Annual Report 2016
resources & energy
We are a professional services business, a partner in delivering
sustained economic and social progress, creating opportunities
for individuals, companies and communities to find and realize
their own futures.
We can only do this with the support of our shareholders,
earned by delivering earnings growth and a satisfactory return
on their investment.
OUR VALUES
Leadership
• Energy and excitement
• Integrity in all aspects of business
• Minimum bureaucracy
• Committed, empowered and technically capable people
• Delivering profitable sustainability
Agility
• Smallest assignment to world-scale developments
• Comprehensive geographic presence
• Global expertise delivered locally
• Responsive to customer preferences
• Optimum customized solutions
Relationships
• Open and respectful
• A trusted supplier, partner and customer
• Collaborative approach to business
• Willing to challenge and innovate
• Enduring customer relationships
Performance
• Industry leadership in health, safety and environmental
performance
• Consistent results for our customers, delivering
on our promises
• People accountable and rewarded for performance
• Innovation delivering value for our customers
• Creating wealth for our shareholders
WorleyParsons delivers projects, provides expertise in engineering,
procurement and construction and offers a wide range of consulting
and advisory services. We cover the full lifecycle, from creating
new assets to sustaining and enhancing operating assets, in the
hydrocarbons, mineral, metals, chemicals and infrastructure sectors.
Our resources and energy are focused on responding to and meeting
the needs of our customers over the long term and thereby creating
value for our shareholders.
Annual General Meeting
WorleyParsons’ 2016 Annual General Meeting will be held on Tuesday
25 October 2016 commencing at 2.00pm (AEDT) at The Westin Sydney,
1 Martin Place, Sydney.
We have created our 2016 shareholder
results microsite, which offers our 2016
results documents and detailed
information on our business operations.
Visit us online
annualreport2016.worleyparsons.com
Contents
Group Financial Highlights
Chairman and CEOs’ Review
Board of Directors
Global Operations and
Significant Contract Awards
Group Leadership Team
Realize Our Future
Corporate Responsibility
Operating and Financial Review
Directors’ Report
Remuneration Report
Financial Statements
Shareholder Information
Glossary
Corporate Information
1
2
5
6
8
10
12
17
25
31
51
103
104
105
Group Financial Highlights
FIVE YEAR PERFORMANCE AT A GLANCE
$m
2012
2013
2014
2015
2016
% change
Aggregated revenue1
7,362.6
7,627.0
7,363.7
7,227.5
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 per share)
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
428.2
5.8%
249.1
3.4%
550.1
12.5%
108.5
101.0
85.0
87.1
1.2%
(54.9)
(0.8%)
251.3
9.2%
(14.7)
(22.2)
56.0
5,892.9
128.9
2.2%
23.5
0.4%
192.0
6.9%
16.3
9.5
0.0
(18.5)
48.0
1.0pp
–
1.2pp
(23.6)
(2.3pp)
–
–
(100.0)
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 and joint operations. 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
$5,892.9m
EBIT
$128.9m
Net profit after tax
$23.5m
Cash flow from operations
$192.0m
.
m
0
7
2
6
7
$
,
.
m
6
2
6
3
7
$
,
.
m
7
3
6
3
7
$
,
.
m
5
7
2
2
7
$
,
.
m
9
2
9
8
5
$
,
.
m
9
7
3
5
$
.
m
3
0
3
5
$
.
m
0
7
2
5
$
.
m
0
7
2
5
$
.
m
2
8
2
4
$
.
m
2
2
5
4
$
.
m
1
7
8
$
.
m
9
8
2
1
$
.
m
0
8
1
4
m$
7
2
0
3
$
.
.
m
2
3
5
3
$
.
m
6
5
4
3
$
.
m
1
2
2
3
$
.
m
1
2
2
3
$
.
m
1
9
4
2
$
.
m
4
3
6
2
$
)
.
m
9
4
5
(
$
.
m
1
3
4
2
$
.
m
5
3
2
$
.
m
1
3
5
1
$
.
m
1
0
5
5
$
.
m
5
7
3
4
$
.
m
5
3
4
4
$
.
m
3
1
5
2
$
.
m
0
2
9
1
$
12
13
14
15
16
12
13
14
15
16
12
13
14
15
16
12
13
14
15
16
The result was earned on
aggregated revenue of
$5,892.9m, a decrease of
18.5% on the $7,227.5m
reported in 2015.
600
500
400
300
200
100
0
EBIT for the year was
$128.9m, an increase of
48.0% on the $87.1m
reported in 2015.
Underlying EBIT, excluding
restructuring and other
costs, for the year was
$302.7m, a decrease of
600
27.6% on the $418.0m
reported in 2015.
500
400
300
200
100
0
600
500
400
300
200
100
0
600
500
400
300
200
100
0
8000
7000
6000
5000
4000
3000
2000
1000
0
The full year result for 2016
was $23.5m compared
with a net loss of $54.9m
reported in 2015.
350
300
250
Underlying NPAT, excluding
restructuring and other
costs, for the year was
$153.1m, a decrease of
37.0% on the $243.1m
reported in 2015.
100
150
200
50
0
400
350
300
250
200
150
100
50
0
-50
-100
350
300
250
200
150
100
50
0
Cash flow from operations
was $192.0m, a decrease
of 23.6% on the $251.3m
400
reported in 2015.
350
300
250
200
150
100
50
0
-50
-100
WorleyParsons Annual Report 2016
1
600
500
400
300
200
100
0
Chairman and
CEOs’ Review
Welcome to the WorleyParsons Annual Report for financial year 2016.
We made substantial progress during the year on our near-term priorities including
improving our level of customer satisfaction, reducing internal costs, streamlining our
service delivery and strengthening our balance sheet.
Our cost reduction program lowered overheads by $170 million
when compared to the prior year. By the end of June we have
achieved annualized cost reductions of $200 million,
exceeding our target of $120 million. These savings reduced
the impact of lower revenues on our underlying EBIT margin.
Our customers continue to face difficult market conditions.
The ongoing weakness in commodity prices has led to further
declines in capital expenditure across the resources and
energy sectors.
Importantly in this environment, our customer feedback results
are the best we have ever achieved, validating the action we
have taken over the last 12 months including the realignment
of the business into the four business lines of Services, Major
Projects, Improve and Advisian. While significant progress has
been made, continuing to adapt and innovate will be a
necessary and integral part of doing business. The Company is
now leaner and better able to meet the challenges in
the market.
In order to improve our service delivery, specific offerings were
developed to deliver further value to WorleyParsons’
customers. We launched the Advisian business line, integrated
the Breakthrough Project Delivery model into the Project
Management Consulting (PMC) offering and accelerated work
process transfers to the Global Delivery Centers (GDC).
We closed 30 offices with an associated floor space reduction
of 73,000 square meters. We maintain a presence in
42 countries. In addition, we finalized the sale of Exmouth
2 WorleyParsons Annual Report 2016
CHAIRMAN AND CEOS’ REVIEW power station and we identified non-core assets to be held for
sale including the South African public infrastructure business
and the Company’s interest in Cegertec WorleyParsons
in Quebec.
We have made progress in strengthening our balance sheet.
Efforts to date have achieved an improvement in day sales
outstanding by 4 days, with more than half our locations
showing improvement from December to June. However, we
still have more to do if we are to achieve our target of industry
average of 65 days. Cash outflows were reduced by
approximately $255 million through a combination of lower
capital expenditure, reduced capital spending on acquisitions
and no interim dividend.
While we are making progress towards our near term goals,
and in most cases exceeding our own targets, we still have
considerably more to do. Our management and organization as
a whole remain focused on doing what is necessary to align
our business with the prevailing marketing conditions, while
also looking for opportunities where we can grow into the long
term sustainable markets of the future.
Realize our future
At the core of the longer term sustainability of the business
are the five strategic themes we introduced during financial
year 2015, focused on defending and growing our business
through the development of enhanced capabilities and
offerings. With our local operations, the objective is to free
them up to focus on excellence in delivery so they are able to
make the most out of the opportunities in their markets. Refer
to pages 10 and 11 of this Annual Report to read more on our
journey to Realize Our Future.
The Company continues to defend and strengthen its
leadership position in upstream oil and gas. We continue to
expand our capability in the growing sub sectors of chemicals,
power and water. Key focus areas are the development of the
Company’s emerging digital and new energy capabilities.
Geographically, Saudi Arabia and China’s “One Belt, One Road”
initiative continue to represent significant opportunities for
the Company.
Financial performance
The Group reported an improved statutory result with net
profit after tax of $23.5 million (NPAT) after last financial
year’s statutory loss of $54.9 million. The underlying net profit
after tax of $153.1 million (excluding $129.6 million of one off
costs) was down 37% on our restated financial year 2015
underlying result of $243.1 million. The Group delivered a
positive operating cash flow of $192.0 million, with cash
conversion at 125% of underlying NPAT compared with 103%
in the prior year. Our gearing was 29.2% and remains within
our target range. Our net debt to EBITDA is 2.4 times. The
Board has resolved not to pay a final dividend for financial year
2016 as the Company focuses on its balance sheet.
Health, Safety and Environment (HSE)
We are committed to our vision of Zero Harm to people and
assets and zero environmental incidents. This year, our Total
Recordable Case Frequency Rate (per 200,000 manhours)
reduced to 0.07 from 0.12. Notwithstanding this improvement,
we are deeply saddened to report four fatal incidents involving
our contractors. Three individuals lost their lives in vehicle
related accidents in Turkey and another person was fatally
injured while working at height in Saudi Arabia. Vehicle
operation and working at heights remain the greatest risks to
the safety of our employees and contractors. These will
continue to be focus areas for the business.
People
It has been a difficult year for our people, as we adapted to the
changing needs of our customers and the dynamics of our
markets. This year we reduced the workforce by a further
6,900 to its current level of 24,500. We have made, and will
continue to make, tough decisions that balance the
requirements to maintain capability and local presence to
support our customers, with the longer term interests of our
shareholders.
Both the Board and Group Leadership Team would like to
express their appreciation for the commitment and
contribution of our people to WorleyParsons during what has
been an extremely trying year.
WorleyParsons Annual Report 2016
3
Board changes
After joining the Board on 1 July 2015, Jagjeet (Jeet) Bindra
assumed the role of Remuneration Committee Chairman
following the 2015 Annual General Meeting. Jeet succeeds
John Green who held the position of Remuneration Committee
Chairman since 2008. We thank John for his strong guidance
and leadership.
Ethics and corporate responsibility
We recognize 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 ongoing
success. All of WorleyParsons’ people and our agents, are
required to maintain the standard of ethical behavior outlined
in our Code of Conduct and as expected by our customers,
suppliers and shareholders.
The Company fulfills its corporate responsibilities across all the
parts of the world where we do business. We ensure that our
programs are as effective and efficient as possible in
delivering value to the communities we support. The
Australian Council of Superannuation Investors awarded
WorleyParsons the rating of “Leading” in corporate
responsibility reporting practices. We also received the award
for “Best Improvement in Climate Disclosure at the Australian
Climate Leadership Forum”.
This year, we also launched the Group’s Diversity and Inclusion
Expectations supported by local campaigns and unconscious
bias training. The Corporate Responsibility section of this
Annual Report provides detail of 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. 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
assurance annually to the Audit and Risk Committee on the
adequacy and effectiveness of the Group’s internal controls.
The Corporate Governance Statement 2016 can be found on
the Company’s website.
Conclusion
We would like to thank the directors, the Group Leadership
Team, and our people for their contribution in what has been
another difficult year in our markets and organization. We
would like to thank our shareholders for their continuing
support and look forward to realizing the future of
WorleyParsons together.
John Grill AO
Chairman and Non-Executive Director
Andrew Wood
Chief Executive Officer
4 WorleyParsons Annual Report 2016
CHAIRMAN AND CEOS’ REVIEW Board of Directors
John Grill AO
Chairman and Non-Executive
Director
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.
Andrew Wood
Chief Executive Officer
See page 29 for biography.
Ron McNeilly
Deputy Chairman and
Lead Independent Director
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.
Erich Fraunschiel
Non-Executive Director
Erich is Chairman of the Audit and Risk
Committee and a member of
the Nominations Committee.
John M Green
Non-Executive Director
John is a member of the Remuneration
Committee and the Nominations
Committee.
Larry Benke
Non-Executive Director
Larry is a member of the Audit and Risk
Committee, the Nominations
Committee and the Health, Safety and
Environment Committee.
Catherine Livingstone AO
Non-Executive Director
Catherine is a member of the Audit and Risk
Committee and the Nominations
Committee.
Wang Xiao Bin
Non-Executive Director
Xiao Bin is a member of the Audit and Risk
Committee and the Nominations Committee.
Christopher Haynes OBE
Non-Executive Director
Chris is Chairman of the Health, Safety and
Environment Committee and a member
of the Nominations Committee.
Peter Janu
Company Secretary and General
Counsel Corporate
See page 30 for biography.
Jagjeet Bindra
Non-Executive Director
Jagjeet (Jeet) is the Chairman of the
Remuneration Committee and a member of
the Nominations Committee and the Health,
Safety and Environment Committee.
For detailed information on Directors and
Company Secretary see pages 28 to 30.
WorleyParsons Annual Report 2016
5
Global Operations and
Significant Contract Awards
Infrastructure 24
85
Significant
Awards
Minerals, Metals
& Chemicals 15
Anchorage
Anchorage
Fort St. John
Fort St. John
Cold Lake
Cold Lake
Chicoutimi
Alma
Chicoutimi
Alma
Kitimat
Burnaby
Edmonton
Blackfalds
Kitimat
Burnaby
Edmonton
Blackfalds
Saskatoon
Calgary
Calgary
Saskatoon
Trois-Rivières
Montreal
Trois-Rivières
Montreal
Fermont
Fermont
Markham
Markham
Sept-Îles
Sept-Îles
Vancouver, WA
Folsom
Vancouver, WA
Folsom
Arcadia/Monrovia
Costa Mesa
Arcadia/Monrovia
Costa Mesa
Billings
Bismarck
Billings
Sudbury
Bismarck
Sudbury
Sarnia
Sarnia
Reading
Reading
Quebec City
Quebec City
Saint John
Saint John
Chattanooga
Atlanta
Chattanooga
Atlanta
Jacksonville
Jacksonville
Houston
Bayport
Houston
Infrastructure 24
Bayport
Mexico City
Mexico City
Hydrocarbons 46
Port of Spain
Port of Spain
Stavanger
Stavanger
Leeds
Teesside
Teesside
Delft
Delft
Plzenˇ
Plzenˇ
Warsaw
Warsaw
Moscow
Moscow
Aksai
Aksai
Atyrau
Atyrau
Leeds
Manchester
Gloucester
Bristol
Farnborough
Woking
London
Manchester
Gloucester
Bristol
Farnborough
Woking
London
Madrid
Madrid
Baku
Baku
Sofia
Sofia
Almaty
Almaty
Tashkent
Tashkent
Cairo
Basrah
Cairo
Ahmadi
Basrah
Manama
Ahmadi
Manama
Al Khobar
Al Khobar
Dubai
Dubai
Yanbu
Riyadh
Yanbu
Riyadh
Muscat
Muscat
Doha
Doha
Abu Dhabi
Abu Dhabi
Hydrocarbons 46
Mumbai
Hyderabad
Hyderabad
Mumbai
Chennai
Bangkok
Chennai
Bangkok
Accra
Lagos
Accra
Lagos
Infrastructure 9
Europe, Middle East
& Africa
Ulaanbaatar
Ulaanbaatar
Beijing
Beijing
Tianjin
Tianjin
Chengdu
Nanjing
Chengdu
Nanjing
Shanghai
Shanghai
Hong Kong
Hong Kong
Infrastructure 9
Lima
Minerals, Metals
& Chemicals 15
Bogotá
Europe, Middle East
& Africa
Bogotá
Lima
85
26Significant
Significant
Awards
Awards
São Paulo
Minerals, Metals
& Chemicals 3
Santiago
Santiago
Hydrocarbons 14
Luanda
Luanda
Belo Horizonte
Belo Horizonte
São Paulo
Rio de Janeiro
Rio de Janeiro
26Significant
Awards
Pretoria
Pretoria
Rustenberg
Rustenberg
Upington
Upington
Johannesburg
Johannesburg
Kimberley
Kimberley
Bloemfontein
Bloemfontein
Cape Town
Cape Town
Minerals, Metals
& Chemicals 3
Durban
Durban
Secunda
Secunda
Port Elizabeth
Port Elizabeth
Kerteh
Kerteh
Kuantan
Kuantan
Kuala Belait
Kuala Belait
Kuala Lumpur
Kuala Lumpur
Duri
Duri
Singapore
Singapore
Hydrocarbons 14
Jakarta
Jakarta
Dili
Dili
Mackay
Mackay
Gladstone
Gladstone
Brisbane
Brisbane
Perth
Perth
Bunbury
Bunbury
Adelaide
Sydney
Adelaide
Sydney
Geelong
Geelong
Melbourne
Auckland
Auckland
Melbourne
New Plymouth
New Plymouth
Hastings
Wellington
Hastings
Wellington
Christchurch
Christchurch
Infrastructure 11
Americas
42 Countries
118 Offices
48Significant
24,500 Employees
Hydrocarbons 27
Awards
Minerals, Metals
& Chemicals 10
Infrastructure 11
Americas
Australia, Pacific, Asia and China
Hydrocarbons 27
Infrastructure 4
Minerals, Metals
& Chemicals 10
11Significant
Awards
Hydrocarbons 5
48Significant
Awards
Minerals, Metals
& Chemicals 2
Australia, Pacific, Asia and China
Hydrocarbons 5
Infrastructure 4
11Significant
Awards
Minerals, Metals
& Chemicals 2
6 WorleyParsons Annual Report 2016
CHAIRMAN AND CEOS’ REVIEW
Infrastructure 24
85
Significant
Awards
Minerals, Metals
& Chemicals 15
Hydrocarbons 46
Europe, Middle East
& Africa
Infrastructure 9
Hydrocarbons 14
26Significant
Awards
Minerals, Metals
& Chemicals 3
Anchorage
Fort St. John
Edmonton
Blackfalds
Cold Lake
Saskatoon
Calgary
Infrastructure 11
Kitimat
Burnaby
Chicoutimi
Alma
Trois-Rivières
Montreal
Markham
Americas
Fermont
Sept-Îles
Billings
Bismarck
Sudbury
Quebec City
Saint John
Hydrocarbons 27
Vancouver, WA
Folsom
Arcadia/Monrovia
Costa Mesa
Sarnia
Reading
Jacksonville
Chattanooga
Atlanta
48Significant
Awards
Houston
Bayport
Minerals, Metals
& Chemicals 10
Mexico City
Leeds
Manchester
Gloucester
Bristol
Farnborough
Woking
London
Stavanger
Teesside
Delft
Warsaw
Plzenˇ
Australia, Pacific, Asia and China
Moscow
Aksai
Atyrau
Madrid
Infrastructure 24
Sofia
Baku
Hydrocarbons 5
Infrastructure 4
11Significant
Awards
Cairo
Basrah
Al Khobar
Riyadh
Yanbu
Ahmadi
Manama
Dubai
Muscat
Doha
Abu Dhabi
Almaty
Tashkent
Ulaanbaatar
Beijing
Tianjin
Hydrocarbons 46
Chengdu
Nanjing
Shanghai
Minerals, Metals
& Chemicals 2
85
Significant
Awards
Mumbai
Hyderabad
Chennai
Bangkok
Kerteh
Kuala Lumpur
Duri
Singapore
Kuantan
Jakarta
Port of Spain
Bogotá
Lima
Santiago
São Paulo
Belo Horizonte
Rio de Janeiro
Accra
Lagos
Minerals, Metals
& Chemicals 15
Luanda
Rustenberg
Upington
Johannesburg
Kimberley
Bloemfontein
Cape Town
Pretoria
Durban
Secunda
Port Elizabeth
Hong Kong
Infrastructure 9
Europe, Middle East
& Africa
Hydrocarbons 14
Kuala Belait
Dili
Minerals, Metals
& Chemicals 3
26Significant
Awards
Mackay
Gladstone
Brisbane
Perth
Bunbury
Adelaide
Sydney
Geelong
Melbourne
Auckland
New Plymouth
Hastings
Wellington
Christchurch
Infrastructure 11
Americas
48Significant
Awards
Minerals, Metals
& Chemicals 10
Hydrocarbons 27
Australia, Pacific, Asia and China
Hydrocarbons 5
Infrastructure 4
11Significant
Awards
Minerals, Metals
& Chemicals 2
WorleyParsons Annual Report 2016
7
Group Leadership Team
Andrew Wood
Chief Executive Officer
See page 29 for biography.
Tom Honan
Group Managing Director – Finance / CFO
Tom is accountable for finance, information management, assurance, development, communications
and investor relations. Tom brings his leadership in driving transformational change, his ability to
create shareholder value and his experience in the management of complex major systems
replacements to his role at WorleyParsons. Tom joined WorleyParsons on 1 December 2015 after
holding CFO roles at Federation Centres, Transurban and Computershare. He has an MBA from
Melbourne Business School and an Economics degree from Monash University.
Chris Ashton
Regional Managing Director - Services, EMEA
Chris is responsible for the Services business line in the Europe, Middle East and Africa (EMEA)
region, delivering a broad range of solutions to our local customers. Chris held senior operational,
sales and strategy roles, working in Europe, the Middle East and the USA prior to taking on his
current role. Chris joined WorleyParsons in 1998 after more than 15 years in senior engineering and
operational roles with international organizations. Chris holds a Degree in Electrical and Electronic
Engineering from the University of Sunderland, a Master Degree in Business Administration from
Cranfield School of Management and completed the Executive Management Program at Harvard
Business School.
Denis Lucey
Regional Managing Director – Services, APAC
Denis is responsible for the Services business line in the Australia, Pacific, Asia and China (APAC)
region delivering a broad range of solutions to our local customers. Denis has over 35 years’
experience working in the resources and energy sector including almost 30 years based in the Asia
region. Denis joined the company in Malaysia in 1990 as a structural engineer, and was a pioneer of
the Indonesian operation in the early 90s. Denis holds a Bachelor’s Degree in Civil Engineering and a
Master’s of Science degree in Offshore Structures.
Chris Parker
Regional Managing Director – Services, Americas
Chris is responsible for the Services business line in the Americas region which includes North
America and Latin America, delivering a broad range of solutions to our local customers. Chris has
over 30 years’ experience across a wide range of sectors including oil & gas, petrochemicals, power
generation and infrastructure. Chris joined the Company in 2004 following the acquisition of
Parsons E&C. He started his career with the Ralph M. Parsons Company in 1981 where he held a
number of key positions. He has a Bachelor Degree in Mechanical Engineering from the
University of Houston and completed the Advanced Management Program, The Wharton School,
University of Pennsylvania.
8 WorleyParsons Annual Report 2016
CHAIRMAN AND CEOS’ REVIEW Filippo Abba
Group Managing Director - Major Projects
Group Managing Director - Improve
Filippo is accountable for the growth and performance of both the nominated global Major Projects’
portfolio and Improve relationships within WorleyParsons. Prior to joining WorleyParsons, Filippo
held a number of senior roles during his 24 years working with Foster Wheeler, most recently CEO of
Foster Wheeler Europe, Middle East and Africa. Throughout his career, Filippo has built broad global
experience and has led sizeable EPC projects. Filippo holds a Bachelor’s Degree and a Doctorate in
Mechanical Engineering from Politecnico di Milan.
Dennis Finn
Group Managing Director and CEO - Advisian
Dennis is responsible for Advisian, WorleyParsons’ global advisory and consulting business. Dennis
joined WorleyParsons from PricewaterhouseCoopers (PwC) in 2014 and has a strong background in
transformational change, global strategy and high impact customer focused interventions. Dennis
joined PwC Australia in 2004 as the lead Partner and Head of Consulting and went on to hold a
number of senior roles in the firm. In 2012, he was appointed Vice Chairman and Global Human
Capital Leader of PwC International based in New York. His background and experience include
operations, manufacturing, HR, marketing and general management across multiple
locations (the UK, the US, Australia, New Zealand and Asia). Dennis started his career as a
radiographer after studying Chemical Plant Operations and Nuclear Processes in the UK.
Marian McLean
Group Managing Director - Assurance and Development
Marian is responsible for both the Assurance and Development activities at WorleyParsons. In this
role, Marian provides leadership of Innovation, the Group Project Management Office and New
Ventures. She is also responsible for assurance on the effectiveness and efficiency of the
WorleyParsons internal controls, reliability of reporting and compliance with laws and regulations.
Marian joined WorleyParsons in June 2008. She has over 20 years’ experience in the manufacturing,
water, construction, service and oil and gas industries. Her qualifications include: Master of Applied
Science (Ergonomics), University of NSW, Graduate Diploma in Safety Science, University of NSW and
Bachelor of Physiotherapy, University of QLD. Marian is a professional member of the American
Society of Safety Engineers, the Society of Petroleum Engineers and the Human Factors and
Ergonomics Society of Australia.
Peter Janu
Company Secretary and General Counsel Corporate
See page 30 for biography.
WorleyParsons Annual Report 2016
9
Realize Our Future
During financial year 2015, we unveiled our strategy to return the Company to growth. As
the resources and energy sectors undergo significant transformation driven by prolonged low
commodity prices, WorleyParsons continues to transform to respond and reposition the business for
future success.
The five strategic themes, first introduced in financial year 2015, remain the platform for
transformation of the business.
01 Build a world class consulting business and dominate the
early project phases
We established the Advisian business line just one year ago to
pursue the white space of management consulting advice based
on deep technical knowledge. Advisian remains a core element of
our strategy as the global vehicle to help our customers meet the
complex challenges they face in the resources and energy sectors.
Customer
02 Be the global PMC
provider of choice
We continue to expand
our PMC offering with the
promotion and application
of the Breakthrough
Project Delivery Model.
05 Use Global Delivery
Centers to apply digital
technology to the delivery
of future services
Through financial year 2016, we
focused on standardization and
simplification of processes
including the transitioning of two
processes to the Global Delivery
Centers. The GDC currently offers
each of our offices the
opportunity to be competitive
though the incorporation of
lower cost resources into their
projects. However, its primary
purpose, however, is to apply
leading technology to automate
those processes to create a step
change that revolutionizes the
delivery of future services.
04 Be the smartest, most
agile local service provider
Our focus is on defending our core
business, the local operations. As
we free them up to focus on
excellence in delivery, they are
able to make the most out of the
opportunities in their markets.
03 Build a leading
Improve business
As we seek to expand into integrated
service offerings beyond the power
sector, we have identified partners to
help deliver this offering to our
customers in other sectors.
10 WorleyParsons Annual Report 2016
CHAIRMAN AND CEOS’ REVIEW Where we are heading
Today, the revenue of the business is
concentrated in the hydrocarbons
sector and the provision of
engineering services. We are
deploying traditional go–to–market
strategies, payment models and
service delivery methods. Our
ambition is to transform the
business by:
• growing our exposure to selected
attractive markets while defending
our position in hydrocarbons
• offering a range of solutions that
increase our market share
• having a differentiated
digital capability
• deploying our global capabilities,
including increased use of our
Global Delivery Centers.
In addition, we will have evolved our go–to–market strategies
to more solution based selling with commercial models more
focused on the value delivered.
Enhancing our exposure to growth
The current priorities for financial year 2017 are to defend and
strengthen our leadership position in onshore conventional,
offshore and heavy oil and oil sands. We see opportunities to
expand into the attractive sub sectors of chemicals and new
energy or renewables and the prospective geography of Saudi
Arabia, across all sectors. A key focus will be the development
of our digital capability across all service offerings.
In the near term, we see opportunities in the power sector,
supporting investments aligned to China’s One Belt One Road
regional development plan and industrial water.
Reducing our costs and strengthening the balance sheet
In February 2016, we announced targets to reduce our internal
costs by $300 million, with initiatives to deliver the first
$120 million in annualized benefits already in place. During
financial year 2016 we exceeded our target of cost reductions
and reduced our annualized overhead costs by $200 million.
We identified initiatives to generate the further $150 million in
annualized benefits from the current baseline through a
combination of cost reduction and revenue improvement
initiatives. A structured program is in place with actions
Current Priorities
Near Term Priorities
Core
Expand
Expand
Expand
Onshore Conventional
Chemicals
New Energy/Renewables
Power
Offshore
Saudi Arabia
Digital
One Belt One Road
Heavy Oil & Oil Sands
Industrial Water
underway in a wide range of areas across the business
including: restructuring our support functions and general
management, improving our resource utilization, increasing
utilization of our GDC, assessing remuneration against local
markets and adjusting where appropriate, rationalizing office
space utilization, exiting unprofitable or non-strategic
locations, aggressive management of our spend with third
parties, review of underperforming projects to improve margins
and a restructure of the information technology platform and
support organization.
We restructured business development into a global sales and
marketing group with an acute focus on leveraging our global
scale and capability more effectively with a more aggressive
pursuit in our current markets and the growth markets of
tomorrow. The combination of structure, focus and reduced
costs is expected to increase our market share.
We also announced our commitment to strengthen the balance
sheet by targeting an improvement in cash position by
$300 million. Through a focused short term effort across the
Group, we have reduced our net debt by $115 million and
reduced our day sales outstanding to 78 days. By implementing
a number of system and process changes into the business, we
expect to continue our performance improvement towards
industry average of 65 days.
WorleyParsons Annual Report 2016 11
CORPORATE RESPONSIBILITY
The Group aims to be recognized as an industry leader in corporate responsibility and to this end is
committed to continuous improvement.
The Group is committed to contributing to the development of local
communities through local employment and corporate responsibility
projects. Contributing to the success of these projects have been the
Group’s overarching support and the willingness of our personnel to
volunteer their time and make donations in support of their local
corporate responsibility activities.
For the year ended 30 June 2016, the Group engaged in a broad range of
activities across its business with a strong focus on community projects
that require technically skilled volunteers. Other activities include
fundraising for not-for-profit organizations, scholarships, sponsorships,
training, programs to reduce the Group’s impact on the environment
and programs promoting improved diversity and inclusion.
The Group has reported an increase in volunteer hours for internal
programs and community skilled volunteering programs. While there
was a solid performance of direct financial contributions by our
operations and personnel, the overall value of these contributions has
reduced in line with the scale of the business.
Across our industries and operations, the Group is seeing increasing
expectations related to supplier selection processes and ethical conduct.
The Group sees this as an opportunity to lead our contractors and
suppliers to increased ethical, social and environmental performance.
CORPORATE RESPONSIBILITY POLICY
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. Our Corporate Responsibility Policy outlines our commitments
to: Governance, Ethics and Transparency, Our People, Human Rights,
Community, Fair Operating Practices and Supply Chain, and the
Environment.
Community involvement in Lagos, Nigeria included Ebola containment
through community awareness.
12 WorleyParsons Annual Report 2016
WORLEYPARSONS FOUNDATION
The WorleyParsons Foundation objectives are to:
• support the execution of high impact strategic community projects;
• become a vehicle for direct corporate investment, fundraising
and volunteering;
• expand opportunities for Group personnel to be directly or indirectly
involved in foundation activities; and
• raise awareness of WorleyParsons’ corporate responsibility
credentials with its stakeholders.
The WorleyParsons Foundation recognizes and acknowledges
employees for their personal contribution in activities that help
promote the key themes of education, disaster recovery, skilled
volunteering, diversity and inclusion and enterprise development.
Foundation Awards were given to 195 individuals responsible for
81 outstanding corporate responsibility activities across 20 countries
aligned to the key themes.
