Annual Report 2019
We help our customers meet
the world’s changing energy,
chemicals and resources needs
We are a professional services business, a partner in delivering sustained
economic, social and environmental 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 2019 Annual
General Meeting will be held on
Monday 21 October 2019 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 Executive
Environmental, Social
and Governance
Operating and Financial Review
Directors’ Report
Remuneration Report
Financial Statements
Shareholder Information
Glossary
Corporate Information
1
2
5
6
17
20
29
37
43
61
118
119
121
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 2019 shareholder
results microsite, which offers our
2019 results documents and detailed
information on our business operations.
Visit us online
annualreport2019.worley.com
Front Cover Worley’s Vadodara office in India
Group Financial Highlights
Five year performance at a glance
Aggregated revenue
$6,439.1m
EBITA
$308.1m
NPATA
$172.3m
Cash flow from operations
$236.3m
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15
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15
16
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18
19
15
16
17
18
19
EBITA
NPATA
Underlying EBITA
Underlying NPATA
$m
2015
2016
2017
2018
2019
% change
Aggregated revenue1
7,227.5
5,725.9
4,377.0
4,749.2
6,439.1
EBITA
EBITA margin
NPATA
Net profit margin
Cash flow from operations
Return on equity
Basic EPS normalized (cents)2
Basic EPS (cents)
Dividends (cents per share)
108.9
1.5%
(39.6)
(0.5%)
251.3
9.2%
(14.7)
(22.2)
56.0
148.1
146.4
278.0
2.6%
36.9
0.6%
192.0
6.9%
16.3
9.5
–
3.3%
45.3
1.0%
78.9
5.5%
20.1
13.4
–
5.9%
72.8
1.5%
259.7
6.8%
27.1
22.6
25
308.1
4.8%
172.3
2.7%
236.3
5.1%
41.3
36.4
27.5
35.6
10.8
(1.1pp)
136.7
1.2pp
(9.0)
(1.7pp)
52.4
61.1
10.0
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
Worley Annual Report 2019 Chairman’s Report
Welcome to the WorleyParsons
Limited (“Worley”) Annual
Report for financial year 2019
John Grill AO
Chairman and Non-Executive Director
In FY2019 Worley underwent one of the most transformative
and dynamic changes in its history with the completion of the
acquisition of the Energy, Chemicals and Resources division of
Jacobs Engineering Group Inc. or “ECR”, and in the process of doing
so positioned the company as a pre-eminent global player in the
energy, chemicals and resources sectors.
The integration of the ECR
business is progressing well with
cost and revenue synergies being
identified beyond those identified
pre-acquisition. The business has
made it a priority to ensure the
strong culture of both organizations
is reflected in the new Worley.
Our operating and financial metrics
continue to be strong. Our customers
have been supportive of the improved
capabilities, expertise and global
reach of Worley.
The New Worley
With the ECR acquisition being finalized in April this year, we
have become the pre-eminent global provider of professional
projects and asset services in energy, chemicals and resources.
This combining of expertise establishes us as the global sector
leader across hydrocarbons, chemicals and mining, minerals and
metals. We have a solid platform to better service our customers
across the entire asset life-cycle, while also delivering our
shareholders enhanced earnings diversification and resilience.
We have reorganized, breaking out our Services line of business
into two separate components: Energy & Chemicals Services,
and Mining, Minerals & Metals Services. This structure will allow
us to best service the needs of the changing energy, chemicals
and resources industries.
The acquisition of ECR continued our strategy of diversifying
earnings by growing in the Chemicals and Mining, Minerals
& Metals sectors. Clear direction provided by the strategy
architecture we rolled out in 2017 has provided the basis for bold
action this year. Andrew Wood will provide further details of the
progress we have made in the past 12 months on page 6.
2
Worley Annual Report 2019 Market dynamics
The energy, chemicals and resources markets continue to
experience significant change. Across our markets, we are seeing
opportunities arising from the rapidly changing energy mix and
the flow on effects in our other sectors. Driven by continued
improvement in market conditions, our energy, chemicals and
resources customers have increased their early phases activity
over the past 12 months.
The current medium-term picture continues to indicate the
global energy transition will open opportunities across all
markets that we serve. These opportunities combined with
our deep domain knowledge and expertise in the power and
new energy space, means that Worley is well positioned to
support our customers in leading and navigating this new world.
The global energy transition will require innovative thinking
and adoption of new technology, and your Company is well
positioned to make a significant contribution to that transition.
ECR Acquisition
In October 2018, Worley entered into a binding agreement to
acquire ECR from Jacobs. The acquisition was completed in April
2019 with the new merged business employing 57,831 people
across 51 countries. The acquisition was completed for a total
consideration of US$3.2 billion (A$4.56 billion), funded by a
A$2.9 billion entitlement offer, and A$842.1 million stock issued
to Jacobs and additional debt.
In combining the two complementary organizations, the
transaction is expected to:
1. generate material EPS accretion and returns for
shareholders;
2. create a pre-eminent global provider of professional project
and asset services in resources and energy;
3. provide global sector leadership across hydrocarbons,
chemicals and mining, minerals & metals;
4. deliver enhanced earnings diversification and resilience; and
5. bring significant value upside through cost and
revenue synergies.
Cost synergies have increased from A$130 million estimated
at the time of announcement to A$150 million including Global
Integrated Delivery synergies. These benefits are anticipated to
be delivered within two years. Further benefits are expected to
be achieved from share services and revenue synergies.
Financial performance
The Group reported an underlying net profit after tax excluding
the post tax impact of amortization on intangible assets
acquired through business combinations of $259.8 million
(which excludes $87.5 million of one off costs post tax), up 43%
on the 2018 underlying result. The Group delivered a positive
operating cash flow of $236.3 million. Our gearing is at 20.9%,
and leverage has remained flat at 1.9 times. The funding
structure of the ECR acquisition has allowed the leverage to
remain flat through the transaction.
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 12.5 cents per share for a total dividend
of 27.5 cents per share for the full year. As a result 52.2% of
our full year underlying profit after tax excluding the post tax
impact of amortization on intangible assets acquired through
business combinations for FY2019 will be distributed to
shareholders as a dividend.
Health, safety and environment (HSE)
A key value shared across all of Worley is our commitment to
safety, and a strong safety culture exists across our Company.
Our teams maintain an industry-leading performance in safety.
This year our Total Recordable Case Frequency Rate (TRCFR) was
0.14 across the Group for employees and contractors.
The energy transition is
opening up opportunities
across all sectors we serve
Brand
Following the completion of the ECR acquisition, the Company
adopted ‘Worley’ as its new brand. The new brand leverages
the brand equity in our name Worley, acknowledges ECR in
the brand colour and typographic style and highlights ‘energy,
chemicals and resources’ in our tagline.
The Company name will be changed to Worley Limited,
subject to the approval of members at the Annual General
Meeting in October 2019.
People
With the acquisition of the ECR business, I am delighted to see
our people numbers increased from 26,050 12 months ago
to 57,831 as at end of June. Our people have demonstrated
enormous resilience and character during the transition period.
This is a credit to them as well as to our Transition Management
Office (TMO) who have worked tirelessly to ensure as smooth
an experience as possible for all our people. 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
Worley Annual Report 2019 CHAIRMAN’S REPORT
Board Changes
Over the past 12 months the Company Board has undergone
several changes with Erich Fraunschiel departing, and Andrew
Liveris, Juan Suárez Coppel, Roger Higgins and Sharon Warburton
joining. Catherine Livingstone has also confirmed that she will not
seek re-election at the Company’s 2019 Annual General Meeting
having served 12 years on the Board.
Erich was a member of the Board since 2003, serving as the
Lead Independent Director and as Chairman of the Audit and
Risk Committee and a member of the Nominations Committee.
We thank Erich for his enormous contribution to the growth and
development of Worley during his tenure.
