollars in accordance with that
Class Order and amounts less than $50,000 that have been rounded down
are represented in this report by 0.0.
WorleyParsons Annual Report 2013 45
DIRECTORS’ REPORT CONTINUED
REMUNERATION REPORT
The Company’s directors present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001 (Act) for the Company and
the consolidated entity for financial year 2013 (FY2013). The information provided in this Remuneration Report has been audited as required by section
308(3C) of the Act. This Remuneration Report forms part of the Directors’ Report.
The Remuneration Report is presented in four sections:
SECTION
WHAT IT COVERS
1. Remuneration Snapshot
The names and positions of the executive directors and group executives (Executives) whose remuneration
details are disclosed.
Key changes during FY2013.
How performance was reflected in the actual remuneration outcomes for Executives in FY2013 and financial year 2012
(FY2012).
2. Remuneration
The guiding principles adopted by the Board which underpin all remuneration decisions and actions.
Governance Framework
How the Board, Nominations Committee and Remuneration Committee make remuneration decisions.
3. Executive Remuneration
in Detail
A breakdown of the Executive remuneration structure, and summary of the key terms and performance conditions for the
“at risk” components (short and long term incentives) including a description of the Combined Incentive Plan.
How the Company’s performance over a five year period has impacted on remuneration outcomes.
Details the remuneration outcomes for Executives in accordance with the Australian Accounting Standards (accounting
standards), including total remuneration, vesting of at risk components and movements in equity holdings. It also includes
details of actual remuneration awarded during the year and actual remuneration received.
The key contract terms governing the employment arrangements of Executives.
4. Non‑Executive Director
The names and positions of the non-executive directors (NEDs) whose remuneration details are disclosed.
Remuneration
The guiding principles which govern the process and basis for setting NED remuneration.
An outline of the remuneration structure for NEDs, including current Board and Committee fees.
Details of NEDs’ total remuneration in FY2013 and FY2012.
PAGE
46
47
47
47
48
49
52
53
58
58
58
59
59
1. REMUNERATION SNAPSHOT
EXECUTIVES
Set out below is a list of the Executives of the Company whose remuneration details are outlined in this Remuneration Report. Except where noted, these
Executives were employed for all of FY2013 in the positions noted below. The use of the term “Executives” throughout this report refers to the Executives
listed below. These Executives, in addition to the NEDs listed on page 58 of the Annual Report, comprised the key management personnel (KMP) of the
Company for FY2013, as defined under the accounting standards.
NAME
POSITION
COUNTRY OF RESIDENCE
EXECUTIVE DIRECTORS
Andrew Wood1
John Grill2
GROUP EXECUTIVES
Barry Bloch
Stuart Bradie
Simon Holt3
Randy Karren4
Iain Ross
David Steele5
Chief Executive Officer (CEO) from 23 October 2012
Chief Executive Officer (CEO) until 23 October 2012
Group Managing Director – People
Group Managing Director – Operations
Chief Financial Officer from 23 October 2012
Group Managing Director – Improve from 23 October 2012
Group Managing Director – Development
Group Managing Director – Delivery
Australia
Australia
Australia
United Kingdom
Australia
Canada
United Kingdom
Malaysia
1 Mr Wood was appointed as CEO and an executive director on 23 October 2012. Prior to that, he was the Group Managing Director – Finance/CFO.
2
Mr Grill retired as CEO on 23 October 2012. He became a NED and Chairman on 1 March 2013 and further details are provided in the Non-Executive Director
Remuneration section and below.
3 Mr Holt commenced as an Executive on 23 October 2012. Prior to that, he was Deputy Chief Financial Officer.
4 Mr Karren commenced as an Executive on 23 October 2012. Prior to that, he was Regional Managing Director Canada.
5 Mr Steele commenced in the role Group Managing Director – New Ventures from 1 July 2013.
Change in role for Mr John Grill
Mr Grill retired as CEO and an executive director of WorleyParsons on 23 October 2012, when he ceased employment with the Company. Mr Grill’s termination
arrangements were in line with his executive service agreement. The termination arrangements comprised payment of accrued annual and long service leave.
Mr Grill retained his deferred short term incentive (STI) which was granted in relation to performance during FY2012; these are retained under the original terms
of the grant including vesting dates. Consistent with the Company’s practice in relation to unvested long term incentive (LTI) held by retiring employees, Mr Grill
retained a pro-rated portion of his unvested LTI under the original terms of the grant including performance measures and vesting dates. No additional benefits
were received by Mr Grill in relation to his retirement.
At the unanimous invitation of the Board’s non-executive directors, Mr Grill subsequently re-joined the Board as non-executive Chairman. He commenced in that
role on 1 March 2013.
46 WorleyParsons Annual Report 2013
KEY CHANGES
New remuneration arrangements implemented in FY2013
During FY2013, a number of changes to executive remuneration arrangements were implemented as foreshadowed in last year’s Remuneration Report,
including:
•
•
•
•
•
•
simplification of incentive programs, including adoption of the new Combined Incentive Plan;
three year deferral period for equity under the Combined Incentive Plan, increased from the prior plan;
equal weighting for total shareholder return (TSR) and earnings per share (EPS) hurdles for new LTI awards;
increased vesting period for new LTI awards from three to four years with no retest. To ensure continuity of equity vesting opportunity, the awards for
FY2013 were granted as two equal tranches to vest over a three and four year period;
expanded peer group for the LTI TSR hurdle for new LTI awards; and
piloting of an all employee share purchase plan in Canada, Singapore and Indonesia.
These changes were adopted following a comprehensive and in-depth review of our remuneration arrangements undertaken in FY2012.
HOW PERFORMANCE WAS REFLECTED IN THE ACTUAL REMUNERATION OUTCOMES
The actual remuneration outcomes for FY2013 for Executives reflect their individual performance and the business conditions faced by, and performance
outcomes achieved by, the Company. Outcome details for individual Executives can be found on pages 54 and 55. In particular:
•
•
•
in assessing the outcome for the Combined Incentive Plan, the threshold for Executives requires that Group net profit after tax (NPAT) be 90% or more of
budget Group NPAT. In FY2013, the Group NPAT of $322.1 million was below this threshold. As a result no Combined Incentive will be awarded;
for performance rights granted in FY2011, achievement against the LTI Plan performance hurdles for the three year period ended 30 June 2013 will result
in a nil vesting. Executives have the choice to retain rights under the TSR measure to be retested for the four year period ending 30 June 2014. No rights
subject to the EPS measure will vest and they will lapse on 30 September 2013; and
for performance rights granted in FY2010, achievement against the LTI Plan performance hurdles for the three year period ended 30 June 2012 resulted in
nil vesting under the EPS measure, with rights lapsed on 30 September 2012, and 70% vesting under the TSR measure. All Executives elected to accept
the vesting outcome at that time. For employees who elected to retain rights under the TSR measure and be retested for the four year period ended
30 June 2013, the retested outcome will result in a nil vesting of rights under the TSR measure.
In addition, fixed pay and the remuneration structure have been reviewed on both an Australian and global basis, and will not increase in FY2014.
2. REMUNERATION GOVERNANCE FRAMEWORK
GUIDING REMUNERATION PRINCIPLES
The diagram below outlines the guiding principles that underpin the Company’s remuneration arrangements for Executives, and illustrates how we seek to put
these into practice through our remuneration decisions and actions:
STRATEGIC VISION
WorleyParsons will be the preferred global provider of technical, project and operational support services to our customers,
using the distinctive WorleyParsons culture to create value for them and prosperity for our people and stakeholders.
Our values guide our vision and provide the discipline to achieve our strategy.
VALUES
Performance
Relationships
Agility
Leadership
Our Executive Remuneration Principles will drive the behaviors and results to help us achieve our strategy and vision.
Executive Remuneration Principles
Providing a fair level of reward in
order to retain and attract high
caliber employees.
Building a culture of achievement by
providing a transparent link between
reward and performance.
Building long term employee
commitment through continued
WorleyParsons share ownership.
Promoting mutually beneficial
outcomes by aligning
employee, customer and
shareholder interests.
Putting the Remuneration Principles into Practice
Roles are benchmarked against roles
in the market. We benchmark fixed
pay, variable pay and pay mix.
Key performance indicators are set
with Executives and reviewed with
the Board.
Opportunity to earn equity through
the LTI Plan and the Combined
Incentive Plan.
Individual remuneration reflects the
individual’s role, responsibilities,
performance, qualifications
and experience.
Reward subject to Company
performance and
individual performance.
Having a minimum
shareholding requirement.
Performance metrics are geared at
focusing Executives on strong
financial performance, while
balancing long term interests of
the Company.
WorleyParsons Annual Report 2013 47
DIRECTORS’ REPORT CONTINUED
REMUNERATION DECISIONS
The diagram below illustrates the process by which remuneration decisions are made within the Company, and explains the roles played by various stakeholders
who are involved in setting remuneration:
BOARD
• Ensures remuneration policies and structures are competitive, fair, and aligned with the
long term interests of the Company.
• Sets and approves remuneration structures.
• Approves NED, CEO and other Executive remuneration.
NOMINATIONS COMMITTEE
REMUNERATION COMMITTEE
Reviews and assesses the CEO’s performance.
Advises the Board on the CEO’s
remuneration, including:
• amount;
• structure; and
• applicable performance targets.
Assists/advises the Board in relation to:
• remuneration structuring and policies;
• NED remuneration;
• performance assessment and remuneration for
Executives; and
• where required, engaging independent advisors
for advice on remuneration structure and
quantum for Executives including the CEO.
MANAGEMENT
CEO recommends pay increases and incentive outcomes for the Executives, other than the CEO. At the
request of the Nominations and/or Remuneration Committee, management:
• provides information relevant to remuneration decisions; and
• where appropriate, liaises with independent advisors to assist the Nominations and/or Remuneration
Committee with factual information (subject to prior Board approval of the provider).
All remuneration decisions relating to Executives are made by the Board. However, where appropriate,
management is included in Committee and Board discussions.
EXTERNAL MARKET DATA AND
EXTERNAL CONSULTANTS
Market data sourced from
published reports and
independent surveys.
Where required, external
consultants engaged by the
Board and Committees to provide
advice or information.
Any advice or recommendations
provided by external
consultants are used as a guide.
They do not substitute for the
Board and Committee decision-
making process.
During FY2013, Aon Hewitt
provided data in relation to the pay
review for Executives and the
review of NED fees. Outcomes
relating to TSR were provided by
Orient Capital. There were
no remuneration recommendations
made by consultants in relation
to Executives.
48 WorleyParsons Annual Report 2013
3. EXECUTIVE REMUNERATION IN DETAIL
Executive minimum shareholding requirement
REMUNERATION STRUCTURE – PUTTING POLICY INTO PRACTICE
Remuneration mix for Executives
Executive remuneration is structured to recognize both an individual’s
responsibilities, qualifications and experience, as well as to drive performance
over the short and long term. The proportion of variable incentive is reflective
of an Executive’s ability to influence Company performance through their role.
Executive remuneration comprises the following:
•
•
fixed pay, which consists of cash (or base) salary, superannuation/
retirement contributions and any salary sacrificed components. It is set
relative to market, with the level of individual fixed pay aligned with
the Executive’s responsibilities, performance, qualifications and
experience; and
incentives may be comprised of cash or equity and are dependent on the
satisfaction of corporate, business unit and individual performance
targets. Details of the Combined Incentive Plan and LTI Plan are set out in
detail in the sections below.
The FY2013 targeted mix of the remuneration components described above
for each of the Executives is outlined below:
The Executive minimum shareholding requirement applies to Executives to
reinforce the Company’s objective of aligning their interests with the
interests of shareholders, and to foster an increased focus on building long
term shareholder value.
To satisfy the requirement, Executives must retain equity delivered via
incentive plans until they hold shares equivalent in value to two times
fixed pay (four times fixed pay for the CEO) and must subsequently
maintain that multiple.
Executives are also encouraged to acquire shares independently of the equity
incentive programs. However, privately acquired shares are not subject to the
restrictions of the minimum shareholding requirement.
Compliance with the requirement is assessed as at 30 June each year. The
table below provides a summary of the position of each Executive against the
requirement as at 30 June 2013:
WEIGHTED
NUMBER OF
SHARES
HELD AT
30 JUNE 20131
VALUE OF
SHARES
HELD AT
30 JUNE 20132
$
ANNUAL
PERCENTAGE
OF MINIMUM
FIXED PAY AT SHAREHOLDING
30 JUNE 20133 REQUIREMENT
ACHIEVED
$
FY2013 targeted remuneration mix for Executives
Andrew Wood
274,302
5,374,427 1,600,000
84%
LTI
Equity Incentive
Cash Incentive
Fixed
GROUP EXECUTIVES
EXECUTIVE DIRECTOR
d
r
a
w
e
r
t
e
g
r
a
t
l
a
t
o
t
f
o
e
g
a
t
n
e
c
r
e
P
100
80
60
40
20
0
25%
15%
30%
30%
19%
12%
24%
28%
11%
23%
45%
38%
15%
32%
53%
18%
13%
26%
28%
28%
11%
11%
23%
23%
43%
38%
38%
A ndre w W ood
Barry Bloch
Stuart Bradie
Sim on H olt
Randy Karren
Iain Ross
D avid Steele
The target at risk remuneration shown in the graph above refers to the
incentive that would be payable if all performance conditions are satisfied
and assumes the full vesting of Combined Incentive, comprised of a cash and
an equity incentive, and LTI awards. The elements of the remuneration shown
above that are at risk are Cash Incentive, Equity Incentive and LTI. Allowances
and benefits are for specific purposes and are excluded in determining the
mix. Actual incentive remuneration paid to the Executives can vary for
individuals depending on the extent that they meet or exceed
performance requirements.
Further details in relation to the Company’s incentive arrangements,
including the specific performance conditions imposed and the outcomes of
those arrangements (based on the Company’s performance over FY2013
and prior years), are set out in the “Combined Incentive Plan” and “LTI Plan”
sections below.
Barry Bloch
Stuart Bradie
Simon Holt4
Randy Karren5
Iain Ross
David Steele
13,695
268,328
709,000
74,227
1,454,337 1,208,267
9,993
195,794
463,000
19%
60%
21%
81,570
1,598,209
623,603
> 100%
497,509
9,747,744 1,052,096
> 100%
151,315
2,964,730
900,000
> 100%
1
2
Includes ordinary and exchangeable shares held in the Company as provided in
note 33(A) to the financial statements plus a 50% weighting of unvested
performance rights provided in note 33(B) to the financial statements. Excludes
shares held by each Executive’s personal related parties.
Calculated as the weighted number of shares held at 30 June 2013 multiplied
by the volume weighted average price of the Company’s shares for the five
trading days up to and including 28 June 2013.
The Australian dollar equivalent of annual fixed pay as at 30 June 2013.
3
4 Mr Holt commenced as Chief Financial Officer on 23 October 2012.
Mr Karren commenced as Group Managing Director – Improve on
5
23 October 2012.
In addition, under the Company’s Securities Dealing Policy, directors and
Executives are not permitted to hedge unvested performance rights or shares
acquired on exercise of performance rights that are subject to restrictions,
including shares that count towards an Executive’s minimum holding
requirement. This ensures that Executives cannot “limit the risk” associated
with these instruments and are subject to the same impacts from fluctuations
in the share price as all other shareholders.
WorleyParsons Annual Report 2013 49
DIRECTORS’ REPORT CONTINUED
Combined Incentive Plan
By linking pay to performance via incentive plans, the Company increases the focus on total reward and provides motivation to Executives to achieve outcomes
beyond the standard expected in the normal course of ongoing employment.
The target value of the Combined Incentive Plan for Executives is shown in the graph on the previous page and is made up of a two thirds Cash portion
(Cash Incentive) and a one third Equity portion (Equity Incentive). The Combined Incentive Plan was introduced in FY2013 and replaces the previous Cash STI,
Deferred Equity STI and Discretionary STI Plans. The minimum potential value of Combined Incentive is zero where applicable gate-opener hurdles have not
been met.
The value of the awards achieved can be viewed in the remuneration outcomes table on pages 54 and 55. This reflects both the Company’s achievement
against Group NPAT and individual performance against an Executive’s key performance indicators (KPIs).
Outlined below is a summary of the Combined Incentive Plan introduced in FY2013:
INCENTIVE ELEMENT
Gate‑opener
CASH INCENTIVE
(TWO THIRDS OF THE AWARD)
EQUITY INCENTIVE
(ONE THIRD OF THE AWARD)
The actual performance is greater than 90% of the budgeted NPAT approved by the Board.
Maximum payout
Maximum payout is possible at 110% of budget.
Delivery and payment timing Payment of the award will be made as a
gross cash amount at the end of the
performance period.
See KPI summary table below.
Performance and forfeiture
conditions
Payment of the award will be through equity deferred for three years in the form of rights
granted under the WorleyParsons Performance Rights Plan.
The Equity Incentive is subject to the same performance conditions as the Cash Incentive.
In addition, the Executive must maintain a satisfactory performance rating. There are no
further hurdles during the deferral period.
However, should the accounts be restated during the deferral period or where an
individual’s behavior is fraudulent, dishonest or in breach of their obligations to
the Company, the award may be forfeited. The performance outcomes that resulted in the
award will be reviewed to ensure that the award is still appropriate at the time of vesting.
Dividends
Tenure
n/a
n/a
To be eligible for an incentive payment, generally participants must have been employed for at least three months of the financial year
and remain in employment at the date of payment.
Performance targets are agreed at the start of the financial year. A summary of the KPIs, along with the weightings for Executives for FY2013, is
outlined below:
FINANCIAL KPIs (50% weighting)1
NON‑FINANCIAL KPIs (50% weighting)1
The weighting of actual KPIs varies depending on the specific role of the individual
and includes the following:
These may vary with Executive responsibility, but usually include KPIs as shown
below. To the extent possible, performance is assessed against quantifiable,
objective measures.
KPIs
METHOD OF ASSESSMENT
KPIs
METHOD OF ASSESSMENT
Group NPAT applicable to all
Executives.
Group NPAT is based upon audited
financial statements, to ensure the
performance assessment for financial
KPIs is aligned with business
performance and the creation of value
for shareholders. The results are
adjusted at Board discretion, to exclude
abnormal items.
Health, safety and
environment performance.
Reduction in the number of reportable
injuries and environmental incidents,
and the completion of advanced safety
audits in support of the Company’s goal
of Zero Harm.
Cash collection for participants with
operational or financial
accountability.
Cash collection is measured via
days sales outstanding which is
used internally to measure
business performance.
Development of strategic and
tactical responses to changed
economic and business landscapes.
Successful implementation of the
business plan and/or strategic
priorities for the business unit,
location or function.
Leadership, people management
and development.
Strategic goals are measured by other
regularly reported financial and non-
financial metrics e.g. growth in targeted
business units2. These goals help to
deliver on our Strategic Vision.
Targeted business growth and customer
retention and acquisition2.
Reduction in turnover which helps to
deliver on our corporate values of
Leadership and Relationships.
1 The CEO has a 60% weighting of Financial KPIs and 40% weighting of Non-Financial KPIs.
2 The specific goals for Executives relating to strategic imperatives are considered commercially sensitive.
50 WorleyParsons Annual Report 2013
Long Term Incentive Plan
There are two specific performance targets, each assessed independently to
earn LTI. These two performance hurdles align an Executive’s interests with
shareholder returns whilst driving long term Company performance. The
measures are as follows:
•
TSR relative to peer group (which applies to 50% of potential LTI for
FY2013); and
•
EPS growth (which applies to 50% of potential LTI for FY2013).
The Board has determined that the number of securities issued to
Executives and all other participants under the incentive Plans should be
capped at 5% of the issued share capital of the Company over a five year
time horizon. Currently, the number of securities issued and held pursuant to
the incentive Plans represents 2.46% of the Company’s issued share capital,
(FY2012: 2.85%).
LTI grants for FY2013
LTI grants are delivered to Executives as rights that are issued under the
WorleyParsons Performance Rights Plan. After vesting, each right entitles the
holder to one fully paid ordinary share in the Company at a nil exercise price
(i.e. a zero exercise price option). The number of rights issued is based on the
Executive’s target LTI with reference to the underlying share price when the
rights are issued. Rights vest and are automatically exercised after a three or
four year period, subject to minimum performance hurdles being satisfied.
In FY2013, LTI awarded to Andrew Wood, in his role as CEO, was granted with
a four year vesting period. LTI awarded to Group Managing Directors was
granted in two equal tranches. The first tranche will vest after a three year
period and the remaining tranche after a four year period. Each tranche has
an equal weighting between TSR and EPS. LTI awarded to the Chief Financial
Officer in FY2013 was granted with a three year vesting period with an
individual performance requirement. The Chief Financial Officer’s
remuneration structure will align to the other KMPs for FY2014, with a four
year vesting period and subject to EPS and TSR performance hurdles.
Where rights cannot be readily issued in certain overseas jurisdictions due to
differing securities laws and taxation treatments, the LTI Plan rules ensure a
participant can still be rewarded for their contribution, whilst catering for the
local restrictions on the issue of securities.
Rights granted under the LTI Plan carry no voting or dividend entitlements. In
addition, other than in relation to bonus issues and capital reorganizations
(when the number of rights may be adjusted by the Board in accordance with
the ASX Listing Rules, so as to ensure no advantage or disadvantage to the
Executive), the rights carry no entitlement to participate in new share issues
made by the Company.
Details of the rights granted to Executives as part of their remuneration in
FY2013 are outlined on page 56.
Relative TSR performance hurdle
The TSR measure represents the change in the value of the Company’s share
price over a period, plus reinvested dividends, expressed as a percentage of
the opening value of the share.
Relative TSR has been chosen as a performance hurdle because, in the
opinion of the Board, it provides the most direct measure of
shareholder return.
Executives will only derive value from the TSR component of the LTI Plan if
the Company’s TSR performance is at least at the median of the companies in
the peer comparison group. This is a group of companies with similar business
profiles, with which the Company competes for capital and executive talent.
For LTI grants made in FY2013, the peer comparison group comprises the
companies shown as follows:
AUSTRALIA AND ASIA
UNITED STATES AND CANADA
EUROPE AND UNITED KINGDOM
Cardno
Downer EDI
JGC Corporation
Leighton Holdings
Monadelphous Group
UGL
AECOM
Aker Solutions
Chicago Bridge & Iron
Company1
Fluor Corporation
Foster Wheeler
Jacobs Engineering Group
KBR
McDermott International
SNC-Lavalin
Stantec
Tetra Tech
URS Corporation
AMEC
Arcadis
Atkins
Balfour Beatty
Fugro
Saipem
Serco Group
Technip
Tecnicas Reunidas
Wood Group
1
Chicago Bridge & Iron Company and the Shaw Group merged with an effective
completion date of 13 February 2013.
The Board has discretion to adjust the comparison group to take into account
events including, but not limited to, takeovers or mergers that might occur
during the performance period.
The vesting schedule of the rights subject to the relative TSR hurdle is
outlined below:
RELATIVE TSR PERCENTILE RANKING
PERCENTAGE OF RIGHTS THAT MAY BE EXERCISED
IF THE RELATIVE TSR HURDLE IS MET
Less than 50th percentile
At 50th percentile
0%
25%
Greater than the 50th percentile
but less than the 75th percentile
Pro-rated vesting between more than 25%
and less than 50%
At 75th percentile or greater
50% (i.e. maximum available under the plan)
No retesting
With an expanded peer group and transition to a four year performance
period, it is expected there will be less volatility. As a result, for LTI awards
made in FY2013 and new LTI awards going forward, Executives will no longer
have an opportunity to retest under the TSR measure.
EPS performance hurdle
Basic EPS is determined by dividing the Group’s NPAT by the weighted
average number of the Company’s ordinary shares on issue during the
financial year. Growth in EPS will be measured by comparing the EPS in the
financial year immediately preceding the issue and the EPS in the
measurement year. EPS has been chosen as a performance hurdle because it
provides a clear line of sight between Executive performance and Company
performance. It is also a well-recognized and understood measure of
performance both within and outside the organization. The Group’s NPAT may
be adjusted by the Board, where appropriate, to better reflect operating
performance as was the case in FY2012 and FY2011.
Executives will only derive value from the EPS component of the grants made
in FY2013 if the Company achieves average compound growth in EPS of at
least 4% per annum above the increase in the Consumer Price Index (CPI)
over the three or four year performance period.
WorleyParsons Annual Report 2013 51
DIRECTORS’ REPORT CONTINUED
The vesting schedule of the rights subject to the EPS hurdle is as follows:
AVERAGE COMPOUND GROWTH IN EPS OVER
THE PERFORMANCE PERIOD
PERCENTAGE OF RIGHTS THAT MAY BE EXERCISED
IF THE EPS HURDLE IS MET
Less than 4% p.a. above
the increase in CPI
4% p.a. above the increase
in CPI
0%
25%
More than 4% p.a. above the
increase in CPI but less than
8% p.a. above the increase in CPI
8% p.a. or greater above the
increase in CPI
Pro-rated vesting between
more than 25% and less than 50%
50% (i.e. maximum available under the plan)
Exercise of rights and allocation of shares
To the extent that the performance hurdles have been satisfied, rights are
automatically exercised (unless an Executive elects otherwise) and
participants acquire shares in the Company at a nil exercise price.
Shares allocated to participants upon exercise of rights rank equally with all
other ordinary shares on issue. Whilst the shares allocated to participants
remain subject to transfer restrictions, participants can apply to have the
restrictions lifted. Upon release of the restrictions, participants will have
unencumbered ownership of the shares, subject to compliance with the
Company’s Securities Dealing Policy and minimum shareholding requirement.