Four WorleyParsons Foundation projects were progressed in FY2016:
• collaboration with the Red Cross for disaster recovery in the
Philippines, developing models for large scale skilled remote
volunteering;
• capability development of Robogals preparedness for global
expansion, so they can scale their model to introduce careers in
science and technology to schoolgirls across the world;
• project delivery of a shelter house for preschool children for the
community of Island of Queullín, Chile; and
• project delivery of community bore well water, solar power and
school buildings for families in Kelicha Pada and two further nearby
villages, India.
A further three projects commenced during FY2016:
• selection and provision of Kangaroo Mother Care support chairs for
National Hospital, Dili, Timor Leste;
• support of earthquake disaster recovery with Red Cross, Ecuador;
and
• support of wildfires disaster recovery with Red Cross, Canada.
MILESTONES
In FY2016, the Group reached a number of corporate responsibility
milestones, including:
• conducting a robust corporate responsibility materiality review
• listing as a member of the 2015 Dow Jones Sustainability Index
Australia and participated in the Corporate Sustainability
Assessment for the first time;
mapping economic, social and environmental issues;
• continuing the Group’s corporate responsibility reporting process
• establishing strategic partnerships and collaborations promoting
skilled volunteering opportunities for our people;
• expanding the WorleyParsons Foundation by supporting more
projects and community partners, governed by the WorleyParsons
Foundation Council;
• progressing a global diversity and inclusion program implementing
Diversity and Inclusion Expectations across the business focusing on
six key areas: diverse and inclusive workplace, recruitment and
promotion, closing pay gaps, accountability and engagement,
flexibility and community;
• delivering non-financial performance commitments covered in the
Corporate Responsibility Indicators section of this report, including
gender diversity targets and an environmental emissions target;
using the internationally recognized Global Reporting Initiative 4.0
Framework;
• fulfilling the Group’s fourth 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; and
• continuing to deliver sustainability-enhancing services to the
Group’s customers through the Group’s advisory service offering.
ACTIVITY HIGHLIGHTS
The Group undertook various corporate responsibility activities in
FY2016, including:
• participating directly in and reporting over 460 corporate
responsibility activities across 23 countries, involving over 8,600
Group personnel;
• supporting local communities through the network of corporate
responsibility champions across 65 offices as well as ongoing
participation in the Group’s own programs: DeltaAfrik Foundation in
Nigeria, UnitedWay program in Canada and various corporate
responsibility and local social committees;
• contributing over $530,000 towards educational programs over 35
offices;
DIVERSITY AND INCLUSION HIGHLIGHTS
The Group undertook various diversity and inclusion activities in
FY2016, including:
• launching the Diversity and Inclusion Expectations with a leadership
statement and videos;
• continuing the global Diversity and Inclusion Working Group to
provide guidance and support for diversity and inclusion initiatives
and promote engagement with local networks;
• developing an internal diversity scorecard to monitor and review
progress across the expectations for discussion and action by leaders;
• launching an internal flexible work campaign to share real stories and
examples of our people working in flexible work arrangements to
promote understanding about flexible working;
• providing scholarships amounting to $76,000;
• cascading ‘Check Yourself, Bias Awareness’ workshops and informal
• group matching $68,000 of Group personnel fundraising programs in
Australia, Canada, Ecuador, New Zealand and Trinidad;
• donating 210 liters of blood across eight offices and 476 participants
to local health organizations and hospitals;
• reducing carbon emissions across a number of offices through
behavioral change programs, office consolidation, encouraging use of
public transport, flexible work options from home, recycling and
FollowMe smart printing;
• expanding the WorleyParsons Academy with an online portal as the
one-stop-shop for WorleyParsons development programs; and
• participating in and contributing to various workshops and forums
on diversity, anti-corruption, Indigenous issues, ethical supply chain
and human rights issues.
discussions targeted at middle management across a number of
offices;
• launching a global Pledge for Parity campaign for International
Women’s Day, which engaged 890 of our people across 20 countries
and 40 locations;
• addressing gender pay gaps through annual pay reviews ; and
• supporting diversity and Women of WorleyParsons networks across
20 local communities, prompting local activities and progress.
WorleyParsons Annual Report 2016 13
CORPORATE RESPONSIBILITY CONTINUED
CORPORATE RESPONSIBILITY MATERIALITY
ASSESSMENT
Data for greenhouse gas emissions and energy consumption for FY2014
and FY2015 were:
A corporate responsibility materiality assessment was conducted to
prioritize current economic, social and environmental issues that are
most important to our business and stakeholders (our people,
customers and investors).
Further information on our corporate responsibility materiality
assessment and the associated materiality matrix is included in the 2016
Corporate Responsibility Performance Report.
CORPORATE RESPONSIBILITY INDICATORS
Contributions by Group personnel and the Group’s business operations
are measured in terms of Australian dollar contributions and volunteer
time contributions.
The Group uses the United States Occupational Safety and
Health Administration reporting requirements for Total Recordable
Case Frequency Rate (TRCFR) and Lost Workday Case Frequency Rate
(LWCFR). The Group also measures online training hours.
The Group’s corporate responsibility indicators for FY2016 and
preceding two years were:
INDICATORS
Greenhouse gas
emissions tCO2-e
Energy consumption
MWh
2015
2014
PER
PERSONNEL
MEMBER1
PER
PERSONNEL
MEMBER1
TOTAL2
TOTAL2
2.68
84,091
2.85
101,415
7.84
246,043
7.18
255,738
1 Personnel include employees and contractors.
2 Totals include gas emissions from, and energy consumed by Exmouth Power
Station, Australia.
Last year, the Board set measurable objectives for achieving gender
diversity. FY2016 shows encouraging progress, and the Group is
focused on improving our female representation with the proportion of
women employees within the Group, women in senior executive
positions and women non-executive directors to achieve our target. The
Group’s progress over time is included in the 2016 Corporate
Governance Statement and progress towards achieving the objectives in
FY2016 is set out in the table below:
INDICATORS1
Contributions by
operations2
Contributions by personnel
members2
Volunteer hours by
personnel members
(community/internal)2
TRCFR
LWCFR
2016
2015
2014
MEASURES
OBJECTIVES
$1.72 million
$2.32 million
$3.09 million
Women employees1
Increase the proportion of women
employees to 30% by 2020
$0.85 million
$1.56 million
$1.75 million
Women senior
executives2
Increase the proportion of women senior
executives to 25% by 2020
26,257 hours
16,302 hours
18,091 hours
Women non-executive
directors
Increase the number of women non-
executive directors to three by 2020
1 This includes both the Group’s employees and contractors.
2016
~23%
~22%
2
0.07
0.03
0.12
0.01
2 Senior executives comprise all employees and contractors at the CEO-1, CEO-2, CEO-3 and
CEO-4 levels.
0.10
0.03
-3
ASSURANCE
Independent assurance supports our commitment to transparency and
accountability. To provide confidence to our stakeholders in our
reporting, Ernst & Young provided limited assurance, in accordance
with the ISAE 3000 standard, over selected corporate responsibility
performance data in our 2015 Annual Report.
No significant changes have been made to these reporting processes in
the 2016 Annual Report. Access the assurance statement.
Online training hours
19,968 hours
33,774 hours
1 Definitions and clarifications
2 For corporate responsibility activities.
3 Not measured.
The Group completed a response for the Carbon Disclosure Project
(CDP) for FY2015 which was reported in June 2016. 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 data collection and analysis stimulated
energy and carbon reduction measures in the global energy efficiency
program in selected offices. The Company also completed a CDP
response in respect of its water use for FY2015.
The Group is in the process of deregistering under the Australian
National Greenhouse and Energy Reporting Act 2007 as the corporate
threshold was not exceeded in FY2016 with the sale of Exmouth Power
Station.
Our energy target for FY2016 is set at 2.5% reduction of total carbon
dioxide equivalents (tCO2-e) against base year FY2014. In FY2015, a
reduction of 17% is well ahead of the two year target. Business
downsizing and subsequent consolidation of office area have
contributed to this reduction.
14 WorleyParsons Annual Report 2016
AWARDS
In July 2015, WorleyParsons retained the status of a ‘National Community Partner’ with Australian Red Cross. This
collaboration is the first of its kind and demonstrates commitment to our communities and support for skilled
volunteering. It also showcases our global reach of knowledge, and should position WorleyParsons as an industry
leader among our peers in large scale ‘pro bono’ services, focusing on disaster recovery.
In July 2015, WorleyParsons was listed as ‘Australia's 30 Most InDemand Employers: 2015’. WorleyParsons
ranked 17 out of 30 and it was the first time that the Company was recognized on LinkedIn’s annual list. The
rankings are based on user interactions with the company page measuring reach and engagement.
In July 2015, WorleyParsons India was awarded ‘Best in Class Corporate Social Responsibility Practice’ award for
its efforts in a host of skilled volunteering and fundraising activities. The Responsible Business Awards are
recognized by the World CSR Congress and World Federation of CSR Professionals and in addition are endorsed
by the Asian Confederation of Industries.
In October 2015, WorleyParsons was named the ‘Best Global Supplier of 2015’ in the category of Exceptional
Performance by BASF. The Exceptional Performance award recognizes WorleyParsons' long term commitment to
developing a high performance culture and outstanding efforts to deliver high value results for BASF.
In November 2015, WorleyParsons United Kingdom was presented with the prestigious ‘Payroll Giving Silver
Award 2015’ for fostering a culture of philanthropy and committed giving in the workplace by making Payroll
Giving available to employees. The National Payroll Giving Excellence Awards showcase the best Payroll Giving
schemes in the UK.
In November 2015, WorleyParsons was announced as the winner of the ‘Best Year on Year Improvement in
Climate Disclosure for 2014-2015’ in the Carbon Disclosure Project Climate Leadership Awards.
In December 2015, WorleyParsons Malaysia was awarded the ‘Gold HSE Award for the Chemicals sector’ by the
Malaysian Occupational Health and Safety Practitioners’ Association (MOSHPA) for the HSE performance and
processes established on the Hibiscus Project. This award from MOSHPA recognizes the significant efforts on the
Project to achieve Zero Harm and the exceptional performance of the site management team.
In April 2016, WorleyParsons India was awarded the ‘Golden Globe Tigers Summit Award for Community
Development’ for their contribution and development of five villages in a remote tribal region near Mumbai,
Maharashtra, India. The WorleyParsons India team has installed water pumps and tanks, solar panels as a source
of renewable energy, refurbished the local school and set up a new E-Learning Center.
In June 2016, WorleyParsons was granted ‘Silver Recognition Level in Corporate Social Responsibility’ by
EcoVadis. The award places the Group in the top 30% of performers evaluated by EcoVadis. As an independent
rating agency, EcoVadis provides supplier sustainability ratings for global supply chains.
In June 2016, WorleyParsons achieved a ‘Leading’ rating in the 2016 research report, Corporate Reporting in
Australia: Disclosure of Sustainability Risks among S&P/ASX200 Companies by the Australian Council of
Superannuation Investors. The Leading rating is the highest of the five categories and demonstrates to investors
that the Company takes investor issues seriously and gives investors valuable information to better inform their
investment decision.
WorleyParsons Annual Report 2016 15
CASE STUDIES
The WorleyParsons Foundation, Collaborating with Red Cross on Disaster Recovery Programs
The WorleyParsons Foundation collaborated with Red Cross to integrate our skilled volunteers into their
international disaster recovery projects, whereby WorleyParsons has been awarded the status of a
'National Community Partner' with Australian Red Cross.
This collaboration is the first of its kind for the Red Cross and will provide innovative support to its
partner organizations. The WorleyParsons Foundation supported two engineers to work on a waste
management project in northern Philippines. Collecting and managing waste are very difficult due to the
remote location and a lack of infrastructure.
The engineers were supported by a number of remote volunteers that meant that WorleyParsons
resources could be utilized for the greater good of disadvantaged communities.
"The WorleyParsons collaboration has been great for Australian Red Cross. The expertise and extra
support WorleyParsons has provided has really helped the project progress and they've helped our
partners in the Philippines find solutions to this difficult problem." Catherine Harris, International
Volunteer Partner, Australian Red Cross.
Advisian Volunteers and Technology Helping Refugees in Kenya, Canada
Seven Advisian employees, led by Principal Geophysicist, Paul Bauman, volunteered their time to find
safe groundwater for approximately 185,000 refugees living in the United Nations High Commissioner
for Refugees (UNHCR) Kakuma Camp near the borders of Uganda, South Sudan, and Ethiopia.
Using electrical resistivity tomography and seismic refraction surveys, the team located new and safer
sources of drinkable groundwater to supply the local community, which are currently being used by the
UNHCR to guide their groundwater drilling program. Paul Bauman was awarded with a prestigious
Community Service Award by the Association of Professional Engineering and Geoscientists of Alberta.
"The water supply situation is very difficult at the Kakuma Refugee Camp, with most areas receiving 12
to 17 liters of water per person per day and water quality in many areas of the Camp is poor due to
elevated fluoride and salt concentrations.” Paul Bauman, Advisian Geophysics Technical Director,
Canada.
The WorleyParsons Academy
The Academy was launched in 2015 to provide learning solutions that develop and enhance our people’s
core workplace skills and capabilities in the areas of project delivery, business development and
leadership.
The Academy provides a blended approach to learning and development through the use of both
physical campuses and online presence. The first campus opened in Houston, USA. The facilities
feature state-of-the art audio/video functionality, with the ability to ‘broadcast’ classes to locations
around the globe.
The Academy online portal was launched in 2016 and is the one-stop-shop for WorleyParsons
development programs. The portal allows access to all course materials, including scheduled courses,
on-demand e-learning solutions and recordings by technical experts.
"Developing talent is a core area of focus for our office and we look forward to further training opportunities for
our staff and our customers." Matthew Bishop, Managing Director, Oman.
Global Diversity Campaign for International Women’s Day 2016
A competition was held for International Women’s Day inviting our people to submit a photo of their
pledge for gender equality. The competition attracted a large response of inspiring photos and powerful
pledges from 40 locations.
Over 890 people in our organization shared their belief in gender parity and made a strong pledge
towards achieving this. CEO, Andrew Wood, started the ball rolling by pledging to encourage equal
opportunity and remove bias from our workplace.
“Parity is not to compete or rebel against the other gender. It is to attain sameness and to achieve consistent
treatment irrespective of gender. Parity can only be achieved through cooperation from both genders. We all have a
part to play in sustaining the drive towards our pledge for parity.” The Pledge for Parity from the people of the
Lagos office, Nigeria.
16 WorleyParsons Annual Report 2016
This collaboration is the first of its kind
for the Red Cross.
Advisian geophysicist performing an
electrical resistivity tomography survey
to find new groundwater sources.
Engineering and project management
courses delivered remotely to Oman.
Parading the street of Lagos with their
contribution to the Pledge for Parity.
OPERATING AND FINANCIAL REVIEW
1. OPERATIONS
1.1 OVERVIEW
WorleyParsons is a professional services provider to the resources,
energy and industrial sectors. During the financial year ended 30
June 2016 (FY2016), we reported along four business lines of
Services, Major Projects, Improve and Advisian and three customer
sectors, each of which is 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 – projects related to water, the environment,
transport, ports and site remediation and decommissioning; and
all forms of power generation, transmission and distribution.
Our customers include multi-national oil and gas, resources and
chemicals companies as well as more regionally and locally focused
companies, national oil companies and government owned utilities
operating in the customer sectors described above. We offer a range
of services from small studies to the delivery of mega projects.
The diversity of our business in terms of geography, industry and
service offering is a fundamental strength. We operate in 42
countries, with no country individually representing more than
25% of aggregated revenue.
1.2 BUSINESS MODEL
Our business is based on our people providing key services to our
customers from within our business lines. We strive to empower
our people to support our customers to be successful. We support
our people with our business procedures and systems and generate
earnings by charging their time spent performing professional
services, to our customers.
Aggregated revenue and profit: Our sources of revenue and profit
are diversified and 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 or profit.
Aggregated revenue excludes revenue that has nil margin (this
typically relates to procurement revenue where WorleyParsons
undertakes procurement on our customers’ behalf with no exposure
to financing costs or warranty obligations). We believe the
disclosure of revenue attributable to associates provides additional
information in relation to the financial position of the Group and
include this revenue within aggregated revenue.
Costs: Our two largest costs are: staff costs; and administration
costs, which include office lease costs. We also have a
significant amount of pass through costs reimbursed by our
customers.
Assets and liabilities: The significant items on our balance sheet
are mainly project related, such as trade receivables, unbilled
contract revenue, provisions and borrowings. We also hold a
number of intangible assets generated through previous
acquisitions. Our business is not capital intensive. Our customers
pay us at longer intervals than our payments of expenses (e.g. staff
salaries). This time differential, along with the time from incurring
the costs, to invoicing the customer, makes up the majority of our
working capital requirements.
1.3 REVIEW OF OPERATIONS
The statutory result for FY2016 was a profit of $23.5 million,
compared with a $54.9 million loss in FY2015 that included the
recognition of a non-cash impairment of goodwill of $198.6 million
(approximately 10% of total goodwill). Underlying net profit after
tax (NPAT)1 was $153.1 million for FY2016, down 37.0% on the
previous corresponding period.
Aggregated revenue declined by 18.5%, against a backdrop of
ongoing declines in market activity. Sustained low commodity
prices and the fall in oil prices have resulted in our customers
continuing to reduce capital and operating expenditure.
Aggregated revenue declined across all of our business lines and
geographies. Our Infrastructure sector performed well with
aggregated revenue essentially flat year on year.
We have been taking action since 2013 to reshape the business to
align it with market activity. During FY2016, the low oil price and
generally subdued commodity prices across the energy and
resources sectors resulted in a further contraction of our customers’
capital and operating budgets, project cancellations and deferrals.
In that environment, during the financial year we announced a
program to reduce our overhead costs by a further $300 million and
to strengthen the balance sheet by $300 million. After having taken
action to deliver $120 million of annualized savings by February
2016, we commenced the Realize our future transformation
program to deliver on our objectives to improve our financial
performance. Through this program we achieved a further $80
million of annualized savings taking the total by the end of FY2016
to $200 million of annualized savings.
The actions taken in FY2016 resulted in the recognition of a series of
charges related to redundancy, onerous leases, onerous contracts
and other restructuring costs in the statutory result.
We now employ 24,500 people and still maintain a presence across
42 countries, compared with 31,400 people across 148 offices at 30
June 2015.
We have secured 85 significant awards this year compared with 105
in FY2015. Backlog at 30 June 2016 is $4.2 billion including $300
million of soft backlog with $2.7 billion relating to FY2017.
Our financial position remains sound with the Company’s gearing
ratio at 30 June 2016 of 29.2%, in the middle of the target range of
25% to 35%.
The FY2015 segment result and segment margins shown in sections
1.3.1 and 1.3.2 of this review have been restated to reflect the
organization of the Group into four business lines, a change to the
allocation of information technology charges and treatment of
restructuring expenses and associated changed reporting effective 1
July 2015.
The reconciliation of the underlying earnings before interest and tax
(EBIT) and underlying NPAT results to the EBIT and NPAT
attributable to members of WorleyParsons Limited is shown in the
following table.
1 The directors consider underlying profit information is important to
understand the sustainable performance of the Company by excluding
selected significant items.
WorleyParsons Annual Report 2016 17
OPERATING AND FINANCIAL REVIEW CONTINUED
EBIT
Add: impairment of goodwill
Add: Arkutun-Dagi project settlement costs
Add: staff restructuring costs
Add: onerous lease contracts
Add: onerous engineering software licenses
Add: other restructuring costs
Add: write-down of investments in equity accounted associates
Less: net gain on revaluation of investments previously accounted for as joint operations
Less: certain functional currency related foreign exchange gains
Underlying EBIT
NPAT attributable to members of WorleyParsons Limited
Add: impairment of goodwill
Add: Arkutun-Dagi project settlement costs, post tax
Add: tax arising on reorganization of business in China
Add: staff restructuring costs, post tax
Add: onerous lease costs, post tax
Add: onerous engineering software licenses, post tax
Add: other restructuring costs, post tax
Add: write-down of investments in equity accounted associates
Less: net gain on revaluation of investments previously accounted for as joint operations
Less: certain functional currency related foreign exchange gains, post tax
Underlying NPAT
FY2016
$’M
128.9
-
-
76.8
86.4
14.3
4.6
12.1
(4.5)
(15.9)
302.7
23.5
-
-
-
56.3
63.4
10.5
3.4
12.1
(4.5)
(11.6)
153.1
FY2015
$’M
87.1
198.6
70.0
38.3
20.2
-
3.8
-
-
-
418.0
(54.9)
198.6
49.0
5.9
27.7
14.1
-
2.7
-
-
-
243.1
THERE ARE THREE MEASURES THAT ARE KEY TO UNDERSTANDING OUR RESULTS:
1. AGGREGATED REVENUE
2. EBIT (EARNINGS BEFORE INTEREST AND TAX)
3. NPAT (NET PROFIT AFTER TAX) ATTRIBUTABLE TO MEMBERS OF WORLEYPARSONS LIMITED
FY2016
$’M
FY2015
$’M Comments
Movement
1. Aggregated
revenue
5,892.9
7,227.5 We define aggregated revenue as:
• our revenue and income calculated in
accordance with relevant accounting
standards;
• plus our share of revenue earned by
our associates; and
• less procurement at nil margin, net
gain on revaluation of investments
previously reported as joint
operations and interest income.
EBIT means earnings before interest and
tax.
Our aggregated revenue decreased by 18.5% in FY2016 when
compared with that for FY2015, due to several large projects
progressing to completion, while potential new project work was
cancelled or deferred.
Our EBIT increased by 48.0% in FY2016 when compared with that
for FY2015, due primarily to the benefit of no impairment charge
recurring, but offset by higher restructuring charges in FY2016.
Our NPAT increased to $23.5 million in FY2016, compared with a
loss of $54.9 million for FY2015, due primarily to the benefit of no
impairment charge recurring but offset by higher restructuring
charges in FY2016.
2. EBIT
128.9
87.1
3. NPAT
23.5
(54.9) NPAT means net profit after tax.
18 WorleyParsons Annual Report 2016
1.3.1 BUSINESS LINE PERFORMANCE
SERVICES
The Services business line reported aggregated revenue of $3,437 million and segment result of $252 million (FY2015 restated: aggregated
revenue of $4,336 million and segment result of $342 million). The segment margin declined to 7.3% from 7.9%.
Aggregated revenue was lower across all regions due to projects completing or moving into construction, and project deferrals and
cancellations. The Middle East operations continued to perform well growing its contribution to the business. Segment margins decreased as
the overhead reduction did not keep pace with declining revenues.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2016
FY2015 (restated)
$’M
3,436.5
4,336.2
Variance %
(21)
%
58
60
$’M
252.0
341.9
Variance %
(26)
Segment
margin
%
7.3
7.9
MAJOR PROJECTS
The Major Projects business line reported aggregated revenue of $1,281 million and segment result of $109 million (FY2015 restated:
aggregated revenue of $1,610 million and segment result of $128 million). The segment margin improved to 8.5% from 7.9%.
Aggregated revenue declined as a result of project completions and other projects moving into construction during financial year 2016.
Segment margins increased through the improved performance of our portfolio of major projects offset the decline and the improved
margins from WorleyParsonsCord.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2016
FY2015 (restated)
$’M
1,281.4
1,610.4
Variance %
(20)
%
22
22
$’M
109.1
128.0
Variance %
(15)
Segment
margin
%
8.5
7.9
IMPROVE
The Improve business line reported aggregated revenue of $519 million and segment result of $23 million (FY2015 restated: aggregated
revenue of $580 million and segment result of $27 million). The segment margin declined to 4.5% from 4.7%.
Aggregated revenue declined primarily due to reductions in sustaining capital expenditure by oil sands customers. Segment margins
declined modestly as overhead reductions partially offset the decline in project activity.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2016
FY2015 (restated)
$’M
519.3
579.6
Variance %
(10)
%
9
8
$’M
23.4
27.3
Variance %
(14)
Segment
margin
%
4.5
4.7
ADVISIAN
Advisian became a standalone business line in FY2016. It incorporates the heritage advisory businesses of Evans & Peck, MTG and Digital
Enterprise, previously reported under the Development group in FY2015 and the INTECSEA business and consulting personnel and their
associated projects transferred from the Services business line. Advisian reported aggregated revenue of $656 million and segment result of
$44 million (FY2015 restated: aggregated revenue of $701 million and segment result of $53 million). The segment margin declined to 6.8%
from 7.5%.
Aggregated revenue and margin decreases were primarily associated with the decline in the Hydrocarbons consulting business in the
Americas and investment associated with development of business in the new energy sector and Digital Enterprise. The Company will
continue to invest in this business to build a globally significant consulting and advisory business.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2016
FY2015 (restated)
$’M
655.7
701.3
Variance %
(7)
%
11
10
$’M
44.3
52.7
Variance %
(16)
Segment
margin
%
6.8
7.5
WorleyParsons Annual Report 2016 19
OPERATING AND FINANCIAL REVIEW CONTINUED
1.3.2 SECTOR PERFORMANCE
HYDROCARBONS
The Hydrocarbons sector reported aggregated revenue of $4,267 million, and segment result of $329 million with a margin of 7.7% (FY2015
restated: aggregated revenue of $5,332 million, segment result of $484 million and segment margin of 9.1%). Hydrocarbons’ contribution to
the Group’s aggregated revenue was 72%, slightly down on last year.
Aggregated revenue declined due to projects reaching completion combined with customers’ reduced capital and operating expenditure.
The refining sub sector revenues increased 2% year on year.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2016
FY2015 (restated)
$’M
4,266.9
5,332.1
Variance %
(20)
%
72
74
$’M
329.0
484.3
Variance %
(32)
Segment
margin
%
7.7
9.1
MINERALS, METALS & CHEMICALS
The Minerals, Metals & Chemicals sector reported aggregated revenue of $643 million and segment result of $40 million with a margin of
6.2% (FY2015 restated: aggregated revenue of $904 million, segment result of $47 million and segment margin of 5.1%). Minerals, Metals &
Chemicals contributed 11% to the Group’s aggregated revenue. Chemicals now represents more than 50% of this sector's contribution.
The Minerals & Metals contribution declined as project activity continued to decrease in line with sustained lower commodity prices.
Chemicals also declined as the increased activity in the United States only partially offset lower in activity in China.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2016
FY2015 (restated)
$’M
642.5
903.7
Variance %
(29)
%
11
12
$’M
39.9
46.5
Variance %
(14)
Segment
margin
%
6.2
5.1
INFRASTRUCTURE
The Infrastructure sector reported aggregated revenue of $984 million and segment result of $60 million with a margin of 6.1% (FY2015
restated: aggregated revenue of $992 million, segment result of $19 million and segment margin of 1.9%). Infrastructure’s contribution to the
Group’s aggregated revenue was 17%.
The Infrastructure sector aggregated revenue was essentially flat year on year as growth in the Middle East offset declines in Australia.
Margins improved primarily due to the resurgence in the power business across renewables, fossil, and nuclear.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2016
FY2015 (restated)
$’M
983.5
991.7
Variance %
(1)
%
17
14
$’M
59.9
19.1
Variance %
214
Segment
margin
%
6.1
1.9
1.4 SIGNIFICANT CHANGES IN OPERATIONS
From 1 July 2015, we established Advisian, the Group's advisory and consulting arm as a standalone business line after being previously
reported under the Development group.
20 WorleyParsons Annual Report 2016
2. FINANCIAL POSITION AND CASH FLOW
2.1 MATTERS RELEVANT TO UNDERSTANDING WORLEYPARSONS’ FINANCIAL POSITION
OUR FINANCIAL CAPACITY REMAINS STRONG BASED ON CASH, GEARING AND DEBT
POSITIONS.
FY2016
$’M
FY2015
$’M Comments
1. Operating
cash flow
192.0
251.3 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.
Movement
Our operating cash flow for FY2016
represents a high cash conversion rate of
125% of underlying NPAT, an
improvement over last year's 103%.
2. Gearing ratio
29.2%
28.0% 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. Refer to Note 12 to the
Financial Statements for the calculation of the
gearing ratio.
Our gearing ratio increased by 1.2
percentage points in FY2016 when
compared with that for FY2015.
This ratio is within our gearing target of
25% to 35%.
3. Debt facility
utilization
57%
59% Our debt facility utilization is the percentage of
our debt facilities that we were using at the end
of the financial year.
4. Loan,
2,182
2,087 Our loan, overdraft lease facilities are the amount
overdraft and
lease
facilities
of our debt facilities at the end of
the financial year.
Our debt facility utilization decreased by 2
percentage points in FY2016 when
compared with that for FY2015, due to
improvements in cash collection.
The amount of our loan, overdraft and lease
facilities increased during FY2016, due to
foreign exchange translation.
2.2 DIVIDENDS
Our directors resolved not to pay a final dividend. The total
dividend with respect to FY2016 is nil cents per share.
2.3 SIGNIFICANT CHANGES IN WORLEYPARSONS’
FINANCIAL POSITION
An assessment of asset carrying values was conducted as part of the
normal process of finalizing the accounts.
As a result of this assessment, an impairment of investments in
associates of $12.1 million was recognized in the FY2016 accounts.
During FY2016, we transferred our South African public
infrastructure business and our interest in Cegertec, in Quebec, to
assets and liabilities held for sale. These items are not material and
so are not reclassified in the Statement of Financial Position.
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:
• operating leases
• operating expenditure commitments.
These future commitments represent approximately 8.9% of
our expenses.
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 and also lease
various items of computer hardware 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.
3. BUSINESS STRATEGY, OUTLOOK AND RISKS
3.1 BUSINESS STRATEGY
We develop our business strategy using an iterative process at each
of the key levels of our business such that we have:
• a Group strategy
• sector strategies
• business plans to guide the implementation of our sector
strategies at a business line level.
Our Group strategy describes markets in which we intend to invest
to create sustainable competitive advantage (leading to greater
market share and/or higher margins) and deliver on our corporate
vision. Our sub sector or regional level strategies are a detailed view
of these markets. At the business line level, we translate our sub
sector strategies into business plans to deliver on the intent of the
sector strategies as applicable to each business line. Our business
plans map specific current and near term opportunities or portfolios
of opportunities to the strategic themes, to provide clear and
tangible targets for the individual business leaders to pursue, win
and execute. Overall, our key markets continue to present
challenges, including increasing competition and customers
delaying committing to new developments. We believe that we took
appropriate steps during FY2016 to identify opportunities to realign
and position the Group to address these challenging market
conditions.
WorleyParsons Annual Report 2016 21
OPERATING AND FINANCIAL REVIEW CONTINUED
Strategically, our immediate focus is on five strategic themes
which are to:
and safety incidents and not meeting the market’s expectations of
our financial performance.
• build a world class consulting and advisory business and
dominate the early project phases;
• be the global project management consultant or “PMC”
provider of choice;
• build a leading major Improve business;
• be the smartest most agile local service provider;
• use the Global Delivery Centers to apply digital technology to
revolutionize the delivery of future services.
Further details on the five strategic themes can be found on pages
10 and 11 of this Annual Report.
In the current market conditions, our priorities for the next 12
months are to:
• protect revenue by winning the right work;
• achieve the overhead reduction target;
• strengthen the balance sheet.
3.2 OUTLOOK
The Company expects trading conditions to remain challenging,
leading to continued pressure on aggregated revenue. The
Company is focused on protecting revenue and gross margin,
achieving further overhead reductions and strengthening the
balance sheet. The benefit of the cost reductions in the first half are
expected to be reflected in second half earnings.
3.3 RISKS
Achievement of our medium and long term prospects could be
impacted by a number of risks. 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 those prospects. The risks are not set out in
any particular order and do not comprise every risk we encounter
in conducting our business or every risk that may affect the
achievement of those prospects. Rather, they are the most
significant risks that we believe we should be monitoring and
seeking to mitigate or otherwise manage at this point in time.
