Annual Report 2018
We help our customers
meet the world’s changing
resources and energy needs
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.
Annual General Meeting
Our values
WorleyParsons Limited 2018 Annual
General Meeting will be held on
Tuesday 23 October 2018 commencing
at 2.00pm (AEDT) at The Westin
Sydney, 1 Martin Place, Sydney.
Contents
Group Financial Highlights
Chairman’s Report
Board of Directors
Chief Executive Officer’s Review
Group Leadership Team
Environmental, Social
and Governance
Operating and Financial Review
Directors’ Report
Remuneration Report
Financial Statements
Shareholder Information
Glossary
Corporate Information
1
2
5
6
16
18
27
34
39
55
114
116
117
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
Relationships
• Open and respectful
• A trusted supplier, partner and
customer
• Collaborative approach to business
• Enduring customer relationships
Agility
• Smallest assignment to
world-scale developments
• Comprehensive geographic presence
• Global expertise delivered locally
• Responsive to customer preferences
• Optimum customized solutions
• Advice to action
Leadership
• Energy and excitement
• Integrity in all aspects of business
• Minimum bureaucracy
• Committed, empowered and
innovative people
• Delivering profitable sustainability
• Innovation delivering value for our
customers
We have created our 2018 shareholder
results microsite, which offers our 2018
results documents and detailed information
on our business operations.
Visit us online
annualreport2018.worleyparsons.com
Front Cover BP’s Clair Ridge Platform, North Sea, UK
Group Financial Highlights
Five year performance at a glance
Aggregated revenue
$4,749.2m
EBIT
$263.8m
Net profit after tax
$62.2m
Cash flow from operations
$259.7m
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EBIT
NPAT
Underlying EBIT
Underlying NPAT
$m
2014
2015
2016
2017
2018
% change
Aggregated revenue1
7,363.7
7,227.5
5,725.9
4,377.0
4,749.2
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)
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
128.9
129.6
263.8
2.3%
23.5
0.4%
192.0
6.9%
16.3
9.5
–
3.0%
33.5
0.8%
78.9
5.5%
20.1
13.4
–
5.6%
62.2
1.3%
259.7
6.8%
27.9
23.3
25.0
8.5
103.5
2.6pp
85.7
0.5pp
229.2
1.3pp
38.8
73.9
n/m
1 Aggregated revenue is defined as statutory revenue and other income plus share of revenue from associates, less procurement revenue at nil margin,
pass-through revenue at nil margin, and interest income. 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.
1
WorleyParsons Annual Report 2018 Chairman’s Report
Welcome to the WorleyParsons
Annual Report for financial
year 2018.
Four years ago we initiated a transformation that is now starting
to deliver results. All our operating and financial metrics are
heading in the right direction. We have the processes, systems
and people in place to ensure we have performance discipline and
operating leverage into the future. We are seeing increased business
development opportunities. Our customers tell us that the quality of
our work is good and getting better. The integration of our North Sea
acquisition has been very successful and the financial results
are exceeding targets.
The market is returning
Having undergone a significant level of change across the
business, we now have a solid platform to better service
our customers across the entire asset life-cycle. We have
changed how we operate internally as well as how we service
our customers. We have shaped our business to best suit the
needs of changing energy and resources industries.
The reorganization of our operating model into four separate
business lines, supported by a single focused global business
development group, has continued to mature and bear results.
Our ability to deliver a full range of services has enabled
greater flexibility to provide services that suit our customers’
requirements. In industries that continue to evolve at an
ever-increasing rate, these requirements will continue to
change and our business is ideally placed to adapt as they do.
Our global front-end group within Advisian is a compelling
differentiator in the market. It enables us to provide expertise
to our customers as they evaluate the development of
new resources and energy projects. The acquisition of our
UK Integrated Solutions business and the acquisition in
the Chemicals sector in Germany provide the company key
growth platforms in the global Maintenance, Modifications
and Operations (MMO) and European Chemicals markets.
Clear direction provided by the strategy architecture introduced
last year has provided the basis for bold action this year. We are
committed to being a key player in the energy and resources
markets. Andrew Wood will provide further details of the
progress we have made in the past 12 months on page 6.
2
WorleyParsons Annual Report 2018 Market dynamic – a new normal
The resources and energy markets are going through a period
of significant change. An extended period of depressed resource
prices led to declined levels of economic activity across the
industry. Last year we mentioned we believed the market had
reached an inflexion point. This view has been confirmed with the
industry continuing to return to greater financial health. Over the
past 12 months we have seen our customers begin to cautiously
increase planned expenditure levels for both greenfield and
brownfield assets.
Our customers’ investments are being made with a focus
on value rather than investment for growth at any cost. Our
customers and their shareholders are demanding improved
lower cost solutions to those delivered previously. The continued
evolution of digital technology has meant we need to change the
way we will deliver projects. The utilization of digital technology
across the entire project delivery process is one of the ways we
will ensure we continue to help our customers achieve good
return on their investments.
In the industries we serve, supply and demand fundamentals
will continue to drive the need for investment. The medium-term
picture continues to be bright with the need to bridge the energy
supply-demand gap caused by under-investment of recent years.
The unstoppable global shift toward cleaner energy continues to
drive the energy mix with renewable energy sources continuing to
grow their contribution. The global energy transition will require
innovative thinking and approaches and your company is well
positioned to make a significant contribution to that transition.
Financial performance
The Group reported an underlying net profit after tax of
$171.4 million (which excludes $109.2 million of one off costs)
up 39.1% on the 2017 underlying result. The Group delivered
a positive operating cash flow of $259.7m. Our gearing at
23.0% is slightly below our target range, and leverage has
reduced to 1.9 times.
In another positive sign for the Company the Board resolved to
re-commence the payment of dividends for the first time since
2015. The Board made this decision based on the improved
operating and cash performance of the company coupled with
improving market expectations. The Board declared a final
dividend payment of 15.0 cents per fully paid ordinary share,
unfranked. This is in addition to the interim dividend of 10.0 cents
per share for a total dividend of 25.0 cents per share for the full
year. As a result 39.9% of our full year underlying net profit after
tax for FY2018 will be distributed to shareholders as a dividend.
John Grill AO
Chairman and Non-Executive Director
The medium-term outlook
for our industries continues
to be bright
Health, safety and environment (HSE)
WorleyParsons’ commitment to health, safety and environment
continues to deliver industry leading results. Key performance
indicators suggest that our safety performance remains one
of the best in the industry. This year our Total Recordable
Case Frequency Rate (TRCFR) was 0.15 across the Group for
employees and contractors, including the expanded workforce
from our new UK Integrated Solutions business.
People
I am delighted to see our employee numbers increase to
26,050 in the past twelve months. This has largely been driven
by our recent acquisitions in the UK and Germany.
Our employees have demonstrated enormous commitment and
dedication to the Company over the past few years in what has
been a challenging period. The last 12 months have been no
exception with the attitude of our people being instrumental to
the Company’s upward trajectory. The Board is acutely aware
of the fact that the Company’s success is underpinned by its
people and the Board expresses its deep appreciation for their
contribution during the year.
3
WorleyParsons Annual Report 2018 CHAIRMAN’S REPORT
Board changes
Over the past 12 months the Company Board has undergone
several changes with Ron McNeilly and Jagjeet (Jeet) Bindra
departing, and Tom Gorman and Anne Templeman-Jones joining.
Ron was a member of the Board since listing in 2002, including
many years as Chairman and Deputy Chairman. We thank Ron
for his enormous contribution to the growth and development
of WorleyParsons during his tenure.
Jeet served on the Company Board from 1 July 2015. In his
time on the Board he fulfilled a number of important roles
including the Chairman of the Remuneration Committee,
and a member of the Health, Safety and Environment and
Nominations Committees.
I would like to take this opportunity to thank both Ron and Jeet
for their contributions to the Board.
Tom Gorman was appointed to the Board effective 18 December
2017. He is Chairman of the Remuneration Committee
and a member of the Health, Safety and Environment and
Nominations Committees. His appointment follows a 30-year
career in executive positions at Ford Motor Company and
Brambles Limited. He is also a director of High Resolves, an
Australian-based non-profit focused on middle school education.
Anne Templeman-Jones was appointed to the Board on
1 November 2017 and is the Chairman of the Audit and Risk
Committee and a member of the Nominations Committee.
Anne has executive experience in institutional and commercial
banking, wealth management and insurance, strategy and risk,
having previously held a number of senior executive roles in
Switzerland and Australia with PricewaterhouseCoopers, the
Bank of Singapore (OCBC Bank), ANZ and Westpac.
Tom and Anne were appointed following a rigorous search and
selection process that involved interviews and background checks
to ensure they were the right fit for the Company. In addition
to possessing the desired competencies, skills, experience and
independence identified in the Company’s ongoing succession
planning, Tom and Anne also demonstrated commitment to the
high ethical standards that the Company’s reputation is built
upon. Their appointments are the result of tenure, selection and
renewal processes that are carefully designed to be aligned with
the Company’s strategy and governance approach to enable the
Board to discharge its duties effectively and to add value.
Ethics and corporate responsibility
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. We are committed
to complying with the law and conducting our business to the
highest standard.
The expectations our shareholders and our customers have for
our people, partners and our agents are outlined in our Code of
Conduct. To reinforce these expectations, training continues to
be delivered and refreshed annually to all our people, contractors
and business partners. We also want to know that our customers
take a responsible approach to business as seriously as we do
and this year we introduced a responsible business assessment
requirement covering such areas as ethical business practices,
carbon emissions intensity and social license.
WorleyParsons has a climate change position statement with
strategic actions that forms the focus of our climate change
program. Our climate change working group has been established
to review and design the climate change program. So far, the
program has embedded climate change within core risk and
strategy processes and has started to assess climate-related
risks and opportunities. The program takes account of the
recommendations of the Task Force on Climate-related
Financial Disclosure (TCFD). The target set for our greenhouse
gas emissions was achieved. We continue to focus on our own
operational energy efficiency and offer lower carbon solutions
to our customers.
As a company and as individuals, we encourage everyone to be
a partner in delivering sustained economic and social progress.
Once again our people’s willingness to support WorleyParsons
Foundation projects continues to be a driving factor behind
delivering on our local corporate responsibility activities within
the communities in which we operate.
We remain staunch in our support of diversity including
indigenous participation and human rights. Key initiatives support
gender equality including reducing the gender pay gap.
Corporate governance
The Company is focused on continuously seeking opportunities
to strengthen its corporate governance arrangements. To this
end, the Company has established a working group to design the
implementation program for the draft 4th edition ASX Corporate
Governance Council’s Corporate Governance Principles and
Recommendations when they are finalized.
The Board is confident that there is a strong corporate
governance system in place and is pleased to confirm that the
Company’s corporate governance arrangements (as outlined
in the Corporate Governance Statement) already address a
number of the new issues raised in the consultation draft of the
4th edition. The Corporate Governance Statement is available on
our website and provides detail on how the Board has adopted
appropriate charters, codes and policies and established a
number of committees to effectively govern the Company.
As part of WorleyParsons’ governance arrangements, the Group
maintains a comprehensive independent internal audit program
that reports directly to the Audit and Risk Committee. This
function allows the Board to focus on special areas of interest,
such as material risks and ethical and legal dealings, and also
provides assurance annually to the Audit and Risk Committee on
the adequacy and effectiveness of the Group’s internal controls.
Conclusion
I would like to thank the directors, the Group Leadership Team,
and most importantly our people for their contribution in a year
where we have begun to see the rewards of a lot of hard work put
in over the past few years. Significant progress has been made
by the Company and I would like to take this opportunity to thank
our shareholders for their continued support and I look forward to
realizing our future together.
John Grill AO
Chairman and Non-Executive Director
4
WorleyParsons Annual Report 2018 Board of Directors
Andrew Wood
Chief Executive Officer
and Executive Director
Tom Gorman
Non-Executive Director
Tom is Chairman of the
Remuneration Committee,
a member of the Nominations
Committee and a member
of the Health, Safety and
Environment Committee.
Christopher
Haynes OBE
Non-Executive Director
Chris is Chairman of
the Health, Safety and
Environment Committee,
a member of the
Nominations Committee
and a member
of the Remuneration
Committee.
Catherine
Livingstone AO
Non-Executive Director
Catherine is a member
of the Audit and Risk
Committee and a member
of the Nominations
Committee.
John Grill AO
Chairman and Non-Executive
Director
John is Chairman of the
Nominations Committee, a
member of the Remuneration
Committee and a member
of the Health, Safety and
Environment Committee.
Anne
Templeman-Jones
Non-Executive Director
Anne is Chairman of the
Audit and Risk Committee
and a member of the
Nominations Committee.
Wang Xiao Bin
Non-Executive Director
Xiao Bin is a member
of the Audit and Risk
Committee and a member
of the Nominations
Committee.
Nuala O’Leary
Group Company
Secretary
Erich Fraunschiel
Non-Executive Director
Erich is a member of the
Audit and Risk Committee
and a member of the
Nominations Committee.
For detailed information on Directors and the
Group Company Secretary see pages 37 to 38.
5
WorleyParsons Annual Report 2018 Chief Executive Officer’s Review
It is an exciting time for
WorleyParsons with the past
twelve months being one of the
most dynamic in recent years.
We believe the changes we have made as a company have us
very well positioned as one of the most future-ready players at
a very exciting time to be in the energy and resources industries.
The energy and resources industries continue to change and
evolve as they undergo one of the biggest transitions of the past
few decades. This transition brings with it some challenges but
for WorleyParsons it brings many opportunities.
Last year we noted that we were at an inflexion point in the
energy and resources markets. This year we can look backwards
and say that we have moved past that inflexion point and are now
seeing increased activity.
Demand and consumption of energy and resources continues
to increase. Supply is tightening while existing fields and mines
decline. Investment to meet that tightening demand into the near
future has declined significantly in recent years. Our customers
have now returned to financial health. We expect increased
investment to follow.
While the demand for oil and gas continues to grow, this year
is the year that fossil based power generation globally starts
to decline as renewables move into the main stream, creating
opportunities for our New Energy team.
We are looking at strong market fundamentals in the medium
term, and WorleyParsons is positioned well for the future with
the right know how and market strategy.
Operational performance
In FY2018, our aggregated revenue grew to $4,749.2 million
(up 8.5% on prior corresponding period) and underlying net profit
after tax (NPAT) was up 39.1% to $171.4 million – the highest
in five years. Combined with our sustained cost reductions, this
gives us strong operating leverage.
We delivered cash flow of $259.7 million, compared to
$78.9 million in FY2017. Our backlog is increasing across all
sectors and geographies. WorleyParsons operational and financial
metrics are all sound.
Safety performance
Our unyielding stand on safety continues to deliver industry
leading results. As outlined in the Chairman’s Report, we
have maintained a stable safety performance across our
group recording a TRCFR of 0.15 which remains one of the
best performing ratings across the industry. In our pursuit
of improvement, we have launched a review of our OneWay™
safety framework to incorporate a greater focus on human
factors. Caring for the safety of our people, remains our
primary emphasis.
6
Andrew Wood
Chief Executive Officer
Project work
This year we saw the successful commencement in operations
for two of the largest projects in our Company’s history. The
1850km cross-continental Trans-Anatolian Natural Gas Pipeline
(TANAP) celebrated its grand opening, and ExxonMobil’s Hebron
offshore platform entered first production. We also continue
to deliver on the Tengizchevroil project (TCO) which, once
complete, will be one of the largest and most complex oil and gas
developments of its kind in the world. Based on these successes,
our backlog is increasing and we are moving onto new projects.
Future ready
Our business is ready to capitalize on the growth we expect in the
resources and energy industries. The focus is now on ensuring
that the operational efficiencies gained in the past 24 months
remain within the business. This will be achieved through our
“Sustaining Performance” management program which focuses
on a range of key business performance metrics. At the group
level, key operating metrics such as staff utilization and backlog
remain strong.
Strategy in action
WorleyParsons has a rich history of using acquisition
opportunities to realize our strategic plans. The strategic
acquisition of our UK Integrated Solutions business fast-tracked
our strategy of building a world class global MMO capability
and gave us a robust entry into the UK North Sea market. We
also accelerated our entry into the European chemicals market
through a smaller acquisition of the M+W Group’s chemicals
engineering business in Germany.
WorleyParsons Annual Report 2018 Our strategy architecture
Pillar 1
Pillar 3
Pillar 2
Viable and competitive business
ensuring performance discipline by
every unit of the organization
maintaining a competitive cost
structure and sustainable business
(including GDC)
current performance = future business
All our value to all our customers
intensive group pursuit of large opportunities
(increasing market share)
intensive campaigns to take proven offerings
to known customers (increasing market size)
expanding our existing Integrated
Solutions capability (fabrication,
construction and Maintenance, Modification
& Operations capability)
All focused on areas of strategic priority
Key player in the new world
participating in the emerging
resources & energy arenas
!
enhance how we work through
automation and digitization of core
processes including talent
management
develop new commercial models
that align our interests with our
customers’
OPERATIONAL EXCELLENCE
+
GROW THE BUSINESS
Viable and competitive business
Our strategy provides our business a solid platform from which we can grow, while maintaining cost out.
Some of the key successes within the past 12 months include an improved 36-month backlog figure from $5.1billion to $6.4billion,
an improvement in operating margin percentage and other key operational metrics such as overhead ratios, gearing and leverage.
Our staff headcount has grown to 26,050 people and operating with a staff utilisation ratio on target of 85%.
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
-10
-20
-30
-40
-50
36 month backlog ($b)
Staff Utilization
4.7
5.1
6.0
6.4
Dec 16
Jun 17
Dec 17
Jun 18
87%
85%
83%
81%
79%
%
n
o
i
t
a
s
i
l
i
t
U
77%
Jan
15
Target
Monthly rate
Apr
15
Jul
15
Oct
15
Jan
16
Apr
16
Jul
16
Oct
16
Jan
17
Apr
17
Jul
17
Oct
17
Jan
18
Apr
18
Overhead Cost Index
NPAT Margin %
HY15
FY15
HY16
FY16
HY17
FY17
HY18
FY18
4.0%
3.0%
2.0%
3.0
2.5
2.0
1.5
1.0
0.5
Gross Margin (%)
Gross Margin %
Gross Margin % excl. UK Integrated Solutions
FY15
HY16
FY16
HY17
FY17
HY18
FY18
Covenant Leverage Ratio
FY15
HY16
FY16
HY17
FY17
HY18
FY18
FY15
HY16
FY16
HY17
FY17
HY18
FY18
7
WorleyParsons Annual Report 2018
CHIEF EXECUTIVE OFFICER’S REVIEW
Our future
As commodity prices improve, our customers’ confidence and spend are growing. The consumption, and therefore demand, of energy
and resources continues to increase. The global energy transition is providing opportunities in our core, growth and emerging markets.
For WorleyParsons, this equates to a viable and exciting future.
Core market trends
Energy
Hydrocarbons
Hydrocarbons remains our largest customer sector. Global macro
trends such as population growth and economic development of
underdeveloped nations continue to drive world energy demand.
While long term energy forecasts differ slightly between our
major customers, energy agencies and industry bodies, all
outlooks forecast growth in core oil and gas markets to 2040.
This includes a resurgence in the medium-term LNG market with
LNG seen as a key mid-term clean fuel source to fill an expected
resource gap caused by the reduced acceptance of coal. A lack of
investment in the past four of years has accentuated a growing
supply gap expected around 2022 for both gas and liquids.
To counter this, final investment decisions (FIDs) on projects
within the hydrocarbons market are expected to triple from
2017 levels by 2019.
Although we are seeing increases in our customers’ budgets
we expect continued capital discipline, focused on projects in
the lower end of the cost curve. This includes an increase in
offshore projects following a major rebasing of construction and
technology costs in that sector.
Our strategic focus on onshore conventional (including in Saudi
Arabia), offshore and MMO will continue while we have added
refining and LNG to our key strategic priorities at a global level.
MMO reflects our ongoing commitment to the operating phase
within the asset life cycle. We will globalize the capabilities gained
through the recent acquisition of our UK Integrated Solutions
business. Refining will focus on activity in the Middle East and
Asia and, in the longer term, changes in the output product mix as
gasoline is displaced by electricity as a transport fuel.
Global liquid production breakeven cost
)
l
b
b
/
$
S
U
(
n
e
v
e
k
a
e
r
B
90
80
70
60
50
40
30
20
10
Oil shale
Frontier
CTL
GTL
Tight Oil
US (Lower 48) Other
US (Lower 48) Tight oil
Canada (Oil Sands)
Deepwater OPEC
Deepwater non OPEC
Shallow water non OPEC
Onshore Non-OPEC
Shallow water OPEC
Iraq
Russian Federation
Onshore OPEC
Iran
Saudi Arabia
Weighted average based on production in 2027
Source: Wood Mackenzie, Global Oil Cost Curves and Pre-FID Breakevens, March 6 2018
Power
The power market is experiencing rapid transformation as it responds to the global
energy transition. Supported by the decline in technology costs in solar and wind and
increased financing for lower carbon fuel sources, renewable energy adoption continues
to gather momentum. Albeit from a low base, we are experiencing growth in offshore
wind particularly where we can leverage our hydrocarbons experience to improve
installation, operations, and safety performance. We are also active in some of the
world’s leading solar thermal power and storage projects.
Gas-fired power remains attractive for providing base load in developing countries
and system security in developed economies. An emphasis on lower carbon power
generation is also renewing interest in new hydro and nuclear in certain geographies.
Power Networks, which includes power transmission, distribution, storage and
micro-grids, continues to experience growth in both developed and developing
economies. Our strong advisory capability in New Energy positions us well to navigate
the energy transition together with our expanding delivery and operations offering
successfully delivering for our power customers in all corners of the globe.
8
WorleyParsons Annual Report 2018
Resources
Minerals & Metals
Expenditure across the Minerals & Metals industry continues to build with improved market
sentiment across core commodities. With a need to maintain existing production levels and
address supply shortfalls, there is a renewed interest in exploration with budgets the highest
they have been over the last five years. This global capital investment growth is seen to
prefer investment aimed at maintaining market share and existing operational efficiencies
in producing assets. The industry is in a time of disruption with miners seeking innovation
in project delivery with the concept of a digital mine seen as a way to increase both capital
and operational efficiency. We have identified a number of growth opportunities across
commodities and regions, particularly in copper, gold, iron ore and phosphate. Our immediate
strategic focus is being driven by iron ore investment in Australia and phosphate assets in
North Africa and Middle East.
Chemicals
Infrastructure
Global megatrends such as urbanization, population growth
and sustainability continue to drive long-term demand growth
within the chemicals market. While the overall trend is positive
a constant balancing equation between feedstock and market
dynamics continues. For this reason, North America, South-
East Asia and China have seen significant investment in the
last decade. We are also seeing increased recent investment
in integrated downstream assets across the Middle East. This
market and feedstock balance will continue to drive the changing
geographic focus over the next decade. We expect a shift towards
integrated refining and chemicals assets across Asia with the
increased demand from countries such as India to impact market
demand. Recent large scale acquisitions have continued the trend
of customer consolidation. We expect this to spurn expansion
of major chemicals producers from China and the Middle East.
We continue to increase our presence in Europe with the recent
acquisition of the M+W business in Germany providing us a
greater level of capability in the region and augmenting our global
delivery solution.
Our Infrastructure business continues to be focused on energy
and resource customers in front-end and delivery services
relating to transport, logistics, terminals, water supply
and management, specialist consulting and non-process
infrastructure. Market sentiment is improving in the sector,
as demonstrated by elevated planned investment across both
public infrastructure and resource infrastructure markets.
Furthermore, infrastructure is growing its share of total project
development costs as new reserves are typically becoming more
remote, shifting into emerging countries with under-developed
existing infrastructure. Our Infrastructure strategy is focused
towards regions with large resource infrastructure markets. The
Middle East, for example, reflects these conditions with growth
expected to be underpinned by significant Program Management
Consultant (PMC) opportunity in transport, water and social
infrastructure. The Belt & Road Initiative continues to grow in
opportunity across all regions and we are committed to further
strengthening our China relationships.
9
WorleyParsons Annual Report 2018 CHIEF EXECUTIVE OFFICER’S REVIEW
Market driven strategic priorities
Throughout the year we conduct formal reviews of our Group’s
key strategic priorities to adapt to market conditions and position
our business for growth across the short, medium and long term.
The Group’s strategic priorities for the upcoming financial year
are outlined below.
Horizon 3
Emerging markets
& products
New Energy
(includng power networks)
Digital
(Internal and External)
Belt & Road Initiative
Horizon 2
Growth Potential
Chemicals & Petrochemicals
(Europe)
Minerals & Metals
(MENA Phosphates and Australia)
Refining
LNG (including LNG to Power)
Horizon 1
Core growth
Onshore Conventional
Offshore
Maintenance, Modifications
and Operations (MMO)
Resource Infrastructure
Saudi Arabia
Strategy delivery case study – Offshore
Strategy delivery case study – MMO
Low Motion Floating Facility – industry recognition
of innovative design
For developments in water-depths greater than 150m,
the offshore facility must float on the water surface
(rather than be fixed to the sea floor). Whilst this floating
solution has many differing forms, they all share a common
disadvantage, namely the movements suffered in response
to the wave, wind and currents of an offshore environment.
This in turn effects the facility performance, causes fatigue
in key structural elements and requires the use of “turrets”
to enable the facility to “weathervane”.
To address these challenges, WorleyParsons’ specialist
sub-sea and floating facility division INTECSEA, created
the Low Motion Floating Facility bringing together tried
and tested components in a manner that, in combination,
represents true innovation in design. This was recognised
by the industry with the award of E&P’s “Best Engineering
Innovation”.
In line with our strategy to build a world class MMO
capability WorleyParsons acquired the North Sea
operations of Amec Foster Wheeler business in
October 2017.
This acquisition provides us with 45+ years’ experience
operating in the North Sea providing services across the
full asset lifecycle. With over 3,000 employees in seven
offices in the UK and the Middle East, the business is a
leader in the MMO market on the UK continental shelf.
This provides our business an excellent platform from
which we can create a truly global capability.
Digital twin for BP’s Clair Ridge
WorleyParsons is delivering both the hook up and the digital
twin of BP’s giant Clair Ridge development in the North Sea,
West of Shetland. The digital twin has been built and hosted
in WorleyParsons’ Asset Information Hub, an information
management environment designed to support the life
of the asset, projected to be in production until 2050.
As well as providing real time data and visualization
of the offshore asset onshore, it will help to increase
reliability, safety and value, while reducing the risk and
cost of production operations, maintenance and future
brownfield development.
10
WorleyParsons Annual Report 2018 Strategy delivery case study – Liquified Natural Gas
(LNG)
LNG Regasification, Singapore LNG Terminal, Powergas,
Singapore.
To increase the security of Singapore’s domestic
gas supply, Powergas is constructing the first LNG
regasification terminal on Jurong Island. WorleyParsons
is providing the basis of design and FEED, including the
development of the EPC contractor tender documents and
subsequent evaluation and recommendations.
WorleyParsons’ expertise in hydrocarbons, power
and infrastructure, coupled with a 20-year heritage in
Singapore and a global process capability are critical to
the success of this important project.
Emerging LNG supply-demand gap
MTPA (DES)
LNG demand will match supply by 2020
400
300
200
100
0
2000
2005
2010
2015
2020
2025
2030
2035
LNG supply
in operation
LNG supply
in construction
Supply
Gap
Source: Shell 2018 LNG Outlook
Strategy delivery case study – Chemicals
Our recent acquisition of a small professional services
company in Germany provides a significant milestone
in the company’s global strategy to meet the needs of
chemical and petrochemical customers in Europe and
provides us a critical piece in our global network. This
capability gives us a large capital projects interface office to
execute projects launched from Europe as well as the ability
to provide brownfields services in major chemical clusters
in Ludwigshafen, Cologne and Antwerp.
11
WorleyParsons Annual Report 2018 CHIEF EXECUTIVE OFFICER’S REVIEW
Strategy delivery case study – New Energy
World’s largest solar power project
The Dubai Electricity and Water Authority (DEWA) has awarded the
700 megawatt Concentrating Solar Power (CSP) fourth phase (DEWA
IV) of the Mohammed bin Rashid Al Maktoum Solar Park in Dubai
to a consortium formed by ACWA Power and Shanghai Electric. The
consortium together with DEWA have formed the Noor Energy 1 entity to
design, build and operate what will be the largest CSP project in the world.
Noor Energy 1 has appointed Advisian as the project Owner’s Engineer.
Advisian will provide a review of the basic and detailed engineering,
will help manage technology risk and will provide technical support
as required during the construction and commissioning of the plant.
Advisian will also participate in Factory Acceptance Tests and support
the Noor Energy 1 Construction and Commissioning team during these
phases of the project.
Advisian will deliver the project using the specialized CSP technology
team based in the Renewable Energy Center of Excellence in Madrid,
Spain with support from Shanghai based engineers, to interface with
the power block design, and the Dubai office for site supervisory support.
Strategy delivery case study – New Energy
Energy storage for commercial renewable integration
Both WorleyParsons and Advisian have been involved in
the Energy Storage for Commercial Renewable Integration
(ESCRI) project in South Australia, in consortium with
ElectraNet and AGL. This 30MW, 8MWh battery energy
project, owned by ElectraNet and part funded by the
Australian Renewable Energy Agency, has recently entered
commissioning and will be providing both market and
network services into the Australian National Electricity
Market. A key objective of the project is to assist the
market transition to higher renewable energy use.
12
WorleyParsons Annual Report 2018 Strategy delivery case study – Digital
We’re working with Rio Tinto to develop the first ‘intelligent
mine’ through the Koodaideri Mine development, using
leading-edge technology to integrate the processing
plant with existing autonomous capabilities, optimizing
productivity, production throughput and HSE goals.
Strategy delivery case study – Digital
The energy and resources industries continue to undergo
a significant level of digital disruption with the scale and
velocity of this change only increasing. Our organization-wide
digital strategy continues to develop and arms us with the
capability needed to thrive in the new operating world.
This year we have seen progress made in this digital realm
across both stand-alone digital offerings as well as ways in
which we can integrate new digital technologies and capabilities
to improve our traditional project delivery processes.
Requis
Following its launch last year our online
procurement platform, Requis, continues to gain traction
with our customers. We have been awarded a five-year
contract from Shell Qatar’s Gas-to-Liquids Operations
to manage the sale of materials and goods via the
Requis Marketplace.
Digital delivery
We automated many of the repetitive tasks during delivery
on the TANAP project, one of the world’s largest pipelines.