Cessation of employment and change of control
Where an Executive leaves the Group, the Board may exercise its discretion
and allow a proportion of any unvested rights to remain in the plan, and
subsequently vest and be exercised in the ordinary course, having regard to
such factors as it determines relevant. Such factors would include
performance against applicable performance hurdles, as well as the
performance and contribution that the relevant Executive has made. In
instances of fraudulent or dishonest behavior, the Board will generally deem
all unvested rights held by the Executive to have lapsed on cessation and
may also deem any vested but unexercised rights to be forfeited.
In the event of a change of control of the Company (e.g. where a third party
unconditionally acquires more than 50% of the issued share capital of the
Company), the Board will exercise its discretion to determine whether any or
all unvested rights vest, having regard to pro-rata performance against
applicable performance hurdles up to the date of the change of control.
COMPANY PERFORMANCE OVER A FIVE YEAR PERIOD
The table below contains a snapshot of the Company’s performance against annual financial KPIs and shows how the Company’s performance has impacted on
remuneration outcomes for Executives under the Company’s incentive programs.
The remuneration arrangements for Executives ensure that remuneration outcomes are lower when the Company’s performance does not justify large awards,
and higher when Company performance is strong. As demonstrated by the table, incentive outcomes have moved in line with the Company’s performance
against relevant key metrics:
FINANCIAL YEAR ENDED 30 JUNE
FY2008
FY2009
FY2010
FY2011
FY2012
FY2013
ANNUALIZED
GROWTH OVER
FIVE YEARS
TSR portion of LTI
Closing share price ($)
37.86
23.81
Dividends paid1 (cents per share)
1 year TSR for the Company (%)
1 year TSR for median of peer group (%)
3 year vesting outcome of LTI (%)
EPS portion of LTI
Underlying EPS (cents per share)2
3 year vesting outcome of LTI (%)
85.5
15.9
32.0
100
142.5
100
STI/ Combined
Incentive
Underlying NPAT ($’m)3
Average % of maximum STI awarded to Executives (%)
343.9
91.8
93.0
(34.8)
(34.8)
100
161.1
100
390.5
53.2
22.21
75.5
(1.6)
(9.9)
82
28.24
25.10
19.49
(12.4%)
86.0
37.4
40.8
nil
91.0
(6.8)
(21.9)
70
92.5
(19.6)
21.6
nil
1.6%
118.5
121.5
140.6
130.8
(1.7%)
nil
291.1
nil
nil
nil
nil
298.5
27.1
345.6
47.0
322.1
nil
(1.3%)
1 The FY2013 final dividend has been announced and is scheduled to be paid on 20 September 2013.
2 Underlying EPS, which in the Board’s opinion reflects the Company’s operating results, has been used for calculating the outcomes.
3
Underlying NPAT, which in the Board’s opinion reflects the Company’s operating results, has been used for calculating the outcomes for FY2011 and FY2012.
Underlying NPAT excludes fair value gains on acquisitions.
52 WorleyParsons Annual Report 2013
REMUNERATION OUTCOMES
Combined Incentive outcomes
As outlined in the description of the Combined Incentive Plan on page 50,
reward outcomes for Executives are linked primarily to performance against
annual financial KPIs, although non-financial (including individual) KPIs are
also relevant.
In the table, “Company Performance over a Five Year Period” on page 52, the
Company performance results for FY2013 are reflected in the decrease to
variable pay earned by Executives during FY2013. The Company performance
in FY2012 was reflected in incentive awards and LTI vesting outcomes.
Based on the NPAT provided above and performance against individual KPIs,
the resulting Combined Incentive payments are detailed in the table on pages
54 and 55.
The graph below illustrates the average percentage of maximum Combined
Incentive/STI awarded to Executives over the past five years compared to
Group NPAT and demonstrates a strong alignment between Company
performance and incentive outcomes for Executives:
Average % of maximum Combined Incentive/STI awarded to
Executives compared to Group NPAT
1
d
e
d
r
a
w
a
I
T
S
m
u
m
x
a
m
i
f
o
%
100
390.5
80
60
40
20
0
53.2%
291.1
345.6
322.1
47.0%
298.5
27.1%
0.0%
0
1
0
2
9
0
0
2
1
1
0
2
2
1
0
2
Financial year
0.0%
3
1
0
2
450
400
350
300
250
200
150
100
50
0
1
2
The average percentage of maximum STI for any financial year relates to
amounts paid in September following that year end, with the exception of a
portion of Iain Ross’ 2009 STI which was deferred for 12 months.
Reported Group NPAT, except for FY2011 and FY2012 where the lower
underlying Group NPAT figures were used.
2
’
m
$
T
A
P
N
p
u
o
r
G
LTI outcomes
The graph below tracks the Company’s TSR over the last three years against
the median TSR of the peer group used for the LTI Plan:
TSR performance measured over the last three years
Company
Median peer group
75th percentile peer group
e
c
n
a
m
r
o
f
r
e
p
R
S
T
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
0
1
l
u
J
0
1
t
c
O
1
1
n
a
J
1
1
r
p
A
1
1
l
u
J
1
1
t
c
O
2
1
n
a
J
2
1
r
p
A
2
1
l
u
J
2
1
t
c
O
3
1
n
a
J
3
1
r
p
A
3
1
l
u
J
Date
This graph illustrates that growth in the Company’s TSR was below median,
which may result in a nil vesting for Executives for TSR related LTI granted in
FY2011. As vesting was not achieved, Executives may elect to retain their
TSR performance rights to be retested and measured for the four year period
ending 30 June 2014.
Over the same three year period, the Company’s EPS was below the minimum
required to trigger vesting against the EPS performance hurdle for LTI granted
in FY2011. EPS performance rights will lapse on 30 September 2013. No
retest applies to this measure.
The table below shows the history of Executives’ grants that have vested to date:
Summary of vested rights
GRANT
EQUITY SETTLED
FY2008
FY20095
FY2010
FY20116
PERFORMANCE
PERIOD
TSR PERCENTILE
ACHIEVED1
RETESTED
TSR PERCENTILE
ACHIEVED2
CHANGE IN
EPS ACHIEVED3
% OF TOTAL
LTI GRANT
VESTED/EXERCISED
VALUE PER RIGHT
VESTED/EXERCISED4
VESTING DATE
$
01 Jul 07 – 30 Jun 10
01 Jul 08 – 30 Jun 11
01 Jul 09 – 30 Jun 12
66th
30th
60th
01 Jul 10 – 30 Jun 13
lowest
68th
70th
10th
n/a
5.8%
(5.2%)
(4.4%)
3.3%
49%
54%
42%
0%
30 Sep 10
30 Sep 12
30 Sep 12
30 Sep 13
21.51
25.65
25.65
n/a
1
2
3
4
5
6
Represents the Company’s relative TSR ranking over the initial three year performance period compared to the comparator group (being the ASX 50 to 150 ranked
companies at the start of the performance period for FY2008, and for FY2009 to FY2011 the peer group comprises AECOM, Aker Solutions, AMEC, Fluor Corporation,
Foster Wheeler, Jacobs Engineering Group, KBR, SNC-Lavalin, URS Corporation and Wood Group).
Represents the Company’s retested relative TSR ranking over a four year performance period compared to the comparator group (as described in Note 1 above).
Change in EPS achieved is calculated as the compound annual growth rate of EPS over the performance period.
This amount is based on the volume weighted average price of the Company’s shares for the 10 trading days following the annual results announcement for the year
in which the rights vest (as there is no exercise price payable in respect of equity or cash settled rights).
Equity granted in FY2009 under the TSR measure vested on 30 September 2012 based on the retested outcome over a four year performance period up
to 30 June 2012.
Equity granted in FY2011 under the TSR and EPS measure is due to have a nil vesting on 30 September 2013. Executives may elect to have TSR performance rights
retested and be measured for the four year performance period up to 30 June 2014.
WorleyParsons Annual Report 2013 53
DIRECTORS’ REPORT CONTINUED
Total remuneration outcomes
Details of remuneration for Executives are provided in the following table in accordance with accounting standards. Additional columns have been provided
under Actual Remuneration Outcomes. This provides a comparison between the accounting standards, actual remuneration awarded during the year and actual
remuneration received during the year.
Accounting standards require the value of equity based payments to be amortized over the relevant period of performance (or vesting period). For those
interested in the value of equity based payments awarded during the year, the value is determined as a percentage of fixed pay that the Company aims to
deliver. This can be found in the Equity Incentive/Deferred STI and LTI columns under the remuneration awarded section of Actual Remuneration Outcomes. For
those interested in the full value that was received during the year, the value is determined as the number of performance rights vested times the share price
at the end of the period of performance, found under the remuneration received section of Actual Remuneration Outcomes.
STATUTORY REMUNERATION OUTCOMES
SHORT TERM EMPLOYEE BENEFITS
POST-
EMPLOYMENT
BENEFITS
OTHER LONG
TERM
BENEFITS
SHARE BASED PAYMENTS
CASH SALARY
CASH
ALLOWANCES1
CASH
INCENTIVE/
CASH STI2
NON-
MONETARY
BENEFITS3
TOTAL
SHORT TERM
CASH AND
BENEFITS4
SUPER-
ANNUATION
LONG SERVICE
LEAVE
EQUITY
INCENTIVE/
STI EQUITY
SETTLED5
LTI EQUITY
SETTLED5
TOTAL
REMUNERATION
IN ACCORDANCE
WITH
ACCOUNTING
STANDARDS
$
$
$
$
$
$
$
$
$
$
SHARE
BASED
PAYMENTS %
OF TOTAL
REMUNERATION
VARIABLE
PAY % OF TOTAL
REMUNERATION
% OF MAXIMUM
STI AWARD
FORFEITED
EXECUTIVE DIRECTORS
Andrew Wood
FY2013 1,344,869
15,769
–
22,964
1,383,602
16,470
26,523
73,135
288,188
1,787,918
20.2%
20.2%
100.0%
FY2012
821,372
50,192
369,000
23,821 1,264,385
15,836
13,825
62,917 311,219
1,668,182
22.4%
44.5%
50.5%
John Grill
FY2013 2,484,268
FY2012 2,092,241
William Hall10
FY2012
229,630
GROUP EXECUTIVES
Barry Bloch
FY2013
692,537
FY2012
661,760
Stuart Bradie
FY2013 1,122,925
-
–
–
-
–
-
–
6,829 2,491,097
5,384
10,903
276,908 224,480
3,008,772
16.7%
16.7%
100.0%
1,530,000
13,635
3,635,876
15,836
34,812
260,000 874,926
4,821,450
23.5%
55.3%
51.2%
116,041
11,660
357,331
–
–
–
85,868
443,199
19.4%
45.6%
56.9%
–
14,269
706,806
16,470
11,753
50,368
88,563
873,960
15.9%
15.9%
100.0%
242,000
12,489
916,249
15,845
11,189
43,333
32,902
1,019,518
7.5%
31.2%
53.4%
FY2012
769,639
284,870
324,000
707,108 2,085,617
76,964
–
639,585 1,762,510
112,293
Simon Holt11
FY2013
307,418
Randy Karren11
FY2013
401,322
Iain Ross
FY2013
977,785
–
–
–
–
–
–
10,854
318,272
11,339
5,278
5,947
407,269
10,232
225,145 1,202,930
97,779
FY2012
714,021
178,505
285,000
209,247
1,386,773
71,402
David Steele
FY2013
887,903
-
–
212,156 1,100,059
FY2012
750,000
75,000
327,000
219,595
1,371,595
-
–
-
-
63,447 197,378
2,135,628
12.2%
12.2%
100.0%
54,583 324,979
2,542,143
14.9%
27.7%
53.1%
-
-
11,687
346,576
18,773
436,274
3.4%
4.3%
3.4%
4.3%
100.0%
100.0%
48,432 180,366
1,529,507
15.0%
15.0%
100.0%
41,667
307,639
1,807,481
19.3%
35.1%
57.2%
64,895 186,063
1,351,017
18.6%
18.6%
100.0%
55,833
212,443
1,639,871
16.4%
36.3%
52.7%
-
-
–
-
–
Total
remuneration
FY2013 8,219,027
15,769
– 1,137,749 9,372,545
269,967
54,457 577,185 1,195,498 11,469,652
FY2012 6,038,663
588,567 3,193,041 1,197,555 11,017,826
195,883
59,826
518,333 2,149,976 13,941,844
These footnotes apply to the table on pages 54 and 55.
1
2
3
4
5
6
7
8
9
This includes assignment uplifts and market adjustments.
The FY2013 amount relates to the FY2013 award under the Cash Incentive portion of the Combined Incentive Plan, in line with the outcomes, there will be no payment
made in September 2013. The FY2012 amount relates to the FY2012 award under the Cash STI Plan and was paid in September 2012.
Non-monetary benefits include benefits such as expatriate benefits (i.e. housing, home leave etc.), health insurance, car parking, company cars or car allowances, fringe
benefits tax, tax advisory services, life insurance and club memberships. In some cases, these are at the election of the Executives i.e. they are salary sacrificed.
This is the total value of short term employee cash and benefits received during reporting period.
This remuneration includes a proportion of the fair value of equity compensation granted or outstanding during the year. The fair value of equity instruments is
determined based on the fair value at grant date and is expensed progressively over the vesting period. The amount included as remuneration is not indicative of the
benefit (if any) that individual Executives may ultimately realize should the equity instruments vest.
This is the total of superannuation received and long service leave benefits accrued during reporting period.
Remuneration awarded during reporting period but deferred for future periods includes equity awards granted under the Combined Incentive and LTI Plans which may
vest and become available to Executives in future periods. A grant value based on fixed pay (as defined on page 49) multiplied by the Incentive plan payout
percentage approved by the Board has been included; this is not indicative of the benefit (if any) that individual Executives may ultimately realize should the equity
instruments vest.
In FY2013 WorleyParsons launched the pilot of the Employee Share Plan in Canada, Singapore and Indonesia. This plan allows all permanent employees in these
countries the opportunity to purchase up to $5,000 worth of shares per annum. The Company will provide an additional share for every five shares purchased and held
for three years. Approximately 2,500 employees participated in the pilot, including Mr Karren.
Remuneration received in reporting period from previous periods includes equity awards granted under the incentive plans in previous years which vested during
reporting period. The STI and LTI value reflects the actual value realized by the Executive. The FY2013 value has been determined based on the number of performance
rights granted in FY2011 that vested for the period ended 30 June 2013 and the closing share price at this date. The FY2012 value has been determined based on the
number of performance rights granted in FY2010 and FY2009 that vested for the period ended 30 June 2012 and the closing share price at this date.
10 Mr Hall retired as an alternate director on 25 October 2011. Share based payments are disclosed to the extent they relate to his occupation in the capacity of a director.
11 Remuneration is disclosed to the extent that it relates to Mr Holt’s and Mr Karren’s occupation in the capacity of an Executive, which commenced on 23 October 2012.
54 WorleyParsons Annual Report 2013
ACTUAL REMUNERATION OUTCOMES
AWARDED AND RECEIVED DURING
REPORTING PERIOD
SHORT TERM
CASH AND
BENEFITS
$
OTHER
BENEFITS6
$
EXECUTIVE DIRECTORS
Andrew Wood
FY2013
1,383,602
42,993
FY2012
1,264,385
29,661
John Grill
FY2013
2,491,097
16,287
FY2012
3,635,876
50,648
William Hall
FY2012
357,331
–
GROUP EXECUTIVES
Barry Bloch
FY2013
706,806
28,223
FY2012
916,249
27,034
Stuart Bradie
FY2013
1,762,510
112,293
FY2012
2,085,617
76,964
Simon Holt
FY2013
318,272
16,617
Randy Karren
FY2013
407,269
10,232
962
Iain Ross
FY2013
1,202,930
97,779
FY2012
1,386,773
71,402
David Steele
FY2013
1,100,059
FY2012
1,371,595
–
–
–
-
–
-
$
–
–
–
$
–
-
–
-
-
–
-
–
-
-
AWARDED DURING REPORTING PERIOD
RECEIVED DURING REPORTING PERIOD
DEFERRED FOR FUTURE PERIODS7
DEFERRED FROM PREVIOUS PERIODS9
EMPLOYEE
SHARE
PLAN8
EQUITY
INCENTIVE/
DEFERRED STI
TOTAL
REMUNERATION
AWARDED DURING
REPORTING PERIOD
EQUITY
INCENTIVE/
DEFERRED STI
$
$
LTI
$
TOTAL
REMUNERATION
RECEIVED DURING
REPORTING PERIOD
$
LTI
$
1,360,012
2,786,607
57,437
–
1,484,032
151,000
625,500
2,070,546
–
403,809
1,697,855
–
–
2,507,384
237,349
–
2,744,733
624,000
1,785,000
6,095,524
–
357,331
–
–
1,064,591
4,751,115
419,421
776,752
283,588
1,018,617
39,565
104,000
270,000
1,317,283
–
–
847,305
2,722,108
49,836
–
–
–
774,594
943,283
1,924,639
131,000
567,256
2,860,837
–
416,785
2,579,366
-
–
–
111,114
446,003
27,988
233,936
652,399
44,067
737,779
2,038,488
38,044
–
–
–
362,877
461,568
1,338,753
100,000
525,749
2,083,924
–
418,241
1,876,416
–
675,010
1,775,069
50,966
–
1,151,025
134,000
562,500
2,068,095
–
232,677
1,604,272
Total remuneration
FY2013
9,372,545
324,424
962
–
4,248,744
13,946,675
545,252
–
10,242,221
FY2012
11,017,826
255,709
–
1,244,000
4,336,005
16,853,540
–
2,955,524
14,229,059
WorleyParsons Annual Report 2013 55
DIRECTORS’ REPORT CONTINUED
Details of vested and outstanding rights over the last five years
NUMBER
OF
RIGHTS
GRANTED1
FAIR VALUE
PER RIGHT
(AT GRANT
DATE)2
$
FAIR VALUE
OF GRANT
(AT GRANT
DATE)3
$
VESTING
DATE/
FIRST
EXERCISE
DATE4
DATE OF
GRANT
NUMBER
OF
RIGHTS
VESTED
VALUE OF
RIGHTS
VESTED5
$
NUMBER
OF
RIGHTS
EXERCISED
EXPIRY
DATE
PLAN
EXECUTIVE DIRECTOR
Andrew Wood
LTI
23 Oct 12
53,084
17 Oct 11
23,702
15 Oct 10
25,387
09 Oct 09
18,650
03 Oct 08
15,288
Deferred Equity STI
01 Oct 12
GROUP EXECUTIVES
Barry Bloch
LTI
01 Oct 12
08 Feb 13
08 Feb 13
2,947
2,947
5,534
5,535
17 Oct 11
10,231
Deferred Equity STI
01 Oct 12
01 Oct 12
2,030
2,029
Stuart Bradie
LTI
08 Feb 13
16,536
08 Feb 13
16,536
17 Oct 11
21,495
15 Oct 10
28,374
09 Oct 09
19,361
03 Oct 08
15,692
Deferred Equity STI
01 Oct 12
Simon Holt8
LTI
01 Oct 12
08 Feb 13
17 Oct 11
15 Oct 10
Deferred Equity STI
01 Oct 12
Randy Karren8
LTI
01 Oct 12
08 Feb 13
08 Feb 13
17 Oct 11
15 Oct 10
Deferred Equity STI
01 Oct 12
01 Oct 12
Employee Share Plan
15 May 13
2,557
2,556
4,337
2,842
3,268
1,436
1,435
4,566
4,565
6,079
8,717
2,261
2,261
40
Iain Ross
LTI
08 Feb 13
14,398
08 Feb 13
14,399
17 Oct 11
19,922
15 Oct 10
26,324
09 Oct 09
19,316
03 Oct 08
15,834
Deferred Equity STI
01 Oct 12
01 Oct 12
1,952
1,951
David Steele
LTI
08 Feb 13
13,174
08 Feb 13
13,173
17 Oct 11
21,315
15 Oct 10
16,049
09 Oct 09
10,746
03 Oct 08
Deferred Equity STI
01 Oct 12
01 Oct 12
8,809
2,615
2,615
VALUE OF
RIGHTS
EXERCISED5
$
-
-
-
NUMBER
OF
RIGHTS
LAPSED6
VALUE OF
RIGHTS
LAPSED7
$
% OF
RIGHTS
LAPSED
-
-
-
-
-
-
0.0%
0.0%
0.0%
836,604
30 Sep 16
18 Oct 19
419,288
30 Sep 14
17 Oct 18
429,802
30 Sep 13
15 Oct 17
-
-
-
-
-
-
-
-
-
359,386
30 Sep 12
30 Sep 16
7,833
200,916
7,833
200,916
10,817
277,448
58.0%
292,154
30 Sep 12
30 Sep 15
8,255
211,741
8,255
211,741
7,033
184,921
46.0%
81,632
30 Jun 13
30 Jun 19
2,947
57,741
81,632
30 Jun 14
30 Jun 19
85,168
30 Sep 16
18 Oct 19
83,745
30 Sep 15
18 Oct 19
180,986
30 Sep 14
17 Oct 18
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
56,231
30 Jun 13
30 Jun 19
2,030
39,774
2,030
39,774
56,203
30 Jun 14
30 Jun 19
254,489
30 Sep 16
18 Oct 19
250,190
30 Sep 15
18 Oct 19
380,247
30 Sep 14
17 Oct 18
480,372
30 Sep 13
15 Oct 17
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
373,086
30 Sep 12
30 Sep 16
8,131
208,560
8,131
208,560
11,230
288,041
58.0%
299,874
30 Sep 12
30 Sep 15
8,474
217,358
8,474
217,358
7,218
189,785
46.0%
70,829
30 Jun 13
30 Jun 19
2,557
50,100
70,801
30 Jun 14
30 Jun 19
74,813
30 Sep 15
18 Oct 19
50,275
30 Sep 14
17 Oct 18
55,327
30 Sep 13
15 Oct 17
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
39,777
30 Jun 13
30 Jun 19
1,436
28,136
1,436
28,136
39,750
30 Jun 14
30 Jun 19
70,271
30 Sep 16
18 Oct 19
69,068
30 Sep 15
18 Oct 19
107,538
30 Sep 14
17 Oct 18
147,579
30 Sep 13
15 Oct 17
-
-
-
-
-
-
-
-
-
-
62,630
30 Jun 13
30 Jun 19
2,261
44,300
62,630
30 Jun 14
30 Jun 19
962
15 May 16
15 May 16
221,585
30 Sep 16
18 Oct 19
217,857
30 Sep 15
18 Oct 19
352,420
30 Sep 14
17 Oct 18
445,665
30 Sep 13
15 Oct 17
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
372,219
30 Sep 12
30 Sep 16
8,113
208,098
8,113
208,098
11,203
287,348
58.0%
302,588
30 Sep 12
30 Sep 15
8,550
219,308
8,550
219,308
7,284
191,520
46.0%
54,070
30 Jun 13
30 Jun 19
1,952
38,246
54,043
30 Jun 14
30 Jun 19
202,748
30 Sep 16
18 Oct 19
199,307
30 Sep 15
18 Oct 19
377,062
30 Sep 14
17 Oct 18
271,710
30 Sep 13
15 Oct 17
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
207,075
30 Sep 12
30 Sep 16
4,513
115,758
4,513
115,758
6,233
159,872
58.0%
168,340
30 Sep 12
30 Sep 15
4,757
122,017
4,757
122,017
4,052
106,540
46.0%
72,436
30 Jun 13
30 Jun 19
2,615
51,236
2,615
51,236
72,436
30 Jun 14
30 Jun 19
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37,954
15,842
-
-
-
-
0.0%
0.0%
56.1%
22.8%
15.76
17.69
16.93
19.27
19.11
27.70
27.70
15.39
15.13
17.69
27.70
27.70
15.39
15.13
17.69
16.93
19.27
19.11
27.70
27.70
17.25
17.69
16.93
27.70
27.70
15.39
15.13
17.69
16.93
27.70
27.70
24.05
15.39
15.13
17.69
16.93
19.27
19.11
27.70
27.70
15.39
15.13
17.69
16.93
19.27
19.11
27.70
27.70
NON-EXECUTIVE DIRECTORS – earned while an Executive
John Grill9
LTI
17 Oct 11
67,639
17.69
1,196,534
30 Sep 14
17 Oct 18
15 Oct 10
69,450
16.93
1,175,789
30 Sep 13
15 Oct 17
09 Oct 09
45,293
03 Oct 08
43,317
Deferred Equity STI
01 Oct 12
12,178
01 Oct 12
12,178
09 Oct 09
11,214
03 Oct 08
10,183
19.27
19.11
27.70
27.70
19.27
19.11
872,796
30 Sep 12
30 Sep 16
19,023
487,940
19,023
487,940
26,270
673,806
58.0%
827,788
30 Sep 12
30 Sep 15
23,391
599,979
23,391
599,979
19,926
523,921
46.0%
337,331
30 Jun 13
30 Jun 19
12,178
238,605
12,178
238,605
337,331
30 Jun 14
30 Jun 19
-
-
-
-
-
-
-
-
0.0%
0.0%
216,094
30 Sep 12
30 Sep 16
1,570
40,271
1,570
40,271
9,644
247,361
86.0%
194,597
30 Sep 12
30 Sep 15
3,666
94,033
3,666
94,033
6,517
169,167
64.0%
261,679
544,643
806,322
5,260,933
9,412,227
14,673,160
134,252
3,274,117
124,535
3,083,730
-
-
-
-
134,252
3,274,117
124,535
3,083,730
181,223
3,299,730
Larry Benke9
LTI
Total vested
Total outstanding
Total
56 WorleyParsons Annual Report 2013
1
2
3
4
5
The service and performance criteria for the rights are discussed in the “LTI Plan” section on page 51. Each right entitles the holder to one fully paid ordinary share in
the Company at a nil exercise price (i.e. a zero exercise price option).