The risk management measures set out below are a sample of the
steps we take to seek to mitigate the various risks. However, the risk
exists that we may fail to implement or fully implement those steps
or that they may be entirely or partly ineffective.
3.3.1 HEALTH AND SAFETY RISK
Our business sometimes requires our people and those people we
manage 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 and
those people we manage.
To seek to mitigate this risk, we have a OneWay™ framework
which includes the expectations that every one of our people and
those people we manage must meet with respect to health and
safety. OneWay™ expectations are supported by our business
processes and we use them in assessing our performance.
3.3.2 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.
There is a risk that our reputation could be damaged including
through unethical business practices, poor project outcomes, health
22 WorleyParsons Annual Report 2016
We use a range of strategies and actions to seek to mitigate this risk
including requiring all of our people to undertake various training
including on the Code of Conduct. In addition, other mitigating
steps, particularly those referred to in health and safety risk, project
delivery risk, and internal reporting risk are relevant to seek to
preserve our reputation.
3.3.3 OPERATING RISKS
Contract management risk: Effective contract management seeks to
ensure, among other things, appropriate project and customer
selection and the effective management of customer expectations.
There is a risk that we will fail to manage our contracts
appropriately and, as a result, find ourselves in disputes with our
customers regarding matters including payment of our fees and
liability for costs and delays. Those disputes may be costly, result in
liability and absorb significant amounts of management time.
We seek to mitigate this risk by implementing project delivery
processes and procedures, providing training and development to
our project staff and appropriate involvement of our legal staff in
the contract process.
Demand risk: The markets for our services are exposed to volatile
and cyclical commodity prices. Those prices impact demand for our
customers’ goods and services and, in particular, our customers’
preparedness to fund capital and operating expenditure. This may
markedly impact demand for our services such that, over relatively
short periods, we experience rapid and/or sustained changes in that
demand.
Responding to such changes may lead to reduced revenue and
increased costs. Our overheads may also need to change such that
they are efficient relative to our revenue and business size.
We have a number of strategies and processes in place to seek to
mitigate this risk including maintaining our diversified business
portfolio, retaining a proportion of our people on short notice
contracts, seeking contractual protection for project demobilization,
sharing work across locations and undertaking ongoing overhead
efficiency reviews and rationalizing overhead where necessary.
Project delivery risk: Our ability to achieve superior shareholder
returns is substantially influenced by our ability to deliver
significant and/or strategically important projects to our customers’
satisfaction.
Project delivery risk is the risk that we fail to do so. The
consequences may include fewer awards of significant projects.
To seek to mitigate this risk, we use regularly-reviewed project
delivery systems and processes and project peer reviews. We have
established the WorleyParsons Academy to further enhance the
capability of our people in project management and project
delivery.
3.3.4 FINANCIAL RISKS
Liquidity risk: Our ability to maintain an appropriate level of
liquidity, particularly through timely conversion of unbilled
contract revenue to cash, impacts returns to shareholders.
There is a risk that given current market conditions, our customers
delay paying us or are unwilling or unable to do so. We seek to
mitigate this risk by focusing on effective working capital
management and closely monitoring both cash collection targets
and measures of debtor conversion.
Internal reporting risk: We operate a complex business which
provides a wide range of services in a dynamic environment, while
straddling multiple jurisdictions and regulatory frameworks.
There is a risk that our internal reporting systems may not
accurately reflect our business performance or prospects and may
therefore result in us not meeting forecasts provided to the market,
thereby adversely affecting investor confidence and the Company’s
share price.
We seek to mitigate this risk by reviewing and enhancing those
systems and seeking to adapt them to our dynamic business
environment.
3.3.5 STRATEGIC RISKS
Strategy risk: We operate in a highly competitive and dynamic
environment. As a result, our ability to develop and implement
effective strategies will be a significant ongoing contributor to our
success.
Strategy risk is the risk of failing to develop and implement effective
strategies. Such failure may, over time, lead to a loss of market
share, and negatively impact our financial performance.
To seek to mitigate this risk, we have an annual strategy
development process utilizing both internally and externally
supplied market data and business knowledge.
The strategy involves five strategic themes executed as projects and
described in section 3.1 of this Operating and Financial Review.
3.4 UNREASONABLE PREJUDICE
We have omitted from the review 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.
3.5 FORWARD LOOKING STATEMENTS
This review contains forward looking statements, including
statements of current intention, opinion and expectation regarding
the Company’s present and future operations, possible future
events and future financial prospects. While these statements reflect
expectations at the date of this review, they are, by their nature, not
certain and are susceptible to change. WorleyParsons makes no
representation, assurance or guarantee as to the accuracy of or
likelihood of fulfilling any such forward looking statements
(whether express or implied), and except as required by applicable
law or the Australian Securities Exchange Listing Rules, disclaims
any obligation or undertaking to publicly update such forward
looking statements.
WorleyParsons Annual Report 2016 23
FINANCIAL REPORT
For the financial year ended 30 June 2016
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
Glossary
Corporate Information
NOTES TO THE FINANCIAL STATEMENTS
The notes include information which is required to understand the financial statements and is material and relevant to the operations, financial position and
performance of the Group. Information is considered material and relevant if, for example:
• the amount in question is significant because of its size or nature; or
• it is important for understanding the results of the Group.
The notes are organized into the following sections:
1. Corporate Information
2. Summary of Significant Accounting Policies
57
57
Structure
Define the different aspects of the Group structure.
Key Numbers
Provide a breakdown of individual line items in the financial statements that
the directors consider the most relevant and summarizes the accounting policies
relevant to understanding these line items.
3. Segment Information
59
20. Investments in Controlled Entities
21. Equity Accounted Associates
22. Interests in Joint Operations
23. Assets and Liabilities Held for Sale
Unrecognized Items
25
51
52
53
54
56
57
96
97
103
104
105
84
85
87
88
88
89
89
Provide information about items that are not recognized in the financial
statements but could potentially have a significant impact on the Group’s
financial position and performance.
24. Commitments for Expenditure
25. Contingent Liabilities
26. Subsequent Events
Other
Notes required by Australian Accounting Standards and/or other regulatory
pronouncements.
27. Procurement
89
28. Property, Plant and Equipment
29. Deferred Tax
30. Related Parties
31. Remuneration of Auditors
32. Key Management Personnel
33. Parent Entity Disclosures
90
91
92
93
93
94
4. Revenue and Other Income
5. Expenses and Losses/(Gains)
6. Income Tax
7. Cash and Cash Equivalents
8. Trade and Other Receivables
9. Trade and Other Payables
10. Intangible Assets
11. Provisions
62
63
64
66
67
67
68
70
Capital
Provide information about the capital management practices of the Group and
shareholder returns for the year.
12. Capital Management
72
13. Interest Bearing Loans and Borrowings
14. Issued Capital
15. Reserves
16. Earnings/(Loss) Per Share
17. Dividends
73
74
76
76
77
Risk
Disclose the Group’s exposure to various financial risks, the potential impact
on the Group’s financial position and performance and the Group’s
management of these risks.
18. Financial Risk Management
77
19. Fair Values
83
24 WorleyParsons Annual Report 2016
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 2016.
PRINCIPAL ACTIVITIES
During the financial year, the principal activities of the Group consisted
of providing engineering design and project delivery services, including
providing maintenance, reliability support services and advisory
services to the following sectors:
• Hydrocarbons;
• Minerals, Metals & Chemicals; and
• Infrastructure.
DIRECTORS
The following persons were directors of the Company during the
financial year. All were directors for the full financial year. All remain
directors at the date of this report.
John Grill (Chairman)
Ron McNeilly (Deputy Chairman and Lead Independent Director)
Larry Benke
Jagjeet Bindra
Erich Fraunschiel
John M Green
Christopher Haynes
Catherine Livingstone
Wang Xiao Bin
Andrew Wood (Chief Executive Officer)
DIRECTORS’ MEETINGS
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:
DIRECTORS
John Grill
Ron McNeilly
Larry Benke
Jagjeet Bindra
Erich Fraunschiel
John M Green
Christopher Haynes
Catherine Livingstone
Wang Xiao Bin
Andrew Wood
NUMBER OF
SHARES
NUMBER OF
PERFORMANCE
RIGHTS
25,372,173
418,984
1,133,383
35,650
198,755
891,869
11,945
13,000
11,000
849,065
–
–
–
–
–
–
–
–
–
467,476
Further details in relation to the rights issued by the Company are set
out in the Remuneration Report and notes 14(C) and 32 to the financial
statements.
The number of Board and standing Board Committee meetings held during the financial year and the number of meetings attended by each of the
Company’s directors is set out below:
DIRECTORS
John Grill
Ron McNeilly
Larry Benke
Jagjeet Bindra
Erich Fraunschiel
John M Green
Christopher Haynes
Catherine Livingstone
Wang Xiao Bin
Andrew Wood
BOARD
AUDIT AND RISK
COMMITTEE
NOMINATIONS
COMMITTEE
REMUNERATION
COMMITTEE
HEALTH, SAFETY AND
ENVIRONMENT COMMITTEE
MEETINGS
HELD WHILE
A DIRECTOR
NUMBER
ATTENDED
MEETINGS
HELD WHILE
A MEMBER
NUMBER
ATTENDED
MEETINGS
HELD WHILE
A MEMBER
NUMBER
ATTENDED
MEETINGS
HELD WHILE
A MEMBER
NUMBER
ATTENDED
MEETINGS
HELD WHILE
A MEMBER
NUMBER
ATTENDED
8
8
8
8
8
8
8
8
8
8
8
8
7
8
8
8
8
8
7
8
6
6
6
6
6
6
6
6
4
5
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
5
5
9
9
8
9
9
9
8
9
6
6
6
4
6
6
6
6
4
6
In addition to those meetings, four special purpose Board Committee meetings were held during the financial year. The Board also met informally
during the financial year 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.
The independent non-executive directors met separately on six occasions, during the financial year.
WorleyParsons Annual Report 2016 25
DIRECTORS’ REPORT CONTINUED
DIVIDENDS – WORLEYPARSONS LIMITED
Details of dividends paid in respect of the current financial year and
previous financial year are as follows:
Final ordinary dividend for 2015 of 22.0 cents per ordinary
share paid on 30 September 2015 (unfranked)
Interim ordinary dividend for 2015 of 34.0 cents per
ordinary share paid on 2 April 2015 (2.7 cents franked)
Final ordinary dividend for 2014 of 51.0 cents per ordinary
share paid on 30 September 2014 (10.5 cents franked)
Total dividends paid
2016
$’M
54.4
–
–
54.4
2015
$’M
–
84.1
125.7
209.8
Since the end of the financial year, the directors have resolved not to
pay a dividend (2015: 22.0 cents per share, unfranked).
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:
CONSOLIDATED
Revenue and other income
Depreciation
Amortization
Write down of investment in equity accounted associate
Impairment of goodwill
Earnings before interest and tax (EBIT)
Net interest expense
Profit before income tax expense
Income tax expense
Statutory profit/(loss) after income tax expense
Non-controlling interests
Statutory profit/(loss) after income tax expense
attributable to members of WorleyParsons Limited:
Add: Staff restructuring costs
Add: Onerous lease contracts
Add: Other restructuring costs
Add: Onerous engineering software licenses
Add: Write-down of investment in equity accounted
associates
Add: Impairment of goodwill
Add: Arkutun-Dagi project settlement costs
Add: Tax arising on reorganization of business in China
Less: Certain functional currency related foreign
exchange gains
Less: Net gain on revaluation of investments previously
accounted for as joint operations
Less: Tax on Arkutun-Dagi settlement costs
Less: Net tax expense on staff and other restructuring
costs, onerous lease contracts, onerous engineering
software licences and certain functional currency related
foreign exchange gains
2016
$’M
7,790.1
(25.1)
(65.0)
(12.1)
–
128.9
(60.0)
68.9
(20.3)
48.6
25.1
23.5
76.8
86.4
4.6
14.3
12.1
–
–
–
(15.9)
(4.5)
–
(44.2)
Underlying profit after income tax expense attributable
to members of WorleyParsons Limited1
153.1
2015
$’M
8,757.5
(24.6)
(85.4)
–
(198.6)
87.1
(55.4)
31.7
(70.7)
(39.0)
15.9
(54.9)
38.3
20.2
3.8
–
–
198.6
70.0
5.9
–
–
(21.0)
(17.8)
243.1
1 The directors consider underlying profit information is important to understand
the sustainable performance of the Company by excluding selected significant
items. The underlying profit for FY2015 has been restated to include staff
restructuring costs, onerous lease contracts and other restructuring costs for
comparability with the current year's presentation.
26 WorleyParsons Annual Report 2016
Revenue and other income
Less procurement revenue at nil margin (including share of
revenue from associates)
Add: share of revenue from associates
Less: net gain on revaluation of investments previously
accounted for as joint operations
Less: interest income
CONSOLIDATED
2016
$’M
7,790.1
(2,226.4)
342.5
(4.5)
(8.8)
2015
$’M
8,757.5
(2,038.0)
514.6
–
(6.6)
Aggregated revenue2
5,892.9
7,227.5
AGGREGATED REVENUE
EBIT
EBIT MARGIN
Services
Major Projects
Improve
Advisian
Global support costs3
Interest and tax for
associates
Amortization of
acquired intangible
assets
Underlying EBIT1
2016
%
7.3
8.5
4.5
6.8
7.3
2015
%
7.9
7.9
4.7
7.5
7.6
2016
$’M
2015
$’M
3,436.5
1,281.4
519.3
655.7
4,336.2
1,610.4
579.6
701.3
5,892.9
7,227.5
2016
$’M
252.0
109.1
23.4
44.3
428.8
(98.6)
2015
$’M
341.9
128.0
27.3
52.7
549.9
(103.4)
(8.3)
(6.7)
(19.2)
(21.8)
302.7
418.0
5.1
5.8
Aggregated revenue was $5,892.9 million, a decrease of 18.5% on the
prior financial year. Underlying EBIT of $302.7 million, was down 27.6%
from the prior financial year result of $418.0 million.
The underlying EBIT margin on aggregated revenue for the Group,
decreased to 5.1% compared with 5.8% in 2015. After tax, the members
of WorleyParsons Limited earned an underlying net margin, on
aggregated revenue of 2.6%, compared to the 2015 net margin of 3.4%.
The underlying effective tax rate 26.6% compared with 28.6% in 2015.
The Group retains a strong cash position of $373.1 million
(2015: $381.9 million) with gearing (net debt/net debt plus total equity)
at financial year end of 29.2% (2015: 28.0%).
Operating cash inflow for the period was $192.0 million, compared to
$251.3 million in 2015. Cash outflow from investing activities was
$79.9 million (2015: $188.9 million).
2 Aggregated revenue is defined as statutory revenue and other income plus share
of revenue from associates less procurement revenue at nil margin, interest
income and net gain on revaluation of investments previously accounted for as
joint operations. 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.
3 Excluding global support related restructuring costs (refer note 3 to the financial
statements).
EARNINGS/(LOSS) PER SHARE
NON-AUDIT SERVICES
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
2016
2015
CENTS
CENTS
9.5
9.5
(22.2)
(22.2)
During the financial year, Ernst & Young, the Group’s auditor,
performed certain other services in addition to its statutory audit duties.
Total fees for non-audit services provided by the auditor amounted to
$931,622.
Underlying basic earnings per share was 61.8 cents per share, a decrease
of 37.2% from the previous financial year result of 98.4 cents per share.
Underlying basic earnings per share is determined by dividing the
underlying profit attributable to members of WorleyParsons Limited (as
set out on page 26) by the weighted average number of ordinary shares
outstanding as at 30 June 2016 (as set out in note 16 to the financial
statements).
The Board has adopted a policy governing the provision of non-audit
services by the 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:
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
• all non-audit services have been reviewed by the Audit and Risk
Effective 1 July 2015, the Group established its advisory and consulting
business, Advisian, as an additional business line. As a result, the
business operations are managed and reported by the following
business lines: Services, Major Projects, Improve and Advisian. Changes
in business lines reporting also included, among other changes, the
Group’s Canadian construction and fabrication business Cord now
being reported as a part of Major Projects. In addition, during FY2016, a
fully-costed information technology model was introduced which
resulted in transition of selected costs from global support costs to each
of the operating business lines. This represents a change to the
operating segments reported in the previous corresponding period. The
previously reported segment results for the year ended 30 June 2015
have been restated to be comparable with the revised segmentation
approach as required by AASB 8 Operating Segments.
MATTERS SUBSEQUENT TO THE END OF THE
FINANCIAL YEAR
Since the end of the financial year, the directors have resolved not to
pay a final dividend (2015: 22.0 cents per share, unfranked).
No other matter or circumstance has arisen since 30 June 2016 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
The likely developments in the Group’s operations in future financial
years and the expected results of those operations are set out in section 3
of the Operating and Financial Review on page 22.
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 and to the work it carries out. 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.
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.
A copy of the auditor’s independence declaration as required under
section 307C of the Act is as follows:
CORPORATE GOVERNANCE STATEMENT
The Company’s Corporate Governance Statement for the year ended
30 June 2016 may be accessed from the Company’s website at
http://www.worleyparsons.com/InvestorRelations/Pages/CorporateGov
ernance.aspx.
WorleyParsons Annual Report 2016 27
DIRECTORS’ REPORT CONTINUED
INFORMATION ON DIRECTORS AND COMPANY
SECRETARY
JOHN GRILL AO 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 (ASX) in 2002 as Worley Group Limited following a
restructuring of that company. In 2004, Worley Group Limited acquired
Parsons E&C Corporation, a United States-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 the Group’s 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 was
appointed an Officer of the Order of Australia in 2014 for distinguished
service to engineering and to business, to the minerals, energy and
power supply industries and as a supporter of advanced education and
training. John is Chairman of Neuroscience Research Australia.
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 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 a former
Deputy Chairman of BlueScope Steel Limited (previously BHP Steel).
He 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
7 April 2015
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 Audit and Risk Committee, Nominations Committee
and Health, Safety and Environment Committee. 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
28 WorleyParsons Annual Report 2016
Director of WorleyParsons Canada until his retirement in 2010. He
successfully led Colt through a period of substantial growth and
expansion which continued with the integration of the company into the
Group’s Canada business. Larry is Chairman of Next Hydrogen, a
manufacturer of advanced electrolyzers for hydrogen production. He 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 Airport. He is also a director of Cervus Equipment
Corporation, a Toronto Stock Exchange listed company in the business
of acquiring and operating agricultural, transportation and construction
equipment dealerships. Larry graduated from the University of Alberta
in 1973 with a Bachelor of Science in Electrical Engineering (Honors).
JAGJEET BINDRA BTECH (CHEME), MS (CHEME), MBA (HONS)
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE JULY 2015
COUNTRY OF RESIDENCE – UNITED STATES
Jagjeet (Jeet) was appointed to the Board on 1 July 2015. He is Chairman
of the Remuneration Committee and a member of the Nominations
Committee and Health, Safety and Environment Committee. Jeet has
over 35 years’ experience in the global resources and energy industry
including 32 years in senior leadership roles within the Chevron Group
of Companies, retiring from Chevron as President of Chevron Global
Manufacturing in 2009. The breadth of his executive experience extends
into oil and gas, chemicals, refinery engineering and operations, design
and construction, project management, engineering technology and
strategic and business planning. He also has extensive public company
board experience and is currently a member of the board of Edison
International/Southern California Edison Company and LyondellBasell
Industries N.V., both publicly listed companies on the New York Stock
Exchange. He was formerly Managing Director and Chief Executive
Officer of Caltex Australia Limited and a director of Broadspectrum
Limited, both publicly listed companies on the ASX at the time. Jeet is a
chemical engineering graduate of the Indian Institute of Technology in
Kanpur, India and holds a Master of Science degree in Chemical
Engineering from the University of Washington and an MBA degree
from Saint Mary’s College of California.
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 BWP Management
Limited, the responsible entity of the BWP Trust, an Australian real
estate investment trust listed on the ASX. 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. Since 2002, he has served as
a non-executive director on the boards of several listed and unlisted
companies.
Australian listed company directorships
LISTED
COMPANY NAME
NATURE OF
DIRECTORSHIP
DATE OF
COMMENCEMENT
DATE OF
CESSATION
BWP Trust
Non-executive
director
Chairman
1 February 2015
n/a
2 December 2015
n/a
JOHN M GREEN BJURIS/LLB, FAICD, SFFIN
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE LISTING IN
NOVEMBER 2002
COUNTRY OF RESIDENCE – AUSTRALIA
John is a member of the Nominations Committee and Remuneration
Committee. He is a company director, a business writer and a novelist.
John is Deputy Chairman of QBE Insurance Group Limited and a non-
executive director of The Centre for Independent Studies. 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
Deputy Chairman
and non-executive
director
1 March 2010
n/a
CHRISTOPHER HAYNES OBE FRENG, BSC (HONS), DPHIL,
CENG, FIMECHE, FIE AUST
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 and Honorary President of the Energy
Industries Council, UK. 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 also a Fellow of the Institution of
Engineers, Australia. Chris 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
Non-executive
director
1 June 2011
n/a
CATHERINE LIVINGSTONE AO BA (HONS), HON DBUS
(MACQUARIE), HON DSC (MURDOCH), HON DBUS (UTS), HON
DSC (UOW), HON DLITT (SYD), 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 Nominations Committee. She is a director of
the Commonwealth Bank of Australia, Saluda Medical Pty Limited and
the George Institute for Global Health. Catherine is also the President of
the Business Council of Australia and the President of the Australian
Museum Trust. She was Chairman of Telstra Corporation Limited from
May 2009 to April 2016 and of CSIRO from 2001 to 2006. Catherine has
also served on the boards of Macquarie Bank Limited, Macquarie Group
Limited, Goodman Fielder Limited and Rural Press Limited. She was
the Managing Director of Cochlear Limited from 1994 to 2000, taking it
through to an initial public offer in 1995. In 2003, Catherine was
awarded the Centenary Medal for service to Australian Society in
Business Leadership and in 2008 she 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.
Australian listed company directorships
LISTED
COMPANY NAME
NATURE OF
DIRECTORSHIP
DATE OF
COMMENCEMENT
DATE OF
CESSATION
Commonwealth
Bank of Australia
Non-executive
director
Telstra Corporation
Limited
Non-executive
director
Macquarie Group
Limited
Macquarie Bank
Limited
Chairman
Non-executive
director
Non-executive
director
1 March 2016
n/a
30 November 2000 27 April 2016
8 May 2009
30 August 2007
27 April 2016
25 July 2013
19 November 2003 25 July 2013
WANG XIAO BIN BCOM, CPA, GDIP APPLIED FINANCE AND
INVESTMENT
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE DECEMBER 2011
COUNTRY OF RESIDENCE – HONG KONG, CHINA
Xiao Bin was appointed to the Board on 1 December 2011 and is a
member of the Audit and Risk Committee and Nominations Committee.
She is based in Hong Kong and 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 the
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 a tenure of over 22 years with the Group, and over 35 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 the Group’s
early expansion into Thailand and 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 a Fellow of the
Institution of Engineers, Australia.
WorleyParsons Annual Report 2016 29
DIRECTORS’ REPORT CONTINUED
PETER JANU BEC, LLB, CA, FGIA
COMPANY SECRETARY AND GENERAL COUNSEL CORPORATE –
APPOINTED OCTOBER 2008
Peter joined WorleyParsons in 2008 in his current role. He is responsible
for corporate governance for the Board, and the senior executive team.
He is also responsible for legal and governance matters relevant to the
listed entity, its capital structure, and its regulatory obligations. Peter’s
specific group accountabilities include continuous disclosure, trade
sanctions and compliance with anti-bribery laws. Peter has a
background in corporate taxation, project finance, legal, governance and
company secretary roles. He has previously worked in the professional
services, investment banking, and construction and mining services
sectors. Peter holds degrees in Law and Economics from The University
of Sydney and is a Chartered Accountant and a Fellow of the
Governance Institute of Australia.
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 ASIC Corporations Instrument
2016/191 (Rounding in Financial /Directors' Reports) 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 Instrument and amounts less than
$50,000 that have been rounded down are represented in this report by
0.0.
30 WorleyParsons Annual Report 2016
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 2016 (FY2016).
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.
LETTER FROM THE CHAIRMAN OF THE REMUNERATION COMMITTEE
Dear Shareholders
As the new Chairman of the Remuneration Committee, I am pleased to present the WorleyParsons Remuneration Report for the financial year
ended 30 June 2016.
I would like to reaffirm that the Remuneration Committee is guided by the Company beliefs which aim to pay our executives competitively and
based upon their contribution to the success of the business. This is explained further on page 34.
To provide shareholders with a clearer picture of our approach to remuneration and an improved reading experience, we have made a number
of changes to our Remuneration Report this year, including the introduction of a new section in the report which contains key shareholder
questions and answers, on pages 32-33.
KEY MANAGEMENT PERSONNEL CHANGES IN FY2016
There were a number of changes to Key Management Personnel (KMP) positions during the year, through new hire, internal promotion and
retirement. These are detailed in section 1 of the report.
REMUNERATION OUTCOMES IN FY2016
Challenging conditions during FY2016 resulted in a decision being made to make no payment of short term incentives through the cash portion
of the Combined Incentive to Executives. A grant of Share Price Performance Rights (SPPRs) was made during the year following the
introduction of changes to the equity portion of the Combined Incentive Plan. The SPPRs provide Executives with a clear goal to increase the
Company’s share price, increase motivation and retention of Executives and ensure we remain competitive in our remuneration practices. The
outcome of the performance hurdles for the Long Term Incentive (LTI) Plan once again resulted in nil vesting as neither of the two equally-
weighted hurdles achieved the minimum performance requirements.
REMUNERATION FOR FY2017
A review of Executive pay was completed, with particular attention given to the at risk component within the pay mix and alignment with our
external peers. We have made no increases in Executives' Fixed Pay for FY2017. The Chief Executive Officer (CEO) has opted to retain his lower
Fixed Pay following his request to reduce this by 10% from 1 July 2015.
For the fifth year, no changes were made to Non-Executive Directors' fees for FY2017. The Chairman has agreed to forgo his fee for FY2017.
The LTI Plan has not achieved the required performance hurdles for the last four years, this demonstrates the alignment of our Executive
remuneration outcomes with shareholder returns. During FY2017, we will review the LTI Plan for FY2018 to ensure that it will motivate our
Executives to deliver value to our shareholders over the long term. For FY2017, the LTI Plan will retain the relative Total Shareholder Return
(TSR) hurdle as 50% of the FY2017 grant with a revision to the comparator group to reflect the Company’s current global competitors (see page
39). Given the importance of delivery of the Company's Realize our future strategy and the role that Executives will play in leading its
implementation, the remaining 50% of the FY2017 grant will be subject to strategic performance hurdles. These performance hurdles will be
subject to the achievement of cost reduction and net debt to EBITDA targets measured at the end of FY2018, both of which are key to the delivery
of the strategy. A further two year restriction period will apply on the shares following the measurement of the targets. Details of performance
against the targets will be disclosed retrospectively due to the commercially sensitive nature of the targets.
Lastly, I would like to highlight the change in composition of the Remuneration Committee from August 2016, so that it comprises myself, John
Grill and Christopher Haynes. My thanks to Ron McNeilly for his contribution as Remuneration Committee member and John Green for his
leadership as Chairman of the Remuneration Committee.
We hope that you will find the new format of the Remuneration Report useful, and welcome the views of shareholders on any of the items
discussed within the report.
Kind regards
Jeet Bindra
Chairman, Remuneration Committee
WorleyParsons Annual Report 2016 31
DIRECTORS’ REPORT CONTINUED
THE REMUNERATION REPORT IS PRESENTED IN FIVE SECTIONS:
SECTION
1. Remuneration in Brief - Key Shareholder Questions and KMP Covered in This Report
2. Remuneration Governance Framework - Guiding Remuneration Principles, Executive Remuneration Structure,
Remuneration Decision Making, Executive Minimum Shareholding Requirement, Clawback (Malus) Provision, Cessation
of Employment and Change of Control
PAGE
32
34
3. Executive Remuneration in Detail - Remuneration Mix for Executives, At Risk Remuneration, Company Performance over
37
a Five Year Period, Remuneration Outcomes in FY2016 and Employment Arrangements
4. Non-Executive Director Remuneration - Non-Executive Directors, Guiding Principles, Remuneration Structure,
Remuneration Outcomes, Non-Executive Director Interests in Shares and Performance Rights
5. Remuneration Tables - Statutory Remuneration Outcomes, Actual Remuneration Outcomes, Executive Minimum
Shareholding Requirement, Executive Interests in Shares and Performance Rights, Non-Executive Director Remuneration
Outcomes, Non-Executive Director Interests in Shares and Performance Rights
6. Glossary of Terms
1. REMUNERATION IN BRIEF
KEY SHAREHOLDER QUESTIONS
QUESTION
ANSWER
How is performance reflected in the
remuneration of Executives in FY2016?
The outcomes of Executives' remuneration for FY2016, reflect the financial results of
the Company:
• zero Fixed Pay increases;
• zero cash payments through the Combined Incentive Plan; and
• nil vesting outcomes for LTI.
Have any changes been made to the
remuneration of the Non-Executive
Directors (NEDs)?
For the fifth consecutive year, there have been no increases to Non-Executive Director
annual fees. In addition, Mr Grill agreed to a further temporary decrease in his
Chairman fee for FY2016 and has waived his fee for FY2017.
What changes have been made to
remuneration components during
FY2016?
As detailed in the 2015 Remuneration Report, we made amendments to the Combined
Incentive Plan for FY2016 in order to increase our competitiveness in our
remuneration versus that of our peers while retaining short term cash incentives and
medium term deferred equity. We have sought to drive a performance culture
through an increase in our incentives for outperformance and build the equity
interests of our Executives to be in alignment with our shareholders' interests.
The cash portion of the Combined Incentive focuses on the achievement of financial
and non-financial Key Performance Indicators (KPIs). The equity portion provides
greater certainty of growth in Executive shareholdings through the SPPRs, with
vesting outcomes linked to share price.
43
44
50
DETAILS
See page 40
See page 43
See page 37
Are there provisions in place for
clawback of incentives?
Yes, the Company maintains a Clawback/Malus provision within both the Combined
Incentive Plan and the LTI Plan.
See page 36
Are there minimum shareholding
requirements in place for the KMP?
Yes, 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. NEDs are required to build a holding
equivalent in value to their annual fee. The minimum shareholding requirements are
assessed each year.
See pages 36, 43
and 46
FIXED PAY
Has Executives' Fixed Pay been
reviewed in FY2016?
32 WorleyParsons Annual Report 2016
Yes, a review was completed during FY2016 which resulted in no increases to Fixed
Pay for our Executives during the year. We are comfortable that the Executives
remain competitive against the external market. It should also be noted that the CEO
requested a 10% reduction in his Fixed Pay from 1 July 2015 and this will continue into
FY2017.
See page 36
COMBINED INCENTIVE PLAN
How is the Combined Incentive Plan
delivered to Executives?
How do the Share Price Performance
Rights (SPPRs) work?
What were the Combined Incentive
Plan outcomes this year?
The Combined Incentive Plan is delivered in both cash (two thirds) and equity (one
third). The cash portion is linked to the achievement of KPIs. The equity portion is
provided as an annual allocation of equity through SPPRs.
The equity portion of the Combined Incentive Plan is an annual grant of performance
rights with a two year performance period. The number of actual shares the
performance rights convert into depends upon the share price at the end of the
performance period. A share price lower than 50% of the original grant price will
result in zero SPPRs vesting; should the share price more than double the original
grant price, a maximum of 200% of the number of rights will vest. In between half and
double, the rights vest on a proportionate basis.
SPPRs provide strong alignment to shareholders' interests and use share price as the
performance hurdle. It will motivate our Executives to take action that results in
enhanced shareholder return.