Examples include:
•
•
•
•
•
we automated pipelines alignment sheet generation;
implemented a staged transfer of the 3D model to reduce
the number of design deliverables, including removal of
approximately 9000 traditional isometrics;
we created an integrated Spatial Services platform and
web-portal containing enormous geo-spatial data volumes,
multiple interfaces, multiple data sources and real-time
updates;
we enhanced the speed and efficiency in processing site
queries and deviation requests from project contractors
through a customized Interface Management System;
we implemented a centralized Master Tag Register
and Data Warehouse across the project managing circa
300,000 tagged items; and
we developed a 3D digital asset for handover to operations
and a Spatial Services Platform.
13
WorleyParsons Annual Report 2018 CHIEF EXECUTIVE OFFICER’S REVIEW
“
Our challenge moving
forward is to leverage
growth in market activity
while ensuring key
overhead areas remain
right sized.
“
Meeting the challenges ahead
Our challenge is to continue to adapt, change and deliver the
solutions required in the expanding and dynamic energy and
resources markets. While doing this we must leverage growth in
market activity while ensuring key overhead areas remain right
sized as business increases. We have put in place initiatives to
ensure our overheads as a percentage of revenue will reduce as
market activity increases.
Our customers tell us that the quality of our work is good and
getting better. The best form of business development is to
continue this trend. We believe our structure, aligned with
the way our customers deliver projects, gives us the platform
to lead the industry.
We must also continue our progress towards industry leading
performance in working capital management. We now have
most parts of the business in that position but we must do more.
Conclusion
In summary, we have exited FY2018 as a strong business,
poised for a very exciting future. We have all our operational
and financial metrics in target zones. We have continued to make
strategic progress to position the business as the market returns.
We have successfully completed a transformational acquisition
with associated capital raising.
What is clear is the resources and energy industries provide
significant opportunity for WorleyParsons over the short, medium
and long term. We see opportunities to expand and diversify our
revenue streams within these industries.
WorleyParsons has a remarkable group of people who have
brought us to this position where we see a bright future. We have
transformed the business over a number of difficult years, and in
FY2018 demonstrated the viability of its new form. I thank each
and every one of our people for their hard work.
To our shareholders, your support is appreciated and I look
forward to working with you to create an exciting future for
your company.
Andrew Wood
Chief Executive Officer
14
WorleyParsons Annual Report 2018 Group Leadership Team
The Group Leadership Team is the senior leadership
team for WorleyParsons. It comprises the leaders
of our business lines and functions. The Group Leadership
Team advises the Chief Executive Officer with regard
to the effective and efficient functioning of the global
business of WorleyParsons.
Our business lines
Full asset lifecycle
Advisian
Major Projects
Integrated Solutions
Services
Australia Pacific
Asia China
Middle East &
Africa
Europe
US West &
Latin America
Canada &
US East
Andrew Wood
Chief Executive
Officer
Francis
McNiff
Director of
Transformation
Nuala O’Leary
Group Company
Secretary
Tony
Frencham
Group Managing
Director - Power
& New Energy
Alan Gordon
Regional Managing
Director - Services,
Europe
Adrian Smith
Group Managing
Director - Advisian
Denis Lucey
Regional Managing
Director - Services,
APAC
Marian McLean
Group Managing
Director - People and
Assurance
Tom Honan
Group Managing
Director - Finance/
CFO
Bradley
Andrews
Group Managing
Director - Digital
Chris Ashton
Group Managing
Director - Major
Projects and
Integrated Solutions
Neil Robertson
Regional Managing
Director - Services,
US West and Latin
America
Karen Sobel
Regional Managing
Director - Services,
Canada and US East
Krishnaswamy
(Krish) Iyer
Regional Managing
Director - Services,
Middle East and
Africa
Detailed information on the Group Leadership Team can be found on the website
www.worleyparsons.com/investors/leadership/group-leadership-team
15
WorleyParsons Annual Report 2018 Global Operations and
Significant Contract Awards
Anchorage
Anchorage
Edmonton
Edmonton
Kitimat
Blackfalds
Kitimat
Vancouver, BC
Portland
Vancouver, BC
Portland
Salt Lake City
Salt Lake City
Kincardine
Sudbury
Saskatoon
Kincardine
Sudbury
Blackfalds
Calgary
Saskatoon
Calgary
Billings
Bismarck
Billings
Sarnia
Bismarck
Sarnia
Markham
Bowmanville
Markham
Bowmanville
St John
St Johns
St John
St Johns
Folsom
Folsom
Reading
Chattanooga
Atlanta
Chattanooga
Atlanta
Houston
Houston
Infrastructure 18
Bayport
Bayport
Baton Rouge
Jacksonville
Orlando
Baton Rouge
Jacksonville
Orlando
Reading
Group
Arcadia / Monrovia
Costa Mesa
Arcadia / Monrovia
Costa Mesa
Group
Infrastructure 18
Hydrocarbons 66
Port of Spain
Port of Spain
Minerals, Metals
& Chemicals 10
94Significant
Awards
Minerals, Metals
& Chemicals 10
Infrastructure 2
Minerals, Metals
& Chemicals 5
Bogotá
Bogotá
Europe, Middle East
& Africa
94Significant
Awards
31
Significant
Awards
São Paulo
São Paulo
Rio de Janeiro
Rio de Janeiro
Santiago
Santiago
Cape Town
Cape Town
Infrastructure 14
Americas
Australia, Pacific, Asia and China
Hydrocarbons 30
Infrastructure 2
Hydrocarbons 12
Infrastructure 2
Minerals, Metals
& Chemicals 1
Minerals, Metals
& Chemicals 4
Hydrocarbons 12
48Significant
Awards
15
Significant
Awards
Americas
Infrastructure 14
42 Countries
116 Offices
48Significant
26,050 Employees
Minerals, Metals
& Chemicals 4
Hydrocarbons 30
Awards
16
Glasgow
Glasgow
Leeds
Leeds
Manchester
Gloucester
Bristol
Woking
London
Manchester
Gloucester
Bristol
Woking
London
Hydrocarbons 66
Aberdeen
Aberdeen
Stockton-on-Tees
Stockton-on-Tees
Teesside
Teesside
Great Yarmouth
Great Yarmouth
Stavanger
Stavanger
Delft
Delft
Schwarzheide
Schwarzheide
Ludwigshafen
Ludwigshafen
Sofia
Sofia
Madrid
Madrid
Baku
Baku
Tashkent
Tashkent
Almaty
Almaty
Moscow
Moscow
Aksai
Aksai
Atyrau
Atyrau
Basrah
Basrah
Ahmadi
Ahmadi
Cairo
Cairo
Al Khobar
Al Khobar
Manama
Manama
Dubai
Dubai
Yanbu
Yanbu
Doha
Doha
Muscat
Muscat
Abu Dhabi
Abu Dhabi
Europe, Middle East
Mumbai
Mumbai
Hyderabad
Hyderabad
Beijing
Beijing
Tianjin
Tianjin
Chengdu
Chengdu
Nanjing
Nanjing
Shanghai
Shanghai
Hong Kong
Hong Kong
Accra
Lagos
Accra
Lagos
Minerals, Metals
& Chemicals 5
& Africa
Chennai
Chennai
Bangkok
Bangkok
Manila
Manila
Kuala Lumpur
Kuala Lumpur
Kuantan
Kuantan
Kerteh
Kerteh
Hydrocarbons 24
Kota Kinabalu
Kota Kinabalu
Kuala Belait
Kuala Belait
Nairobi
Singapore
Singapore
Hydrocarbons 24
Luanda
Luanda
Infrastructure 2
Jakarta
Jakarta
Dili
Dili
Nairobi
31
Significant
Awards
Pretoria
Pretoria
Maputo
Johannesburg
Johannesburg
Maputo
Australia, Pacific, Asia and China
Minerals, Metals
& Chemicals 1
15
Significant
Awards
Mackay
Mackay
Gladstone
Gladstone
Brisbane
Brisbane
Perth
Perth
Bunbury
Bunbury
Adelaide
Newcastle
Newcastle
Adelaide
Sydney
Sydney
Auckland
Auckland
Geelong
Geelong
Melbourne
Melbourne
New Plymouth
New Plymouth
Hastings
Hastings
Wellington
Wellington
Christchurch
Christchurch
WorleyParsons Annual Report 2018
Group
Infrastructure 18
Hydrocarbons 66
Minerals, Metals
& Chemicals 10
94Significant
Awards
Europe, Middle East
& Africa
Minerals, Metals
& Chemicals 5
Infrastructure 2
31
Significant
Awards
Hydrocarbons 24
Anchorage
Anchorage
Edmonton
Edmonton
Kincardine
Kincardine
Sudbury
Sudbury
Kitimat
Blackfalds
Kitimat
Blackfalds
Saskatoon
Saskatoon
Calgary
Calgary
Markham
Markham
Bowmanville
Bowmanville
Vancouver, BC
Vancouver, BC
Portland
Portland
Infrastructure 14
Billings
Salt Lake City
Salt Lake City
Bismarck
Billings
Sarnia
Americas
Bismarck
Sarnia
Folsom
Folsom
Reading
Reading
St John
St Johns
St John
St Johns
Arcadia / Monrovia
Arcadia / Monrovia
Costa Mesa
Costa Mesa
Chattanooga
Chattanooga
Atlanta
Houston
Atlanta
Houston
Bayport
Bayport
Baton Rouge
Jacksonville
Jacksonville
Orlando
Minerals, Metals
& Chemicals 4
Port of Spain
Port of Spain
Bogotá
Bogotá
Hydrocarbons 30
Infrastructure 2
Minerals, Metals
& Chemicals 1
Orlando
Baton Rouge
48Significant
Awards
Glasgow
Leeds
Manchester
Gloucester
Bristol
Infrastructure 18
Woking
London
Glasgow
Leeds
Manchester
Gloucester
Bristol
Woking
London
Madrid
Delft
Aberdeen
Stockton-on-Tees
Teesside
Great Yarmouth
Aberdeen
Stockton-on-Tees
Teesside
Great Yarmouth
Stavanger
Stavanger
Delft
Group
Moscow
Moscow
Schwarzheide
Schwarzheide
Ludwigshafen
Ludwigshafen
Sofia
Australia, Pacific, Asia and China
Sofia
Baku
Madrid
Aksai
Aksai
Atyrau
Atyrau
Baku
Tashkent
Almaty
Tashkent
Almaty
Hydrocarbons 66
Beijing
Beijing
Tianjin
Tianjin
Hydrocarbons 12
Basrah
Ahmadi
Manama
Dubai
Ahmadi
Manama
Dubai
Basrah
Cairo
Al Khobar
Yanbu
Muscat
Muscat
Doha
Abu Dhabi
Cairo
Al Khobar
Yanbu
15
Significant
Awards
Doha
Abu Dhabi
94Significant
Nairobi
Awards
Nairobi
Chengdu
Chengdu
Nanjing
Nanjing
Shanghai
Shanghai
Hong Kong
Minerals, Metals
& Chemicals 5
Hong Kong
Europe, Middle East
& Africa
Mumbai
Mumbai
Hyderabad
Hyderabad
Chennai
Chennai
Bangkok
Bangkok
Manila
Manila
Kuala Lumpur
Kuala Lumpur
Kuantan
Kuantan
Kerteh
Kerteh
Kota Kinabalu
Infrastructure 2
Kuala Belait
Kota Kinabalu
Kuala Belait
Singapore
Singapore
Jakarta
Jakarta
Dili
Dili
Hydrocarbons 24
31
Significant
Awards
Accra
Lagos
Accra
Lagos
Minerals, Metals
& Chemicals 10
Luanda
Luanda
São Paulo
São Paulo
Rio de Janeiro
Rio de Janeiro
Pretoria
Johannesburg
Pretoria
Maputo
Johannesburg
Maputo
Mackay
Mackay
Gladstone
Gladstone
Brisbane
Brisbane
Santiago
Santiago
Cape Town
Cape Town
Perth
Perth
Bunbury
Bunbury
Adelaide
Adelaide
Geelong
Geelong
Melbourne
Melbourne
Newcastle
Sydney
Newcastle
Sydney
Auckland
New Plymouth
Auckland
New Plymouth
Christchurch
Christchurch
Hastings
Wellington
Infrastructure 14
Americas
48Significant
Awards
Minerals, Metals
& Chemicals 4
Hydrocarbons 30
Infrastructure 2
Hydrocarbons 12
Australia, Pacific, Asia and China
Minerals, Metals
& Chemicals 1
15
Significant
Awards
Hastings
Wellington
17
WorleyParsons Annual Report 2018
Environmental, Social and Governance
Progress of our Environmental, Social and Governance (ESG) objectives and our corporate responsibility
program contribute to the Group’s social license credentials. WorleyParsons is committed to working
responsibly and is positioned to help customers meet their own ESG objectives.
Our business
We have a business framework which embeds Environmental, Social
and Governance (ESG) objectives into the way we do business.
We help our customers meet the world’s changing resources and energy needs.
About us
Our values
Corporate governance
We are 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 in a responsible manner.
Our people represent many nationalities,
cultures and speak many languages.
Their energy and resources are directed to
deliver projects, provide expertise in
engineering, procurement and construction and
offer 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.
Our values are approved by the Board and
are communicated through the business.
We exhibit these through:
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
Relationships
• Open and respectful
• A trusted supplier, partner
and customer
• Collaborative approach to business
• Enduring customer relationships
Agility
• Smallest assignment to world-scale
developments
• Comprehensive geographic presence
• Global expertise delivered locally
• Responsive to customer preferences
• Optimum customized solutions
• Advice to action
Leadership
• Energy and excitement
• Integrity in all aspects of business
• Minimum bureaucracy
• Committed, empowered and
innovative people
• Delivering profitable sustainability
• Innovation delivering value for
our customers
The Board provides oversight and leadership for
our business. The Board regards good corporate
governance as critical in achieving our objectives
and high standards of safety and performance.
The Board has adopted appropriate charters
codes and policies to achieve this.
We recognize that we have responsibilities to
our shareholders, customers, employees and
suppliers as well as to the environment and the
communities in which we operate.
Leadership and culture
Our approach to a responsible business
• Our reputation for honesty, integrity and
ethical practices is our most important asset.
• We are committed to complying with the law
and conducting our business to the
highest standards.
• We expect all our people and partners
(including suppliers and agents) to uphold this
commitment and live up to our reputation
every day.
Embedding our approach
• Our Enterprise Management System (EMS)
establishes a globally consistent approach for
how we do business.
• Our Code of Conduct sets the standard for
ethical and professional behavior we expect
our people and partners to uphold.
• OneWayTM is the integrity framework guiding
the way we work.
• EcoNomicsTM describes the philosophy of
providing profitable sustainability to our
customers.
• The WorleyParsons Foundation is one of the
ways we deliver sustained economic and
social progress.
• We set targets, monitor and report progress
across a number of nonfinancial metrics that
define good business practices specific to
our business.
18
WorleyParsons Annual Report 2018 Progress and Milestones
Governance
As an Australian incorporated company, WorleyParsons Limited complies with the Corporations Act 2001. In addition, as an entity listed on the
Australian Securities Exchange (ASX), WorleyParsons Limited complies with the ASX Listing Rules. Our Corporate Governance Statement, reports on the
3rd Edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations and is located in the Investor Relations
section of our Company website. A working group has commenced to review and design an implementation program to adopt the 4th Edition of the ASX
Corporate Governance Council’s Corporate Governance Principles and Recommendations within the required time frame.
ESG reporting
Since 2012, we have been structuring our corporate disclosure through an integrated reporting process aligned to leading international reporting
standards. This year, we delivered ESG-related reporting for:
•
•
•
•
•
the 6th year aligning with the internationally-recognized GRI sustainability reporting framework;
the 6th year in fulfilling the Group’s obligations as a signatory to the United Nations (UN) Global Compact;
the 2nd year of adopting the UN Sustainable Development Goals;
the 9th year participating in the Carbon Disclosure Project (CDP) sharing how we measure, disclose and manage vital environmental information; and
investor presentations and also complying with all mandatory diversity reporting requirements, including Australian and UK, relevant entities
submitted Workplace Gender Equality Reports for the reporting period.
Climate change
WorleyParsons has a climate change position statement underpinned with strategic actions that forms the focus of our climate change program.
So far the program has embedded climate change considerations within our core risk and strategy processes and has started to assess climate-related
risks and opportunities. This program takes account of the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD). The
TCFD followed the 2016 Paris Climate Agreement and aims to assist organizations like ours to take account of climate-related issues and disclose the
financial impact that climate risks have on business.
We will continue to analyze our physical and transitional exposures to climate change and the risks and opportunities it presents to our business.
Climate change position statement
We recognize that climate change will have significant
implications for the industries we serve. Together
with our customers and industry partners, we use
the principles of EcoNomicsTM and the UN Sustainable
Development Goals to help drive solutions for a lower
carbon world. We are committed to being part of the
solution, to reducing our own emissions intensity and
protecting our people and assets from the physical
impact of climate change.
Climate change strategic actions
We have committed to the following strategic
actions:
• minimizing our own carbon emissions;
•
responding to our industry and customers’
climate change needs;
• protecting our people and assets from the
physical and transitional impact of climate
change; and
• demonstrating our corporate commitments
to climate change as we educate, measure
and report progress on our climate related
disclosures.
19
WorleyParsons Annual Report 2018 Responsible business assessments
We want to know that our customers take a responsible approach to
business as seriously as we do. Responsible business assessments are
embedded within our sales processes and risk assessments for new
projects and contracts across our business, assessing the risk profile of
customers and projects. This year, we introduced assessments for ethical
business practices, carbon emissions intensity and social license.
Corporate responsibility materiality review
We asked our stakeholders what sustainability issues, risks and
opportunities aligned to the UN Sustainable Development Goals, are
important to them and our business. The ranked results are plotted on a
materiality matrix and are reviewed by our leadership team to consider
within strategy and risk processes.
Databases and tools provide information regarding legal judgments
or equivalent for:
• bribery and corruption;
•
labour management issues and
• human rights violations;
• safety
• environmental damages;
Economic contribution through taxes paid
With approximately $450 million paid in effective tax contributions in
FY2017, there is a significant indirect economic contribution made in
economies where we operate. As our employees spend their wages
locally on diverse goods and services, there is a further, indirect economic
contribution. We do not measure this indirect economic benefit globally,
but it is an important component of our contribution in the 42 countries
where we operate.
Data protection and cyber security
Protecting the personal information of our people and information
of customers and our business is a priority. With increasing risks and
regulatory expectations, we now have a dedicated team who manage the
exposure with a number of enhanced solutions such as intrusion blocking,
virus detecting/cleaning, data encryption and system monitoring software
systems in place to prevent and/or stop unauthorized system activity.
Ethics and whistle blowing
This year, our Code of Conduct training was delivered to more than
26,000 contractors, employees and business partners. An ethics helpline
is available to all our people in 42 countries.
Our enhanced Whistle Blowing Policy provides protection to whistle
blowers and encourages reporting of contraventions. The key
mechanisms for the protection of whistle blowers are confidentiality,
anonymity, protection of employment conditions and appropriate support
to prevent any other forms of retaliation.
WorleyParsons complies with all applicable prevention of bribery and
corruption legislation, extends the requirement of compliance, including
the prohibition of facilitation payments, and has zero tolerance for
bribery, fraud and other types of corruption. We continue to apply our
Gifts and Entertainment Policy with a strict protocol for registering gifts
and entertainment.
Safety
Our teams have maintained an industry-leading performance in safety.
Over the past 10 years, OneWayTM has been the integrity framework
guiding the way we work throughout WorleyParsons. It encompasses
the tools and processes that we follow to ensure the wellbeing of people,
assets and the environment. Recently, we have recognized that we should
incorporate the principles of human performance, which is in line with our
customers and industry. OneWayTM will evolve to reflect these changes.
Transparency and communications
As an Australian incorporated company, we comply with the
ASX Listing Rules. Those rules require listed entities to publish a corporate
governance statement and other key documents on their company
websites and to provide periodic and continuous disclosure to the market.
We updated our company website and reached out to over
500,000 followers of our social media platforms to communicate to
our broader community.
Internal communication websites, online discussion groups and emails are
used to deliver important messages. Our people are encouraged to openly
share their opinions, subject matter expertise and voice their concerns.
ETHICS HELPLINE
Confidentiality is assured
20
ENVIRONMENTAL, SOCIAL AND GOVERNANCE Corporate Responsibility Program
As a company and as individuals, we encourage everyone to be a partner in delivering
sustained economic and social progress.
The willingness of our personnel to volunteer their time and make
donations in support of their local corporate responsibility activities was
a key driver to the success of our corporate responsibility achievements
for the financial year ended 30 June 2018 (FY2018). Contributions to
developing our local communities via skills transfer, education, local
employment and enterprise development are providing support to
our aims of long term positive social impact and hence helping the
UN Sustainable Development Goals.
The target set for greenhouse gas emissions for FY2020 was
achieved and we have seen progress towards gender diversity with
the FY2020 measurable objective for woman senior executives met
in FY2018.
For FY2018, we saw an increase in volunteering hours, contributions
by our people and active champions throughout our virtual corporate
responsibility network.
The WorleyParsons Foundation continues to grow, supporting an even
more diverse range of activities and projects across the globe, providing
the Group with larger-scale opportunities to deliver tangible positive
outcomes and enhance the Group’s social impact.
We remain staunch in our support of diversity including indigenous
participation and human rights with a number of key initiatives supporting
gender equality.
In FY2018, our global gender pay gap between male and female
remuneration has reduced.
Corporate Responsibility Policy
WorleyParsons is committed to working responsibly 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.
Supporting local communities through our network of volunteering
corporate responsibility champions. The Big Umbrella, Melbourne.
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 our key
corporate responsibility themes. The Foundation Awards are now entering
their sixth year. In FY2018, awards were given to over 700 individuals in
48 offices in 31 countries. They were responsible for championing social
impact by taking the lead in local volunteering activities.
All our selected WorleyParsons Foundation projects involve skilled
volunteering from our people alongside financial contributions, delivered
in a pro bono offering. The social impact delivered from a broad range of
WorleyParsons Foundation projects continues to grow with these projects
supported in FY2018:
• sponsoring another 16 WorleyParsons employees to attend the
Pollinate Energy Fellowship Program, India;
• supporting water extraction and donating water management
equipment to the refugee communities in Kakuma, Uganda;
• enhancing community projects with technical studies prompting
solutions for water and sanitation in small communities, Papua New
Guinea;
•
installing water solutions to community schools in the Lake Turkana
region working with Winds of Change, Kenya;
• supporting engagement in high schools through Power of Engineering
across Australia and other selected offices;
• supporting micro-finance and education programs with Opportunity
International, India;
• expanding accommodation and activities for disadvantaged kids at
Five Acres, USA;
• supporting Houston Hurricane recovery efforts of United Way, USA;
• supporting the Cystic Fibrosis Foundation via the 21st Annual Breath
of Life Golf Tournament, Houston;
•
installing water facilities and solar power and refurbishing school
facilities across a number of villages, India;
• supporting water and sanitation workshops with the Centre of
Affordable Waste and Sanitation Technology, Colombia; and
• sponsoring film production celebrating local culture, Timor Leste.
21
WorleyParsons Annual Report 2018 ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Corporate responsibility materiality review
A corporate responsibility materiality review was conducted where we asked over 500 of our stakeholders what sustainability issues, risks and opportunities
are important to them. These ranked results, aligned to the UN Sustainable Development Goals, have the most potential to impact our business and are
important to our stakeholders.
High
s
n
o
s
r
a
P
y
e
l
r
o
W
o
t
t
c
a
p
m
I
Affordable and
Clean Energy
Industry, Innovation and
Infrastructure
Climate Action
Clear Water
and Sanitation
Decent Work and
Economic Growth
Low
Level of Stakeholder Concern
High
Communities
Supply Chain
Economic
Environment
Our People
Issues of most concern across stakeholders with the highest impact on WorleyParsons
• Affordable and clean energy
• Climate action
• Decent work and economic growth
• Clear water and sanitation
•
Industry, innovation and infrastructure
Further information on our corporate responsibility materiality review and the associated materiality matrix is included in the
2018 Corporate Responsibility Performance Report.
Activity highlights
In addition to supporting our customers on their sustainability programs
through our project delivery and consulting services, the Group undertook
various corporate responsibility activities across our operations
independent of customer influences in FY2018, including:
• participating directly in and reporting over 390 corporate responsibility
activities across 31 countries, involving over 11,000 Group personnel;
• supporting local communities through the network of corporate
responsibility champions across 48 offices;
• granting over $80,000 in scholarships and supporting education via
89 corporate responsibility activities with over 7000 volunteering
hours. One example is WorleyParsons support for the international
internship program of the Australian Government’s Colombo Plan;
•
reducing carbon emissions across a number of offices through office
consolidation; LED lighting replacement; behavioral change programs;
encouraging the use of public transport; flexible work options from
home and recycling while also encouraging carbon offsets with tree
planting;
• demonstrating responsible attitudes to water and sanitation with a
recognized stewardship program in Colombia, Papua New Guinea,
Singapore and rainwater recycling in South Africa; and
• participating in and contributing to various workshops and forums on
sustainability, diversity, anti-corruption and human rights issues.
22
Diversity and inclusion highlights
The Group undertook various diversity and inclusion activities in FY2018,
including:
• establishing our FY2018 diversity plan, with a focus on increasing
gender representation at all levels, agreed by each leadership team;
•
implementing our inaugural talent sponsorship program for active
development of our top female talent;
• conducting gender pay gap assessments across comparable roles,
tiers and regions, where our global gender pay gap between male and
female remuneration has reduced approximately 1% (varying by office).
At the manager and senior manager roles, the salary gap reduced by
approximately 1% and 3% respectively;
• delivering cultural awareness, inclusive recruitment and promotion
training and bias awareness workshops in some locations; and
• supporting diversity and Women of WorleyParsons networks across
21 regions, prompting local activities and progress via internal news
websites.
WorleyParsons Annual Report 2018
Corporate responsibility indicators
Our teams continue to consolidate Group level reporting across a number
of key indicators that track our progress in Corporate Responsibility.
We continued our global champion forums to provide guidance and
support for corporate responsibility and diversity and inclusion initiatives
and promote engagement with local networks. These champions report
progress and tracking of 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 FY2018 were:
The Group completed a response for the CDP for FY2017 which was
reported in June/July 2018. 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.
An energy target for FY2020 was set at 5% reduction of total carbon
dioxide equivalents (tCO2-e) against base year FY2016. In FY2017,
a reduction of 13% was achieved well above the four-year target.
Consolidation of office areas has contributed to this reduction, along
with building upgrades and locally-designed initiatives to reduce
energy consumption.
Data for greenhouse gas emissions and energy consumption for
FY2017 and FY2016 were:
Indicators1
Contributions by
operations
2018
$1.10
million
Contributions by personnel
members
$0.76
million
2017
$1.00
million
$0.69
million
2012-2018
$14.05
million
$9.50
million
Volunteer hours by
personnel members
(community/internal)
TRCFR
LWCFR
25,501
hours
14,728
hours
141,604
hours
0.15
0.02
0.14
0.02
n/a
n/a
1 Definitions and clarifications, refer to: https://www.worleyparsons.com/~/media/
Files/W/WorleyParsons/documents/cr/cr-definitions.pdf
The Board has set measurable objectives for achieving gender diversity.
FY2018 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 2018 Corporate Governance
Statement and progress towards achieving the objectives in FY2018 is set
out in the table below:
Measures
Objectives
2018
2017
Women
employees1
Increase the proportion of
women employees to 30% by
2020
21%
21%
Women senior
executives2
Increase the proportion of
women senior executives to
25% by 2020
26%
26%
Women
non-executive
directors
Increase the number of women
non-executive directors to 3
by 2020
1 This includes both the Group’s employees and contractors.
2017
2016
Per
Personnel
Member1
Total
Per
Personnel
Member1
Total
2.19
49,853
2.35
57,534
5.27
120,090 7.84
246,043
Indicators
Greenhouse gas
emissions tCO2-e
Energy consumption
MWh
1 Personnel include employees and contractors.
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 Australian Standard on Assurance Engagements ASAE 3000,
over selected corporate responsibility performance data. No significant
changes have been made to these reporting processes since the last
review. The assurance statement is accessed here: https://www.
worleyparsons.com/~/media/Files/W/WorleyParsons/documents/cr/
fy15-assurance-statement.pdf
Limited assurance is planned for FY2019 corporate responsibility
indicators.
Corporate Responsibility Performance Report
A more comprehensive analysis of our corporate responsibility
program and progress made is shared in the Corporate Responsibility
Performance Report. The report is published annually and is issued as
our ‘communication of progress’ for the United Nations Global Compact,
showing how we have adopted the Global Reporting Initiative standard.
For the 2018 Corporate Responsibility Performance Report, refer to our
Company website.
3
2
www.worleyparsons.com/investors/corporate-governance
2 Senior executives comprise all employees and contractors at the CEO-1, CEO-2,
CEO-3 levels.
As we adopt the recommendations of the TCFD, we have chosen to
disclose a Climate Change Position Statement and strategic actions as
part of our new Climate Change Program. We will continue to analyze our
physical and transitional exposures to climate change and disclose our
progress in FY2019.
23
WorleyParsons Annual Report 2018 Awards recognizing ESG-related achievements
WorleyParsons was awarded a silver recognition level by EcoVadis for our CSR Scorecard. This result
places our Company among the top 30% of performers evaluated by EcoVadis.
WorleyParsons was recognized as a 2017 Top 100 Global Energy Leader and a Top 25 Oil & Gas Related
Equipment and Services Global Leader by Thomson Reuters. The study, the first holistic assessment of
its kind, objectively identifies today’s leading energy companies with the fortitude to excel in a complex
business environment.
WorleyParsons was awarded the Global Mobility Team of the Year (large program) award at the FEM
EMEA EMMAs (Expatriate Management & Mobility Awards). The awards celebrate the best and brightest
of the global mobility industry and the supporting suppliers and vendors.
WorleyParsons was named in the top 15 EPC contractors in the Middle East by Refining
& Petrochemicals Middle East.
WorleyParsons was named the fifth best International Design Firm by Engineering News Record, for the
second consecutive year WorleyParsons has been named in the top five.
WorleyParsons was named in the Top 200 Environmental Firms by Engineering News Record. ENR’s list
of the Top 200 Environmental Firms.
WorleyParsons was awarded the EPC Contractor of the Year Award at the second LNG Solutions Global
Summit. WorleyParsons has also been shortlisted in the same category for 2018.
WorleyParsons was named the 27th most innovative company in Australia according to The Australian
Financial Review.