Fair value per right at grant date is independently determined using an appropriate option pricing model in accordance with AASB 2 Share-based Payment that takes
into account the exercise price, the term of the right, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the right, the share price
at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the right. This amount
represents the actual cost to the Company. A Monte Carlo simulation is used for the relative TSR portion and a Black-Scholes model is used for the EPS portion.
Total fair value at grant is calculated by multiplying the fair value per right by the number of rights granted. This does not represent the actual value the Executive will
derive from the grant, which will depend on the achievement of performance hurdles measured over the vesting period. The maximum value of the rights granted has
been estimated based on the fair value per right. The minimum total value of the rights granted, if the applicable performance hurdles are not met, is nil.
This is the date at which rights first become exercisable subject to meeting performance hurdles. Once vested, rights are exercisable up until the expiry date. Rights
granted on 3 October 2008 were retained for retesting over a four year period (to 30 September 2012).
This amount is based on the volume weighted average price of the Company’s shares for the 10 trading days following the annual results announcement for the year in
which the rights vest (as there is no exercise price payable in respect of equity or cash settled rights).
6 The number of rights lapsed represents rights lapsed due to performance hurdles not being met and/or rights lapsed on cessation of employment.
7 Based on the measurement of the relevant performance hurdles, this total value may be an accumulation of values for rights lapsed over multiple periods.
8
Rights issued to Mr Holt and Mr Karren are disclosed to the extent they were outstanding or granted following the commencement of their occupation in the capacity of
an Executive, which commenced on 23 October 2012.
Mr Grill and Mr Benke received rights as part of their employment with the Company prior to their retirement on 23 October 2012 and 30 June 2010 respectively.
Board approval was received for retention of a pro-rated number of rights under the original terms of the grant including performance measures and vesting dates.
This is consistent with the Company’s practice in relation to unvested LTI held by retiring employees. Full details are disclosed on page 52. Rights lapsed on Mr Grill’s
and Mr Benke’s retirement have been valued based on the volume weighted average price of the Company’s shares for the 10 trading days up to and including their
retirement dates.
9
WorleyParsons Annual Report 2013 57
Unlimited
12 months
12 months
NAME
POSITION
COUNTRY OF RESIDENCE
4. NON-EXECUTIVE DIRECTOR REMUNERATION
NON‑EXECUTIVE DIRECTORS
This section outlines the remuneration arrangements in place for the
Company’s NEDs. All directors held office for the whole of FY2013, except
where otherwise stated. The NEDs for FY2013 are listed below:
John Grill1
Ron McNeilly2
Larry Benke
Erich Fraunschiel
John M Green
Christopher Haynes, OBE
Catherine Livingstone, AO
JB McNeil
Wang Xiao Bin
Chairman
Deputy Chairman and
Lead Independent Director
Director
Director
Director
Director
Director
Director
Director
Australia
Australia
Canada
Australia
Australia
United Kingdom
Australia
United States
Hong Kong
1 Mr Grill commenced as a NED and Chairman on 1 March 2013.
2
Mr McNeilly was Chairman until 1 March 2013, when he commenced as Deputy
Chairman and Lead Independent Director.
REMUNERATION POLICY
The principles of fairness and shareholder alignment are reflected through
the Company’s commitment to setting NED fees at a level which remains
market competitive, whilst ensuring they reflect the caliber of directors
required to address the significant strategic and operational challenges faced
by the Company, domestically and abroad.
NED fees have been reviewed on both an Australian and global basis and will
not increase in FY2014.
The aggregate amount of fees (which include Board and Committee fees) that
may be paid to NEDs in any year is capped at the level approved by
shareholders. The current maximum aggregate amount of $3.25 million per
annum was approved by shareholders at the 2012 AGM. Of the aggregate
annual fee pool, 72% ($2.355 million) was utilized during FY2013 (76%
($1.974 million) for FY2012 for the then $2.6 million limit). NEDs do not
receive performance related payments.
DIRECTORS’ REPORT CONTINUED
EMPLOYMENT ARRANGEMENTS
The key aspects of Executive contracts are outlined below:
CONTRACT
DURATION
NON‑COMPETE
CLAUSES
NOTICE PERIODS
EXECUTIVE DIRECTOR
Andrew Wood
GROUP EXECUTIVES
Barry Bloch
Stuart Bradie
Simon Holt
Randy Karren
Iain Ross
David Steele
Unlimited
12 months
6 months
Unlimited
12 months
6 months
Unlimited
12 months
6 months
Unlimited
12 months
6 months
Unlimited
12 months
6 months
Unlimited
12 months
6 months
The contracts include the components of remuneration which are to be paid
to Executives, and provide for annual review, but do not prescribe how
remuneration levels are to be modified from year to year.
In the event of termination, all Executives are generally entitled to receive
their statutory leave entitlements and superannuation benefits. In relation to
incentive plans upon termination, where an Executive resigns, the
Combined Incentive is paid only if the Executive is employed on the date of
payment which is subsequent to the performance year. The Board retains
discretion to pro-rate deferred equity payments in special circumstances
such as retirement.
In accordance with the plan rules, the Board retains discretion on the
treatment of both vested and unvested LTI in all instances of separation as
outlined in the LTI Plan discussion on page 51. In exercising such discretion in
the Combined Incentive and LTI Plans, where the Board allows retention of
awards, this is typically on a pro-rata basis and subject to the original
performance requirements and timing.
The Company did not pay sign-on payments to any Executives
during FY2013.
At the October 2010 Annual General Meeting (AGM), the Board sought and
received approval from shareholders, where discretion was applied for the
retention of LTI following cessation of employment for the value of LTI to be
disregarded when calculating the relevant participant’s cap for the purposes
of section 200F(2)(b) or section 200G(1)(c) of the Act.
58 WorleyParsons Annual Report 2013
REMUNERATION OUTCOMES
Remuneration of the NEDs for FY2013 and FY2012 is set out below:
REMUNERATION STRUCTURE
Board and Committee fees
Board and Committee fees for FY2013 and FY2014 are set out below. These
amounts are inclusive of superannuation contributions made on behalf of
NEDs in accordance with the Company’s statutory obligations.
ROLE
Chairman1
Deputy Chairman and Lead Independent Director1
Other non-executive director
Chairman of Audit and Risk Committee
Member of Audit and Risk Committee
Chairman of Remuneration Committee
Member of Remuneration Committee
Chairman of Health, Safety and Environment Committee
Member of Health, Safety and Environment Committee
Chairman/Member of Nominations Committee
FY2013 AND
FY2014 FEES
$520,000
$312,000
$194,000
$47,000
$26,000
$37,000
$21,000
$30,000
$12,000
nil
1
The Chairman of the Board and Deputy Chairman and Lead Independent
Director do not receive additional fees for Committees of which they may be
a member.
Other benefits
NEDs are eligible to receive travel allowances of $5,000 for attendance at
overseas meetings. NEDs are also entitled to be reimbursed for all
business related expenses, including travel, incurred in the discharge of
their obligations.
John Grill2
FY2013
Ron McNeilly
FY2013
FY2012
Larry Benke
FY2013
FY2012
Erich Fraunschiel
FY2013
FY2012
John M Green
FY2013
FY2012
Eric Gwee3
FY2012
Superannuation contributions are made on behalf of the NEDs in accordance
with the Company’s statutory superannuation obligations. The Company does
not pay retirement benefits to NEDs in addition to its statutory obligations.
Christopher Haynes, OBE4
FY2013
FY2012
From time to time, the Board may determine special fees for additional duties
undertaken by directors.
Catherine Livingstone, AO
NED minimum shareholding requirement
A minimum shareholding requirement exists to provide alignment between
director and shareholder interests. Each NED must build a holding of the
Company’s ordinary shares equivalent to that director’s annual fee. NEDs are
expected to comply with this requirement within their first full term of three
years as a director.
All NEDs complied with the minimum shareholding requirement as at
30 June 2013 with the exception of Christopher Haynes, OBE, who
commenced during FY2012 and has a further eighteen months to comply.
Particulars of directors’ beneficial interests in shares of the Company as at
30 June 2013 are set out in note 33 to the financial statements.
FY2013
FY2012
JB McNeil
FY2013
FY2012
Wang Xiao Bin5
FY2013
FY2012
Total remuneration
SHORT TERM
EMPLOYEE BENEFITS
POST-
EMPLOYMENT
BENEFITS
FEES
$
ALLOWANCES
$
SUPERANNUATION1
$
TOTAL
$
167,840
5,000
5,490
178,330
434,188
465,252
204,125
184,996
224,526
214,221
214,526
194,221
10,000
10,000
25,000
30,000
10,000
10,000
10,000
10,000
65,026
5,000
219,318
92,498
203,526
194,221
240,995
223,652
203,526
113,296
30,000
15,000
10,000
5,000
25,000
30,000
30,000
15,000
16,470
29,738
460,658
504,990
-
-
229,125
214,996
16,470
15,775
250,996
239,996
16,470
25,775
240,996
229,996
-
-
-
70,026
249,318
107,498
16,470
15,775
229,996
214,996
-
-
265,995
253,652
16,470
249,996
9,202
137,498
FY2013
FY2012
2,112,570
155,000
87,840
2,355,410
1,747,383
130,000
96,265
1,973,648
1
Superannuation contributions are made on behalf of the NEDs in accordance
with the Company’s statutory superannuation obligations. The superannuation
figures also include additional (i.e. non-statutory) salary sacrificed contributions
to superannuation and pension plans, as nominated by NEDs.
2 Mr Grill commenced as a NED and Chairman on 1 March 2013.
3 Mr Gwee retired as a director on 25 October 2011.
4 Dr Haynes commenced as a director on 1 January 2012.
5 Ms Wang commenced as a director on 1 December 2011.
This Directors’ Report is made in accordance with a resolution of the directors.
JOHN GRILL
Chairman
Sydney, 14 August 2013
WorleyParsons Annual Report 2013 59
Statement of financial Performance For the financial year ended 30 June 2013
Notes
conSolidated
2013
$’M
2012
$’M
ReVeNUe ANd otheR iNcoMe
Professional services revenue
Procurement revenue
construction and fabrication revenue
interest income
other
Revenue and other income
eXPeNses
staff costs
Procurement costs
contract-related reimbursable costs
office and administration costs
depreciation
Amortization
Borrowing costs
other
Total expenses
share of net profits of associates accounted for using the equity method
Profit before income tax expense
income tax expense
Profit after income tax expense
Profit after income tax expense attributable to:
Members of WorleyParsons Limited
Non‑controlling interests
Basic earnings per share (cents)
diluted earnings per share (cents)
6,025.2
5,858.3
1,938.5
847.7
6.0
14.1
912.5
618.7
7.0
11.9
8,831.5
7,408.4
(4,326.4)
(4,114.2)
(1,931.0)
(894.6)
(1,288.6)
(1,137.7)
(579.3)
(492.0)
(21.0)
(81.3)
(59.4)
(94.3)
(19.1)
(83.9)
(51.1)
(149.6)
(8,381.3)
(6,942.2)
23.4
27.6
473.6
493.8
(129.4)
(117.3)
344.2
376.5
322.1
22.1
130.8
129.9
353.2
23.3
143.7
142.5
5
9
24(c)
6(A)
21
21
the above statement of financial performance should be read in conjunction with the accompanying notes.
60 WorleyParsons Annual Report 2013
Statement of comPrehenSive income For the financial year ended 30 June 2013
Profit after income tax expense
Items that may be reclassified in future periods to the Statement of Financial Performance:
Net movement in foreign currency translation reserve
Net movement in hedge reserve
Total comprehensive income, net of tax
total comprehensive income, net of tax, attributable to:
Members of WorleyParsons Limited
Non‑controlling interests
the above statement of comprehensive income should be read in conjunction with the accompanying notes.
conSolidated
2013
$’M
2012
$’M
344.2
376.5
82.9
18.8
(34.6)
1.2
445.9
343.1
418.4
27.5
319.9
23.2
WorleyParsons Annual Report 2013 61
Statement of financial PoSition As at 30 June 2013
Notes
7
8
8
35
27
9
10
24(B)
35
27
11
12
13
14
36
15
16
17
36
18
19
20
conSolidated
2013
$’M
2012
$’M
320.0
247.3
1,915.7
1,725.9
176.1
184.8
2.5
105.3
1.1
1.6
–
89.5
0.6
1.5
2,522.3
2,249.6
139.6
135.7
2,050.4
1,704.8
131.4
104.1
30.8
27.1
160.5
22.3
16.0
28.5
132.6
20.0
2,562.1
2,141.7
5,084.4
4,391.3
1,175.6
976.4
156.0
–
468.1
4.0
3.0
15.7
499.6
4.0
1,803.7
1,498.7
902.7
141.6
43.2
0.3
733.8
112.6
66.3
0.0
1,087.8
912.7
2,891.5
2,411.4
2,192.9
1,979.9
1,238.5
1,221.3
(177.8)
(267.7)
1,098.2
1,003.8
2,158.9
1,957.4
34.0
22.5
2,192.9
1,979.9
Assets
Current assets
cash and cash equivalents
trade receivables
other receivables
income tax receivable
Prepayments
derivatives
Finance lease receivable
Total current assets
Non‑current assets
Property, plant and equipment
intangible assets
equity accounted associates
derivatives
Finance lease receivable
deferred tax assets
other non-current assets
Total non‑current assets
TOTAL ASSETS
LiABiLities
Current liabilities
trade and other payables
interest bearing loans and borrowings
income tax payable
Provisions
derivatives
Total current liabilities
Non‑current liabilities
interest bearing loans and borrowings
deferred tax liabilities
Provisions
derivatives
Total non‑current liabilities
TOTAL LIABILITIES
NET ASSETS
eQUitY
issued capital
Reserves
Retained profits
Parent entity interest
Non-controlling interests
TOTAL EQUITY
the above statement of financial position should be read in conjunction with the accompanying notes.
62 WorleyParsons Annual Report 2013
Statement of changeS in equity For the financial year ended 30 June 2013
conSolidated
FoReigN
cURReNcY
RetAiNed tRANsLAtioN
ReseRVe
$’M
PRoFits
$’M
issUed
cAPitAL
$’M
PeRFoRMANce
Rights
ReseRVe
$’M
hedge
ReseRVe
$’M
AcQUisitioN
ReseRVe
$’M
PAReNt
NoN-
eNtitY coNtRoLLiNg
iNteRests
$’M
iNteRest
$’M
totAL
$’M
As at 1 July 2012
1,221.3 1,003.8
(295.5)
(1.9)
39.3
(9.6) 1,957.4
22.5 1,979.9
Profit after income tax
expense
other comprehensive income
Total comprehensive income,
net of tax
–
–
–
322.1
–
–
–
77.5
18.8
322.1
77.5
18.8
–
–
–
Transactions with owners
Performance rights
transactions
Non-controlling interests
dividends paid
17.2
–
–
–
–
(227.7)
–
–
–
–
–
–
(6.4)
–
–
–
–
–
–
–
–
322.1
96.3
22.1
5.4
344.2
101.7
418.4
27.5
445.9
10.8
–
–
1.2
10.8
1.2
(227.7)
(17.2)
(244.9)
As at 30 June 2013
1,238.5 1,098.2
(218.0)
16.9
32.9
(9.6) 2,158.9
34.0 2,192.9
As at 1 July 2011
1,219.6
871.7
(261.0)
(3.1)
23.9
(9.6) 1,841.5
15.3 1,856.8
Profit after income tax
expense
other comprehensive
(loss)/income
Total comprehensive income,
net of tax
Transactions with owners
transfer of performance
rights on purchase and
issuance of shares
Non-controlling interests on
acquisition of subsidiaries
dividends paid
–
–
–
353.2
–
–
–
(34.5)
1.2
353.2
(34.5)
1.2
–
–
–
1.7
–
–
–
–
(221.1)
–
–
–
–
–
–
15.4
–
–
–
–
–
–
–
–
353.2
23.3
376.5
(33.3)
(0.1)
(33.4)
319.9
23.2
343.1
17.1
–
17.1
–
3.2
3.2
(221.1)
(19.2)
(240.3)
As at 30 June 2012
1,221.3 1,003.8
(295.5)
(1.9)
39.3
(9.6) 1,957.4
22.5 1,979.9
the above statement of changes in equity should be read in conjunction with the accompanying notes.
WorleyParsons Annual Report 2013 63
Statement of caSh floWS For the financial year ended 30 June 2013
cAsh FLows FRoM oPeRAtiNg ActiVities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
dividends received from associates
interest received
Borrowing costs paid
income taxes paid
Net cash inflow from operating activities
cAsh FLows FRoM iNVestiNg ActiVities
Payments for purchase of equity accounted investment
Payments for acquisition of controlled entities
cash balances in controlled entities acquired, net of bank overdraft
Payments for purchase of property, plant and equipment and computer software
Proceeds from sale of property, plant and equipment
Net cash outflow from investing activities
cAsh FLows FRoM FiNANciNg ActiVities
Repayments of borrowings
Proceeds from borrowings
costs of bank facilities and net payments for finance leases
Net loans from/(to) related parties
dividends paid to the company’s shareholders
dividends paid to non-controlling interests
Net cash outflow from financing activities
Net increase in cash
cash and cash equivalents at the beginning of the financial year
effects of exchange rate changes on cash
Notes
conSolidated
2013
$’M
2012
$’M
8,467.2
6,853.6
(7,846.0)
(6,286.7)
621.2
566.9
13.8
6.0
23.0
7.0
(47.6)
(45.3)
(149.9)
(114.1)
26
443.5
437.5
23(d)
23(d)
22(B)
(8.7)
(282.5)
22.4
(78.2)
0.3
(21.5)
(28.9)
2.7
(59.0)
0.4
(346.7)
(106.3)
(1,758.0)
(2,252.9)
1,963.0
2,267.9
(10.7)
10.9
(6.4)
(20.7)
(227.7)
(221.1)
(16.9)
(18.4)
(39.4)
(251.6)
57.4
247.3
15.3
79.6
166.1
1.6
Cash and cash equivalents at the end of the financial year
7
320.0
247.3
the above statement of cash flows should be read in conjunction with the accompanying notes.
64 WorleyParsons Annual Report 2013
noteS to the financial StatementS For the financial year ended 30 June 2013
1. corPorate information
the financial report of worleyParsons Limited (company or Parent entity) for
the financial year ended 30 June 2013 was authorized for issue in accordance
with a resolution of the directors on 14 August 2013.
worleyParsons Limited is a company limited by shares incorporated in
Australia whose shares are publicly traded on the Australian securities
exchange (AsX: woR). worleyParsons Limited is a for-profit entity for the
purpose of preparing the financial statements.
the nature of the operations and principal activities of the company is
described in note 34.
2. Summary of Significant accounting PolicieS
(A) BASIS OF ACCOUNTING
(i) Basis of preparation
this general purpose financial report has been prepared in
accordance with the Corporations Act 2001, Australian Accounting
standards (AAs) and other authoritative pronouncements of the
Australian Accounting standards Board (AAsB).
the group is of a kind referred to in class order 98/0100 issued by
the Australian securities and investments commission, relating to
the “rounding off” of amounts in the directors’ Report and financial
statements. Unless otherwise expressly stated, amounts have been
rounded off to the nearest hundred thousand dollars in accordance
with that class order. Amounts shown as 0.0 represent amounts less
than $50,000 which have been rounded down.
(ii) Statement of compliance
the consolidated financial report complies with international
Financial Reporting standards and interpretations as issued by the
international Accounting standards Board.
(iii) Historical cost convention
the financial report has been prepared on a historical cost basis,
except for derivative financial instruments and available-for-sale
financial assets that have been measured at fair value. the carrying
values of recognized assets and liabilities that are hedged with fair
value hedges are adjusted to record changes in the fair values
attributable to the risks that are being hedged.
(iv) Critical accounting estimates
in the application of AAs, management is required to make
judgments, estimates and assumptions about carrying values of
assets and liabilities that are not readily apparent from other sources.
the estimates and underlying assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making judgments.
the estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognized in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future periods
if the revision affects both current and future periods.
Management has identified the following critical accounting policies
for which significant judgments, estimates and assumptions are
made:
•
•
•
•
•
revenue recognition, refer note 2(G);
goodwill and intangible assets with identifiable useful lives, refer
notes 2(L) and 10;
warranty and other provisions, refer notes 2(O), 14 and 17;
share based payments, refer note 2(C); and
recovery of deferred taxes, refer notes 2(D) and 6(D).
Actual results may differ from these estimates under different
assumptions and conditions and may materially affect financial
results or the financial position reported in future periods.
(v) Adoption of new and amended accounting standards
the group has adopted the following new and amended accounting
standards from 1 July 2012:
•
•
•
AASB 7 Financial Instruments: Disclosures – Enhanced
Derecognition Disclosure Requirements;
AASB 2010‑8 Amendments to Australian Accounting Standards
– Deferred Tax: Recovery of Underlying Assets; and
AASB 2011‑9 Amendments to Australian Accounting Standards
– Presentation of items of other comprehensive income.
Adoption of these standards did not have any material effect on the
statement of financial performance, statement of comprehensive
income and statement of financial position of the group.
(vi) New and amended standards not yet applicable
the following new and amended accounting standards have been
issued or amended but are not yet effective and have not been
adopted by the group for the annual reporting period ended 30 June
2013:
effective 1 July 2013:
AASB 10 Consolidated Financial Statements
AAsB 10 establishes a new control model that applies to all entities
and is applicable to accounting periods beginning on or after
1 January 2013 and will be effective for the group from 1 July 2013.
it replaces parts of AAsB 127 consolidated and separate Financial
statements dealing with the accounting for consolidated financial
statements and Uig 112 consolidation – special Purpose entities.
the new control model broadens the situations when an entity is
considered to be controlled by another entity and includes new
guidance for applying the model to specific situations, including
when acting as a manager may give control, the impact of potential
voting rights and when holding less than a majority voting rights
may give control. the group has made its assessment of its
relationships with other entities to determine if control may exist
under the new definitions. No material situations have been
identified to date.
AASB 11 Joint Arrangements
AAsB 11 replaces AAsB 131 interests in Joint Ventures and Uig 113
Jointly controlled entities – Non-Monetary contributions by Venturers.
AAsB 11 uses the principle of control in AAsB 10 consolidated
Financial statements to define joint control, and therefore the
determination of whether joint control exists may change. in addition,
AAsB 11 removes the option to account for jointly controlled entities
using proportionate consolidation. this standard is applicable to
accounting periods beginning on or after 1 January 2013 and will be
effective for the group from 1 July 2013 and may result in a change
in the accounting for the joint arrangements held by the group.
Management has assessed the impact of the change to the
accounting standards. No material impact is expected to result in
the statement of financial performance and statement of financial
position; and no material impact is expected on total earnings or
on net assets.
AASB 12 Disclosure of Interests in Other Entities
AAsB 12 is applicable to accounting periods beginning on or after
1 January 2013 and includes all disclosures relating to an entity’s
interests in subsidiaries, joint arrangements, associates and
structured entities. there will be no impact on any of the amounts
recognized in the group’s financial statements.
AASB 13 Fair Value Measurement
AAsB 13 establishes a single source of guidance for determining the
fair value of assets and liabilities. this standard does not change
when an entity is required to use fair value, but rather, provides
guidance on how to determine fair value when fair value is required
or permitted. AAsB 13 also expands the disclosure requirements for
all assets or liabilities carried at fair value. this includes information
about the assumptions made and the qualitative impact of those
assumptions on the fair value determined. AAsB 13 is applicable to
accounting periods beginning on or after 1 January 2013; however,
adoption of this standard is not expected to have any impact on the
group’s financial statements.
WorleyParsons Annual Report 2013 65
noteS to the financial StatementS For the financial year ended 30 June 2013
AASB 119 Employee Benefits
the amended standard changes the definition of short term
employee benefits. the distinction between short term and long
term employee benefits is now based on whether the benefits are
expected to be settled wholly within 12 months after the reporting
date. this standard is applicable to accounting periods beginning on
or after 1 January 2013 and will be effective for the group from
1 July 2013. it will result in a change in the group’s classification
of provision for employee benefits.
AASB 1053 Application of Tiers of Australian Accounting Standards
this standard establishes a differential financial reporting framework
consisting of two tiers of reporting requirements for preparing
general purpose financial statements. AAsB 1053 is applicable to
accounting periods beginning on or after 1 July 2013; however,
adoption of this standard is not expected to have any impact on
the group’s financial statements.
(B) BASIS OF CONSOLIDATION
the consolidated financial statements incorporate the assets and
liabilities of all entities controlled by worleyParsons Limited as at 30 June
2013 and the results of all controlled entities for the financial year then
ended. worleyParsons Limited and its controlled entities together are
referred to in this financial report as the consolidated entity or the group.
investments in associates and joint ventures are equity accounted and
are not part of the consolidated group (refer note 2(B)(iii) below).
the impact of all transactions between entities in the consolidated entity
are eliminated in full. Non-controlling interests in the results and equity
of controlled entities are shown separately in the statement of financial
performance, statement of comprehensive income and statement of
financial position.
(i) Controlled entities
where control of an entity is obtained during a financial year, its
results are included in the statement of financial performance and
the statement of comprehensive income from the date on which
control commences. where control of an entity ceases during a
financial year, its results are included for that part of the year during
which control existed.
A change in the ownership interest of a subsidiary that does not
result in a loss of control, is accounted for as an equity transaction.
(ii) Jointly controlled operations and assets
the proportionate interests in the assets, liabilities and expenses of
jointly controlled operations and jointly controlled assets have been
incorporated in the financial statements under the appropriate
headings. details of the jointly controlled operations and assets
have been set out in note 25.