The FY2016 financial outcomes have resulted in zero cash payments being made to the
Executives under the cash component of the Combined Incentive Plan. SPPRs have
been granted during FY2016, in accordance with the equity portion of the Combined
Incentive Plan, which remain subject to the share price performance condition until
the end of the two year vesting period. The amount granted is calculated as one third
of the Executive’s Combined Incentive target.
See page 37
See page 38
See page 37
LTI PLAN
How has the LTI Plan performed this
year?
As a result of not achieving the required minimum, there will be zero vesting of the
LTI awards.
See page 41
What are the performance hurdles for
the LTI Plan?
There are two equally-weighted performance hurdles for the LTI Plan, relative Total
Shareholder Return (TSR) and Earnings Per Share (EPS).
See page 39
How long is the performance period for
the LTI Plan?
The performance period is four years.
Does the LTI Plan allow for retesting?
No, there is no retesting of the LTI for Executives.
Does an Executive receive dividends on
the unvested LTI?
Have there been any changes to the LTI
Plan this year?
Are there any LTI Plan changes planned
for FY2017?
No, there are no dividends paid on the unvested LTI.
No changes have occurred for existing LTI grants.
Yes, following a review of the existing comparator group for our relative TSR
performance hurdle (50% of the grant), future grants will have a slightly varied
comparator group aligned to our current competitive landscape.
The focus of Executives on the delivery of the Company's 'Realize our future' strategy
and leading the change will be achieved through the provision of strategic
performance rights (50% of the grant). These performance hurdles will be subject to
the achievement of cost reduction and net debt to EBITDA targets measured at the end
of FY2018, both of which are key to the delivery of the strategy. A further two year
restriction period will apply on the shares following the measurement of the targets.
Details of performance against the targets will be disclosed retrospectively due to the
commercially sensitive nature of the targets.
During FY2017, we will review the LTI Plan performance hurdles for FY2018 grants to
ensure the motivational value of this portion of our Executives' remuneration is
effective into the future.
See page 39
See page 41
See page 40
See page 39
See page 39
WorleyParsons Annual Report 2016 33
DIRECTORS’ REPORT CONTINUED
KMP COVERED IN THIS REPORT
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 FY2016 in the positions noted below. The use of the term “Executives” throughout this report
refers to the Executives listed. These Executives in addition to the NEDs listed on page 43 of the Annual Report, comprised the KMP of the
Company for FY2016, as defined under the Accounting Standards.
NAME
POSITION
COUNTRY OF RESIDENCE
KMP DURATION
Andrew Wood
Chief Executive Officer
Australia
Filippo Abba
Group Managing Director – Improve and Major Projects
United Kingdom
Robert (Chris) Ashton
Regional Managing Director – Europe, Africa & Middle East
United States
1 January 2016 (commenced)
Dennis Finn
Group Managing Director/Chief Executive Officer, Advisian
United Kingdom
1 July 2015 (commenced)
Thomas Honan
Group Managing Director Finance/CFO
Denis Lucey
Regional Managing Director – Asia Pacific
Australia
Indonesia
1 December 2015 (commenced)
1 January 2016 (commenced)
Christopher Parker1
Regional Managing Director – Americas
United States
1 January 2016 (commenced)
Simon Holt2
Chief Financial Officer
David Steele3
Group Managing Director – Services
Australia
Australia
1 December 2015 (ceased)
1 January 2016 (ceased)
1 Mr Parker was KMP for FY2015, ceased to be KMP on 30 June 2015 and was reinstated on 1 January 2016.
2 Mr Holt ceased to be KMP on 1 December 2015 and ceased employment on 11 February 2016.
3 Mr Steele ceased to be KMP on 1 January 2016 when he moved to another role prior to his retirement on 30 June 2016.
2. REMUNERATION GOVERNANCE FRAMEWORK
GUIDING REMUNERATION PRINCIPLES
The guiding principles for executive remuneration are driven from the Company beliefs. The beliefs guide our actions, making it clear what we
are accountable for and how we achieve success:
COMPANY BELIEFS
DELIVER WHAT WE
PROMISE
ZERO HARM
PRUDENTLY
CONTAIN COST AND
ELIMINATE WASTE
BUILD ENDURING
CUSTOMER
RELATIONSHIPS
DEVELOP AND
REWARD TEAMS
WHO DELIVER ON
CUSTOMER
EXPECTATIONS
EXECUTIVE REMUNERATION PRINCIPLES
These principles
drive the behaviors
and results to help us
achieve our strategy
and vision
Provide a fair level of reward in order to retain and attract high caliber employees
Build a culture of achievement by providing a transparent link between reward and performance
Build long term employee commitment through continued WorleyParsons share ownership
Promote mutually beneficial outcomes by aligning employee, customer and shareholder interests
Support the expectations of the Diversity and Inclusion Policy
34 WorleyParsons Annual Report 2016
EXECUTIVE REMUNERATION STRUCTURE
Executive remuneration is structured to recognise an individual’s role, responsibilities, qualifications and experience as well as to drive
performance over the short and long term. The proportion of variable pay is reflective of an Executive’s ability to influence Company
performance through their role. The diagram below provides a high level overview of the various remuneration components, timing for their
delivery and their link to the remuneration principles:
* Excludes Dennis Finn (refer page 40).
REMUNERATION DECISION MAKING
Remuneration decision making within the Company follows set processes through which various stakeholders are involved; these include:
Board
• ensures remuneration policies and structures are competitive, fair, and aligned with the long term interests of the Company;
• sets and approves remuneration structures; and
• approves NED, CEO and other Executive remuneration quantum;
Nominations Committee
• reviews and assesses the CEO’s performance; and
• advises the Board on the CEO’s remuneration, including amount, structure and applicable performance targets;
Remuneration Committee
• 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, and NEDs.
Management
The CEO recommends pay increases and incentive outcomes for the Executives, other than the CEO. At the request of the Nominations and/or
Remuneration Committees, management:
• provides information relevant to remuneration decisions; and
• where appropriate, liaises with independent advisors to assist the Nominations and/or Remuneration Committees 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 is sourced from published reports and independent surveys. Where required, external consultants are 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 are
not a substitute for the Board and Committee decision-making process. There were no remuneration recommendations made by consultants in
relation to KMP in FY2016.
WorleyParsons Annual Report 2016 35
DIRECTORS’ REPORT CONTINUED
Benchmarking of total remuneration and remuneration mix for Executives during FY2016 was performed by Aon Hewitt, an independent
research and advisory remuneration consulting firm. This advice was used as a guide, and was not a substitute for thorough consideration of all
of the issues by the Remuneration Committee. The cost of advice and assistance by Aon Hewitt for the Executives is not material for either party.
Aon Hewitt was engaged by and reported to the Chairman of the Remuneration Committee. The Board is therefore satisfied that the information
provided by Aon Hewitt was free from undue influence by members of the Executive group to whom the remuneration benchmark information
related.
Frederic W. Cook, an independent remuneration consulting firm, was engaged to provide commentary and analytical support on the collation of
industry peer group data, no advice was provided. The cost of the support was not material for either party.
Orient Capital calculated the TSR for the purpose of vesting LTI. The amount paid to Orient Capital for TSR reporting is not material for either
party.
EXECUTIVE MINIMUM SHAREHOLDING REQUIREMENT
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.
Compliance with the requirement is assessed as at 30 June each year. The table on page 46 provides a summary of the position of each Executive
against the requirement as at 30 June 2016.
In addition, under the Company’s Securities Dealing Policy, directors and Executives are not permitted to hedge unvested performance rights or
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.
CLAWBACK (MALUS) PROVISION
The Company maintains a Clawback provision within the Combined Incentive Plan and the LTI Plan.
If in the Board’s opinion, an employee:
• acts fraudulently or dishonestly;
• is in breach of their obligations to the Company or another Group company; or
• received awards based on financial accounts which are later restated,
the Board may determine that unvested performance rights lapse; this is also known as a Malus provision. The Board may also deem any vested
but unexercised performance rights to have lapsed. Additionally, the Board may seek to recover shares received from exercised rights.
CESSATION OF EMPLOYMENT AND CHANGE OF CONTROL
Where an Executive leaves the Group, the Board may exercise its discretion and allow a portion of any unvested rights to remain in the plan.
Rights will subsequently vest and be exercised in the ordinary course, having regard to such factors as the Board determines relevant. Such
factors would include performance against applicable performance hurdles, as well as the performance and contribution that the relevant
Executive has made. Generally, the Board only exercises discretion in special circumstances, such as retirement.
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.
36 WorleyParsons Annual Report 2016
3. EXECUTIVE REMUNERATION IN DETAIL
REMUNERATION MIX FOR EXECUTIVES
The targeted mix of remuneration components shown in the graph below refers to the incentive that would be payable if all performance
conditions are satisfied and assumes vesting of the Combined Incentive Plan, comprised of a cash and equity incentive and LTI awards at 100%.
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, the performance conditions imposed and the outcomes of those
arrangements (based on the Company’s performance over FY2016 and prior years), are set out on page 40 under the Combined Incentive Plan
and LTI Plan outcome sections.
Targeted pay mix for Executives
AT RISK REMUNERATION
By linking pay to performance via incentive plans, the Company focuses on total reward and provides motivation to Executives to achieve
outcomes beyond the standard expected in the normal course of ongoing employment. The elements of remuneration that are at risk are the
Combined Incentive Plan and the LTI Plan. The following tables provide details on each of the Plans.
COMBINED INCENTIVE PLAN
The Combined Incentive Plan for Executives is made up of two thirds cash (Cash Incentive) and one third equity (Equity Incentive). The
minimum potential value of the Combined Incentive Plan is zero where applicable hurdles have not been met. 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/vesting. Outlined below is a detailed summary of the Cash and Equity Incentive components:
Cash Incentive (two thirds of target incentive)
Performance targets are set and measured through both financial and non-financial KPIs. These KPIs are agreed at the beginning of the financial
year and the Board retains rigorous oversight, to ensure they retain sufficient stretch, and appropriate thresholds.
Gate opener1
Individual thresholds will apply for each KPI to provide the Executive’s line of sight over achieving their targets.
Financial KPIs require achievement above 80% of budget (such as Group NPAT or business line EBIT) for the sliding
scale to start to apply – 5% awarded for each 1% achieved above 80%, capped at 200% (at 120% achievement against
budget).
Maximum payout1
Maximum payout of 150% of target incentive.
Incentive delivery and
payment timing
Payment of the award will be made as a gross cash amount at the end of the performance period.
KPI weighting for
FY2016
CEO – 60% financial/40% non-financial.
Other Executives – Either 50% financial/50% non-financial or 60% financial/40% non-financial.
WorleyParsons Annual Report 2016 37
DIRECTORS’ REPORT CONTINUED
Cash Incentive (two thirds of target incentive)
KPI details for FY2016 -
chosen due to their
direct link to the
Company's priorities for
the period, and in
alignment with the best
interests of shareholders
Financial
Group NPAT - 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.
Business line financial targets - Financial goals specific to the business line e.g. Earnings Before Interest and Tax
(EBIT).
Cash collection - Cash collection is measured via days sales outstanding.
Non-financial
Health, safety and environment performance - Reduction in the number of reportable incidents and the
demonstration of personal and visible leadership in support of the Company’s goal of Zero Harm.
Successful implementation of the business plan and/or strategic priorities for the business line - Targeted
business growth, customer retention, customer satisfaction and acquisition (the specific goals for Executives relating
to strategic imperatives are considered commercially sensitive to disclose).
Performance and
forfeiture conditions
(including Malus)
The KPIs listed above were chosen in alignment with the key strategic areas of focus for the Company, and are
rewarded after they have been achieved as determined by the Board.
Refer the Clawback (Malus) provision - see page 36.
1 Variation for Dennis Finn - The Advisian EBIT results are measured against the target and used as a multiplier that applies to the incentive payout calculation. Achievement
must be greater than 50%, otherwise the multiplier, and therefore the incentive payment is zero; between 51% and 75% achievement, the multiplier increases linearly; and above
75% (up to 200%), the multiplier is equivalent to the achievement percentage. The overall payment is subject to a maximum of 200% of target. This incentive plan arrangement
reflects the higher leveraged model typical in professional services and focuses the Advisian business line as it grows into a world-class global advisory business.
Equity Incentive (one third of target incentive)
The performance rights provided through the Equity Incentive are called Share Price Performance Rights (SPPRs). SPPRs are granted annually
as performance rights. The vesting period for the SPPRs is two years. The number of rights is determined by dividing the dollar value of the
award achieved by the face value of shares. The grant price for the FY2016 allocation of SPPRs was $7.46, based on 10 day volume weighted
average price following the release of the FY2015 results.
Gate opener
The threshold relates to the share price at the end of the performance period. If the closing share price is half or less
than half the opening share price, the SPPRs lapse.
Maximum payout
The maximum number of SPPRs that convert to shares is double the original amount that was granted.
Incentive delivery
and payment timing
If the share price doubles (or more than doubles) over the two year performance period, the rights convert into twice
the number of shares. If the share price halves (or more than halves), the rights do not convert into any shares and they
lapse. In between double and half the share price, the rights vest on a proportionate basis.
Performance and
forfeiture conditions
(including Malus)
The Executive must maintain a satisfactory performance rating during the performance period. See ‘Incentive delivery
and payment timing’ above for the additional share price performance conditions.
Should the accounts be restated during the performance period or where an employee has acted fraudulently or
dishonestly or is in breach of their obligations to the Company, the award may be forfeited.
Dividends
Not applicable, no dividends are payable on unvested rights.
Examples
The four examples are
based on a notional
grant of 1,000 SPPRs
with a notional
WorleyParsons share
price of $8.00 at the
time the SPPRs are
issued i.e. a notional
value of $8,000.
In two years’ time:
Scenario 1: The opening share price rises to $20.00 (i.e. more than doubles). The 1,000 SPPRs convert to 2,000 shares and
their total value = $40,000. The Executive’s incentive has delivered a $40,000 reward (in shares) i.e. $32,000 above the
notional $8,000 value at the time of issue.
Scenario 2: The opening share price rises to $12.00. The 1,000 SPPRs convert to 1,000 x ($12/$8) = 1,500 shares and their
total value = $18,000. The Executive’s incentive has delivered an $18,000 reward (in shares) i.e. $10,000 above the
notional $8,000 value at the time of issue.
Scenario 3: The opening share price falls to $6.00. The 1,000 SPPRs convert to 1,000 x ($6/$8) = 750 shares and their total
value = $4,500. The Executive’s incentive has delivered a $4,500 reward (in shares) i.e. $3,500 below the notional $8,000
value at the time of issue.
Scenario 4: The opening share price halves or more; then the SPPRs lapse and no shares are issued.
SPPRs were not granted in FY2016 for the Executives who commenced in their roles after the grant of SPPRs was made in October 2015.
38 WorleyParsons Annual Report 2016
LONG TERM INCENTIVE PLAN
The provision of LTI is currently assessed through two equally weighted, independent performance targets (TSR and EPS) that align an
Executive’s interests with shareholder returns while driving long term Company performance.
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 (unless an Executive elects otherwise) after a four year vesting period, subject to defined performance hurdles being
satisfied. 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, while catering for the local restrictions on the issue of securities.
Relative Total
Shareholder Return
(TSR) - 50% of
potential LTI
The TSR measure represents the change in the value of the Company’s share price over a period, including reinvested
dividends, expressed as a percentage of the opening value of the shares. 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 and
reflects an investor’s choice to invest in this company or direct competitors.
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 over a four year period. Executives are not provided an
opportunity to retest under the TSR measure.
The vesting schedule of the rights subject to the relative TSR hurdle is as follows:
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
Greater than the 50th percentile but less
than the 75th percentile
0%
25%
Pro-rated vesting between 25% and 50%
At 75th percentile or greater
50% (i.e. maximum available under the plan)
For LTI grants made since FY2013, the comparator group comprises the companies shown below:
AECOM, Aker Solutions, AMEC Foster Wheeler, Arcadis, Atkins, Balfour Beatty, Cardno, Chicago Bridge & Iron
Company, CIMIC, Downer EDI, Fluor Corporation, Fugro, Jacobs Engineering Group, JGC Corporation, KBR,
McDermott International, Monadelphous Group, SNC Lavalin, , Saipem, Serco Group, Stantec, Technip, Tecnicas
Reunidas, Tetra Tech, UGL and Wood Group. The Board has discretion to adjust the comparator group to take into
account events including, but not limited to, takeovers or mergers that might occur during the performance period.
For LTI grants in FY2017, the comparator group will include a revised list of companies that were identified by the
Board as having similar business profiles and with which the Company competes for capital and executive talent, these
include: AECOM, Aker Solutions, AMEC Foster Wheeler, Arcadis, Fluor Corporation, Fugro, Jacobs Engineering
Group, JGC Corporation, KBR, Petrofac, SNC Lavalin, Stantec, Tetra Tech, Wood Group and WSP Global.
Basic EPS is determined by dividing the Group 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 NPAT
may be adjusted by the Board, where appropriate, to better reflect operating performance.
Executives will only derive value from the EPS component of the grants made in FY2016 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 four year performance period.
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
Pro-rated vesting between 25% and 50%
8% p.a. or greater above the increase in CPI
50% (i.e. maximum available under the plan)
Earnings Per Share
(EPS) - 50% of
potential LTI
A review of the LTI Plan performance hurdles will occur for future grants to ensure it continues to motivate our Executives into the future.
For LTI grants in FY2017, the EPS hurdle will be replaced with a strategic performance hurdle, see page 33.
WorleyParsons Annual Report 2016 39
DIRECTORS’ REPORT CONTINUED
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 Australian Securities Exchange (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. The Board has determined that the number of securities issued to Executives and all other participants under the Company’s
equity 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 equity plans represents 2.01% of the Company’s issued share capital (FY2015: 1.71%).
With the exception of Dennis Finn who has a varied pay mix more aligned with professional services, all current Executives are able to receive
rights through the LTI Plan. Details of the rights granted to Executives as the LTI component of their remuneration in FY2016 are outlined on
page 47.
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. Participants will have unencumbered
ownership of the shares, subject to compliance with the Company’s Securities Dealing Policy and minimum shareholding requirement.
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, Combined Incentive and LTI Plan outcomes have
moved in line with the Company’s performance against relevant key metrics:
FINANCIAL YEAR ENDED 30 JUNE
FY2011
FY2012
FY2013
FY2014
FY2015
FY2016
Closing share price ($)
Dividends paid1 (cents per share)
TSR portion of LTI
1 year TSR for the Company (%)
1 year TSR for median of peer group (%)
Vesting outcome of LTI (%)
EPS portion of LTI
Underlying EPS (cents per share)2
Vesting outcome of LTI (%)
Combined Incentive3
Underlying NPAT ($’m)4
Average % of maximum Combined
Incentive awarded to Executives (%)
Share price used for SPPR grant ($)5
28.24
86.0
37.4
40.8
nil
121.5
nil
298.5
27.1
-
25.10
91.0
(6.8)
(21.9)
70
140.6
nil
345.6
47.0
19.49
92.5
(19.6)
21.6
nil
130.8
nil
322.1
nil
17.41
85.0
(6.8)
1.4
nil
106.8
nil
263.4
nil
10.41
56.0
(36.4)
(23.6)
nil
98.4
nil
243.1
nil
7.20
-
(30.2)
(4.0)
nil
61.8
nil
153.1
nil
-
-
-
-
$7.46
ANNUALIZED
GROWTH
OVER FIVE
YEARS
(23.9%)
(100.0%)
(12.6%)
(12.5%)
1 No final dividend for FY2016.
2 Underlying EPS, which in the Board’s opinion reflects the Company’s operating results, has been used to calculate the outcomes.
3 The Combined Incentive Plan was introduced in FY2013; previously, this was the Short Term Incentive Plan.
4 Group NPAT was considered to reflect the Company’s operating results for FY2013 and has been used to calculate the remuneration outcomes for that financial year. For all other financial periods
represented in this table, underlying NPAT has been used to calculate the remuneration outcomes. Underlying NPAT excludes impairment of goodwill, net gain on revaluation of investments previously
accounted for as equity accounted associates and joint operations, restructuring costs (net of tax), write off of investments accounted for as equity accounted associates and other adjustments at the Board
discretion, being the difference between reported Group NPAT and underlying NPAT.
5 The first grant of SPPRs was made during FY2016 to Executives, calculated as one third of their Combined Incentive target. See page 47 for further details.
REMUNERATION OUTCOMES IN FY2016
COMBINED INCENTIVE PLAN OUTCOMES
As outlined in the description of the Combined Incentive Plan on pages 37-38, reward outcomes for Executives are linked to performance against
annual financial and non-financial KPIs for the cash component.
In the five year table above and the following graph, the Company performance is compared to variable pay outcomes for each 12 month period.
Based on the Company’s financial performance and performance against individual KPIs, there were no resulting payments for the Cash
Incentive portion of the Combined Incentive Plan for FY2016 as detailed in the table on page 44. Details of the grant of SPPRs are provided on
page 47.
40 WorleyParsons Annual Report 2016
The graph below illustrates the average Combined Incentive as a percentage of maximum awarded to Executives over each of the past five years
compared to underlying NPAT. It demonstrates Executives have not been rewarded during this difficult period:
Average % of maximum Combined Incentive awarded to Executives compared to underlying NPAT
1 The average Combined Incentive as a percentage of maximum for any financial year relates to amounts paid in the September following that financial year end.
2 Underlying NPAT figures are used for this graph, in 2013 these are the same as reported Group NPAT figures.
SPPRs granted during FY2016 will be displayed in the above graph upon vesting, should this occur.
LTI PLAN OUTCOMES
The graph below tracks the Company’s TSR over the last four years against the median TSR of the peer comparison group used for the LTI Plan:
TSR performance measured over the last four years
This graph illustrates that growth in the Company’s TSR was below median, which has resulted in a nil vesting for Executives for TSR related
LTI granted in FY2013. As vesting was not achieved, the TSR performance rights will lapse on 30 September 2016. Over the same four year
period, the Company’s EPS growth was below the minimum required to trigger vesting against the EPS performance hurdle for LTI granted in
FY2013. EPS performance rights will lapse on 30 September 2016. No retest applies to either measure.
The LTI Plan has not achieved the required performance hurdles for the last four years, demonstrating the alignment of our Executive
remuneration outcomes with shareholder returns. It is important that we are able to continue to motivate our Executives to deliver value to our
shareholders over the long term and we will review the LTI Plan during FY2017 to ensure that we continue to use the most appropriate
performance hurdles.
WorleyParsons Annual Report 2016 41
DIRECTORS’ REPORT CONTINUED
Summary of vested rights
The table below shows the recent history of vesting of Executives’ equity grants:
GRANT
FY2011
FY2012
FY2013
FY20135
PERFORMANCE PERIOD
01 Jul 10 – 30 Jun 13
01 Jul 11 – 30 Jun 14
01 Jul 12 – 30 Jun 15
01 Jul 12 – 30 Jun 16
TSR PERCENTILE
ACHIEVED1
RETESTED
TSR PERCENTILE
ACHIEVED2
CHANGE IN
EPS ACHIEVED3
% OF TOTAL
LTI GRANT
VESTED/EXERCISED
VESTING DATE
VALUE PER RIGHT
VESTED/EXERCISED4
$
lowest
lowest
8th
11th
lowest
lowest
n/a
n/a
3.3%
(4.2%)
(17.0%)
(18.6%)
0%
0%
0%
0%
30 Sep 13
30 Sep 14
30 Sep 15
30 Sep 16
n/a
n/a
n/a
n/a
1 Represents the Company’s relative TSR ranking over the performance period compared to the relative comparator group.
2 Represents the Company’s retested relative TSR ranking over a four year performance period compared to the relative comparator group.
3 Change in EPS achieved is calculated as the compound annual growth rate of EPS over the performance period.
4 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).
5 In FY2013 Andrew Wood was granted LTI with a four year vesting period, details provided on page 47.
EMPLOYMENT ARRANGEMENTS
The key aspects of Executive contracts are outlined below:
EXECUTIVE DIRECTOR
Andrew Wood
GROUP EXECUTIVES
Filippo Abba
Robert (Chris) Ashton
Dennis Finn
Thomas Honan
Denis Lucey
Christopher Parker
CONTRACT DURATION
NON-COMPETE CLAUSES
NOTICE PERIODS1
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
12 months
12 months
12 months
12 months
12 months
12 months
12 months
12 months
6 months
6 months
6 months
6 months
6 months
6 months
1 Notice period required to be given by the KMP to the Group is the same as the notice period required to be given by the Group to the KMP upon termination of employment.
The contracts include the components of remuneration which are to be paid to Executives, and provide for an 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. 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).
In accordance with the plan rules, the Board retains discretion on the treatment of both vested and unvested equity in all instances of separation
as outlined in the Combined Incentive Plan and the LTI Plan details on page 36. In exercising such discretion, this is typically on a pro-rata basis
and subject to the original performance requirements and timing.
At the October 2013 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 purpose of section 200F(2)(b) or section 200G(1)(c) of the Act.
Mr Holt ceased to be KMP from 1 December 2015 when Mr Honan commenced in the expanded role of Group Managing Director Finance/CFO.
Mr Holt received a payment upon the cessation of his employment on 11 February 2016, reported on page 44. In accordance with the LTI Plan
rules a pro-rata portion of his unvested performance rights was approved by the Board in December 2015, and the pro-rated unvested equity will
remain in place subject to the original time and performance hurdles.
The Company did not pay sign-on payments to Executives during FY2016.
42 WorleyParsons Annual Report 2016
4. NON-EXECUTIVE DIRECTOR REMUNERATION
NON-EXECUTIVE DIRECTORS
This section outlines the remuneration arrangements in place for the Company’s Non-Executive Directors (NEDs). All directors held office for the
whole of FY2016, except where otherwise stated. The NEDs for FY2016 are listed below:
NAME
John Grill
Ron McNeilly
Larry Benke
Jagjeet Bindra
Erich Fraunschiel
John M Green
Christopher Haynes
Catherine Livingstone
Wang Xiao Bin
POSITION
Chairman
Deputy Chairman and Lead Independent Director
Director
Director
Director
Director
Director
Director
Director
COUNTRY OF RESIDENCE
Australia
Australia
Canada
United States
Australia
Australia
United Kingdom
Australia
Hong Kong, China
GUIDING PRINCIPLES
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, while ensuring they reflect the caliber of directors required to address the significant strategic and operational
challenges faced by the Company, domestically and abroad.
For the fifth consecutive year, there will be no increase in annual fees for NEDs in FY2017. 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, 76% ($2.47 million) was
utilized during FY2016 (69% ($2.23 million) for FY2015). NEDs do not receive performance related payments.
REMUNERATION STRUCTURE
Board and Committee fees
Board and Committee fees for FY2016 and FY2017 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
Chairman1,2
Deputy Chairman and Lead Independent Director1
Other NED
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
FY2016 ANNUAL 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.
2 Mr Grill requested a temporary reduction in his Chairman fee of $520,000 per annum in both FY2015 (reduced to $460,000) and FY2016 (reduced to $395,053).
Other benefits
NEDs are eligible to receive travel allowances of $5,000 per trip for additional time incurred on overseas business related travel including
attendance at Board meetings and site visits. These payments are made within the NED fee pool. NEDs are also entitled to be reimbursed for all
business related expenses, including travel, incurred in the discharge of their obligations. The Company does not pay retirement benefits to
NEDs, except where required by legislation. From time to time, the Board may determine special fees for additional duties undertaken by
directors. No such fees were paid in FY2016.
REMUNERATION OUTCOMES
The remuneration outcomes of the NEDs for FY2016 and FY2015 are set out in the Remuneration Tables section of the report, on page 49.
NED INTERESTS IN SHARES AND PERFORMANCE RIGHTS
The NED beneficial interests in shares and performance rights of the Company as at 30 June 2016 is detailed in the Remuneration Tables section
of the report, on page 49. The service and performance criteria for the rights are discussed in the LTI Plan section on page 39.
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 in value 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. For the purpose of this test, the value of shares is calculated using the number of shares held at 30
June 2016 multiplied by the five day volume weighted average price of the Company’s shares up to and including 30 June 2016 ($7.06) or
purchase price if higher. All NEDs currently comply with the minimum shareholding requirement.
WorleyParsons Annual Report 2016 43
DIRECTORS’ REPORT CONTINUED
5. REMUNERATION TABLES
STATUTORY REMUNERATION OUTCOMES
Executive remuneration is detailed in the following table in accordance with accounting standards.
Accounting standards require the value of equity based payments to be amortized over the relevant period of performance (or vesting period).
The value of equity based payments awarded during the year is determined as a percentage of Fixed Pay that the Company aims to deliver. This
can be found in the Equity Incentive and LTI columns under the remuneration awarded section of Actual Remuneration Outcomes on page 45.
The full value that was received during the year is determined as the number of performance rights vested times the share price at the end of the
performance period. This can be found under the remuneration received section of Actual Remuneration Outcomes on page 45.
SHORT TERM EMPLOYEE BENEFITS
POST-
EMPLOY-
MENT
BENEFITS
OTHER
LONG
TERM
BENEFITS
TERMIN-
ATION
BENEFITS
SHARE BASED PAYMENTS
CASH
SALARY
$
CASH
INCENTIVE1
$
OTHER
BENEFITS2
$
TOTAL
SHORT
TERM
CASH
AND
BENEFITS
$
SUPER-
ANNUATION
$
LONG
SERVICE
LEAVE
$
TERMIN-
ATION
BENEFITS3
$
EQUITY
INCENTIVE4
$
LTI
EQUITY
SETTLED4
$
TOTAL
REMUN-
ERATION
IN
ACCORDANCE
WITH
ACCOUNTING
STANDARDS
$
SHARE
BASED
PAYMENTS
% OF
TOTAL
REMUN-
ERATION
VARIABLE
PAY
% OF
TOTAL
REMUN-
ERATION
% OF
MAXIMUM
STI
AWARD
FORFEITED
Dennis Finn
FY2016 1,225,831
-
455,171 1,681,002
EXECUTIVE DIRECTOR
Andrew Wood
FY2016 1,435,238
FY2015 1,581,217
GROUP EXECUTIVES
Filippo Abba
FY2016
661,610
FY2015
153,147
Robert (Chris) Ashton5
FY2016
299,410
-
-
-
-
-
Thomas Honan6
FY2016
542,094
Denis Lucey5
FY2016
356,457
Chris Parker5
FY2016
322,657
FY2015
563,704
FORMER GROUP EXECUTIVES
Simon Holt7
FY2016
254,682
FY2015
531,217
David Steele8
FY2016
449,849
FY2015
881,217
Randy Karren9
FY2015
459,525
Ian Wilkinson9
FY2015
365,282
-
-
-
-
-
-
-
-
-
-
9,533 1,444,771
19,307
24,112
15,978 1,597,195
18,783
26,523
643,656 1,305,266
52,631
164,415
317,562
188,593
488,003
6,126
6,245
-
-
-
-
-
895
542,989
16,945
9,147
238,748
595,205
8,017
14,525
337,182
13,067
576,771
14,892
17,231
-
-
-
-
-
-
-
-
-
-
-
-
-
147,591
140,765
1,776,546
16.2%
16.2% 100.0%
-
237,085
1,879,586
12.6%
12.6% 100.0%
54,697
424,359
1,836,953
26.1%
26.1% 100.0%
-
135,695
459,383
29.5%
29.5%
N/A
18,192
10,286
522,726
5.4%
5.4% 100.0%
190,947
-
-
-
-
-
-
10,099
24,681
65,756
1,871,949
10.2%
10.2% 100.0%
569,081
613,321
376,755
-
1.6%
6.6%
-
100.0%
1.6% 100.0%
6.6% 100.0%
659,758
10.0%
10.0% 100.0%
9,482
264,164
13,196
80,210
522,770
2,972
(21,080)
862,232
(2.1%)
(2.1%)
100.0%
14,804
546,021
18,783
209,893
659,742
10,536
9,117
7,460
97,616
978,833
18,783
14,919
7,903
467,428
11,716
-
8,595
373,877
12,895
5,984
-
-
-
-
-
-
76,038
649,959
11.7%
11.7% 100.0%
6,858 (164,823)
519,773
(30.4%)
(30.4%)
100.0%
63,367
1,075,902
530,127
-
-
-
50,983
69,109
5.9%
9.6%
5.9% 100.0%
9.6% 100.0%
461,865
15.0%
15.0% 100.0%
Total remuneration
FY2016 5,547,828
FY2015 4,535,309
- 1,770,496 7,318,324
322,378 4,857,687
-
141,769
104,317
120,929
56,543
522,770
-
421,257
-
424,287
698,033
8,949,336
5,716,580
1 The amount relates to the Cash Incentive portion of the Combined Incentive Plan.
2 This includes assignment uplifts, market adjustments and non-monetary benefits which include benefits such as expatriate benefits (i.e. housing, home leave etc. applicable to Mr Abba, Mr Ashton, Mr
Finn, Mr Lucey and Mr Steele), health insurance, car parking, company cars or car allowances, fringe benefits tax, tax advisory services and life insurance. In some cases, these are at the election of the
Executives i.e. they are salary sacrificed.