Paul Bauman, an expert geophysicist in Calgary, was selected for the prestigious Craig J. Beasley
Award. Craig J. Beasley was the driving force behind the founding of Geoscientists Without Borders®. In
recognition of this contribution, the Craig J. Beasley Award for Social Contribution is given to a person or
organization that has made a meritorious achievement that supports the application of geophysics to a
humanitarian, public service, or other socially significant cause.
Karl Qiu, President of WorleyParsons China, was honored as one of the Top 10 Economic Figures in
China’s ICT industry during the recent 2017 China ICT Conference of Entrepreneurs. Karl delivered a
keynote speech on ‘Digital Enterprises in the Industrial Big Data Age’ at the event and was recognized
for his efforts in digital solutions for the industry.
William Beck, a WorleyParsons retiree, received the Construction Industry Institute’s (CII) Richard L.
Tucker Award, in recognition of his significant contribution to the advancement of CII’s mission and
success. William recently retired after serving WorleyParsons for 37 years.
Geeta Thakorlal, President of Advisian’s INTECSEA business, was given an honoree award at the Houston
Business Journal’s second annual Women Who Mean Business Awards. The criteria for selection included
career achievement, contribution to company and city success, community involvement and leadership.
Awards Recognizing Our People
24
ENVIRONMENTAL, SOCIAL AND GOVERNANCEWorleyParsons Annual Report 2018
Case studies showing how we support the UN Sustainable Development goals
Deploying a socio-environmental project in the Brazilian Amazon
Finding clean water for nearly 60,000 refugees in Bangladesh
Aimed at improving the lives of people in and around Altamira in the
Brazilian Amazon, WorleyParsons teams are delivering a USD 2 billion
project that includes constructing new housing, schools, sanitation
and infrastructure as well as shipyards, a fish market and beaches.
The sanitation efforts alone supply water and sewage for 100,000
people. Education activities have improved schools for 34,000 students
and created classrooms for 15,000 additional children. The local
economy has been strengthened with the construction of two shipyards,
formation of 60 workers’ organizations, 13 occupational health and safety
courses, an artisanal fishing center and a fish market. Infrastructure
improvements are vast, including the development of nine bridges,
32 kilometers of roads, six berths, the Natural Park of Altamira and three
beaches. Extensive social monitoring and small business support has also
bolstered this community. “Using our expertise to benefit communities
is the greatest reward of our profession,” said Neil Robertson, regional
managing director and Group Leadership Team representative.
A WorleyParsons team performed a critical geophysical exploration for
drinking water in the Kutupalong, Leda and Nayapara refugee camps,
which were facing acute water shortages due to the lack of rain. A team
of five WorleyParsons hydro-physicists, under a consulting agreement for
the United Nations High Commission for Refugees, headed to Bangladesh
to help find deeper wells. They used state-of-the-art mining and
geophysical industry technology, such as: high resolution unmanned aerial
vehicle (UAV) imagery, daily mapping and 3D interactive, cloud-based
visualization technology. Our team have been long term supporters of
water exploration for refugee camps. In 2016 and 2017, their water
exploration resulted in clean water for 60,000 of the 185,000 refugees
in Kakuma; and for 8,000 returnees to 22 villages and health clinics in
Northern Uganda. The WorleyParsons Foundation is supporting the
drilling and hand pump installation of 10 wells in the most recent Uganda
project. “We were able to save the United Nations High Commission
for Refugees months of drilling and exploration when our mapped area
revealed big differences to theirs. We also found new possibilities for
excavating and expanding existing surface reservoirs,” explains Paul
Bauman, an expert Geophysicist, based in Calgary.
Working to find sanitation solutions in Papua New Guinea
Mumbai volunteers set up a bright future for six small villages
Colleagues from WorleyParsons and Advisian headed to the seaside
community of Hanuabada to show how remote skills can be brought
together to make a big difference to projects such as World Vision’s
Water, Sanitation and Hygiene (WASH) program in Papua New Guinea.
In February 2018, three volunteers visited the coastal community of
Hanuabada with three other volunteers providing expert technical input
into the study from their respective offices. Under an arrangement
with World Vision for provision of pro bono services, the volunteers led
a feasibility study for the investigation and design of options for toilet
systems to improve local sanitation conditions for the 12,000 people of
Hanuabada. The WorleyParsons Foundation supported the non-labor
costs and provided a donation to support the project execution. The
team worked with World Vision and Asia P3 Hub to speak with various
stakeholders in the community. ”We were able to interview residents and
meet and consult government representatives to gather insights while
visiting existing toilet facilities,” says Rajiv Venkatraman, from Advisian
in Melbourne. Our WASH experts have been invited to participate in the
next phase of this project as well as other projects with World Vision in
other countries.
Over the past four years, a team of volunteers from WorleyParsons’
Mumbai office have had a significant impact on six humble villages on
the outskirts of Mumbai, bringing much needed clean water, power and
schooling facilities to the community. The Maya and Vishwas (meaning
‘hope’) projects were initially supported by WorleyParsons India in 2014
and became our benchmark WorleyParsons Foundation projects. Our
passionate team of volunteers led by Jackin Ganger worked directly
with the community to provide school infrastructure along with water
and power for the remote communities. What started as one school
on the outskirts of Mumbai has since grown to a total of four by the
end of 2017 and two more community schools were updated in 2018.
One of the principal objectives of the WorleyParsons Foundation is
to bring about significant and sustainable changes in the lives of the
underprivileged by undertaking life-changing projects for communities
that will benefit their women and children in particular.
25
WorleyParsons Annual Report 2018 Supporting indigenous people across the world
WorleyParsons is committed to meaningful engagement with Indigenous communities. We recognize that our success in doing this depends on our
demonstrated understanding of and respect for cultural values and the social, environmental and economic issues that affect Indigenous people.
We have adopted the term Indigenous consistent with United Nations nomenclature, however local preferences are respected and utilized across our
business for Aboriginal, traditional owners, First Nations etc.
Australia
For the past five years, WorleyParsons’ Australia West business has
welcomed Year 11 and 12 students into our workplace from Governor
Stirling Senior High School. The aim of the work experience program is to
expose the indigenous students to the diverse range of roles we have in
our business to assist with their future career planning. Not only do the
students enjoy the experience of seeing firsthand what engineers, cost
controllers, environmental advisers and project managers do each day,
our employees have gained an insight into Indigenous culture and how
sharing their own career stories can inspire the students and provide
future career options. To mark the five-year anniversary of the program,
we were proud to welcome a group of students and teachers and the
school’s dance troupe to our offices. The troupe performed traditional
dances and shared stories of where they were from and the significance
of their culture in learning and the workplace. The school also presented
us with a recognition gift of a didgeridoo which will be engraved with the
names of all of the students who have worked with us since 2013.
Canada
The Pond Inlet Small Craft Harbour is part of Advisian’s current Nunavut Marine Infrastructure Project with the Government of Nunavut. Advisian was
contracted by the Government of Nunavut to provide engineering design and environmental baselines. An important component in our design and
environmental work on this project has been obtaining and considering Inuit traditional knowledge from local hunters and fishers. A series of design
workshops allowed members of the Hunters and Trappers Organization in Pond Inlet to work directly with our lead marine engineer, Harald Kullmann,
and our Indigenous Knowledge lead, Diane Pinto, to provide valuable information on local site conditions, harvesting patterns, species of interest, travel
routes and water/ice access. Inuit traditional knowledge was also obtained from interviews with key elders in the community and a focused workshop with
hunters. The input resulted in design modifications to meet the needs of the community. Incorporation of Inuit traditional knowledge improved the team’s
plan and design.
Also, WorleyParsonsCord supports Indigenous apprentices in Alberta.
In 2017, thanks to a partnership between Red Deer College, Montana
First Nation and WorleyParsonsCord, Red Deer College launched the
Virtual Reality and Co-operative Trades – The Next Generation Program.
The program offered Aboriginal students the opportunity to develop
the skills and experience needed for careers in welding. The program is
funded in part by the Government of Canada’s Flexibility and Innovation
in Apprenticeship Technical Training program. The program included two
groups of 25 students. “It’s awesome. Everyday we just get up, get ready,
go to class and use the virtual welders. It’s good hands-on skills that are
being taught”, said a welding student from the Montana First Nation.
WorleyParsonsCord was the industry partner of the virtual reality welding
program and provided work placement opportunities for three of the
program’s first group of students.
United States
NANA WorleyParsons is a project delivery company focused on
multidiscipline engineering and design, procurement and construction
management services. Based in Alaska, our staff of project managers,
engineers, designers and support personnel work in Anchorage, Kenai
and client field operation facilities on the North Slope. Their extensive
technical expertise in Arctic and Sub-Arctic engineering for remote
locations is at the core of NANA WorleyParsons. Staff experience is
backed by real-world success on projects often located in harsh and
remote environments. NANA’s owners, or shareholders, are Iñupiat,
meaning “real people” who have inhabited Northwest Alaska for more
than 10,000 years. Iñupiat are part of the Inuit, or circumpolar Indigenous
people of the world.
26
ENVIRONMENTAL, SOCIAL AND GOVERNANCEWorleyParsons Annual Report 2018 Operating and Financial Review
1.3 REVIEW OF OPERATIONS
The statutory result for FY2018 was a net profit after tax (NPAT) of $62.2
million, compared with $33.5 million in FY2017. Underlying NPAT was
$171.4 million for FY2018, up 39.1% on the previous corresponding period.
Aggregated revenue increased by 8.5%, driven by the contribution of the UK
Integrated Solutions business acquired in October 2017. Revenue grew
5.6% from the first half to second half. Revenue in the underlying business
remained relatively flat compared to FY2017, reflecting the markets within
which we operate.
WorleyParsons undertook a major transformation program between
FY2015 and FY2017 to better align with our customers and to resize
following the major market reduction caused by a decline in capital
expenditure of our resources and energy customers. This transformation
included reorganizing into four business lines and reshaping how we
support the business with a program that achieved $500 million in overhead
savings. In FY2018, we have seen the business maintain the cost out
program while delivering improved financial and operating outcomes.
In FY2018, there have been a number of charges related to consultant fees
and onerous leases relating to the transformation program which are
included in the statutory result.
We now employ 26,050 people and still maintain a presence in 116 offices
across 42 countries, compared with 22,800 people across 106 offices at 30
June 2017.
We secured 94 significant awards this year compared with 86 in FY2017.
Backlog at 30 June 2018 was $6.4 billion, compared to $5.1 billion at 30
June 2017.
Our financial position remains sound with the Company’s gearing ratio of
23.0% at 30 June 2018, slightly below the target range of 25% to 35%.
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 on the following page.
1. OPERATIONS
1.1 OVERVIEW
WorleyParsons is a professional services provider to the resources and
energy sectors. We operate in four business lines of Advisian, Major
Projects, Integrated Solutions and Services. Major Projects and Integrated
Solutions are combined into a single segment providing coverage of all
construction and fabrication yard activity, easy access to Global Delivery
Center resources and a shared management team in one group. This
strengthens our capability and reputation in integrated Engineering,
Procurement and Construction (EPC) with the aim of extending this offering
to existing and new customers. To strengthen our integrated EPC offering
as well as ensuring coverage of all construction and fabrication activity, the
Major Projects and Integrated Solutions business lines operate under a
single management team.
We report along three segments of Advisian, Major Projects and Integrated
Solutions, and Services 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; and
Infrastructure – resource 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 major 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 17% of aggregated revenue. Our
ten largest customers account for 43% 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.
WorleyParsons Annual Report 2018
27
OPERATING AND FINANCIAL REVIEW CONTINUED
EBIT
Staff restructuring costs
Onerous lease contracts
Other restructuring costs
Acquisition costs
Impairment of associate intangible assets
Onerous engineering software licenses
Net loss on sale of assets held for sale
Underlying EBIT
NPAT attributable to members of WorleyParsons Limited
Staff restructuring costs, post tax
Onerous lease costs, post tax
Other restructuring costs, post tax
Acquisition costs
Impairment of associate intangible assets
Onerous engineering software licenses, post tax
Net loss on sale of assets held for sale
Tax from changes in US tax legislation
Underlying NPAT
FY2018
$’M
263.8
-
12.2
14.2
5.9
2.7
-
-
298.8
62.2
-
8.9
10.0
5.9
2.7
-
-
81.7
171.4
FY2017
$’M
129.6
59.2
24.2
38.9
-
2.3
3.2
0.4
257.8
33.5
41.4
17.0
27.2
-
1.6
2.2
0.3
-
123.2
THERE ARE THREE MEASURES THAT ARE KEY TO UNDERSTANDING OUR RESULTS:
1. AGGREGATED REVENUE;
2. EBIT (EARNINGS BEFORE INTEREST AND TAX); AND
3. NPAT (NET PROFIT AFTER TAX) ATTRIBUTABLE TO MEMBERS OF WORLEYPARSONS LIMITED.
FY2018
$’M
FY2017
$’M
Comments
Movement
1. Aggregated revenue
4,749.2
4,377.0 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 revenue at nil
margin, pass-through revenue at
nil margin and interest income.
EBIT means earnings before
interest and tax.
2. EBIT
(statutory)
263.8
129.6
(underlying)
298.8
257.8
3. NPAT
(statutory)
62.2
33.5 NPAT means net profit after tax.
(underlying)
171.4
123.2
28
WorleyParsons Annual Report 2018
Our aggregated revenue increased by 8.5% in FY2018 when
compared with that for FY2017, driven by the acquisition of the
UK Integrated Solutions business.
Our statutory EBIT increased by 103.5% in FY2018 when
compared with that for FY2017, due primarily to the benefit of
increased volume, a reduction in overhead costs with increased
margins and lower restructuring costs.
Underlying EBIT increased by 15.9% when compared with that
for FY2017. This increase is due to increased volume and
decreased overheads.
Our statutory NPAT increased to $62.2 million in FY2018
compared with $33.5 million for FY2017, due primarily to the
benefit of increased EBIT, and reduced restructuring costs being
partially offset with charges relating to changes in US corporate
tax law.
Underlying NPAT increased by 39.1% when compared with that
for FY2017, primarily due to increased volume and lower
overheads during the year.
1.3.1 BUSINESS LINE PERFORMANCE
SERVICES
The Services business line effectively combines local service, knowledge, relationships and capability to deliver engineering services and projects of all sizes
across the asset lifecycle. It is the local partner for companies and communities to deliver sustained economic and social progress. Working closely with
WorleyParsons' other three business lines - Major Projects, Integrated Solutions and Advisian - Services brings together the local knowledge and global
expertise to deliver all our value to all our customers.
The Services business line reported aggregated revenue of $2,391.3 million and segment result of $236.2 million (FY2017: aggregated revenue of $2,681.1
million and segment result of $242.8 million). The segment margin improved to 9.9% from 9.1%. Aggregated revenue was lower in the Middle East as some
contracts moved to Major Projects for implementation and in the United States with some large projects completing during the period. Canada, Australia and
New Zealand returned to growth.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2018
FY2017
$’M
2,391.3
2,681.1
Variance %
(11)
%
50
61
$’M
236.2
242.8
Variance %
(3)
Segment
margin
%
9.9
9.1
MAJOR PROJECTS AND INTEGRATED SOLUTIONS
Major Projects specialize in the full project delivery of large, complex, strategically important projects wherever they are in the world. Integrated Solutions
delivers maintenance, modification, operations, engineering, fabrication, construction, hook-up and commissioning services to, mainly, existing assets around
the globe. The Major Projects and Integrated Solutions business lines reported aggregated revenue of $1,837.9 million and segment result of $172.2 million
(FY2017: aggregated revenue of $1,213.4 million and segment result of $119.5 million). The segment margin declined to 9.4% from 9.8%.
Aggregated revenue increased with the acquisition of the UK Integrated Solutions business in the North Sea, as well as an upturn in the Norway business.
Segment margin declined largely due to the lower margin Integrated Solutions business contributing a larger portion of revenue to the segment.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2018
FY2017
$’M
1,837.9
1,213.4
Variance %
51
%
39
28
$’M
172.2
119.5
Variance %
44
Segment
margin
%
9.4
9.8
ADVISIAN
Advisian is a global consulting firm that provides strategic and front-end advice, integrated with deep technical expertise to clients in the hydrocarbons,
resources and infrastructure sectors. Advisian reported aggregated revenue of $520.0 million and segment result of $17.7 million (FY2017: aggregated
revenue of $482.5 million and segment result of $12.5 million). The segment margin improved to 3.4% from 2.6%.
Aggregated revenue increased across all three customer sectors with the largest increases coming from Hydrocarbons and Minerals, Metals and Chemicals
customer sectors. The Minerals, Metals & Chemicals sector along with the Infrastructure sector improved their margin in FY2018.
The Company continues to invest in Advisian to shape this business to build a globally significant consulting and advisory business in the resources and
energy markets. Advisian also contains the investment for the Company's strategic development in Digital and New Energy.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2018
FY2017
$’M
520.0
482.5
Variance %
8
%
11
11
$’M
17.7
12.5
Variance %
42
Segment
margin
%
3.4
2.6
WorleyParsons Annual Report 2018
29
OPERATING AND FINANCIAL REVIEW CONTINUED
1.3.2 SECTOR PERFORMANCE
HYDROCARBONS
The Hydrocarbons sector reported aggregated revenue of $3,588.0 million and segment result of $347.7 million with a margin of 9.7% (FY2017: aggregated
revenue of $3,105.6 million, segment result of $311.3 million and segment margin of 10.0%). Hydrocarbons’ contribution to the Group’s aggregated revenue
was 76%, increasing from last year.
The increase in aggregated revenue was driven by the recent acquisition of our UK Integrated Solutions business operating in the North Sea, and a return to
growth in Canada and Norway.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2018
FY2017
$’M
3,588.0
3,105.6
Variance %
16
%
76
71
$’M
347.7
311.3
Variance %
12
Segment
margin
%
9.7
10.0
MINERALS, METALS & CHEMICALS
The Minerals, Metals & Chemicals sector reported aggregated revenue of $427.4 million and segment result of $23.7 million with a margin of 5.5% (FY2017:
aggregated revenue of $441.1 million, segment result of $16.7 million and segment margin of 3.8%). Minerals, Metals & Chemicals contributed 9% to the
Group’s aggregated revenue. Chemicals now represents more than 55% of this sector's contribution.
The Minerals & Metals contribution declined with major project activity yet to materialize despite an increased level of study and front-end activity being
seen in the market. Chemicals increased with a higher level of activity being seen in the United States and Europe, supported by our recent acquisition in
Germany.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2018
FY2017
$’M
427.4
441.4
Variance %
(3)
%
9
10
$’M
23.7
16.7
Variance %
42
Segment
margin
%
5.5
3.8
INFRASTRUCTURE
The Infrastructure sector reported aggregated revenue of $733.8 million and segment result of $54.7 million with a margin of 7.5% (FY2017: aggregated
revenue of $830.0 million, segment result of $46.8 million and segment margin of 5.6%). Infrastructure’s contribution to the Group’s aggregated revenue
declined to 15%.
The drop in aggregated revenue was driven by the conclusion of projects in Europe, Middle East and Africa. Growth was seen in our Integrated Solutions
business in the operations of power facilities. Margins increased across both our Advisian and Major Projects and Integrated Solutions business due to
improved project delivery performance and increased operational efficiency.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2018
FY2017
$’M
733.8
830.0
Variance %
(12)
%
15
19
$’M
54.7
46.8
Variance %
17
Segment
margin
%
7.5
5.6
1.4 SIGNIFICANT CHANGES IN OPERATIONS
On 27 October 2017, the Group acquired 100% of the voting shares of AFW UK Oil & Gas Limited and its controlled entities (UK Integrated Solutions) for a
total consideration of $384.3 million. With operations in the UK North Sea, UK Integrated Solutions is the leading Maintenance, Modifications and Operations
(MMO) service provider in the UK oil and gas sector. The acquisition provides the Group with a robust entry into the UK North Sea and supports our global
MMO strategy.
30
WorleyParsons Annual Report 2018
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.
FY2018
$’M
259.7
1. Operating cash
flow
FY2017
$’M
Comments
78.9 Our operating cash flow comprises the payments we
receive from our customers less the amount we pay
our suppliers plus related interest and tax paid. In our
financial statements, operating cash flow is called net
cash inflow from operating activities.
2. Gearing ratio
23.0%
29.1% 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.
3. Debt facility
utilization
60%
60% Our debt facility utilization is the percentage of our
debt facilities that we were using at the end of the
financial year.
4. Loan, overdraft
and lease
facilities
1,677
1,835 Our loan, overdraft and lease facilities are the amount
of our debt facilities at the end of the financial year.
Movement
Our operating cash flow for FY2018 represents
an increase from FY2017, due largely to
increased volume and lower cash restructuring
costs.
Our gearing ratio decreased by 6.1 percentage
points in FY2018 when compared with that for
FY2017.
This ratio is now slightly below our gearing target
of 25% to 35%.
Our debt facility utilization remained stable in
FY2018 when compared with that for FY2017.
The amount of our loan, overdraft and lease
facilities continued to decrease during FY2018,
due to the repayment of a US private placement
note.
2.2 DIVIDENDS
Our directors resolved to pay a final dividend of 15.0 cents per fully paid
ordinary share, including exchangeable shares, unfranked. This is in addition
to the interim dividend of 10.0 cents per share. As a result, 39.9% of our full
year underlying net profit after tax for FY2018 will be distributed to
shareholders as a dividend.
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.
During FY2018, we acquired the UK Integrated Solutions business, as well
as a small acquisition in the chemicals sector in Germany. We also acquired
the remaining 35% of WorleyParsons Oman.
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; and
• operating expenditure commitments.
These future commitments represent approximately 11.4% of our expenses.
In general, we lease the space in 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
WorleyParsons has a strategy architecture to allow us to respond
dynamically to the changing world. The architecture is a framework that
integrates all the strategic processes at WorleyParsons, describing how
they interact over the course of the financial year and how they
systematically allow us to improve our collective performance, accelerate
our revenue growth and address the dramatic changes in our industry.
The architecture is built around the following three pillars:
1. Operational excellence ensuring we always maintain a viable and
competitive business;
2. Grow the business in the near term by offering all of our value to all of
our customers; and
3.
Position the business to grow as a key player in the new world.
The three pillars combine to provide a holistic view of strategy and all three
are needed for our strategy to stand.
3.2 OUTLOOK
Driven by continued improvement in market conditions, our resources and
energy customers are increasing early phase activity for the next cycle of
investment. This is reflected in the recent level of contract awards and our
growing backlog. By maintaining our focus and growing our position in the
resources and energy markets we expect to deliver improved earnings in
FY2019.
Our focus on costs will continue so that operating leverage is delivered as
the business grows. We expect to continue to improve our balance sheet
metrics in FY2019.
3.3 RISKS
Achievement of our medium and long-term objectives could be impacted by
a number of risks. Those risks could, individually or together, have an
adverse effect on achievement of those objectives.
Set out below is an overview of a number of key risks that we face in
seeking to achieve those objectives. 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
objectives. 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, SAFETY AND ENVIRONMENT 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.
The nature of our work may give rise to environmental risk. We identify
environmental aspects of our work and their potential impact and put in
place controls and monitoring to address them. We continue to implement
emissions reduction strategies and to support our customers in their efforts.
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, safety and environment. OneWay™
expectations are supported by our business processes and we use them in
assessing our performance.
3.3.2 OPERATING RISKS
Contract management risk: Effective contract management seeks to ensure,
among other things, appropriate project and customer selection and the
WorleyParsons Annual Report 2018
31
OPERATING AND FINANCIAL REVIEW CONTINUED
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.
Cybersecurity risk: Our work relies on the effective processing and storing of
information using information technology. With the use of IT systems, there
is a risk of unauthorized access, disruption, loss of critical or sensitive data
and other security incidents as a result of cyberattacks. We are mitigating
this risk through strengthened security measures, continual threat
monitoring, user education, and by implementing information security
policies in line with international standards.
3.3.3 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 and safety
incidents and not meeting the market’s expectations of our financial
performance.
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, safety and environment risk, project delivery risk,
and internal reporting risk, are relevant to seek to preserve our reputation.
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
objectives 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.
Taxation risk: WorleyParsons operates in a large number of countries. We
are currently seeing an increasing trend for Governments in all parts of the
world to change their approach to the regulation and collection of tax.
Consequently, there is a risk that the level of taxation imposed on
WorleyParsons could change materially as a result of a change in legislation
or approach in the countries in which we operate. WorleyParsons has a
process in place to monitor such changes and ensure that we continue to
pay the appropriate amount of tax in all jurisdictions.
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 three strategic pillars with a
number of priority areas reviewed on a regular schedule and described in
section 3.1 of this review.
Climate risk: Climate change will have both physical and transitional risk
implications for the industries we serve. Regulatory and other changes may
lead to increased cost, delays or cancellation associated with some projects.
Conversely, the pace of other projects such as those associated with new
energy may increase. We are committed to being part of the solution, to
reducing our own emissions intensity and responding to our industry's and
customers’ climate change needs. To seek to mitigate this risk, we have
embedded climate change considerations within core risk and strategy
processes and are assessing climate-related risks and opportunities. In
addition, we have established a climate change working group to review and
design an implementation program for the Taskforce on Climate-related
Financial Disclosure (TCFD).
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 publication,
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.
32
WorleyParsons Annual Report 2018
Financial report
For the financial year ended 30 June 2018
Directors’ Report
Statement of Financial Performance and Other 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
34
55
56
57
59
60
106
107
114
116
117
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
60
2. Summary of Significant Accounting Policies
60
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
64
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
67
68
69
71
72
73
74
76
Capital
Provide information about the capital management practices of the Group and
shareholder returns for the year.
12. Capital Management
78
13. Interest Bearing Loans and Borrowings
14. Changes in liabilities arising from financing activities
15. Issued Capital
16. Reserves
17. Earnings Per Share
18. Dividends
79
80
81
83
84
85
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.
19. Financial Risk Management
85
20. Fair Values
Structure
Define the different aspects of the Group structure.
21. Investments in Controlled Entities
22. Equity Accounted Associates
23. Interests in Joint Operations
24. Assets and Liabilities Held for Sale
Unrecognized Items
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.
25. Commitments for Expenditure
26. Contingent Liabilities
27. Subsequent Events
Other
Notes required by Australian Accounting Standards and/or other regulatory
pronouncements.
28. Procurement
29. Property, Plant and Equipment
30. Deferred Tax
31. Related Parties
32. Remuneration of Auditors
33. Key Management Personnel
34. Parent Entity Disclosures
91
92
95
97
97
98
98
99
99
100
101
102
103
103
104
WorleyParsons Annual Report 2018
33
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 2018.
DIRECTORS' 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
Erich Fraunschiel
Tom Gorman
Christopher Haynes
Catherine Livingstone
Anne Templeman-Jones
Wang Xiao Bin
NUMBER OF
SHARES
27,909,392
218,631
13,500
13,139
14,302
2,250
11,000
NUMBER OF
PERFORMANCE
RIGHTS
–
–
–
–
–
–
–
Andrew Wood
642,305
Further details in relation to the rights issued by the Company are set out in
the Remuneration Report and notes 15 and 16 to the financial statements.
1,091,043
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 - the extraction and processing of oil and gas;
• Minerals, Metals & Chemicals - the extraction and processing of mineral
resources and the manufacture of chemicals; and
• Infrastructure - projects related to water, the environment, transport,
ports and site remediation and decommissioning; and all forms of power
generation, transmission and distribution.
DIRECTORS
The following persons were directors of the Company during the financial
year and, unless otherwise noted, all were directors for the full financial year
and until the date of this report:
• John Grill (Chairman)
• Erich Fraunschiel (Lead Independent Director from 28 October 2017)
• Ron McNeilly (Deputy Chairman and Lead Independent Director until
retirement on 27 October 2017)
• Jagjeet Bindra (resigned on 15 December 2017)
• Tom Gorman (appointed on 18 December 2017)
• Christopher Haynes
• Catherine Livingstone
• Anne Templeman-Jones (appointed on 1 November 2017)
• Wang Xiao Bin
• Andrew Wood (Chief Executive Officer)
DIRECTORS’ MEETINGS
The number of Board and standing Board Committee meetings held during the financial year and the number of meetings attended by each of the directors is
set out below:
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
10
10
5
5
5
10
10
5
10
10
10
10
5
5
5
10
9
5
10
10
6
2
6
4
6
6
2
6
4
6
6
6
2
2
3
6
6
4
6
6
6
2
2
3
6
6
4
6
6
2
4
6
6
2
4
6
6
2
2
4
6
6
2
2
4
6
DIRECTORS
John Grill
Erich Fraunschiel
Ron McNeilly*
Jagjeet Bindra**
Tom Gorman
Christopher Haynes
Catherine Livingstone
Anne Templeman-Jones
Wang Xiao Bin
Andrew Wood
* Ron McNeilly retired on 27 October 2017.
** Jagjeet Bindra resigned on 15 December 2017.
In addition to those meetings, special purpose Board Committee meetings and briefings were held during the financial year. The Board also attended regular
Board briefings during the financial year.
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.
34
WorleyParsons Annual Report 2018
DIVIDENDS – WORLEYPARSONS LIMITED
Details of dividends paid in the current financial year and previous financial
year are as follows:
CONSOLIDATED
2018
$’M
2017
$’M
Final dividend for the full year 2018 of 15.0 cents per ordinary
share to be paid on 24 September 2018 (unfranked)
Interim ordinary dividend for half year 2018 of 10.0 cents per
ordinary share paid on 26 March 2018 (unfranked)
Total dividends paid / to be paid
2018
$’M
41.1
27.3
68.4
2017
$’M
–
–
–
Revenue and other income
4,835.8
5,220.6
Less: Procurement revenue at nil margin (including
share of revenue from associates)
Less: Pass-through revenue at nil margin
Add: Share of revenue from associates
Less: Interest income
Aggregated revenue 2
(94.4)
(157.3)
170.6
(5.5)
(826.2)
(229.0)
218.7
(7.1)
4,749.2
4,377.0
Since the end of the financial year, the directors have resolved to pay a final
dividend of 15.0 cents per fully paid ordinary share, including exchangeable
shares, unfranked (2017: 0 cents per share). In accordance with AASB 137
Provisions, Contingent Liabilities and Contingent Assets, the aggregate amount
of the proposed final dividend of $41.1 million is not recognized as a liability
as at 30 June 2018.