(iii) Equity accounted investments
(a)
Joint ventures
the interest in joint ventures is carried at the lower of the equity
accounted amount and the recoverable amount in the
consolidated financial statements. the share of profits or losses
of the entities is recognized in the statement of financial
performance and the statement of comprehensive income, and
the share of movements in reserves is recognized in the
statement of financial position.
Profits or losses on transactions establishing joint ventures and
transactions with the joint ventures are eliminated to the extent
of the consolidated entity’s ownership interest until such time as
they are realized by the joint ventures on consumption or sale.
details of the joint ventures have been set out in note 24.
(b) Associates
investments in associates are accounted for in the consolidated
financial statements using the equity method of accounting.
Under this method, the consolidated entity’s share of the
post-acquisition profits or losses after tax of associates is
recognized in the statement of financial performance and the
statement of comprehensive income, and its share of
post-acquisition movements in reserves is recognized in
consolidated reserves. the cumulative post-acquisition
movements are adjusted against the cost of the investment.
66 WorleyParsons Annual Report 2013
Associates are those entities over which the consolidated entity
exercises significant influence, but not control. details of the
associates are set out in note 24.
(iv) Non‑controlling interests
Non-controlling interests not held by the company are allocated their
share of net profit after tax in the statement of financial
performance and of total comprehensive income net of tax in the
statement of comprehensive income, and are presented within equity
in the statement of financial position, separately from Parent entity
interest.
(C) EMPLOYEE BENEFITS
Provision is made for employee benefits accumulated as a result of
employees rendering services up to the reporting date. these benefits
include wages and salaries, annual leave, sick leave and long service
leave.
Liabilities arising in respect of wages and salaries, annual leave, sick
leave and any other employee benefits expected to be settled within
12 months of the reporting date are measured at their nominal amounts
based on remuneration rates which are expected to be paid when the
liability is settled. All other employee benefits or liabilities are measured
at the present value of the estimated future cash outflows to be made in
respect of services provided by the employees up to the reporting date.
in determining the present value of future cash outflows, the market
yield as at the reporting date on national government bonds, which have
terms to maturity approximating the terms of the related liability, is used.
employee benefits expenses arising in respect of wages and salaries,
non-monetary benefits, leave entitlements and other types of
entitlements are charged against profits on a net basis in their respective
categories.
(i) Equity based compensation scheme – performance rights
Performance rights (rights) over the ordinary shares of
worleyParsons Limited are granted to executive directors and other
executives of the consolidated entity for nil consideration in
accordance with performance guidelines approved by the Board. the
fair values of the rights are amortized on a straight line basis over
their performance period. For share settled rights, the fair value of
the rights is the share price at grant date adjusted for the impact of
performance hurdles and other vesting or exercise criteria attached
to the right. For cash settled rights, the fair value of the rights is
recalculated at the end of each reporting period and amortized on a
straight line basis over their vesting period. the accounting
estimates and assumptions relating to rights would have no impact
on the carrying amounts of assets and liabilities within the next
annual reporting period but may impact expenses and equity.
Fair value per right at grant date is independently determined using
an appropriate option pricing model in accordance with AAsB 2
share-based Payment that takes into account the exercise price, the
term of the right, the vesting and performance criteria, the impact of
dilution, the non-tradable nature of the right, the share price at grant
date and expected price volatility of the underlying share, the
expected dividend yield and the risk-free interest rate for the term of
the right. this amount represents the actual cost to the company.
A Monte carlo simulation is applied to fair value the tsR element. in
accordance with the rules of the performance rights plan, the model
simulates the company’s tsR and compares it against the peer group
over the three-year period of each grant. the model takes into
account the historic dividends, share price volatilities and
co-variances of the company and each comparator company to
produce a predicted distribution of relative share performance. this is
applied to the grant to give an expected value of the tsR element.
For the ePs and “continuing employment condition” the
Black-scholes model is utilized. total fair value at grant is calculated
by multiplying the fair value per right by the number of rights
granted. this does not represent the actual value the executive will
derive from the grant, which will depend on the achievement of
performance hurdles measured over the vesting period. the
maximum value of the rights granted has been estimated based on
the fair value per right. the minimum total value of the rights
granted, if the applicable performance hurdles are not met, is nil.
(ii) Deferred short term incentive plan
deferred short term incentives are granted to executive directors and
other executives of the consolidated entity in accordance with
guidelines approved by the Board. these incentives are delivered in
the form of a grant of rights under the Performance Rights Plan,
except where the value of the incentive is less than the established
threshold.
the rights awarded under the plan are deferred and will vest in two
equal tranches. the group accounts for these deferred awards as
equity settled share based payments. incentives granted which are
less than the established threshold are accounted for as an employee
benefit in accordance with the group accounting policies.
(iii) Employee share plan
employees in eligible countries are invited to participate in an
employee share plan. shares purchased under the employee share
plan are subject to dealing restrictions until the restriction end date.
the group will grant one bonus entitlement to a share for every five
shares purchased through employee share plan which vests on the
restriction end date at which point it will convert to an ordinary
share. the group accounts for the bonus entitlements as equity
settled share based payments.
(D) TAXES
(i)
Income tax
the income tax expense for the period is the tax payable on the
current period’s taxable income based on the income tax rate for
each jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences between the tax
bases of assets and liabilities and their carrying amounts in the
financial statements and to unused tax losses as well as any
adjustments required between prior periods’ current tax expense
and income tax returns and any relevant withholding taxes.
deferred tax assets and liabilities are recognized for temporary
differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates which are
enacted or substantially enacted for each jurisdiction. the relevant
tax rates are applied to the cumulative amounts of deductible and
taxable temporary differences to measure the deferred tax asset
or liability. An exception is made for certain temporary differences
arising from the initial recognition of an asset or a liability. No
deferred tax asset or liability is recognized in relation to these
temporary differences if they arose in a transaction, other than
a business combination, that at the time did not affect either
accounting profit or taxable profit or loss.
deferred tax assets are recognized for deductible temporary
differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilize those temporary
differences.
deferred tax liabilities and assets are not recognized for temporary
differences between the carrying amount and tax bases of
investments in controlled entities where the Parent entity is able
to control the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse in the
foreseeable future.
current and deferred tax amounts relating to items recognized
directly in equity are also recognized in equity and not in the
statement of financial performance.
(ii) Tax consolidation
worleyParsons Limited and its wholly owned Australian entities
elected to form a tax consolidated group from 1 July 2003. on
formation of the tax consolidated group, the entities in the tax
consolidated group entered into a tax sharing agreement which, in
the opinion of the directors, limits the joint and several liability of
the wholly owned entities in the case of a default by the head
entity, worleyParsons Limited.
the entities have also entered into a tax funding agreement under
which the wholly owned entities fully compensate worleyParsons
Limited for any current tax liability assumed and are compensated by
worleyParsons Limited for any current tax loss, deferred tax assets
and tax credits that are transferred to worleyParsons Limited under
the tax consolidation legislation. the tax consolidated current tax
liability or current year tax loss and other deferred tax assets are
required to be allocated to the members of the tax consolidated
group in accordance with Uig 1052 tax consolidation Accounting.
the group uses an allocation method for this purpose where the
allocated current tax payable, current tax loss, deferred tax assets
and other tax credits for each member of the tax consolidated group
are determined as if the group is a stand-alone taxpayer but
modified as necessary to recognize membership of a tax consolidated
group. the funding amounts are determined by reference to the
amounts recognized in the wholly owned entities’ financial
statements which are determined having regard to membership of
the tax consolidated group. the amounts receivable/payable under
the tax funding agreement are due upon receipt of the funding
advice from the head entity, which is issued as soon as practicable
after the end of each financial year. the head entity may also require
payment of interim funding amounts to assist with its obligations to
pay tax installments. the funding amounts are recognized as current
inter-company receivables or payables.
(iii) Goods and services tax (GST)
Revenues, expenses and assets are recognized net of the amount
of gst except where the gst incurred on a purchase of goods and
services is not recoverable from the taxation authority. in these
circumstances, the gst is recognized as part of the cost of
acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of gst
included.
the net amount of gst recoverable from, or payable to, the taxation
authority is included as part of receivables or payables in the
statement of financial position.
cash flows are included in the statement of cash flows on a gross
basis. the gst component of cash flows arising from investing and
financing activities, which is recoverable from, or payable to, the
taxation authority, is classified as an operating cash flow.
commitments and contingencies are disclosed net of the amount
of gst recoverable from, or payable to, the taxation authority.
(E) FOREIGN CURRENCY TRANSLATION
(i) Functional and presentation currency
items included in the financial statements of each of the group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (functional currency). the
consolidated financial statements are presented in Australian dollars,
which is the group’s presentation currency.
(ii) Translation of foreign currency transactions
transactions denominated in a foreign currency are converted at the
exchange rate at the date of the transaction. Foreign currency
receivables and payables at balance date are translated at exchange
rates at balance date. exchange gains and losses are brought to
account in determining the profit and loss for the financial year.
(iii) Specific hedges
hedging is undertaken to avoid or minimize potential adverse
financial effects of movements in foreign currency exchange rates.
gains or losses arising upon entry into a hedging transaction
intended to hedge the purchase or sale of goods or services,
together with subsequent exchange gains or losses resulting from
those transactions, are deferred up to the date of the purchase or
sale and included in the measurement of the purchase or sale. Note 3
provides specific details on the calculation of these gains or losses.
Foreign exchange gains and losses arising from a monetary item
receivable from or payable to a foreign operation, the settlement
of which is neither planned nor likely in the foreseeable future, are
considered to form part of a net investment in a foreign operation
and are recognized directly in equity in the foreign currency
translation reserve.
At each balance date, the group measures the effectiveness of its
cash flow hedges. the effective portion of the gain or loss on the
hedging instrument is recognized directly in equity, while the
ineffective portion is recognized in the profit and loss.
WorleyParsons Annual Report 2013 67
noteS to the financial StatementS For the financial year ended 30 June 2013
(F) ACQUISITION OF ASSETS AND BUSINESS COMBINATIONS
(iv) Dividends
the purchase method of accounting is used to account for all business
combinations regardless of whether equity instruments or other assets
are acquired. cost is measured as the fair value of the assets given up,
shares issued or liabilities undertaken or assumed at the date of
acquisition. transaction costs directly attributable to the acquisition are
expensed as incurred. where equity instruments are issued in a business
combination, the value of the instruments is their market price as
determined by market valuation at the acquisition date. transaction costs
arising on the issue of equity instruments are recognized directly in
equity.
if the business combination is achieved in stages, the acquisition date
fair value of the group’s previously held equity interest in the acquiree
is remeasured to fair value at the acquisition date through profit or loss.
except for non-current assets or disposal groups classified as held for
sale (which are measured at fair value less costs to sell), all identifiable
assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any non-controlling interest.
the excess of the cost of the business combination over the net fair
value of the group’s share of the identifiable net assets acquired is
recognized as goodwill. if the cost of acquisition is less than the group’s
share of the net fair value of the identifiable net assets of the subsidiary,
the difference is recognized as a gain in the statement of financial
performance, but only after a reassessment of the identification and
measurement of the net assets acquired.
where settlement of any part of the consideration is deferred, the
amounts payable in the future are discounted to their present value as
at the date of exchange. the discount rate used is the group’s
incremental borrowing rate, being the rate at which a similar borrowing
could be obtained from an independent financier under comparable terms
and conditions.
(G) REVENUE RECOGNITION
Amounts disclosed as revenue are net of trade allowances, duties and
taxes paid. Revenue is recognized and measured at the fair value of the
consideration received or receivable to the extent that it is probable that
the economic benefits will flow to the group and the revenue can be
reliably measured. the following specific recognition criteria must be met
before revenue is recognized:
(i) Engineering design, construction and fabrication and project services
contract revenue and expenses are recognized in accordance with
the percentage of completion method unless the outcome of the
contract cannot be reliably estimated. where it is probable that a loss
will arise from a contract, the excess of total costs over revenue is
recognized as an expense immediately.
where the outcome of a contract cannot be reliably estimated,
contract costs are recognized as an expense as incurred, and where it
is probable that the costs will be recovered, revenue is recognized to
the extent of costs incurred. incentive payments on contracts are
recognized as part of total contract revenue where it is probable that
specified performance standards are met or exceeded and the
amount of the incentive payment can be reliably measured.
Revenue from cost plus contracts is recognized by reference to the
recoverable costs incurred during the reporting period plus the
percentage of fees earned.
For fixed price contracts, the stage of completion is measured by
reference to costs incurred to date as a percentage of estimated total
costs for each contract.
(ii) Sale of goods
Revenue is recognized when the significant risks and rewards of
ownership of the goods have passed to the buyer and the costs
incurred or to be incurred in respect of the transaction can be
measured reliably. Risks and rewards of ownership are considered
passed to the buyer at the time of delivery of the goods to the
customer.
(iii) Interest
interest income is recognized as it accrues using the effective
interest rate method.
68 WorleyParsons Annual Report 2013
Revenue is recognized when the group’s right to receive the
payment is established.
(H) TRADE AND OTHER RECEIVABLES
All trade and other receivables are recognized at the original amounts
less an allowance for any uncollectible debts. An allowance for doubtful
debts is made when there is objective evidence that the group will not
be able to collect debts. the recoverable amount of trade and other
receivables is reviewed on an ongoing basis.
Unbilled contract revenue is stated at the aggregate of contract costs
incurred to date plus recognized profits less recognized losses and
progress billings. contract costs include all costs directly related to
specific contracts, costs that are specifically chargeable to the customer
under the terms of the contract and an allocation of overhead expenses
incurred in connection with the consolidated entity’s activities in general.
(I) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated
depreciation and impairment, if any. depreciation is calculated on a
straight line basis to write off the net cost or revalued amount of each
item of property, plant and equipment (excluding land) over its expected
useful life to the consolidated entity. the expected useful lives for plant
and equipment range from three to 10 years. the estimated useful lives,
residual values and depreciation method are reviewed at the end of each
annual reporting period.
the cost of improvements to or on leasehold properties is amortized over
the unexpired period of the lease or the estimated useful life of the
improvement to the consolidated entity, whichever is the shorter.
(J)
IMPAIRMENT OF ASSETS
Assets that have an indefinite useful life are not subject to amortization
and are tested at least twice a year for impairment. Assets that are
subject to amortization are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount exceeds its
recoverable amount. the recoverable amount is the higher of an asset’s
fair value less costs to sell, and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash generating units (cgUs)).
(K) LEASES
the determination of whether an arrangement is or contains a lease is
based on the substance of the arrangement and requires an assessment
of whether the fulfillment of the arrangement is dependent on the use
of a specific asset or assets and the arrangement conveys a right to use
the asset.
(i) The Group as a lessee
Finance leases, which transfer to the group substantially all the
risks and rewards incidental to ownership of the leased item, are
capitalized at the inception of the lease at the fair value of the
leased asset or, if lower, at the present value of the minimum lease
payments. Lease payments are apportioned between the finance
charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability.
Finance charges are recognized as an expense in the statement of
financial performance.
the minimum lease payments of operating leases, where the lessor
effectively retains substantially all of the risks and rewards of
ownership of the leased item, are recognized as an expense on a
straight line basis. Lease incentives are recognized in the statement
of financial performance as an integral part of the total lease
expense.
(ii) The Group as a lessor
Leases where the group transfers substantially all the risks and
rewards incidental to ownership of an asset to the lessee or a third
party are classified as finance leases. A receivable at an amount
equal to the present value of the lease payments, including any
guaranteed residual value, is recognized.
income on finance leases is recognized on a basis reflecting a
constant periodic return based on the lessor’s net investment
outstanding in respect of the finance lease.
Leases where the company retains substantially all the risks and
rewards incidental to ownership of an asset are classified as
operating leases. operating lease rental revenue is recognized on
a straight line basis.
(L) INTANGIBLE ASSETS
(i) Goodwill
goodwill represents the excess of the purchase consideration over
the fair value of identifiable net assets acquired at the time of
acquisition of a business or shares in a controlled entity or an
associate. goodwill on acquisition of controlled entities is included
in intangible assets and goodwill on acquisition of associates is
included in investments in associates. gains and losses on the
disposal of an entity include the carrying amount of goodwill
relating to the entity sold.
Goodwill is not amortized; instead, it is tested at least twice a year
for any impairment in the carrying amount or more frequently if
events or changes in circumstances indicate that it might be
impaired. goodwill is carried at cost less accumulated impairment
losses.
For the purposes of impairment testing, goodwill acquired in a
business combination is allocated to groups of cgUs that are
expected to benefit from the synergies of the combination,
irrespective of whether other assets or liabilities of the group are
assigned to those groups of units. the groups of cgUs to which
goodwill is allocated are the operating segments determined in
accordance with AAsB 8 operating segments, as set out in note 34.
these segments represent the lowest level within the entity at
which the goodwill is monitored for internal management purposes.
impairment is determined by assessing the recoverable amount of
the groups of cgUs to which the goodwill relates. when the
recoverable amount of the groups of cgUs is less than the carrying
amount, an impairment loss is recognized.
impairment losses recognized for goodwill are not subsequently
reversed.
(ii) Identifiable intangible assets
intangible assets acquired separately or in a business combination
are initially measured at cost. the cost of an intangible asset
acquired in a business combination is its fair value as at the date of
acquisition. Following initial recognition, intangible assets are carried
at cost less any accumulated amortization and any accumulated
impairment losses. internally generated intangible assets are not
capitalized and expenditure is recognized in the profit and loss in
the year in which the expenditure is incurred.
the useful lives of intangible assets are assessed to be either finite
or indefinite. intangible assets with finite lives are amortized over
the useful life and tested for impairment whenever there is an
indication that the intangible asset may be impaired. the
amortization period and the amortization method for an intangible
asset with a finite useful life are reviewed at least each financial
year end. changes in the expected useful life or the expected
pattern of consumption of future economic benefits embodied in the
asset are accounted for prospectively by changing the amortization
period or method, as appropriate, which is a change in accounting
estimate. the amortization expense on intangible assets with finite
lives is recognized in the statement of financial performance on a
straight line basis over the following periods:
•
•
•
•
•
customer contracts and relationships
3‑15 years
trade names
computer software
favorable property leases
other
5‑10 years
5 years
3‑10 years
3‑10 years.
intangible assets with indefinite useful lives are tested for
impairment annually, either individually or at the cgU level. such
intangible assets are not amortized. the useful life of an intangible
asset with an indefinite life is reviewed each reporting period to
determine whether indefinite life assessment continues to be
supportable. if not, the change in the useful life assessment from
indefinite to finite is accounted for as a change in an accounting
estimate and is thus accounted for on a prospective basis.
Research costs are expensed as incurred. An intangible asset arising
from development expenditure on an internal project is recognized
only when the group can demonstrate the technical feasibility of
completing the intangible asset so that it will be available for use or
sale, its intention to complete and its ability to use or sell the asset,
how the asset will generate future economic benefits, the availability
of resources to complete the development and the ability to measure
reliably the expenditure attributable to the intangible asset during
its development.
(M) TRADE AND OTHER PAYABLES
Liabilities for trade and other payables amounts are carried at cost which
is the fair value of the consideration to be paid in the future for goods
and services received, whether or not billed to the group.
(N) INTEREST BEARING LOANS AND BORROWINGS
Loans are initially recognized at fair value, net of transaction costs
incurred. Loans are subsequently measured at amortized cost. Any
difference between the proceeds (net of transaction costs) and the
redemption amount is recognized in the statement of financial
performance over the period of the loan using the effective interest
rate method.
(O) PROVISIONS
Provisions are recognized when the consolidated entity has a legal,
equitable or constructive obligation to make a future sacrifice of
economic benefits to other entities as a result of past transactions or
other past events, it is probable that a future sacrifice of economic
benefits will be required and a reliable estimate can be made of the
amount of the obligation.
(i) Deferred revenue
the group at times receives payment for services prior to revenue
being recognized in the financial statements. Revenue is classified as
deferred due to the criteria required for its recognition not being met
as at the reporting date, in line with the accounting policy set out in
note 2(g) above.
(ii) Expected losses on contracts
where the outcome for a services contract is expected to result in an
overall loss over the life of the contract, this loss is provided for
when it first becomes known that a loss will be incurred.
(iii) Insurance
Provision for insurance liabilities is recognized in line with actuarial
calculations of unsettled insurance claims, net of insurance
recoveries. the provision is based on the aggregate amount of
individual claims incurred but not reported that are lower in value
than the insurance deductible of the consolidated entity. it is based
on the estimated cost of settling claims and consideration is given to
the ultimate claim size, future inflation as well as the levels of
compensation awarded through the courts.
(iv) Warranties
Provision is made for the estimated liability on all products and
services still under warranty at balance date. this provision is
estimated having regard to prior service warranty experience. in
calculating the liability at balance date, amounts were not discounted
to their present value as the effect of discounting was not material.
in determining the level of provision required for warranties, the
group has made judgments in respect of the expected performance
and the costs of fulfilling the warranty. historical experience and
current knowledge have been used in determining this provision.
(v) Deferred consideration
deferred consideration acquired in a business combination is initially
measured at fair value at the date of acquisition. subsequently, it is
measured in accordance with AAsB 137 Provisions, contingent
Liabilities and contingent Assets.
(vi) Dividends payable
Provision is made for the amount of any dividends declared,
determined or publicly recommended by the directors before or at
the end of the financial year but not distributed at balance date.
WorleyParsons Annual Report 2013 69
noteS to the financial StatementS For the financial year ended 30 June 2013
(vii) Restructurings
Provisions for restructurings are recognized when the consolidated
entity has developed a detailed formal plan for the restructuring and
has raised a valid expectation in those affected that it will carry out
the restructuring by starting to implement the plan or announcing its
main features to those affected by it.
(P) REPAIRS AND MAINTENANCE
Repairs, minor renewals and improvements, and the purchase of minor
items of tools and equipment are charged to expense as incurred. Major
renewals and improvements are capitalized to the respective asset and
depreciated.
(Q) BORROWING COSTS
Borrowing costs are recognized as expenses in the period in which they
are incurred, except when they are included in the costs of qualifying
assets. Borrowing costs include:
(i)
interest on bank overdrafts, and short term and long term
borrowings;
(ii)
amortization of discounts or premiums relating to borrowings; and
(iii) finance lease charges.
(R) CASH AND CASH EQUIVALENTS
cash and cash equivalents in the statement of financial position comprise
cash at bank and in hand and short term deposits with an original
maturity of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes
in value.
For the purposes of the statement of cash flows, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts. Bank overdrafts are included within interest
bearing loans and borrowings in current liabilities on the statement of
financial position.
where cash and cash equivalents held by the group are subject to
external restrictions, the nature of the restrictions and value of cash
subject to these restrictions are disclosed in note 7.
discrete pre-tax financial information about each of these customer
sector groups is reported to the chief operating decision makers on a
monthly basis.
the group’s operations are organized and managed separately
according to the nature of the services they provide, with each
segment serving different markets. the group provides engineering
design, project services, and maintenance and reliability support
services to a number of markets. the consolidated entity’s activities
also include infrastructure developments within the Power sector.
(ii) Accounting policies and inter‑segment transactions
segment revenues, expenses, assets and liabilities are those that are
directly attributable to a segment and the relevant portion that can
be allocated to the segment on a reasonable basis. segment assets
include all assets used by a segment and consist primarily of
receivables and plant and equipment. segment revenues, expenses
and results include transactions between segments incurred in the
ordinary course of business. these transactions are priced on an
arm’s length basis and are eliminated on consolidation.
the accounting policies used by the group in reporting segments
internally are the same as those contained in these financial
statements and are consistent with those used in the prior period.
the segment result includes the allocation of overhead that can be
directly attributed to an individual business segment. the following
items and associated assets and liabilities are not allocated to
segments as they are not considered part of the core operations of
any segment:
•
•
•
•
•
•
global support costs;
interest and tax for associates;
amortization of acquired intangible assets;
net gain on revaluation of investments previously accounted for
as equity accounted associates;
net borrowing costs; and
income tax expense.
(S) ISSUED CAPITAL
(V) ASSETS HELD FOR SALE
issued and paid up capital is recognized at the fair value of the
consideration received by the group. Any transaction costs arising on the
issue of ordinary shares are recognized directly in equity as a reduction of
the share proceeds received.
(T) EARNINGS PER SHARE
(i) Basic earnings per share
Basic earnings per share is determined by dividing the profit
attributable to members of worleyParsons Limited by the weighted
average number of ordinary shares outstanding during the financial
year.
(ii) Diluted earnings per share
diluted earnings per share is calculated as profit attributable to
members of worleyParsons Limited adjusted for:
•
•
•
costs of servicing equity (other than dividends);
the after‑tax effect of dividends and interest associated with
dilutive potential ordinary shares that have been recognized as
expenses; and
other non‑discretionary changes in revenues or expenses during
the period that would result from the dilution of potential
ordinary shares.
divided by the weighted average number of ordinary shares and dilutive
potential ordinary shares, adjusted for any bonus element.
(U) SEGMENT REPORTING
(i)
Identification of reportable segments
the group has identified its operating segments based on the
internal reports that are reviewed and used by the chief executive
officer and the group Managing directors (the chief operating
decision makers) in assessing performance and in determining the
allocation of resources. the operating segments identified by
management are based on the customer sector groups:
Hydrocarbons; Minerals, Metals & Chemicals; Infrastructure
& Environment and Power.
70 WorleyParsons Annual Report 2013
Non-current assets and disposal groups are classified as held for sale and
measured at the lower of their carrying value, and fair value less costs to
sell if their carrying amount will be recovered principally through a sale
transaction. they are not depreciated or amortized. For an asset or
disposal group to be classified as held for sale, it must be available for
immediate sale in its present condition and its sale must be highly
probable.