3 The amount includes a payment in lieu of notice, salary received during the transition period and a separation payment.
4 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.
5 Remuneration is disclosed to the extent that it relates to Mr Ashton’s, Mr Lucey's and Mr Parker's employment in the capacity of an Executive, which commenced on 1 January 2016.
6 Remuneration is disclosed to the extent that it relates to Mr Honan's employment in the capacity of an Executive, which commenced on 1 December 2015.
7 Remuneration is disclosed to the extent that it relates to Mr Holt's employment in the capacity of an Executive, which ceased on 1 December 2015. The Board exercised its discretion to allow him to retain a
pro-rata portion of unvested equity subject to the original time and performance hurdles.
8 Mr Steele ceased to be an Executive on 1 January 2016 and retired from the Company effective 30 June 2016. The Board exercised its discretion to allow him to retain a pro-rata portion of unvested equity
subject to the original time and performance hurdles with the exception of the FY2016 SPPR allocation which will be measured at the original vest date against the share price at the end of the 2016
performance period.
9 Remuneration is disclosed to the extent that it relates to Mr Karren's and Mr Wilkinson's employment in the capacity of an Executive, which ceased on 31 March 2015 and 6 February 2015 respectively.
Share based payments are disclosed to the extent they relate to their employment in the capacity of an Executive.
44 WorleyParsons Annual Report 2016
ACTUAL REMUNERATION OUTCOMES
The table below shows actual remuneration awarded during the year and actual remuneration received during the year. This is separate to the
Executive remuneration details in accordance with the Accounting Standards per page 44.
AWARDED AND RECEIVED DURING
REPORTING PERIOD
AWARDED DURING REPORTING PERIOD
DEFERRED FOR FUTURE PERIODS2
RECEIVED DURING REPORTING PERIOD
DEFERRED FROM PREVIOUS PERIODS3
SHORT TERM CASH
AND BENEFITS
$
OTHER
BENEFITS1
$
EQUITY
INCENTIVE
$
TOTAL
REMUNERATION
AWARDED
DURING
REPORTING
PERIOD
$
LTI
$
EQUITY
INCENTIVE
$
EXECUTIVE DIRECTORS
Andrew Wood
GROUP EXECUTIVES
Filippo Abba
Robert (Chris) Ashton4
Dennis Finn
Thomas Honan5
Denis Lucey4
Chris Parker4
FY2016
FY2015
FY2016
FY2015
FY2016
FY2016
FY2016
FY2016
FY2016
FY2015
FORMER GROUP EXECUTIVES
Simon Holt6
FY2016
FY2015
David Steele7
Randy Karren8
Ian Wilkinson8
Total remuneration
FY2016
FY2015
FY2015
FY2015
FY2016
FY2015
1,444,771
1,597,195
1,305,266
317,562
488,003
1,681,002
542,989
595,205
337,182
576,771
264,164
546,021
659,742
978,833
467,428
373,877
7,318,324
4,857,687
43,419
45,306
52,631
6,126
6,245
727,271
-
204,188
-
153,868
-
1,042,188
-
-
-
-
138,898
-
269,999
-
-
-
26,092
8,017
14,892
17,231
616,176
27,900
17,996
33,702
11,716
18,879
785,468
160,860
1,236,356
1,360,011
3,451,817
3,002,512
424,187
1,067,531
-
-
-
-
-
369,039
219,996
220,002
674,999
675,005
238,858
443,925
1,986,272
1,391,219
648,116
2,723,190
569,081
603,222
352,074
963,041
1,239,234
793,923
1,622,736
1,687,540
718,002
836,681
-
-
-
-
-
-
-
-
-
-
26,130
-
-
-
-
-
2,536,412
-
2,555,538
4,374,371
13,195,742
9,392,918
26,130
-
TOTAL
REMUNERATION
RECEIVED
DURING
REPORTING
PERIOD
$
1,488,190
1,642,501
1,521,084
323,688
494,248
1,681,002
569,081
603,222
352,074
627,970
906,470
603,506
677,738
1,012,535
542,426
449,688
8,293,109
5,202,314
LTI
$
-
-
163,187
-
-
-
-
-
-
33,968
-
29,585
-
-
63,282
56,932
163,187
183,767
1 This is the total of superannuation received and long service leave benefits accrued during the reporting period.
2 Remuneration awarded during the reporting period but deferred for future periods includes equity awards granted under the Combined Incentive Plan and LTI Plan which may vest and become
available to Executives in future periods. A grant value based on Fixed Pay (as defined on page 35) 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.
3 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 Equity Incentive
and LTI value reflects the actual value realized by the Executive.
4 Remuneration is disclosed to the extent that it relates to Mr Ashton’s, Mr Lucey's and Mr Parker's employment in the capacity of an Executive, which commenced on 1 January 2016.
5 Remuneration is disclosed to the extent that it relates to Mr Honan's employment in the capacity of an Executive, which commenced on 1 December 2015.
6 Remuneration is disclosed to the extent that it relates to Mr Holt's employment in the capacity of an Executive, which ceased on 1 December 2015. The amount provided under 'Other Benefits' includes
termination benefits amount shown on page 44. The Board exercised its discretion to allow him to retain a pro-rata portion of unvested equity subject to the original time and performance hurdles.
7 Mr Steele ceased to be an Executive on 1 January 2016 and retired from the Company effective 30 June 2016. The Board exercised its discretion to allow him to retain a pro-rata portion of unvested equity
subject to the original time and performance hurdles with the exception of the FY2016 SPPR allocation which will be measured at the original vest date against the share price at the end of the 2016
performance period.
8 Remuneration is disclosed to the extent that it relates to Mr Karren's and Mr Wilkinson's employment in the capacity of an Executive, which ceased on 31 March 2015 and 6 February 2015 respectively.
Share based payments are disclosed to the extent they relate to their employment in the capacity of an Executive.
WorleyParsons Annual Report 2016 45
DIRECTORS’ REPORT CONTINUED
EXECUTIVE 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 2016:
EXECUTIVE DIRECTOR
Andrew Wood4
GROUP EXECUTIVES
Filippo Abba
Robert (Chris) Ashton
Dennis Finn
Thomas Honan
Denis Lucey
Christopher Parker
WEIGHTED
NUMBER OF SHARES
HELD AT 30 JUNE 20161
VALUE OF SHARES
HELD AT 30 JUNE 20162
$
ANNUAL FIXED PAY AT
30 JUNE 20163
$
PERCENTAGE
OF MINIMUM
REQUIREMENT ACHIEVED
1,090,303
7,697,539
88,121
23,554
71,776
10,000
106,741
18,747
789,406
193,485
521,093
70,600
778,210
237,150
1,600,000
626,578
582,135
1,160,924
950,000
698,517
636,312
>100%
63%
17%
22%
4%
56%
19%
1 Includes shares held in the Company plus a 50% weighting of unvested performance rights provided on page 47.
2 Calculated as the weighted number of shares held at 30 June 2016 multiplied by the volume weighted average price of the Company’s shares for the five trading days up to and including 30 June 2016
($7.06) or the price at which performance rights were allocated.
3 The Australian dollar equivalent of annual Fixed Pay as at 30 June 2016.
4 Effective 1 July 2015, Mr Wood elected to reduce his Fixed Pay by 10%. The minimum shareholding requirement will be held against the higher Fixed Pay amount.
EXECUTIVE INTERESTS IN SHARES AND PERFORMANCE RIGHTS
Executives’ beneficial interests in shares and performance rights granted as at 30 June 2016 are detailed in the table below. The service and
performance criteria for the rights are discussed in the Combined Incentive Plan and LTI Plan sections on pages 38 and 39.
NUMBER OF SHARES AND PERFORMANCE RIGHTS HELD IN WORLEYPARSONS LIMITED
EXECUTIVE DIRECTOR
Andrew Wood
GROUP EXECUTIVES
Filippo Abba
Robert (Chris) Ashton2
Dennis Finn
Thomas Honan3
Denis Lucey2
Christopher Parker4
TYPE
Shares
Rights
Shares
Rights
Shares
Rights
Shares
Rights
Shares
Rights
Shares
Rights
Shares
Rights
FORMER GROUP EXECUTIVES
Simon Holt5
Shares
Rights
David Steele5
Total
Shares
Rights
Shares
Rights
BALANCE AT
1 JULY 2015
GRANTED
PERFORMANCE
RIGHTS
ON EXERCISE OF
PERFORMANCE
RIGHTS
CHANGE IN
STATUS
OTHER
TRANSACTIONS1
BALANCE AT
30 JUNE 2016
856,565
211,226
-
91,256
-
-
-
-
-
-
-
-
-
-
8,329
26,065
126,079
110,566
990,973
439,113
n/a
270,472
n/a
86,553
n/a
-
n/a
143,552
n/a
-
n/a
-
n/a
-
n/a
49,435
n/a
130,165
n/a
680,177
-
-
26,641
(26,641)
-
-
-
-
-
-
-
-
-
-
4,337
(4,337)
-
-
30,978
(30,978)
-
-
-
-
10,255
26,598
-
-
-
-
104,088
5,306
7,455
22,585
(12,666)
(21,457)
(126,079)
(214,769)
(16,947)
(181,737)
-
(14,222)
(14,104)
-
-
-
-
-
10,000
-
-
-
-
-
-
(49,706)
-
(25,962)
(4,104)
(89,890)
856,565
467,476
12,537
151,168
10,255
26,598
-
143,552
10,000
-
104,088
5,306
7,455
22,585
-
-
-
-
1,000,900
816,685
1 Where the Company incurs overseas withholding tax obligations due to the vesting of the Executives’ performance rights, a sufficient number of the shares that the Executive otherwise would have
retained following vesting of their performance rights will be relinquished in order to enable the Company to meet its withholding tax obligations.
2 Mr Ashton and Mr Lucey commenced in the role as an Executive effective 1 January 2016.
3 Mr Honan commenced in the role as an Executive effective 1 December 2015.
4 Mr Parker was KMP for FY2015, ceased to be KMP on 30 June 2015 and was reinstated on 1 January 2016.
5 Mr Holt and Mr Steele ceased to be an Executive effective 1 December 2015 and 1 January 2016 respectively.
46 WorleyParsons Annual Report 2016
Details of vested and outstanding rights over the last five years - full details of prior year equity grants are set out in the remuneration report
for the relevant year.
FAIR
VALUE
PER
RIGHT
OF (AT
GRANT
DATE)2
$
FAIR
VALUE
OF
GRANT
(AT
GRANT
DATE)3
$
DATE
OF
GRANT
NUMBER
OF
RIGHTS
GRANTED1
VESTING
DATE/
FIRST
EXERCISE
DATE
NUMBER
OF
RIGHTS
VESTED
EXPIRY
DATE
VALUE
OF
RIGHTS
VESTED4
$
NUMBER
OF
RIGHTS
EXERCISED
VALUE
OF
RIGHTS
EXERCISED4
$
NUMBER
OF
RIGHTS
LAPSED5
VALUE
OF
RIGHTS
LAPSED6
$
% OF
RIGHTS
LAPSED
PLAN
EXECUTIVE DIRECTOR
Andrew Wood
LTI
30 Oct 15
170,297
30 Oct 14
83,232
3.69
8.62
628,396 30 Sep 19 28 Oct 22
717,460 30 Sep 18 30 Oct 21
24 Oct 13
60,688
13.59
824,750 30 Sep 17 24 Oct 20
23 Oct 12
53,084
15.76
836,604 30 Sep 16 18 Oct 19
17 Oct 11
14,222
17.69
251,587 30 Sep 15 17 Oct 18
SPPR
30 Oct 15
100,175
4.42
442,774 31 Oct 17 28 Oct 22
Deferred Equity STI
01 Oct 12
2,947
27.70
81,632 30 Jun 13 30 Jun 19
01 Oct 12
2,947
27.70
81,632 30 Jun 14 30 Jun 19
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,947
2,947
57,741
50,606
2,947
2,947
57,741
50,606
GROUP EXECUTIVES
Filippo Abba7
LTI
SPPR
30 Oct 15
01 Apr 15
01 Apr 15
01 Apr 15
01 Apr 15
30 Oct 15
58,428
11,333
26,641
26,641
26,641
28,125
Robert (Chris) Ashton8 Combined Incentive
30 Oct 15
21,194
3.69
5.37
7.82
8.40
9.02
4.42
5.15
215,599 30 Sep 19 28 Oct 22
60,858 30 Sep 18 01 Apr 22
208,333 30 Sep 17 01 Apr 22
223,784 30 Sep 16 01 Apr 22
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
240,302 30 Sep 15 01 Apr 22 26,641
198,742
26,641
198,742
124,313 30 Sep 17 28 Oct 22
109,149 30 Sep 18 28 Oct 22
-
-
-
-
-
-
-
-
-
-
-
-
14,222
251,587 100.0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,720
3,736
1,442
1,442
-
-
4,901
5,244
1,485
1,484
-
-
-
-
-
35,211
61,046
28,254
24,762
-
-
36,561
85,687
29,096
25,483
-
-
-
-
-
4,720
3,736
1,442
1,442
-
-
4,901
5,244
1,485
1,484
-
-
-
-
-
35,211
61,046
28,254
24,762
-
-
36,561
85,687
29,096
25,483
-
-
-
-
-
4,337
2,842
-
1,436
1,435
-
-
-
-
-
-
-
-
-
-
32,354
46,438
-
28,136
24,642
-
-
-
-
-
-
-
-
-
-
4,337
2,842
-
1,436
1,435
-
-
-
-
-
-
-
-
-
-
25,615
86,784 84.5%
8,018
2,856
27,165 59.6%
9,676 34.6%
32,354
46,438
-
-
-
-
-
-
-
13,217
44,780 69.1%
28,136
24,642
-
-
-
-
-
-
-
-
-
-
-
-
-
69,683
504,120 74.9%
20,640
149,320 50.0%
30,120
217,902 100.0%
13,174
13,173
12,789
95,307 100.0%
95,300 100.0%
92,522 100.0%
18,570
134,344 49.9%
2,615
2,615
51,236
44,905
2,615
2,615
51,236
44,905
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,876
115,135 81.2%
6,246
1,428
3,684
60,554 56.3%
13,844 31.3%
55,739 100.0%
6,079
2,261
2,261
99,331
44,300
38,826
6,079
2,261
2,261
99,331
44,300
38,826
-
-
-
-
-
-
-
-
-
WorleyParsons Annual Report 2016 47
4,310
17.25
74,348 30 Sep 15 18 Oct 19
3,263
19.14
62,454 30 Sep 14 17 Oct 18
4,310
3,263
30,810
53,317
4,310
3,263
30,810
53,317
Equity
30 Oct 14
08 Feb 13
17 Oct 11
5,404
11.42
61,714 30 Sep 17 30 Oct 21
4,720
17.25
81,420 30 Sep 15 18 Oct 19
3,736
19.14
71,507 30 Sep 14 17 Oct 18
Deferred Equity STI
01 Oct 12
1,442
27.70
39,943 30 Jun 13 30 Jun 19
01 Oct 12
1,442
27.70
39,943 30 Jun 14 30 Jun 19
Dennis Finn8
Combined Incentive
30 Oct 15
SPPR
30 Oct 15
62,492
81,060
5.15
4.42
321,834 30 Sep 18 28 Oct 22
358,285 30 Sep 17 28 Oct 22
Denis Lucey8
Combined Incentive
08 Feb 13
4,901
17.25
84,542 30 Sep 15 18 Oct 19
Equity
17 Oct 11
5,244
19.14
100,370 30 Sep 14 17 Oct 18
Deferred Equity STI
01 Oct 12
1,485
27.70
41,135 30 Jun 13 30 Jun 19
01 Oct 12
1,484
27.70
41,107 30 Jun 14 30 Jun 19
Christopher Parker8
LTI
30 Oct 14
18,522
8.62
159,660 30 Sep 18 30 Oct 21
Combined Incentive
30 Oct 14
4,063
11.42
46,399 30 Sep 17 30 Oct 21
Equity
FORMER GROUP EXECUTIVES
Simon Holt9
LTI
08 Feb 13
17 Oct 11
30 Oct 15
30 Oct 14
24 Oct 13
08 Feb 13
17 Oct 11
30,303
13,464
3.69
8.62
111,818 30 Sep 19 28 Oct 22
116,060 30 Sep 18 30 Oct 21
8,264
13.59
112,308 30 Sep 17 24 Oct 20
4,337
17.25
74,813 30 Sep 15 18 Oct 19
2,842
19.14
54,396 30 Sep 14 17 Oct 18
SPPR
30 Oct 15
19,132
4.42
84,563 30 Sep 17 28 Oct 22
Deferred Equity STI
01 Oct 12
1,436
27.70
39,777 30 Jun 13 30 Jun 19
David Steele9
LTI
01 Oct 12
1,435
27.70
39,750 30 Jun 14 30 Jun 19
30 Oct 15
30 Oct 14
92,975
41,310
3.69
8.62
343,078 30 Sep 19 28 Oct 22
356,092 30 Sep 18 30 Oct 21
24 Oct 13
30,120
13.59
409,331 30 Sep 17 24 Oct 20
08 Feb 13
13,174
15.39
202,748 30 Sep 16 18 Oct 19
08 Feb 13
13,173
15.13
199,307 30 Sep 15 18 Oct 19
17 Oct 11
12,789
17.69
226,237 30 Sep 15 17 Oct 18
SPPR
30 Oct 15
37,190
4.42
164,380 30 Sep 17 28 Oct 22
Deferred Equity STI
01 Oct 12
2,615
27.70
72,436 30 Jun 13 30 Jun 19
01 Oct 12
2,615
27.70
72,436 30 Jun 14 30 Jun 19
Randy Karren11
LTI
30 Oct 14
14,618
8.62
126,007 30 Sep 18 30 Oct 21
24 Oct 13
11,102
13.59
150,876 30 Sep 17 24 Oct 20
08 Feb 13
08 Feb 13
17 Oct 11
4,566
15.39
70,271 30 Sep 16 18 Oct 19
4,565
15.13
69,068 30 Sep 15 18 Oct 19
6,079
19.14
116,352 30 Sep 14 17 Oct 18
Equity
Deferred Equity STI
01 Oct 12
2,261
27.70
62,630 30 Jun 13 30 Jun 19
01 Oct 12
2,261
27.70
62,630 30 Jun 14 30 Jun 19
DIRECTORS’ REPORT CONTINUED
FAIR
VALUE
PER
RIGHT
OF (AT
GRANT
DATE)2
$
FAIR
VALUE
OF
GRANT
(AT
GRANT
DATE)3
$
DATE
OF
GRANT
NUMBER
OF
RIGHTS
GRANTED1
PLAN
VESTING
DATE/
FIRST
EXERCISE
DATE
NUMBER
OF
RIGHTS
VESTED
EXPIRY
DATE
VALUE
OF
RIGHTS
VESTED4
$
NUMBER
OF
RIGHTS
EXERCISED
VALUE
OF
RIGHTS
EXERCISED4
$
NUMBER
OF
RIGHTS
LAPSED5
VALUE
OF
RIGHTS
LAPSED6
$
% OF
RIGHTS
LAPSED
Randy Karren
Employee Share
Purchase Plan10
15 May 14
15 May 13
9
40
16.57
24.05
149 15 May 17 15 May 17
962 15 May 16 15 May 16
Ian Wilkinson8
LTI
30 Oct 14
22,032
8.62
189,916 30 Sep 18 30 Oct 21
Equity
30 Oct 14
08 Feb 13
17 Oct 11
5,136
11.42
58,653 30 Sep 17 30 Oct 21
5,746
17.25
99,119 30 Sep 15 18 Oct 19
5,469
19.14
104,677 30 Sep 14 17 Oct 18
Deferred Equity STI
01 Oct 12
1,686
27.70
46,702 30 Jun 14 30 Jun 19
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,746
5,469
1,686
42,865
89,363
28,952
5,746
5,469
1,686
42,865
89,363
28,952
9
40
-
-
-
-
-
87 100.0%
388 100.0%
-
-
-
-
-
-
-
-
-
-
NON-EXECUTIVE DIRECTOR - EARNED WHILE AN EXECUTIVE
John Grill11
LTI
17 Oct 11
17,811
17.69
315,077 30 Sep 15 17 Oct 18
-
-
Deferred Equity STI
01 Oct 12
12,178
27.70
337,331 30 Jun 13 30 Jun 19 12,178
238,605
01 Oct 12
12,178
27.70
337,331 30 Jun 14 30 Jun 19 12,178
209,121
-
12,178
12,178
-
17,811
315,077 100.0%
238,605
209,121
-
-
-
-
-
-
1 The service and performance criteria for the rights are discussed in the LTI Plan section on page 39. 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). Where rights were granted prior to commencement as Executives, the service and performance criteria are aligned with those discussed in the Combined Incentive Plan
section in the 2015 Remuneration Report.
2 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. We have used a Monte Carlo simulation model to value the relative
TSR rights and SPPRs and a Black-Scholes model to value the EPS rights, other cash settled rights and other equity settled rights.
3 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.
4 This amount is based on the volume weighted average price of the Company’s shares for the five or 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) or following the end of the relevant financial year, as applicable.
5 The number of rights lapsed represents rights lapsed due to performance hurdles not being met and/or rights lapsed on cessation of employment.
6 Based on the measurement of the relevant performance hurdles, this total value may be an accumulation of values for rights lapsed over multiple periods.
7 The performance rights granted to Mr Abba in April 2015, as disclosed in the 2015 Remuneration Report, were structured with specific targets related to his personal performance and the ongoing
performance of the Improve business line.
8 The value of the rights issues to Mr Ashton, Mr Finn, Mr Lucey, Mr Parker and Mr Wilkinson are disclosed on page 44 to the extent that they were granted during their term as an Executive. Mr Ashton,
Mr Finn, Mr Parker and Mr Wilkinson were granted rights in the Combined Incentive Plan prior to them becoming KMP.
9 Mr Holt’s and Mr Steele's employment in the capacity of an Executive ceased on 1 December 2015 and 1 January 2016 respectively. Rights lapsed 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 cessation dates.
10 The fair value at grant for matching bonus entitlements under the Employee Share Purchase Plan is calculated as the weighted average market price over the plan year.
11 Mr Grill and Mr Karren received rights as part of their employment with the Company prior to their retirement effective 23 October 2012 and 31 March 2015 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 36. Rights lapsed on Mr Grill’s and Mr Karren’s retirement have been valued based on the volume weighted average price of the
Company’s shares for the five or 10 trading days up to and including their retirement dates.
All vested rights are exercisable. There are no vested and unexercisable rights.
48 WorleyParsons Annual Report 2016
NON-EXECUTIVE DIRECTOR - REMUNERATION OUTCOMES
Remuneration of the NEDs for FY2016 and FY2015 is set out below:
SHORT TERM EMPLOYEE BENEFITS
POST-EMPLOYMENT BENEFITS
SHARE BASED PAYMENT
FEES
$
TRAVEL ALLOWANCES
$
SUPERANNUATION1
$
EQUITY
INCENTIVE
STI/CASH SETTLED
$
John Grill
FY2016
FY2015
Ron McNeilly
FY2016
FY2015
Larry Benke
FY2016
FY2015
Jagjeet Bindra
FY2016
Erich Fraunschiel
FY2016
FY2015
John M Green
FY2016
FY2015
Christopher Haynes
FY2016
FY2015
Catherine Livingstone
FY2016
FY2015
Wang Xiao Bin
FY2016
FY2015
Total remuneration
FY2016
FY2015
378,439
441,217
292,693
293,217
232,000
232,000
225,500
221,808
222,342
203,511
212,282
224,000
224,000
201,390
201,726
201,390
201,726
-
5,000
15,000
-
30,000
30,000
25,000
20,000
5,000
20,000
-
25,000
30,000
20,000
-
25,000
20,000
2,180,731
2,028,510
180,000
90,000
16,614
18,783
19,307
18,783
-
-
-
19,192
18,658
18,689
18,718
-
-
18,610
18,274
18,610
18,274
111,022
111,490
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
TOTAL
$
395,053
465,000
327,000
312,000
262,000
262,000
250,500
261,000
246,000
242,200
231,000
249,000
254,000
240,000
220,000
245,000
240,000
2,471,753
2,230,000
1 Superannuation contributions are made on behalf of the NEDs in accordance with the Company’s statutory superannuation obligations. In some cases, the amounts in this table are lower than the
annualized superannuation guarantee cap (Cap). The legislation requires the Cap to apply quarterly. The lower amount results from those quarters in which only one payment was made and it is lower
than the quarterly Cap.
NON-EXECUTIVE DIRECTOR INTERESTS IN SHARES AND PERFORMANCE RIGHTS
NED beneficial interests in shares and performance rights of the Company as at 30 June 2016 are detailed in the below table. The service and
performance criteria for the rights are discussed in the LTI Plan section on page 39.
NUMBER OF SHARES AND PERFORMANCE RIGHTS HELD IN WORLEYPARSONS LIMITED
John Grill, AO1
Ron McNeilly
Larry Benke2
Jagjeet Bindra
Erich Fraunschiel
John M Green
Christopher Haynes, OBE
Catherine Livingstone, AO
Wang Xiao Bin
TYPE
Shares
Rights
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
BALANCE AT
1 JULY 2015
25,372,173
17,811
442,564
1,133,383
-
198,755
891,869
11,945
13,000
11,000
CHANGE IN STATUS
-
-
-
-
19,000
-
-
-
-
-
OTHER
TRANSACTIONS
-
(17,811)
-
-
16,650
-
-
-
-
-
BALANCE AT
30 JUNE 2016
25,372,173
-
442,564
1,133,383
35,650
198,755
891,869
11,945
13,000
11,000
1 Mr Grill received rights as part of his employment with the Company prior to his retirement effective 23 October 2012. In 2011, shareholders approved that Mr Grill’s performance rights should be cash
settled.
2 Mr Benke received exchangeable shares as part of the Colt Group consideration upon acquisition in 2007.
WorleyParsons Annual Report 2016 49
DIRECTORS’ REPORT CONTINUED
6. GLOSSARY OF TERMS
TERMS USED IN THE REMUNERATION REPORT
Clawback (Malus) – provides the Board with discretion on the treatment of equity awards where an employee has acted fraudulently or
dishonestly, is in breach of that employee’s obligations to the Company, or has received awards based on financial accounts which are later
restated.
Combined Incentive Plan – a variable component of total remuneration. Two thirds of the incentive value is paid as cash subject to the
achievement of annually set KPIs and one third is an annual allocation of performance rights deferred as an equity award subject to a two
year service, performance and share price hurdle.
Earnings Per Share (EPS) – determined by dividing the Group NPAT by the weighted average number of the Company’s ordinary shares on
issue during the financial year.
Executive – as detailed on page 34, Executives include both Executive Directors and Group Executives and have authority and responsibility
for planning, directing and controlling the activities of the entity, directly or indirectly.
Group Net Profit After Tax (NPAT) – is the net profit earned by the Group after deducting all expenses including interest, depreciation and
tax. From time to time, in determining outcomes under the incentive plans, the Board may use its discretion to apply the underlying NPAT
which in the Board’s opinion reflects the Company’s operating results.
Key Management Personnel (KMP) – those persons having authority and responsibility for planning, directing and controlling the activities
of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. KMP comprise Executives and
Non-Executive Directors and are detailed on pages 34 and 43.
Key Performance Indicators (KPIs) – performance targets agreed at the start of each financial year under the Combined Incentive Plan.
KPIs include both financial and non-financial metrics, examples of which are detailed on page 38.
Long Term Incentive (LTI) Plan – a variable component of total remuneration. Performance rights are granted to Executives under the LTI
Plan and will vest and become available for exercise after four years, subject to Company achievement against prescribed long term
performance requirements.
Non-Executive Director (NED) – as detailed on page 43, directors of the entity have authority and responsibility for planning, directing and
controlling the activities of the entity, directly or indirectly.
Total Shareholder Return (TSR) – provides a measure of the change in the value of the Company’s share price over a period, including
reinvested dividends, expressed as a percentage of the opening value of the shares.
This Directors’ Report (including Remuneration Report) is made in accordance with a resolution of the directors.
JOHN GRILL AO
Chairman
Sydney, 24 August 2016
50 WorleyParsons Annual Report 2016
STATEMENT OF FINANCIAL PERFORMANCE
For the financial year ended 30 June 2016
REVENUE AND OTHER INCOME
Professional services revenue
Procurement revenue
Construction and fabrication revenue
Interest income
Other income
Total revenue and other income
EXPENSES
Professional services costs
Procurement costs
Construction and fabrication costs
Global support costs
Other costs
Borrowing costs
Total expenses
Share of net (losses)/profits of associates accounted for using the equity method
Profit before income tax expense
Income tax expense
Profit/(loss) after income tax expense
Profit/(loss) after income tax expense attributable to:
Members of WorleyParsons Limited
Non-controlling interests
Basic earnings/(loss) per share (cents)
Diluted earnings/(loss) per share (cents)
The above Statement of Financial Performance should be read in conjunction with the accompanying notes.