Catherine has served on the Company’s Board from 1 July 2007
and has been lead independent director, a Chairman of the Audit
and Risk Committee as well as a member of the Nominations
Committee. I would like to take this opportunity to thank
Catherine for her contributions to the Board.
Andrew Liveris was appointed to the Board effective
5 September 2018. He is a member of the Nominations
Committee and the Remuneration Committee and Chairman
of the recently formed Transformation Committee. His
appointment follows a 40-year career in executive positions
at The Dow Chemical Company. He is also a director of IBM,
Saudi Aramco and Novonix Limited.
Roger Higgins was appointed to the Board effective 20 February
2019. He is a member of the Nominations Committee and the
Health, Safety and Environment Committee. He has extensive
experience in mining and operations and has previously held
senior executive positions with Teck Resources Limited, BHP
Billiton and Ok Tedi Mining Limited.
Sharon Warburton was appointed to the Board effective 20
February 2019. She is a member of the Nominations Committee
and the Audit and Risk Committee. Throughout her 30-year
career she had predominantly worked in the construction,
mining and infrastructure sectors and has previously held senior
executive positions at Rio Tinto, Brookfield Multiplex, ALDAR
Properties PJSC, Multiplex and Citi Group.
Juan Suárez Coppel was appointed to the Board effective
27 May 2019 and is a member of the Nominations Committee
and the Audit and Risk Committee. Juan has extensive
experience in energy and resources in the Americas and was
previously Chief Financial Officer and then Chief Executive
Officer of Petróleos Mexicanos (PEMEX), a senior executive
with Grupo Modelo and an independent non-executive
director of Jacobs Engineering Group Inc.
Andrew, Roger, Sharon and Juan 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, all four 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.
4
Ethics and corporate responsibility
Maintaining, enhancing and protecting Worley’s reputation
for integrity, honesty and ethical business practices is of high
importance to the Board. As we transition and transform our
business it will continue to be a critical factor in the Company’s
future success. We are committed to complying with all applicable
laws and conducting our business to the highest standard, as
set out in our Code of Conduct which describes the standard
to which we hold not only ourselves, but also our partners and
agents. Training continues to be refreshed annually to our people,
contractors and business partners, to make clear and reinforce
Worley’s expectations.
This year has been the first full year of implementation of our
responsible business assessment standard which is embedded
in our risk assessment processes to ensure our customers take
a responsible approach to business as seriously as we do. This
process has informed our decision making around bidding work,
by prompting consideration of risk issues such as ethical business
practices, carbon emissions intensity and social license.
The climate change working group continues to develop
a strategic climate change program for Worley, including
design of an implementation program for relevant
disclosures consistent with the recommendations of the
Task Force on Climate-related Financial Disclosures (TCFD).
In FY2019, we completed a risk and opportunity assessment
to identify the transitional exposure of the business and the
physical risks posed to our people and assets.
Worley is committed to providing a workplace that is diverse and
inclusive of people from a wide range of backgrounds. Key focus
areas relate to increasing female representation within the Group
and women in senior executive positions and women
Non-Executive Directors.
Corporate governance
The Board strives to ensure that the Group meet high standards
of safety, performance and governance. The Group recognizes
that it has responsibilities to its shareholders, customers,
employees and suppliers as well as to the communities in
which it operates.
The Board has ultimate authority over, and oversight of, the
Group and regards corporate governance as a critical element
in achieving the Group’s objectives. Accordingly, the Board has
adopted appropriate charters, codes and policies and established
a number of committees (committees or Board committees) to
discharge its duties.
Conclusion
I would like to thank the directors, the 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. I would also like to thank our banks and
advisors for their support during the year and specifically for
the ECR transaction. 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
Worley Annual Report 2019 Board of Directors
John Grill AO
Chairman and Non-Executive Director
John is Chairman of the Board and Chairman
of the Nominations Committee and a member
of the Remuneration Committee and Health,
Safety and Enivronment Committee.
Juan Suárez Coppel
Non-Executive Director
Juan is a member of the Nominations Committee
and the Audit and Risk Committee.
Sharon Warburton
Non-Executive Director
Sharon is a member of the Nominations
Committee and the Audit and Risk Committee.
Christopher Haynes OBE
Non-Executive Director
Christopher is Chairman of the Health,
Safety and Environment Committee and a
member of the Remuneration Committee
and Nominations Committee.
Anne Templeman-Jones
Non-Executive Director
Anne is Chairman of the Audit and Risk Committee
and a member of the Nominations Committee.
Catherine Livingstone AO
Non-Executive Director
Catherine is the Lead Independent Director
of the Board and is a member of the Audit
and Risk Committee and a member of the
Nominations Committee.
Roger Higgins
Non-Executive Director
Roger is a member of the Nominations Committee
and the Health, Safety and Environment
Committee.
Thomas Gorman
Non-Executive Director
Tom is Chairman of the Remuneration
Committee and a member of the Health,
Safety and Environment Committee and the
Nominations Committee.
Andrew Liveris AO
Non-Executive Director
Andrew is a member of the Nominations
Committee and Remuneration Committee.
Wang Xiao Bin
Non-Executive Director
Xiao Bin is a member of the Audit and
Risk Committee and a member of the
Nominations Committtee.
Andrew Wood
Chief Executive Officer
Nuala O’Leary
Group Company Secretary
For detailed information on Directors and the Group Company Secretary see pages 40 to 42.
5
Worley Annual Report 2019 Chief Executive
Officer’s Review
This financial year we have made great
progress on delivering on our commitment
to become the leading service provider
to the energy, chemicals and resources
sectors. Our dedicated team have continued
to deliver good project outcomes for our
customers and strong financial results for
our shareholders.
Andrew Wood
Chief Executive Officer
The acquisition of ECR has transformed our position in the
energy, chemicals and resources sectors. It has created a step
change in exposure for the business to the stable and expanding
chemicals market, coupled with increasing our position to
the Downstream refining markets. This has balanced out our
exposure to the Upstream hydrocarbons sector, while also
maintaining our industry leading position in this space.
Last year we noted that we were seeing increased activity
across the energy, chemicals and resources markets. This
year we can look back and say that this increased activity
has transitioned into sustainable growth, and increased
opportunities in new and emerging markets.
The global energy transition is also gaining pace including a
shift towards low carbon intensity electrification of the world
energy supply. The resultant direction of the future energy
mix is clear, however the pace of change is not, nor is how
each country will react. Oil and gas are expected to increase
annual sanctioned investment through to 2025 and there are
significant opportunities for Worley to strongly support the
energy transition across our core sectors. Specifically, the shift
towards gas and lighter fuels, coupled with the rapid growth in
petrochemicals are both areas where Worley is well placed to
support our customers as they move into the future.
As fossil-based power generation globally continues to
decline, we are also seeing increased activity in renewables
particularly offshore wind, distributed energy solutions, new
energy applications of hydrogen, and an increased focus on
energy efficiency programs across existing facilities. Worley
is well positioned to support its customers in leading and
navigating this change.
6
Acquisition Transition Progress
In October 2018 we established the Transition Management
Office (TMO) as a dedicated team to manage the integration of
ECR with WorleyParsons to create Worley. The TMO team have
been working tirelessly since the acquisition was completed
in April this year. The program is on schedule, with system
integration, synergy realization, culture and people, customer
engagement and organizational transformation progressing
to plan. Cost synergy projections have increased from $130
to $150 million, while further margin synergies have been
developed through increased Global Integrated Delivery (GID)
uptake and shared services. Revenue synergies continue to be
developed across the breadth of markets we serve.
The TMO team has been focused on ensuring the strong
culture of both organizations are reflected in Worley. The team
has made it a priority to ensure the Worley culture continues
to evolve and grow as the Group moves from transition to
transformation.