An impairment loss is recognized for any initial or subsequent write-down
of the asset (or disposal group) to fair value less costs to sell. A gain is
recognized for any subsequent increases in fair value less costs to sell of
an asset (or disposal group), but not in excess of any cumulative
impairment loss previously recognized. A gain or loss not previously
recognized by the date of the sale of the non-current asset (or disposal
group) is recognized at the date of derecognition.
the assets and liabilities are presented separately on the face of the
statement of financial position.
(W) DETERMINATION OF FAIR VALUES
A number of the group’s accounting policies and disclosures require the
determination of fair value, for both financial and non-financial assets
and liabilities. Fair values have been determined for measurement and/or
disclosure purposes based on the following methods. when applicable,
further information about the assumptions used in determining fair
values is disclosed in the notes specific to that asset or liability.
(i) Property, plant and equipment
the fair value of property, plant and equipment recognized as the
result of a business combination is based on market values. the
market value of property is the estimated amount for which a
property could be exchanged on the date of valuation between a
willing buyer and a willing seller in an arm’s length transaction of
proper marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion. the market value of plant,
equipment, fixtures and fittings is based on quoted market prices for
similar items.
(ii) Investments in equity and debt securities
the fair value of held-to-maturity investments, financial assets at
fair value through profit and loss, and available-for-sale financial
assets is determined by reference to their quoted bid price at the
reporting date. the fair value of held-to-maturity investments is
determined for disclosure purposes only.
(iii) Derivatives
the fair value of forward exchange contracts is estimated by
discounting the difference between the contractual forward price for
the residual maturity of the contract using a risk-free interest rate
(based on government bonds). the fair value of interest rate swaps is
based on broker quotes. those quotes are tested for reasonableness
by discounting estimated cash flows based on the terms and
maturity of each contract and using market interest rates for similar
instruments at the measurement date.
(iv) Non‑derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated
based on the present value of future principal and interest cash
flows, discounted at the market rate of interest at the reporting date.
For finance leases, the market rate of interest is determined by
reference to similar lease agreements.
3. financial riSK management
(A) OVERVIEW
the group’s principal financial instruments comprise receivables,
payables, bank loans and overdrafts, finance leases, cash and short term
deposits and derivatives. the group has exposure to the following risks
from its use of financial instruments:
•
•
•
credit risk;
liquidity risk; and
market risk.
this note presents information about the group’s exposure to each of
the above risks, its objectives, policies and processes for measuring and
managing risk, and the management of capital. Quantitative disclosures
are included throughout this financial report.
the Board has overall responsibility for the establishment and oversight
of the risk management framework. the Audit and Risk committee
assists the Board in overseeing the integrity of the group’s financial
reporting risk management framework and internal controls.
Risk management policies are established to identify and analyze the
risks faced by the group, to set appropriate risk limits and controls, and
to monitor risks and adherence to limits. Risk management policies and
systems are reviewed regularly to reflect changes in market conditions
and the group’s activities. the group, through its training and
management standards and procedures, aims to develop a disciplined and
constructive control environment in which all employees understand their
roles and obligations.
the committee is assisted in its oversight role by internal Audit. internal
Audit undertakes both regular and ad hoc reviews of risk management
controls and procedures, the results of which are reported to the
committee.
(B) CREDIT RISK
credit risk is the risk of financial loss to the group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the group’s receivables from
customers and investment securities.
(i) Trade and other receivables
the group’s exposure to credit risk is influenced mainly by the
individual characteristics of each customer. the profiles of the
group’s customer base, including the default risk of the industry and
country in which customers operate, have less of an influence on
credit risk. geographically and on a customer basis, there is no
concentration of credit risk.
the group has a credit policy under which each new customer is
analyzed for creditworthiness before the group’s standard payment
and delivery terms and conditions are offered. the group’s review
includes external ratings, when available, and in some cases bank
references.
the group has established an allowance for impairment that
represents its estimate of incurred losses in respect of trade and
other receivables. this allowance comprises only those components
that are individually significant.
(ii) Guarantees
details of outstanding guarantees are provided in note 30(A).
the group is, in the normal course of business, required to provide
guarantees and letters of credit on behalf of controlled entities,
associates and related parties in respect of their contractual
performance related obligations.
(C) LIQUIDITY RISK
Liquidity risk is the risk that the group will not be able to meet its
financial obligations as they fall due. the group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to
the group’s reputation.
the group ensures that it has sufficient cash on demand to meet
expected operational expenses including the servicing of financial
obligations; this excludes the potential impact of extreme circumstances
that cannot reasonably be predicted, such as natural disasters.
(D) MARKET RISK
Market risk is the risk that changes in market prices, such as foreign
exchange rates, interest rates and equity prices, will affect the group’s
income or the value of its holdings of financial instruments. the objective
of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimizing the return.
the group enters into derivatives, and also incurs financial liabilities, in
order to manage market risk. generally, the group seeks to apply hedge
accounting in order to reduce volatility in profit and loss.
(i) Currency risk
the group is exposed to currency risk on sales, purchases and
borrowings that are denominated in a currency other than the
respective functional currencies of group entities.
the group uses forward exchange contracts and foreign currency
options to hedge its currency risk, most with a maturity of less than
one year from the reporting date. when necessary, forward exchange
contracts are rolled over at maturity.
interest on borrowings is denominated in currencies that match the
cash flows generated by the underlying operations for the group
resulting in an economic hedge. interest is primarily AUd, cAd, gBP
and Usd.
(ii) Interest rate risk
the group enters into interest rate swaps to manage interest rate
risk. the group adopts a policy of ensuring that the majority of its
exposure to interest rates on borrowings is on a fixed rate basis.
(E) CAPITAL MANAGEMENT
the Board’s policy is to maintain a strong capital base so as to maintain
investor, creditor and market confidence and to sustain future
development of the business. the Board monitors the return on capital,
which the group defines as net operating income divided by total
shareholders’ equity, excluding non-controlling interests. the Board also
determines the level of dividends to ordinary shareholders.
the Board seeks to maintain a balance between the higher returns that
might be possible with higher levels of borrowings and the advantages
and security afforded by a sound capital position.
WorleyParsons Annual Report 2013 71
noteS to the financial StatementS For the financial year ended 30 June 2013
3. financial riSK management (continued)
the Board monitors this through the gearing ratio (net debt/net debt plus
total equity), the size of available banking facilities and the assessment
of the outlook for the group operations. the target for the group’s
gearing ratio is between 25% and 35%. the gearing ratio at 30 June
2013 and 2012 was as follows:
6. income taX
(A) INCOME TAX EXPENSE
current tax
deferred tax
overprovision in previous financial periods
Income tax expense
deferred income tax expense included in
income tax expense comprises:
conSolidated
2013
$’M
1,062.2
320.0
742.2
2012
$’M
739.8
247.3
492.5
2,192.9
1,979.9
(increase)/decrease in deferred tax assets
25.3%
19.9%
increase in deferred tax liabilities
total interest bearing loans and borrowings1
Less: cash and cash equivalents
Net debt
total equity
Gearing
conSolidated
2013
$’M
2012
$’M
135.5
117.7
4.2
(10.3)
12.5
(12.9)
129.4
117.3
(1.1)
5.3
4.2
4.2
8.3
12.5
1 excluding capitalized borrowing costs.
Deferred tax
there were no changes in the group’s approach to capital management during
the financial year.
Neither the group nor any of its subsidiaries is subject to externally imposed
capital requirements.
4. eXPenSeS and loSSeS/(gainS)
(B) RECONCILIATION OF PRIMA FACIE TAX EXPENSE TO
INCOME TAX EXPENSE
Profit before income tax expense
473.6
493.8
Prima facie tax expense at the group’s statutory income
tax rate of 30% (2012: 30%)
142.1
148.1
Profit before income tax expense includes the following specific expenses
and losses/(gains):
tax effect of amounts which are non-deductible/
(non-taxable) in calculating taxable income:
eXPeNses ANd Losses
operating lease rentals – minimum lease payments
Retirement benefits
Performance rights expense
MoVeMeNts iN PRoVisioNs
employee benefits
warranties
insurance
other
5. other income
Net gain on revaluation of investments previously accounted
for as equity accounted associates
other
Other income
conSolidated
Non-deductible performance rights
2013
$’M
2012
$’M
Non-taxable gain on acquisitions
share of net profits of associates accounted for using
the equity method
203.7
137.8
10.8
172.2
129.0
17.1
tax losses not previously recognized
over provision in previous financial periods
difference in overseas tax rate1
other
3.2
–
(7.0)
(1.9)
(10.3)
(7.1)
10.4
5.3
(2.3)
(8.2)
(0.4)
(12.9)
(14.3)
2.0
239.5
247.8
Income tax expense
129.4
117.3
(1.9)
5.0
(11.5)
2.8
0.2
36.9
conSolidated
2013
$’M
2012
$’M
–
14.1
14.1
7.6
4.3
11.9
1
Represents income tax expense for foreign tax rate differential and international
withholding taxes.
(C) AMOUNTS RECOGNIZED DIRECTLY IN EQUITY
Aggregate amount of tax arising in the reporting period and not recognized in
profit after income tax expense but directly credited to equity:
deferred tax – credited directly to equity
16.8
2.5
(D) TAX LOSSES
the group has tax losses for which no deferred tax asset is recognized on the
statement of Financial Position:
Unused tax losses for which no deferred tax asset has
been recognized
Potential tax benefit at 30%
25.6
7.7
28.3
8.5
the benefit for tax losses will only be recognized if:
•
•
•
•
the consolidated entity derives future assessable income of a nature and
of an amount sufficient to enable the benefit from the deductions for the
losses to be realized; or
the losses are transferred to an eligible entity in the consolidated entity;
and
the consolidated entity continues to comply with conditions for
deductibility imposed by tax legislation; and
no changes in legislation adversely affect the consolidated entity in
realizing the benefit from the deductions for the losses.
72 WorleyParsons Annual Report 2013
Notes
conSolidated
2013
$’M
2012
$’M
7. current aSSetS – caSh and caSh equivalentS
cash and cash equivalents
320.0
247.3
the above figures are reconciled to cash at the end of the financial year as shown
in the statement of cash flows as follows:
cash at bank and on hand
Balance per statement of cash flows
320.0
320.0
247.3
247.3
PROCUREMENT AND RESTRICTED CASH AND CASH EQUIVALENTS
included within cash and cash equivalents is $53.2 million (2012: $51.4 million)
which has been identified as for procurement services or restricted, but available
for use under certain circumstances by the group.
Procurement cash is held in relation to procurement activities undertaken by
the group on behalf of its customers (refer note 28). Restricted cash is held in
relation to guarantees (refer note 30(A)) and financing activities.
Notes
conSolidated
2013
$’M
2012
$’M
8. current aSSetS – trade and other receivaBleS
tRAde ReceiVABLes
trade receivables
Unbilled contract revenue
Retentions
Allowance for doubtful debts
Allowance for doubtful debts
939.7
984.5
22.0
(30.5)
941.5
782.2
27.1
(24.9)
1,915.7
1,725.9
Balance at the beginning of the financial year
24.9
25.7
Net charge to the statement of financial performance
Provision from entities acquired
Amounts written off against the opening provision balance
differences arising on translation of foreign operations
4.8
4.9
(2.6)
(1.5)
4.3
–
(3.1)
(2.0)
Balance at the end of the financial year
30.5
24.9
the group’s exposure to credit, currency and interest rate risk for trade
receivables and unbilled contract revenue is disclosed respectively in
notes 35, 37 and 38.
otheR ReceiVABLes
other receivables
Amounts owing by equity accounted
associates and related parties
130.7
112.9
32(B)
45.4
71.9
176.1
184.8
WorleyParsons Annual Report 2013 73
noteS to the financial StatementS For the financial year ended 30 June 2013
9. non‑current aSSetS – ProPerty, Plant and equiPment
conSolidated
2013
$’M
2012
$’M
Land and buildings
At cost
Accumulated depreciation
Leasehold improvements
At cost
Accumulated amortization
Plant and equipment
At cost
Accumulated depreciation
Computer equipment
At cost
Accumulated depreciation
1.7
(0.3)
1.4
172.9
(100.5)
72.4
175.1
(118.7)
56.4
79.4
(70.0)
9.4
1.6
(0.1)
1.5
144.2
(65.3)
78.9
140.8
(94.0)
46.8
63.2
(54.7)
8.5
Total property, plant and equipment
139.6
135.7
RECONCILIATIONS
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current and previous financial years are
set out below:
LANd ANd
BUiLdiNgs
$’M
LeAsehoLd
iMPRoVeMeNts
$’M
conSolidated
PLANt ANd
eQUiPMeNt
$’M
coMPUteR
eQUiPMeNt
$’M
1.5
0.0
0.1
0.0
0.0
–
(0.2)
1.4
1.6
–
0.0
(0.1)
0.0
–
0.0
1.5
78.9
2.0
13.7
(0.5)
–
(25.1)
3.4
72.4
61.0
0.1
37.7
(0.2)
–
(20.8)
1.1
78.9
46.8
8.8
15.5
(0.6)
(15.9)
–
1.8
56.4
35.5
2.3
23.8
(0.6)
(14.1)
–
(0.1)
46.8
8.5
1.3
4.4
(0.3)
(5.1)
–
0.6
9.4
10.0
–
4.0
(0.4)
(5.0)
–
(0.1)
8.5
totAL
$’M
135.7
12.1
33.7
(1.4)
(21.0)
(25.1)
5.6
139.6
108.1
2.4
65.5
(1.3)
(19.1)
(20.8)
0.9
135.7
Balance at 1 July 2012
Additions due to the acquisition of entities
Additions
disposals
depreciation
Amortization
differences arising on translation of foreign operations
Balance at 30 June 2013
Balance at 1 July 2011
Additions due to the acquisition of entities
Additions
disposals
depreciation
Amortization
differences arising on translation of foreign operations
Balance at 30 June 2012
74 WorleyParsons Annual Report 2013
10. non‑current aSSetS – intangiBle aSSetS
Goodwill
At cost
Accumulated impairment
Customer contracts and relationships
At cost
Accumulated amortization
Trade names
At cost
Accumulated amortization
Computer software
At cost
Accumulated amortization
Favorable property leases
At cost
Accumulated amortization
Other
At cost
Accumulated amortization
conSolidated
2013
$’M
2012
$’M
1,874.8
1,570.3
(1.6)
(1.6)
1,873.2
1,568.7
166.7
(115.8)
50.9
85.1
(58.2)
26.9
127.2
(91.3)
35.9
69.9
(51.9)
18.0
233.7
191.1
(148.7)
(109.7)
85.0
81.4
9.7
(9.7)
–
17.3
(2.9)
14.4
9.1
(9.1)
–
3.2
(2.4)
0.8
Total intangible assets
2,050.4
1,704.8
RECONCILIATIONS
Reconciliations of intangible assets at the beginning and end of the current and previous financial years are set out below:
Balance at 1 July 2012
Additions due to the acquisition of entities
Additions
Amortization
differences arising on translation of
foreign operations
Balance at 30 June 2013
Balance at 1 July 2011
Additions due to the acquisition of entities
Additions
Amortization
differences arising on translation of
foreign operations
Balance at 30 June 2012
goodwiLL
$’M
1,568.7
207.7
–
–
96.8
1,873.2
1,529.2
37.0
–
–
2.5
1,568.7
conSolidated
cUstoMeR
coNtRActs ANd
ReLAtioNshiPs
$’M
tRAde NAMes
$’M
coMPUteR
soFtwARe
$’M
FAVoRABLe
PRoPeRtY
LeAses
$’M
35.9
34.1
–
(19.2)
0.1
50.9
61.9
–
–
18.0
13.2
–
(4.5)
0.2
26.9
25.0
–
–
81.4
0.4
35.3
(32.3)
0.2
85.0
78.2
0.0
34.8
(22.8)
(7.1)
(31.6)
(3.2)
35.9
0.1
18.0
–
81.4
–
–
–
–
–
–
1.3
–
–
(1.3)
0.0
–
otheR
$’M
0.8
–
13.8
(0.2)
0.0
14.4
1.2
–
–
(0.3)
(0.1)
0.8
totAL
$’M
1,704.8
255.4
49.1
(56.2)
97.3
2,050.4
1,696.8
37.0
34.8
(63.1)
(0.7)
1,704.8
WorleyParsons Annual Report 2013 75
noteS to the financial StatementS For the financial year ended 30 June 2013
10. non‑current aSSetS – intangiBle aSSetS (continued)
Impairment testing
identifiable intangible assets with finite lives are carried at cost less
accumulated amortization and adjusted for any accumulated impairment loss.
the assets are assessed at each reporting date as to whether there is any
indication that the asset may be impaired. goodwill is an intangible asset with
an indefinite life which is tested at least twice a year for impairment. the
recoverable amount test is based on the higher of value in use, and fair value
less cost to sell. these calculations use cash flow projections based on
financial forecasts of how the business is expected to operate based on
current performance and the business environment but taking into account
expected future changes.
the groups of cgUs to which goodwill is allocated are the operating segments
determined in accordance with AAsB 8 operating segments.
the goodwill allocated to the groups of cgUs and the key assumptions used
for the value in use impairment testing are as follows:
2013
hydrocarbons
Minerals, Metals & Chemicals
Infrastructure & Environment
Power
2012
hydrocarbons
Minerals, Metals & Chemicals
Infrastructure & Environment
Power
PRe-tAX
discoUNt
% PA
11.4
13.4
13.9
11.2
PRe-tAX
discoUNt
% PA
12.8
14.5
15.4
13.0
goodwiLL
$’M
1,397.3
156.3
158.4
161.2
1,873.2
goodwiLL
$’M
1,186.7
74.8
157.1
150.1
1,568.7
the first five years forecast cash flows are based on management’s estimates
of the short and long term prospects for the industry and previous
experience. the growth rate beyond five years is assumed to be 3% per
annum.
the calculation of value in use for the cgUs is most sensitive to the following
assumptions:
•
•
•
growth rates used in years 1 to 5;
change in discount rates; and
long term growth rate.
goodwill is not impaired at reporting date and there are no known probable
changes in estimates that would lead to an impairment.
76 WorleyParsons Annual Report 2013
conSolidated
2013
$’M
2012
$’M
11. non‑current aSSetS – deferred taX aSSetS
the balance comprises temporary differences attributable to:
Amounts recognized in the statement of financial performance:
Allowance for doubtful debts
employee benefits provisions
warranty provisions
Project provisions
other provisions
Fixed assets
sundry accruals
Recognized tax losses
Unused foreign tax credits
Unrealized foreign exchange losses
Lease incentives
other
Deferred tax assets
5.1
49.2
0.4
6.6
31.1
6.0
16.3
11.7
1.6
21.2
4.8
6.5
5.9
56.1
0.7
5.0
18.2
9.8
14.3
2.2
4.4
4.4
5.0
6.6
160.5
132.6
Balance at the beginning of the financial year
132.6
123.9
Acquisition of controlled entities
credited/(charged) to the statement of Financial Performance
credited to equity
differences arising on translation of foreign operations
1.4
1.1
19.7
5.7
1.2
(4.2)
6.7
5.0
Balance at the end of the financial year
160.5
132.6
Notes
conSolidated
2013
$’M
2012
$’M
12. current liaBilitieS – trade and other PayaBleS
trade payables
Accruals
Payables to associates and related parties 32(B)
Billings in advance
Accrued staff costs
389.2
473.6
21.7
98.7
192.4
1,175.6
346.7
372.0
10.2
73.6
173.9
976.4
the group’s exposure to currency and interest rate risk for trade and other
payables is disclosed in notes 37 and 38.
conSolidated
2013
$’M
2012
$’M
13. current liaBilitieS – intereSt Bearing loanS
and BorroWingS
Notes payable
secured bank loan
Unsecured bank loans
Finance lease liability
capitalized borrowing costs
151.4
1.5
1.7
2.3
(0.9)
156.0
–
1.4
2.3
0.0
(0.7)
3.0
NOTES PAYABLE IN US$
Unsecured notes payable were issued in the United states private debt
capital market in May 2007, April 2008, March 2011 and september 2012
(refer note 15).
SECURED BANK LOAN
Refer note 15 for terms and conditions.
UNSECURED BANK LOANS
Refer note 15 for terms and conditions.
FINANCE LEASE LIABILITY
Refer note 15 for terms and conditions.
14. current liaBilitieS – ProviSionS
employee benefits
deferred revenue and project
insurance
warranties
deferred consideration
other
the nature and timing of provisions is set out in note 17.
conSolidated
2013
$’M
2012
$’M
290.5
94.3
25.0
16.7
12.2
29.4
289.5
163.7
19.2
13.8
–
13.4
468.1
499.6
RECONCILIATIONS
Reconciliations of the carrying amounts of each class of current provisions at the beginning and end of the current and previous financial years are set out below:
carrying amount at 1 July 2012
Provision from entities acquired
Additional provisions
Non-current provision reclassified to current
Release of unused provision
Amounts utilized
differences arising from translation of foreign operations
Carrying amount at 30 June 2013
carrying amount at 1 July 2011
Provision from entities acquired
Additional provisions
Release of unused provision
Amounts utilized
differences arising from translation of foreign operations
Carrying amount at 30 June 2012
conSolidated
eMPLoYee
BeNeFits
$’M
deFeRRed
ReVeNUe
ANd PRoJect
$’M
iNsURANce
$’M
wARRANties
$’M
deFeRRed
coNsideRAtioN
$’M
289.5
22.6
241.9
–
(14.8)
(262.7)
14.0
290.5
215.8
7.7
238.8
(3.0)
(173.3)
3.5
289.5
163.7
–
52.5
–
(31.5)
(95.1)
4.7
94.3
89.3
0.0
149.6
(2.6)
(70.1)
(2.5)
19.2
–
6.8
–
(1.0)
(1.6)
1.6
25.0
20.7
0.0
3.1
(2.9)
(2.8)
1.1
13.8
4.2
4.0
–
(5.9)
(0.2)
0.8
16.7
15.0
–
8.2
(5.4)
(4.4)
0.4
163.7
19.2
13.8
–
–
–
12.2
–
–
–
12.2
10.7
0.0
–
0.0
(10.7)
–
–
otheR
$’M
13.4
–
17.0
12.2
(3.4)
(10.8)
1.0
29.4
7.8
–
8.6
–
(2.7)
(0.3)
13.4
conSolidated
2013
$’M
2012
$’M
15. non‑current liaBilitieS – intereSt Bearing loanS
and BorroWingS
Notes payable
secured bank loan
Unsecured bank loans
Finance lease liability
capitalized borrowing costs
884.6
15.9
–
4.8
(2.6)
658.9
17.4
59.8
–
(2.3)
902.7
733.8
NOTES PAYABLE IN US$
Unsecured notes payable were issued in the United states private debt
capital market in May 2007, April 2008, March 2011 and september 2012.
the issue in september 2012 comprised Us$205.0 million maturing in
september 2022 with a fixed coupon of 4.00% per annum, Us$75.0 million
maturing in september 2019 with a fixed coupon of 3.45% per annum and
Us$20.0 million maturing in 2017 with a fixed coupon of 3.09% per annum.
the issue in March 2011 comprised Us$175.0 million maturing in March 2021
with a fixed coupon of 5.56% per annum, Us$22.0 million maturing in March
2018 with a fixed coupon of 4.86% per annum and Us$10.0 million maturing
in 2016 with a fixed coupon of 4.16% per annum. the issue in April 2008
comprised Us$144.5 million maturing in April 2018 with a fixed coupon of
6.50% per annum. the issue in May 2007 comprised Us$140.5 million
maturing in May 2014 with a fixed coupon of 5.61% per annum and
Us$169.5 million maturing in May 2017 with a fixed coupon of 5.76%
per annum.
WorleyParsons Annual Report 2013 77
noteS to the financial StatementS For the financial year ended 30 June 2013
15. non‑current liaBilitieS – intereSt Bearing loanS
and BorroWingS (continued)
in accordance with the group’s financial risk management policy, cross
currency swaps have been entered into, swapping Us$521.5 million of notes
payable into c$522.4 million. this represents 80.0% of the notes issued in
2008, 2011 and 2012.
SECURED BANK LOAN
The secured bank loan of $17.4 million (current: $1.5 million; non‑current:
$15.9 million) is a floating facility with an interest rate swap. this bank loan
is secured by the assets of exmouth Power station Pty Limited which have a
carrying value of $32.6 million. the terms of the loan facility preclude the
assets from being used as a security for other debt within the group.
the loan facility requires the assets to be insured.
UNSECURED BANK LOANS
Unsecured bank loans are floating interest rate debt facilities. these
facilities, denominated in various currencies, are subject to negative pledge
arrangements which require the group to comply with certain minimum
financial requirements.
FINANCE LEASE LIABILITY
the group leases various plant and equipment under finance leases with
terms of three to eight years.
conSolidated
2013
$’M
2012
$’M
16. non‑current liaBilitieS – deferred taX liaBilitieS
the balance comprises temporary differences attributable to:
Amounts recognized in the statement of financial performance:
identifiable intangible assets and goodwill
Unbilled contract revenue
Fixed assets
Unrealized foreign exchange gains
Prepayments
other
52.9
58.0
2.7
16.5
1.3
2.9
42.9
53.3
7.2
3.7
0.6
0.5
Amounts recognized directly in equity:
other
Deferred tax liabilities
134.3
108.2
7.3
4.4
141.6
112.6
Balance at the beginning of the financial year
Acquisition of controlled entities
charged to the statement of financial performance
charged to equity
differences arising on translation of foreign operations
112.6
15.8
5.3
2.9
5.0
99.1
0.0
8.3
4.4
0.8
Balance at the end of the financial year
141.6
112.6
17. non‑current liaBilitieS – ProviSionS
employee benefits
deferred consideration
warranties
other
conSolidated
2013
$’M
2012
$’M
43.0
–
–
0.2
43.2
37.9
12.2
0.7
15.5
66.3
NATURE AND TIMING OF PROVISIONS
employee benefits: Refer note 2(c) for the relevant accounting policy and
a discussion of the significant estimation and assumptions applied in the
measurement of this provision.
deferred revenue and project provisions: the group at times recovers
payment for services prior to revenue being recognized in the financial
statements. it is expected that this revenue will be earned within two years
of the balance date.
warranties: Provision is made for the estimated liability on all products and
services under warranty at balance date. it is expected that these costs will
be incurred within two years of the balance date.
deferred consideration: where settlement of any part of the consideration for
a business combination is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. the discount
rate used is the group’s incremental borrowing rate, being the rate at which
a similar borrowing could be obtained from an independent financier under
comparable terms and conditions.
insurance: the provision is based on the estimated cost of settling
insured claims.