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
2017
$’M
AGGREGATED REVENUE
EBIT
2018
$’M
2017
$’M
2018
$’M
2017
$’M
EBIT MARGIN
2018
%
2017
%
Services
2,391.3
2,681.1
236.2
242.8
9.9
9.1
Major Projects and
Integrated Solutions
1,837.9
1,213.4
172.2
Advisian
520.0
482.5
17.7
4,749.2
4,377.0
426.1
119.5
12.5
374.8
9.4
3.4
9.0
9.8
2.6
8.6
Global support costs 3
Interest and tax for
associates
Amortization of
acquired intangible
assets
(110.7)
(96.7)
(2.4)
(3.5)
(14.2)
(16.8)
Revenue and other income
Depreciation
Amortization
Write down of investment in equity accounted associates
Earnings before interest and tax (EBIT)
Net interest expense
Profit before income tax expense
Income tax expense
Statutory profit after income tax expense
Non-controlling interests
Statutory profit after income tax expense attributable to
members of WorleyParsons Limited
Staff restructuring costs
Onerous lease costs
Other restructuring costs
Acquisition costs
Impairment of associate intangibles
Onerous engineering software licenses
Net loss on the sale of assets held for sale
Net tax expense on restructuring costs
Tax from changes in US tax legislation
2018
$’M
4,835.8
(18.1)
(49.9)
–
263.8
(58.4)
205.4
(129.7)
75.7
13.5
62.2
–
12.2
14.2
5.9
2.7
–
–
(7.5)
81.7
Underlying profit after income tax expense attributable to
members of WorleyParsons Limited 1
171.4
5,220.6
Underlying EBIT1
298.8
257.8
6.3
5.9
Aggregated revenue was $4,749.2 million, an increase of 8.5% on the prior
financial year. Underlying EBIT of $298.8 million was up 15.9% from the prior
financial year result of $257.8 million.
The underlying EBIT margin on aggregated revenue for the Group, increased
to 6.3% compared with 5.9% in 2017. After tax, the members of
WorleyParsons Limited earned an underlying profit, on aggregated revenue
of 3.6%, compared to the 2017 profit of 2.8%.
The underlying effective tax rate of 23.1% compared with 22.8% in 2017.
The Group retains a strong cash position of $277.9 million
(2017: $244.3 million) with gearing (net debt/net debt plus total equity)
at financial year end of 23.0% (2017: 29.1%).
Operating cash inflow for the period was $259.7 million, compared to
$78.9 million in 2017. Cash outflow from investing activities was
$399.1 million (2017: $62.5 million).
(18.0)
(62.8)
(1.3)
129.6
(68.8)
60.8
(4.6)
56.2
22.7
33.5
59.2
24.2
38.9
–
2.3
3.2
0.4
(38.5)
–
123.2
1 The directors consider that underlying profit information, which excludes significant non-recurring
2 Aggregated revenue is defined as statutory revenue and other income plus share of revenue from
associates less procurement revenue at nil margin, pass-through revenue at nil margin and interest
income. 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.
items, is important in order to understand the sustainable performance of the Company.
3 Excluding global support related restructuring costs (refer to note 3 to the financial statements).
WorleyParsons Annual Report 2018
35
DIRECTORS’ REPORT CONTINUED
EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
2018
2017
CENTS
CENTS
(restated) 1
23.3
23.1
13.4
13.3
Underlying basic earnings per share was 64.3 cents, an increase of 30.7%
from the previous financial year result of 49.2 cents1.
Underlying basic earnings per share is determined by dividing the underlying
profit attributable to members of WorleyParsons Limited (as set out on page
35) by the weighted average number of ordinary shares outstanding during
the financial year (as set out in note 17 to the financial statements).
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 27 October 2017, the Group acquired 100% of the voting shares of AFW
UK Oil & Gas Limited and its controlled entities (referred to as UK Integrated
Solutions) for cash consideration of $384.3 million. With operations in the
UK North Sea, UK Integrated Solutions is a leading Maintenance,
Modifications and Operations (MMO) service provider in the UK oil and gas
sector. The acquisition provides the Group with a robust entry into the UK
North Sea and supports the Group's global MMO strategy.
During the period, the Group raised $322.0 million through a 1 for 10 fully
underwritten non-renounceable rights offer for ordinary fully paid shares in
WorleyParsons Limited and incurred of $6.3 million of equity raising costs.
In December 2017, the Group refinanced its US$620 million syndicated debt
facility that was due to expire in August 2018. The new arrangement
consists of a US$700 million multi-currency facility. The new debt structure
provides the Group with additional flexibility and liquidity to meet its
working capital and strategic growth requirements. The new financing
facility matures in December 2020.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Since the end of the financial year, the directors have resolved to pay a final
dividend of 15.0 cents per fully paid ordinary share, including exchangeable
shares, unfranked (2017: 0 cents per share). In accordance with AASB 137
Provisions, Contingent Liabilities and Contingent Assets, the aggregate amount
of the proposed final dividend of $41.1 million is not recognized as a liability
as at 30 June 2018.
No other matter or circumstance has arisen since 30 June 2018 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 31.
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.
NON-AUDIT SERVICES
During the financial year, Ernst & Young, the Group’s auditor, performed
certain other services in addition to its statutory audit duties. Total fees for
non-audit services provided by the auditor amounted to $391,212.
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:
• all non-audit services have been reviewed by the Audit and Risk
Committee to ensure they do not impact the integrity and objectivity
of the auditor; and
• none of the services undermines the general principles relating to auditor
independence as set out in APES 110 Code of Ethics for Professional
Accountants, including reviewing and auditing the auditor’s own work,
acting in a management or decision making capacity for the Group, acting
as advocate for the Group or jointly sharing economic risk and rewards.
A copy of the auditor’s independence declaration as required under
section 307C of the Act is as follows:
1 In accordance with accounting standards, earnings per share were adjusted to reflect the equity
raising during the period as disclosed in note 17 to the financial statements.
36
WorleyParsons Annual Report 2018
ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Corporations (Rounding in
Financial/Directors' Reports) Instrument 2016/191 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.
CORPORATE GOVERNANCE STATEMENT
The Company’s Corporate Governance Statement for the year ended
30 June 2018 may be accessed from the Company’s website at
http://www.worleyparsons.com/InvestorRelations/Pages/CorporateGovern
ance.aspx.
INFORMATION ON DIRECTORS AND GROUP 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 the Growth Centres Advisory Committee for the
Department of Industry, Innovation and Science and Chairman of the
Mindgardens Alliance, a partnership between the Black Dog Institute,
Neuroscience Research Australia (NeuRA), South Eastern Sydney Local
Health District (SESLHD) and the University of New South Wales.
ERICH FRAUNSCHIEL BCOM (HONS), FCPA, FAICD
LEAD INDEPENDENT DIRECTOR AND NON-EXECUTIVE DIRECTOR – DIRECTOR
SINCE MARCH 2003
COUNTRY OF RESIDENCE – AUSTRALIA
Erich is Lead Independent Director of the Board and a member of the Audit
and Risk Committee and 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
1 February 2015
n/a
Chairman
2 December 2015
n/a
TOM GORMAN BA (ECONOMICS AND INTERNATIONAL RELATIONS),
MBA (DISTINCTION) (HARVARD)
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE DECEMBER 2017
COUNTRY OF RESIDENCE – UNITED STATES OF AMERICA
Tom was appointed to the Board effective 18 December 2017. He is
Chairman of the Remuneration Committee and a member of the Health,
Safety and Environment Committee and Nominations Committee. His
appointment follows a 30-year career in executive positions at Ford Motor
Company and Brambles Limited. He retired as CEO of Brambles in February
2017. He has worked in multiple functions including finance, operations,
logistics, marketing, and business development and has lived and worked in
the United States, England, France and Australia. He is a director of High
Resolves, an Australian-based non-profit focused on middle school
education. Tom graduated, cum laude, from Tufts University with degrees in
Economics and International Relations and obtained an MBA, with
distinction, from the Harvard Business School.
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
Remuneration Committee and 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 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
WorleyParsons Annual Report 2018
37
DIRECTORS’ REPORT CONTINUED
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 Chairman of
Commonwealth Bank of Australia and a director of Saluda Medical Pty
Limited, the Australian Ballet and is the Chancellor of University of
Technology, Sydney. Catherine was the President of the Business Council of
Australia from 2014 to 2016 and the Chairman of Telstra Corporation
Limited from May 2009 to April 2016 and of CSIRO from 2001 to 2006. She
has also served on the boards of Macquarie Bank Limited, Macquarie Group
Limited, Goodman Fielder Limited and Rural Press Limited. Catherine was
the Managing Director of Cochlear Limited from 1994 to 2000. 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
Commonwealth Bank
of Australia
Telstra Corporation
Limited
Non-executive
director
Chairman
Non-executive
director
Chairman
DATE OF
COMMENCEMENT
DATE OF
CESSATION
1 March 2016
n/a
1 January 2017
30 November 2000
n/a
27 April 2016
8 May 2009
27 April 2016
ANNE TEMPLEMAN-JONES BCOM, MRM, EMBA, CA, FAICD
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE NOVEMBER 2017
COUNTRY OF RESIDENCE – AUSTRALIA
Anne was appointed to the Board on 1 November 2017 and is Chairman of
the Audit and Risk Committee and a member of the Nominations
Committee. Anne is a non-executive director of Commonwealth Bank of
Australia, GUD Holdings Limited and The Citadel Group Limited. She
previously served as a non-executive director of HT&E Limited, Cuscal
Limited, HBF Health Limited, Pioneer Credit Limited, TAL Superannuation
Fund, Notre Dame University and the McCusker Foundation for Alzheimers
Research. Anne has executive experience in institutional and commercial
banking, wealth management and insurance, strategy and risk, having
previously held a number of senior executive roles in Switzerland and
Australia with PricewaterhouseCoopers, the Bank of Singapore (OCBC Bank),
ANZ and Westpac. Anne has a Masters in Risk Management from The
University of New South Wales, an Executive MBA from the AGSM, The
University of New South Wales and a Bachelor of Commerce from the
University of Western Australia. Anne is a Chartered Accountant and a
Fellow of the Australian Institute of Company Directors.
Australian listed company directorships
LISTED
COMPANY NAME
NATURE OF
DIRECTORSHIP
Commonwealth Bank
of Australia
The Citadel Group
Limited
GUD Holdings Limited
HT&E Limited
(formerly APN News
& Media Limited)
Non-executive
director
Non-executive
director
Non-executive
director
Non-executive
director
DATE OF
COMMENCEMENT
DATE OF
CESSATION
5 March 2018
n/a
8 September 2017 n/a
1 August 2015
n/a
20 May 2013
14 April 2018
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
38
WorleyParsons Annual Report 2018
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 PricewaterhouseCoopers 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 24 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.
NUALA O'LEARY LLB, BA
GROUP COMPANY SECRETARY – APPOINTED AUGUST 2016
COUNTRY OF RESIDENCE – AUSTRALIA
Nuala joined the Group in 2002. She is responsible for corporate governance
for the Board and the Group Leadership Team and governance matters
relevant to the listed entity, its capital structure, and its regulatory
obligations. Nuala’s specific Group accountabilities include continuous
disclosure. Nuala has a background in corporate litigation, legal, governance
and company secretary roles. She has previously worked in private legal
practice. Nuala holds degrees in Law and Arts from The University of Sydney
and a graduate diploma of Applied Corporate Governance. Nuala is a Solicitor
of the Supreme Court of NSW.
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.
Remuneration Report
Our focus on delivering the business
strategy was evident in our improved
performance during the year
KEY MESSAGES FROM THE CHAIRMAN OF THE REMUNERATION COMMITTEE
Dear Shareholders
Our focus on delivering the business strategy was evident in our improved performance during the year. The impact of this performance on the remuneration
outcomes for our executives in FY2018 is provided in summary below and discussed in more detail within the Remuneration Report.
We believe that our executives' remuneration aligns to our remuneration principles and strategy. The Remuneration Report includes an explanation of each
component of remuneration, the mix between fixed and variable pay, and our rationale for the use of cash or equity within the remuneration package.
On fixed pay, we decided based on a review of the external market not to increase our executives' fixed pay for FY2018, except for an executive who took on
an expanded role and duties. The Chief Executive Officer maintained a voluntary 10% reduction of his fixed pay throughout FY2018. This reduction has been
in place since 1 July 2015. For the NEDs, the Board decided that for the seventh consecutive year, annual fees should remain the same. In addition, Mr Grill
waived his entire FY2018 Chairman fee for the second full financial year.
On variable pay, we have continued to adopt a proactive approach to ensure variable pay outcomes align to the changing priorities of the business. For the
cash based component, FY2018 KPIs were returned to the pre-FY2017 structure, which includes a weighted mix of financial and strategic measures linked to
sustaining and developing the business for the long term. By contrast the FY2017 KPI structure represented a unique requirement to focus executives on the
achievement of critical short term group financial outcomes. Given our performance and the outcomes of the executives’ FY2018 key performance
indicators, we decided that executives should receive a cash payment as part of their variable pay.
The share price performance rights (SPPRs) granted to executives in 2015 vested during the period based on share price growth, continued employment and
satisfactory performance during the two year vesting period.
The FY2015 long term equity performance hurdles of relative total shareholder return (TSR) have been achieved and earnings per share (EPS) growth has not
been achieved, resulting in a partial vesting for that grant.
The portion of the FY2017 long term equity grant which was tied to a strategic performance hurdle, as highlighted in the FY2016 Remuneration Report, was
measured against two key financial metrics at the end of FY2018 (a two year performance period). Based on these measures, the performance hurdles have
been achieved and the performance rights will be converted to restricted shares. A further two year restriction period applies, ending on 30 September 2020.
The UK Integrated Solutions acquisition and capital raising are a significant area of focus for our management team during FY2018. The provision of a grant
of performance rights with hurdles linked to the ongoing success of the acquisition was awarded to two executives that were key to the transaction during
FY2018. Further details of the above grants and performance hurdles are provided within the report (see page 47).
Your Board appreciates the ongoing support and feedback from shareholders. We continue to ensure our executives focus on helping our customers meet
the world’s changing resources and energy needs.
Kind regards
Thomas J Gorman
Chairman, Remuneration Committee
WorleyParsons Annual Report 2018
39
DIRECTORS’ REPORT CONTINUED
The Company’s directors present the Remuneration Report for the Company and for the consolidated entity for FY2018. It forms part of the Directors’ Report
and has been prepared in accordance with section 300A of the Corporations Act 2001 (Act). The information in the report has been audited as required by
section 308(3C) of that Act.
THE REMUNERATION REPORT IS PRESENTED IN FIVE SECTIONS:
SECTION
1. Remuneration in Brief - Key Management Personnel Covered in This Report, Key Shareholder Questions
2. Executive Remuneration in Detail - Guiding Remuneration Principles, Executive Remuneration Structure, Remuneration
Outcomes in FY2018, Company Performance over a Five Year Period, Variable Pay in Detail, Employment Arrangements
3. Non-Executive Director Remuneration - Guiding Principles, Remuneration Structure, Remuneration Outcomes, Non-
Executive Director Interests in Shares
4. Remuneration Governance Framework - Remuneration Decision Making, Executive Minimum Shareholding Requirement,
Hedging, Clawback (Malus) Provision, Cessation of Employment and Change of Control
5. Remuneration Tables - Statutory and 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
PAGE
40
43
48
49
50
1. REMUNERATION IN BRIEF
This section outlines the director and executive arrangements in place for the Company.
The list below of executives and non-executive directors comprised the Key Management Personnel (KMP) of the Company for FY2018, as defined under the
accounting standards. The use of the term "Executives" throughout this report refers to the KMP whose remuneration details are outlined in this report.
All KMP were employed/held office for the whole of FY2018, except where otherwise stated.
KMP COVERED IN THIS REPORT
NAME
NON-EXECUTIVE DIRECTORS
John Grill
Erich Fraunschiel1
Thomas J Gorman2
Christopher Haynes
Catherine Livingstone
Anne Templeman-Jones2
Wang Xiao Bin
FORMER NON-EXECUTIVE
DIRECTORS
Ron McNeilly3
Jagjeet S Bindra4
EXECUTIVES
Andrew Wood
Robert (Chris) Ashton
Thomas Honan
Adrian Smith5
PREVIOUSLY REPORTED EXECUTIVE
Dennis Finn6
POSITION
Chairman
Lead Independent Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Former Deputy Chairman and Lead Independent Director
Former Non-Executive Director
Chief Executive Officer
Group Managing Director – Major Projects and Integrated Solutions, Global Sales
and Marketing
Group Managing Director Finance/CFO
Group Managing Director/Chief Executive Officer, Advisian
COUNTRY OF RESIDENCE
Australia
Australia
United States of America
United Kingdom
Australia
Australia
China
Australia
United States of America
Australia
United States of America
Australia
United Kingdom
Former Group Managing Director/Chief Executive Officer, Advisian
Australia
1 Mr Fraunschiel commenced as Lead Independent Director on 28 October 2017.
2 Mr Gorman and Ms Templeman-Jones commenced on 18 December 2017 and 1 November 2017 respectively.
3 Mr McNeilly retired on 27 October 2017.
4 Mr Bindra resigned on 15 December 2017.
5 Mr Smith commenced on 1 October 2017.
6 Mr Finn ceased in the role and ceased to be KMP on 30 September 2017.
40
WorleyParsons Annual Report 2018
KEY SHAREHOLDER QUESTIONS
QUESTION
ANSWER
How is the
Company's
performance
reflected in the
Executive
remuneration
in FY2018?
The Board decided that the Company’s FY2018 financial outcomes merited a payment of the cash component of the
Executives' variable pay based on achievement of key performance indicators (KPIs). Each Executive received between 23%
and 28% of their target through the variable pay plan.
FY2015 long term equity award - outcomes - the relative TSR growth minimum performance hurdles required for this award
to vest were achieved and EPS has not been achieved. This results in a partial vesting on 30 September 2018. As no retest
applies to either measure, the EPS component, and part of the TSR component, of the grant will lapse on 30 September 2018.
FY2017 long term equity award 'strategic tranche' - outcomes have been achieved and the performance rights will be
converted to restricted shares on 30 September 2018. A further two year restriction period applies, ending on 30 September
2020. Performance hurdles are provided within the report.
SPPRs granted in FY2016 vested during FY2018, based on the share price performance during the period, continued
employment and performance. The alignment based on share price growth during this period resulted in a multiple of 1.84.
This is shown graphically below:
REFER
PAGE
See
pages
44,45
Have any
changes been
made to the
remuneration
of NEDs?
What changes
have been
made to
remuneration
components
during FY2018?
For the seventh consecutive year, there have been no increases to NED annual fees.
In addition, Mr Grill waived his entire Chairman fee for FY2018.
See
page
48
For the cash based component of variable pay, FY2018 KPIs were returned to the pre-2017 structure, which includes a
weighted mix of financial and strategic measures linked to sustaining and developing the business for the long term. By
contrast the FY2017 KPI structure represented a unique requirement to focus executives on the achievement of critical short
term group financial outcomes.
See
pages
46, 47
As disclosed in the FY2017 Remuneration Report, the minor but important changes to the SPPR and long term equity grants
made during FY2018 were implemented as communicated. This included raising the minimum share price required for vesting
of SPPRs from 50% to 70% of the share price at grant, and reverting back to EPS growth as a performance measure for 50% of
the Long Term Incentive (LTI) grant.
No other changes have been made to any of the remuneration components for FY2018.
Are there
minimum
shareholding
requirements in
place for the
KMP?
Yes, the following mandatory minimum shareholding requirements apply:
• Executives must retain equity until they hold shares equivalent in value to two times their fixed pay (or for the CEO, four
times fixed pay) and they must subsequently maintain that multiple; and
• NEDs are required to build a minimum shareholding equivalent in value to their annual fee and are expected to comply with
this requirement within their first full term of three years as a director. The minimum shareholding requirements are
assessed each year.
See
pages
48, 49
and
52
Where Executives do not currently meet the minimum requirement, they build this through our remuneration arrangements.
WorleyParsons Annual Report 2018
41
DIRECTORS’ REPORT CONTINUED
Has Executives'
fixed pay been
reviewed in
FY2018?
We review the Executive remuneration framework each year and in doing so, the Board considers the pay practices of the
industry and the markets in which the Company operates. This ensures the Company provides competitive remuneration
(including fixed pay) that will attract and retain suitably qualified executives.
See
page
49
It is particularly important that we do not consider the Australian market in isolation due to the global nature of our business
and location of our talent.
Chris Ashton received an adjustment due to the expansion of his role during the period. During the year, Chris Ashton's role
was expanded to include Global Sales and Marketing in addition to leading the Major Projects and Integrated Solutions
business. There have been no other increases in fixed pay for Executives in FY2018.
We made no changes to the CEO's fixed pay during FY2018. The 10% reduction that he initiated to his fixed pay has been in
place since 1 July 2015.
How is variable
pay delivered to
Executives?
An Executive's variable pay (or pay at risk) is delivered through a mix of cash and equity (medium and long term performance
rights if specific performance hurdles are met). Variable pay:
• forms a significant proportion of an Executive's total remuneration package as shown below in the pay mix graphic;
• depends on various aspects of the Company’s performance; and
• is subject to a clawback (malus) provision.
The targeted mix of remuneration components assumes all performance conditions are satisfied. Allowances and benefits are
for specific purposes and are excluded from determining the pay mix.
See
pages
43, 44
Why are there
two equity
based plans
within the
variable pay
arrangements?
What are the
performance
hurdles and
measurement
period for the
SPPRs?
What are the
performance
hurdles and
measurement
period for the
long term
equity grant?
The Executive pay mix contains two equity components each with different performance hurdles. Those hurdles aim to drive
value for shareholders in both the medium and the long term.
The two plans are the SPPRs and the long term equity plan. They are aligned with our remuneration principles which include
building share ownership and aligning employee, customer and shareholder interests.
See
pages
45 to
47
The SPPRs are an annual grant of performance rights with a share price multiplier and performance hurdle. They ensure our
Executives continue to be aligned with shareholders, strive towards strengthening the core business and positioning the
Company for the future. The performance period is two years, with the quantum of vesting linked to share price movement
during that period (within a minimum floor and maximum cap), a service condition and satisfactory performance.
See
page
46
SPPRs provide strong alignment to shareholders' interests and they also motivate our Executives to take action that results in
enhanced shareholder return.
For FY2018, the long term equity grant includes both relative TSR and EPS performance hurdles with a 50/50 weighting
applied to each hurdle. The TSR and EPS hurdles are measured three years after grant date. If all the relevant vesting
conditions have been met, the TSR and EPS performance rights will vest and convert into restricted shares. The restricted
shares will be subject to further vesting conditions and a trading restriction for an additional 12 months, retaining the four
year measurement period.
See
pages
46,47
Full details of prior year grants are set out in the Remuneration Report for the relevant year.
42
WorleyParsons Annual Report 2018
2. EXECUTIVE REMUNERATION IN DETAIL
GUIDING REMUNERATION PRINCIPLES
The remuneration principles that underpin Executive remuneration drive the behaviors and results to help us achieve our strategy and mission:
EXECUTIVE REMUNERATION STRUCTURE
We structure our Executive remuneration to recognise an individual’s role, responsibilities, qualifications and experience as well as to help them drive
performance over the short and long term. The proportion of variable pay available to an Executive reflects their ability to influence Company performance.
The explanation below provides details of the various remuneration components, the pay mix, the timing for their delivery and their link to the remuneration
principles. Actual variable pay an Executive receives varies depending on the extent that they and the Company meet or exceed our performance
requirements.
More information about the Company’s variable pay arrangements, the performance conditions imposed and the outcomes of those arrangements (based on
the Company’s performance over FY2018 and earlier), are set out below and on pages 44 and 45.
Fixed pay - provides an Executive with competitive fixed pay, set relative to market. Given in the form of cash (or base) salary, superannuation contributions
and any salary sacrificed components. Requires the Executive’s ongoing employment and performance.
Variable pay (cash) - rewards an Executive’s previous year performance against Company goals and KPIs. Given in the form of cash linked to the Executive’s
achievement against annual KPIs which the Board sets and measures.
Variable pay (medium term equity) - is future-focused to motivate an Executive to deliver sustainable growth in share price. Given in the form of equity
through SPPRs linked to two year performance targets (share price movement). Requires the Executive’s continued employment and satisfactory
performance. No retesting provisions allowed. No dividends paid on unvested SPPRs.
Variable pay (long term equity) - designed to reward an Executive for delivering on long term performance as measured against external peers and internal
targets. Given in the form of long term equity linked to four year vesting period (with three year relative TSR and EPS growth targets). Requires the
Executive’s continued employment and performance. No retesting provisions allowed. No dividends paid on unvested long term equity.
WorleyParsons Annual Report 2018
43
DIRECTORS’ REPORT CONTINUED
The targeted mix of remuneration components shown below refers to the amount that an Executive would be paid if all their performance conditions that
apply to variable pay are satisfied and assumes they achieve 100% of their cash and equity awards. Allowances and benefits are for specific purposes and are
excluded in determining the mix.
REMUNERATION OUTCOMES IN FY2018
Variable pay outcomes - cash
Based on KPI outcomes for FY2018 and the Company's
financial performance for the period, the Board decided to
provide cash payments to the Executives through the
variable pay plan. The graph to the right shows the
strong alignment between Company performance as
measured by Group net profit after tax (NPAT) and
variable pay to Executives for the last five years.
Variable pay outcomes - SPPRs
SPPRs granted during FY2016 were tested against their
performance hurdles in FY2018. The SPPRs vested as
the closing share price at the end of the two year
performance period was between the minimum floor and
maximum cap of the opening share price. In addition,
satisfactory performance and continued employment
hurdles were achieved.
The opening share price was $7.26 and the closing share
price was $13.39; this resulted in the SPPRs converting to
shares for the Executives during FY2018, with a multiple
of 1.84x. The details are provided on page 46. This
reflects an 84% improvement in the share price between
date of grant and date of vesting.
1 The average cash amount awarded as a percentage of maximum for any financial year relates to amounts that were paid
as part of the cash portion of the variable pay plans (previously the Combined Incentive Plan) in the September following
that financial year end. Year on year changes in the % of maximum cash awarded are a result of company financial
performance, the composition of the KMP, and individual performance achievement relative to targets.
2 Underlying NPAT figures are used for this graph. In FY2014, these are the same as reported Group NPAT figures.
Variable pay outcomes - long term equity
The graph below compares the Company’s TSR, over the last four years, against the 50th and 75th percentiles TSR of the peer comparator group that we use
as a measure for the long term equity plan:
TSR performance measured over the last four years
FY2015 grant - this graph shows that growth in the
Company’s TSR was above the 50th percentile,
which resulted in a partial vesting for Executives for
the FY2015 TSR grant.
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 long
term equity granted in FY2015 resulting in nil
vesting for Executives for the EPS grant.
No retest applies to either measure.
FY2017 grant - the strategic tranche (50% of this grant) was provided to ensure continued focus and dedication of the executive team and was subject to the
achievement of both cost reduction targets of $350 million delivered during the period FY2016, FY2017 and FY2018, in addition to net debt-to-EBITDA
target (2x or less) measured at the end of FY2018. These specific targets were not disclosed at the time of grant because they were commercially sensitive,
but have been disclosed retrospectively in accordance with the Company's commitment to do so in the 2016 Notice of Meeting and Annual Report. Both
targets were achieved resulting in the performance rights being converted to restricted shares. The restricted shares will vest on 30 September 2020,
subject to continued service and satisfactory individual performance.
44
WorleyParsons Annual Report 2018
FY2018 'Special Acquisition' grant - tranche 1 (half of the grant) was measured against progress made on a detailed scorecard across key workstreams
during FY2018. Following a review of the scorecard, and progress made on the transition, tranche 1 will vest in September 2018.
Summary of vested rights
The table below shows the recent history of vesting of Executives’ regular long term equity grants:
GRANT
FY2013
FY20133
FY2014
FY2015
PERFORMANCE PERIOD
01 Jul 12 – 30 Jun 15
01 Jul 12 – 30 Jun 16
01 Jul 13 – 30 Jun 17
01 Jul 14 – 30 Jun 18
TSR PERCENTILE
ACHIEVED1
CHANGE IN
EPS ACHIEVED2
% OF TOTAL
LTI GRANT
VESTED/EXERCISED
8th
11th
36th
65th
(17.0%)
(18.6%)
(21.5%)
(11.9%)
0%
0%
0%
40%
VESTING DATE
30 Sep 15
30 Sep 16
30 Sep 17
30 Sep 18
VALUE PER RIGHT
VESTED/EXERCISED
$
n/a
n/a
n/a
n/a
1 Represents the Company’s relative TSR ranking over the performance period compared to the peer comparator group.
2 Change in EPS achieved is calculated as the compound annual growth rate of EPS over the performance period. FY2017 EPS restated for the impact of the entitlement offer to fund the UK Integrated Solutions
acquisition in accordance with AASB 133 Earnings Per Share; however, there is no material impact on the change in EPS achieved. FY2018 EPS reflects an adjustment related to the entitlement offer to fund
the UK Integrated Solutions acquisition in accordance with AASB 133 Earnings Per Share; however, there is no material impact in EPS achieved.
3 In FY2013, Andrew Wood was granted LTI with a four year vesting period, details are provided in the remuneration report for the relevant year.
COMPANY PERFORMANCE OVER A FIVE YEAR PERIOD
The table below shows a snapshot of the Company’s financial performance and how that impacts on remuneration outcomes for Executives as part of our
variable pay programs. Our Executives' remuneration arrangements ensure that their remuneration is lower when our performance does not justify large
awards and is higher when our performance is strong. As demonstrated by the table, variable pay outcomes have moved in line with the Company’s
performance against relevant key metrics.
The table below shows how the Company's financial performance impacts Executive remuneration:
FINANCIAL YEAR ENDED 30 JUNE
FY2014
FY2015
FY2016
Closing share price ($)
17.41
TSR portion of long term equity
1 year TSR for the Company (%)
Dividends paid (cents)
1 year TSR for 50th percentile of peer group (%)
Vesting outcome of LTI (%)
85.0
(6.8)
1.4
nil
EPS portion of long term equity
Cash portion of variable pay3
Underlying EPS (cents)1
106.8
Vesting outcome of LTI (%)
nil
Underlying NPAT ($’m)4
263.4
10.41
56.0
(36.4)
(23.6)
nil
98.4
nil
243.1
7.20
-
(30.2)
(4.0)
nil
61.8
nil
153.1
FY2017
11.22
-
56.3
3.8
nil
49.22
nil
123.2
ANNUALIZED
GROWTH OVER
FY2018
FIVE YEARS
17.63
10.0
58
8.5
40
64.3
nil
171.4
0.25%
(34.8%)
(9.7%)
(8.2%)
Average % of maximum cash portion awarded
to Executives (%)
nil
nil
nil
14
16.5
1 Underlying EPS, which in the Board’s opinion reflects the Company’s operating results, has been used to calculate the outcomes.