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Figure 1: Chemicals Capital Expenditure - Trend and Outlook
Source: IHS Markit (2019)
Worley Annual Report 2019 Aggregated Revenue
WorleyParsons
pre‑acquisition
Aggregated Revenue
FY19 pro forma
18%
6%
18%
6%
75%
75%
11%
40%
49%
100%
80%
11%
60%
40%
40%
20%
0
Business Mix
Business Mix
10%
10%
11%
75%
49%
81%
55%
34%
9%
43%
48%
15%
FY16
9%
FY17
FY18
FY19
Opex
Modification, Sustaining and Small Capex
Major Capital Projects
Energy
Chemicals
Resources
Opex
Energy
Chemicals
Energy
Resources
Chemicals
Resources
Modification,
Sustaining and
Small Capex
Major Capital Projects
Operational performance
In FY2019, our aggregated revenue grew to $6,439.1 million
(up 35.6% on prior corresponding period) and underlying NPATA
was up 42.7% to $259.8 million. NPATA margins have improved,
Backlog is up 10% during the year and our staff utilization
remains on target. We delivered cash flow of $236.3 million,
compared to $259.7 million in FY2018. Our Backlog has
increased across all sectors with a strong increase in the
Americas, largely on the back of the ECR acquisition. Worley’s
operational and financial metrics are all sound.
Safety performance
Our focus on safety is unwavering. Both of our organizations
have strong safety cultures. This will underpin our shared vision
for safety as Worley moves forward. This 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 0.14 which remains one of the
best performing ratings across the industry. In our pursuit of
improvement our focus areas for FY2020 include the launch and
embedment of a new Assurance system, continued focus on our
Field HSE, and evolving the heritage OneWayTM and Jacobs ECR
BeyondZERO® programs.
Corporate Responsibility
We continue to support our customers and suppliers to deliver
sustained economic, social and environmental progress via their
projects, and our people to deliver community-based initiatives
that make a real difference. Our corporate responsibility
champions network and the Worley Foundation continue to
drive positive impact via corporate responsibility projects in
communities. Our Company is a staunch advocate of Science,
Technology, Engineering and Mathematics (STEM) education
and we have held events to encourage the next generation to
embrace STEM education across our global operations.
As a leading provider of technical services to the energy,
chemicals and resources sectors we have a key role to support
our customers to navigate the global energy transition and
continue to invest in our New Energy business. Worley has
considerable experience in this regard, gained from working on
more than 1,350 New Energy projects globally.
Strategy
Our immediate focus is completing the integration of the ECR
acquisition and realizing the cost and revenue synergies. During
this period, we will develop a transformation strategy for the
new Worley that will enhance our leadership position in energy,
chemicals and resources, capture the opportunities presented
by the global energy transition, and change the way we work by
leveraging automation and the use of digital products.
7
Worley Annual Report 2019 CHIEF EXECUTIVE OFFICER’S REVIEW
Our customer sectors
Upstream &
Midstream
Power & New Energy
Energy
Downstream
& Chemicals
Chemicals
Mining, Minerals,
& Metals
Infrastructure
Resources
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 backlog figure from $16.4 billion to $18.0 billion,
an improvement in operating margin percentage and other key operational metrics such as overhead ratios, gearing and leverage.
Our staff headcount has grown to 57,831 people and operating with a staff utilisation ratio on target of 87%.
Backlog information ($b)
Staff Utilization
ECR Acquisition
9.9
6.5
10.8
10.6
18
6.8
6.8
Jun 18
Dec 18
Mar 19
Jun 19
WorleyParsons
ECR
Worley
Leverage Ratio*
UKIS Acquisition
ECR Acquisition
90%
88%
86%
84%
82%
80%
78%
%
n
o
i
t
a
z
i
l
i
t
U
5.0%
4.0%
3.0%
2.0%
1.0%
Target
Monthly rate
Jul
16
Oct
16
Jan
17
Apr
17
Jul
17
Oct
17
Jan
18
Apr
18
Jul
18
Oct
18
Jan
19
Apr
19
Jul
19
NPATA Margin %
FY16
HY17
FY17
HY18
FY18
HY19
FY19
FY16
HY17
FY17
HY18
FY18
HY19
FY19
’
B
$
A
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
-
3.5
3.0
2.5
2.0
1.5
1.0
0.5
8
Worley Annual Report 2019
Our future
Our customers’ confidence and spending has been growing. The consumption, and therefore
demand, of energy, chemicals and resources continues to increase. Across all our markets, we
see opportunity arising from the rapidly changing energy mix and climate adaption challenge
and the flow on effects in our other sectors. However, as we move into FY2020 the level of
macroeconomic uncertainty is rising including the trade wars between China and the US, the
uncertainty of Brexit and Iran. We continue to monitor the potential impact that this may have
on the sectors we serve.
CORE MARKET TRENDS
Energy
Upstream and Midstream Hydrocarbons
Global macro trends such as population increase and growth
in 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 the Upstream oil and
gas markets to 2040.
Gas production volumes continue to grow as countries seek
a midterm clean fuel source to fill an expected resource gap
caused by the reduced acceptance of coal. Whilst selected
intercountry pipelines have been sanctioned, it is the LNG
industry that is the primary enabler for the global gas economy.
Predicted supply side shortages in the early 2020s have driven
investment back into the LNG industry for both greenfield
developments and major expansions within the heritage
LNG centres. We elevated the LNG subsector to our strategic
focus areas in FY2019 and expect it to remain a key area of
investment in the coming years.
Power and New Energy
The Power market is continuing to evolve as the world moves
toward increased electrification, driving a shift in power related
investment opportunities. Renewables such as solar, wind and
nuclear power will play a major role in future global energy
demands. Grids, including micro-grids and storage will also
occupy a significant share in spend as a means to integrate
these technologies.
Given this outlook, our Power and New Energy business is
deliberately focusing in growth technologies of high complexity,
and low risk for commoditization. Specifically, we are looking
to enhance our portfolio in offshore wind, expand our offerings
around distributed energy solutions, position ourselves as leaders
in the emerging hydrogen technology space, and globalize our
power operations and maintenance capability platform.
Our strong advisory capabilities will continue to provide
a platform from which to build a full value chain offering
that includes project delivery and ongoing operations
and maintenance.
Worley Annual Report 2019
9
CHIEF EXECUTIVE OFFICER’S REVIEW
Chemicals
Refining
Given the increased competition from new energy forms,
combined with transportation fuel demand reaching its peak,
there is the expectation of a longer-term decline in traditional
refining markets. Asia and Middle-East are expected to see
growth in demand for refining investments close to mid points
of forecast demand growth. These two regions are estimated to
contribute 80% of capital spending through to 2050. A refining
and petrochemicals integration trend is emerging as customers
look to safeguard profitability, tie-up supply chain and optimize
Downstream facilities for their Upstream crude production.
Areas of investment growth include renewable diesel (Canada
and Europe), the integration of refining and petrochemical
plants (Asia and the Middle-East), as well as the expectation
of increased short-term projects as refiners adapt to the new
business reality of the 2020 IMO regulations and continued
implementation of clean fuel globally.
Petrochemicals
Historically, petrochemicals capital expenditure growth
has tended to exceed GDP growth and that forecast is set
to continue with demand growth across all major products
expected. This is matched with a growth in the crude oil-
chemical market which is being led by large projects across Asia
and the Middle-East (particularly Saudi Arabia). Asia and the
Middle-East are also expected to lead the way for demand and
expenditure growth for plastics, despite challenges associated
with single use plastic waste and recycling. Key growth
markets include grass root ethylene complexes, and Western
investments into China.
Chemicals
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, Asia, the Middle East and
North America are the current hotspots for chemicals capital
expenditure in the coming years. With our expanded capabilities
in chemicals from ECR, further expansion into the inorganic and
speciality chemicals markets is planned.
Regulatory changes on foreign ownership is stimulating
investment into China. This, combined with out extensive
delivery capabilities in this region, will enable both local market
and large scale global project execution.