NOTES
4
5
21(C)
6(A)
16
16
CONSOLIDATED
2016
$’M
4,641.8
2,571.7
561.6
8.8
6.2
7,790.1
(4,457.0)
(2,558.0)
(513.8)
(109.2)
(12.1)
(68.8)
(7,718.9)
(2.3)
68.9
(20.3)
48.6
23.5
25.1
9.5
9.5
2015
$’M
5,517.9
2,370.9
857.9
6.6
4.2
8,757.5
(5,166.8)
(2,360.0)
(775.3)
(103.9)
(268.6)
(62.0)
(8,736.6)
10.8
31.7
(70.7)
(39.0)
(54.9)
15.9
(22.2)
(22.2)
WorleyParsons Annual Report 2016 51
STATEMENT OF COMPREHENSIVE INCOME
For the financial year ended 30 June 2016
Profit/(loss) after income tax expense
Other comprehensive (loss)/income
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 (loss)/income, net of tax
Total comprehensive (loss)/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
2016
$’M
48.6
(111.9)
3.8
(59.5)
(79.9)
20.4
2015
$’M
(39.0)
95.9
(0.3)
56.6
32.3
24.3
52 WorleyParsons Annual Report 2016
STATEMENT OF FINANCIAL POSITION
As at 30 June 2016
ASSETS
Current assets
Cash and cash equivalents
Trade receivables
Other receivables
Prepayments
Income tax receivable
Derivatives
Total current assets
Non-current assets
Intangible assets
Deferred tax assets
Derivatives
Equity accounted associates
Property, plant and equipment
Other non-current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Interest bearing loans and borrowings
Income tax payable
Derivatives
Total current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Provisions
Trade and other payables
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained profits
Members of WorleyParsons Limited
Non-controlling interests
TOTAL EQUITY
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
NOTES
7
8
8
18
10
29(A)
18
21(B)
28
9
11
13
18
13
29(B)
11
9
14
15
CONSOLIDATED
2016
$’M
2015
$’M
373.1
1,648.2
231.0
116.6
15.4
0.7
2,385.0
2,077.2
297.5
94.8
86.8
73.3
6.2
2,635.8
5,020.8
1,244.3
406.0
249.2
14.8
4.8
1,919.1
990.2
116.8
84.4
30.4
1,221.8
3,140.9
1,879.9
1,264.9
(223.1)
842.1
1,883.9
(4.0)
1,879.9
381.9
1,918.1
224.8
113.3
60.8
0.9
2,699.8
2,090.3
212.3
73.6
116.2
107.2
1.7
2,601.3
5,301.1
1,350.1
487.9
25.5
13.4
2.9
1,879.8
1,210.4
115.7
48.1
29.5
1,403.7
3,283.5
2,017.6
1,255.0
(111.0)
873.0
2,017.0
0.6
2,017.6
WorleyParsons Annual Report 2016 53
STATEMENT OF CHANGES IN EQUITY
For the financial year ended 30 June 2016
ISSUED
CAPITAL
$’M
1,255.0
RETAINED
PROFITS
$’M
873.0
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$’M
(159.0)
HEDGE
RESERVE
$’M
10.7
PERFORMANCE
RIGHTS
RESERVE
$’M
46.9
ACQUISITION
RESERVE
$’M
(9.6)
MEMBERS OF
WORLEY
PARSONS
LIMITED
$’M
2,017.0
NON-
CONTROLLING
INTERESTS
$’M
0.6
CONSOLIDATED
As at 1 July 2015
Profit after income tax
expense
Foreign exchange movement
on translation of foreign
controlled entities and
associates
Net investments hedged
Income tax on net
investments hedged
Net loss on foreign exchange
hedges
Income tax on net loss on
foreign exchange hedges
Fair value gain on mark to
market of cross currency
hedge
Income tax on fair value gain
on mark to market of cross
currency hedge
Total comprehensive
income/(loss), net of tax
Transactions with owners
Share based payments
expense
Transfer to issued capital on
issuance of shares to satisfy
performance rights
Dividends paid
-
-
-
-
-
-
-
-
-
-
9.9
-
23.5
-
-
-
-
-
-
-
-
(72.5)
(56.2)
21.5
-
-
-
-
-
-
-
-
(0.5)
0.0
5.7
(1.4)
23.5
(107.2)
3.8
-
-
-
-
-
-
-
-
-
-
-
(54.4)
842.1
-
-
-
-
-
-
(266.2)
14.5
1.2
(9.9)
-
38.2
-
-
-
-
-
-
-
-
-
-
-
-
(9.6)
TOTAL
$’M
2,017.6
48.6
(77.2)
(56.2)
21.5
(0.5)
0.0
5.7
(1.4)
23.5
(72.5)
(56.2)
21.5
(0.5)
0.0
5.7
(1.4)
25.1
(4.7)
-
-
-
-
-
-
(79.9)
20.4
(59.5)
1.2
-
-
-
1.2
-
(54.4)
1,883.9
(25.0)
(4.0)
(79.4)
1,879.9
As at 30 June 2016
1,264.9
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
54 WorleyParsons Annual Report 2016
STATEMENT OF CHANGES IN EQUITY
For the financial year ended 30 June 2016
CONSOLIDATED
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$’M
(246.5)
HEDGE
RESERVE
$’M
11.0
PERFORMANCE
RIGHTS
RESERVE
$’M
49.3
ACQUISITION
RESERVE
$’M
(9.6)
MEMBERS OF
WORLEY
PARSONS
LIMITED
$’M
2,181.6
NON-
CONTROLLING
INTERESTS
$’M
3.3
-
94.0
(9.3)
2.8
-
-
-
-
-
-
-
-
-
0.7
(0.1)
(2.8)
0.8
1.1
RETAINED
PROFITS
$’M
1,137.7
(54.9)
-
-
-
-
-
-
-
-
ISSUED
CAPITAL
$’M
1,239.7
-
-
-
-
-
-
-
-
-
-
-
15.3
As at 1 July 2014
(Loss)/profit after income tax
expense
Foreign exchange movement
on translation of foreign
controlled entities and
associates
Net investments hedged
Income tax on net
investments hedged
Net gain on foreign exchange
hedges
Income tax on net gain on
foreign exchange hedges
Fair value loss on mark to
market of cross currency
hedge
Income tax on fair value loss
on mark to market of cross
currency hedge
Disposal of interest rate
hedges
Total comprehensive
(loss)/income, net of tax
Transactions with owners
Share based payments
expense
Transfer to issued capital on
issuance of shares to satisfy
performance rights
Dividends paid
As at 30 June 2015
(54.9)
87.5
(0.3)
-
-
-
-
-
-
-
-
(159.0)
10.7
12.9
(15.3)
-
46.9
-
1,255.0
(209.8)
873.0
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(9.6)
TOTAL
$’M
2,184.9
(39.0)
102.4
(9.3)
2.8
0.7
(0.1)
(2.8)
0.8
1.1
(54.9)
94.0
15.9
8.4
(9.3)
2.8
0.7
(0.1)
(2.8)
0.8
1.1
-
-
-
-
-
-
-
32.3
24.3
56.6
12.9
-
-
-
12.9
-
(209.8)
2,017.0
(27.0)
0.6
(236.8)
2,017.6
WorleyParsons Annual Report 2016 55
STATEMENT OF CASH FLOWS
For the financial year ended 30 June 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
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 acquisition of controlled entities
Cash balances in controlled entities acquired, net of bank overdraft
Proceeds from disposal of investments
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 loans and borrowings
Proceeds from loans and borrowings
Costs of bank facilities
Net loans from/(to) related parties
Cash received on close out of cross currency swap
Dividends paid to members of WorleyParsons Limited
Dividends paid to non-controlling interests
Net cash outflow from financing activities
Net increase/(decrease) in cash
Cash and cash equivalents at the beginning of the financial year
Effects of foreign exchange rate changes on cash
Cash and cash equivalents at the end of the financial year
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
NOTES
7
20(B)
20(B)
17(B)
7
CONSOLIDATED
2016
$’M
8,113.3
(7,809.2)
304.1
6.3
6.4
(60.9)
(63.9)
192.0
(25.2)
-
13.8
(69.5)
1.0
(79.9)
(3,635.6)
3,612.3
(3.5)
0.5
-
(54.4)
(24.1)
(104.8)
7.3
380.8
(15.0)
373.1
2015
$’M
9,010.3
(8,566.7)
443.6
15.8
4.1
(56.2)
(156.0)
251.3
(106.1)
4.2
-
(88.6)
1.6
(188.9)
(3,212.7)
3,347.6
(3.3)
(1.5)
19.0
(209.8)
(27.0)
(87.7)
(25.3)
368.3
37.8
380.8
56 WorleyParsons Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 30 June 2016
1. CORPORATE INFORMATION
The financial report of WorleyParsons Limited (Company or parent entity) for the financial year ended 30 June 2016 was authorized for issue in
accordance with a resolution of the directors on 24 August 2016.
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 purposes of preparing the financial statements.
The nature of the operations and principal activities of the Company are described in note 3.
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 ASIC Corporations Instrument 2016/191 (Rounding in Financial /Directors' Reports) 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 Instrument. Amounts
shown as 0.0 represent amounts less than AUD 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 (IASB).
(iii) Historical cost convention
The financial report has been prepared on a historical cost basis, except for derivative financial instruments 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.
The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances.
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 4;
• goodwill and intangible assets with identifiable useful lives, refer note 10;
• project, warranty and other provisions, refer note 11; and
• recovery of deferred taxes, refer note 29.
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 amendment from 1 July 2015:
• AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments [AASB CF 2013-1, AASB
1031, and AASB 9].
Adoption of this amendment did not have any material effect on the Statement of Financial Performance, Statement of Comprehensive Income and
Statement of Financial Position of the Group.
WorleyParsons Annual Report 2016 57
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(vi) New accounting standards not yet applicable
The following new 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 2016:
Effective 1 July 2016:
AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations
[AASB 1 & AASB 11]
AASB 2014-3 provides guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business to
apply, to the extent of its share, all the principles in AASB 3 Business Combinations and other AAS except for those principles that conflict with the
guidance in AASB 11. Furthermore, entities are required to disclose the information required by AASB 3 and other AAS for business combinations.
The impacts of this amendment are not expected to be material for the Group’s financial statements.
AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation [AASB 116 &
AASB 138]
AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets both establish the principle for the basis of depreciation and amortization as
being the expected pattern of consumption of the future economic benefits of an asset. The IASB has clarified that the use of revenue based methods
to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally
reflects factors other than the consumption of the economic benefits embodied in the asset. The amendment also clarified that revenue is generally
presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption,
however, can be rebutted in certain limited circumstances. The amendment is not expected to impact the Group’s financial statements.
AASB 2014-9 Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements
AASB 2014-9 amends AASB 127 Separate Financial Statements, and consequentially amends AASB 1 First-time Adoption of Australian Accounting
Standards and AASB 128 Investments in Associates and Joint Ventures, to allow entities to use the equity method of accounting for investments in
subsidiaries, joint ventures and associates in their separate financial statements. AASB 2014-9 also makes editorial corrections to AASB 127. The
amendment is not expected to impact the Group’s financial statements.
AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
AASB 2014-10 amends AASB 10 Consolidated Financial Statements and AASB 128 Investments in Associates and Joint Ventures to address an
inconsistency between the requirements in AASB 10 and those in AASB 128, in dealing with the sale or contribution of assets between an investor
and its associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a
business, as defined in AASB 3 Business Combinations, between an investor and its associate or joint venture, is recognized in full. However, any gain
or loss resulting from the sale or contribution of assets that do not constitute a business is recognized only to the extent of unrelated investors’
interests in the associate or joint venture. The impact of this amendment is not expected to be material to the Group’s financial statements.
Effective 1 July 2017:
2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses: Amendments to AASB 112
This Standard amends AASB 112 Income Taxes to clarify the requirements on recognition of deferred tax assets for unrealized losses on debt
instruments measured at fair value. The impacts of this amendment are not expected to be material to the Group’s financial statements.
2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107
This Standard amends AASB 107 Statement of Cash Flows to require entities preparing financial statements in accordance with Tier 1 reporting
requirements to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities,
including both changes arising from cash flows and non-cash changes. The amendment is expected to enhance the Group's disclosure in relation to
interest bearing loans and borrowings with minor additional changes.
Effective 1 July 2018:
AASB 15 Revenue from Contracts with Customers and AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15
AASB 15 addresses how revenue is recognized and will require the Group to identify contracts and performance obligations, determine the
transaction price, allocate the transaction price to each performance obligation and recognize revenue when each performance obligation is satisfied.
AASB 2014-5 incorporates the consequential amendments to a number of AASBs (including interpretations) arising from the issuance of AASB 15.
The Group has not finalized its assessment of how changes to the rules for revenue recognition will impact the Group’s financial statements.
AASB 9 Financial Instruments
AASB 9 is the AASB’s replacement for AASB 139 Financial Instruments: Recognition and Measurement. The standard includes requirements for
classification, recognition and measurement, impairment, derecognition and general hedge accounting. The Group has not yet finalized its
assessment of how changes to the rules for financial instruments will impact the Group’s financial statements.
Effective 1 July 2019:
AASB 16 Leases
AASB 16 is the AASB's replacement for AASB 117 Leases. The standard includes new recognition, measurement and disclosure requirements for
lessees. The Group has not yet finalized its assessment of how the new lessee accounting requirements will impact the Group's financial statements.
58 WorleyParsons Annual Report 2016
(B) BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by WorleyParsons Limited as at 30 June 2016 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 are equity accounted and are not part of the consolidated entity
(refer note 21).
The impact of all transactions between entities in the consolidated entity is 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.
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 the equity of members of WorleyParsons Limited.
(C) FOREIGN CURRENCY TRANSLATION
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.
Translation of foreign currency transactions
Transactions denominated in a foreign currency are converted at the foreign exchange rate at the date of the transaction. Foreign currency
receivables and payables at balance date are translated at foreign exchange rates at balance date. Foreign exchange gains and losses are brought to
account in determining the profit and loss for the financial year.
(D) OTHER ACCOUNTING POLICIES
Significant and other accounting policies that summarize the measurement basis used and are relevant to the understanding of the financial
statements are provided throughout the notes to the financial statements.
3. SEGMENT INFORMATION
(A) OPERATING SEGMENTS
Professional services revenue
Construction and fabrication revenue
Procurement revenue at margin
Other income
Total segment revenue1
Segment result2
Segment margin
Other segment information
Depreciation and amortization expense
Impairment of goodwill
Share of net (losses)/profits of associates accounted for using the
equity method
Equity accounted associates
Purchase of non-current assets
SERVICES
2016
$’M
2015
$’M
MAJOR
PROJECTS
IMPROVE
ADVISIAN
TOTAL
2016
$’M
2015
$’M
2016
$’M
2015
$’M
2016
$’M
2015
$’M
2016
$’M
2015
$’M
3,081.7 3,854.8
170.2
307.0
4.2
85.7
268.3
0.8
778.5
475.9
26.1
0.9
881.5
687.7
41.2
-
512.0 577.9
-
1.7
-
-
7.3
-
599.9 678.1
-
23.2
-
-
55.8
-
4,972.1 5,992.3
857.9
373.1
4.2
561.6
357.5
1.7
3,436.5 4,336.2
1,281.4 1,610.4
519.3 579.6
655.7 701.3
5,892.9 7,227.5
252.0
341.9
7.3% 7.9%
109.1
128.0
8.5% 7.9%
23.4
27.3
4.5% 4.7%
44.3
52.7
6.8% 7.5%
428.8
549.9
7.3% 7.6%
42.3
-
(8.1)
60.6
40.3
69.1
59.4
(2.9)
69.1
40.3
13.6
-
(0.6)
7.3
17.7
7.3
56.2
2.6
3.2
15.0
7.3
-
6.3
4.9
60.4
11.1
16.3
5.5
42.0
4.5
7.7
-
0.1
2.6
6.0
6.9
22.6
-
1.9
4.3
70.9
-
(2.3)
88.2
198.6
10.8
86.8
69.5
116.2
64.1
The previously reported segment results for the year ended 30 June 2015 have been restated to be comparable with the revised segmentation approach as
required by AASB 8 Operating Segments. The Group has also included additional information segmented according to its customer sector groups.
1 Segment revenue represents aggregated revenue, which is defined as statutory revenue and other income plus share of revenue from associates less procurement
revenue at nil margin, interest income and net gain on revaluation of investments previously accounted for as joint operations. The directors believe the disclosure of
revenue attributable to associates provides additional information in relation to the financial performance of the Group.
2 Segment result is segment revenue less segment expenses and excludes the items listed in note 3(H). It is the key financial measure that is presented to the chief
operating decision makers.
WorleyParsons Annual Report 2016 59
3. SEGMENT INFORMATION (continued)
(B) CUSTOMER SECTOR GROUPS
Professional services revenue
Construction and fabrication revenue
Procurement revenue at margin
Other income
Total segment revenue
Segment result
Segment margin
HYDROCARBONS
2016
$’M
2015
$’M
3,444.8
561.6
259.6
0.9
4,196.2
857.9
277.8
0.2
4,266.9
5,332.1
329.0
7.7%
484.3
9.1%
MINERALS, METAL
& CHEMICALS
INFRASTRUCTURE
TOTAL
2016
$’M
634.1
-
8.4
-
642.5
39.9
6.2%
2015
$’M
894.3
-
9.3
0.1
903.7
46.5
5.1%
2016
$’M
893.2
-
89.5
0.8
983.5
59.9
6.1%
2015
$’M
901.8
-
86.0
3.9
991.7
19.1
1.9%
2016
$’M
2015
$’M
4,972.1
561.6
357.5
1.7
5,992.3
857.9
373.1
4.2
5,892.9
7,227.5
428.8
7.3%
549.9
7.6%
(C) RECONCILIATION OF SEGMENT REVENUE TO TOTAL REVENUE AND OTHER INCOME PER THE
STATEMENT OF FINANCIAL PERFORMANCE
Segment revenue
Procurement revenue at nil margin (including share of revenue from associates)
Share of revenue from associates
Interest income
Net gain on revaluation of investments previously accounted for as joint operations
Total revenue and other income per the Statement of Financial Performance
(D) RECONCILIATION OF SEGMENT RESULT TO PROFIT/ (LOSS) AFTER INCOME TAX EXPENSE PER THE
STATEMENT OF FINANCIAL PERFORMANCE
Segment result
Global support costs
Interest and tax for associates
Amortization of acquired intangible assets
Total underlying earnings before interest expense and tax expense (underlying EBIT)
Total underlying EBIT margin on aggregated revenue for the Group
Staff restructuring costs1
Onerous lease contracts2
Onerous engineering software licenses
Other restructuring costs
Write-down of investments in equity accounted associates
Certain functional currency related foreign exchange gains
Net gain on revaluation of investments previously accounted for as joint operations
Impairment of goodwill
Arkutun-Dagi project settlement costs
Total EBIT
EBIT margin on aggregated revenue for the Group
Net borrowing costs
Income tax expense
Profit/(loss) after income tax expense per the Statement of Financial Performance
1 Includes staff restructuring costs incurred in equity accounted investments.
2 Includes onerous lease costs incurred in equity accounted investments.
60 WorleyParsons Annual Report 2016
TOTAL
2015
$’M
7,227.5
2,038.0
(514.6)
6.6
-
2016
$’M
5,892.9
2,226.4
(342.5)
8.8
4.5
7,790.1
8,757.5
TOTAL
2015
$’M
549.9
(103.4)
(6.7)
(21.8)
418.0
5.8%
(38.3)
(20.2)
-
(3.8)
-
-
-
2016
$’M
428.8
(98.6)
(8.3)
(19.2)
302.7
5.1%
(76.8)
(86.4)
(14.3)
(4.6)
(12.1)
15.9
4.5
-
-
(198.6)
(70.0)
128.9
2.2%
(60.0)
(20.3)
48.6
87.1
1.2%
(55.4)
(70.7)
(39.0)
(E) RECONCILIATION OF GLOBAL SUPPORT COSTS TO THE STATEMENT OF FINANCIAL PERFORMANCE
Global support costs per Segment Information
Staff restructuring costs
Staff restructuring costs attributable to professional services costs, construction and fabrication costs and staff restructuring costs
incurred by equity accounted associates
Other restructuring costs
Global support costs per the Statement of Financial Performance
(F) GEOGRAPHIC SEGMENTS1
Revenue from external customers2
2016
Australia, Pacific, Asia and China
Europe, Middle East and Africa
Americas
Total
Other income
Interest income
AGGREGATED
REVENUE
ADD:
PROCUREMENT
REVENUE AT
NIL MARGIN
$’M
1,366.7
2,059.4
2,466.8
5,892.9
$’M
14.1
42.1
2,170.2
2,226.4
Total revenue and other income per the Statement of Financial Performance
2015
Australia, Pacific, Asia and China
Europe, Middle East and Africa
Americas
Total
Other income
Interest income
AGGREGATED
REVENUE
ADD:
PROCUREMENT
REVENUE AT
NIL MARGIN
$’M
1,599.0
2,355.2
3,273.3
7,227.5
$’M
15.2
251.8
1,771.0
2,038.0
Total revenue and other income per the Statement of Financial Performance
Non-current assets by geographical location:4
Australia, Pacific, Asia and China
Europe, Middle East and North Africa
Americas
Non-current assets by geographical location
LESS:
SHARE OF
REVENUE
FROM
ASSOCIATES
$’M
(120.3)
(154.3)
(67.9)
(342.5)
LESS:
SHARE OF
REVENUE
FROM
ASSOCIATES
$’M
(176.6)
(247.3)
(90.7)
(514.6)
TOTAL
2015
$’M
103.4
38.3
(37.8)
2016
$’M
98.6
76.8
(70.8)
4.6
-
109.2
103.9
LESS:
OTHER
INCOME3
$’M
(1.7)
-
-
(1.7)
LESS:
OTHER
INCOME
$’M
(3.2)
-
(1.0)
(4.2)
2016
$’M
112.6
115.3
125.1
353.0
TOTAL
REVENUE
FROM
EXTERNAL
CUSTOMERS
$’M
1,258.8
1,947.2
4,569.1
7,775.1
6.2
8.8
7,790.1
TOTAL
REVENUE
FROM
EXTERNAL
CUSTOMERS
$’M
1,434.4
2,359.7
4,952.6
8,746.7
4.2
6.6
8,757.5
2015
$’M
126.0
136.1
146.5
408.6
1 Geographic locations are presented across all business lines. This is different to the internal reports presented to the chief operating decision makers.
2 Revenue is attributed to the geographic location based on the entity providing the services.
3 Excludes net gain on revaluation of investments previously accounted for as joint operations.
4 Excludes goodwill, deferred tax assets and derivative financial instruments.
WorleyParsons Annual Report 2016 61
3. SEGMENT INFORMATION (continued)
(G) IDENTIFICATION OF REPORTABLE SEGMENTS
The Group has identified its operating segments based on the monthly internal reports that are reviewed and used by the Chief Executive Officer
(CEO), Group Managing Director Finance / CFO and other Group Managing Directors (chief operating decision makers) in assessing performance
and in determining the allocation of resources. Effective 1 July 2015, the Group established its advisory and consulting business, Advisian, as an
additional business line. As a result, the business operations are managed and reported by the following business lines: Services, Major Projects,
Improve and Advisian. Changes in business lines reporting also included, amongst other changes, the Group’s Canadian construction and
fabrication business Cord now being reported as a part of Major Projects. In addition, during the financial year 2016, a fully costed information
technology model was introduced which resulted in transition of selected costs from global support costs as disclosed in the previous period to each
of the operating business lines in the current period. This represents a change to the operating segments reported in the previous corresponding
period. The previously reported segment results for the year ended 30 June 2015 have been restated to be comparable with the revised segmentation
approach as required by AASB 8 Operating Segments. The Group has also included additional information segmented according to its customer
sector groups.
(H) ACCOUNTING POLICIES AND INTER-SEGMENT TRANSACTIONS
Segment revenues and expenses 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 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 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:
• impairment of goodwill;
• global support costs;
• Arkutun-Dagi project settlement costs;
• interest and tax for associates;
• amortization of acquired intangible assets;
• staff restructuring costs;
• onerous lease contracts;
• onerous engineering software licenses;
• write-down of investments in equity accounted associates;
• certain functional currency related foreign exchange gains;
• net gain on revaluation of investments previously accounted for as joint operations;
• net borrowing costs; and
• income tax expense.
(I) MAJOR CUSTOMERS
The most significant customer accounted for 5.6% (2015: 6.4%) of aggregated revenue and is within the Services, Major Projects, Improve and
Advisian business lines and Hydrocarbons customer sector group.
4. REVENUE AND OTHER INCOME
Professional services revenue
Procurement revenue
Construction and fabrication revenue
Interest income
Revenue
Net gain on revaluation of investments previously accounted for as joint operations
Gain on sale of Exmouth Power Station
Other
Total revenue and other income
CONSOLIDATED
2016
$’M
4,641.8
2,571.7
561.6
8.8
7,783.9
4.5
-
1.7
7,790.1
2015
$’M
5,517.9
2,370.9
857.9
6.6
8,753.3
-
1.3
2.9
8,757.5
During the year ended 30 June 2016, the Group finalized the acquisition accounting for an additional net interest in entities which had previously
been accounted for as joint operations. This resulted in a $4.5 million net gain on revaluation of investments previously accounted for as joint
operations. There was no such transaction during the year ended 30 June 2015.
RECOGNITION AND MEASUREMENT
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. Revenues are recognized net of the amount of goods and services tax (GST). The following specific recognition criteria must be met before
revenue is recognized:
62 WorleyParsons Annual Report 2016
Professional services and construction and fabrication
Revenue from cost plus contracts is recognized by reference to the recoverable costs incurred during the reporting period plus the percentage of
fees earned. Contract revenue and costs 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. 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.
Procurement
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.
Interest
Interest income is recognized as it accrues using the effective interest rate method.
Dividends
Revenue is recognized when the Group’s right to receive the payment is established.
KEY ESTIMATES
Percentage of completion
The percentage of completion is estimated by qualified professionals. The Group considers the terms of the contract, internal models and other
sources when estimating the projected total cost and the stage of completion.
5. EXPENSES AND LOSSES/ (GAINS)
Profit before income tax expense includes the following specific expenses and losses/(gains):
EXPENSES AND LOSSES
Short term employee benefits
Post-employment benefits
Share based payments
Total staff costs
Impairment of goodwill
Write-down of investment in equity accounted associates
Arkutun-Dagi project settlement costs
Total other costs
Operating lease rentals - minimum lease payments
Amortization
Depreciation
MOVEMENTS IN PROVISIONS
Employee benefits
Onerous leases
Warranties
Insurance
Other
CONSOLIDATED
2016
$’M
2015
$’M
3,559.8
106.5
1.2
3,667.5
-
12.1
-
12.1
151.1
65.0
25.1
166.0
86.4
6.3
(5.1)
27.9
4,119.3
138.0
12.9
4,270.2
198.6
-
70.0
268.6
210.6
85.4
24.6
204.7
20.2
9.8
(2.9)
25.3
RECOGNITION AND MEASUREMENT
Employee benefits
Employee benefits expenses are charged against profit on a net basis in their respective categories.
(i) Share based payments – 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 equity settled 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.
WorleyParsons Annual Report 2016 63
5. EXPENSES AND LOSSES/ (GAINS) (continued)
Fair value per right at grant date is independently determined using an appropriate option pricing model that takes into account the exercise price,
the term of the right, the vesting and performance criteria, the impact of dilution, the non-traded 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 and the SPPRs. For the EPS, EBIT and
“continuous employment" condition, the Black-Scholes model is utilized. Total fair value at grant date 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) Employee share plan
Employees in eligible countries were 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
the 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. The employee share plan has closed to new participants, effective from 1 May 2016.
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:
• interest on bank overdrafts, and short term and long term loans and borrowings;
• amortization of discounts or premiums relating to loans and borrowings and non-current payables; and
• finance lease charges.
Operating lease rentals – minimum lease payments
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 part
of the total lease expense.
Depreciation and amortization
Property, plant and equipment
Depreciation is calculated on a straight line basis to write off the net cost 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.
Identifiable intangible assets
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 for an intangible asset
with a finite useful life is 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. 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
• trade names
• computer software
• other
5 years; and
5-20 years;
3-10 years.
3-15 years;
Goods and Services Tax (GST)
Expenses are recognized net of the amount of GST except where the GST incurred is not recoverable from the taxation authority. In these
circumstances, GST is recognized as part of the expense.
6. INCOME TAX
(A) INCOME TAX EXPENSE
Current tax
Deferred tax
Under/(over)provision in previous financial periods
Income tax expense
Deferred income tax expense included in income tax expense comprises:
(Increase)/decrease in deferred tax assets
Increase/(decrease) in deferred tax liabilities
Deferred tax
64 WorleyParsons Annual Report 2016
CONSOLIDATED
2016
$’M
2015
$’M
124.8
(104.8)
0.3
20.3
(105.7)
0.9
(104.8)
81.0
(8.1)
(2.2)
70.7
10.6
(18.7)
(8.1)
(B) RECONCILIATION OF PRIMA FACIE TAX PAYABLE TO INCOME TAX EXPENSE
Profit before income tax expense
Prima facie tax expense at WorleyParsons Limited’s statutory income tax rate of 30% (2015: 30%)
Tax effect of amounts which are non-deductible/(non-taxable) in calculating taxable income:
Non-deductible impairment of goodwill
Non-deductible share based payments expense
Non-taxable gain on acquisitions
Non-deductible impairment of associates
Share of losses/(profits) of associates accounted for using the equity method
Tax losses not previously recognized
Under/(over)provision in previous financial periods
Other
Income tax expense
CONSOLIDATED
2016
$’M
68.9
20.7
-
0.4
(1.4)
3.6
0.7
(1.7)
0.3
(2.3)
20.3
2015
$’M
31.7
9.5
59.6
3.8
-
-
(3.2)
(0.7)
(2.2)
3.9
70.7
(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
(20.1)
(3.5)
(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%
84.1
25.2
57.6
17.3
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.
RECOGNITION AND MEASUREMENT
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 as well as any adjustments required between prior periods’ current tax expense and income
tax returns and any relevant withholding taxes.
Current and deferred tax amounts relating to items recognized directly in equity are recognized in equity and not in the Statement of Financial
Performance.
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.
WorleyParsons Annual Report 2016 65
NOTES
CONSOLIDATED
2016
$’M
2015
$’M
373.1
381.9
7. CASH AND CASH EQUIVALENTS
Balance per the Statement of Financial Position
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
Cash and cash equivalents
Less: bank overdraft
Balance per the Statement of Cash Flows
13
Reconciliation of profit/(loss) after income tax expense to net cash inflow from operating activities:
Profit/(loss) after income tax expense
NON-CASH ITEMS
Impairment of goodwill
Amortization
Depreciation
Share based payments expense
Doubtful debts expense
Share of associates' dividends received in excess of share of (losses)/profits
Net gain on revaluation of investments previously accounted for as joint operations
Write-down of investments in equity accounted associates
Write-down of onerous engineering software licenses
Other
Cash flow adjusted for non-cash items
CHANGES IN ASSETS AND LIABILITIES ADJUSTED FOR EFFECTS OF PURCHASE OF
CONTROLLED ENTITIES
Decrease/(increase) in trade and other receivables
Increase in prepayments and other assets
Increase in deferred tax assets
Decrease/(increase) in income tax receivable
(Decrease)/increase in trade and other payables
(Decrease)/increase in billings in advance
Increase/(decrease) in income tax payable
Increase/(decrease) in deferred tax liabilities
(Decrease)/increase in provisions
Net cash inflow from operating activities
373.1
373.1
-
373.1
48.6
-
65.0
25.1
1.2
3.5
8.6
(4.5)
12.1
14.3
3.2
381.9
381.9
(1.1)
380.8
(39.0)
198.6
85.4
24.6
12.9
13.9
5.0
-
-
1.3
177.1
302.7
223.7
(17.4)
(85.2)
39.2
(2.5)
(93.8)
1.4
1.1
(51.6)
192.0
(48.4)
(26.9)
(11.5)
(41.2)
58.4
11.3
(22.7)
(12.6)
42.2
251.3
RECOGNITION AND MEASUREMENT
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.
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 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 is classified as an operating cash flow.
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 below.
PROCUREMENT AND RESTRICTED CASH AND CASH EQUIVALENTS
Included within cash and cash equivalents is $83.6 million (2015: $107.5 million) which has been identified as for procurement ($69.4 million) or
restricted, but available for use under certain circumstances by the Group ($14.2 million).
Procurement cash is held in relation to procurement activities undertaken by the Group on behalf of its customers (refer note 27). Restricted cash is
held in relation to guarantees (refer note 25(A)) and financing activities.