2 FY2017 underlying EPS was restated from 49.6 to 49.2 cents. This is associated with the acquisition of UK Integrated Solutions where the Company issued 24.8 million shares at $13 each in the reporting
period. The issue was a 1 for 10 fully underwritten, pro-rata, accelerated non-renounceable entitlement offer for $322.0 million. Underlying EPS was retrospectively modified by multiplying the original
weighted average number of shares by an adjustment factor of 1.01 in accordance with AASB 133 Earnings per Share.
3 The cash component of the variable pay is linked to the achievement of annual KPIs; previously, this was the Combined Incentive Plan which was a mix of cash and equity.
4 Group NPAT reflects the Company’s operating results for FY2014-FY2018. We have used it to calculate the remuneration outcomes for that financial year. For all other financial periods represented in this
table, we have used underlying NPAT to calculate the remuneration outcomes. Underlying NPAT excludes impairment of goodwill, restructuring costs (net of tax), net loss on sale of assets held for sale,
impairment of associate intangible assets, certain functional currency related foreign exchange gains, net gain on revaluation of investments previously accounted for as equity accounted associates and joint
operations and other adjustments at the Board discretion, being the difference between reported statutory NPAT and underlying NPAT.
VARIABLE PAY IN DETAIL
By linking pay to performance, we focus and motivate Executives to achieve outcomes beyond the standard expected in the normal course of employment.
The elements of an Executive's remuneration that are at risk are in the form of both cash and equity. The following section provides details about each of the
components of variable pay.
Cash component - linked to performance against KPIs
The performance targets are set and measured through both financial and strategic KPIs. These KPIs, and their appropriate thresholds, are linked to the
business strategy, agreed at the beginning of the financial year and are fundamental to the long term sustainability and development of the business.
The Board retains rigorous oversight of the KPIs, to ensure they are challenging and retain sufficient motivation to stretch the Executives.
The minimum potential value is zero where applicable levels of performance have not been met. The maximum opportunity is 150% of the Executive’s target.
Each KPI has an individual threshold. For financial KPIs, achievement above 80% of the budget/target is required before a sliding scale applies i.e. for each 1%
above 80% of the budget, 5% is awarded. This is capped at 200% (which is for 120% achievement against budget). Strategic KPIs, which are a mix of individual
financial and non-financial metrics, have a maximum achievement of 100%.
Generally, for an Executive to be eligible for a cash payment, they must have been employed for at least three months of the financial year and remain in
employment at the date of payment.
WorleyParsons Annual Report 2018
45
DIRECTORS’ REPORT CONTINUED
FY2018 KPIs and their link to the Company’s strategy:
Financial KPIs (60% weighting for the CEO, 50% weighting for the other Executives)
Group NPAT, Maintain the cost out program, Group DSO - chosen as they reflect and measure achievement against a number of the Company’s core financial
KPIs. Significant focus has been on all of these key metrics during the year and the outcomes for FY2018, are indicated in the financial report. Group NPAT
grew at both underlying and statutory levels, our cost out program being maintained and for Group DSO we have achieved good progress across a majority of
business units with still some room for improvement.
Strategic KPIs (40% weighting for the CEO, 50% weighting for the other Executives)
HSE - chosen in support of the Company's goal of Zero Harm and measured through the reduction in the number of reportable incidents and the
demonstration of personal and visible leadership through activities measured throughout the performance year.
The remaining KPIs chosen, focus on our three strategic pillars with varied weightings and specific targets for each Executive based on their role. The specific
KPIs for Executives relating to strategic imperatives are considered commercially sensitive. A broad explanation of each is provided below:
• Viable and competitive business - includes the delivery of key imperatives for their business line linked to targeted business growth objectives and the
implementation of operational excellence initiatives.
• All our value to all our customers - includes targets which drive collaboration and capability development within and across business lines and achieve
increased market share and market size outcomes.
• Key player in the new world - includes metrics which focus efforts on positioning the business for future successes including development of new markets
and service line capabilities as well as the development of key talent.
SPPRs - linked to medium term Company performance
Performance rights which are granted annually to Executives as SPPRs, aim to focus Executives on increasing the Company's share price over a two year
period. The number of SPPRs granted is determined by dividing the dollar value of the award achieved by the face value of shares. For the SPPRs to convert
into shares, the share price at the end of the two year performance period (the closing share price) must be, when measured, in between the maximum cap
and the minimum floor of the opening share price. The SPPRs vest on a proportionate basis between the cap and the floor. To receive shares, an Executive
must remain employed and receive satisfactory performance ratings throughout the two year vesting period. If these conditions are not met, then their
SPPRs will lapse. No dividends are payable on unvested SPPRs
Examples - the following scenarios are each based on a notional grant of 1,000 SPPRs with a notional WorleyParsons opening share price of $10.00 at the time the
SPPRs are issued i.e. a notional value of $10,000. In two years' time:
Scenario 1: The closing share price is $21.00 (i.e. more than doubles). The 1,000 SPPRs convert to 2,000 shares and their total value = $42,000.
Scenario 2: The closing share price is $12.00. The 1,000 SPPRs convert to 1,000 x ($12/$10) = 1,200 shares and their total value = $14,400.
Scenario 3: The closing share price is $8.00. The 1,000 SPPRs convert to 1,000 x ($8/$10) = 800 shares and their total value = $6,400.
Scenario 4: The closing share price is 70%1 or less than the opening share price; then the SPPRs lapse and no shares are issued.
1 The higher floor was introduced for the FY2018 grant of SPPRs following feedback from shareholders; for earlier grants, this was half or less than half of the opening share price.
The FY2016 SPPR grant price was: $7.26 - closing price $13.39, a multiple of 1.84 was applied ($13.39/$7.26).
The FY2017 SPPR grant price was: $8.11.
The FY2018 SPPR grant price was: $13.39.
Long term equity - linked to long term Company performance
Long term equity is assessed against two equally weighted, independent performance targets that align an Executive’s interests with shareholder returns
while driving long term Company performance. Long term equity grants are delivered to Executives as rights that are issued under the WorleyParsons
Performance Rights Plan. After an Executive's rights vest, 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 to an Executive is based on the Executive’s target long term equity with reference to the
underlying share price when the rights are issued.
An Executive's rights vest and are automatically exercised (unless the Executive elects otherwise) after the vesting period, subject to defined performance
hurdles being satisfied. If an Executive's rights cannot be readily issued in certain overseas jurisdictions due to differing securities laws and taxation
treatments, the long term equity plan rules ensure that the Executive can still be rewarded for their contribution, while catering for the local restrictions on
the issue of securities.
46
WorleyParsons Annual Report 2018
Grants made during FY2018 (these will be measured over a three year performance period plus an additional one year restriction period):
Relative TSR performance hurdle - 50% weighting
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. The Board chose relative TSR as a performance hurdle because it believes this provides the most direct measure of
shareholder return and reflects an investor’s choice to invest in this company or its direct competitors. Executives will derive value from the TSR component
of the long term equity plan only, if over a three year period, the Company’s TSR performance is at least at the 50th percentile of the companies in the peer
comparator group.
There is no retesting opportunity for the long term equity under the relative 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
0%
25%
Greater than the 50th percentile but less than the 75th percentile
Pro-rated vesting between 25% and 50%
At 75th percentile or greater
The TSR comparator group for the FY2018 grant includes: AECOM, Arcadis, Fluor Corporation, Fugro, Jacobs Engineering Group, JGC Corporation, KBR,
Petrofac, SNC Lavalin, Stantec, Tetra Tech, Wood Group1 and WSP Global.
50% (i.e. maximum available under the plan)
1 Due to the acquisition by Wood Group on 9 October 2017, AMEC Foster Wheeler is no longer listed above.
The Board has discretion to adjust the peer comparator group to take into account events that happen during the performance period, for example, takeovers
or mergers.
EPS growth performance hurdle - 50% weighting
To measure basic EPS, we divide the Group NPAT by the weighted average number of the Company’s ordinary shares on issue during the financial year. We
measure growth in EPS by comparing the EPS in the financial year immediately preceding the issue with the EPS in the measurement year. The Board chose
EPS growth as a performance hurdle because it provides a clear line of sight between Executive performance and Company performance. Also, it is 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 growth component of the grant made during FY2018 if
the Company achieves average compound growth in EPS of at least 4% per annum above the increase in the Consumer Price Index (CPI) over the three year
performance period. The vesting schedule of the rights subject to the EPS growth 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)
Special Acquisition Grant
The acquisition of the UK Integrated Solutions business during FY2018 was of strategic significance to the Company. It aimed to build a global MMO
business, entry into the UK North Sea market and provide additional growth potential, based on the joint capabilities of our people. The successful
completion of the transaction, including the capital raising and an effective transition was critical to the delivery of this strategic priority. A grant of
performance rights has been provided to Robert (Chris) Ashton and Thomas Honan and is linked to performance hurdles which are measured through a
transition scorecard (KPIs include achievement of cost and revenue synergies; integration of core operating systems; implementation of core governance and
control processes; and retention of key personnel). The face value of the grant equated to 60% of their fixed pay. Subject to the performance hurdles being
achieved to the satisfaction of the Board, continued employment and satisfactory performance, the grant will vest in two tranches: half after 12 months, the
remaining half after 24 months.
Prior year long term equity grants
Full details of prior year grants, including TSR peer groups, are set out in the Remuneration Report for the relevant year. In summary:
• for FY2017, the long term equity grant included the relative TSR hurdle measured over a four year performance period in addition to a strategic
performance hurdle (50/50 weighting) measured over a two year performance period (with a further two year restriction period). This was a one-off
change for the FY2017 award given the importance of delivery of the Company's Realize our future strategy and the role that Executives play in leading its
implementation. The details of the strategic performance hurdle is explained on page 44; and
• for FY2013 to FY2016, the relative TSR and EPS growth performance hurdles shown above were used (50/50 weighting) and measured over a four year
performance period.
Other provisions
Rights granted to the Executives under the SPPR and long term equity plans carry:
• no voting or dividend entitlements; and
• no entitlement to participate in new share issues made by the Company (other than bonus issues and capital reorganizations (when the number of rights
may be adjusted by the Board in accordance with the ASX Listing Rules, so as to ensure no advantage or disadvantage to the Executive)).
Dilution limit
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 period. Currently, the number of securities issued and held pursuant to the equity plans
represents 2.22% of the Company’s issued share capital (FY2017: 2.25%).
Eligible recipients
All current Executives are able to receive rights through the long term equity plan. Details of the rights granted to Executives as the long term equity
component of their remuneration in FY2018 are outlined on page 53.
Exercise of rights and allocation of shares
To the extent that the performance hurdles have been satisfied, an Executive's rights are automatically exercised (unless an Executive elects otherwise) and
participants acquire shares in the Company at a nil exercise price. Shares allocated to an Executive upon exercise of rights rank equally with all other ordinary
shares on issue. Where the shares are subject to further vesting conditions or restriction periods (i.e. they are restricted shares), they cannot be sold prior to
the vesting date or end of the restriction period (as applicable) and may still be forfeited in certain circumstances. After vesting, participants have
unencumbered ownership of the shares, subject to compliance with the Company’s Securities Dealing Policy and minimum shareholding requirement.
WorleyParsons Annual Report 2018
47
DIRECTORS’ REPORT CONTINUED
EMPLOYMENT ARRANGEMENTS
The key aspects of Executive contracts are outlined below:
NAME
EXECUTIVE DIRECTOR
Andrew Wood
GROUP EXECUTIVES
Robert (Chris) Ashton
Thomas Honan
Adrian Smith
CONTRACT DURATION
NON-COMPETE CLAUSES
NOTICE PERIODS1
Unlimited
Unlimited
Unlimited
Unlimited
12 months
12 months
12 months
12 months
12 months
6 months
6 months
6 months
1 Notice period, whether given by the Executive or the Group is the same.
The Executive's contracts include the components of remuneration which are to be paid. They 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 variable pay plans upon
termination, where an Executive resigns, the cash portion of the variable pay is paid only if the Executive is employed on the date of payment (which is after
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
on page 49. In exercising such discretion, this is typically on a pro-rata basis and subject to the original performance requirements and timing.
At the 2016 Annual General Meeting, the Board sought and received approval from shareholders, where discretion was applied for the retention of long term
equity following cessation of employment for the value of long term equity to be disregarded when calculating the relevant participant’s cap for the purposes
of section 200F(2)(b) or 200G(1)(c) of the Act.
Mr Finn ceased to be KMP of WorleyParsons from 30 September 2017 after he resigned from the Company. All his unvested equity lapsed when his
employment ended.
The Company did not provide any sign-on or separation payments to Executives during FY2018.
3. NON-EXECUTIVE DIRECTOR REMUNERATION
This section outlines the remuneration arrangements in place for the Company’s NEDs. All NEDs held office for the whole of FY2018, unless otherwise stated
on page 40.
GUIDING PRINCIPLES
The principles of fairness and shareholder alignment are reflected through the Company setting NED fees at a level that is market competitive, and that
reflects the caliber of directors the Company requires for it to adequately address the significant strategic and operational challenges it faces, domestically
and abroad.
In FY2018, Directors' fees remained constant. They have now been at the same amount for seven years in a row. There will be no increase in annual fees for
NEDs in FY2019.
The aggregate amount of fees (which include Board and Committee fees) that the Company may pay to NEDs in any year is capped at the level approved by
shareholders. The current maximum aggregate amount is $3.25 million per annum. Shareholders approved that amount at the 2012 Annual General
Meeting. Of the aggregate annual fee pool, 68% ($2.09 million) was paid during FY2018 (for FY2017, this was 53% or $1.73 million). NEDs are paid fees for
services on the Board and its Committees. The directors do not receive any performance related incentives such as options or rights to shares, and no
retirement benefits are provided to NEDs other than superannuation contributions.
REMUNERATION STRUCTURE BOARD AND COMMITTEE FEES
Board and Committee fees for FY2017 and FY2018 are set out below. These amounts include superannuation contributions made on behalf of NEDs in
accordance with the Company’s statutory obligations.
ROLE
Chairman1
Deputy Chairman3
Member
Chairman/Member of Nominations Committee or Lead Independent Director
BOARD
AUDIT AND RISK
HSE
REMUNERATION
COMMITTEE
$520,0002
$312,000
$194,000
nil
$47,000
$30,000
$37,000
$26,000
nil
$12,000
nil
$21,000
nil
1 The Chairman of the Board does not receive additional Board membership fees or fees for Committees of which he may be a member. The Chairman of a Committee does not receive additional membership
fees for that Committee.
2 Mr Grill requested a temporary reduction in his Chairman fee of $520,000 per annum in FY2016 (reduced to $395,053) and elected to receive no fees for his role in both FY2017 and FY2018.
3 The Deputy Chairman does not receive additional fees for Committees of which they may be a member. The role is currently vacant.
Other benefits
NEDs are eligible for travel allowances of $5,000 a trip for additional time incurred on overseas business related travel including attendance at Board
meetings and site visits. These payments are made from 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, unless 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 FY2018.
REMUNERATION OUTCOMES
The remuneration outcomes of the NEDs for FY2018 and FY2017 are set out in the Remuneration Tables section of the report, on page 54.
NON-EXECUTIVE DIRECTOR INTERESTS IN SHARES
The NED beneficial interests in shares of the Company as at 30 June 2018 are detailed in the Remuneration Tables section of the report, on page 54.
NED minimum shareholding requirement
A minimum shareholding requirement for NEDs exists to align director and shareholder interests. Each NED must build a holding of the Company’s ordinary
shares equivalent in value to their annual fee. NEDs are expected to comply with this requirement within their first full term of three years as a director. For
the purposes of this test, the value of shares is calculated using the number of shares held at 30 June 2018 multiplied by the five day volume weighted
average price of the Company’s shares up to and including 30 June 2018 ($17.47) or purchase price if higher.
48
WorleyParsons Annual Report 2018
4. REMUNERATION GOVERNANCE FRAMEWORK
REMUNERATION DECISION MAKING
The diagram below illustrates the process by which remuneration decisions are made within the Company, and explains the roles various stakeholders play in
setting remuneration:
During FY2018, the Board arranged for an independent research and advisory consulting firm, Aon Hewitt, to benchmark the Company's total remuneration
and remuneration mix for Executives. The Remuneration Committee used the firm's advice as a guide, not a substitute for thorough consideration of all of
the issues. The cost of Aon Hewitt's advice and assistance is not material for either party. Aon Hewitt was engaged by, and reported to, the Chairman of the
Remuneration Committee. The Board is satisfied that the information Aon Hewitt provided was free from undue influence by any Executive.
The Board engaged Orient Capital to calculate the TSR for the purposes of vesting long term equity. The amount the Company paid to Orient Capital for TSR
reporting is not material for either party.
No remuneration consultants provided any remuneration recommendations to the Board during FY2018.
EXECUTIVE MINIMUM SHAREHOLDING REQUIREMENT
Executives are required to hold a minimum shareholding so as to:
• reinforce the Company’s objective of aligning their interests with the interests of shareholders; and
• foster an increased focus on building long term shareholder value.
To satisfy the requirement, Executives must retain equity they receive through incentive plans until they hold shares equivalent in value to two times their
fixed pay (or the CEO, four times fixed pay). They must maintain that multiple. Each year on 30 June, the Board assess each Executive's compliance with the
requirement. The table on page 52 shows a summary of the position of each Executive against the requirement as at 30 June 2018.
HEDGING
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 (this is also known as a Malus provision) within the variable pay plans. This provision enables the Board to
have an employee's unvested performance rights or vested but unexercised performance rights, lapse if the Board is of the opinion, that the employee:
• has acted fraudulently or dishonestly;
• is in breach of their obligations to the Company or another Group company; or
• received awards based on financial accounts which were later restated.
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. 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. Rights that are retained will subsequently vest or lapse in the
ordinary course.
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.
WorleyParsons Annual Report 2018
49
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 SPPR
and LTI columns under the remuneration awarded section of Actual Remuneration Outcomes on page 51.
SHORT TERM EMPLOYEE BENEFITS
POST-
EMPLOYMENT
BENEFITS
OTHER LONG
TERM
BENEFITS
TERMINATION
BENEFITS
SHARE BASED PAYMENTS
NAME
YEAR
CASH
SALARY
$000
CASH
INCENTIVE1/
CASH STI
$000
OTHER
BENEFITS2
$000
TOTAL SHORT
TERM CASH
AND BENEFITS
$000
SUPER-
ANNUATION
BENEFITS
$000
LONG
SERVICE
LEAVE
$000
TERMINATION
BENEFITS
$000
EQUITY
INCENTIVE3/
STI EQUITY
SETTLED
$000
LTI
EQUITY
SETTLED3
$000
TOTAL
REMUNERATION
IN ACCORDANCE
WITH ACCOUNTING
STANDARDS
$000
VARIABLE PAY
% OF TOTAL
REMUNERATION
%
EXECUTIVE DIRECTOR
Andrew Wood
FY2018
FY2017
1,435
1,435
GROUP EXECUTIVES
Robert (Chris) Ashton
FY2018
Thomas Honan
Adrian Smith4
FY2017
FY2018
FY2017
FY2018
FY2017
663
512
930
930
357
-
PREVIOUSLY REPORTED GROUP EXECUTIVES
Dennis Finn5
FY2018
263
Total remuneration
FY2017
FY2018
FY20176
1,049
3,648
4,656
407
317
96
72
136
124
39
-
-
217
678
795
10
7
145
262
3
2
162
-
1
96
321
720
1,852
1,759
904
846
1,069
1,056
558
-
264
1,362
4,647
6,171
20
20
9
13
20
20
-
-
7
20
56
87
24
24
-
-
16
16
-
-
5
14
45
54
-
-
-
-
-
-
-
-
-
-
-
-
876
549
413
134
608
128
57
-
45
507
1,999
1,047
535
588
99
55
190
110
13
-
-
-
837
766
55.0%
49.5%
42.7%
24.9%
49.1%
27.3%
17.3%
-
14.1%
38.0%
3,307
2,940
1,425
1,048
1,903
1,330
628
-
321
1,903
7,584
8,125
1 The amount relates to the cash portion of the FY2018 variable pay plan typically payable in September 2018.
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 Ashton and Mr Smith), 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 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,
varies based on the probability of vesting 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.
4 Remuneration for FY2018 was disclosed to the extent that it related to Mr Smith's employment in the capacity of an Executive, which commenced on 1 October 2017.
5 Remuneration is disclosed to the extent that it relates to Mr Finn's employment in the capacity of an Executive, which ceased on 30 September 2017. All of Mr Finn's unvested equity lapsed following his
departure. See page 53 for further details.
6 The FY2017 totals have been rounded in line with the current standard. Full details of prior year total remuneration are set out in the Remuneration Report for the relevant year.
Share based payments are disclosed to the extent they relate to their employment in the capacity of an Executive.
50
WorleyParsons Annual Report 2018
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 50.
AWARDED AND RECEIVED DURING
REPORTING PERIOD
SHORT TERM
CASH AND
BENEFITS
$000
(A)
OTHER
BENEFITS1
$000
(B)
RECEIVED DURING REPORTING PERIOD
DEFERRED FROM PREVIOUS PERIODS2
AWARDED DURING REPORTING PERIOD
DEFERRED FOR FUTURE PERIODS3
TOTAL REMUNERATION
RECEIVED DURING
REPORTING PERIOD
$000
(E)4
LTI
$000
(D)
EQUITY
INCENTIVE
/SPPR
$000
(F)
NAME
EXECUTIVE DIRECTOR
Andrew Wood
FY2018
FY2017
GROUP EXECUTIVES
Robert (Chris) Ashton
FY2018
Thomas Honan
Adrian Smith6
FY2017
FY2018
FY2017
FY2018
FY2017
1,852
1,759
904
846
1,069
1,056
558
-
PREVIOUSLY REPORTED GROUP EXECUTIVE
Dennis Finn7
Total remuneration
FY2018
FY2017
FY2018
FY20178
264
1,362
4,647
6,171
EQUITY
INCENTIVE
$000
(C)
2,495
-
53
-
-
-
-
-
2,019
-
4,567
44
44
9
13
36
36
-
-
12
34
101
141
-
-
-
-
-
-
-
-
-
-
-
LTI
$000
(G)
1,236
1,236
315
284
570
570
89
-
-
-
727
727
530
170
855
285
142
-
-
490
TOTAL REMUNERATION
AWARDED DURING
REPORTING PERIOD
$000
(H)5
3,859
3,766
1,758
1,313
2,530
1,947
789
-
276
1,886
9,212
11,533
4,391
1,803
966
859
1,105
1,092
558
-
2,295
1,396
9,315
6,492
-
180
2,254
2,210
2,198
3,023
1 This is the total of superannuation received and long service leave benefits accrued during the reporting period.
2 Remuneration received in reporting period from previous periods includes equity awards granted under the variable pay plans in previous years which vested during reporting period. The Equity Incentive and
LTI value reflects the actual value realized by the Executive.
3 Remuneration awarded during the reporting period but deferred for future periods includes equity awards granted under the variable pay plans (SPPRs and long term equity) which may vest and become
available to Executives in future periods. A grant value based on fixed pay (as defined on page 44) multiplied by the variable pay plan target 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.
4 Total remuneration received during the reporting period, deferred from previous periods disclosed in column E is the sum of (A)+(B)+(C)+(D).
5 Total remuneration awarded during the reporting period, deferred from previous periods disclosed in column H is the sum of (A)+(B)+(F)+(G).
6 Remuneration for FY2018 was disclosed to the extent that it related to Mr Smith's employment in the capacity of an Executive, which commenced on 1 October 2017.
7 Remuneration is disclosed to the extent that it relates to Mr Finn's employment in the capacity of an Executive, which ceased on 30 September 2017. Mr Finn's unvested equity lapsed following his departure.
See page 53.
8 The FY2017 totals have been rounded in line with the current standard. Full details of prior year total remuneration are set out in the Remuneration Report for the relevant year.
Share based payments are disclosed to the extent they relate to their employment in the capacity of an Executive.
WorleyParsons Annual Report 2018
51
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 2018:
NAME
EXECUTIVE DIRECTOR
Andrew Wood4
GROUP EXECUTIVES
Robert (Chris) Ashton
Thomas Honan
Adrian Smith
WEIGHTED
NUMBER OF SHARES
HELD AT 30 JUNE 20181
VALUE OF SHARES
HELD AT 30 JUNE 20182
$000
ANNUAL FIXED PAY AT
30 JUNE 20183
$000
PERCENTAGE
OF MINIMUM
REQUIREMENT ACHIEVED
1,412,196
84,330
116,924
20,246
24,671
1,473
2,043
354
1,600
700
970
518
>100%
>100%
>100%
34%
1 Includes shares held in the Company plus a 50% weighting of unvested performance rights provided on page 53.
2 Calculated as the weighted number of shares held at 30 June 2018 multiplied by the volume weighted average price of the Company’s shares for the five trading days up to and including 30 June 2018 ($17.47)
or the price at which performance rights were allocated.
3 The Australian dollar equivalent of annual fixed pay as at 30 June 2018.
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 2018 are detailed in the table below. The service and performance
criteria for the rights are discussed in the SPPR and long term equity sections on pages 45 to 47 or are available in prior year Remuneration Reports.
NUMBER OF SHARES AND PERFORMANCE RIGHTS HELD IN WORLEYPARSONS LIMITED
BALANCE AT
1 JULY 2017
GRANTED
PERFORMANCE
RIGHTS
ON EXERCISE OF
PERFORMANCE
RIGHTS1
CHANGE IN
STATUS
OTHER
TRANSACTIONS2
BALANCE AT
30 JUNE 2018
NAME
TYPE
EXECUTIVE DIRECTOR
Andrew Wood
Shares
Rights
GROUP EXECUTIVES
Robert (Chris) Ashton
Shares
Thomas Honan
Adrian Smith4
Rights
Shares
Rights
Shares
Rights
Dennis Finn5
Total
Shares
Rights
Shares
Rights
PREVIOUSLY REPORTED GROUP EXECUTIVE
856,565
656,518
10,255
82,566
10,000
105,424
-
-
-
203,982
876,820
1,048,490
n/a
146,650
n/a
63,135
n/a
106,424
n/a
17,310
n/a
-
n/a
184,758
(100,175)
5,404
(5,404)
-
-
-
-
149,503
(81,060)
339,665
333,519
(186,639)
-
-
-
-
-
-
11,591
-
(149,503)
(122,922)
(137,912)
(122,922)
49,720
(60,688)
(1,478)
-
1,000
-
-
-
-
-
49,242
(60,688)
1,091,043
642,305
14,181
140,297
11,000
211,848
11,591
17,310
-
-
1,127,815
1,011,760
1 May include SPPRs which vested during FY2018 where a multiple was applied in accordance with the outcome of the performance hurdles.
2 May include rights lapsed or a transaction 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.
3 Shares purchased as part of participation in the Non-Renounceable Entitlement Offer on 11 October 2017.
4 Mr Smith's commenced as KMP on 1 October 2017.
5 Mr Finn ceased to be KMP on 30 September 2017 following his resignation.
52
WorleyParsons Annual Report 2018
DETAILS OF VESTED, EXERCISED, LAPSED AND OUTSTANDING RIGHTS
Full details of prior year equity grants are set out in the Remuneration Report for the relevant year. Each of the grants shown have an expiry date seven
years following the grant date.
NAME
TYPE
GRANT DATE
VEST DATE
GRANTED1
FAIR VALUE
PER RIGHT2
FAIR VALUE
OF GRANT3
$000 NUMBER
VALUE4
$000
VALUE4
NUMBER
$000 NUMBER5
VALUE6
$000
RIGHTS
LAPSED
%
VESTED
EXERCISED
LAPSED
EXECUTIVE DIRECTOR
Andrew Wood
LTI
31 Oct 17 30 Sep 21
31 Oct 17 30 Sep 21
31 Oct 16 30 Sep 20
31 Oct 16 30 Sep 20
30 Oct 15 30 Sep 19
30 Oct 15 30 Sep 19
30 Oct 14 30 Sep 18
30 Oct 14 30 Sep 18
24 Oct 13 30 Sep 17
SPPR
31 Oct 17 30 Sep 19
31 Oct 16 30 Sep 18
46,168
46,168
76,225
76,225
85,148
85,149
41,616
41,616
60,688
54,315
89,676
30 Oct 15 31 Oct 17
100,175
GROUP EXECUTIVES
Robert (Chris) Ashton7
LTI
31 Oct 17 30 Sep 21
31 Oct 17 30 Sep 21
31 Oct 16 30 Sep 20
31 Oct 16 30 Sep 20
Equity
31 Oct 17 30 Sep 19
31 Oct 17 30 Sep 18
SPPR
31 Oct 17 30 Sep 19
31 Oct 16 30 Sep 18
Comb Incentive
30 Oct 15 30 Sep 18
Thomas Honan
LTI
30 Oct 14 30 Sep 17
31 Oct 17 30 Sep 21
31 Oct 17 30 Sep 21
31 Oct 16 30 Sep 20
31 Oct 16 30 Sep 20
Equity
31 Oct 17 30 Sep 19
31 Oct 17 30 Sep 18
SPPR
31 Oct 17 30 Sep 19
Adrian Smith
LTI
Equity8
SPPR
PREVIOUSLY REPORTED GROUP EXECUTIVE
Dennis Finn7,9
SPPR
31 Oct 16 30 Sep 18
31 Oct 17 30 Sep 21
31 Oct 17 30 Sep 21
31 Oct 17 30 Sep 19
31 Oct 17 30 Sep 19
31 Oct 16 30 Sep 18
31 Oct 15 30 Sep 17
Comb Incentive
30 Oct 15 30 Sep 18
11,763
11,763
17,490
17,490
12,747
12,747
14,115
20,988
21,194
5,404
21,285
21,284
35,141
35,142
21,285
21,285
21,285
35,141
3,334
3,334
2,862
7,780
60,430
81,060
62,492
9.72
13.13
5.96
6.41
2.62
4.75
6.50
10.73
13.59
17.18
10.96
4.42
9.72
13.13
5.96
6.41
13.54
13.89
17.18
10.96
5.15
11.42
9.72
13.13
5.96
6.41
13.54
13.89
17.18
10.96
9.72
13.13
13.54
17.18
10.96
4.42
5.15
449
606
454
489
223
404
271
447
825
933
983
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
443 100,175
1,341 100,175
1,341
114
154
104
112
173
177
242
230
109
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
62
5,404
73
5,404
73
207
279
209
225
288
296
366
385
32
44
39
134
662
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 60,688
825 100.0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
358
81,060
1,085
81,060
1,085
-
-
-
322
-
-
-
- 62,492
322 100.0%
- 60,430
662 100.0%
1 The service and performance criteria for the rights are discussed in the long term equity section on page 46 and 47. Each right entitles the holder to one fully paid ordinary share in the Company (or a multiple in
the case of SPPRs, as discussed on page 46) 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, strategic
hurdle rights, and SPPRs and a Black-Scholes model to value the EPS growth rights, acquisition hurdle rights, other cash settled rights and other equity settled rights.