10
Resources
Mining, Minerals & Metals
Miners’ strong balance sheets are resulting in increasing project
development pipelines. The trend towards accelerated sustaining
capital investment is evident as miners seek to extend the life
of mines, improve productivity and maintain market share. This
is true for growth commodities including iron ore, copper, gold
and fertilizers. As significant, near surface deposits become
depleted the need to exploit deeper, more complex orebodies
at the lowest cost will increasingly drive the mining industry.
Underground mining is where proportionally higher capital will be
spent in the future of mining. It is capital intensive and requires
close and collaborative relationships to develop successful
solutions. Our customers are increasingly pursuing a technology
enabled, automated, data driven and efficient operation. We
continue to focus on innovation in project delivery with the
concept of a digital mine seen as a way to increase both capital
and operational efficiency. Our immediate strategic focus is
being driven by investment in phosphates in North Africa and
Middle East, iron ore in Australia as well as copper and gold
across all key mining markets.
Resource Infrastructure
In line with our corporate strategy, our resource infrastructure
business continues to be focused on growth opportunities within
the energy and resource sectors. We have well established
global businesses servicing the front end and delivery phases of
projects and these service lines include transport, environmental
and water, and advisory services. From a regional perspective,
we remain focused on the regions where we see projected
growth in our core business sectors pursuing the significant
infrastructure needs of these projects.
Worley Annual Report 2019 STRATEGY DELIVERY CASE STUDY –
CHEMICALS
Lubrizol Zeue Project -
La Prote, Texas
Worley was engaged by Lubrizol to
undertake the engineering, procurement
and construction of a proprietary chemicals
plant in La Porte Texas. The Zeus Project
was complete in 2019 with over 90% of the
detailed design having been completed by
the Global Integrated Delivery (GID) team
in India. Full integration of construction
management tools created measurable
efficiencies in advanced work packaging
(AWP) processes. Our Indian procurement
personnel co-located in Chinese supplier
shops, interfacing between engineering and
fabricators. This resulted in expedited work
processes, real time decision making and
appropriate prioritisation of tasks.
STRATEGY DELIVERY CASE STUDY – MMM
Khouribga, Morocco – Beni Amir
phosphate wash plant
JESA, our 50/50 joint venture with OCP Group, is a powerful
combination, enabling us to successfully deliver projects in
Morocco and internationally. This is key to our North Africa
and global phosphates strategy.
The Beni Amir Phosphate Wash Plant is an example of
an industry leading project where JESA had the Project
Management Consulting (PMC) role. The project was unique
in the world for a phosphates project, and included a 190 km
long pipeline, the longest of its kind in the world. The project
was recognized in 2016 as a sustainable development
project under 22nd Conference of the Parties (COP 22),
based on its water savings, greenhouse gas emissions, as
well as transportation costs and capacity.
11
Worley Annual Report 2019 CHIEF EXECUTIVE OFFICER’S REVIEW
STRATEGY DELIVERY CASE STUDY – POWER AND NEW ENERGY
Intermittent Dynamic Electrowinning of Electrolytic Manganese Metal
(EMM)– Western Australia
Element 25 (E25) owns and operates the Butcherbird High
Purity Manganese Project, developing Australia’s largest-
known onshore manganese resource located in Western
Australia. The main products to be produced include high-
purity Manganese Sulphate (MnSO4) which can be used as
an NMC (Nickel-Manganese-Cobalt) cathode in Lithium Ion
(Li-Ion) batteries, and Electrolytic Manganese Metal (EMM)
for stainless steel and other speciality steel markets.
Producing EMM requires an energy-intensive process called
electrowinning, which recovers metal, like manganese,
from a solution by passing a current through it. The process
traditionally relies on stable current, with energy sourced
from cheap baseload options such as coal or hydro. Based on
E25’s scoping study, using gas as a potential power source,
projected power costs would contribute approximately 40%
of total project costs, with 90% being used solely for EMM
production. Due to the remote location and lack of access
to cheap energy sources, E25 engaged Advisian to provide
lower-cost power options to improve the economics of the
Butcherbird High Purity Manganese Project.
Advisian identified a solution to reduce power costs through
the use of renewable energy. E25, along with Advisian, are
currently investigating the use of Intermittent Dynamic
Electrowinning (IDE) generated through wind and solar, and
what impact that will have on the electrowinning process. If
viable this will allow E25 to access a clean and cheap energy
source, that will also improve the cost competitiveness of
the EMM produced.
STRATEGY DELIVERY CASE STUDY – ONSHORE
Khazzan Gas Project – Oman
Selected as BP’s EPCM partner for the long-term complex
USD16 billion program, providing key leadership and
technical specialist services for the gathering, well sites,
export systems and supporting infrastructure. The project
was led from Oman and was supported by the UK and
our high value engineering center in India. Phase 1 was
delivered ahead of schedule and under budget resulting in
beneficial production being achieved two months ahead of
schedule, and with over 33 million hours incident free. The
project was awarded the 2019 MEED best project in the
Middle East award.
12
Worley Annual Report 2019
STRATEGY DELIVERY CASE STUDY – MMM
Oyu Tolgoi Underground Copper
Mine – Mongolia
Worley delivered EPCM services for the
expanded underground development and copper
processing facility. Our delivery team included
personnel from Australia, Chile, South Africa
and Mongolia with deep expertize and domain
knowledge in mining including underground and
surface material handling, shaft sinking, mineral
processing and infrastructure.
Our Innovative engineering approach resulted in
decreased capital expenditure, improved safety
outcomes and ongoing operational benefits
resulting in cost savings, including improvement
to foundations, heating and conveyors.
STRATEGY DELIVERY CASE STUDY – MMM
CHEMETICS
Chemetics became part of the Worley Group post the
ECR acquisition and delivers technology and solutions
for sulphuric acid and other specialty chemical facilities
globally, from greenfield projects to maintenance and
turnarounds. This is achieved through Chemetics’ research
and development lab and custom-built fabrication facility
in Canada, global transportation and logistics management
capabilities, specialized project teams and worldwide
network of trusted suppliers.
Over the past 50 years, Chemetics’ full life cycle solutions
and equipment have enabled more than 800 sulfuric acid
plants achieve higher capacities and availability, lower
operating costs, decreased emissions and exceptional
safety performance.
As the original developer and owner of processes for
chlorine dioxide and sodium chlorate production, Chemetics
continues to support the pulp industry through our
bleaching chemical technologies.
13
Worley Annual Report 2019 CHIEF EXECUTIVE OFFICER’S REVIEW
STRATEGY DELIVERY CASE STUDY – DIGITAL
CAROL
Advisian Digital has commercialized an internally
developed technology and taken to market the
first commercial robot for catalyst and adsorbent
unloading from LNG, gas plant and refinery vessels.
In response to increasingly stringent requirements
to reduce human risk in inert confined space entry
and turnaround operations, the CAROL (Catalyst
Removal Amphirol) robot is an innovative solution to
a legacy problem.
To date, successful in plant trials have been
conducted at Chevron (Australia), Southern Company
(USA) and Imperial Oil (Canada). These trials have
demonstrated that CAROL removes the need to
have a human inside a compromised and confined
space (vessel) during catalyst vacuuming operations.
As a result, human safety can be improved by a
factor of 10 and the turnaround duration has proven
to be reduced by at least 20%.
STRATEGY DELIVERY CASE STUDY – DIGITAL
Keystone XL Data Visualization and
Advanced Analytics
Advisian Digital built a data foundation for the Keystone
XL construction project that provided access to data from
many different project delivery systems provided by Worley,
TC Energy and other 3rd parties. The Assure platform was
used to provide a data hub. Through Assure, the project
is utilizing the visualization environment for advanced
/ predictive analytics to provide insights to the project
leadership in near real time so that timely and well informed
decisions can be made. This type of environment, built at this
scale, is new to the large bore pipeline project industry and
TC Energy is already seeing the benefits, even before full scale
construction has started.