RECONCILIATIONS
Reconciliations of the carrying amounts of each class of non-current
provisions at the beginning and end of the current and previous financial
years are set out below:
carrying amount at 1 July 2012
Additional provisions
Non-current provision reclassified
to current
Release of unused provision
Amounts utilized
differences arising from translation
of foreign operations
Carrying amount at
30 June 2013
carrying amount at 1 July 2011
Provision from entities acquired
Additional provisions
Release of unused provision
Amounts utilized
eMPLoYee
BeNeFits
$’M
37.9
18.7
–
(6.3)
(8.9)
1.6
43.0
28.4
–
15.8
(3.8)
(3.4)
differences arising from translation
of foreign operations
0.9
conSolidated
deFeRRed
coNsideRAtioN wARRANties
$’M
$’M
otheR
$’M
15.5
0.1
(12.2)
(3.3)
–
0.7
0.4
–
(1.2)
–
0.1
0.1
–
–
–
0.7
–
–
–
0.2
16.5
–
4.6
(5.0)
–
(0.6)
12.2
–
(12.2)
–
–
–
–
12.2
–
–
–
–
–
Carrying amount at
30 June 2012
37.9
12.2
0.7
15.5
78 WorleyParsons Annual Report 2013
conSolidated
2013
2012
NUMBeR oF
shARes
$’M
NUMBeR oF
shARes
$’M
18. iSSued caPital
ordinary shares, fully paid1,2 246,480,559
1,238.5 245,735,305
1,221.3
special voting share
1
–
1
–
246,480,560 1,238.5 245,735,306 1,221.3
1
2
included in ordinary shares are 3,594,667 (2012: 3,847,859) exchangeable shares.
the issuance of the exchangeable shares and the attached special voting share replicate
the economic effect of issuing ordinary shares in the company. Accordingly, for accounting
purposes, exchangeable shares are treated in the same single class of issued capital
as ordinary shares. in addition, the Australian securities exchange (AsX) treats these
exchangeable shares to have been converted into ordinary shares of the company at the
time of their issue for the purposes of the AsX Listing Rules. ordinary shares have no par
value and the company does not have a limited amount of authorized capital.
the worleyParsons Limited Plans trust holds 267,173 (2012: 267,173) shares in the
company, which has been consolidated and eliminated in accordance with the accounting
standards.
(A) MOVEMENTS IN SHARES
Special voting share
the special voting share was issued to computershare trust company of
canada Limited (trustee) as part of the consideration for the acquisition of
the colt group. the special voting share does not have the right to receive
dividends as declared, and in the event of the winding up of the company is
unable to participate in the proceeds from the sale of all surplus assets. the
special voting share has a right to vote together as one class of share with
the holders of ordinary shares in the circumstances in which shareholders
have a right to vote, subject to the company’s constitution and applicable
law. the trustee must vote in the manner instructed by an exchangeable
shareholder in respect of the number of votes that would attach to the
ordinary shares to be received by that exchangeable shareholder on exchange
of its exchangeable shares. the special voting share has an aggregate
number of votes equal to the number of votes attached to ordinary shares
into which the exchangeable shares are retracted or redeemed.
(C) PERFORMANCE RIGHTS
the policy in respect of performance rights is outlined in note 2(c).
numBer of
Performance rightS
2013
2012
2013
2012
Balance at the beginning of the financial year
3,621,459 3,298,344
NUMBeR oF
shARes
$’M
NUMBeR oF
shARes
$’M
245,735,306
1,221.3 245,699,307
1,219.6
Rights granted
Rights exercised
Rights lapsed or expired
985,829
993,730
(745,254)
(35,999)
(727,740)
(634,616)
Balance at the end of the financial year
3,134,294 3,621,459
exercisable at the end of the financial year
54,626
3,106
253,192
6.8
447,144
12.0
weighted average exercise price
$nil
$nil
Balance at the beginning
of the financial year
ordinary shares issued on
redemption of
exchangeable shares
exchangeable shares
exchanged for ordinary
shares
transfer from performance
rights reserve on purchase
and issuance of shares
(253,192)
(6.8)
(447,144)
(12.0)
745,254
17.2
35,999
1.7
Balance at the end of
the financial year
246,480,560 1,238.5 245,735,306 1,221.3
(B) TERMS AND CONDITIONS OF ISSUED CAPITAL
Ordinary shares
ordinary shares have the right to receive dividends as declared and, in the
event of the winding up of the company, to participate in the proceeds from
the sale of all surplus assets in proportion to the number of and amounts paid
up on shares held. ordinary shares entitle their holder to one vote, either in
person or by proxy, at a meeting of the company.
Exchangeable shares
the exchangeable shares were issued by worleyParsons canada sPV
Limited as part of the consideration for the acquisition of the colt group.
exchangeable shares may be exchanged into ordinary shares of the company
on a one-for-one basis (subject to adjustments) at any time by the
exchangeable shareholders.
exchangeable shares have the right to receive the same cash dividends or
cash distributions as declared on the ordinary shares into which they are
convertible. in the event of the winding up of the company, the exchangeable
shares would convert to ordinary shares, which would participate in the
proceeds from the sale of all surplus assets pro-rata with other ordinary
shares.
the exchangeable shares, through a voting trust which holds a special voting
share in the company, entitle their holders to vote at the company’s general
meetings as though they hold ordinary shares. during the financial year
ended 30 June 2013, 253,192 (2012: 447,144) exchangeable shares were
exchanged.
the outstanding balance as at 30 June 2013 is represented by:
•
•
•
•
•
•
•
•
•
•
•
•
107,292 performance rights, vesting on 30 September 2016 and expiring
on 18 October 2019;
755,389 performance rights, vesting on 30 September 2015 and expiring
on 18 October 2019;
891,404 performance rights, vesting on 30 September 2014 and expiring
on 17 October 2018;
51,185 performance rights, vesting on 30 June 2014 and expiring on
30 June 2019;
1,236,856 performance rights, vesting on 30 September 2013 and
expiring on 15 October 2017;
51,202 performance rights, vested on 30 June 2013 and expiring on
30 June 2019;
37,542 performance rights, vested on 30 September 2012 and expiring
on 30 September 2016;
499 performance rights, vested on 30 September 2012 and expiring on
30 September 2016;
1,236 performance rights, vested on 30 September 2012 and expiring on
30 September 2015;
505 performance rights, vested on 30 September 2011 and expiring
on 2 October 2014;
333 performance rights, vested on 30 September 2010 and expiring
on 2 October 2014; and
851 performance rights, vested on 30 September 2009 and expiring
on 1 February 2014.
the performance rights are exercisable upon meeting the conditions set out
in note 33(B).
WorleyParsons Annual Report 2013 79
noteS to the financial StatementS For the financial year ended 30 June 2013
conSolidated
2013
$’M
2012
$’M
Notes
conSolidated
2013
$’M
2012
$’M
19. reServeS
Foreign currency translation reserve
(218.0)
(295.5)
hedge reserve
Performance rights reserve
Acquisition reserve
16.9
32.9
(9.6)
(1.9)
39.3
(9.6)
(177.8)
(267.7)
(A) FOREIGN CURRENCY TRANSLATION RESERVE
the foreign currency translation reserve is used to record exchange
differences arising from the translation of the financial statements of foreign
controlled entities and associates, and the net investments hedged in their
entities.
20. retained ProfitS
Balance at the beginning of the
financial year
Profit attributable to members of
worleyParsons Limited
1,003.8
871.7
322.1
353.2
dividends paid
22(B)
(227.7)
(221.1)
Balance at the end of the financial year
1,098.2
1,003.8
conSolidated
2013
2012
21. earningS Per Share
AttRiBUtABLe to MeMBeRs oF woRLeYPARsoNs LiMited
Balance at the beginning of the financial year
(295.5)
(261.0)
Basic earnings per share (cents)
130.8
143.7
Foreign exchange movement on translation of foreign
controlled entities and associates
Net investments hedged
income tax on net investments hedged
123.5
(65.7)
19.7
(24.9)
(13.7)
4.1
Balance at the end of the financial year
(218.0)
(295.5)
Basic earnings per share (cents) excluding net
acquisition gains
diluted earnings per share (cents)
diluted earnings per share (cents) excluding net
acquisition gains
130.8
129.9
140.6
142.5
129.9
139.5
the following reflects the income and security data used in the calculation of
basic and diluted earnings per share:
(A) RECONCILIATION OF EARNINGS USED IN CALCULATING EARNINGS
PER SHARE
earnings used in calculating basic and diluted
earnings per share
Less: net gain on revaluation of investments
previously accounted for as equity accounted
associates (refer note 5)
32.7
11.6
earnings used in calculating basic and diluted
earnings per share excluding net acquisition gains
$’M
$’M
322.1
353.2
–
(7.6)
322.1
345.6
(B) HEDGE RESERVE
the hedge reserve is used to record gains or losses on hedging instruments
used in the cash flow hedges that are recognized directly in equity, as
described in note 2(e)(iii). Amounts are recognized in the statement of
financial performance when the associated hedged transaction affects the
profit and loss.
Balance at the beginning of the financial year
Net loss on foreign exchange hedges
income tax on net gain on foreign exchange hedges
(1.9)
(6.2)
1.7
(3.1)
(0.9)
0.2
Fair value gain on mark to market of cross
currency hedge
income tax on fair value loss on mark to market of
cross currency hedge
Net gain/(loss) on interest rate hedges
Balance at the end of the financial year
(9.5)
0.1
16.9
(8.5)
(1.2)
(1.9)
the total amount recognized in the statement of financial performance was a
loss of $0.1 million (2012: $0.6 million).
this amount is included in other expenses.
(C) PERFORMANCE RIGHTS RESERVE
the performance rights reserve is used to recognize the fair value of
performance rights issued but not vested.
Balance at the beginning of the financial year
Performance rights expense
39.3
19.8
23.9
17.1
Reversal of performance rights expense associated with
rights which did not vest based on the earnings per
share hurdles
transfer to issued capital on purchase and issuance of
shares to satisfy performance rights
Balance at the end of the financial year
(9.0)
–
22. dividendS
(17.2)
32.9
(1.7)
39.3
(D) ACQUISITION RESERVE
the acquisition reserve is used to record differences between the carrying
value of non-controlling interests before acquisition and the consideration
paid upon acquisition of an additional shareholding, where the transaction
does not result in a loss of control. the reserve is attributable to the equity of
the Parent entity.
Balance at the beginning and end of the financial year
(9.6)
(9.6)
80 WorleyParsons Annual Report 2013
(B) WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR
weighted average number of ordinary securities
used in calculating basic earnings per share
246,285,840 245,725,630
element of performance rights which are
considered dilutive
Adjusted weighted average number of ordinary
securities used in calculating diluted earnings
per share
1,744,159 2,096,599
248,029,999 247,822,229
the weighted average number of converted, lapsed or cancelled potential
ordinary shares used in calculating diluted earnings per share was 324,622
(2012: 180,029).
conSolidated
2013
$’M
2012
$’M
(A) FINAL DIVIDEND PROPOSED
dividend in respect of the six months to 30 June 2013:
51.0 cents per share (unfranked)
125.7
–
dividend in respect of the six months to 30 June 2012:
51.0 cents per share (31.3 cents franked)
–
125.3
the directors have resolved to pay a final dividend of 51.0 cents per share,
unfranked (2012: 51.0 cents per share, partially franked at 61.3%). combined
with the half year (interim) dividend, the company will make total dividend
payments of 92.5 cents per share for the financial year (2012: 91.0 cents per
share). the dividend will be paid on 20 september 2013 for shareholders on
the register at the record date of 30 August 2013.
in accordance with AAsB 137 Provisions, contingent Liabilities and
contingent Assets, the aggregate amount of the proposed final dividend of
$125.7 million is not recognized as a liability as at 30 June 2013.
conSolidated
2013
$’M
2012
$’M
(B) PARENT ENTITY
worleyParsons Limited Parent entity financial statements include investments
in the following entities:
eNtitY
coUNtRY oF
iNcoRPoRAtioN
2013
$’M
2012
$’M
engineering securities Pty Limited atf
the worley Limited trust
Australia
worleyParsons canada callco Ltd.
canada
94.7
220.8
94.7
220.8
worleyParsons canada holdings
Pty Limited
worleyParsons Financial services
Pty Limited
Australia
197.9
197.9
Australia
440.1
953.5
440.1
953.5
the Parent entity’s summary financial information as required by the
Corporations Act 2001 is as follows:
(B) DIVIDENDS PAID DURING THE FINANCIAL YEAR
dividend in respect of the six months to 31 december 2012:
41.5 cents per share (41.5 cents franked)
dividend in respect of the six months to 30 June 2012:
51.0 cents per share (31.3 cents franked)
dividend in respect of the six months to 31 december 2011:
40.0 cents per share (31.7 cents franked)
dividend in respect of the six months to 30 June 2011:
50.0 cents per share (12.9 cents franked)
102.4
125.3
–
–
227.7
–
–
98.3
122.8
221.1
(C) IMPUTATION CREDIT BALANCE OF THE PARENT ENTITY
the amount of imputation credits available on a tax
paid basis for future tax distributions is:
imputation credits balance as at the end of the financial
year at the corporate tax rate of 30% (2012: 30%)
15.8
34.6
Profit before income tax expense
STATEMENT OF FINANCIAL PERFORMANCE
imputation debits arising from the refund of income
tax provided in this financial report
(15.8)
imputation credits available for distribution
imputation debits that will arise from the payment of
the final dividend
Imputation credits available for future dividends
–
–
–
(1.7)
32.9
(32.9)
–
income tax expense
Profit after income tax expense
Profit attributable to members of worleyParsons Limited
Retained profits at the beginning of the financial year
dividends paid
eNtitY
coUNtRY oF
iNcoRPoRAtioN
2013
%
2012
%
Beneficial
intereSt held By
conSolidated entity
STATEMENT OF COMPREHENSIVE INCOME
Profit after income tax expense
total comprehensive income, net of tax
23. inveStmentS in controlled entitieS
STATEMENT OF FINANCIAL POSITION
Retained profits at the end of the financial year
130.7
188.2
current assets
total assets
current liabilities
total liabilities
Net assets
issued capital
Performance rights reserve
Retained profits
total equity
in accordance with the accounting standards, the group discloses only
significant entities identified on the basis of materiality:
(A) WORLEYPARSONS LIMITED GROUP ACCOUNTS INCLUDE A
CONSOLIDATION OF THE FOLLOWING SIGNIFICANT ENTITIES:
worley No 2 Pty Limited1
Australia
100
worleyParsons canada services Ltd
canada
worleyParsons engineering Pty Limited1 Australia
worleyParsons europe Limited
United Kingdom
worleyParsons Financial services
Pty Limited1
worleyParsons group inc
worleyParsons international inc
Australia
UsA
UsA
worleyParsons oman engineering LLc
oman
worleyParsons services Pty Limited1
Australia
Acquired during the year
Rosenberg worleyParsons As2
Norway
twP holdings Proprietary Limited
south Africa
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
51
100
–
–
1
2
entities subject to Australian securities and investments commission class order 98/1418
relief.
Previously named Bergen group Rosenberg As.
2013
$’M
2012
$’M
171.2
208.8
(1.0)
(2.1)
170.2
170.2
188.2
206.7
206.7
202.6
(227.7)
(221.1)
170.2
170.2
206.7
206.7
577.2
510.4
1,534.5
1,464.0
131.7
132.4
15.1
15.1
1,402.1
1,448.9
1,238.5
1,221.3
32.9
130.7
39.4
188.2
1,402.1
1,448.9
details in relation to parent company guarantees are disclosed in note 30(A).
WorleyParsons Annual Report 2013 81
23. INVESTMENTS IN CONTROLLED ENTITIES (continued)
(C) CLOSED GROUP
Pursuant to Australian Securities and Investments Commission Class Order
98/1418, relief has been granted to Worley No 2 Pty Limited, WorleyParsons
Engineering Pty Limited, WorleyParsons Financial Services Pty Limited and
WorleyParsons Services Pty Limited, from the Corporations Act 2001
requirements for preparation, audit and lodgment of their financial reports.
As a condition of the Class Order, WorleyParsons Limited together with the
parties noted entered into a Deed of Cross Guarantee on 26 May 2003.
The effect of the deed is that WorleyParsons Limited has guaranteed to
pay any deficiency in the event of the winding up of the abovementioned
controlled entities. The controlled entities have also given a similar guarantee
in the event that WorleyParsons Limited is wound up. The Statement of
Financial Performance and Statement of Financial Position of the entities
which are parties to the Deed of Cross Guarantee and The Worley Limited
Trust (Closed Group) are as follows:
STATEMENT OF FINANCIAL PERFORMANCE
Profit before income tax expense
Income tax expense
Profit after income tax expense
Profit attributable to members of WorleyParsons Limited
Retained profits at the beginning of the financial year
CLOSED GROUP
2013
$’M
2012
$’M
190.5
(55.5)
135.0
135.0
311.9
277.8
(57.9)
219.9
219.9
309.2
Dividends paid
(224.7)
(217.2)
Retained profits at the end of the financial year
222.2
311.9
STATEMENT OF FINANCIAL POSITION
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non‑current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other non‑current assets
Total non‑current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non‑current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Provisions
Total non‑current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained profits
TOTAL EQUITY
82 WorleyParsons Annual Report 2013
43.5
23.8
1,417.0
1,262.2
16.2
10.3
1,476.7
1,296.3
0.3
64.9
48.4
0.3
64.9
45.5
902.8
895.6
1,016.4
1,006.3
2,493.1
2,302.6
828.4
4.5
832.9
159.4
14.2
0.0
173.6
1,006.5
595.3
14.2
609.5
57.8
21.5
24.4
103.7
713.2
1,486.6
1,589.4
1,238.5
1,221.3
25.9
222.2
56.2
311.9
1,486.6
1,589.4
(D) ACQUISITION OF CONTROLLED ENTITIES
Effective 1 January 2013, WorleyParsons Norway AS, a wholly owned
subsidiary of the Company, acquired 100% of shares in Bergen Group
Rosenberg AS, currently known as Rosenberg WorleyParsons AS, and its
subsidiaries for a cash consideration of $185.6 million (NOK1,079 million).
Effective 1 March 2013, WorleyParsons RSA Group Proprietary Limited, a
wholly owned subsidiary of the Company, acquired 100% of the shares in
TWP Holdings Proprietary Limited and its subsidiaries for a cash consideration
of $96.9 million (ZAR883 million).
The above acquisitions’ contribution to the Group’s reported after‑tax profit
attributable to members of the Parent Entity was $7.6 million, and the
reported contribution to revenue was $190.0 million. Had these acquisitions
taken place at 1 July 2012, the additional contribution to the Group’s profit
after income tax expense would have been $9.8 million and to revenue would
have been $218.5 million.
BERGEN GROUP
ROSENBERG AS
ACQUISITION
$’M
TWP HOLDINGS
PROPRIETARY
LIMITED
ACQUISITION
$’M
TOTAL
ACQUISITIONS
$’M
ASSETS
Cash and cash equivalents
Trade and other receivables
Prepayments
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
Total assets
LIABILITIES
Trade and other payables
Interest bearing loans and borrowings
Provisions
Deferred tax liabilities
Total liabilities
Net assets acquired
Intangible assets
25.6
46.0
1.6
9.2
0.2
–
13.4
96.0
36.2
4.6
21.0
2.6
64.4
31.6
32.0
Deferred tax liability on intangible assets
Goodwill arising on acquisition
(9.0)
131.0
(3.2)
37.4
1.1
2.9
0.2
1.4
0.3
22.4
83.4
2.7
12.1
0.4
1.4
13.7
40.1
136.1
20.6
4.6
5.8
–
31.0
9.1
15.3
(4.2)
76.7
56.8
9.2
26.8
2.6
95.4
40.7
47.3
(13.2)
207.7
Total consideration, excluding acquisition
costs expensed
185.6
96.9
282.5
Consideration:
Cash consideration
Total consideration
Net cash effect:
Cash consideration paid
Cash and overdrafts included in net
assets acquired
185.6
185.6
96.9
96.9
282.5
282.5
185.6
96.9
282.5
(25.6)
3.2
(22.4)
Net cash outflow
160.0
100.1
260.1
Acquisition related costs are included in other expenses in profit or loss and
in operating cash flows in the statement of cash flows.
Goodwill represents the value of the assembled workforce and any premium
from synergies and future growth opportunities that cannot be recognized
separately. Except as indicated, the carrying value equals the fair value of
the net assets acquired.
The fair values of the acquisition balances are provisional due to the
complexity and timing of the acquisitions. The review of the assets and
liabilities will continue for 12 months from acquisition date.
In the prior year, an additional 44% share in ARA WorleyParsons SA and
affiliated businesses was acquired for $17.7 million.
There were no changes to the acquisition values recognized in the
30 June 2013 financial statements.
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2013
oWnerShiP
intereSt
conSolidated
carrying
amount
conSolidated
2013
%
2012
%
2013
$’M
2012
$’M
eNtitY
PRiNciPAL ActiVitY
24. equity accounted inveStmentS
(A) DETAILS OF EQUITY ACCOUNTED INVESTMENTS ARE AS FOLLOWS:
in accordance with the accounting standards, the group discloses only
significant investments identified on the basis of materiality:
Significant investments
Cegertec
worleyParsons inc
Minerals, Metals &
chemicals
deltaAfrik
engineering Limited hydrocarbons
50
50
13.5
12.4
49
49
26.1
19.2
Ranhill
worleyParsons
sdn Bhd
transfield worley
Power services
Pty Limited
Other investments
hydrocarbons
49
49
33.5
28.6
Power
50
50
21.9
36.4
12.1
31.8
conSolidated
2013
$’M
2012
$’M
(F) RETAINED PROFITS ATTRIBUTABLE TO EQUITY ACCOUNTED
INVESTMENTS
Balance at the beginning of the financial year
115.4
share of net profits of investments accounted for using
the equity method
dividends declared
23.4
(15.2)
106.3
27.6
(18.5)
Balance at the end of the financial year
123.6
115.4
(G) SHARE OF EQUITY ACCOUNTED INVESTMENTS’ CONTINGENT LIABILITIES
12.4
Performance related guarantees issued
12.7
(H) SHARE OF EQUITY ACCOUNTED INVESTMENTS’ EXPENDITURE
COMMITMENTS
operating lease commitments
5.1
6.7
(I) SUMMARY OF FINANCIAL POSITION OF EQUITY ACCOUNTED INVESTMENTS
the consolidated entity’s share of aggregate assets and liabilities of equity
accounted investments is:
current assets
131.4
104.1
Non-current assets
current liabilities
Non-current liabilities
Net assets
goodwill
240.7
69.6
189.7
38.1
(163.3)
(109.7)
(23.3)
(21.5)
123.7
7.7
96.6
7.5
conSolidated
2013
$’M
2012
$’M
(B) CARRYING AMOUNT OF EQUITY ACCOUNTED INVESTMENTS
carrying amount at the beginning of the financial year
104.1
share of net profits of investments accounted for using
the equity method
dividends declared by equity accounted investments
change in nature of investment and investment acquired
Movement in foreign currency translation reserve of equity
accounted investments
23.4
(15.2)
10.8
8.3
86.3
27.6
(18.5)
7.1
1.6
Carrying amount at the end of the financial year
131.4
104.1
(C) NET PROFITS ATTRIBUTABLE TO EQUITY ACCOUNTED INVESTMENTS
Profits before income tax expense
33.5
40.7
income tax expense
Net profits of equity accounted investments
(10.1)
23.4
(13.1)
27.6
(D) REVENUE ATTRIBUTABLE TO EQUITY ACCOUNTED INVESTMENTS
share of revenue from equity accounted investments
549.2
665.0
(E) RESERVES ATTRIBUTABLE TO EQUITY ACCOUNTED INVESTMENTS
FoReigN cURReNcY tRANsLAtioN ReseRVe
Balance at the beginning of the financial year
effect of decrease in reserve
(23.3)
8.3
(24.9)
1.6
Balance at the end of the financial year
(15.0)
(23.3)
Carrying amount at the end of the financial year
131.4
104.1
JoiNtLY coNtRoLLed oPeRAtioNs ANd Assets
PRiNciPAL ActiVitY
oWnerShiP
intereSt
conSolidated
2013
%
2012
%
25. intereStS in Jointly controlled oPerationS and aSSetS
in accordance with the accounting standards, the group discloses only
significant jointly controlled operations and assets identified on the basis of
materiality:
WORLEYPARSONS LIMITED GROUP ACCOUNTS INCLUDE A PROPORTIONATE
CONSOLIDATION OF THE FOLLOWING ENTITIES:
Significant jointly controlled operation and asset
Foster wheeler energy worleyParsons
(Pluto LNg) Joint Venture
hydrocarbons
40
transfield worley Joint Venture
hydrocarbons
50
40
50
Jointly controlled operations and assets established during the year
SKM‑WorleyParsons JV
Infrastructure &
environment
50
–
WorleyParsons Annual Report 2013 83
noteS to the financial StatementS For the financial year ended 30 June 2013
27. finance leaSe receivaBle
current finance lease receivable
Non-current finance lease receivable
Gross investment in lease receivable
Present value of minimum lease payments:
within one year
Later than one year and not later than five years
More than five years
Present value of minimum lease payments
Gross investment in lease receivable
conSolidated
2013
$’M
2012
$’M
1.6
27.1
28.7
1.6
7.6
19.5
28.7
28.7
1.5
28.5
30.0
1.5
7.1
21.4
30.0
30.0
the finance lease receivable relates to the power supply contract held by the
company’s 100% subsidiary, exmouth Power station Pty Limited, which is an
arrangement that contains a lease.