3 Total fair value of 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 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 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 value of the rights issued to Mr Ashton and Mr Finn are disclosed on page 50 to the extent that they were granted during their term as an Executive. Mr Ashton and Mr Finn were granted rights in the
Combined Incentive Plan prior to them becoming KMP. Mr Finn's unvested equity lapsed following his departure.
8 The value of the rights issued to Mr Smith are disclosed on page 50 to the extent that they were granted during his term as an Executive in the Company Performance Pay Plan.
9 Mr Finn ceased to be an Executive on 30 September 2017.
All vested rights are exercisable. There are no vested and unexercisable rights.
WorleyParsons Annual Report 2018
53
DIRECTORS’ REPORT CONTINUED
NON-EXECUTIVE DIRECTOR REMUNERATION OUTCOMES
Remuneration of the NEDs for FY2018 and FY2017 is set out below:
NAME
John Grill
Ron McNeilly2
Jagjeet S Bindra3
Erich Fraunschiel
Thomas J Gorman4
Christopher Haynes
Catherine Livingstone
Anne Templeman-Jones5
Wang Xiao Bin
Total remuneration
YEAR
FY2018
FY2017
FY2018
FY2017
FY2018
FY2017
FY2018
FY2017
FY2018
FY2017
FY2018
FY2017
FY2018
FY2017
FY2018
FY2017
FY2018
FY2017
FY2018
FY2017
FEES
$000
-
-
94
292
112
243
200
214
131
-
245
243
213
209
141
-
200
201
1,336
1,528
SHORT TERM EMPLOYEE BENEFITS
POST-EMPLOYMENT BENEFITS
TRAVEL ALLOWANCES
$000
SUPERANNUATION1
$000
-
-
-
5
10
35
10
5
15
-
25
25
10
5
10
-
30
35
110
120
-
-
8
20
-
-
20
19
-
-
-
-
20
19
13
-
20
19
81
82
TOTAL
$000
-
-
102
317
122
278
230
238
146
-
270
268
243
233
164
-
250
255
1,527
1,731
1 Superannuation contributions are made on behalf of the NEDs in accordance with the Company’s statutory superannuation obligations.
2 Mr McNeilly retired on 27 October 2017.
3 Mr Bindra resigned on 15 December 2017.
4 Mr Gorman commenced on 18 December 2017.
5 Ms Templeman-Jones commenced on 1 November 2017.
NON-EXECUTIVE DIRECTOR INTERESTS IN SHARES
NED beneficial interests in shares of the Company as at 30 June 2018 are detailed in the below table:
NUMBER OF SHARES HELD IN WORLEYPARSONS LIMITED
NAME
John Grill
Ron McNeilly1
Jagjeet S Bindra2
Erich Fraunschiel
Thomas J Gorman3
Christopher Haynes
Catherine Livingstone
Anne Templeman-Jones4
Wang Xiao Bin
TYPE
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
BALANCE AT
1 JULY 2017
25,372,173
442,564
19,000
198,755
-
11,945
13,000
-
11,000
CHANGE IN STATUS
-
(480,092)
(19,000)
-
13,500
-
-
2,250
-
OTHER
TRANSACTIONS5
2,537,219
37,528
-
19,876
-
1,194
1,302
-
-
BALANCE AT
30 JUNE 2018
27,909,392
n/a
n/a
218,631
13,500
13,139
14,302
2,250
11,000
1 Mr McNeilly retired on 27 October 2017.
2 Mr Bindra resigned on 15 December 2017.
3 Mr Gorman commenced on 18 December 2017.
4 Ms Templeman-Jones commenced on 1 November 2017.
5 Shares purchased as part of participation in the Non-Renounceable Entitlement Offer on 11 October 2017.
This Directors’ Report (including Remuneration Report) is made in accordance with a resolution of the directors.
JOHN GRILL AO
Chairman
Sydney, 22 August 2018
54
WorleyParsons Annual Report 2018
Statement of financial performance and other
comprehensive income
For the financial year ended 30 June 2018
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
Acquisition costs
Other costs
Borrowing costs
Total expenses
Share of net profit of associates accounted for using the equity method
Profit before income tax expense
Income tax expense
Profit after income tax expense
Profit after income tax expense attributable to:
Members of WorleyParsons Limited
Non-controlling interests
Other comprehensive 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 income, net of tax
Total comprehensive income/(loss), net of tax, attributable to:
Members of WorleyParsons Limited
Non-controlling interests
Basic earnings per share (cents) 1
Diluted earnings per share (cents)1
NOTES
4
3(E)
21(B)
5
22(C)
6(A)
17
17
2018
$’M
3,837.3
432.3
552.5
5.5
8.2
4,835.8
(3,530.7)
(417.3)
(497.4)
(110.7)
(5.9)
(14.2)
(63.9)
CONSOLIDATED
2017
$’M
3,558.7
1,142.4
502.8
7.1
9.6
5,220.6
(3,364.6)
(1,135.4)
(444.0)
(103.3)
-
(40.2)
(75.9)
(4,640.1)
(5,163.4)
9.7
205.4
(129.7)
75.7
62.2
13.5
35.8
(6.9)
104.6
93.4
11.2
23.3
23.1
3.6
60.8
(4.6)
56.2
33.5
22.7
(37.9)
(3.0)
15.3
(4.4)
19.7
13.4
13.3
The above Statement of Financial Performance and Other Comprehensive Income should be read in conjunction with the accompanying notes.
1 Basic and diluted earnings per share were adjusted for the equity raise as disclosed in note 17.
WorleyParsons Annual Report 2018
55
Statement of financial position
As at 30 June 2018
ASSETS
Current assets
Cash and cash equivalents
Trade receivables
Other receivables
Prepayments
Procurement assets
Income tax receivable
Derivatives
Total current assets
Non-current assets
Trade receivables
Intangible assets
Deferred tax assets
Equity accounted associates
Derivatives
Property, plant and equipment
Other non-current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Procurement payables
Provisions
Interest bearing loans and borrowings
Income tax payable
Derivatives
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing loans and borrowings
Deferred tax liabilities
Provisions
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.
56
WorleyParsons Annual Report 2018
NOTES
7
8
8
28
19
8
10
30(A)
22(B)
19
29
9
28
11
13
19
9
13
30(B)
11
15
16
CONSOLIDATED
2018
$’M
2017
$’M
261.6
1,171.1
147.9
101.9
66.5
4.0
2.2
1,755.2
28.9
2,282.0
201.6
81.3
63.2
54.3
9.3
2,720.6
4,475.8
789.2
39.8
318.5
36.0
5.6
3.4
226.2
1,079.0
183.4
110.8
103.0
3.2
2.6
1,708.2
28.2
2,002.6
258.1
77.3
87.7
52.3
13.4
2,519.6
4,227.8
781.6
71.1
282.6
272.5
5.1
1.8
1,192.5
1,414.7
29.8
963.1
10.9
66.7
1,070.5
2,263.0
2,212.8
1,589.9
(276.4)
910.5
2,224.0
(11.2)
2,212.8
28.8
830.1
24.3
61.6
944.8
2,359.5
1,868.3
1,268.5
(270.4)
875.6
1,873.7
(5.4)
1,868.3
Statement of changes in equity
For the financial year ended 30 June 2018
ISSUED
CAPITAL
$’M
RETAINED
PROFITS
$’M
As at 1 July 2017
1,268.5
875.6
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$’M
(301.1)
CONSOLIDATED
HEDGE
RESERVE
$’M
PERFORMANCE
RIGHTS
RESERVE
$’M
ACQUISITION
RESERVE
$’M
MEMBERS OF
THE GROUP
$’M
NON-
CONTROLLING
INTERESTS
$’M
TOTAL
$’M
11.5
42.1
(22.9)
1,873.7
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 loss on mark to
market of cross currency hedge
Income tax on fair value loss on
mark to market of cross
currency hedge
Total comprehensive income,
net of tax
Transactions with owners
Issue of share capital, net of
transaction costs
Share based payments
expense
Transfer to issued capital on
issuance of shares to satisfy
performance rights
Increase in ownership of
controlled entity
Dividends paid
-
-
-
-
-
-
-
-
-
315.7
-
5.7
-
-
As at 30 June 2018
1,589.9
62.2
-
-
108.2
-
-
-
-
-
-
(88.1)
18.0
-
-
-
-
-
-
-
-
(4.0)
1.2
(5.9)
1.8
62.2
38.1
(6.9)
-
-
-
-
(27.3)
910.5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8.2
(5.7)
-
-
62.2
108.2
(88.1)
18.0
(4.0)
1.2
(5.9)
1.8
(5.4)
13.5
(2.3)
1,868.3
75.7
105.9
-
-
-
-
-
-
(88.1)
18.0
(4.0)
1.2
(5.9)
1.8
93.4
11.2
104.6
315.7
8.2
-
-
-
-
315.7
8.2
-
-
-
-
-
-
-
-
-
-
-
-
-
(39.7)
(39.7)
(2.8)
(42.5)
(263.0)
4.6
44.6
(62.6)
2,224.0
-
(27.3)
(14.2)
(11.2)
(41.5)
2,212.8
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
WorleyParsons Annual Report 2018
57
Statement of changes in equity
For the financial year ended 30 June 2017
ISSUED
CAPITAL
$’M
RETAINED
PROFITS
$’M
As at 1 July 2016
1,264.9
842.1
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$’M
(266.2)
CONSOLIDATED
HEDGE
RESERVE
$’M
PERFORMANCE
RIGHTS
RESERVE
$’M
ACQUISITION
RESERVE
$’M
MEMBERS OF
THE GROUP
$’M
NON-
CONTROLLING
INTERESTS
$’M
TOTAL
$’M
14.5
38.2
(9.6)
1,883.9
(4.0)
22.7
(3.0)
1,879.9
56.2
(69.8)
-
-
-
-
-
-
43.1
(11.2)
4.3
(1.2)
(8.3)
2.2
-
-
-
(21.1)
(5.4)
7.5
-
(13.3)
(21.1)
1,868.3
(4.4)
19.7
15.3
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
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
Increase in ownership of
controlled entity
Dividends paid
-
-
-
-
-
-
-
-
-
-
3.6
-
-
33.5
-
-
(66.8)
-
-
-
-
-
-
43.1
(11.2)
-
-
-
-
-
-
-
-
4.3
(1.2)
(8.3)
2.2
33.5
(34.9)
(3.0)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7.5
(3.6)
-
-
-
-
-
-
-
-
-
-
-
-
-
33.5
(66.8)
43.1
(11.2)
4.3
(1.2)
(8.3)
2.2
7.5
-
(13.3)
(13.3)
-
-
As at 30 June 2017
1,268.5
875.6
(301.1)
11.5
42.1
(22.9)
1,873.7
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
58
WorleyParsons Annual Report 2018
Statement of cash flows
For the financial year ended 30 June 2018
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)/refunded
Net cash inflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for acquisition of controlled entities, net of cash acquired
Payments for purchase of property, plant and equipment and computer software
Proceeds from disposal of investments
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 related parties
Proceeds from equity raising, net of equity raising costs
Dividends paid to members of WorleyParsons Limited
Dividends paid to non-controlling interests
Net cash inflow/(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
CONSOLIDATED
2018
$’M
2017
$’M
5,186.6
(4,849.7)
5,802.0
(5,680.2)
336.9
4.3
3.4
(53.8)
(31.1)
259.7
(360.1)
(41.7)
2.3
0.4
(399.1)
(1,993.6)
1,888.8
(10.3)
1.4
315.7
(27.3)
(8.6)
166.1
26.7
244.3
6.9
277.9
121.8
2.9
4.7
(57.0)
6.5
78.9
(18.8)
(44.7)
0.9
0.1
(62.5)
(2,042.8)
1,930.0
(2.6)
3.4
-
-
(21.8)
(133.8)
(117.4)
373.1
(11.4)
244.3
7
18(B)
7
WorleyParsons Annual Report 2018
59
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Notes to the financial statements
For the financial year ended 30 June 2018
1. CORPORATE INFORMATION
The financial report of WorleyParsons Limited (Company or parent entity) for the financial year ended 30 June 2018 was authorized for issue in accordance
with a resolution of the directors on 22 August 2018.
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. 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 and valuation of deferred taxes, refer note 30.
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 amendments from 1 July 2017:
2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses: Amendments to AASB 112
AASB 2016-1 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 impact of this amendment is not material to the Group’s financial statements.
2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107
AASB 2016-2 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 movements. The amendment enhances the Group's disclosure in relation to interest bearing loans and borrowings.
Refer to note 14.
60
WorleyParsons Annual Report 2018
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 2018:
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 introduces a five-step approach to revenue recognition which requires the Group to identify contracts and performance obligations, determine the
transaction price, allocate the transaction price to each performance obligation and recognize revenue as each performance obligation is satisfied.
Subsequent to the financial year end, on 1 July 2018, the standard has been adopted by the Group.
The application of AASB 15 does not have a significant impact on the financial position and/or financial performance of the Group, apart from providing
additional disclosures on the Group’s revenue transactions as discussed below.
The Group's main revenue streams are:
Professional services revenue
The Group performs engineering design and project delivery services. These activities tend to be highly integrated and accordingly where appropriate
will be accounted for as a single performance obligation. Performance obligations are fulfilled over time as the services are delivered, as the Group has
a right of payment for services delivered to date together with the highly customised nature of the services provided. Consequently, under AASB 15 the
Group will continue to recognise revenue for these service contracts over time rather than at a point of time.
Construction and fabrication revenue
The Group performs construction and fabrication services. These activities tend to be highly integrated and accordingly where appropriate will be
accounted for as a single performance obligation. Performance obligations are fulfilled over time as the services are delivered, as the Group has a right
of payment for services delivered to date together with the highly customised nature of the services provided. Consequently, under AASB 15 the Group
will continue to recognise revenue for these construction contracts over time rather than at a point of time.
Procurement revenue
Procurement revenue represents services from entering into contracts with customers to acquire, on their behalf, equipment produced by various
suppliers and/or services provided by different subcontractors. The Group continues to be involved in procurement as a principal and as an agent, and
has concluded that AASB 15 would not materially change the current assessment of principal versus agent.
AASB 15 uses the terms ‘receivables’, ‘contract asset’ and ‘contract liability’ to describe what might more commonly be known as ‘unbilled contract revenue’
and ‘deferred revenue’ or ‘billings in advance’. The Standard does not prohibit an entity from using alternative descriptions, and the Group is currently
assessing whether the Group retains the existing terminology or adopts the terminology used in AASB 15.
The Group has concluded that no additional disaggregation of revenue is required as the current disclosures sufficiently depict how the nature, amount,
timing and uncertainty of revenue and cash flows are affected by economic factors. Additional disclosures that will be presented will include disclosures
relating to the Group's unsatisfied performance obligations at the end of the reporting period (i.e. backlog for fixed price contracts with duration longer than
12 months).
For all additional disclosures required by AASB 15 in FY2019, the comparatives will also be presented for FY2018.
AASB 9 Financial Instruments
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement. The standard includes requirements for financial instruments classification,
recognition and measurement, impairment, derecognition and hedge accounting. Except for hedge accounting, retrospective application is required but
providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with limited exceptions.
Subsequent to the financial year end, on 1 July 2018, the standard has been adopted by the Group. The Group has performed an assessment on all three
aspects of AASB 9 and has concluded that the standard does not have a significant impact on the financial position and/or financial performance of the
Group. The details of this assessment are as follows:
(a) Classification and measurement
The Group assessed the financial assets and financial liabilities as at 30 June 2018 based on the facts and circumstances that existed at that date and
concluded that the initial application of AASB 9 would have the following impact on the Group’s financial assets and liabilities with regards to their
classification and measurement:
• Financial assets classified as held-to-maturity investments and loans and receivables under AASB 139 that are measured at amortised cost as at 30 June
2018 will continue to be classified and measured at amortised cost under AASB 9 as they are held to collect contractual cash flows and these cash flows
consist solely of payments of principal and interest on the principal amounts outstanding;
• Financial assets that are measured at fair value through profit or loss under AASB 139 as at 30 June 2018 will continue to be classified and measured as
such under AASB 9; and
WorleyParsons Annual Report 2018
61
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
• Financial liabilities that are measured at amortised cost under AASB 139 as at 30 June 2018 will continue to be classified and measured at amortised cost
under AASB 9.
(b) Hedge accounting
Under AASB 9, the general hedge accounting requirements retain the three existing types of hedge accounting. However, greater flexibility has been
introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify as hedging instruments
and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and
replaced with the principle of an ‘economic relationship’. Retrospective assessment of hedge effectiveness is also no longer required under AASB 9.
(c) Impairment
AASB 9 replaces the incurred loss model under AASB 139 with its expected credit loss model. The expected credit loss model requires the Group to account
for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the
financial assets. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.
AASB 9 also provides a simplified approach for measuring the loss allowance at an amount equal to lifetime expected credit losses for trade receivables,
contract assets and lease receivables in certain circumstances.
The Group assessed the financial assets and amounts due from customers as at 30 June 2018 for impairment using reasonable and supportable information
that is available without undue cost or effort in accordance with the requirements of AASB 9 to determine the credit risk of the respective customers. The
result of the assessment are as follows:
• The Group has applied the simplified approach in relation to trade receivables and contract assets to calculate the expected credit loss. The Group has
determined that an additional expected credit loss allowance of $4.0-$6.0 million, pre tax is required on 1 July 2018 and will be recognised against retained
earnings, net of tax.
• In addition, the Group will also recognize $0.3 million of an expected credit loss provision in relation to its related party receivable balances.
The Group's assessment of the application of the expected credit loss model on intercompany loans and receivables is ongoing. This will not have any impact
at the consolidated level as all intercompany balances are eliminated on consolidation but may potentially have an impact on the respective parent entity and
the closed group disclosures.
AASB 2016-5 Amendments to Australian Accounting Standards-Classification and Measurement of Share-based Payments Transactions
This Standard amends AASB 2 Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments
provide requirements on the accounting for:
• The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments;
• Share-based payment transactions with a net settlement feature for withholding tax obligations; and
• A modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-
settled.
The amendment is not expected to have a significant impact on the results and financial position of the Group.
AASB Interpretation 22 Foreign Currency Transactions and Advance Consideration
The Interpretation clarifies that in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part thereof) on
the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an
entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts
in advance, then the entity must determine a date of the transaction for each payment or receipt of advance consideration.
The interpretation is not expected to have a significant impact on the results and financial position of the Group.
Effective 1 July 2019:
AASB 16 Leases
AASB 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. AASB 16
will supersede the current lease guidance including AASB 117 Leases and the related interpretations when it becomes effective.
Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for lessee accounting and replaced by a model where a
right-of-use asset and a corresponding liability have to be recognised for all leases by lessees (i.e. all on balance sheet) except for short-term leases and
leases of low value assets.
The right-of-use asset (‘RoU’) is initially measured as equal to the corresponding lease liability, less any adjustments in respect of lease incentives, initial
direct costs and other required items. It is subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment
losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the future lease payments.
Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications. Recognition of RoU and respective
lease liabilities will lead to an increase in depreciation and finance charges. These charges will replace the operating lease expense that is currently reported
62
WorleyParsons Annual Report 2018
in the Group's financial report Furthermore, the classification of cash flows will also be affected as operating lease payments under AASB 117 are presented
as operating cash flows; whereas under the AASB 16 model, the lease payments will be split into a principal and an interest portion which will be presented
as financing and operating cash flows respectively.
In contrast to lessee accounting, AASB 16 substantially carries forward the lessor accounting requirements in AASB 117, and continues to require a lessor to
classify a lease either as an operating lease or a finance lease.
Furthermore, extensive disclosures are required by AASB 16.
As at 30 June 2018, the Group has non-cancellable operating lease commitments of $406.9 million. AASB 117 does not require the recognition of any right-
of-use asset or liability for future payments for these leases; instead, certain information is disclosed as operating lease commitments in Note 25. A
preliminary assessment indicates that these arrangements will meet the definition of a lease under AASB 16, and hence the Group expects to recognise a
right-of-use asset and a corresponding liability in respect of all these leases unless they qualify for low value or short-term leases upon the application of
AASB 16. The new requirement to recognise a right-of-use asset and a related lease liability is expected to have a significant impact on the amounts
recognised in the Group’s consolidated financial statements and the Group is currently assessing its potential impact. It is not practicable to provide a
reasonable estimate of the financial effect until the full assessment is complete.
AASB 2017-7 Amendments to Australian Accounting Standards – Long-term Interests in Associates and Joint Ventures
This Standard amends AASB 128 Investments in Associates and Joint Ventures to clarify that an entity is required to account for long-term interests in an
associate or joint venture, which in substance form part of the net investment in the associate or joint venture but to which the equity method is not applied,
using AASB 9 Financial Instruments before applying the loss allocation and impairment requirements in AASB 128.
The Group is yet to assess the impact of this amendment.
AASB Interpretation 23 Uncertainty over Income Tax Treatments, and relevant amending standards
The Interpretation clarifies the application of the recognition and measurement criteria in AASB 112 Income Taxes when there is uncertainty over income tax
treatments. The Interpretation specifically addresses the following:
• Whether an entity considers uncertain tax treatments separately;
• The assumptions an entity makes about the examination of tax treatments by taxation authorities;
• How an entity determines taxable profit/loss, tax bases, unused tax losses, unused tax credits and tax rates; and
• How an entity considers changes in facts and circumstances.
The Group is yet to assess the impact of this amendment.
AASB 2018-1 Annual Improvements to IFRS Standards 2015-2017 Cycle
The amendments clarify certain requirements in:
• AASB 3 Business Combinations and AASB 11 Joint Arrangements - previously held interest in a joint operation
• AASB 112 Income Taxes - income tax consequences of payments on financial instruments classified as equity
• AASB 123 Borrowing Costs - borrowing costs eligible for capitalisation.
The Group is yet to assess the impact of this amendment.
Effective 1 July 2020:
Conceptual Framework for Financial Reporting
The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies
some important concepts, including the topics of objectives of financial reporting, qualitative characteristics of useful financial information, financial
statements and the reporting entity, the elements of financial statements, recognition and derecognition, measurement, presentation and disclosure and
concepts of capital and capital maintenance.
The Group is yet to assess the impact of this Framework.
WorleyParsons Annual Report 2018
63
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(B) BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by WorleyParsons Limited as at 30 June 2018 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 22).
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 and Other 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 denominated
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. Where required, the prior year balances were restated for comparative purposes.
3. SEGMENT INFORMATION
On 27 October 2017, the Group acquired 100% of the voting shares of AFW UK Oil & Gas Limited and its controlled entities ("UK Integrated Solutions"). UK
Integrated Solutions became part of the Major Projects and Integrated Solutions and Services segments. The Group has also included additional information
segmented according to its customer sector groups.
(A) OPERATING SEGMENTS
Professional services revenue
Construction and fabrication revenue
Procurement revenue at margin
Other income
Total segment revenue 1
Segment result 2
Segment margin
Other segment information
Depreciation and amortization expense
Share of net profits of associates accounted for using the equity method
Carrying value of equity accounted associates
Purchase of non-current assets
MAJOR PROJECTS
AND INTEGRATED
SOLUTIONS
SERVICES
ADVISIAN
TOTAL
2017
$’M
2018
$’M
2018
$’M
2,197.6 2,452.5 1,195.4
552.5
90.0
-
-
185.5
8.2
-
219.2
9.4
2017
$’M
685.1
502.8
25.4
0.1
2018
$’M
457.6
-
62.4
-
2017
$’M
2018
$’M
2017
$’M
410.8 3,850.6 3,548.4
502.8
552.5
316.2
337.9
9.6
8.2
-
71.6
0.1
2,391.3 2,681.1 1,837.9 1,213.4
520.0
482.5 4,749.2 4,377.0
236.2
9.9%
242.8
9.1%
172.2
9.4%
119.5
9.8%
17.7
3.4%
12.5
2.6%
426.1
9.0%
374.8
8.6%
34.3
7.6
69.3
23.7
40.3
1.7
66.4
28.6
10.4
1.4
7.3
12.3
16.3
1.9
8.5
12.3
9.1
0.7
4.7
5.7
7.4
-
2.4
3.8
53.8
9.7
81.3
41.7
64.0
3.6
77.3
44.7
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, pass-through revenue at nil margin and interest income. 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.
64
WorleyParsons Annual Report 2018
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
2018
$’M
2,751.7
552.5
277.5
6.3
2017
$’M
2,363.3
502.8
230.7
8.8
3,588.0
3,105.6
347.7
9.7%
311.3
10.0%
MINERALS, METALS
& CHEMICALS
INFRASTRUCTURE
TOTAL
2018
$’M
422.7
-
4.7
-
427.4
23.7
5.5%
2017
$’M
436.5
-
4.1
0.8
441.4
16.7
3.8%
2018
$’M
676.2
-
55.7
1.9
733.8
54.7
7.5%
2017
$’M
748.6
-
81.4
-
2018
$’M
3,850.6
552.5
337.9
8.2
2017
$’M
3,548.4
502.8
316.2
9.6
830.0
4,749.2
4,377.0
46.8
5.6%
426.1
9.0%
374.8
8.6%
(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)
Pass-through revenue at nil margin 1
Share of revenue from associates
Interest income
Total revenue and other income per the Statement of Financial Performance
(D) RECONCILIATION OF SEGMENT RESULT TO PROFIT 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 and tax (underlying EBIT)
Total underlying EBIT margin on aggregated revenue for the Group
Other restructuring costs
Onerous lease contracts
Acquisition costs
Impairment of associate intangible assets
Staff restructuring costs 2
Onerous engineering software licenses
Net loss on sale of assets held for sale
Total EBIT
EBIT margin on aggregated revenue for the Group
Net borrowing costs
Income tax expense
Profit after income tax expense per the Statement of Financial Performance
2018
$’M
4,749.2
94.4
157.3
(170.6)
5.5
TOTAL
2017
$’M
4,377.0
826.2
229.0
(218.7)
7.1
4,835.8
5,220.6
2018
$’M
426.1
(110.7)
(2.4)
(14.2)
298.8
6.3%
(14.2)
(12.2)
(5.9)
(2.7)
-
-
-
263.8
5.6%
(58.4)
(129.7)
75.7
TOTAL
2017
$’M
374.8
(96.7)
(3.5)
(16.8)
257.8
5.9%
(38.9)
(24.2)
-
(2.3)
(59.2)
(3.2)
(0.4)
129.6
3.0%
(68.8)
(4.6)
56.2
1 Pass-through revenue at nil margin refers to sub-contract packages for services or materials where the Group does not receive a margin.
2 Includes staff restructuring costs incurred in equity accounted associates.
WorleyParsons Annual Report 2018
65
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(E) RECONCILIATION OF GLOBAL SUPPORT COSTS TO THE STATEMENT OF FINANCIAL PERFORMANCE
Global support costs per segment information 1
Staff restructuring costs
Staff restructuring costs attributable to professional services costs, construction and fabrication costs and staff restructuring costs incurred by
equity accounted associates
Global support costs per the Statement of Financial Performance
TOTAL
2017
$’M
96.7
59.2
(52.6)
2018
$’M
110.7
-
-
110.7
103.3
(F) GEOGRAPHIC SEGMENTS2
Revenue from external customers 3
2018
Australia, Pacific, Asia and China
Europe, Middle East and Africa
Americas
Total
Other income
Interest income
ADD:
PROCUREMENT
REVENUE AT
NIL MARGIN
ADD:
PASS-THROUGH
REVENUE AT
NIL MARGIN
AGGREGATED
REVENUE
$’M
1,080.9
2,121.7
1,546.6
4,749.2
$’M
9.9
20.2
64.3
94.4
$’M
-
157.3
-
157.3
Total revenue and other income per the Statement of Financial Performance
2017
Australia, Pacific, Asia and China
Europe, Middle East and Africa
Americas
Total
Other income
Interest income
ADD:
PROCUREMENT
REVENUE AT
NIL MARGIN
ADD:
PASS-THROUGH
REVENUE AT
NIL MARGIN
$’M
13.4
9.9
802.9
826.2
$’M
-
229.0
-
229.0
AGGREGATED
REVENUE
$’M
1,064.8
1,577.6
1,734.6
4,377.0
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 Africa
Americas
Non-current assets by geographical location
LESS:
SHARE OF
REVENUE
FROM
ASSOCIATES
$’M
(119.1)
(22.8)
(28.7)
(170.6)
LESS:
SHARE OF
REVENUE
FROM
ASSOCIATES
$’M
(118.2)
(55.4)
(45.1)
(218.7)
TOTAL
REVENUE
FROM
EXTERNAL
CUSTOMERS
$’M
971.1
2,274.1
1,576.9
4,822.1
8.2
5.5
4,835.8
TOTAL
REVENUE
FROM
EXTERNAL
CUSTOMERS
$’M
959.7
1,755.6
2,488.6
5,203.9
9.6
7.1
5,220.6
2017
$’M
62.4
80.7
197.9
341.0
LESS:
OTHER
INCOME
$’M
(0.6)
(2.3)
(5.3)
(8.2)
LESS:
OTHER
INCOME4
$’M
(0.3)
(5.5)
(3.8)
(9.6)
2018
$’M
56.2
124.4
207.2
387.8
1 Excludes all restructuring costs.
2 Geographic locations are presented across all business lines.
3 Revenue is attributed to the geographic location based on the entity providing the services.
4 Excludes goodwill, deferred tax assets and derivative financial instruments.
66
WorleyParsons Annual Report 2018
3. SEGMENT INFORMATION (continued)
(G) IDENTIFICATION OF REPORTABLE SEGMENTS
The Group's operations are managed and reported through the following business lines: Services, Major Projects and Integrated Solutions, and Advisian.
These remain in line with 30 June 2017 reportable segments.
(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 overheads that can be directly attributed to an individual business segment. The following items and associated
assets and liabilities are not allocated to segments as they are not considered part of the core operations of any segment:
• global support costs;
• interest and tax for associates;
• amortization of acquired intangible assets;
• other restructuring costs;
• onerous lease contracts;
• acquisition costs;
• impairment of associate intangible assets;
• staff restructuring costs;
• onerous engineering software licences;
• net loss on disposals on sale of assets held for sale;
• net borrowing costs; and
• income tax expense and income tax charges in relation to US tax reform.