In TC Energy, Advisian Digital has found a willing partner to
push this technology forward in a sustainable way that is
wholly focussed on delivering for this progressive customer.
14
STRATEGY DELIVERY CASE STUDY – DIGITAL
Gulf of Mexico
We are currently implementing solutions on an active
construction site on the Gulf Coast of the United States.
This project has savings targets for each solution
below and is expecting an estimated 150% return on
the investment cost of this deploying this technology
solution.
• Workflow Digitization: Traditional pen-and-paper
systems were replaced with real time connected
tablets / electronic forms and streamlined work
processes;
• Time and Cost Management: The integration of
separate tools and systems to automate the flow of
information in and out of our solutions. Additionally,
productivity is available near real time as timesheets
and quantity tracking forms are completed and
submitted;
• Personnel Location: Individual tracking devices
connected through a Wi-Fi mesh of wireless access
points and integrated into an analytics dashboard
allowed real time monitoring of hundreds of craft
laborers for safety and productivity improvements;
• Material Location: RFID-based material tracking
system using mobile and vehicle mounted readers
improved site material management and craft
productivity; and
• Equipment Location and Utilization: Individual
tracking devices installed on construction equipment
enable the site to monitor location and usage of
rental equipment. When use of equipment is not
maximized, the construction managers are able to
make informed decisions and reduce cost.
Worley Annual Report 2019 STRATEGY DELIVERY CASE STUDY
– ONSHORE
MEGlobal - US Gulf Coast
– BOOKRAMEG project
Design and construction of a world
scale MEG facility. Project mechanical
completion within schedule incentive
bandwidth established by customer.
Project issued 90% of equipment
purchase orders in a three-month time
period which met target expectation
established at project start. Identified
USD33.5 million in savings during
FEED phase.
STRATEGY DELIVERY CASE STUDY
– POWER AND NEW ENERGY
Lake Turkana Wind Power
Project - Kenya
Worley completed the Lake Turkana
Wind Power Project in Kenya. Installing
365 turbines in 362 days in one of the
most remote places on the planet with
full support and engagement of the local
community.
It will now deliver 310MW of power
for a million Kenyan households which
truly fulfils our purpose of helping our
customers meet the world’s changing
resources and energy needs.
Worley Annual Report 2019
15
CHIEF EXECUTIVE OFFICER’S REVIEW
The culture of Worley
will leverage the best of
both organizations whilst
continuing to evolve and
grow as the company
moves from transition to
transformation.
Meeting the challenges ahead
The successful integration of ECR and WorleyParsons remains
a priority, including delivering the identified cost, margin and
revenue synergies. Foundations have been established to ensure
that we build on the best of both organizations, unlocking long-
term sustainable value.
We are well positioned to navigate the challenges posed by the
global energy transition. We have identified growth potential in
our core markets.
Our people are our most important asset and the culture of
Worley will leverage the best of both organizations whilst
continuing to evolve and grow as the Company moves from
transition to transformation.
Conclusion
I closed my statement last year talking about the exciting
opportunities I saw in the industry in the year ahead. And it
has indeed been an exciting year. In April 2019, WorleyParsons
and ECR, two global leaders in engineering, technical and
professional services, came together under our new brand,
Worley. I am pleased to see our people from both organizations
approaching the new organization with curiosity and
excitement, discovering new ways of working together.
Worley 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
are now poised for a very exciting future. 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
16
Worley Annual Report 2019 Group Executive
The Group Executive is the senior leadership team for Worley. It comprises the
leaders of our lines of business and functions. The Group Executive advises the
Chief Executive Officer with regard to the effective and efficient functioning of
the global business of Worley.
Andrew Wood
Chief Executive Officer
Tom Honan
Chief Financial Officer
Chris Ashton
Chief Operating Officer
Adrian Smith
President – Advisian
Karen Sobel
Group President – Major Projects
& Integrated Solutions
Vinayak Pai
Group President – Energy &
Chemicals Services
Andrew Berryman
President – Mining,
Minerals & Metals Services
Nuala O’Leary
Group Company Secretary
17
Worley Annual Report 2019 Global Operations
Prudhoe Bay
Prudhoe Bay
Anchorage
Anchorage
Kitimat
Vancouver, BC
Vancouver, BC
Portland
Salt Lake City
Portland
Salt Lake City
Kitimat
Blackfalds
Edmonton
Edmonton
Blackfalds
Calgary
Saskatoon
Calgary
Kincardine
Sudbury
Saskatoon
Kincardine
Sudbury
Billings
Billings
Denver
Folsom
Bismarck
Sarnia
Bismarck
Sarnia
Denver
Chattanooga
Atlanta
Houston
Chattanooga
Atlanta
Houston
Bayport
Bayport
Folsom
Los Angeles
Long Beach
Costa Mesa
Los Angeles
Long Beach
Costa Mesa
Reading
Reading
Charleston
Charleston
Jacksonville
Orlando
Lakeland
Jacksonville
Orlando
Lakeland
Metairie
Baton Rouge
Metairie
Baton Rouge
Mexico City
Mexico City
Markham
Bowmanville
Markham
Bowmanville
Saint John
St John’s
Saint John
St John’s
Stavanger
Delft
Hoogvliet
Meerssen
The Hague
Stavanger
Delft
Hoogvliet
Meerssen
The Hague
London
Aberdeen
London
Aberdeen
Cologne
Cologne
Schwarzheide
Schwarzheide
Ludwigshafen
Ludwigshafen
Glasgow
Glasgow
Stockton
Stockton
-on-Tees
-on-Tees
Teesside
Teesside
Leeds
Leeds
Manchester
Manchester
Gloucester
Gloucester
Great Yarmouth
Great Yarmouth
Bristol
Bristol
Woking
Woking
Ghent
Antwerp
Luxembourg
Ghent
Antwerp
Luxembourg
Basel
Milan
Madrid
Madrid
Casablanca
Casablanca
Bogotá
Bogotá
Port of Spain
Chaguanas
Port of Spain
Chaguanas
Accra
Lagos
Accra
Lagos
51
Countries
Lima
Lima
Rio de Janeiro
Rio de Janeiro
São Paulo
São Paulo
Secunda
Secunda
Maputo
Maputo
Johannesburg
Johannesburg
Santiago
Santiago
Buenos Aires
Buenos Aires
Cape Town
Cape Town
18
Porvoo
Porvoo
Stenungsund
Stenungsund
Moscow
Moscow
Basel
Milan
Sofia
Sofia
Aksai
Aksai
Atyrau
Atyrau
Sakhalin
Sakhalin
Baku
Baku
Tashkent
Tashkent
Almaty
Almaty
Ulanbataar
Ulanbataar
Beijing
Beijing
Tianjin
Tianjin
Cairo
Cairo
Al Khobar
Al Khobar
Yanbu
Yanbu
Basrah
Basrah
Ahmadi
Ahmadi
Manama
Manama
Dubai
Dubai
Chengdu
Chengdu
Nanjing
Nanjing
Shanghai
Shanghai
Muscat
Muscat
Baroda
Baroda
Kolkata
Kolkata
Hong Kong
Hong Kong
Doha
Doha
Abu Dhabi
Abu Dhabi
Mumbai
Mumbai
Hyderabad
Hyderabad
Bangalore
Bangalore
Chennai
Chennai
Bangkok
Bangkok
Manila
Manila
Kuala Lumpur
Kuala Lumpur
Kerteh
Kerteh
Kuantan
Kuantan
Kota Kinabalu
Kota Kinabalu
Kuala Belait
Kuala Belait
Nairobi
Nairobi
Singapore
Singapore
Jakarta
Jakarta
Dili
Dili
Mackay
Mackay
Gladstone
Gladstone
Brisbane
Brisbane
Newcastle
Newcastle
Sydney
Sydney
Auckland
Perth
Perth
Bunbury
Bunbury
Adelaide
Adelaide
Geelong
Geelong
Melbourne
Melbourne
New Plymouth
New Plymouth
Auckland
Hastings
Hastings
Christchurch
Christchurch
Wellington
Wellington
Worley Annual Report 2019
Stavanger
Stavanger
Delft
Delft