28. Procurement
in certain situations, the group will enter into contracts with its customers
which require the group to procure goods and services on behalf of the
customers.
where the risks and rewards associated with the procurement activities are
assumed by the group, the revenues and expenses, and assets and liabilities
are recognized on a gross basis in the statement of Financial Performance
and statement of Financial Position.
the following procurement services revenues and expenses, and assets and
liabilities have been recognized on a gross basis in the statement of Financial
Performance and statement of Financial Position:
REVENUES AND EXPENSES¹
Procurement services revenue at margin
Procurement expenses at margin
conSolidated
2013
$’M
2012
$’M
190.8
216.3
(183.3)
(198.4)
Procurement services revenue at nil margin
1,747.7
696.2
Procurement expenses at nil margin
(1,747.7)
(696.2)
ASSETS AND LIABILITIES
cash and cash equivalents
trade and other receivables
trade and other payables
38.8
123.1
42.9
26.2
(130.3)
(15.2)
1 Revenue and expenses exclude procurement services revenue and expenses from associates.
25. intereStS in Jointly controlled oPerationS and
aSSetS (continued)
the consolidated entity’s interests in the assets and liabilities employed in
the jointly controlled operations and assets are included in the statement of
financial position under the following classifications:
Assets
Current assets
cash and cash equivalents
trade and other receivables
other financial assets
Total current assets
Non‑current assets
Property, plant and equipment
Total non‑current assets
TOTAL ASSETS
LiABiLities
Current liabilities
trade and other payables
Provisions
Total current liabilities
Non‑current liabilities
other non-current liabilities
Total non‑current liabilities
TOTAL LIABILITIES
NET (LIABILITIES)/ASSETS
conSolidated
2013
$’M
2012
$’M
7.5
47.5
5.8
17.9
102.3
2.5
60.8
122.7
3.4
3.4
0.4
0.4
64.2
123.1
57.5
15.6
73.1
1.1
1.1
90.4
19.1
109.5
1.2
1.2
74.2
110.7
(10.0)
12.4
conSolidated
2013
$’M
2012
$’M
26. noteS to the Statement of caSh floWS
Reconciliation of profit after income tax expense to
net cash inflow from operating activities:
Profit after income tax expense
344.2
376.5
NON‑CASH ITEMS
depreciation
Amortization
Performance rights expense
doubtful debts expense
share of associates’ net profits in excess of
dividends received
Net gain on revaluation of investments previously
accounted for as equity accounted associates
other
21.0
81.3
10.8
4.8
19.1
83.9
17.1
4.3
(9.6)
(4.7)
–
2.6
(7.6)
5.3
cash flow adjusted for non-cash items
455.1
493.9
CHANGES IN ASSETS AND LIABILITIES ADJUSTED FOR
EFFECTS OF PURCHASE OF CONTROLLED ENTITIES
increase in trade and other receivables
(166.3)
(401.5)
decrease/(increase) in prepayments and other assets
increase in deferred tax assets
increase in trade and other payables
increase in billings in advance
decrease in income tax payable
increase in deferred tax liabilities
(decrease)/increase in provisions
Net cash inflow from operating activities
0.5
(26.5)
214.1
25.1
(18.2)
13.2
(53.5)
443.5
(42.2)
(2.8)
234.3
14.2
(1.6)
7.6
135.6
437.5
84 WorleyParsons Annual Report 2013
29. commitmentS for eXPenditure
31. remuneration of auditorS
conSolidated
2013
$’M
2012
$’M
conSolidated
2013
$
2012
$
(A) OPERATING LEASES
commitments for minimum lease payments in relation to non-cancelable operating
leases are payable as follows:
within one year
Later than one year and not later than five years
Later than five years
Commitments not recognized in the
financial statements
215.4
514.5
89.7
179.3
458.2
62.6
819.6
700.1
(B) OPERATING EXPENDITURE COMMITMENTS
estimated commitments for operating expenditure in relation to software are
payable as follows:
within one year
Later than one year and not later than five years
Commitments not recognized in the
financial statements
28.9
58.7
20.1
22.3
87.6
42.4
the Parent entity has no commitments for expenditure.
30. contingent liaBilitieS
(A) GUARANTEES
the company is, in the normal course of business, required to provide
guarantees and letters of credit on behalf of controlled entities, associates
and related parties in respect of their contractual performance-related
obligations.
these guarantees and letters of credit only give rise to a liability where the
entity concerned fails to perform its contractual obligation.
conSolidated
Parent entity
2013
$’M
2012
$’M
2013
$’M
2012
$’M
Bank guarantees outstanding
at balance date in respect of
contractual performance
Commitments not recognized
in the financial statements
616.1
522.3
359.1
346.2
616.1
522.3
359.1
346.2
(B) ASBESTOS
Certain subsidiaries acquired as part of the Parsons acquisition (Parsons E&C)
have been, and continue to be, the subject of litigation relating to the
handling of, or exposure to, asbestos. due to the continuation and extension
of the existing indemnity and asbestos claims administration arrangements
between Parsons Corporation and Parsons E&C Corporation, the Group is not
aware of any circumstance that is likely to lead to a residual contingent
exposure for the group in respect of asbestos liabilities.
(C) ACTUAL AND PENDING CLAIMS
the company is subject to various actual and pending claims arising in
the normal course of business. the company has regular claims reviews,
including updates from corporate and outside counsel, to assess the need
for accounting recognition or disclosure of these contingencies. the directors
are currently of the view that the consolidated entity is adequately provided
in respect of these claims in accordance with the accounting policy set out
in note 2(o).
Remuneration for audit or review of the financial reports of the Parent entity or
any other entity in the group:
Auditor of the Parent Entity – Ernst & Young
3,166,110 2,539,297
other auditors of controlled entities
166,403
189,713
Amounts received for other services:
tax related services
Acquisition related assurance services
other non-audit services
3,332,513 2,729,010
335,210
211,967
210,731
116,000
935,717
298,034
1,481,658
626,001
4,814,171 3,355,011
32. related PartieS
(A) DIRECTORS
the names of persons who were directors of the company at any time during
the financial year were as follows:
John grill (chairman and chief executive officer) – retired as a director and
chief executive officer on 23 october 2012, and was appointed as a director
and chairman on 1 March 2013.
Ron McNeilly (chairman and Non-executive director) until 1 March 2013,
deputy chairman and Lead independent director from 1 March 2013.
Larry Benke
erich Fraunschiel
John M green
christopher haynes, oBe
catherine Livingstone, Ao
JB McNeil
wang Xiao Bin
Andrew wood (chief executive officer) – appointed as a director and chief
executive officer on 23 october 2012.
(B) OTHER RELATED PARTIES
conSolidated
2013
$’M
2012
$’M
Aggregate amounts included in the determination of profit before income tax
expense that resulted from transactions with each class of other related parties
were as follows:
dividend revenue from associates
15.2
18.5
Aggregate amounts brought to account in relation to other transactions with each
class of other related parties:
Loans advanced to:
Associates and related parties
Loan repayments from:
Associates and related parties
6.7
8.8
4.4
3.4
Aggregate amounts, receivable from, and payable to, each class of other related
parties at balance date were as follows:
Current receivables
Associates and related parties
45.4
71.9
Current payables
Associates and related parties
21.7
10.2
Related entities provide specific advisory services to controlled entities in the
normal course of business. these transactions are made on normal terms and
conditions and at market rates.
(C) CONTROLLING ENTITIES
worleyParsons Limited is the ultimate Australian parent company.
WorleyParsons Annual Report 2013 85
noteS to the financial StatementS For the financial year ended 30 June 2013
33. Key management PerSonnel diScloSureS
(A) PARTICULARS OF KEY MANAGEMENT PERSONNEL (KMP)
INTERESTS IN SHARES
Particulars of KMP’s beneficial interest in shares of the company as at
30 June 2013 are as follows:
numBer of ShareS held in WorleyParSonS limited
BALANce At
1 JULY 2012
oN eXeRcise oF
PeRFoRMANce
Rights
chANge iN
stAtUs
otheR
tRANsActioNs
BALANce At
30 JUNe 2013
(B) PARTICULARS OF KMP PERFORMANCE RIGHTS
Particulars of KMP’s equity settled performance rights granted as at
30 June 2013 are as follows:
numBer of Performance rightS
held in WorleyParSonS limited
BALANce At
1 JULY 2012
gRANted
eXeRcised
chANge iN
stAtUs
otheR
tRANs-
ActioNs
BALANce
At
30 JUNe
2013
–
25,372,173
Grand total
510,433 214,432 (123,099)
26,863 (128,065) 500,564
eXecUtiVe ANd NoN-eXecUtiVe diRectoRs
John grill1,2
208,373
24,356
(54,592)
Larry Benke3
7,812
–
(5,236)
Andrew wood
76,912
58,978
(16,088)
Sub‑total
293,097
83,334
(75,916)
gRoUP eXecUtiVes
Barry Bloch
10,231
15,128
(2,030)
78,646
38,185
(16,605)
stuart Bradie
simon holt4
Randy Karren5
–
–
–
–
–
–
(82,666) 95,471
(2,576)
–
(11,735) 108,067
(96,977) 203,538
–
23,329
(12,172) 88,054
–
–
4,337
9,171
–
–
7,545
19,318
– 11,882
–
28,489
iain Ross
75,063
32,700
(16,663)
david steele
53,396
31,577
(11,885)
–
–
(12,154) 78,946
(6,762) 66,326
Sub‑total
217,336 131,098
(47,183)
26,863
(31,088) 297,026
1
2
3
4
5
Mr grill retired as a director and chief executive officer on 23 october 2012, and was
appointed as a director and chairman on 1 March 2013.
cash settled performance rights were granted to Mr grill as at 30 June 2012. No equity
settled performance rights are granted to Mr grill as at 30 June 2012.
Mr Benke was appointed as a non-executive director effective 1 July 2010. Prior to this
appointment, he received allocations of performance rights under the Long term incentive
Plan. Upon his retirement, the Board exercised discretion to allow a pro-rata proportion of his
outstanding performance rights to remain in the Plan.
Mr holt commenced as an executive on 23 october 2012.
Mr Karren commenced as an executive on 23 october 2012.
Long term incentive (Lti) grants are delivered to executive directors, other
KMP and other executives as performance rights (rights). during the year, an
offer was made to KMP who are also executives and to other executive
employees. the rights are issued under the worleyParsons Performance
Rights Plan and are settled in shares when vested.
each right entitles the holder to one fully paid ordinary share in the company
at a nil exercise price (i.e. a zero exercise price option). the number of rights
issued is based on the target Lti with reference to the underlying share price
when issued. Rights vest and are automatically exercised after a three or four
year period, subject to minimum performance hurdles being satisfied.
For executives the measurement of performance is based on the following:
•
•
Total shareholder return (TSR) relative to peer group is at least at the
median of the companies in the peer comparison group (which applies to
50% of potential long term incentive for FY2013); and
Earnings per share (EPS) growth (which applies to 50% of potential long
term incentive for FY2013).
NoN-eXecUtiVe diRectoRs
Ron McNeilly
401,064
Larry Benke1
1,130,195
erich Fraunschiel
168,755
John M green
891,869
christopher
haynes, oBe
catherine
Livingstone, Ao
JB McNeil
wang Xiao Bin
–
13,000
10,300
4,000
Sub‑total
2,619,183
eXecUtiVe diRectoRs
John grill2
25,329,759
Andrew wood3
804,583
–
–
–
–
–
–
–
–
–
42,414
16,088
Sub‑total
26,134,342
58,502
gRoUP eXecUtiVes
Barry Bloch
–
stuart Bradie
50,977
simon holt4
Randy Karren5
–
–
2,030
16,605
3,275
4,461
–
–
–
–
401,064
1,130,195
168,755
891,869
6,055
6,055
–
500
7,000
13,000
10,800
11,000
13,555 2,632,738
15,000
835,671
15,000 26,207,844
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(38,661)
777
–
63,279
(1,745)
2,030
28,921
4,052
65,995
iain Ross
490,397
16,663
david steele
107,379
11,885
–
–
(50,000)
457,060
–
119,264
Sub‑total
648,753
54,919
64,056
(90,406)
677,322
Grand total
29,402,278
113,421
64,056
(61,851) 29,517,904
1
2
3
4
5
Mr Benke received exchangeable shares as part of the colt group consideration.
Mr grill retired as a director and chief executive officer on 23 october 2012, and was
appointed as a director and chairman on 1 March 2013.
Mr wood was appointed as a director and as chief executive officer on 23 october 2012.
Mr holt commenced as an executive on 23 october 2012.
Mr Karren commenced as an executive on 23 october 2012 and received exchangeable
shares as part of the colt group consideration.
86 WorleyParsons Annual Report 2013
the peer comparison group for Lti grants made in FY2013, the vesting
schedule of the rights subject to the relative tsR hurdle and the vesting
schedule of rights subject to the ePs hurdle are set out in the Remuneration
Report on pages 51 to 52.
executives will only derive value from the ePs component of the grants made
in FY2013 if the company achieves average compound growth in ePs of at
least 4% per annum above the increase in customer pricing index (cPi) over
the three or four year performance period.
other executive employees were granted the rights vesting upon
achievement of continuing employment conditions and achievement of a
“meeting expectations performance” rating between 1 July 2012 and 30 June
2015.
where a participant leaves the group, the Board may exercise its discretion
and allow a proportion of any unvested rights to remain in the plan, and
subsequently vest and be exercised in the ordinary course, having regard to
such factors as it determines relevant.
Weighted average remaining contractual life
the weighted average remaining contractual life for the rights outstanding as
at 30 June 2013 is 1.1 years (2012: 1.3 years).
Weighted average fair value
the weighted average fair value of rights granted during the year was
$19.50 (2012: $17.69).
Pricing model
the following table lists the inputs to the models used for the years ended
30 June 2013 and 30 June 2012:
PeRFoRMANce Rights
PLAn 2013 – TSR & EPS
GROUP ExECUTIVES
CEO
PeRFoRMANce
Rights PLAN
2012 – TSR
& EPS
dividend yield (%)
expected volatility (%)
3.94
30
Risk-free interest rate (%)
2.82 – 2.86
expected life of rights (years)
Rights exercise price ($)
weighted average share price at
measurement date ($)
4.08
30
2.57
4
–
3.49
35
3.23
3
–
3 – 4
–
25.53
25.33
27.46
the expected volatility was determined based on the historical share price
volatility of the company. the resulting expected volatility therefore reflects
the assumption that the historical volatility is indicative of future trends,
which may not necessarily be the actual outcome.
(C) SUMMARY OF KMP REMUNERATION
short term employee benefits
Post-employment benefits
other long term benefits
share based payments
Total compensation
conSolidated
2013
$
2012
$
9,372,545 11,017,826
269,967
195,883
54,457
59,826
1,772,683 2,668,309
11,469,652 13,941,844
34. Segment information
(A) IDENTIFICATION OF REPORTABLE SEGMENTS
the group has identified its operating segments based on the internal reports
that are reviewed and used by the chief executive officer and the group
Managing directors (“the chief operating decision makers”) in assessing
performance and in determining the allocation of resources. the operating
segments identified by management are based on the customer sector
groups: Hydrocarbons; Minerals, Metals & Chemicals; Infrastructure &
environment and Power.
discrete pre-tax financial information about each of these customer sector
groups is reported to the chief operating decision makers on a monthly basis.
the group’s operations are organized and managed separately according to
the nature of the services they provide, with each segment serving different
markets. the group provides engineering design, project services, and
maintenance and reliability support services to a number of markets.
the consolidated entity’s activities also include infrastructure developments
within the Power sector.
(B) ACCOUNTING POLICIES AND INTER‑SEGMENT TRANSACTIONS
segment revenues, expenses, assets and liabilities are those that are directly
attributable to a segment and the relevant portion that can be allocated to
the segment on a reasonable basis. segment assets include all assets used
by a segment and consist primarily of receivables and plant and equipment.
segment revenues, expenses and results include transactions between
segments incurred in the ordinary course of business. these transactions are
priced on an arm’s length basis and are eliminated on consolidation.
the accounting policies used by the group in reporting segments internally
are the same as those contained in note 2.
the segment result includes the allocation of overhead that can be directly
attributed to an individual business segment.
the following items and associated assets and liabilities are not allocated
to segments as they are not considered part of the core operations of
any segment:
•
•
•
•
•
•
global support costs;
interest and tax for associates;
amortization of acquired intangible assets;
net gain on revaluation of investments previously accounted for as equity
accounted associates;
net borrowing costs; and
income tax expense.
(C) MAJOR CUSTOMERS
the group has a number of customers to which it provides services. the
most significant customer accounts for 12.4% (2012: 11.3%) of aggregated
revenue including procurement and is within the hydrocarbons customer
sector group. the next most significant customer accounts for less than 10%.
WorleyParsons Annual Report 2013 87
noteS to the financial StatementS For the financial year ended 30 June 2013
34. Segment information (continued)
(D) OPERATING SEGMENTS
HYDROCARBOnS
MInERALS, METALS & CHEMICALS
iNFRAstRUctURe
& EnVIROnMEnT
POWER
TOTAL
JUNe
2013
$’M
JUNe
2012
$’M
JUNe
2013
$’M
JUNe
2012
$’M
JUNe
2013
$’M
JUNe
2012
$’M
JUNe
2013
$’M
JUNe
2012
$’M
JUNe
2013
$’M
JUNe
2012
$’M
Revenue
Professional services revenue
4,250.0
4,110.0
926.5
892.5
745.1
840.3
524.5
524.1
6,446.1
6,366.9
construction and fabrication revenue
Procurement services revenue at margin
other income
847.7
245.4
1.2
618.7
285.8
0.6
–
10.9
0.2
–
1.2
1.7
–
38.4
0.3
–
30.5
0.0
–
24.4
12.4
–
55.2
2.0
847.7
319.1
14.1
618.7
372.7
4.3
Total segment revenue1
5,344.3
5,015.1
937.6
895.4
783.8
870.8
561.3
581.3
7,627.0
7,362.6
Reconciliation of segment revenue to total revenue and other income per the statement of Financial Performance:
Segment revenue
Procurement services revenue at nil margin
share of revenue from associates
Net gain on revaluation of investments previously accounted for as equity accounted associates
interest income
Total revenue and other income per the Statement of Financial Performance
7,627.0
7,362.6
1,747.7
696.2
(549.2)
(665.0)
–
6.0
7.6
7.0
8,831.5
7,408.4
Segment result2
Segment margin
633.7
11.9%
598.4
11.9%
135.5
14.5%
134.1
15.0%
85.9
11.0%
118.4
13.6%
49.4
8.8%
61.4
10.6%
904.5
11.9%
912.3
12.4%
Reconciliation of segment result to profit after income tax per the statement of Financial Performance:
Segment result
global support costs3
interest and tax for associates
Amortization of acquired intangible assets
eBit
eBit margin on aggregated revenue for the group
Net gain on revaluation of investments previously accounted for as equity accounted associates
Net borrowing costs
income tax expense
Profit after income tax per the Statement of Financial Performance
Other segment information
904.5
912.3
(342.7)
(336.7)
(11.1)
(23.7)
527.0
6.9%
–
(13.8)
(31.5)
530.3
7.2%
7.6
(53.4)
(44.1)
(129.4)
(117.3)
344.2
376.5
depreciation and amortization expense
76.1
59.0
14.6
22.6
6.2
17.5
5.4
3.9
102.3
103.0
share of net profits of associates accounted
for using the equity method
equity accounted associates
Purchase of non-current assets
19.9
88.9
38.3
22.6
75.2
49.6
2.2
15.1
4.3
3.0
10.1
28.0
0.3
0.1
35.8
1.1
5.2
17.9
1.0
27.3
1.9
0.9
13.6
4.8
23.4
131.4
80.3
27.6
104.1
100.3
1
2
3
segment revenue represents aggregated revenue, which is defined as statutory revenue and other income plus share of revenue from associates less procurement services revenue at nil margin,
interest income and net gain on revaluation of investments previously accounted for as equity accounted associates. the directors believe the disclosure of revenue attributable to associates
provides additional information in relation to the financial performance of the group.
segment result represents earnings before interest and tax expense (eBit) which is the key financial measure that is presented to the chief operating decision makers.
due to a change in presentation of global support costs in the internal reports presented to the chief operating decision makers, the prior year segment result and global support costs have been
restated to be comparable with the current year’s disclosure, as required by AAsB 8 operating segments. the impact of this change is an increase in global support costs from $317.5 million to
$336.7 million for the year ended 30 June 2012.
88 WorleyParsons Annual Report 2013
2013
$’M
2012
$’M
35. credit riSK
(E) GEOGRAPHIC SEGMENTS
Revenue from external customers:1
Asia and china
Australia and New Zealand
canada
europe
Latin America
Middle east, North Africa and india
sub-saharan Africa
460.3
542.2
1,501.7
1,709.0
2,581.7
1,832.1
721.7
408.3
1,277.4
194.0
635.1
207.8
812.0
162.9
United states of America and caribbean
1,666.3
1,488.4
Total revenue from external customers
8,811.4
7,389.5
Non-current assets by geographical location:2
Asia and china
Australia and New Zealand
canada
europe
Latin America
Middle east, North Africa and india
sub-saharan Africa
United states of America and caribbean
113.0
303.8
1,055.3
114.8
191.8
5.7
265.9
320.5
96.3
272.0
969.3
87.3
197.7
6.6
70.3
293.6
Non‑current assets by geographical location
2,370.8
1,993.1
Unbilled contract revenue
1
Revenue is attributed to the geographic location based on the location of the entity
providing the services and includes professional services revenue, procurement revenue and
construction and fabrication revenue.
2 excludes derivative financial instruments and deferred tax assets.
0-30 days
Past due 31-60 days
Past due 61-90 days
Past due 91-120 days
More than 121 days
the financial assets of the group comprise cash and cash equivalents, trade
and other receivables, and derivative financial instruments and off statement
of financial position guarantees and letters of credit. the group’s exposure to
credit risk arises from potential default of the counterparty, with a maximum
exposure equal to the carrying amount of these instruments. exposure at
balance date is addressed in each applicable note. credit exposure of
derivatives is considered to be any positive market value.
the carrying amount of the group’s financial assets represents the maximum
credit exposure. the group’s maximum exposure to credit risk at the reporting
date was:
cash and cash equivalents
carrying amount
conSolidated
2013
$’M
2012
$’M
320.0
247.3
trade receivables, unbilled contract revenue and retentions 1,915.7
1,725.9
Amounts owing by associates and related parties
derivatives
45.4
31.9
71.9
16.6
2,313.0
2,061.7
the ageing of the group’s trade receivables, unbilled contract revenue and
retentions at the reporting date was:
gRoss
2013
$’M
984.5
708.2
102.5
45.1
18.9
87.0
iMPAiRMeNt
2013
$’M
–
(1.6)
(0.2)
(1.1)
(0.6)
gRoss
2012
$’M
782.2
649.1
115.5
56.5
29.5
(27.0)
118.0
1,946.2
(30.5)
1,750.8
iMPAiRMeNt
2012
$’M
–
(7.3)
(3.3)
(0.4)
(0.8)
(13.1)
(24.9)
Based on historic default rates, the group believes that no impairment
allowance is necessary in respect of receivables not past due or past due
by up to 30 days other than for specifically identified accounts. the group’s
typical payment terms are 30 days from date of invoice.
the allowance amounts in respect of trade receivables are used to record
impairment losses unless the group is satisfied that no recovery of the
amount owing is possible; at that point, the amount is considered
irrecoverable and is written off against the financial asset directly.
counterparties with receivables neither past due nor impaired are assessed
as creditworthy.
WorleyParsons Annual Report 2013 89
noteS to the financial StatementS For the financial year ended 30 June 2013
36. liquidity riSK
Liquidity risk is the risk that the group will not be able to meet its financial
obligations as they fall due. the group’s approach to managing liquidity is to
ensure that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the group’s reputation.
the group has unrestricted access at balance date to the following lines
of credit:
conSolidated
2013
$’M
2012
$’M
SECURED FACILITIES
total facilities available:
Loan facilities
Finance lease facilities
Facilities utilized at balance date:
Loan facilities
Finance lease facilities
Facilities available at balance date:
Loan facilities
Finance lease facilities
17.4
7.1
24.5
17.4
7.1
24.5
–
–
–
the maturity profile in respect of the group’s secured loan facilities is set
out below:
due within one year
due between one and four year(s)
due after four years
3.8
10.1
10.6
24.5
18.8
–
18.8
18.8
–
18.8
–
–
–
1.4
5.0
12.4
18.8
UNSECURED FACILITIES
total facilities available:
Loan facilities
overdraft facilities
Bank guarantees and letters of credit
Facilities utilized at balance date:
Loan facilities
overdraft facilities
Bank guarantees and letters of credit
Facilities available at balance date:
Loan facilities
overdraft facilities
Bank guarantees and letters of credit
conSolidated
2013
$’M
2012
$’M
1,770.8
1,336.2
117.1
861.8
89.6
787.3
2,749.7
2,213.1
1,037.7
721.0
–
–
616.1
522.3
1,653.8
1,243.3
733.1
117.1
245.7
615.2
89.6
265.0
1,095.9
969.8
the maturity profile in respect of the group’s available unsecured loan and
overdraft facilities is set out below:
due within one year
due between one and four year(s)
due after four years
427.0
490.2
970.7
137.5
731.1
557.2
1,887.9
1,425.8
the table below analyzes the group’s financial liabilities into relevant maturity groupings based on the remaining period from balance date to the contractual
maturity date. As the amounts disclosed in the table are the contractual undiscounted cash flows, their balances will not necessarily agree with the amounts
disclosed in the statement of financial position.