(I) MAJOR CUSTOMERS
The most significant customer accounted for 10.1% (2017: 6.1%) of aggregated revenue and is within the Services, Major Projects and Integrated Solutions,
and Advisian segments and Hydrocarbons and Minerals, Metal & Chemicals customer sector group.
4. REVENUE AND OTHER INCOME
Professional services revenue
Procurement revenue
Construction and fabrication revenue
Interest income
Revenue
Other
Total revenue and other income
CONSOLIDATED
2018
$’M
2017
$’M
3,837.3
432.3
552.5
5.5
4,827.6
8.2
4,835.8
3,558.7
1,142.4
502.8
7.1
5,211.0
9.6
5,220.6
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. The following specific recognition criteria must be met before revenue is recognized:
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.
WorleyParsons Annual Report 2018
67
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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 within project teams. 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/(GAINS)
Short term employee benefits
Post-employment benefits
Share based payments
Total staff costs
Write-down of investment in equity accounted associates
Other restructuring costs
Total other costs
Operating lease rentals- minimum lease payments
Amortization
Depreciation
MOVEMENTS IN PROVISIONS 1
Employee benefits
Insurance
Onerous leases
Warranty
Other
CONSOLIDATED
2018
$’M
2017
$’M
2,822.3
65.4
8.2
2,895.9
-
14.2
14.2
132.8
49.9
18.1
163.5
(2.7)
13.3
8.4
25.6
2,634.2
79.1
7.5
2,720.8
1.3
38.9
40.2
138.9
62.8
18.0
182.6
8.9
5.3
(10.6)
23.4
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.
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 component, strategic hurdle rights 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.
1 Excludes amounts utilised.
68
WorleyParsons Annual Report 2018
5. EXPENSES AND LOSSES/(GAINS) (continued)
(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. There are no rights outstanding related
to this plan at 30 June 2018.
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
3-15 years;
5-20 years;
7 years; and
3-10 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 provision in previous financial periods
Income tax expense
Deferred income tax expense included in income tax expense comprises:
Decrease in deferred tax assets
Decrease in deferred tax liabilities
Deferred tax
CONSOLIDATED
2018
$’M
2017
$’M
48.3
74.3
7.1
129.7
94.8
(20.5)
74.3
76.7
(72.9)
0.8
4.6
18.9
(91.8)
(72.9)
WorleyParsons Annual Report 2018
69
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(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% (2017: 30%)
Tax effect of amounts which are non-deductible/(non-taxable) in calculating taxable income:
Non-deductible share based payments expense
Non-deductible impairment of associates
Share of net profits of associates accounted for using the equity method
Tax losses not previously recognized
Under provision in previous financial periods
Non-deductible costs of UK Integrated Solutions acquisition
Tax expense in relation to the US tax reform
Difference in overseas tax rates and other 1
Income tax expense
CONSOLIDATED
2018
$’M
2017
$’M
205.4
61.6
2.6
-
(2.9)
(0.7)
7.1
1.8
81.7
(21.5)
129.7
60.8
18.2
2.3
0.4
(1.1)
(1.5)
0.8
-
-
(14.5)
4.6
(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
21.0
(10.2)
(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%
81.9
24.6
81.5
24.5
The benefit for tax losses will only be recognized if:
• the consolidated entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses
to be realized; or
• the losses are transferred to an eligible entity in the consolidated entity; and
• the consolidated entity continues to comply with conditions for deductibility imposed by tax legislation; and
• no changes in legislation adversely affect the consolidated entity in realizing the benefit from the deductions for the losses.
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.
1 Primarily represents the differential for foreign tax rates and other.
70
WorleyParsons Annual Report 2018
7. CASH AND CASH EQUIVALENTS
Cash and cash equivalents per Statement of Financial Position
Procurement cash and cash equivalents
Cash at bank and on hand
Less: bank overdraft
Balance per the Statement of Cash Flows
Reconciliation of profit after income tax expense to net cash inflow from operating activities:
Profit after income tax expense
NON-CASH ITEMS
Amortization
Depreciation
Share based payments expense
Doubtful debts expense
Share of associates' share of profits in excess of dividends received
Write-down of investments in equity accounted associates
Write-down of capitalised borrowing costs
(Release)/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 in trade and other receivables
Decrease in prepayments and other assets
Decrease in deferred tax assets
(Increase)/decrease in income tax receivable
Decrease in trade and other payables
Increase/(decrease) in billings in advance
Decrease in income tax payable
Decrease in deferred tax liabilities
Increase/(decrease) in provisions
Net cash inflow from operating activities
NOTES
28
13
CONSOLIDATED
2017
$’M
226.2
25.6
251.8
(7.5)
244.3
56.2
62.8
18.0
7.5
1.3
(0.7)
1.3
-
3.2
(4.2)
2018
$’M
261.6
20.8
282.4
(4.5)
277.9
75.7
49.9
18.1
8.2
4.7
(5.4)
-
0.8
(1.6)
(0.5)
149.9
145.4
198.4
10.0
65.1
(0.9)
(163.3)
2.9
(2.9)
(25.3)
25.8
259.7
456.6
2.6
39.4
12.2
(417.6)
(8.2)
(9.6)
(92.5)
(49.4)
78.9
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
Cash and cash equivalents include restricted cash that is available for use under certain circumstances by the Group of $1.5 million (2017: $2.0 million).
Included within procurement assets are cash and cash equivalents of $20.8 million (2017: $25.6 million) which has been identified as for procurement.
Procurement cash is held in relation to procurement activities undertaken by the Group on behalf of its customers (refer note 28). Restricted cash is held in
relation to guarantees (refer note 26(A)) and financing activities.
WorleyParsons Annual Report 2018
71
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
8. TRADE AND OTHER RECEIVABLES
CURRENT TRADE RECEIVABLES
Trade receivables
Unbilled contract revenue
Retentions
Allowance for impairment of trade receivables
Less: procurement trade and other receivables
Allowance for impairment of trade receivables:
Balance at the beginning of the financial year
Additions through business combinations
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
NON-CURRENT TRADE RECEIVABLES 1
Trade receivables
Unbilled contract revenue
OTHER RECEIVABLES
Other receivables
Amounts receivable from associates and related parties
NOTES
CONSOLIDATED
2018
$’M
2017
$’M
748.6
526.4
27.8
(86.0)
(45.7)
745.5
468.5
23.1
(80.7)
(77.4)
1,171.1
1,079.0
28
80.7
3.4
4.7
(4.2)
1.4
86.0
14.2
14.7
28.9
101.3
46.6
147.9
81.9
-
1.3
(3.2)
0.7
80.7
13.8
14.4
28.2
127.7
55.7
183.4
31(B)
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.
1 Non-current trade receivables and unbilled contract revenue relate to a single project where recovery is expected to take greater than twelve months.
72
WorleyParsons Annual Report 2018
9. TRADE AND OTHER PAYABLES
CURRENT
Trade payables
Accruals
Amounts payable to associates and related parties
Billings in advance
Accrued staff costs
Other payables
Less: procurement trade and other payables
NON-CURRENT
Other payables
NOTES
CONSOLIDATED
2018
$’M
2017
$’M
31(B)
28
317.0
252.8
13.4
118.6
125.9
1.3
(39.8)
789.2
29.8
29.8
380.8
226.8
15.0
115.7
111.1
3.3
(71.1)
781.6
28.8
28.8
The Group’s exposure to currency and interest rate risk for trade and other payables is disclosed in note 19.
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 2018
73
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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
RECONCILIATIONS
Reconciliations of intangible assets at the beginning and end of the current and previous financial years are set out below:
CUSTOMER CONTRACTS
AND
RELATIONSHIPS
$’M
CONSOLIDATED
TRADE
NAMES
$’M
COMPUTER
SOFTWARE
$’M
14.4
62.5
-
(12.5)
2.4
66.8
28.7
-
(13.9)
(0.4)
14.4
8.2
-
-
(1.7)
(0.1)
6.4
11.1
-
(2.9)
-
8.2
141.1
-
18.6
(29.5)
-
130.2
135.7
36.4
(31.1)
0.1
141.1
GOODWILL
$’M
1,832.8
174.6
-
-
60.6
2,068.0
1,890.5
-
-
(57.7)
1,832.8
Balance at 1 July 2017
Additions through business combinations
Additions
Amortization
Differences arising on translation of foreign operations
Balance at 30 June 2018
Balance at 1 July 2016
Additions
Amortization
Differences arising on translation of foreign operations
Balance at 30 June 2017
RECOGNITION AND MEASUREMENT
CONSOLIDATED
2018
$’M
2017
$’M
2,268.2
(200.2)
2,068.0
256.2
(189.4)
66.8
84.2
(77.8)
6.4
347.8
(217.6)
130.2
32.7
(22.1)
10.6
2,033.0
(200.2)
1,832.8
187.9
(173.5)
14.4
82.7
(74.5)
8.2
329.2
(188.1)
141.1
24.8
(18.7)
6.1
2,282.0
2,002.6
OTHER
$’M
6.1
-
7.6
(3.1)
-
10.6
11.2
1.6
(6.7)
-
6.1
TOTAL
$’M
2,002.6
237.1
26.2
(46.8)
62.9
2,282.0
2,077.2
38.0
(54.6)
(58.0)
2,002.6
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.
74
WorleyParsons Annual Report 2018
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.
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. The risk
adjusted revenue growth rates for all the CGUs range from 3% to 6%. 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:
2018
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, AFRICA
$’M
MAJOR PROJECTS AND
INTEGRATED SOLUTIONS
$’M
ADVISIAN
$’M
303.6
313.7
12.2%
3.0%
509.9
526.9
13.3%
3.0%
350.3
368.7
13.4%
3.0%
410.1
258.9
591.3 267.4
11.6% 12.8%
3.0% 3.0%
2017
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, AFRICA
$’M
MAJOR PROJECTS AND
INTEGRATED
SOLUTIONS
ADVISIAN
$’M
$’M
312.2
303.6
14.9%
3.0%
524.3
509.9
14.2%
3.0%
360.2
350.3
17.3%
3.0%
421.7 272.1
410.1 258.9
12.6% 13.8%
3.0% 3.0%
SENSITIVITY ANALYSIS
The combined fair value in all the CGUs exceeds the carrying value by $1,793.5 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. 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 is as follows:
• terminal growth rates: a 1% decrease in the terminal growth rate will result in all the 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 2018
75
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11. PROVISIONS
CURRENT
Employee benefits
Project provisions
Insurance
Onerous leases
Warranty
Other
NON-CURRENT
Employee benefits
Onerous leases
Warranty
Other
CONSOLIDATED
2018
$’M
2017
$’M
180.1
86.3
22.1
14.7
8.5
6.8
318.5
30.3
24.8
10.1
1.5
66.7
170.8
44.4
25.9
20.8
14.3
6.4
282.6
31.7
22.6
4.2
3.1
61.6
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:
CURRENT
Balance at 1 July 2017
Provisions from acquired entities
Additional provisions
Release of unused provision
Amounts utilized
Differences arising from translation of foreign operations
Balance at 30 June 2018
Balance at 1 July 2016
Additional provisions
Release of unused provision
Amounts utilized
Differences arising from translation of foreign operations
Balance at 30 June 2017
CONSOLIDATED
EMPLOYEE
BENEFITS
$’M
PROJECT
PROVISIONS
$’M
INSURANCE
$’M
ONEROUS
LEASES
$’M
WARRANTIES
$’M
DEFERRED
CONSIDERATION
$’M
OTHER
$’M
170.8
1.1
228.3
(70.6)
(154.3)
4.8
180.1
204.4
248.2
(70.5)
(207.9)
(3.4)
170.8
44.4
21.2
29.9
(4.0)
(6.2)
1.0
86.3
25.8
25.9
(4.7)
(1.4)
(1.2)
44.4
25.9
-
-
(2.7)
(0.3)
(0.8)
22.1
18.5
11.2
(2.3)
(0.8)
(0.7)
25.9
20.8
-
7.2
(1.9)
(12.2)
0.8
14.7
25.6
18.5
(1.5)
(19.4)
(2.4)
20.8
14.3
-
8.2
(5.6)
(8.8)
0.4
8.5
18.6
6.0
(5.0)
(4.7)
(0.6)
14.3
-
-
-
-
-
-
-
6.3
-
-
(6.2)
(0.1)
6.4
0.4
0.8
(1.1)
(0.2)
0.5
6.8
9.6
-
-
(0.9)
(2.3)
-
6.4
76
WorleyParsons Annual Report 2018
NON-CURRENT
Balance at 1 July 2017
Additional provisions
Release of unused provision
Amounts utilized
Differences arising from translation of foreign operations
Balance at 30 June 2018
Balance at 1 July 2016
Additional provisions
Release of unused provision
Amounts utilized
Differences arising from translation of foreign operations
Balance at 30 June 2017
CONSOLIDATED
EMPLOYEE
BENEFITS
$’M
ONEROUS
LEASES
$’M
WARRANTIES
$’M
31.7
5.8
-
(8.2)
1.0
30.3
32.2
6.7
(1.8)
(4.7)
(0.7)
31.7
22.6
9.7
(1.7)
(6.2)
0.4
24.8
34.6
(11.7)
-
-
(0.3)
22.6
4.2
5.8
-
-
0.1
10.1
16.2
0.8
(12.4)
-
(0.4)
4.2
OTHER
$’M
3.1
-
-
(1.6)
-
1.5
1.4
3.0
(0.8)
-
(0.5)
3.1
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.
Project losses
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.
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.
Where required, the prior year balances were restated for comparative purposes.
WorleyParsons Annual Report 2018
77
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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 2018 and 30 June 2017
was as follows:
Total interest bearing loans and borrowings 1
Less: derivatives 2
Less: cash and cash equivalents 3
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 in breach of externally imposed capital requirements.
2018
$’M
1,008.1
(63.2)
(282.4)
662.5
2,212.8
23.0%
CONSOLIDATED
2017
$’M
1,106.2
(87.7)
(251.8)
766.7
1,868.3
29.1%
1 Excluding capitalized borrowing costs.
2 Only includes mark-to-market cross currency swaps.
3 Includes procurement cash.
78
WorleyParsons Annual Report 2018
13. INTEREST BEARING LOANS AND BORROWINGS
Current
Notes payable
Unsecured bank loans
Bank overdraft
Finance lease liability
Capitalized borrowing costs
Non-current
Notes payable
Unsecured bank loans
Capitalized borrowing costs
CONSOLIDATED
2017
$’M
242.7
23.0
7.5
0.2
(0.9)
272.5
592.2
240.6
(2.7)
830.1
2018
$’M
-
31.7
4.5
0.1
(0.3)
36.0
618.7
353.1
(8.7)
963.1
In December 2017, the Group refinanced its major US syndicated debt facility that was due to expire in August 2018. The new arrangement consists of a
US$700 million multi-currency facility. The new debt structure provides the Group with additional flexibility and liquidity to meet its working capital and
strategic growth requirements. The new financing facility matures in December 2020.
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 144.5
USD 169.5
DATE OF ISSUE
September 2012
September 2012
September 2012
March 2011
March 2011
April 2008
May 2007
DATE OF MATURITY
FIXED COUPON PER ANNUM
September 2022
September 2019
September 2017 (matured)
March 2021
March 2018 (matured)
April 2018 (matured)
May 2017 (matured)
4.00%
3.45%
3.09%
5.56%
4.86%
6.50%
5.76%
Cross currency swaps have been entered into, swapping USD 195.0 million (2017: USD 289.3 million) of notes payable into CAD 194.3 million (2017: CAD
288.3 million). This represents 42.9% (2017: 45.1%) of the outstanding notes.
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 and are subject to negative pledge arrangements which require the Group to comply with
certain minimum financial requirements.
WorleyParsons Annual Report 2018
79
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
14. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
The movements in financial liabilities and related financial assets are as follows:
2018
Current interest bearing loans and borrowings
Non-current interest bearing loans and borrowings
Finance lease liability
Liabilities
Derivative asset
Assets
2017
Current interest bearing loans and borrowings
Non-current interest bearing loans and borrowings
Finance lease liability
Liabilities
Derivative asset
Assets
AS AT
1 JULY
$'M
RECLASSIFICATION
$'M
CASHFLOWS FROM
FINANCING ACTIVITIES
$'M
FOREIGN EXCHANGE
MOVEMENTS
$'M
FAIR VALUE &
OTHER CHANGES
$'M
273.2
832.8
0.2
1,106.2
87.7
87.7
247.9
993.5
2.5
1,243.9
94.8
94.8
-
-
-
-
-
-
250.3
(250.3)
-
-
-
-
(238.5)
102.8
(0.1)
(135.8)
(31.0)
(31.0)
(222.0)
109.5
(0.3)
(112.8)
-
-
4.5
36.2
-
40.7
1.9
1.9
(3.0)
(19.9)
-
(22.9)
(3.4)
(3.4)
(3.0)
-
-
(3.0)
4.6
4.6
-
-
(2.0)
(2.0)
9.1
9.1
AS AT
30 JUNE
$'M
36.2
971.8
0.1
1,008.1
63.2
63.2
273.2
832.8
0.2
1,106.2
87.7
87.7
80
WorleyParsons Annual Report 2018
2018
NUMBER OF SHARES
$’M
2017
NUMBER OF SHARES
$’M
CONSOLIDATED
15. ISSUED CAPITAL
Ordinary shares, fully paid 1
Special voting share
(A) MOVEMENTS IN SHARES
Balance at the beginning of the financial year
Ordinary shares issued
Ordinary shares issued on redemption of exchangeable shares
Exchangeable shares exchanged for ordinary shares
Transfer from performance rights reserve on issuance of shares and SPPR amendments 2
Ordinary shares issued from WorleyParsons Limited Plans Trust
Less: transaction costs of equity issue
273,936,032
1
1,589.9
-
248,189,086
1
273,936,033
1,589.9
248,189,087
2018
NUMBER OF
SHARES
248,189,087
24,788,418
267,475
(267,475)
861,160
97,368
-
$’M
2017
NUMBER OF SHARES
1,268.5
322.0
7.2
(7.2)
5.7
-
(6.3)
247,837,326
-
1,177,207
(1,177,207)
351,761
-
-
Balance at the end of the financial year
273,936,033
1,589.9
248,189,087
1,268.5
-
1,268.5
$’M
1,264.9
-
31.5
(31.5)
3.6
-
-
1,268.5
During the reporting period, the Group issued 24.8 million shares at $13.0 each to fund the UK Integrated Solutions acquisition. The issue was a 1 for 10 fully
underwritten, pro-rata, accelerated non-renounceable entitlement offer for $322.0 million. The costs attributable to the issuance of shares were $6.3m and
have been charged to equity as a reduction in issued capital.
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 2018 267,475 (2017: 1,177,207) 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 1,096,193 (2017: 1,363,638) 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 151,459 (2017: 248,827) shares in the Company, which have been consolidated and eliminated in accordance with the accounting
standards.
2 Includes 44,673 (2017:30,966) employee bonus shares and 34,773 SPPR amendments (2017:nil).
WorleyParsons Annual Report 2018
81
NUMBER OF
PERFORMANCE RIGHTS AND SPPR
2018
2017
3,137,954
1,598,773
(781,714)
(383,974)
2,830,580
1,059,084
(320,795)
(430,915)
3,571,039
3,137,954
nil
$nil
1,199
$nil
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(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
Performance rights
The outstanding balance as at 30 June 2018 is represented by:
• 149,870 performance rights, vesting on 30 September 2018 and expiring on 30 October 2021;
• 806,343 performance rights, vesting on 30 September 2018 and expiring on 28 October 2022;
• 370,837 performance rights, vesting on 30 September 2018 and expiring on 30 October 2023;
• 159,866 performance rights, vesting on 30 September 2018 and expiring on 29 October 2024;
• 198,277 performance rights, vesting on 30 September 2019 and expiring on 28 October 2022;
• 331,962 performance rights, vesting on 30 September 2019 and expiring on 30 October 2023;
• 815,992 performance rights, vesting on 30 September 2019 and expiring on 29 October 2024;
• 165,397 performance rights, vesting on 30 September 2020 and expiring on 30 October 2023;
• 512,558 performance rights, vesting on 30 September 2020 and expiring on 29 October 2024; and
• 59,937 performance rights, vesting on 30 September 2020 and expiring on 19 February 2025.
Weighted average remaining contractual life
The weighted average remaining life for the rights outstanding as at 30 June 2018 is 5.4 years (2017: 5.4 years).
Weighted average fair value
The weighted average fair value of rights granted during the financial year was $14.51 (2017: $8.15).
KEY ESTIMATES
Pricing model
The following table lists the inputs to the models used for the financial years ended 30 June 2018 and 30 June 2017:
Dividend yield (%)
Expected volatility (%) 1
Risk-free interest rate (%)
Expected life of rights (years)
Rights exercise price ($)
Weighted average share price at measurement date ($)
PERFORMANCE RIGHTS
PLAN TSR, EPS AND SPPR
2018
1.77-2.28
55
1.75-2.09
2-4
nil
14.01
2017
1.31-2.25
60
1.68-1.83
2-4
nil
8.50
1 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.
82
WorleyParsons Annual Report 2018
16. RESERVES
Foreign currency translation reserve
Hedge reserve
Performance rights reserve
Acquisition reserve
CONSOLIDATED
2018
$’M
2017
$’M
(263.0)
4.6
44.6
(62.6)
(276.4)
(301.1)
11.5
42.1
(22.9)
(270.4)
(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.
No amount was recognized in the Statement of Financial Performance in relation to hedge ineffectiveness for the year ended 30 June 2018 (2017: nil).
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. The Group increased its share of WorleyParsons
Oman Engineering LLC to 100% during the year ended 30 June 2018.
WorleyParsons Annual Report 2018
83
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
17. EARNINGS PER SHARE
2018
CENTS
CONSOLIDATED
2017
CENTS
RESTATED
In the reporting period the Group issued 24.8 million shares at $13.0 each to fund the UK Integrated Solutions acquisition.
In accordance with the accounting standards, the basic and dilutive earnings per share were retrospectively adjusted for all periods presented by multiplying
the original weighted average number of shares by a bonus factor of 1.01. The bonus factor is calculated by dividing the fair value per share before the
exercise of rights by the theoretical ex-rights value per share.
ATTRIBUTABLE TO MEMBERS OF WORLEYPARSONS LIMITED
Basic earnings per share
Diluted earnings per share
The following reflects the income and security data used in the calculation of basic and diluted earnings per share:
(A) RECONCILIATION OF EARNINGS USED IN CALCULATING EARNINGS PER SHARE
Earnings used in calculating basic and diluted earnings per share
(B) WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE DENOMINATOR
Weighted average number of ordinary securities used in calculating basic earnings per share 1
Performance rights which are considered dilutive 2
23.3
23.1
$’M
62.2
13.4
13.3
$’M
33.5
Number
266,733,280
2,187,379
Number
250,556,551
2,049,211
Adjusted weighted average number of ordinary securities used in calculating diluted earnings per share
268,920,659
252,605,762
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 per share was 245,852 (2017: 151,958 - adjusted by a bonus factor of 1.01).
MEASUREMENT
Basic earnings per share
Basic earnings per share is determined by dividing the profit attributable to members of WorleyParsons Limited by the weighted average number of ordinary
shares outstanding during the financial year.
Diluted earnings per share
Diluted earnings per share is calculated as profit attributable to members of WorleyParsons Limited adjusted for:
• costs of servicing equity (other than dividends);
• the after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognized as expenses; and
• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares, divided by the
weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
1 Prior period number of shares is calculated by multiplying the original weighted average number of shares of 248,075,793 by a bonus factor of 1.01.
2 Prior period number of shares is calculated by multiplying the original weighted average number of shares of 2,028,922 by a bonus factor of 1.01.
84
WorleyParsons Annual Report 2018
CONSOLIDATED
2018
$’M
2017
$’M
18. DIVIDENDS
(A) FINAL DIVIDEND PROPOSED
Dividend in respect of the six months to 30 June 2018:
15.0 cents per share, unfranked
Dividend in respect of the six months to 30 June 2017:
Nil cents per share
41.1
-
The directors have resolved to pay a final dividend of 15.0 cents per fully paid ordinary share, including exchangeable shares, unfranked (2017: nil cents per
share). The Company will make total dividend payments of 25.0 cents per share for the financial year ended 30 June 2018 (2017: nil cents per share). The
final dividend will be paid on 24 September 2018 for shareholders on the register at the record date, being 29 August 2018.
In accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the aggregate amount of the proposed final dividend of $41.1 million is
not recognised as a liability as at 30 June 2018.
(B) DIVIDENDS PAID DURING THE FINANCIAL YEAR
Dividend in respect of the six months to 31 December 2017:
10.0 cents per share (unfranked)
(C) IMPUTATION CREDIT BALANCE OF THE PARENT ENTITY
There is nil imputation credits available for distribution (FY2017: nil).
19. FINANCIAL RISK MANAGEMENT
27.3
27.3
-
-
-
-
(A) OVERVIEW
The Group’s principal financial instruments comprise receivables, payables, bank loans and overdrafts, finance leases, cash and short term deposits and
derivatives. The Group has exposure to the following risks from its use of financial instruments:
• credit risk;
• liquidity risk; and
• market risk.
This note presents information about the Group’s exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk,
and the management of capital. Quantitative disclosures are included throughout this financial report.
The Board has overall responsibility for the establishment and oversight of the risk management framework. The Audit and Risk Committee assists the
Board in overseeing the integrity of the Group’s financial reporting risk management framework and internal controls.
Risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks
and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The
Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.
The Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and
procedures, the results of which are reported to the Committee.
(B) CREDIT RISK
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The financial
assets of the Group comprise cash and cash equivalents, trade and other receivables, 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.
WorleyParsons Annual Report 2018
85
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19. FINANCIAL RISK MANAGEMENT (continued)
Guarantees
Details of outstanding guarantees are provided in note 26(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 receivable from 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
2018
$’M
541.1
464.8
43.2
17.2
10.4
255.0
1,331.7
PROVISION FOR
IMPAIRMENT
2018
$’M
-
-
-
-
-
(86.0)
(86.0)
CARRYING AMOUNT
CONSOLIDATED
2018
$’M
282.4
1,245.7
101.3
46.6
65.4
1,741.4
GROSS
2017
$’M
482.9
419.5
54.0
32.5
22.3
254.1
1,265.3
2017
$’M
251.8
1,184.6
127.7
55.7
90.3
1,710.1
PROVISION FOR
IMPAIRMENT
2017
$’M
-
-
-
-
-
(80.7)
(80.7)
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. Other ageing categories are
assessed on a case by case basis.
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.
86
WorleyParsons Annual Report 2018
(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's main facility was refinanced in December 2017 as detailed in note 13.
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 facilities 1
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
CONSOLIDATED
2018
$’M
2017
$’M
1,615.1
61.9
1,221.1
2,898.1
1,003.5
4.5
519.6
1,527.6
611.6
57.4
701.5
1,762.7
72.5
1,116.7
2,951.9
1,098.5
7.5
568.1
1,674.1
664.2
65.0
548.6
1,370.5
1,277.8
87.6
1,310.6
278.8
1,677.0
335.9
1,232.5
266.8
1,835.2
0.1
0.1
0.1
0.1
0.1
0.1
0.2
0.2
0.2
0.2
0.2
0.2
1 Excludes capitalized borrowing costs.
WorleyParsons Annual Report 2018
87
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19. FINANCIAL RISK MANAGEMENT (continued)
The table below analyzes the Group’s financial liabilities into relevant maturity groupings based on the remaining period from balance date to the contractual
maturity date. As the amounts disclosed in the table are the contractual undiscounted cash flows, their balances will not necessarily agree with the amounts
disclosed in the Statement of Financial Position.