Hoogvliet
Hoogvliet
Meerssen
Meerssen
The Hague
The Hague
Cologne
Schwarzheide
Ludwigshafen
Cologne
Schwarzheide
Ludwigshafen
Porvoo
Porvoo
Stenungsund
Stenungsund
Bristol
Madrid
Madrid
Casablanca
Casablanca
Cairo
Cairo
Billings
Bismarck
Billings
Bismarck
Sarnia
Sarnia
Saint John
Saint John
St John’s
St John’s
Leeds
Manchester
Manchester
Gloucester
Gloucester
Luxembourg
Leeds
Ghent
Antwerp
Ghent
Antwerp
Luxembourg
Basel
Milan
Basel
Milan
Sofia
Prudhoe Bay
Prudhoe Bay
Anchorage
Anchorage
Kitimat
Kitimat
Vancouver, BC
Vancouver, BC
Portland
Portland
Salt Lake City
Salt Lake City
Edmonton
Edmonton
Sudbury
Sudbury
Kincardine
Kincardine
Blackfalds
Blackfalds
Saskatoon
Saskatoon
Calgary
Calgary
Markham
Markham
Bowmanville
Bowmanville
Folsom
Denver
Folsom
Denver
Reading
Reading
Charleston
Charleston
Los Angeles
Los Angeles
Long Beach
Long Beach
Costa Mesa
Costa Mesa
Chattanooga
Chattanooga
Atlanta
Houston
Atlanta
Houston
Bayport
Bayport
Jacksonville
Jacksonville
Orlando
Lakeland
Metairie
Orlando
Lakeland
Metairie
Mexico City
Mexico City
Baton Rouge
Baton Rouge
London
London
Aberdeen
Aberdeen
Glasgow
Glasgow
Stockton
-on-Tees
Stockton
-on-Tees
Teesside
Teesside
Great Yarmouth
Great Yarmouth
Bristol
Woking
Woking
Lima
Lima
Rio de Janeiro
Rio de Janeiro
São Paulo
São Paulo
Moscow
Moscow
Aksai
Aksai
Atyrau
Atyrau
Sofia
Baku
Baku
Tashkent
Tashkent
Almaty
Almaty
Ulanbataar
Ulanbataar
Beijing
Sakhalin
Sakhalin
Beijing
Tianjin
Tianjin
Basrah
Basrah
Ahmadi
Ahmadi
Chengdu
Chengdu
Nanjing
Nanjing
Shanghai
Shanghai
Al Khobar
Yanbu
Al Khobar
Yanbu
Manama
Dubai
Manama
Dubai
Doha
Abu Dhabi
Doha
Abu Dhabi
Muscat
Muscat
Baroda
Baroda
Kolkata
Kolkata
Hong Kong
Hong Kong
Mumbai
Mumbai
Hyderabad
Hyderabad
Bangalore
Bangalore
Chennai
Chennai
Bangkok
Bangkok
Manila
Manila
Bogotá
Bogotá
Port of Spain
Port of Spain
Chaguanas
Chaguanas
Accra
Lagos
Accra
Lagos
Nairobi
Nairobi
Singapore
Singapore
Kuala Lumpur
Kuala Lumpur
Kerteh
Kerteh
Kuantan
Kuantan
Kota Kinabalu
Kuala Belait
Kota Kinabalu
Kuala Belait
Santiago
Santiago
Buenos Aires
Buenos Aires
Cape Town
Cape Town
Secunda
Johannesburg
Secunda
Maputo
Johannesburg
Maputo
Jakarta
Jakarta
Dili
Dili
Perth
Perth
Bunbury
Bunbury
Adelaide
Mackay
Mackay
Gladstone
Gladstone
Brisbane
Brisbane
Adelaide
Newcastle
Sydney
Newcastle
Sydney
Auckland
New Plymouth
Auckland
New Plymouth
Hastings
Hastings
Geelong
Geelong
Melbourne
Melbourne
Christchurch
Christchurch
Wellington
Wellington
57,831
People
19
Worley Annual Report 2019
Environmental, Social and Governance
As a leading provider of professional project and asset services in the energy, chemicals and
resources sectors, Worley is committed to high standards of Environmental, Social and Governance
(ESG) performance and to supporting our customers to meet their ESG objectives.
Our business
We have a business framework which embeds Environmental, Social
and Governance objectives into the way we do business.
We help our customers meet the world’s changing energy, chemicals and resources needs.
About us
We are a pre-eminent global provider
of professional project and asset
services in the energy, chemicals and
resources sectors. We are a partner in
delivering sustained economic, social
and evironmental 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 sustainable earnings growth and
a satisfactory return on their investment in
a responsible manner.
Our people represent many nationalities
and 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 energy, chemicals
and resources 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.
20
Our values
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
Corporate governance
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.
Different elements of ESG governance
are overseen by the Board Audit and Risk
Committee and the Board Health, Safety
and Environment Committee.
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 acting lawfully, ethically
and responsibly 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 management system establishes a
globally consistent approach for how we
do business and is currently being refreshed
to incorporate the best from ECR, acquired
during the period.
• Our Code of Conduct sets the standard for
ethical and professional behavior we
expect our people and partners to uphold.
• EcoNomicsTM describes the philosophy
of providing profitable sustainability to
our customers.
• The Worley Foundation is one of the
ways we deliver sustained economic
and social progress.
Worley Annual Report 2019 Environment
Climate change
Worley’s greatest contribution to addressing climate change continues
to be through the provision of technical advice and project support to
our customers. We support them via the application of new technologies
and improved design and operations to deliver lower carbon intensity
outcomes as they navigate the energy transition. A sample of our
activities is presented on page 22.
Our Climate Change Working Group (CCWG) was established in
FY2018 to develop a strategic climate change program for Worley,
including design of an implementation program for the relevant
recommendations made by the Task Force on Climate-related Financial
Disclosures (TCFD) across the four thematic areas of governance,
strategy, risk management and metrics.
The CCWG has representation from the Strategy, Planning and Investor
Relations, Assurance, Corporate Affairs and Energy Transition groups. It
reports periodically on a number of areas including transition risk and
scenario analysis to the Board Audit and Risk Committee. It reports on
minimizing the Worley Group’s carbon emissions, and on actions to protect
our people and assets from the physical impact of climate change, to
the Board Health, Safety and Environment Committee. Our climate
change activities and strategy are supported by active engagement
with our people, customers and investors.
TCFD Disclosure Index
Recommendations
In FY2019, we continued working towards relevant disclosure consistent
with the recommendations of the TCFD. We completed a risk and
opportunity assessment to identify the transitional exposure of the
business and the physical risks posed to our people and assets. We
identified the opportunities associated with supporting our customers
as they navigate through how to achieve their climate change goals and
the implementation of technologies and efficiencies required for carbon
reduction and energy transition.
We will refine the risks and opportunities in light of the acquisition of
ECR, prior to commencing detailed scenario analysis. This will be used
to evaluate the resilience of our lines of business and sectors to the
risks and opportunities linked to the energy transition and the physical
impacts of climate change. We have developed an implementation
roadmap for progressive adoption of relevant TCFD recommendations
and we are currently piloting scenario analysis across sectors with a
major customer.
Our assessment against the 11 elements of the TCFD framework
for the period is presented below. We will disclose our further
progress in FY2020.
We will continue to analyze the physical and transitional exposures to
our business posed by climate change in order to capture associated
opportunities in our key markets of energy, chemicals and resources
and to further enhance the resilience and agility of our business.