As At 30 JUNe 2013
due within one year
due between one and four year(s)
due after four years
As At 30 JUNe 2012
due within one year
due between one and four year(s)
due after four years
37. currency riSK
tRAde
PAYABLes
$’M
389.2
–
–
conSolidated
PAYABLes to
AssociAtes ANd
ReLAted PARties
$’M
iNteRest BeARiNg
LoANs ANd
BoRRowiNgs
$’M
eXPected FUtURe
iNteRest
PAYMeNts
$’M
deRiVAtiVes
$’M
21.7
–
–
156.9
203.5
701.8
389.2
21.7
1,062.2
346.7
–
–
346.7
10.2
–
–
10.2
3.7
214.6
521.5
739.8
8.9
44.8
237.6
291.3
0.6
20.2
194.9
215.7
4.0
0.3
–
4.3
4.0
0.0
–
4.0
totAL
FiNANciAL
LiABiLities
$’M
580.7
248.6
939.4
1,768.7
365.2
234.8
716.4
1,316.4
the group operates internationally and is therefore subject to foreign currency risk. in the ordinary course of business, the group structures its contracts to
be in the functional currency of the country where the work is performed and cost is incurred. if group entities enter into transactions in currencies other than
their respective functional currencies, in order to hedge the resulting foreign currency transaction risk, the group utilizes derivative financial instruments
(e.g. forward exchange contracts and foreign currency options).
A number of the group controlled entities have a functional currency other than AUd. the exchange gains or losses on the net equity investment of foreign
operations are reflected in the foreign currency translation reserve within the Parent entity’s equity. currency exposure arising from the net assets of the
group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.
(A) FORWARD EXCHANGE CONTRACTS
the group is exposed to exchange rate transaction risk on foreign currency sales, purchases, and loans to and from related entities. the most significant
exchange risk is Us dollar receipts by Australian and non-Us entities. when required, hedging is undertaken through transactions entered into in the foreign
exchange markets. Forward exchange contracts have been used for hedging purposes. Forward exchange contracts are generally accounted for as
cash flow hedges.
90 WorleyParsons Annual Report 2013
9,796.44
9,287.23
idR 42,614
Usd (4.4)
idR 69,600
–
–
hKd 20.8
hKd 3.5
Usd (0.5)
–
iNR 45.0
Usd (0.8)
iNR 149.7
–
–
JPY 7.7
MYR 0.9
AUd (0.3)
–
At balance date, the details of outstanding contracts were:
Maturing in the next six months to 31 December 2013
Weighted average
eXchange rate
2013
2012
amount
receivaBle/(PayaBle)
2013
$’M
2013
$’M
Buy AUd and sell cAd
Buy AUd and sell QAR
Buy AUd and sell Usd
Buy AUd and sell ZAR
Buy BRL and sell Usd
Buy cAd and sell eUR
Buy cAd and sell Kwd
Buy cAd and sell Usd
Buy cNY and sell Usd
Buy eUR and sell AUd
Buy gBP and sell AUd
Buy gBP and sell sgd
Buy gBP and sell Usd
Buy hKd and sell sgd
Buy hKd and sell Usd
Buy idR and sell Usd
Buy iNR and sell Usd
Buy JPY and sell AUd
Buy MYR and sell AUd
Buy QAR and sell ZAR
Buy sgd and sell AUd
Buy sgd and sell eUR
Buy sgd and sell Usd
Buy sgd and sell ZAR
Buy Usd and sell cAd
Buy Usd and sell eUR
Buy Usd and sell MYR
Buy Usd and sell ZAR
Buy ZAR and sell gBP
Buy ZAR and sell Usd
Maturing in the next 6‑12 months to 30 June 2014
Buy AUd and sell sgd
Buy AUd and sell Usd
Buy BRL and sell Usd
Buy cAd and sell Usd
Buy cNY and sell Usd
Buy gBP and sell Usd
Buy hKd and sell sgd
Buy sgd and sell Usd
Buy Usd and sell eUR
Buy AUd and sell sgd
Maturing in the next 12‑18 months to 31 December 2014
Buy BRL and sell Usd
Buy gBP and sell Usd
Maturing in the next 18‑24 months to 30 June 2015
Buy BRL and sell Usd
Maturing in the next 24‑30 months to 31 December 2015
Buy BRL and sell Usd
Maturing in the next 30‑36 months to 30 June 2016
Buy BRL and sell Usd
1.03
0.27
1.07
0.11
1.97
–
–
–
6.18
0.70
–
–
0.64
–
7.76
–
–
0.99
–
1.94
1.39
3.61
1.02
6.33
–
0.64
0.51
0.64
6.10
–
55.61
–
3.11
–
1.26
1.60
1.23
0.14
0.97
1.30
0.32
–
14.57
10.20
0.86
1.06
2.01
–
6.21
–
–
–
–
0.86
2.06
–
2.09
2.38
2.43
50.73
83.88
–
0.45
1.26
–
1.27
–
–
1.29
–
0.12
–
–
–
–
1.96
1.03
6.34
0.64
6.11
1.27
1.3
–
1.98
0.64
–
–
–
amount
receivaBle/(PayaBle)
2012
$’M
–
–
2012
$’M
–
–
AUd 44.9
Usd (45.4)
–
BRL 1.5
cAd 0.9
cAd 19.0
cAd 1.6
cNY 46.8
–
–
Usd (0.8)
eUR (0.6)
Kwd (5.3)
Usd (1.5)
Usd (7.4)
–
gBP 10.0
AUd (15.5)
gBP 0.2
gBP 2.1
AUd 9.3
AUd 0.1
AUd 37.1
AUd 4.5
BRL 4.8
–
–
–
cAd (9.0)
QAR (0.3)
Usd (34.8)
ZAR (42.4)
Usd (2.5)
–
–
–
cNY 10.5
eUR 2.0
Usd (1.7)
AUd (2.9)
–
–
–
–
gBP 9.6
Usd (15.0)
sgd (0.4)
Usd (3.4)
sgd (3.4)
–
Usd (7.5)
Usd (3.0)
AUd (0.1)
–
–
–
–
–
Usd (1.2)
Usd (0.5)
Usd (2.6)
Usd (2.4)
sgd (0.9)
Usd (2.0)
eUR (1.0)
–
Usd (0.1)
Usd (1.2)
–
–
–
–
QAR 1.6
ZAR (3.6)
AUd (5.6)
eUR (0.1)
Usd (1.2)
ZAR (17.7)
cAd (3.0)
eUR (0.3)
MYR (0.7)
sgd 14.4
AUd (11.4)
–
–
sgd 8.9
Usd (7.0)
–
–
–
–
Usd 5.8
eUR (4.5)
–
–
–
Usd 0.1
ZAR (1.1)
–
sgd 7.1
sgd 0.2
sgd 1.5
sgd 2.4
Usd 2.9
Usd 0.3
Usd 0.2
–
ZAR 7.1
ZAR 23.4
AUd 0.0
AUd 2.6
BRL 2.2
–
gBP (0.5)
Usd (2.3)
sgd (0.0)
Usd (2.5)
Usd (1.1)
–
–
–
–
–
BRL 2.4
cAd 0.5
cNY 1.9
Usd (0.3)
cNY 16.5
–
–
–
–
–
–
–
–
AUd 0.0
sgd 0.0
BRL 1.7
Usd (0.8)
–
–
BRL 1.2
Usd (0.6)
BRL 1.4
Usd (0.6)
BRL 0.5
Usd (0.2)
gBP 1.5
hKd 5.6
sgd 2.5
Usd 1.3
–
BRL 0.2
gBP 0.7
–
–
–
As these contracts are hedging anticipated future receipts and sales to the extent that they satisfy hedge accounting criteria, any unrealized gains and losses
on the contracts, together with the cost of the contracts, are deferred and will be recognized in the measurement of the underlying transaction provided the
underlying transaction is still expected to occur as originally designated. included in the amounts deferred are any gains and losses on hedging contracts
terminated prior to maturity where the related hedged transaction is still expected to occur as designated.
WorleyParsons Annual Report 2013 91
noteS to the financial StatementS For the financial year ended 30 June 2013
37. currency riSK (continued)
the gains and losses deferred in the statement of financial position were:
effective hedge – unrealized gains
effective hedge – unrealized losses
Net unrealized losses, pre-tax
conSolidated
2013
$’M
1.1
(2.6)
(1.5)
2012
$’M
0.6
(1.6)
(1.0)
(B) CROSS CURRENCY SWAPS
the group uses cross currency swaps to hedge its foreign currency interest rate risk, most with a maturity of greater than one year from the reporting date.
At balance date, the details of cross currency swaps were:
contracts to Buy Usd and sell cAd
Maturing 24 March 2016
Maturing 13 september 2017
Maturing 24 March 2018
Maturing 30 April 2018
Maturing 13 september 2019
Maturing 24 March 2021
Maturing 13 september 2022
the following gains and losses have been deferred at balance date:
Fair value gain on cross currency hedge
Foreign exchange loss on hedge relationship
Net unrealized gain pre-tax in hedge reserve
Weighted average
eXchange rate
2013
2012
amount
receivaBle/(PayaBle)
amount
receivaBle/(PayaBle)
2013
$’M
2013
$’M
2012
$’M
2012
$’M
0.99
1.01
0.99
1.00
1.01
0.99
1.01
0.99
–
0.99
1.00
–
0.99
Usd 10.0
Usd 20.0
Usd 22.0
cAd (9.9)
Usd 10.0
cAd (9.9)
cAd (20.3)
cAd (21.7)
–
–
Usd 22.0
cAd (21.7)
Usd 144.5
cAd (144.5)
Usd 144.5
cAd (144.5)
Usd 75.0
cAd (76.0)
–
–
Usd 120.0
cAd (118.3)
Usd 120.0
cAd (118.3)
–
Usd 130.0
cAd (131.7)
–
–
conSolidated
2013
$’M
30.8
(25.0)
5.8
2012
$’M
16.0
(11.6)
4.4
(C) CONSOLIDATED FOREIGN CURRENCY RISK EXPOSURE
the group’s year-end statement of financial position exposure to foreign currency risk was as follows, based on notional amounts. the following are financial
assets and liabilities (unhedged amounts) in currencies other than the functional currencies of the entity in which they are recorded:
As At 30 JUNe 2013
cash and cash equivalents
trade receivables and unbilled contract revenue
derivative assets
trade payables
gross statement of financial position exposure
As At 30 JUNe 2012
cash and cash equivalents
trade receivables and unbilled contract revenue
derivative assets
trade payables
gross statement of financial position exposure
1 Represents in currency millions as indicated.
cAd1
0.4
0.6
30.0
(0.5)
30.5
cAd1
0.2
0.3
16.6
(0.6)
16.5
gBP1
2.5
3.1
0.0
(1.5)
4.1
gBP1
1.0
1.9
0.1
(0.5)
2.5
Usd1
otheR1
34.6
51.8
0.0
(50.5)
35.9
14.6
39.0
0.0
(6.4)
47.2
Usd1
otheR1
15.3
52.7
0.0
(21.4)
46.6
5.0
51.5
0.0
(14.6)
41.9
(D) CURRENCY SENSITIVITY ANALYSIS
A 10% weakening of the Australian dollar against the following currencies at 30 June 2013 would have increased/(decreased) equity and profit by the amounts
shown below. this analysis assumes that all other variables, in particular interest rates, remain constant. the analysis is performed and shown on the same
basis for 2012.
conSolidated
2013
2012
eFFects iN MiLLioNs oF AUd
eQUitY
PRoFit
eQUitY
PRoFit
cAd
gBP
Usd
other
92 WorleyParsons Annual Report 2013
–
–
–
–
0.0
0.5
3.0
3.3
–
–
–
–
0.0
0.3
3.6
2.9
A 10% strengthening of the Australian dollar against the above currencies at 30 June 2013 would have had the equal but opposite effect on the above
currencies to the amounts shown above, on the basis that all other variables remain constant.
the following significant exchange rates against the AUd applied during the financial year:
cAd
gBP
Usd
38. intereSt rate riSK
average eXchange rate
rePorting date
SPot eXchange rate
2013
2012
2013
2012
1.0311
0.6545
1.0274
1.0349
0.6513
1.0324
0.9726
0.6083
0.9281
1.0374
0.6469
1.0039
interest rate risk is the risk that changes in interest rates will affect the group’s income or the value of its holdings of financial instruments.
(A) INTEREST RATE RISK EXPOSURE
the group’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods are set out in the following table:
FiXed iNteRest MAtURiNg iN:
1 YeAR
oR Less
$’M
1 to
2 YeAR(s)
$’M
2 to
3 YeARs
$’M
3 to
4 YeARs
$’M
4 to MoRe thAN
5 YeARs
$’M
5 YeARs
$’M
NoN-
iNteRest
BeARiNg
$’M
totAL
$’M
As At 30 JUNe 2013
FINANCIAL ASSETS
cash and cash equivalents
trade receivables, unbilled contract revenue and retentions
Amounts owing by associates and related parties
derivatives
total financial assets
FINANCIAL LIABILITIES
Bank loans
Notes payable
Finance lease liabilities
trade payables
Payables to associates and related parties
derivatives
interest rate swaps
total financial liabilities
Net financial assets
As At 30 JUNe 2012
FINANCIAL ASSETS
weighted
AVeRAge
iNteRest
RAte
% PA
FLoAtiNg
iNteRest
RAte
$’M
2.3
320.0
–
–
–
320.0
–
–
–
6.0
5.5
4.0
–
–
–
–
1.7
1.5
–
–
–
–
–
151.4
2.3
–
–
–
(17.0)
1.5
(15.3)
156.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.7
–
2.0
–
–
–
1.6
5.3
–
–
–
–
–
cash and cash equivalents
2.9
247.3
–
–
–
247.3
trade receivables, unbilled contract revenue and retentions
Amounts owing by associates and related parties
derivatives
total financial assets
FINANCIAL LIABILITIES
Bank loans
Notes payable
trade payables
Payables to associates and related parties
derivatives
interest rate swaps
total financial liabilities
Net financial assets
–
–
–
3.0
6.0
–
–
–
–
62.1
1.4
1.5
1.7
–
–
–
–
–
–
–
–
139.9
–
–
–
(18.4)
43.7
1.4
2.8
1.5
142.9
–
–
–
–
1.6
3.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
320.0
– 1,926.6 1,926.6
–
–
45.4
31.9
45.4
31.9
– 2,003.9 2,323.9
1.8
1.9
2.0
8.5
10.8
182.6
200.9
490.3
1.6
1.0
0.2
0.0
–
–
–
–
–
–
–
–
–
–
–
–
1.7
1.9
2.0
8.3
–
19.1
– 1,036.0
–
7.1
389.2
389.2
21.7
21.7
4.3
–
4.3
–
15.9
187.4
205.1
507.1
415.2 1,477.4
846.5
–
–
–
–
–
–
–
–
–
–
1.8
9.9
–
–
–
–
–
–
–
–
–
–
247.3
– 1,725.9 1,725.9
–
–
71.9
16.6
71.9
16.6
– 1,814.4 2,061.7
1.9
10.5
168.9
340.2
–
–
–
–
–
–
–
–
346.7
10.2
4.0
–
80.9
658.9
346.7
10.2
4.0
–
1.7
1.9
10.3
13.4
172.7
361.0
360.9 1,100.7
961.0
WorleyParsons Annual Report 2013 93
noteS to the financial StatementS For the financial year ended 30 June 2013
38. intereSt rate riSK (continued)
39. fair valueS
(B) INTEREST RATE SWAP CONTRACTS
exmouth Power station Pty Limited, 100% owned by a wholly owned
subsidiary of worleyParsons Limited, built and operates the exmouth Power
station and has drawn down on a loan facility which currently has a floating
interest rate. it is policy to protect part of the loan from exposure to
increasing interest rates. Accordingly, the entity has entered into an interest
rate swap contract under which it is obliged to receive interest at variable
rates and to pay interest at fixed rates. the contract is settled on a net basis
and the net amount receivable or payable at the reporting date is included in
other receivables or payables.
the contract requires settlement of net interest receivable or payable six
monthly. the settlement dates coincide with the dates on which interest is
payable on the underlying debt.
swaps currently in place cover approximately 97.5% (2012: 97.5%) of the
loan principal outstanding and are timed to expire as each loan repayment
falls due. the fixed interest rate is 5.89% per annum (2012: 5.89%).
At 30 June 2013, the notional principal amounts and periods of expiry of the
interest rate swap contracts were as follows:
Less than one year
Later than one year but not later than five years
Later than five years
conSolidated
2013
$’M
1.5
7.2
8.3
17.0
2012
$’M
1.4
6.7
10.3
18.4
As these contracts are hedging anticipated future receipts and sales, any
unrealized gains and losses on the contract, together with the cost of the
contract, are deferred and will be recognized in the measurement of the
underlying transactions provided the underlying transactions are still
expected to occur as originally designated. included in the amounts deferred
are any gains and losses on hedging contracts terminated prior to maturity
where the related hedging transaction is still expected to occur as
designated. this contract has been accounted for as a cash flow hedge.
(C) CASH FLOW SENSITIVITY ANALYSIS FOR VARIABLE INTEREST BEARING
FINANCIAL ASSETS AND LIABILITIES
A change of 100 basis points (BP) per annum in interest rates at the reporting
date would have increased/(decreased) equity and profit by the amounts
shown below. this analysis assumes that all other variables, in particular
foreign currency rates, remain constant. the analysis is performed on the
same basis for 2012.
eFFect iN MiLLioNs oF AUd
2013
Variable rate instruments
interest rate swaps
cash and overdraft
cash flow sensitivity (net)
2012
Variable rate instruments
interest rate swaps
cash and overdraft
cash flow sensitivity (net)
equity
Profit
100BP
iNcReAse
100BP
decReAse
100BP
iNcReAse
100BP
decReAse
–
0.1
–
0.1
–
0.1
–
0.1
–
(0.1)
–
(0.1)
–
(0.1)
–
(0.1)
0.0
–
2.1
2.1
0.4
–
1.6
2.0
(0.0)
–
(2.1)
(2.1)
(0.4)
–
(1.6)
(2.0)
FAIR VALUES COMPARED TO CARRYING AMOUNTS
the fair values of financial assets and liabilities, together with the carrying
amounts shown in the statement of financial position, are as follows:
2013
2012
cARRYiNg
AMoUNt
$’M
FAiR VALUe
$’M
cARRYiNg
AMoUNt
$’M
FAiR VALUe
$’M
ASSETS
cash and cash equivalents
320.0
320.0
247.3
247.3
trade receivables, unbilled
contract revenue and
retentions
Amounts owing by associates
and related parties
derivatives
LIABILITIES
1,915.7
1,915.7
1,725.9
1,725.9
45.4
31.9
45.4
31.9
71.9
16.6
71.9
16.6
interest bearing loans and
borrowings
1,062.2
1,232.8
trade payables
389.2
389.2
Payables to associates and
related parties
derivatives
21.7
4.3
21.7
4.3
739.8
346.7
10.2
4.0
825.1
346.7
10.2
4.0
835.6
665.0
961.0
875.7
the group classifies fair value measurement using the hierarchy that reflects
the significance of the inputs used in making the measurements. derivatives
held by the group are fair valued using Level 2 measurements within the
hierarchy. the fair value of the derivatives held by the group are estimated
using inputs other than quoted prices that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices), such
as forward interest and foreign currency rates. the group uses valuation
techniques such as present value techniques, comparison to similar
instruments for which market observable inputs exist and other relevant
models used by market participants.
the basis for determining fair values is disclosed in note 2(w).
40. SuBSequent eventS
since the end of the financial year, the directors have resolved to pay a final
dividend of 51.0 cents per fully paid ordinary share, including exchangeable
shares, unfranked (30 June 2012: 51.0 cents per share, partially franked
at 61.3%).
in accordance with AAsB 137 Provisions, contingent Liabilities and
contingent Assets, the aggregate amount of the proposed final dividend
of $125.7 million is not recognized as a liability as at 30 June 2013.
No other material matter or circumstance has arisen since 30 June 2013 that
has significantly affected, or may significantly affect:
•
•
•
the consolidated entity’s operations in future financial years;
the results of those operations in future financial years; or
the consolidated entity’s state of affairs in future financial years.
94 WorleyParsons Annual Report 2013
directorS’ declaration
in accordance with a resolution of the directors of worleyParsons Limited, i state that:
1.
in the opinion of the directors:
(a)
the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that
date; and
(ii)
complying with Australian Accounting standards and the Corporations Regulations 2001;
(b)
the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2(A);
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and
(d)
as at the date of this declaration, there are reasonable grounds to believe that the members of the closed group identified in note 23 will be able to
meet any obligations or liabilities to which they are or may become subject, by virtue of the deed of cross guarantee.
2.
this declaration has been made after receiving the declarations required to be made to the directors from the chief executive officer and chief financial
officer in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2013.
on behalf of the Board
John grill
chairman
sydney, 14 August 2013
WorleyParsons Annual Report 2013 95
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent auditor’s report to the members of WorleyParsons Limited
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Report on the financial report
We have audited the accompanying financial report of WorleyParsons Limited (“the company”), which
comprises the consolidated statement of financial position as at 30 June 2013, the consolidated
statement of financial performance, the consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year
Independent auditor’s report to the members of WorleyParsons Limited
then ended, notes comprising a summary of significant accounting policies and other explanatory
information, and the directors' declaration of the consolidated entity comprising the company and the
Report on the financial report
entities it controlled at the year's end or from time to time during the financial year.
We have audited the accompanying financial report of WorleyParsons Limited (“the company”), which
comprises the consolidated statement of financial position as at 30 June 2013, the consolidated
Directors' responsibility for the financial report
statement of financial performance, the consolidated statement of comprehensive income, the
The directors of the company are responsible for the preparation of the financial report that gives a
consolidated statement of changes in equity and the consolidated statement of cash flows for the year
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
then ended, notes comprising a summary of significant accounting policies and other explanatory
and for such internal controls as the directors determine are necessary to enable the preparation of
information, and the directors' declaration of the consolidated entity comprising the company and the
the financial report that is free from material misstatement, whether due to fraud or error. In Note 2,
entities it controlled at the year's end or from time to time during the financial year.
the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
Auditor's responsibility
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
and for such internal controls as the directors determine are necessary to enable the preparation of
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
the financial report that is free from material misstatement, whether due to fraud or error. In Note 2,
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
reasonable assurance about whether the financial report is free from material misstatement.
Statements, that the financial statements comply with International Financial Reporting Standards.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
Auditor's responsibility
the financial report. The procedures selected depend on the auditor's judgment, including the
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
In making those risk assessments, the auditor considers internal controls relevant to the entity's
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
preparation and fair presentation of the financial report in order to design audit procedures that are
reasonable assurance about whether the financial report is free from material misstatement.
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
policies used and the reasonableness of accounting estimates made by the directors, as well as
the financial report. The procedures selected depend on the auditor's judgment, including the
evaluating the overall presentation of the financial report.
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal controls relevant to the entity's
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
preparation and fair presentation of the financial report in order to design audit procedures that are
our audit opinion.
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting
Independence
policies used and the reasonableness of accounting estimates made by the directors, as well as
In conducting our audit we have complied with the independence requirements of the Corporations Act
evaluating the overall presentation of the financial report.
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
96 WorleyParsons Annual Report 2013
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Opinion
In our opinion:
a.
the financial report of WorleyParsons Limited is in accordance with the Corporations Act
2001, including:
i
giving a true and fair view of the consolidated entity's financial position as at 30 June
2013 and of its performance for the year ended on that date; and
Opinion
ii
In our opinion:
a.
b.
complying with Australian Accounting Standards and the Corporations Regulations
2001; and
the financial report of WorleyParsons Limited is in accordance with the Corporations Act
2001, including:
the financial report also complies with International Financial Reporting Standards as
i
disclosed in Note 2.
giving a true and fair view of the consolidated entity's financial position as at 30 June
2013 and of its performance for the year ended on that date; and
Report on the remuneration report
ii
b.
complying with Australian Accounting Standards and the Corporations Regulations
2001; and
the financial report also complies with International Financial Reporting Standards as
disclosed in Note 2.
We have audited the Remuneration Report included in pages 46 to 59 of the directors' report for the
year ended 30 June 2013. The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Report on the remuneration report
Opinion
We have audited the Remuneration Report included in pages 46 to 59 of the directors' report for the
In our opinion, the Remuneration Report of WorleyParsons Limited for the year ended 30 June 2013,
year ended 30 June 2013. The directors of the company are responsible for the preparation and
complies with section 300A of the Corporations Act 2001.
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of WorleyParsons Limited for the year ended 30 June 2013,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Bruce Meehan
Partner
Ernst & Young
Sydney
14 August 2013
Bruce Meehan
Partner
Sydney
14 August 2013
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
WorleyParsons Annual Report 2013 97
Shareholder information
toP 20 holdingS of fully Paid ordinary ShareS aS at 1 auguSt 2013
NAMe
hsBc custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
wilaci Pty Limited
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