As at 30 June 2018
Due within one year
Due between one and four year(s)
Due after four years
As at 30 June 2017
Due within one year
Due between one and four year(s)
Due after four years
TRADE AND OTHER
PAYABLES
AMOUNTS PAYABLE
TO ASSOCIATES AND
RELATED PARTIES
INTEREST BEARING
LOANS AND
BORROWINGS
EXPECTED
FUTURE
INTEREST PAYMENTS
$’M
$’M
$’M
$’M
CONSOLIDATED
318.3
29.8
-
348.1
384.1
28.8
-
412.9
13.4
-
-
13.4
15.0
-
-
15.0
22.7
706.6
278.8
1,008.1
273.4
565.9
266.9
1,106.2
-
40.4
46.9
87.3
10.7
55.6
54.7
121.0
DERIVATIVES
$’M
3.4
-
-
3.4
1.8
-
-
1.8
TOTAL
FINANCIAL
LIABILITIES
$’M
357.8
776.8
325.7
1,460.3
685.0
650.3
321.6
1,656.9
(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 of 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 as follows:
Contracts to buy USD and sell CAD
Matured 24 March 2018
Matured 30 April 2018
Maturing 13 September 2019
Maturing 24 March 2021
WEIGHTED AVERAGE
EXCHANGE RATE
AMOUNT
RECEIVABLE/(PAYABLE)
AMOUNT
RECEIVABLE/(PAYABLE)
2018
-
-
1.01
0.99
2017
0.99
1.00
1.01
0.99
2018
$’M
2018
$’M
2017
$’M
2017
$’M
-
-
USD 75.0
USD 120.0
-
-
CAD (76.0)
CAD (118.3)
USD 22.0
USD 72.3
USD 75.0
USD 120.0
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 loss pre-tax in hedge relationship
88
WorleyParsons Annual Report 2018
CONSOLIDATED
2017
$’M
87.7
(96.0)
(8.3)
2018
$’M
63.2
(69.1)
(5.9)
(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:
Maturing in the next 6 months to 31 December 2018
Buy CAD Sell AUD
Buy EUR Sell AUD
Buy EUR and sell USD
Buy GBP and Sell AUD
Buy GBP and Sell KWD
Buy GBP and Sell PLN
But GBP and Sell USD
Buy IDR and Sell USD
Buy INR and Sell USD
Buy KWD Sell AUD
Buy KWD Sell USD
Buy MYR and Sell AUD
Buy MYR and Sell CAD
Buy MYR and Sell GBP
Buy MYR and Sell USD
Buy NOK Sell AUD
Buy NOK Sell CAD
Buy NOK Sell USD
Buy QAR Sell USD
Buy SGD and Sell AUD
Buy SGD and Sell USD
Buy USD and Sell AUD
Buy USD Sell GBP
Buy USD Sell NOK
Buy SGD and Sell AUD
Buy SGD and Sell USD
Maturing in next 6-12 months to 30 June 2019
Buy IDR and Sell USD
Maturing in the next 12-18 months to 31 December 2019
Buy IDR and Sell USD
Maturing in the next 18-24 months to 30 June 2020
Buy IDR Sell USD
Maturing in the next 24-30 months to 31 December 2020
Buy IDR Sell USD
Maturing in the next 30-36 months to 30 June 2021
Buy IDR Sell USD
WEIGHTED AVERAGE
EXCHANGE RATE
2018
2017
AMOUNT
RECEIVABLE/(PAYABLE)
2018
$’M
2018
$’M
AMOUNT
RECEIVABLE/(PAYABLE)
2017
$’M
2017
$’M
1.0
0.7
0.8
0.6
2.5
0.2
0.7
13,589.6
65.1
0.2
0.3
3.2
-
-
-
6.2
6.3
8.0
3.7
1.0
1.3
-
1.3
0.1
-
-
-
0.7
0.9
-
-
-
0.8
13,255.3
66.5
-
-
3.2
3.2
5.4
4.3
6.3
-
-
-
1.1
-
0.8
-
-
1.1
1.4
CAD 25.3
EUR 7.5
EUR 7.3
GBP 16.5
GBP 1.9
GBP 5.0
GBP 59.9
IDR 25,592.4
INR 376.0
KWD 0.8
KWD 1.0
MYR 14.6
-
-
-
NOK 15.0
NOK 38.0
NOK 47.0
QAR 6.7
SGD 8.0
SGD 3.7
-
USD 7.0
USD 13.1
-
-
AUD (25.7)
AUD (11.8)
USD (8.5)
AUD (29.6)
KWD (0.8)
PLN (24.2)
USD (79.6)
USD (1.8)
USD (5.7)
AUD (3.4)
USD (3.3)
AUD (4.9)
-
-
-
AUD (2.5)
CAD (6.1)
USD (5.7)
USD (1.8)
AUD (7.9)
USD (2.7)
-
GBP (5.3)
NOK (106.0)
-
-
-
EUR 2.0
EUR 2.7
-
-
-
GBP 9.1
IDR 16,245.6
INR 85.1
MYR 19.9
MYR 3.7
MYR .6
MYR 25.6
NOK 14.0
-
-
SGD 1.9
-
USD 10.0
-
-
SGD 10.0
SGD 2.8
-
AUD (3.0)
USD (3.1)
-
-
-
USD (11.8)
USD (1.2)
USD (1.3)
AUD (5.9)
CAD (1.2)
GBP (0.1)
USD (6.0)
AUD (2.2)
-
-
AUD (1.8)
-
AUD (13.2)
-
-
AUD (9.5)
USD (2.0)
13,589.6
13,255.3
IDR 26,303.4
USD (1.8)
IDR 16,557.6
USD (1.2)
13,589.6
13,255.3
IDR 26,798.4
USD (1.8)
IDR 161,804.3
USD (10.8)
13,589.6
-
IDR27,428.4
USD (1.8)
13,589.6
-
IDR 27,671.4
USD (1.8)
13,589.6
-
IDR 28,014.4
USD (1.8)
-
-
-
-
-
-
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 as follows:
Effective hedge – unrealized gains
Effective hedge – unrealized losses
Net unrealized (losses)/gains, pre‑ tax
CONSOLIDATED
2017
$’M
4.3
-
4.3
2018
$’M
-
(4.0)
(4.0)
WorleyParsons Annual Report 2018
89
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19. 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 2018
Cash and cash equivalents
Trade receivables
Trade payables
Gross Statement of Financial Position exposure
As at 30 June 2017
Cash and cash equivalents
Trade receivables
Trade payables
Gross Statement of Financial Position exposure
CAD
$’M
0.3
-
(0.7)
(0.4)
1.1
-
(2.3)
(1.2)
CONSOLIDATED
GBP
$’M
4.4
3.1
(4.6)
2.9
5.1
5.3
(1.3)
9.1
USD
$’M
53.6
49.2
(67.5)
35.3
46.4
44.4
(69.3)
21.5
EUR
$’M
3.6
20.7
(5.5)
18.8
4.5
13.9
(12.7)
5.7
OTHER 1
$’M
15.0
16.9
(16.0)
15.9
10.5
13.2
(11.2)
12.5
(4) CURRENCY SENSITIVITY ANALYSIS
A 10% weakening of the Australian dollar against the following currencies at 30 June 2018 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 presented on the same basis for 2017.
EFFECTS IN MILLIONS OF AUD
CAD
GBP
USD
EUR
Other
CONSOLIDATED
2018
2017
EQUITY
PROFIT
EQUITY
-
-
-
-
-
0.0
0.4
3.7
2.3
1.1
-
-
-
-
-
PROFIT
(0.1)
1.2
2.2
0.7
0.9
A 10% strengthening of the Australian dollar against the above currencies at 30 June 2018 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
2018
0.9842
0.5763
0.7756
0.6502
2017
1.0006
0.5951
0.7542
0.6922
2018
0.9749
0.5624
0.7354
0.6360
2017
0.9988
0.5908
0.7683
0.6715
1 Represented in AUD currency millions as indicated.
90
WorleyParsons Annual Report 2018
(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 2018
Cash and cash equivalents
Bank loans 1
Notes payable1
Finance lease liabilities
AS AT 30 JUNE 2017
Cash and cash equivalents
Bank loans and overdrafts1
Notes payable1
Finance lease liabilities
WEIGHTED
AVERAGE
INTEREST
RATE
% PA
3.5
4.4
4.5
4.2
2.6
3.6
4.9
6.9
FLOATING
INTEREST
RATE
$'M
282.4
-
-
-
251.8
-
-
-
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
TOTAL
$'M
-
31.7
-
0.1
-
23.0
242.7
0.2
-
-
102.0
-
353.0
237.9
-
-
-
-
-
240.6
-
-
97.6
227.8
-
-
-
-
-
-
-
-
-
-
278.8
-
-
-
-
-
-
-
-
-
-
-
266.8
-
-
-
-
-
-
-
-
-
282.4
384.7
618.7
0.1
251.8
263.6
834.9
0.2
As the largest component of interest bearing liabilities, being notes payable, is at fixed interest rates, the effect of changes in interest rates on equity and
profit of the Group is negligible.
20. 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 $1,060.7 million (2017: $1,186.7 million) and a carrying value of $1,008.1 million (2017: $1,106.2 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 2018
91
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
ENTITY
COUNTRY OF INCORPORATION
21. INVESTMENTS IN CONTROLLED ENTITIES
(A) SIGNIFICANT ENTITIES
Worley No 2 Pty Limited 1
WorleyParsons Canada Services Ltd
WorleyParsons Cord LP
WorleyParsons Engineering Pty Limited24
WorleyParsons Europe Limited
WorleyParsons Financial Services Pty Limited24
WorleyParsons Group Inc
WorleyParsons International Inc
WorleyParsons Oman Engineering LLC 2
WorleyParsons Services Pty Limited24
Rosenberg WorleyParsons AS
Beijing MaisonWorleyParsons Engineering & Technology Co Limited
WorleyParsons Kazakhstan LLP
Acquired in FY2018
WorleyParsons Services UK Limited (Note 21B) 3
Australia
Canada
Canada
Australia
United Kingdom
Australia
USA
USA
Oman
Australia
Norway
China
Kazakhstan
United Kingdom
BENEFICIAL
INTEREST HELD BY
CONSOLIDATED ENTITY
2018
%
2017
%
100
100
100
100
100
100
100
100
100
100
100
80
100
100
100
100
100
100
100
100
100
100
65
100
100
80
100
-
In accordance with the accounting standards, the Group discloses only significant entities identified on the basis of materiality.
1 Entities subject to ASIC Corporations Instrument 2016/785.
2 The Group increased its share of WorleyParsons Oman Engineering LLC to 100% during the year ended 30 June 2018.
3 This represents the legal name of main operating entity in the UK Integrated Solutions group of acquired entities.
92
WorleyParsons Annual Report 2018
(B) ACQUISITION OF CONTROLLED ENTITIES
On 27 October 2017, the Group acquired 100% of the voting shares of AFW UK Oil & Gas Limited and its controlled entities (UK Integrated Solutions) for a
total consideration of $384.3 million. With operations in the UK North Sea, UK Integrated Solutions is the leading Maintenance, Modifications & Operations
(MMO) service provider in the UK oil and gas sector. The acquisition provides the Group with a robust entry into the UK North Sea and supports our global
MMO strategy. UK Integrated Solutions is reported as a part of the Major Projects and Integrated Solutions and Services business lines. The financial report
includes the results of UK Integrated Solutions for the eight-month period from the acquisition date.
The acquisition's contribution to the Group's reported after tax profit attributable to members of the Parent Entity was $19.4 million, and the reported
contribution to revenue was $503.2 million. If the acquisition had occurred on 1 July 2017, management estimates that the contribution to the Group's profit
after income tax would have been $23.3 million, and to revenue would have been $854.5 million.
The Group incurred acquisition related costs of $ 5.9 million on legal fees, due diligence and advisory costs. These costs have been included in acquisition
costs in the Statement of Financial Performance, and in operating cash flows in the Statement of Cash Flows.
ASSETS
Cash
Trade and other receivables
Prepayments
Deferred tax assets
Property, plant and equipment
Other assets
Total assets
LIABILITIES
Trade and other payables
Other liabilities
Total liabilities
Total identifiable net assets acquired at fair value
Intangible assets
Deferred tax liability arising on intangible assets
Goodwill arising on acquisition
Total consideration, excluding acquisition costs expensed
NET CASH EFFECT
Cash consideration paid
Consideration receivable
Cash and overdrafts included in net assets acquired
Transaction costs of the acquisition
Net cash outflow
CONSOLIDATED
PROVISIONAL FAIR VALUE
RECOGNIZED ON ACQUISITION
$’M
64.6
259.1
8.2
8.4
5.3
4.4
350.0
(137.5)
(51.5)
(189.0)
161.0
62.5
(11.9)
172.3
383.9
384.3
(0.4)
(64.6)
5.9
325.2
Goodwill represents the value of the assembled workforce and any premium from synergies and future growth opportunities that cannot be recognized
separately. Goodwill has been allocated to the Major Projects & Integrated Solutions and Services-EMEA cash generating units. Except as indicated, the
carrying value equals the fair value of the net assets acquired.
The fair values of the acquisition balances are provisional due to the timing of the acquisition. The review of the assets and liabilities will continue for 12
months from acquisition date.
During FY2018 WorleyParsons acquired the Ludwigshafen and Schwarzheide offices of the M&W Group in Germany on 1 April 2018 for $2.3 million. The
business acquired provides engineering services supporting world scale facilities of the chemical companies in Germany. Goodwill of $2.3 million has been
recognised from the preliminary purchase price allocation, and allocated to the Services-EMEA cash generating unit.
During FY2018, the Group increased its share of WorleyParsons Oman Engineering LLC by 35% during the financial year and now holds 100%. In the prior
financial year, the Group had acquired an additional 14% in this entity.
In the prior financial year certain assets and liabilities of the Group’s business in South Africa were sold for a total of $6.4 million and resulted in a net profit of
$0.9m. No such transaction has taken place in the current financial year.
WorleyParsons Annual Report 2018
93
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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 acquisition 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.
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.
94
WorleyParsons Annual Report 2018
22. EQUITY ACCOUNTED ASSOCIATES
(A) DETAILS OF EQUITY ACCOUNTED ASSOCIATES
The Group’s largest equity accounted investments 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
2018
%
2017
%
Transfield Worley Power Services Pty Limited
Australia
Infrastructure
DeltaAfrik Engineering Limited
Nana WorleyParsons LLC
Nigeria
Hydrocarbons
USA
Hydrocarbons
Ranhill WorleyParsons Sdn Bhd
Malaysia
Hydrocarbons
Transfield Services-WorleyParsons JV (M) Sdn Bhd Malaysia
Hydrocarbons
BW Energy Services PTE Ltd
Singapore
Infrastructure
Other investments
50
50
50
49
33
50
50
50
50
49
33
50
(B) CARRYING AMOUNT OF EQUITY ACCOUNTED ASSOCIATES
Balance at the beginning of the financial year
Share of net profit 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 PROFIT ATTRIBUTABLE TO EQUITY ACCOUNTED ASSOCIATES
Profit before income tax expense 1
Income tax expense
Net profit of equity accounted associates
(D) REVENUE ATTRIBUTABLE TO EQUITY ACCOUNTED ASSOCIATES
Share of revenue from equity accounted associates2
(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
2018
$’M
21.1
21.8
11.0
8.9
3.3
3.8
11.4
81.3
2018
$’M
77.3
9.7
(4.9)
-
-
(0.8)
81.3
12.5
(2.8)
9.7
2017
$’M
22.8
20.4
10.9
7.4
3.8
1.6
10.4
77.3
CONSOLIDATED
2017
$’M
86.8
3.6
(2.9)
(3.6)
(1.3)
(5.3)
77.3
6.6
(3.0)
3.6
296.7
306.2
(24.9)
-
(0.8)
(25.7)
(19.6)
(0.1)
(5.2)
(24.9)
1 Includes impairment of intangible assets in an associate of $2.7 million.
2 Includes pass-through revenue at nil margin and procurement revenue at nil margin.
WorleyParsons Annual Report 2018
95
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
22. EQUITY ACCOUNTED ASSOCIATES (continued)
(F) RETAINED PROFITS ATTRIBUTABLE TO EQUITY ACCOUNTED ASSOCIATES
Balance at the beginning of the financial year
Share of net profits of investments accounted for using the equity method
Write-down of investments in equity accounted associates
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 as follows:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Balance at the end of the financial year
CONSOLIDATED
2017
$’M
84.8
3.6
(1.3)
(2.9)
84.2
2.0
2.1
133.1
53.6
(95.6)
(13.8)
77.3
77.3
2018
$’M
84.2
9.7
-
(4.9)
89.0
3.3
4.1
130.7
47.6
(82.9)
(14.1)
81.3
81.3
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.
96
WorleyParsons Annual Report 2018
23. 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
2018
%
50
2017
%
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
Total current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Total current liabilities
TOTAL LIABILITIES
NET ASSETS
2018
$’M
8.1
61.3
69.4
69.4
63.8
63.8
63.8
5.6
2017
$’M
10.2
59.3
69.5
69.5
63.2
63.2
63.2
6.3
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.
24. ASSETS AND LIABILITIES HELD FOR SALE
There are no assets and liabilities held for sale at 30 June 2018.
In the prior year the Group disposed of the investment in the equity accounted Cegertec WorleyParsons Inc at a nil profit to the Group.
Also in prior year certain net assets of the WorleyParsons Public Infrastructure business in South Africa were sold as detailed in note 21.
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.
WorleyParsons Annual Report 2018
97
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
25. COMMITMENTS FOR EXPENDITURE
(A) OPERATING LEASES
Commitments for minimum lease payments in relation to non-cancellable property 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
2018
$’M
2017
$’M
153.7
241.1
12.1
406.9
111.5
11.7
123.2
160.5
325.1
1.3
486.9
105.3
7.1
112.4
26. 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
2017
$’M
568.1
568.1
2018
$’M
519.6
519.6
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.
98
WorleyParsons Annual Report 2018
27. SUBSEQUENT EVENTS
Since the end of the financial year, the directors have resolved to pay a final dividend of 15.0 cents per fully paid ordinary share, including exchangeable
shares, unfranked (2017: nil cents per share).
In accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the aggregate amount of the proposed final dividend of $41.1 million is
not recognised as a liability as at 30 June 2018.
Unless disclosed elsewhere in the financial statements, no other material matter or circumstance has arisen since 30 June 2018 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.
28. PROCUREMENT
In certain situations, the Group will enter into contracts with its customers which require the Group to procure goods and services on behalf of the 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 EXPENSES 1
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
2018
$’M
337.9
(322.9)
94.4
(94.4)
20.8
45.7
39.8
CONSOLIDATED
2017
$’M
316.2
(309.2)
826.2
(826.2)
25.6
77.4
71.1
1 Revenue and expenses exclude procurement revenue and expenses from associates.
WorleyParsons Annual Report 2018
99
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
29. PROPERTY, PLANT AND EQUIPMENT
Land and buildings
At cost
Accumulated depreciation
Leasehold improvements
At cost
Accumulated amortization
Plant and equipment
At cost
Accumulated depreciation
IT equipment
At cost
Accumulated depreciation
Total property, plant and equipment
2018
$’M
16.0
(6.1)
9.9
171.5
(154.4)
17.1
182.3
(159.9)
22.4
78.0
(73.1)
4.9
54.3
CONSOLIDATED
2017
$’M
10.1
(5.2)
4.9
165.6
(147.0)
18.6
170.2
(145.7)
24.5
74.6
(70.3)
4.3
52.3
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 2017
Additions
Disposals
Other movements
Depreciation
Amortization
Differences arising on translation of foreign operations
Balance at 30 June 2018
Balance at 1 July 2016
Additions
Disposals
Other movements
Depreciation
Amortization
Differences arising on translation of foreign operations
Balance at 30 June 2017
LAND AND
LEASEHOLD
PLANT AND
IT
BUILDINGS
IMPROVEMENTS
EQUIPMENT
EQUIPMENT
CONSOLIDATED
$’M
4.9
3.0
(0.2)
3.1
(1.1)
-
0.2
9.9
4.6
0.6
-
0.8
(0.9)
-
(0.2)
4.9
$’M
18.6
6.1
(0.5)
(4.2)
-
(3.1)
0.2
17.1
31.2
2.7
(1.4)
(4.9)
-
(8.2)
(0.8)
18.6
$’M
24.5
10.3
(0.4)
2.0
(14.4)
-
0.4
22.4
28.2
10.5
(2.5)
4.5
(15.0)
-
(1.2)
24.5
$’M
4.3
4.0
-
(0.9)
(2.6)
-
0.1
4.9
9.3
2.7
-
(5.6)
(2.1)
-
0.0
4.3
TOTAL
$’M
52.3
23.4
(1.1)
-
(18.1)
(3.1)
0.9
54.3
73.3
16.5
(3.9)
(5.2)
(18.0)
(8.2)
(2.2)
52.3
RECOGNITION AND MEASUREMENT
Property, plant and equipment are stated at cost less accumulated depreciation, amortization and impairment, if any.
100
WorleyParsons Annual Report 2018
30. 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 trade 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
Total deferred tax assets
Deferred tax asset and liabilities offset
Net deferred tax assets
Amounts recognized directly in equity:
Foreign exchange losses
Deferred tax assets
Balance at the beginning of the financial year
Additions through business combinations
Credited to the Statement of Financial Performance
Charged to equity
Differences arising on translation of foreign operations
Balance at the end of the financial year
CONSOLIDATED
2018
$’M
2017
$’M
5.8
32.3
3.7
26.8
37.2
24.7
5.6
105.1
9.8
6.9
1.1
1.5
260.5
(69.5)
191.0
10.6
201.6
258.1
8.5
(94.8)
20.4
9.4
201.6
9.2
36.4
1.9
26.1
86.6
18.3
18.4
61.1
51.0
23.3
2.0
11.4
345.7
(77.8)
267.9
(9.8)
258.1
297.5
-
(18.9)
(10.9)
(9.6)
258.1
WorleyParsons Annual Report 2018
101
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. 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
Total deferred tax liabilities
Deferred tax asset and liabilities offset
Net deferred tax liabilities
Amounts recognized directly in equity:
Other
Deferred tax liabilities
Balance at the beginning of the financial year
Additions through business combinations
Credited to the Statement of Financial Performance
Charged to equity
Differences arising on translation of foreign operations
Balance at the end of the financial year
CONSOLIDATED
2018
$’M
2017
$’M
54.7
19.3
4.0
-
0.6
(0.1)
78.5
(69.5)
9.0
1.9
10.9
24.3
11.9
(20.5)
(0.6)
(4.2)
10.9
69.7
12.5
-
14.2
0.5
2.6
99.5
(77.8)
21.7
2.6
24.3
116.8
-
(91.8)
(0.7)
-
24.3
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.
31. 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, AO (Chairman)
Ron McNeilly - retired on 27 October 2017
Erich Fraunschiel - (Lead Independent Director from 28 October 2017)
Jagjeet (Jeet) Bindra - resigned on 15 December 2017
Tom Gorman - appointed on 18 December 2017
Christopher Haynes, OBE
Catherine Livingstone, AO
Anne Templeman-Jones - appointed on 1 November 2017
Wang Xiao Bin
Andrew Wood (Chief Executive Officer)
102
WorleyParsons Annual Report 2018
(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
2017
$’M
-
(3.4)
2.9
55.7
15.0
2018
$’M
-
(1.4)
4.9
46.6
13.4
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.
32. 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 paid for other services:
Tax related services
Other non-audit services
33. KEY MANAGEMENT PERSONNEL
Short term employee benefits
Post-employment benefits
Other long term benefits
Share based payments
Total compensation
CONSOLIDATED
2018
$
2017
$
3,164,184
167,783
2,623,585
91,569
3,331,967
2,715,154
237,679
153,533
391,212
383,771
137,921
521,692
3,723,179
3,236,846
CONSOLIDATED
2018
$
2017
$
6,093,000
137,000
45,000
2,836,000
7,819,000
169,000
54,000
1,813,000
9,111,000
9,855,000
WorleyParsons Annual Report 2018
103
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
34. 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
(Loss)/profit before income tax expense
Income tax benefit
(Loss)/profit after income tax
(Loss)/profit attributable to members of WorleyParsons Limited
Retained profits at the beginning of the financial year
Dividends paid 1
Retained profits at the end of the financial year
STATEMENT OF COMPREHENSIVE INCOME
(Loss)/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
2018
$’M
440.1
197.9
121.0
100.0
94.7
953.7
2018
$’M
(3.7)
3.0
(0.7)
(0.7)
97.3
(27.3)
69.3
(0.7)
(0.7)
1,029.0
2,008.9
194.1
305.1
1,703.8
1,589.9
44.6
69.3
1,703.8
2017
$’M
440.1
197.9
121.0
100.0
94.7
953.7
2017
$’M
6.2
0.2
6.4
6.4
90.9
-
97.3
6.4
6.4
1,029.2
1,998.2
561.5
590.3
1,407.9
1,268.5
42.1
97.3
1,407.9
The parent entity has bank guarantees in respect of contractual performance outstanding at 30 June 2018 for the amount of $nil (2017: $334.6 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.
104
WorleyParsons Annual Report 2018
(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, Engineering Securities Pty Limited, Advisian Group Pty Limited, Advisian Pty Ltd, 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, Energy Resourcing Australia Pty Limited and INTECSEA Pty Ltd entered into a 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, ASIC Corporations Instrument 2016/785 relieves certain of the controlled entities from the Corporations Act 2001 requirements for preparation, audit
and lodgement of financial reports.
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 paid 1
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
Interest bearing loans and borrowings
Provisions
Derivative liability
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
2018
$’M
142.3
(13.6)
128.7
128.7
729.6
-
(27.3)
831.0
18.0
1,324.2
34.7
1,376.9
66.0
264.1
5.4
2,509.6
2,845.1
4,222.0
771.1
-
59.0
0.8
830.9
749.6
227.7
13.0
990.3
1,821.2
2,400.8
1,589.9
(20.1)
831.0
2,400.8
2017
$’M
173.7
(22.3)
151.4
151.4
557.3
20.9
-
729.6
51.6
1,253.0
35.9
1,340.5
53.4
275.4
7.8
2,116.7
2,453.3
3,793.8
562.9
221.8
42.0
-
826.7
782.7
166.2
11.3
960.2
1,786.9
2,006.9
1,268.5
8.8
729.6
2,006.9
1 Dividends paid by the Closed Group exclude dividends paid to holders of exchangeable shares.
WorleyParsons Annual Report 2018
105
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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 2018 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 34(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 2018.
On behalf of the Board
JOHN GRILL, AO
Chairman
Sydney, 22 August 2018
106
WorleyParsons Annual Report 2018
WorleyParsons Annual Report 2018
107
108
WorleyParsons Annual Report 2018
WorleyParsons Annual Report 2018
109
110
WorleyParsons Annual Report 2018
WorleyParsons Annual Report 2018
111
112
WorleyParsons Annual Report 2018
WorleyParsons Annual Report 2018
113
Shareholder information
2018
NAME
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
Wilaci Pty Limited
National Nominees Limited
Serpentine Foundation Pty Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
Mr John Michael Grill
HSBC Custody Nominees (Australia) Limited
Haju Pty Limited
Juha Pty Limited
Taylor Square Designs Pty Ltd
UBS Bank Canada TR
Inmac Engineering Pty Ltd
Inmaccorp Pty Ltd
Netwealth Investments Limited
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
Mr John Craig Reeves
Total
Total number of current holders for all named classes is 18,501.
TOP 20 HOLDINGS OF FULLY PAID ORDINARY SHARES AS AT 1 AUGUST
SHARES
% OF ISSUED CAPITAL
RANK
88,776,845
54,333,460
40,002,487
14,165,807
10,040,602
5,329,308
4,602,305
4,110,226
2,826,277
2,404,630
1,650,000
1,650,000
1,423,641
1,010,000
900.000
776,697
761,960
754,337
717,000
651,517
236,887,099
32.39
19.82
14.60
5.17
3.66
1.94
1.68
1.50
1.03
0.88
0.60
0.60
0.52
0.37
0.33
0.28
0.28
0.28
0.26
0.24
86.43
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
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.
114
WorleyParsons Annual Report 2018
SHAREHOLDER INFORMATION CONTINUED
SUBSTANTIAL HOLDERS OF 5% OR MORE OF FULLY PAID ORDINARY SHARES AS AT 1 AUGUST 2018*
NAME
Dar Al-Handasah Consultants Shair and Partners Holdings Ltd (Dar)**
John Grill & associated companies
T. Rowe Price Associates, Inc.
* As disclosed in substantial shareholder notices received by the Company.
NOTICE DATE
31 July 2018
31 May 2010
9 January 2018
SHARES
62,474,391
25,313,786
17,119,010
** As disclosed in the substantial shareholder notice received by the Company, Samurai Investments, a Dar group company, has a cash-settled equity swap
with Citigroup Global Markets Australia Pty Limited, which as at the date of the substantial shareholder notice, related to a notional 8,101,511 shares
(equivalent to approximately 2.97% of the shares on issue at the time). The cash-settled equity swap does not give Dar, any Dar group company or Talal Shair
any relevant interest in shares.
RANGE OF FULLY PAID ORDINARY SHARES AS AT 1 AUGUST 2018
SHARES
% OF ISSUED CAPITAL
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
UNMARKETABLE PARCELS
Minimum $500 parcel at $18.45 per unit
HOLDERS
12,676
4,896
523
344
62
18,501
4,661,749
10,342,397
3,631,121
8,354,313
247,097,911
274,087,491
MINIMUM PARCEL SIZE
28
HOLDERS
602
1.70
3.77
1.33
3.05
90.15
100.00
SHARES
5,896
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 which 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 2018
115
Glossary
$, $m Australian dollars unless otherwise stated, millions of Australian dollars.
Americas Services business line region encompassing sub‐ regions of North America and Latin America.
APAC Services business line region encompassing Australia, Pacific, Asia and China.
ASIC Australian Securities and Investments Commission
ASX Australian Securities Exchange
Backlog 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 the Group. With respect to long term agreements and framework agreements, an amount is included for the
work expected to be received over the period under consideration. The view of backlog is sensitive to timing of awards and as such a conservative view of
timing has been adopted.
Board The board of directors of the Company.
CEO Chief Executive Officer.
Company or WorleyParsons WorleyParsons Limited ACN 096 090 158.
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 Earnings before interest and tax.
EcoNomics™ Our framework for integrating sustainability into our customers’ projects and operations. That framework assists them in making decisions
where trade‐ offs exist between technical, social, environmental and financial performance.
EMEA Services business line region encompassing Europe, Middle East and Africa.
EPC Engineering, Procurement and Construction.
EPC contract Under an EPC contract, we will generally be responsible for the design of, the procurement of equipment and materials for, and the construction
and commissioning of, an asset, such as a power station. This will generally require us to ensure that the completed asset meets certain specified
performance targets. To do so, we will generally procure the necessary equipment and materials and engage various sub‐ contractors ourselves.
EPCM Engineering, Procurement and Construction Management.
EPCM contract Under an EPCM contract, we will generally be responsible for providing our professional services, but unlike an EPC contract, will not be
responsible for delivering a completed asset to our customer. Instead, we will provide engineering and design services to our customer, procure equipment
but only as agent for our customer and manage our customer’s other suppliers as the customer’s representative. We will generally be paid an hourly rate for
the services we provide.
EPS Earnings per share. Determined by dividing the Group NPAT by the weighted average number of the Company’s ordinary shares on issue during the
financial year.
Executive 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.
Front end engineering design (FEED) Basic engineering design providing owners and their financiers with information enabling them to determine whether
or not, and if so how, to commit resources to a proposed project to maximize its projected returns.
FY2017 and FY2018 financial year 2017 and financial year 2018.
Group WorleyParsons Limited and the entities it controls.
Group net profit after tax (NPAT) 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.
HSE Health, Safety and Environment.
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.
Midstream The transport (by pipeline, rail, barge or truck), storage, and wholesale marketing of crude or refined petroleum products.
MMO Maintenance, Modifications and Operations activities.
Non-executive director (NED) Non‐ executive directors of the entity have authority and responsibility for planning, directing and controlling the activities of
the entity, directly or indirectly.
OneWay™ Our enterprise‐ wide integrity management framework which establishes our corporate expectations for Zero Harm to our business.
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.
Upstream 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.
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WorleyParsons Annual Report 2018
Corporate information
WorleyParsons Limited
ACN 096 090 158
DIRECTORS
John Grill, AO (Chairman)
Erich Fraunschiel - (Lead Independent Director from 27 October 2017)
Tom Gorman
Christopher Haynes, OBE
Catherine Livingstone, AO
Anne Templeman-Jones
Wang Xiao Bin
Andrew Wood (Chief Executive Officer)
COMPANY SECRETARY
Nuala O'Leary
REGISTERED OFFICE
Level 15
141 Walker Street
North Sydney NSW 2060
AUDITORS
Ernst & Young
BANKERS
Barclays Bank
Bank ABC
BNP Paribas
Intesa Sanpaolo Bank
HSBC
JPMorgan Chase
Royal Bank of Canada
Mizuho Bank
Macquarie Bank
Standard Chartered Bank
State Bank of India
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 2018
117
www.worleyparsons.com