Assessment
Governance - Disclose the organization’s governance around climate-related risks and opportunities
a) Describe the board’s oversight of climate-related risks and opportunities
• Audit and Risk Committee charter
b) Describe management’s role in assessing and managing climate-related
• Climate change position
risks and opportunities
statement
• Climate Change Working Group
• For policies and charters refer to the
Corporate Governance page in the
Investor Relations section of the Group’s
website (www.worley.com)
• Annual Report p. 21, 22
Strategy - Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy,
and financial planning where such information is material
a) Describe the climate-related risks and opportunities the organization
• Investor Day pack
• The Investor Day pack is available from
has identified over the short, medium, and long term
• Material risks
b) Describe the impact of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning
c) Describe the resilience of the organization’s strategy, taking into
consideration different climate-related scenarios, including a 2°C
or lower scenario
the Reports & Presentations page in the
Investor Relations section of the Group’s
website (www.worley.com)
• Annual Report p. 21, 35
• Corporate Responsibility Report
p. 14 - 18
Risk Management - Disclose how the organization identifies, assesses, and manages climate-related risks
a) Describe the organization’s processes for identifying and assessing
• Climate change risk assessment
• Annual Report p. 35
climate-related risks
• Climate change scenario analysis
• Corporate Responsibility Report
b) Describe the organization’s processes for managing climate-related risks
c) Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organization’s overall
risk management
• Responsible Business
Assessments
• Carbon Disclosure Project
(CDP) report
p. 12, 15
• CDP report FY2018
Metrics and Targets - Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where
such information is material
a) Disclose the metrics used by the organization to assess
• Greenhouse Gas Emissions
• Annual Report p. 27
climate-related risks and opportunities in line with its strategy
and risk management process
b)
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks
c) Describe the targets used by the organization to manage climate-related
risks and opportunities and performance against targets
• Corporate Responsibility Report
p. 22, 23
• CDP report FY2018
21
Worley Annual Report 2019 Climate change position statement
Case study: Supporting the energy transition
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 United Nations (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;
demonstrating our corporate commitments to climate change
as we educate, measure and report progress on our climate
related disclosures;
investing in and growing our New Energy business, particularly
in renewables and distributed energy; and
•
advising customers on carbon intensity reduction programs.
1,350+ New Energy
projects globally
Equinor hydrogen production plant with carbon capture
and storage (CCS)
Worley is completing a feasibility study for Equinor to evaluate
the possibilities for building a hydrogen production plant, including
CO2 capture, liquefaction and export facilities, at Eemshaven in the
Netherlands. A hydrogen/nitrogen mixture will be supplied as fuel to
an existing natural gas-fired power plant that will be converted into
a hydrogen-fueled power plant designed to lower the plant’s carbon
emissions at a large scale and dispatch hydrogen to a future
hydrogen market via a hydrogen pipeline and storage facilities.
To avoid CO2 emissions from the hydrogen production
process, up to two million tons per year of CO2 will be
captured and then liquefied for ease of
transportation to Norway, where it will be
injected and stored in an offshore reservoir.
The study being performed by Worley focuses
on the objective of selecting the most
effective reformer technology
for hydrogen production
together with a suitable CO2
capture technology. Worley is
also delivering the conceptual
design of the plant as a basis
for economic evaluation and
further project definition.
H2 Plant
CO2 storage
Power plant
Schematic overview of Equinor
hydrogen production plant and CCS
Solar
Wind
Hydropower
Hydrogen
Geothermal
Biomass &
Waste to Energy
Smart &
Distributed Energy
166+
Solar photovoltaic
(PV) projects
485 MW
Largest PV project
126+
Solar concentrated
solar power (CSP)
& hybrid projects
437+
Onshore wind
projects
310 MW
Largest onshore
wind farm –
365 turbines in
362 days
105+
Offshore wind
projects
2,600 MW
Largest offshore
wind farm
200+
Hydropower projects
10 GW+
Construction within
the last 15 years
20,342 MW
Largest hydropower
project
210 GW+
Total generating
capacity
20+
Green or blue
hydrogen roles
undertaken globally,
including pilot plants
30 GW
Largest green
hydrogen electrolyzer
studied, combined
with offshore wind
20+
Hydrogen
pathways
considered in
commercial detail
31+
Geothermal
projects globally
1,520 MW
Ongoing asset
services support for
over a decade at the
largest geothermal
field in the world,
The Geysers Power
Generation Complex
134+
Biomass or Waste to
Energy projects
200 MW
Fuel conversion from
Coal to Biomass
20+ years
Designed and
operating a co-gen
facility fueled partly
using landfill gas
15 million
Gallons/year of
renewable jet fuels,
design, fabrication
and construction
support
75+
Energy storage
projects
16
Battery (BESS)
projects
80 kW
Smallest BESS
Project
30 MW
Largest BESS Project
67+
Distributed energy
systems projects
Over 17 years
Specialized demand
response and energy
efficiency global
experience
22
ENVIRONMENTAL, SOCIAL AND GOVERNANCEWorley Annual Report 2019 Social
Our people
Diversity and inclusion
The Group undertook various diversity and inclusion activities in
FY2019, including:
•
•
•
•
•
•
maintaining our Diversity and Inclusion plan as agreed by our
leadership team, with a focus on increasing gender diversity at all
levels and increasing our early career hires;
continuing our talent sponsorship program for active development
of our top female talent; last year, 46% of the identified women
participating in our talent sponsorship program progressed to next-
step developmental roles;
conducting pay gap assessments across comparable roles, tiers and
regions. Our global pay gap between male and female remuneration
reduced approximately 3.7% (varying by office). At the manager and
senior manager roles, the salary gap reduced by approximately 6%
and 1.6% respectively;
delivering cultural awareness, inclusive recruitment and promotion
training and bias awareness workshops in some locations;
creating our LGBTIQ+ and allies network group, with executive
sponsor and steering committee representation; and
commenced transitioning our employee network groups from both
WorleyParsons and ECR into a Worley network model.
Employee network groups
Worley is committed to unlocking the potential of our people and our
culture. It’s important we recognize our talented people, celebrate our
diverse community and connect our people through networks where we
can relate to others, collaborate, learn and continue building a culture of
inclusion and positive impact. Our people networks are an integral tool to
ensure we connect globally, educate and inspire each other and to provide
a safe, inclusive and supportive workplace.
We have commenced integrating our employee network groups from
WorleyParsons and ECR; this involves engagement with our people
on what vision and programs they want to champion both internally and
within the communities in which we operate. Our employee networks
represent the rich diversity of the Worley community.
Communications with our people
This year we reached out to over 574,000 followers across our social
media platforms to communicate our news with our broader community.
Of our 166 posts on LinkedIn this year, 32 were community related, and
we made over 10 million impressions across newsfeeds globally.
Internal communication websites, online discussion groups and emails are
used to deliver important messages. Our people are encouraged to openly
share their opinions and subject matter expertise and voice their concerns.
Open, honest and transparent communications were a hallmark of internal
communications before, during and after the acquisition of ECR. Leading
up to transaction close, a series of 12 targeted ‘playbooks’ were produced
to help our people understand in detail the changes that would take effect
along with the publication of regular questions and answers, webinars,
town hall meetings and regular, consistent updates to all parties. For
the ECR audience, 16,000 views were recorded for three of the updates.
Following transaction close, over 85 town hall meetings were held
across the world in the first week. Our leadership teams across the
world were meeting and greeting our people at all sites, giving the
opportunity for discussion and feedback.
Actively seeking views, and listening to our people to build
our values and inform our future, are an important part of our
communications strategy.
Data protection and cyber security
Protecting the personal information of our people and the information
of our customers and our business is a priority. We have a dedicated
team managing and monitoring a number of enhanced solutions such
as intrusion blocking, endpoint security, data and email encryption,
enhanced protection for sensitive data stores, and 24/7 system and
access monitoring to prevent/stop unauthorized activity. The Worley
Cyber Security Program operates in coordination with the newly
formed cross divisional Information Security Council and the Worley
Data Protection Office.