66 WorleyParsons Annual Report 2016
NOTES
CONSOLIDATED
2016
$’M
2015
$’M
8. TRADE AND OTHER RECEIVABLES
TRADE RECEIVABLES
Trade receivables
Unbilled contract revenue
Retentions
Allowance for impairment of trade receivables
Allowance for impairment of trade receivables
Balance at the beginning of the financial year
Net charge to the Statement of Financial Performance
Amounts written off against the opening allowance
Differences arising on translation of foreign operations
Balance at the end of the financial year
The Group's exposure to credit, currency and interest rate risk for trade receivables and unbilled
contract revenue is disclosed in note 18.
OTHER RECEIVABLES
Other receivables
Amounts owing by associates and related parties
30(B)
832.9
823.2
42.8
(50.7)
949.5
952.4
65.7
(49.5)
1,648.2
1,918.1
49.5
3.5
(3.1)
0.8
50.7
176.6
54.4
231.0
36.4
13.9
(3.7)
2.9
49.5
164.6
60.2
224.8
RECOGNITION AND MEASUREMENT
All trade and other receivables are recognized at the original amounts less an allowance for any impairment of receivables. An allowance for
impairment of receivables 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. Receivables are stated with the amount of GST included.
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 Group’s activities in general.
9. TRADE AND OTHER PAYABLES
CURRENT
Trade payables
Accruals
Payables to associates and related parties
Billings in advance
Accrued staff costs
Other payables
NON-CURRENT
Other payables
NOTES
30(B)
CONSOLIDATED
2016
$’M
2015
$’M
477.7
500.2
16.7
83.2
158.7
7.8
499.0
449.0
11.0
177.0
203.0
11.1
1,244.3
1,350.1
30.4
30.4
29.5
29.5
The Group’s exposure to currency and interest rate risk for trade and other payables is disclosed in note 18.
RECOGNITION AND MEASUREMENT
Liabilities for trade and other payables 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. Payables are stated with the amount of GST included.
WorleyParsons Annual Report 2016 67
CONSOLIDATED
2016
$’M
2015
$’M
10. 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
Other
At cost
Accumulated amortization
Total intangible assets
2,090.7
(200.2)
1,890.5
191.3
(162.6)
28.7
83.9
(72.8)
11.1
301.1
(165.4)
135.7
25.9
(14.7)
11.2
2,077.2
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 2015
Additions
Impairment
Amortization
Differences arising on translation of foreign
operations
Balance at 30 June 2016
Balance at 1 July 2014
Additions due to the acquisition of entities
Additions
Impairment
Amortization
Differences arising on translation of foreign
operations
Balance at 30 June 2015
CUSTOMER
CONTRACTS AND
RELATIONSHIPS
$’M
GOODWILL
$’M
TRADE NAMES
$’M
COMPUTER
SOFTWARE
$’M
OTHER
$’M
CONSOLIDATED
1,906.8
8.6
-
-
(24.9)
1,890.5
1,860.3
106.6
-
(198.6)
-
138.5
1,906.8
40.3
4.9
-
(15.5)
(1.0)
28.7
42.6
13.1
-
-
(16.8)
1.4
40.3
15.3
-
-
(3.7)
(0.5)
11.1
20.8
-
-
-
(5.0)
(0.5)
15.3
113.3
49.4
-
(26.9)
(0.1)
135.7
86.3
-
58.4
-
(31.8)
0.4
113.3
14.6
1.5
-
(4.8)
(0.1)
11.2
19.2
-
-
-
(4.8)
0.2
14.6
2,107.0
(200.2)
1,906.8
189.3
(149.0)
40.3
84.8
(69.5)
15.3
244.7
(131.4)
113.3
24.5
(9.9)
14.6
2,090.3
TOTAL
$’M
2,090.3
64.4
-
(50.9)
(26.6)
2,077.2
2,029.2
119.7
58.4
(198.6)
(58.4)
140.0
2,090.3
RECOGNITION AND MEASUREMENT
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 controlled entities or associates. 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.
68 WorleyParsons Annual Report 2016
Identifiable intangible assets
Intangible assets acquired separately or in a business combination have finite useful lives and 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.
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.
Impairment of assets
Goodwill is not amortized; instead, it is tested annually, unless impairment is indicated. Goodwill is carried at cost less accumulated impairment.
For the purposes of impairment testing, goodwill acquired in a business combination is allocated to groups of cash generating units (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 CGUs. Goodwill is allocated to six CGUs. These CGUs represent the lowest level within the entity at which the goodwill is monitored for internal
management purposes. Each CGU is set out below. 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. 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 (CGUs). Impairment testing calculations use cash flow projections based on financial forecasts of
how the business is expected to perform consistent with current and historical experience and external data. The estimation of future cash flows
requires assumptions to be made regarding future uncertain events. Management has risk adjusted the future cash flows to recognize challenging
market conditions. The risk adjusted revenue growth rates for the all CGUs range from 2% to 5%. The Group has initiated an overhead reduction
program and intends to decrease total costs (including direct and overhead) by approximately 5%, excluding any benefits from uncommitted
restructuring. A risk premium is included in determining each CGU's discount rate, reflecting the level of forecasting, size, country and financing
risks for that CGU.
KEY ESTIMATES
The goodwill allocated to the material CGUs and the key assumptions used for the value in use impairment testing are as follows:
2016
Opening balance
Closing balance
Risk-weighted pre-tax discount rate
Risk-adjusted growth rate beyond five years
SERVICES –
AUSTRALIA,
PACIFIC, ASIA AND
CHINA,
$’M
SERVICES – EUROPE,
MIDDLE EAST,
NORTH AFRICA
$’M
SERVICES –
AMERICAS
$’M
MAJOR PROJECTS
$’M
IMPROVE
$’M
ADVISIAN
$’M
571.8
255.8
12.5%
3.0%
550.2
514.3
14.0%
3.0%
420.1
398.4
14.9%
3.0%
145.9
338.2
11.6%
3.0%
119.5
118.3
12.7%
3.0%
2015
Opening balance
Closing balance
Risk-weighted pre-tax discount rate
Risk-adjusted growth rate beyond five years
SERVICES – AMERICAS
$’M
SERVICES – AUSTRALIA,
PACIFIC, ASIA AND
CHINA,
$’M
SERVICES – EUROPE,
MIDDLE EAST, NORTH
AFRICA
$’M
MAJOR PROJECTS
$’M
527.7
571.8
11.9%
3.0%
505.1
550.2
12.1%
3.0%
430.2
420.1
11.9%
3.0%
189.2
145.9
10.5%
3.0%
99.3
265.5
13.2%
3.0%
IMPROVE
$’M
168.4
119.5
12.1%
3.0%
SENSITIVITY ANALYSIS
The combined fair value in the all the CGUs exceed the carrying value by over $800 million. Management recognizes that the cash flow projections,
discount and growth rates used to calculate the value in use may vary from what has been estimated.
The value in use estimate is particularly sensitive to the achievement of long-term growth rates, discount rates and the forecast performance
improvement program. The Group has performed detailed sensitivity analysis as part of its impairment testing to ensure that the results of its testing
are reasonable.
Sensitivity analysis on the inputs for all CGUs are as follows:
• Terminal growth rates: a 1% decrease in the terminal growth rate will result in all CGUs listed above being free of impairment at reporting date;
• Post tax discount rates: a 0.5% increase in the discount rate will result in all the CGUs listed above being free of impairment at reporting date; and
• Forecast cash flows: a 3% decrease in the forecast cash flows will result in all the CGUs listed above being free of impairment at reporting date
WorleyParsons Annual Report 2016 69
11. PROVISIONS
CURRENT
Employee benefits
Deferred revenue and project provisions
Insurance
Onerous leases
Warranties
Deferred consideration
Other
NON-CURRENT
Employee benefits
Onerous leases
Warranties
Deferred consideration
Other
CONSOLIDATED
2016
$’M
204.4
123.0
18.5
25.6
18.6
6.3
9.6
406.0
32.2
34.6
16.2
-
1.4
84.4
2015
$’M
266.2
109.6
22.6
23.3
31.0
23.7
11.5
487.9
40.0
-
0.3
6.0
1.8
48.1
RECONCILIATIONS
Reconciliations of each class of current and non-current provision at the beginning and end of the current and previous financial years are set out
below:
CONSOLIDATED
CURRENT
Balance at 1 July 2015
Additional provisions/ transfers
from non current provisions
Release of unused provision
Amounts utilized
Differences arising from translation
of foreign operations
Balance at 30 June 2016
Balance at 1 July 2014
Provision from entities acquired
Additional provisions
Release of unused provision
Amounts utilized
Differences arising from translation
of foreign operations
Balance at 30 June 2015
EMPLOYEE
BENEFITS
$’M
DEFERRED
REVENUE
AND PROJECT
PROVISIONS
$’M
INSURANCE
$’M
ONEROUS
LEASES
$’M
WARRANTIES
$’M
DEFERRED
CONSIDERATION
$’M
OTHER
$’M
266.2
227.2
(70.1)
(219.2)
0.3
204.4
270.5
3.2
231.7
(43.5)
(222.8)
27.1
266.2
109.6
171.8
(61.3)
(95.7)
(1.4)
123.0
106.0
1.7
124.3
(36.7)
(94.9)
9.2
109.6
22.6
2.8
(7.9)
-
1.0
18.5
19.8
-
-
(2.9)
0.0
5.7
22.6
23.3
51.1
-
(47.7)
(1.1)
25.6
2.3
0.0
21.0
-
-
-
23.3
31.0
9.8
(19.4)
(0.5)
(2.3)
18.6
19.7
0.0
22.0
(12.2)
0.0
1.5
31.0
23.7
6.1
(0.2)
(24.3)
1.0
6.3
-
0.0
23.9
-
0.0
(0.2)
23.7
11.5
2.6
(1.6)
(1.9)
(1.0)
9.6
8.2
0.0
1.5
(0.2)
0.0
2.0
11.5
70 WorleyParsons Annual Report 2016
NON-CURRENT
Balance at 1 July 2015
Additional provisions
Release of unused provision/transfer to current provision
Amounts utilized
Differences arising from translation of foreign operations
Balance at 30 June 2016
Balance at 1 July 2014
Additional provisions
Release of unused provision
Amounts utilized
Differences arising from translation of foreign operations
Balance at 30 June 2015
CONSOLIDATED
EMPLOYEE
BENEFITS
$’M
ONEROUS
LEASES
$’M
WARRANTIES
$’M
DEFERRED
CONSIDERATION
$’M
OTHER
$’M
40.0
10.0
(1.1)
(17.5)
0.8
32.2
32.6
16.5
-
(12.2)
3.1
40.0
-
35.3
-
-
(0.7)
34.6
0.9
0.1
(0.9)
-
(0.1)
-
0.3
16.2
(0.3)
-
-
16.2
0.3
-
-
-
-
0.3
6.0
-
(6.1)
-
0.1
-
-
6.0
-
-
-
6.0
1.8
1.1
(0.5)
-
(1.0)
1.4
1.5
0.6
(0.7)
-
0.4
1.8
RECOGNITION AND MEASUREMENT
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.
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, severance pay 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 high quality corporate bond rate
with terms to maturity approximating the terms of the related liability, is used.
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 4. It is expected this
revenue will be earned within two years of balance date.
Project provisions
Where the outcome for a services contract is expected to result in an overall loss over the life of the project, this loss is provided for when it first
becomes known that a loss will be incurred.
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.
Onerous leases
Provisions for onerous leases are recognized when the unavoidable costs of meeting the lease obligations under the contract exceed the economic
benefits expected to be received under it.
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. It is expected that these costs will be incurred within two years of balance date.
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.
WorleyParsons Annual Report 2016 71
11. PROVISIONS (continued)
Deferred consideration
Deferred consideration arising from 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. 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.
Dividends payable
Provision is made for the amount of any dividends declared, determined, announced or publicly recommended by the directors before or at the end
of the financial year but not distributed at balance date.
12. 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 equity, which the Group defines as profit after income tax expense divided by the average 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.
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 2016 and
30 June 2015 was as follows:
Total interest bearing loans and borrowings1
Less: derivatives2
Less: cash and cash equivalents
Net debt
Total equity
Gearing
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.
CONSOLIDATED
2016
$’M
1,243.9
(94.8)
(373.1)
776.0
1,879.9
29.2%
2015
$’M
1,240.1
(73.6)
(381.9)
784.6
2,017.6
28.0%
1 Excluding capitalized borrowing costs
2 Including mark-to-market of cross currency swaps.
72 WorleyParsons Annual Report 2016
13. INTEREST BEARING LOANS AND BORROWINGS
Current
Notes payable
Unsecured bank loans
Finance lease liability
Bank overdraft
Capitalized borrowing costs
Non-current
Notes payable
Unsecured bank loans
Finance lease liability
Capitalized borrowing costs
CONSOLIDATED
2016
$’M
227.5
20.4
2.2
-
(0.9)
249.2
861.1
132.4
0.3
(3.6)
990.2
2015
$’M
12.9
8.6
3.0
1.1
(0.1)
25.5
1,048.1
163.4
3.0
(4.1)
1,210.4
RECOGNITION AND MEASUREMENT
Interest bearing loans and borrowings
Loans and borrowings are initially recognized at fair value, net of transaction costs incurred. Loans and borrowings 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.
Finance lease liability
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.
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.
A qualifying asset is defined as an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. Borrowing costs
include:
• interest on bank overdrafts, and short term and long term loans and borrowings;
• amortization of discounts or premiums relating to loans and borrowings and non-current payables; and
• finance lease charges.
TERMS AND CONDITIONS
Notes payable
Unsecured notes payable were issued in the United States private debt capital market in May 2007, April 2008, March 2011 and September 2012 as
follows:
AMOUNT, MILLION
USD 205.0
USD 75.0
USD 20.0
USD 175.0
USD 22.0
USD 10.0
USD 144.5
USD 169.5
DATE OF ISSUE
September 2012
September 2012
September 2012
March 2011
March 2011
March 2011
April 2008
May 2007
DATE OF MATURITY
FIXED COUPON PER ANNUM
September 2022
September 2019
September 2017
March 2021
March 2018
March 2016 (matured)
April 2018
May 2017
4.00%
3.45%
3.09%
5.56%
4.86%
4.16%
6.50%
5.76%
Cross currency swaps have been entered into, swapping USD 289.3 million (2015: USD 299.3 million) of notes payable into CAD 288.3 million (2015:
CAD 298.2 million). This represents 45.1% of the outstanding notes issued in 2008, 2011 and 2012.
Finance lease liability
The Group leases various plant and equipment under finance leases with terms of three to eight years.
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.
WorleyParsons Annual Report 2016 73
14. ISSUED CAPITAL
Ordinary shares, fully paid1
Special voting share
(A) MOVEMENTS IN SHARES
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 issuance of shares
Ordinary shares issued from WorleyParsons Limited Plans Trust
Balance at the end of the financial year
2016
NUMBER OF
SHARES
247,867,335
1
247,867,336
2016
NUMBER OF
SHARES
247,263,345
580,189
(580,189)
555,636
48,355
247,867,336
CONSOLIDATED
2015
NUMBER OF
SHARES
$’M
1,264.9
-
1,264.9
247,263,344
1
247,263,345
$’M
1,255.0
15.5
(15.5)
9.9
0.0
1,264.9
2015
NUMBER OF
SHARES
246,531,762
197,150
(197,150)
731,583
-
247,263,345
$’M
1,255.0
-
1,255.0
$’M
1,239.7
5.3
(5.3)
15.3
-
1,255.0
RECOGNITION AND MEASUREMENT
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.
(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 2016, 580,189 (2015: 197,150) exchangeable shares
were exchanged.
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.
1 Included in ordinary shares are 2,540,875 (2015: 3,121,064) 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 218,818 (2015: 267,173) shares in the Company, which have been consolidated and eliminated in
accordance with the accounting standards.
74 WorleyParsons Annual Report 2016
(C) PERFORMANCE RIGHTS
The policy in respect of performance rights is outlined in note 5.
Balance at the beginning of the financial year
Rights granted
Rights exercised
Rights lapsed or expired
Balance at the end of the financial year
Exercisable at the end of the financial year
Weighted average exercise price
NUMBER OF
PERFORMANCE RIGHTS AND SPPR
2016
2015
2,226,779
1,874,717
(555,636)
(715,280)
2,830,580
1,874
$nil
2,891,244
1,042,685
(731,583)
(975,567)
2,226,779
864
$nil
Performance rights
The outstanding balance as at 30 June 2016 is represented by:
• 1,874 performance rights, vested on 30 September 2015 and expiring on 18 October 2019;
• 68,422 performance rights, vesting on 30 September 2016 and expiring on 18 October 2019;
• 297,444 performance rights, vesting on 30 September 2016 and expiring on 24 October 2020;
• 91,932 performance rights, vesting on 30 September 2017 and expiring on 24 October 2020;
• 602,618 performance rights, vesting on 30 September 2017 and expiring on 30 October 2021;
• 152,644 performance rights, vesting on 30 September 2018 and expiring on 30 October 2021;
• 26,641 performance rights, vesting on 30 September 2016 and expiring on 1 April 2022;
• 1,009,252 performance rights, vesting on 30 September 2018 and expiring on 28 October 2022;
• 256,705 performance rights, vesting on 30 September 2019 and expiring on 28 October 2022;
• 26,641 performance rights, vesting on 30 September 2017 and expiring on 1 April 2022;
• 100,175 performance rights, vesting on 31 October 2017 and expiring on 28 October 2022; and
• 196,232 performance rights, vesting on 31 October 2017 and expiring on 28 October 2022.
Weighted average remaining contractual life
The weighted average remaining life for the rights outstanding as at 30 June 2016 is 5.7 years (2015: 5.4 years).
Weighted average fair value
The weighted average fair value of rights granted during the financial year was $4.82 (2015: $10.60).
KEY ESTIMATES
Pricing model
The following table lists the inputs to the models used for the financial years ended 30 June 2016 and 30 June 2015:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of rights (years)
Rights exercise price ($)
Weighted average share price at measurement date ($)
PERFORMANCE RIGHTS
PERFORMANCE RIGHTS
PLAN 2016
TSR, EPS AND SPPR
CEO
EXECUTIVES
7.80-8.40
45
1.76-1.95
2-4
nil
6.52
7.80-8.40
45
1.76-1.95
2-4
nil
6.52
PLAN 2015
TSR & EPS
CEO
6.43
30
2.85
4
nil
13.70
EXECUTIVES
6.43-7.34
30-35
1.75-2.85
0.5-4
nil
9.34 & 13.70
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.
WorleyParsons Annual Report 2016 75
15. RESERVES
Foreign currency translation reserve
Hedge reserve
Performance rights reserve
Acquisition reserve
CONSOLIDATED
2016
$’M
(266.2)
14.5
38.2
(9.6)
(223.1)
2015
$’M
(159.0)
10.7
46.9
(9.6)
(111.0)
(A) FOREIGN CURRENCY TRANSLATION RESERVE
The foreign currency translation reserve is used to record foreign exchange differences arising from the translation of the financial statements of
foreign controlled entities and associates, and the net investments hedged in their entities.
(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.
Amounts are recognized in the Statement of Financial Performance when the associated hedged transaction affects the profit and loss.
The total amount recognized in the Statement of Financial Performance in relation to hedge ineffectiveness was a loss of $0.3 million (2015:
$0.0 million). This amount is included in professional services costs.
RECOGNITION AND MEASUREMENT
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 foreign
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.
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.
(C) PERFORMANCE RIGHTS RESERVE
The performance rights reserve is used to recognize the fair value of performance rights issued but not vested.
(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.
16. EARNINGS/(LOSS) PER SHARE
ATTRIBUTABLE TO MEMBERS OF WORLEYPARSONS LIMITED
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
The following reflects the income and security data used in the calculation of basic and diluted earnings/(loss) per share:
(A) RECONCILIATION OF EARNINGS/(LOSS) USED IN CALCULATING EARNINGS/(LOSS) PER SHARE
Earnings/(loss) used in calculating basic and diluted earnings/(loss) per share
(B) WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR
Weighted average number of ordinary securities used in calculating basic earnings/(loss) per share
Performance rights which are considered dilutive1
CONSOLIDATED
2016
CENTS
2015
CENTS
9.5
9.5
$’M
23.5
(22.2)
(22.2)
$’M
(54.9)
Number
247,676,851
657,337
Number
247,078,995
-
Adjusted weighted average number of ordinary securities used in the calculating diluted earnings/(loss) per share
248,334,188
247,078,995
Within the total number of performance rights which are considered dilutive, the weighted average number of converted, lapsed or cancelled
potential ordinary shares used in calculating diluted earnings/(loss) per share was 38,923 (2015: nil). In the previous reporting period, 308,430 of such
potential ordinary shares were considered antidilutive.
1 In the period performance rights which could be considered dilutive but were considered antidilutive were 1,204,233.
76 WorleyParsons Annual Report 2016
MEASUREMENT
Basic earnings/(loss) per share
Basic earnings/(loss) per share is determined by dividing the profit/(loss) attributable to members of WorleyParsons Limited by the weighted
average number of ordinary shares outstanding during the financial year.
Diluted earnings/(loss) per share
Diluted earnings/(loss) per share is calculated as profit/(loss) 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.
17. DIVIDENDS
(A) FINAL DIVIDEND PROPOSED
Dividend in respect of the six months to 30 June 2016:
Nil cents per share
Dividend in respect of the six months to 30 June 2015:
22.0 cents per share, unfranked1
CONSOLIDATED
2016
$’M
2015
$’M
-
-
-
54.4
The directors have resolved not to pay a final dividend (2015: 22.0 cents per share, unfranked). The Company will make total dividend payments of
nil per share for the financial year (2015: 56.0 cents per share including the half year (interim) dividend).
(B) DIVIDENDS PAID DURING THE FINANCIAL YEAR
Dividend in respect of the six months to 30 June 2015:
22.0 cents per share (unfranked)
Dividend in respect of the six months to 31 December 2014:
34.0 cents per share (2.7 cents franked)
Dividend in respect of the six months to 30 June 2014:
51.0 cents per share (10.5 cents franked)
(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% (2015: 30%)
Imputation debits arising from the payments of refunds of income tax provided in
this financial report
Imputation credits available for distribution
Imputation debits that will arise from the payment of the final dividend
Imputation credits available for future dividends
18. FINANCIAL RISK MANAGEMENT
54.4
-
-
54.4
1.2
(1.2)
-
-
-
-
84.1
125.7
209.8
5.2
(5.2)
-
-
-
(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.
1 The Group has sufficient credits in its foreign income account to ensure that there should be no Australian dividend withholding tax withheld on
dividends paid to non-resident shareholders. The unfranked portion of the dividend represents conduit foreign income.
WorleyParsons Annual Report 2016 77
18. FINANCIAL RISK MANAGEMENT (continued)
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.
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 maximum exposure to credit risk is 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.
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.
Guarantees
Details of outstanding guarantees are provided in note 25(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.
Maximum credit exposure
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
Trade receivables, unbilled contract revenue and retentions
Other receivables
Amounts owing by associates and related parties
Derivatives
The ageing of the Group’s trade receivables, unbilled contract revenue and retentions at the reporting date was:
Unbilled contract revenue
0-30 days
Past due 31-60 days
Past due 61-90 days
Past due 91-120 days
More than 121 days
GROSS
2016
$’M
823.2
448.0
80.6
53.3
15.7
278.1
1,698.9
PROVISION FOR
IMPAIRMENT
2016
$’M
-
-
-
(0.8)
(0.3)
(49.6)
(50.7)
CARRYING AMOUNT
CONSOLIDATED
2016
$’M
373.1
1,648.2
176.6
54.4
95.5
2,347.8
GROSS
2015
$’M
952.4
517.4
206.8
50.1
53.3
187.6
1,967.6
2015
$’M
381.9
1,918.1
164.6
60.2
74.5
2,599.3
PROVISION FOR
IMPAIRMENT
2015
$’M
-
(0.5)
(0.1)
(0.1)
(0.2)
(48.6)
(49.5)
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.
78 WorleyParsons Annual Report 2016
(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.
The Group has unrestricted access at balance date to the following lines of credit:
UNSECURED FACILITIES
Total facilities available:
Loan facilities
Overdraft facilities
Bank guarantees and letters of credit
Facilities utilized at balance date:
Loan facilities1
Overdraft facilities
Bank guarantees and letters of credit
Facilities available at balance date:
Loan facilities
Overdraft facilities
Bank guarantees and letters of credit
The maturity profile in respect of the Group's total unsecured loan and overdraft facilities is set out below:
Due within one year
Due between one and four year(s)
Due after four years
SECURED FACILITIES
Total facilities available:
Finance lease facilities
Facilities utilized at balance date:
Finance lease facilities
The maturity profile in respect of the Group's secured facilities is set out below:
Due within one year
Due between one and four year(s)
CONSOLIDATED
2016
$’M
2015
$’M
2,076.5
102.7
1,159.3
3,338.5
1,241.4
-
646.6
1,888.0
835.1
102.7
512.7
1,950.8
130.0
1,196.1
3,276.9
1,233.0
1.1
753.6
1,987.7
717.8
128.9
442.5
1,450.5
1,289.2
382.3
1,286.9
510.0
2,179.2
173.6
1,319.1
588.1
2,080.8
2.5
2.5
2.5
2.5
2.2
0.3
2.5
6.0
6.0
6.0
6.0
3.0
3.0
6.0
1 Excludes capitalized borrowing costs.
WorleyParsons Annual Report 2016 79
18. FINANCIAL RISK MANAGEMENT (continued)
The table below analyses 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 2016
Due within one year
Due between one and four year(s)
Due after four years
As at 30 June 2015
Due within one year
Due between one and four year(s)
Due after four years
TRADE AND OTHER
PAYABLES
PAYABLES TO
ASSOCIATES AND
RELATED PARTIES
$’M
485.5
30.4
-
515.9
510.1
29.5
-
539.6
$’M
16.7
-
-
16.7
11.0
-
-
11.0
INTEREST
BEARING
LOANS AND
BORROWINGS
$’M
CONSOLIDATED
EXPECTED
FUTURE
INTEREST
PAYMENTS
$’M
250.1
483.8
510.0
1,243.9
25.6
626.4
588.1
1,240.1
11.8
25.1
137.5
174.4
0.5
63.5
162.6
226.6
DERIVATIVES
$’M
4.8
-
-
4.8
2.9
-
-
2.9
TOTAL
FINANCIAL
LIABILITES
$’M
768.9
539.3
647.5
1,955.7
550.1
719.4
750.7
2,020.2
(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 the 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. 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 costs incurred.
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 loans and 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 denominated.
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 equity attributable to members of WorleyParsons Limited.
Currency exposure arising from the net assets of the Group’s foreign operations is managed primarily through borrowings denominated in the
relevant foreign currencies.
(1) 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
Matured 24 March 2016
Maturing 24 March 2018
Maturing 30 April 2018
Maturing 13 September 2019
Maturing 24 March 2021
WEIGHTED AVERAGE
EXCHANGE RATE
AMOUNT
RECEIVABLE/(PAYABLE)
AMOUNT
RECEIVABLE/(PAYABLE)
2016
-
0.99
1.00
1.01
0.99
2015
0.99
0.99
1.00
1.01
0.99
2016
$’M
2016
$’M
2015
$’M
2015
$’M
-
USD 22.0
USD 72.3
USD 75.0
USD 120.0
-
CAD (21.7)
CAD (72.3)
CAD (76.0)
CAD (118.3)
USD 10.0
USD 22.0
USD 72.3
USD 75.0
USD 120.0
CAD (9.9)
CAD (21.7)
CAD (72.3)
CAD (76.0)
CAD (118.3)
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 gain pre-tax in hedge relationship
80 WorleyParsons Annual Report 2016
CONSOLIDATED
2016
$’M
94.8
(89.1)
5.7
2015
$’M
73.6
(74.4)
(0.8)
(2) FORWARD EXCHANGE CONTRACTS
The Group is exposed to foreign exchange rate transaction risk on foreign currency sales and purchases, and loans to and from related entities. The
most significant foreign exchange risk is USD receipts by Australian and other 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 and are generally
accounted for as cash flow hedges.
At balance date, the details of significant outstanding contracts were:
WEIGHTED AVERAGE
EXCHANGE RATE
AMOUNT
RECEIVABLE/(PAYABLE)
AMOUNT
RECEIVABLE/(PAYABLE)
Maturing in the next 6 months to 31 December 2016
Buy AUD and Sell USD
Buy CAD and Sell USD
Buy CNY and Sell AUD
Buy CNY and Sell CAD
Buy CNY and Sell USD
Buy EUR and Sell AUD
Buy EUR and Sell KRW
Buy EUR and Sell KWD
Buy EUR and sell USD
Buy GBP and Sell AUD
Buy GBP and Sell CNY
Buy GBP and Sell EUR
Buy GBP and Sell RUB
Buy GBP and Sell USD
Buy INR and Sell USD
Buy MYR and Sell AUD
Buy MYR and Sell CAD
Buy MYR and Sell GBP
Buy MYR and Sell USD
Buy NOK and Sell AUD
Buy NOK and Sell SGD
Buy NZD and Sell AUD
Buy SGD and Sell AUD
Buy SGD and Sell USD
Buy USD and Sell AUD
Buy USD and Sell CAD
Buy USD and Sell GBP
Buy ZAR and Sell EUR
Maturing in the next 6-12 months to 30 June 2017
Buy AUD and Sell USD
Buy CNY and Sell USD
Buy EUR and Sell KWD
Buy GBP and Sell CNY
Buy GBP and Sell EUR
Maturing in the next 12-18 months to 31 December
2017
Buy AUD and Sell USD
2016
1.32
-
4.79
-
6.60
-
-
2.92
1.10
-
9.90
0.66
-
1.46
68.36
3.00
3.24
6.75
4.37
6.10
0.17
1.06
0.99
1.38
-
1.31
-
16.33
-
6.66
-
10.24
-
2015
1.15
1.24
-
5.08
-
0.69
2.97
-
-
0.49
0.77
0.01
-
-
2.86
-
-
-
5.92
1.12
1.04
0.77
1.57
-
1.31
-
2.95
-
0.80
2016
$’M
2016
$’M
2015
$’M
2015
$’M
AUD 24.4
-
CNY 121.4
-
CNY 83.5
-
-
EUR 0.7
EUR 6.8
-
GBP 2.6
GBP 0.1
-
GBP 2.2
INR 62.9
MYR 1.7
MYR 8.0
MYR 1.4
MYR 9.7
NOK 135.0
NOK 0.0
NZD 6.0
SGD 7.3
SGD 0.8
-
USD 11.9
-
ZAR 19.7
-
CNY 10.7
-
GBP 1.3
-
USD (18.5)
-
AUD (25.3)
-
USD (12.6)
-
-
KWD (0.2)
USD (7.5)
-
CNY (26.1)
EUR (0.2)
-
USD (3.2)
USD (0.9)
AUD (0.6)
CAD (2.5)
GBP (0.2)
USD (2.2)
AUD (22.1)
SGD (0.2)
AUD (5.7)
AUD (7.4)
USD (0.6)
-
CAD (15.5)
-
EUR (1.2)
-
USD (1.6)
-
CNY (13.7)
-
AUD 9.1
CAD 40
-
CNY 2.5
-
EUR 0.3
EUR 1.4
-
-
GBP 3.5
GBP 1.9
GBP 0.6
-
-
MYR 10
-
-
-
NOK 179
USD (7.9)
USD (32.3)
-
CAD (0.5)
-
AUD (0.4)
KRW (0.5)
-
-
AUD (7.1)
EUR (2.4)
RUB (37.8)
-
-
AUD (3.5)
-
-
-
AUD (30.2)
NZD 5.5
SGD 2.6
AUD (4.9)
AUD (2.5)
USD 10.0
AUD (13.0)
USD 5.6
-
GBP (3.6)
-
AUD 3.0
USD (2.3)
EUR 0.7
KWD (0.2)
GBP 0.4
EUR (0.5)
1.0
-
AUD 0.0
USD (0.0)
-
-
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.
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
2016
$’M
1.5
(2.0)
(0.5)
2015
$’M
0.9
(2.9)
(2.0)
WorleyParsons Annual Report 2016 81
18. FINANCIAL RISK MANAGEMENT (continued)
(3) 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 2016
Cash and cash equivalents
Trade receivables and unbilled contract revenue
Trade payables
Gross Statement of Financial Position exposure
As at 30 June 2015
Cash and cash equivalents
Trade receivables and unbilled contract revenue
Trade payables
Gross Statement of Financial Position exposure
(4) CURRENCY SENSITIVITY ANALYSIS
CAD1
$’M
0.5
1.4
(4.0)
(2.1)
0.5
0.8
(0.2)
1.1
CONSOLIDATED
GBP1
$’M
3.4
1.8
(3.1)
2.1
4.7
2.8
(0.7)
6.8
USD1
$’M
96.8
61.6
(86.4)
72.0
87.7
83.1
(60.6)
110.2
EUR1
$’M
3.4
13.0
(7.5)
8.9
2.1
5.7
(32.6)
(24.8)
OTHER1
$’M
14.1
7.2
(6.5)
14.8
23.7
70.1
(39.3)
54.5
A 10% weakening of the Australian dollar against the following currencies at 30 June 2016 in relation to the preceding foreign currency exposures
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 2015.
CONSOLIDATED
2016
2015
EFFECTS IN MILLIONS OF AUD
EQUITY
PROFIT
EQUITY
PROFIT
CAD
GBP
USD
EUR
Other
-
-
-
-
-
(0.2)
0.3
7.5
1.0
1.0
-
-
-
-
-
0.1
1.1
11.1
(2.8)
3.8
A 10% strengthening of the Australian dollar against the above currencies at 30 June 2016 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
EUR
AVERAGE
EXCHANGE RATE
REPORTING DATE
SPOT EXCHANGE RATE
2016
0.9653
0.4912
0.7284
0.6565
2015
0.9774
0.5305
0.8370
0.6958
2016
0.9647
0.5595
0.7450
0.6712
2015
0.9542
0.4914
0.7737
0.6907
1 Represented in AUD currency millions as indicated.
82 WorleyParsons Annual Report 2016
(ii) Interest rate risk
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.
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.
(1) INTEREST RATE RISK EXPOSURES
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:
AS AT 30 JUNE 2016
Cash and cash equivalents
Bank loans 1
Notes payable1
Finance lease liabilities
AS AT 30 JUNE 2015
Cash and cash equivalents
Bank loans and overdrafts1
Notes payable1
Finance lease liabilities
WEIGHTED
AVERAGE
INTEREST
RATE
% PA
FLOATING
INTEREST
RATE
$'M
1 YEAR
OR LESS
$'M
1 TO
2 YEAR(S)
$'M
2 TO
3 YEARS
$'M
3 TO
4 YEARS
$'M
4 TO
5 YEARS
$'M
MORE THAN
5 YEARS
$'M
NON-
INTEREST
BEARING
$'M
1.4
2.3
5.1
2.8
1.5
2.0
5.1
2.1
373.1
-
-
-
381.9
-
-
-
-
20.4
227.5
2.2
-
9.7
12.9
3.0
-
-
250.3
0.3
-
163.4
219.1
2.8
-
132.4
-
-
-
-
-
-
-
-
-
-
240.9
0.2
100.7
234.9
275.2
-
-
-
-
-
-
-
-
-
-
-
96.9
-
491.2
-
-
-
-
-
-
-
-
-
TOTAL
$'M
373.1
152.8
1,088.6
2.5
381.9
173.1
1,061.0
6.0
As the largest component of interest bearing liabilities, being notes payable, are at fixed interest rates, the effect of changes in interest rates on equity
and profit of the Group is negligible. All other financial assets and financial liabilities are non-interest bearing.
19. FAIR VALUES
DETERMINATION OF FAIR VALUES
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.
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.
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is the price that would be paid to transfer a liability in an orderly transaction between
market participants at the measurement date. For finance leases, the market rate of interest is determined by reference to similar lease agreements.
FAIR VALUES COMPARED TO CARRYING AMOUNTS
The fair values of financial assets and liabilities approximate their carrying values with the exception of interest bearing loans and borrowings which
have a fair value of $1,394.0 million (2015: $1,385.5 million) and a carrying value of $1,243.9 million (2015: $1,240.1 million).
The Group uses the following hierarchy for determining the fair value of a financial asset or liability:
• Level 1 – the fair value is calculated using quoted prices in active markets; and
• Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices). The Group's interest bearing loans and borrowings and derivative instruments including
interest rate swaps and forward exchange contracts fall within Level 2 of the hierarchy.
Derivative instruments including interest rate swaps and forward exchange contracts are restated to fair values at each reporting date based on
market observable inputs such as foreign exchange spot and forward rates, interest rate curves and forward rate curves.
Fair values of the Group’s interest bearing loans and borrowings are determined by discounting future cash flows using period-end borrowing rates
on loans and borrowings with similar terms and maturity.
There were no transfers between Level 1 and 2, and no financial instruments were measured at Level 3 (where fair value is measured using
unobservable inputs for the asset or liability) for the periods presented in this report.
1 Excludes capitalized borrowing costs.
WorleyParsons Annual Report 2016 83
ENTITY
COUNTRY OF INCORPORATION
20. INVESTMENTS IN CONTROLLED ENTITIES
(A) SIGNIFICANT ENTITIES
Worley No 2 Pty Limited1
WorleyParsons Canada Services Ltd
WorleyParsonsCord Limted
WorleyParsons Engineering Pty Limited1
WorleyParsons Europe Limited
WorleyParsons Financial Services Pty Limited1
WorleyParsons Group Inc
WorleyParsons International Inc
WorleyParsons Oman Engineering LLC
WorleyParsons Services Pty Limited1
Rosenberg WorleyParsons AS
Beijing MaisonWorleyParsons Engineering & Technology Co Limited
WorleyParsons Kazakhstan LLP
Australia
Canada
Canada
Australia
United Kingdom
Australia
USA
USA
Oman
Australia
Norway
China
Kazakhstan
BENEFICIAL
INTEREST HELD BY
CONSOLIDATED ENTITY
2016
%
2015
%
100
100
100
100
100
100
100
100
51
100
100
80
100
100
100
100
100
100
100
100
100
51
100
100
80
100
In accordance with the accounting standards, the Group discloses only significant entities identified on the basis of materiality.
(B) ACQUISITION OF CONTROLLED ENTITIES
During the year ended 30 June 2016, the Group finalized the acquisition accounting for an additional net interest in entities which had previously
been accounted for as joint operations. This resulted in a $4.5 million net gain on revaluation of investments previously accounted for as joint
operations.
On 24 October 2014, the Group acquired 100% of the voting shares of MTG Limited (MTG) and its controlled entities. MTG is a US based
management consulting firm in the oil and gas, petrochemicals and chemicals industries with operations in North America, the United Kingdom
and Australia. The acquisition was made as a building block in the growth of Advisian, the advisory business of the Group.
There were no other changes to the acquisition values recognized in the 30 June 2015 financial statements.
RECOGNITION AND MEASUREMENT
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.
Acquisition of assets and business combinations
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 the profit and loss.
1 Entities subject to Australian Securities and Investments Commission Class Order 98/1418 relief.
84 WorleyParsons Annual Report 2016
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.
21. EQUITY ACCOUNTED ASSOCIATES
(A) DETAILS OF EQUITY ACCOUNTED ASSOCIATES
The Group’s largest equity accounted associates are listed below. None is considered individually material to the Group.
OWNERSHIP INTEREST
CONSOLIDATED
CARRYING AMOUNT
CONSOLIDATED
ENTITY
Significant investments
PRINCIPAL
PLACE OF
BUSINESS
PRINCIPAL ACTIVITY
Transfield Worley Power Services Pty Limited
Australia
Infrastructure
DeltaAfrik Engineering Limited
Nigeria
Hydrocarbons
Ranhill WorleyParsons Sdn Bhd
Malaysia
Hydrocarbons
Nana WorleyParsons LLC
USA
Hydrocarbons
Cegertec WorleyParsons Inc
Canada
Minerals, Metals & Chemicals
Other investments1
2016
%
50
49
49
50
50
2015
%
50
49
49
50
50
(B) CARRYING AMOUNT OF EQUITY ACCOUNTED ASSOCIATES
Balance at the beginning of the financial year
Share of net (losses)/profits of investments accounted for using the equity method
Dividends declared by equity accounted associates
Change in nature of investment
Write-down of investments in equity accounted associates
Movement in foreign currency translation reserve of equity accounted associates
Balance at the end of the financial year
(C) NET PROFITS ATTRIBUTABLE TO EQUITY ACCOUNTED ASSOCIATES
Profits before income tax expense
Income tax expense
Net profits of equity accounted associates
2016
$’M
23.5
21.3
13.6
12.6
3.0
12.8
86.8
2016
$’M
116.2
(2.3)
(6.3)
(0.8)
(12.1)
(7.9)
86.8
2.7
(5.0)
(2.3)
2015
$’M
22.4
22.9
20.3
13.9
12.7
24.0
116.2
CONSOLIDATED
2015
$’M
115.5
10.8
(15.8)
-
-
5.7
116.2
14.8
(4.0)
10.8
(D) REVENUE ATTRIBUTABLE TO EQUITY ACCOUNTED ASSOCIATES
Share of revenue from equity accounted associates
342.5
514.6
(E) RESERVES ATTRIBUTABLE TO EQUITY ACCOUNTED ASSOCIATES
FOREIGN CURRENCY TRANSLATION RESERVE
Balance at the beginning of the financial year
Change in nature of investment
Movement in reserve
Balance at the end of the financial year
(11.7)
0.2
(8.1)
(19.6)
(17.4)
5.7
(11.7)
1 In July 2015 the ownership of Sakhneftegaz Engineering LLC changed from 50% to 100% and the entity was consolidated from July 2015. The financial result of change
of nature of the investment did not have a significant impact to the financial statements at 30 June 2016.
WorleyParsons Annual Report 2016 85
21. EQUITY ACCOUNTED ASSOCIATES (continued)
(F) RETAINED PROFITS ATTRIBUTABLE TO EQUITY ACCOUNTED ASSOCIATES
Balance at the beginning of the financial year
Share of net (losses)/profits of investments accounted for using the equity method
Write-down of investments in equity accounted associates
Change in nature of investment
Dividends declared by equity accounted associates
Balance at the end of the financial year
(G) SHARE OF EQUITY ACCOUNTED ASSOCIATES’ CONTINGENT LIABILITIES
Performance related guarantees issued
(H) SHARE OF EQUITY ACCOUNTED ASSOCIATES’ EXPENDITURE COMMITMENTS
Operating lease commitments
(I) SUMMARY OF FINANCIAL POSITION OF EQUITY ACCOUNTED ASSOCIATES
The consolidated entity’s share of aggregate assets and liabilities of equity accounted associates is:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Goodwill
Balance at the end of the financial year
CONSOLIDATED
2016
$’M
2015
$’M
106.4
(2.3)
(12.1)
(0.9)
(6.3)
84.8
5.0
1.5
124.3
72.3
(98.5)
(11.3)
86.8
-
86.8
111.4
10.8
-
-
(15.8)
106.4
7.4
0.6
165.4
90.2
(131.9)
(15.4)
108.3
7.9
116.2
RECOGNITION AND MEASUREMENT
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. Associates are those entities over which the consolidated
entity exercises significant influence, but not control.
86 WorleyParsons Annual Report 2016
22. INTERESTS IN JOINT OPERATIONS
JOINT OPERATION
The Group’s largest joint operation is listed below. It is not individually material to the Group.
Kazakh Projects Joint Venture
PRINCIPAL ACTIVITY
Hydrocarbons
OWNERSHIP INTEREST
CONSOLIDATED
2016
%
50
2015
%
50
The consolidated entity’s interests in the assets and liabilities employed in all joint operations are included in the Statement of Financial Position
under the following classifications:
CONSOLIDATED
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other
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 ASSETS
2016
$’M
7.8
35.4
1.5
44.7
0.0
0.0
44.7
38.8
0.1
38.9
-
-
38.9
5.8
2015
$’M
7.7
41.2
4.6
53.5
0.1
0.1
53.6
50.6
-
50.6
-
-
50.6
3.0
RECOGNITION AND MEASUREMENT
The Group recognizes its proportionate interest in the assets, liabilities, revenues and expenses of any joint operations. These balances are
incorporated in the financial statements under the appropriate headings.
WorleyParsons Annual Report 2016 87
23. ASSETS AND LIABILITIES HELD FOR SALE
At 30 June 2016, the investment in the equity accounted associate Cegertec WorleyParsons Inc (Cegertec) and certain assets and liabilities of the
WorleyParsons business in South Africa were in the process of being sold. The details are listed below:
• Cegertec is an investment accounted for as an equity accounted associate. At 30 June 2016, the total investment was $3.0m, after an impairment
charge of $7.5m recognized in FY2016. The value of investment into Cegertec as at 30 June 2016 represents the amount expected to be recovered
through sale.
• Certain net assets of the WorleyParsons Public Infrastructure business in South Africa totaling $2.0m at 30 June 2016 are expected to be recovered
through sale.
Whilst these businesses are assessed as assets held for sale as at 30 June 2016 and have been measured at fair value in accordance with accounting
standards, they have not been reclassified as current assets in the Statement of Financial Position on the basis of materiality.
RECOGNITION AND MEASUREMENT
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 except where the amounts involved are
considered immaterial.
24. COMMITMENTS FOR EXPENDITURE
(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
(B) OPERATING EXPENDITURE COMMITMENTS
Estimated commitments for operating expenditure in relation to software and information technology are payable as follows:
Within one year
Later than one year and not later than five years
Commitments not recognized in the financial statements
Commitments are disclosed net of the amount of GST payable to the taxation authority.
CONSOLIDATED
2016
$’M
2015
$’M
170.0
375.9
24.8
570.7
92.2
26.2
118.4
201.0
403.2
65.4
669.6
110.6
14.1
124.7
88 WorleyParsons Annual Report 2016
25. 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.
Bank guarantees outstanding at balance date in respect of contractual performance
Commitments not recognized in the financial statements
CONSOLIDATED
2016
$’M
646.6
646.6
2015
$’M
753.6
753.6
Contingencies are disclosed net of the amount of GST recoverable from or payable to the taxation authority.
(B) 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 11.
(C) 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.
26. SUBSEQUENT EVENTS
Since the end of the financial year, the directors have resolved to pay no dividend (2015: 22.0 cents per share, unfranked).
Unless disclosed elsewhere in the financial statements, no other material matter or circumstance has arisen since 30 June 2016 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.
27. 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
customer.
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 revenues and costs, and assets and liabilities have been recognized on a gross basis in the Statement of Financial
Performance and Statement of Financial Position:
REVENUE AND EXPENSES1
Procurement revenue at margin
Procurement costs at margin
Procurement revenue at nil margin
Procurement costs at nil margin
ASSETS AND LIABILITIES
Cash and cash equivalents
Trade and other receivables
Trade and other payables
CONSOLIDATED
2016
$’M
345.3
(331.6)
2,226.4
(2,226.4)
69.4
324.7
(326.7)
2015
$’M
336.0
(325.1)
2,034.9
(2,034.9)
91.6
171.2
(123.0)
1 Revenue and expenses exclude procurement revenue and expenses from associates.
WorleyParsons Annual Report 2016 89
CONSOLIDATED
28. PROPERTY, PLANT AND EQUIPMENT
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
Total property, plant and equipment
2016
$’M
9.1
(4.5)
4.6
170.5
(139.3)
31.2
173.4
(145.2)
28.2
76.9
(67.6)
9.3
73.3
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:
Balance at 1 July 2015
Additions
Disposals
Other movements
Depreciation
Amortization
Differences arising on translation of foreign operations
Balance at 30 June 2016
Balance at 1 July 2014
Additions due to the acquisition of entities
Additions
Disposals
Depreciation
Amortization
Differences arising on translation of foreign operations
Balance at 30 June 2015
CONSOLIDATED
LAND AND
LEASEHOLD
BUILDINGS
IMPROVEMENTS
PLANT AND
EQUIPMENT
COMPUTER
EQUIPMENT
$’M
9.3
-
(0.7)
-
(3.9)
-
(0.1)
4.6
1.2
-
8.2
-
(0.3)
-
0.2
9.3
$’M
46.4
8.1
(8.3)
(0.7)
-
(14.1)
(0.2)
31.2
60.5
-
9.8
(0.6)
-
(27.0)
3.7
46.4
$’M
45.3
9.1
(3.2)
(4.6)
(18.9)
-
0.5
28.2
46.3
0.2
16.2
(1.1)
(19.8)
-
3.5
45.3
$’M
6.2
6.2
(0.8)
-
(2.3)
-
-
9.3
7.7
0.2
2.4
(0.4)
(4.5)
-
0.8
6.2
RECOGNITION AND MEASUREMENT
Property, plant and equipment are stated at cost less accumulated depreciation, amortization and impairment, if any.
2015
$’M
9.8
(0.5)
9.3
196.2
(149.8)
46.4
190.3
(145.0)
45.3
79.8
(73.6)
6.2
107.2
TOTAL
$’M
107.2
23.4
(13.0)
(5.3)
(25.1)
(14.1)
0.2
73.3
115.7
0.4
36.6
(2.1)
(24.6)
(27.0)
8.2
107.2
90 WorleyParsons Annual Report 2016
29. DEFERRED TAX
(A) DEFERRED TAX ASSETS
The balance comprises temporary differences attributable to:
Amounts recognized in the Statement of Financial Performance:
Allowance for impairment of receivables
Employee benefits provisions
Warranty provisions
Project provisions
Other provisions
Property, plant and equipment
Sundry accruals
Recognized tax losses
Unused foreign tax credits
Unrealized foreign exchange losses
Lease incentives
Other
Amounts recognized directly in equity:
Foreign exchange losses
Deferred tax assets
Balance at the beginning of the financial year
Acquisition of controlled entities
Credited to the Statement of Financial Performance
Charged to equity
Disposal of subsidiary
Differences arising on translation of foreign operations
Balance at the end of the financial year
CONSOLIDATED
2016
$’M
2015
$’M
9.0
42.0
3.6
16.7
55.3
19.3
19.7
35.3
40.2
51.3
3.0
1.0
296.4
1.1
297.5
212.3
-
105.7
(20.8)
-
0.3
297.5
7.2
45.1
4.4
17.2
41.7
14.6
17.0
16.2
11.7
0.0
2.4
12.9
190.4
21.9
212.3
195.6
6.6
(10.6)
(4.9)
(0.5)
26.1
212.3
WorleyParsons Annual Report 2016 91
29. DEFERRED TAX (continued)
(B) 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
Property, plant and equipment
Unrealized foreign exchange gains
Prepayments
Other
Amounts recognized directly in equity:
Other
Deferred tax liabilities
Balance at the beginning of the financial year
Acquisition of controlled entities
Credited to the Statement of Financial Performance
Charged to equity
Disposal of subsidiary
Differences arising on translation of foreign operations
Balance at the end of the financial year
CONSOLIDATED
2016
$’M
2015
$’M
70.6
20.1
0.5
34.2
1.4
(13.3)
113.5
3.3
116.8
115.7
-
0.9
(0.7)
-
0.9
116.8
69.1
20.7
0.1
13.7
1.3
6.7
111.6
4.1
115.7
122.3
4.7
(18.7)
(1.4)
(0.4)
9.2
115.7
RECOGNITION AND MEASUREMENT
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 and loss.
Deferred tax assets and liabilities 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.
KEY ESTIMATES
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.
30. 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)
Ron McNeilly (Deputy Chairman and Lead Independent Director)
Larry Benke
Jagjeet Bindra
Erich Fraunschiel
John M Green
Christopher Haynes
Catherine Livingstone
Wang Xiao Bin
Andrew Wood (Chief Executive Officer).
92 WorleyParsons Annual Report 2016
(B) OTHER RELATED PARTIES
Aggregate amounts brought to account in relation to other transactions with each class of other related parties were as follows:
Loans advanced to:
Associates and related parties
Loan repayments from:
Associates and related parties
Dividends received from:
Dividend revenue from associates
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
Current payables
Associates and related parties
CONSOLIDATED
2016
$’M
2.1
(2.6)
6.3
54.4
16.7
2015
$’M
0.3
1.2
15.8
60.2
11.0
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.
31. REMUNERATION OF AUDITORS
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
Other auditors of controlled entities
Amounts received for other services:
Tax related services
Acquisition related assurance services
Other non-audit services
32. KEY MANAGEMENT PERSONNEL
Short term employee benefits
Post-employment benefits
Termination benefits
Other long term benefits
Share based payments
Total compensation
CONSOLIDATED
2016
$
2015
$
3,018,158
115,666
3,133,824
835,817
12,211
83,594
931,622
4,065,446
3,571,935
149,839
3,721,774
757,757
52,240
567,365
1,377,362
5,099,136
CONSOLIDATED
2016
$
2015
$
9,679,055
252,791
522,770
120,929
845,544
11,421,089
6,976,197
215,807
-
56,543
698,033
7,946,580
WorleyParsons Annual Report 2016 93
33. PARENT ENTITY DISCLOSURES
(A) PARENT ENTITY
WorleyParsons Limited parent entity financial statements include investments in the following entities:
ENTITY
COUNTRY OF INCORPORATION
WorleyParsons Financial Services Pty Limited
WorleyParsons Canada Holdings Pty Limited
WorleyParsons Canada Callco Ltd
WorleyParsons Engineering Pty Limited
Engineering Securities Pty Limited atf The Worley Limited Trust
Australia
Australia
Canada
Australia
Australia
The parent entity’s summary financial information as required by the Corporations Act 2001 is as follows:
STATEMENT OF FINANCIAL PERFORMANCE
Profit before income tax expense
Income tax benefit/(expense)
Profit after income tax
Profit attributable to members of WorleyParsons Limited
Retained profits at the beginning of the financial year
Dividends paid1
Retained profits at the end of the financial year
STATEMENT OF COMPREHENSIVE INCOME
Profit after income tax expense
Total comprehensive income, net of tax
STATEMENT OF FINANCIAL POSITION
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Performance rights reserve
Retained profits
Total equity
2016
$’M
440.1
197.9
121.0
100.0
94.7
953.7
2016
$’M
13.0
1.0
14.0
14.0
130.7
(53.8)
90.9
14.0
14.0
1,040.6
2,013.5
589.1
619.5
1,394.0
1,264.9
38.2
90.9
1,394.0
2015
$’M
440.1
197.9
121.0
100.0
94.7
953.7
2015
$’M
159.6
(21.2)
138.4
138.4
199.3
(207.0)
130.7
138.4
138.4
1,006.4
1,990.0
527.9
557.4
1,432.6
1,255.0
46.9
130.7
1,432.6
The parent entity has bank guarantees in respect of contractual performance outstanding at 30 June 2016 for the amount of $381.8 million
(2015: $484.2 million). These commitments have not been recognized in the financial statements.
The parent entity has no commitments for expenditure.
1 Dividends paid by the Parent Entity exclude dividends paid to holders of exchangeable shares.
94 WorleyParsons Annual Report 2016
(B) CLOSED GROUP
WorleyParsons Limited together with Worley No 2 Pty Limited, WorleyParsons Engineering Pty Limited, WorleyParsons Financial Services Pty
Limited, WorleyParsons Services Pty Limited and Engineering Securities Pty Limited entered into a Deed of Cross Guarantee on 26 May 2003. On 23
June 2016, Advisian Group Pty Limited, Worley SPV1 Pty Limited, WorleyParsons EA Holdings Pty Limited, WorleyParsons Infrastructure
Holdings Pty Limited, WorleyParsons SEA Pty Limited, WorleyParsons South America Holdings Pty Limited and WorleyParsons Africa Holdings
Pty Limited also became parties to the Deed of Cross Guarantee. 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. As a result, Australian Securities and Investments Commission Class Order 98/1418 relieves certain
of the controlled entities from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports.
Comparative information for 2015 has been restated to include unincorporated joint ventures of WorleyParsons Services Pty Limited and also
foreign branches of WorleyParsons Engineering Pty Limited.
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:
CLOSED GROUP
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
Retained profits of entities that became party to the Deed during the financial year
Dividends paid1
Retained profits at the end of the financial year
STATEMENT OF FINANCIAL POSITION
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Deferred tax assets
Intangible assets
Property, plant and equipment
Other non-current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing loans and borrowings
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained profits
TOTAL EQUITY
2016
$’M
85.0
(10.5)
74.5
74.5
226.1
310.5
(53.8)
557.3
18.4
979.2
43.6
1,041.2
67.7
217.1
9.0
2,140.7
2,434.5
3,475.7
285.6
86.6
372.2
1,078.0
198.7
12.7
1,289.4
1,661.6
1,814.1
1,264.9
(8.1)
557.3
1,814.1
2015
$’M
95.6
(15.6)
80.0
80.0
354.2
-
(208.1)
226.1
29.5
1,748.3
74.6
1,852.4
74.4
191.0
14.1
948.7
1,228.2
3,080.6
366.6
109.2
475.8
852.4
191.9
16.2
1,060.5
1,536.3
1,544.3
1,255.0
63.2
226.1
1,544.3
1 Dividends paid by the Closed Group exclude dividends paid to holders of exchangeable shares.
WorleyParsons Annual Report 2016 95
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 2016 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 33(B) 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 2016.
On behalf of the Board
JOHN GRILL, AO
Chairman
Sydney, 24 August 2016
96 WorleyParsons Annual Report 2016
WorleyParsons Annual Report 2016 97
98 WorleyParsons Annual Report 2016
WorleyParsons Annual Report 2016 99
100 WorleyParsons Annual Report 2016
WorleyParsons Annual Report 2016 101
102 WorleyParsons Annual Report 2016
SHAREHOLDER INFORMATION
TOP 20 HOLDINGS OF FULLY PAID ORDINARY SHARES AS AT 17 AUGUST 2016
NAME
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
Wilaci Pty Limited
Serpentine Foundation Pty Limited
BNP Paribas Noms Pty Ltd
Mr John Michael Grill
HSBC Custody Nominees (Australia) Limited - A/c 3
Haju Pty Limited
Juha Pty Limited
Taylor Square Designs Pty Ltd
UBS Bank Canada TR Chalet Holdings Inc
Argo Investments Limited
Inmac Engineering Pty Ltd
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Lujeta Pty Ltd
Dubotu Pty Ltd
UBS Nominees Pty Ltd
Total
SHARES
% OF ISSUED CAPITAL
RANK
73,286,577
51,869,298
19,237,089
16,326,044
11,778,006
4,844,825
3,925,932
2,569,342
1,921,130
1,500,000
1,500,000
1,423,641
1,077,475
972,336
890,000
873,087
830,000
828,500
800,000
760,000
29.54
20.91
7.75
6.58
4.75
1.95
1.58
1.04
0.77
0.60
0.60
0.57
0.43
0.39
0.36
0.35
0.33
0.33
0.32
0.31
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
197,213,282
79.46
Total number of current holders for all named classes is 23,188.
The table above includes exchangeable shares. The ASX treats these shares as having been converted into ordinary shares of the Company at the
time of their issue for the purposes of the ASX Listing Rules.
SUBSTANTIAL HOLDERS OF 5% OR MORE OF FULLY PAID ORDINARY SHARES AS AT 17 AUGUST 2016*
NAME
NOTICE DATE
John Grill and associated companies
Franklin Resources, Inc and its affiliates
UBS Group AG and related bodies corporate
Polaris Capital Management, LLC
Veritas Asset Management LLP
Allan Gray Australia
BlackRock Group and subsidiaries
* As disclosed in substantial shareholder notices received by the Company.
RANGE OF FULLY PAID ORDINARY SHARES AS AT 17 AUGUST 2016
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
31 May 2010
24 March 2016
9 August 2016
22 March 2016
31 October 2014
24 February 2016
22 July 2016
HOLDERS
15,650
6,239
737
487
75
23,188
UNMARKETABLE PARCELS
Minimum $500 parcel at $7.91 per unit
MINIMUM PARCEL SIZE
64
SHARES
25,313,786
22,328,837
22,195,218
18,445,731
14,393,694
12,528,580
12,423,313
SHARES
% OF ISSUED CAPITAL
6,459,544
13,983,888
5,421,364
12,031,749
210,189,607
248,086,152
HOLDERS
1,657
2.60
5.64
2.19
4.85
84.72
100.00
SHARES
53,660
The table above includes exchangeable shares. The 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. In addition to the shares set out in the table, there is one special voting
share issued to Computershare Trust Company of Canada Limited as part of the consideration for the acquisition of the Colt Group.
VOTING RIGHTS
All ordinary shares carry one vote per share without restriction. In the case of the exchangeable shares, voting rights are provided through the
special voting share that carries an aggregate number of votes equal to the number of votes attached to the ordinary shares into which the
exchangeable shares are exchangeable.
WorleyParsons Annual Report 2016 103
GLOSSARY
Term
Americas
APAC
Backlog
Definition
Services business line region encompassing Canada, United States of America and Latin America.
Services business line region encompassing Australia, Pacific, Asia, China.
Backlog is the total dollar value of the amount of revenues expected to be recorded for the next
36 months as a result of work performed under contracts or purchase/work orders awarded to
WorleyParsons. With respect to long term agreements and framework agreements an amount is
included for the work expected to be received over the period under consideration. The view of
backlog is sensitive to timing of awards and as such a conservative view of timing has been adopted.
Downstream
The refining of petroleum crude oil and the processing and purifying of raw natural gas, as well as the
marketing and distribution of products derived from crude oil and natural gas.
EBIT
EMEA
EPC
EPS
GDC
HSE
OneWayTM
PMC
Upstream
Earnings before interest and tax.
Services business line region encompassing Europe, Middle East and Africa.
Engineering, Procurement and Construction.
Earnings per share.
Global Deliver Center.
Health Safety and Environment.
Our enterprise-wide integrity management framework which establishes our corporate expectations
for zero harm to our business.
Project Management Consultancy.
The searching for potential underground or underwater crude oil and natural gas fields, drilling of
exploratory wells, and the subsequent drilling and operation of the wells that recover and bring the
crude oil and/or raw natural gas to the surface.
104 WorleyParsons Annual Report 2016
CORPORATE INFORMATION
WorleyParsons Limited
ACN 096 090 158
DIRECTORS
John Grill (Chairman)
Ron McNeilly (Deputy Chairman and Lead Independent Director)
Larry Benke
Jagjeet (Jeet) Bindra
Erich Fraunschiel
John M Green
Christopher Haynes, OBE
Catherine Livingstone, AO
Wang Xiao Bin
Andrew Wood (Chief Executive Officer)
COMPANY SECRETARY
Peter Janu
REGISTERED OFFICE
Level 12
141 Walker Street
North Sydney NSW 2060
AUDITORS
Ernst & Young
BANKERS
Banco Bilbao Vizcaya Argentaria
Bank of America Merrill Lynch
BNP Paribas
Commonwealth Bank of Australia
HSBC
JPMorgan Chase
National Australia Bank
Royal Bank of Canada
Standard Chartered Bank
Sumitomo Mitsui Banking Corporation
UBS
Wells Fargo
Westpac Banking Corporation
LAWYERS
Herbert Smith Freehills
SHARE REGISTRY
Computershare Investor Services Pty Limited
Level 4, 60 Carrington Street
Sydney NSW 2000
Australia
Phone: 1300 850 505
WorleyParsons Annual Report 2016 105
Annual Report 2016
resources & energy
www.worleyparsons.com
DRAFT