Safety
Our teams maintain an industry-leading performance in safety. Our
management framework has been guiding the way we work at Worley
over the past 10 years. It encompasses the tools and processes we
follow to ensure the wellbeing of people, assets and the environment.
Recently, we have begun incorporating the principles of human
performance, in line with our customers and industry. Our management
framework will evolve to reflect these changes.
Case study: Safety
Safety week
We celebrated safety week as Worley from 6 to 10 May, which
was an opportunity to start building a collective culture.
The theme for the week was “Stronger Together, Safer Together”
and our people were encouraged to organize activities and events
throughout the week.
The following initiatives were kicked off during safety week:
•
•
•
SharePoint site with suggested activities and resources to
support local activities and events;
a safety week Yammer group was established to encourage
discussion and sharing of ideas and activities. There were
2,922 active people in this group and 30,190 read messages,
most of these during safety week itself; and
a 24-hour virtual conversation about safety was run to enable
our people to connect with leaders in an informal setting
and experience a session of open dialogue on safety. The
virtual discussion was a great success with 46 leader hosts,
21 facilitators, and more than 420 participants, from over 35
different locations participating during the 24-hour period.
A project team in Uganda showing their safety week
commitment pledges.
23
Worley Annual Report 2019 Communities
Communities
Since 2013, the Worley Foundation has supported the execution of
Since 2013, the Worley Foundation has supported the execution of
high-impact community projects around the world, changing the lives
high-impact community projects around the world, changing the lives
of thousands of people. An extension of the Corporate Responsibility
of thousands of people. An extension of the Corporate Responsibility
programs and activities and governed by the Worley Foundation Council,
programs and activities and governed by the Worley Foundation Council,
it aims to become a vehicle for direct corporate investment, fundraising
it aims to become a vehicle for direct corporate investment, fundraising
and volunteering and highlight our corporate responsibility credentials to
and volunteering and highlight our corporate responsibility credentials to
our stakeholders.
our stakeholders.
The social impact delivered from a broad range of Worley Foundation
The social impact delivered from a broad range of Worley Foundation
projects continues to grow with these projects supported in FY2019:
projects continues to grow with these projects supported in FY2019:
•
•
sponsorship of another 16 Worley people to attend the Pollinate
sponsorship of another 16 Worley people to attend the Pollinate
Energy Professionals Fellowship, India;
Energy Professionals Fellowship, India;
• Kerala Floods matching donation;
• Kerala Floods matching donation;
•
•
•
•
•
•
•
•
phase 2 of water and sanitation workshops with the Centre of
phase 2 of water and sanitation workshops with the Centre of
Affordable Waste and Sanitation Technology, Colombia;
Affordable Waste and Sanitation Technology, Colombia;
phase 2 of a project to install water facilities and solar power and
phase 2 of a project to install water facilities and solar power and
refurbishing school facilities across a number of villages in India;
refurbishing school facilities across a number of villages in India;
African capability building workshops regarding corruption and
African capability building workshops regarding corruption and
bribery run in conjunction with Transparency International;
bribery run in conjunction with Transparency International;
supporting Worley employees to join a mentorship program with
supporting Worley employees to join a mentorship program with
Lean in Energy;
Lean in Energy;
• assisting vulnerable children with Child and Youth Care Chile;
• assisting vulnerable children with Child and Youth Care Chile;
•
•
engagement in high schools through Power of Engineering across
engagement in high schools through Power of Engineering across
Australia and other selected offices; and
Australia and other selected offices; and
•
•
the Cystic Fibrosis Foundation.
the Cystic Fibrosis Foundation.
Corporate responsibility champions network
Corporate responsibility champions network
The Worley corporate responsibility champions are the heart and soul
The Worley corporate responsibility champions are the heart and soul
of Worley’s local corporate responsibility activities. Developing our
of Worley’s local corporate responsibility activities. Developing our
local communities via skills transfer, education, local employment and
local communities via skills transfer, education, local employment and
enterprise development supports our objective of long-term positive
enterprise development supports our objective of long-term positive
social impact in the communities in which we work and, in turn, supports
social impact in the communities in which we work and, in turn, supports
progress towards the UN Sustainable Development Goals.
progress towards the UN Sustainable Development Goals.
In heritage WorleyParsons the following occurred:
In WorleyParsons the following occurred:
•
•
•
•
direct participation in over 294 corporate responsibility activities
direct participation in over 296 corporate responsibility activities
across 21 countries, involving over 6,000 Group personnel; and
across 21 countries, involving over 6,000 Group personnel; and
support of local communities through the network of corporate
support of local communities through the network of corporate
responsibility champions across 40+ offices.
responsibility champions across 40+ offices.
During FY2019 we welcomed 250+ new colleagues from ECR into
During FY2019 we welcomed 250+ new colleagues from ECR into
the corporate responsibility champions employee network. During
the corporate responsibility champions employee network. During
June 2019, we had an internal communications theme of corporate
June 2019, we had an internal communications theme of corporate
responsibility as one step in the process to build a collective culture in
responsibility as one step in the process to build a collective culture in
our new organization. Communications were shared with our people
our new organization. Communications were shared with our people
raising their awareness of the key corporate responsibility programs
raising their awareness of the key corporate responsibility programs
available within Worley, such as the Worley Foundation, and the
available within Worley, such as the Worley Foundation, and the
Pollinate Energy Professionals Fellowship, along with key external
Pollinate Energy Professionals Fellowship, along with key external
initiatives such as the UN Sustainable Development Goals.
initiatives such as the UN Sustainable Development Goals.
Worley also continued to support our customers with their sustainability
Worley also continued to support our customers with their sustainability
programs through our project delivery and consulting services.
programs through our project delivery and consulting services.
Review and improvement
Review and improvement
As we become the market leader in our sector in FY2020 we will review
As we become the market leader in our sector in FY2020 we will review
our corporate responsibility program to ensure it is aligned with issues
our corporate responsibility program to ensure it is aligned with issues
meaningful to society and of relevance to our Group activities.
meaningful to society and of relevance to our Group activities.
24
24
Worley Annual Report 2019
Case study: Science, Technology, Engineering
Case study: Science, Technology, Engineering
and Mathematics (STEM) education
and Mathematics (STEM) education
The future of engineering: supporting STEM education
The future of engineering: supporting STEM education
Worley is a strong supporter of STEM education in schools across
Worley is a strong supporter of STEM education in schools across
the world.
the world.
POWER OF ENGINEERING, INDIA
POWER OF ENGINEERING, INDIA
Our collaboration with Power of Engineering went global with a STEM
Our collaboration with Power of Engineering went global with a STEM
education workshop facilitated by some of our Mumbai engineers
education workshop facilitated by some of our Mumbai engineers
at Nanhi Kali Girls at VPS Urdu School No. 2 in India. Our volunteers
at Nanhi Kali Girls at VPS Urdu School No. 2 in India. Our volunteers
encouraged girls to study engineering or design and our volunteers
encouraged girls to study engineering or design and our volunteers
enjoy seeing the creativity on display.
enjoy seeing the creativity on display.
NAKIBOTS, NEW ZEALAND
NAKIBOTS, NEW ZEALAND
For the past two years Worley has proudly supported Nakibots;
For the past two years Worley has proudly supported Nakibots;
an afterschool club designed to help intermediate and high school
an afterschool club designed to help intermediate and high school
children learn about STEM.
children learn about STEM.
The students create and build robots which are entered into national
The students create and build robots which are entered into national
and international competitions. The first all-female team from
and international competitions. The first all-female team from
New Zealand was crowned winners of their division at the world
New Zealand was crowned winners of their division at the world
championship for middle school students and best all-girl team
championship for middle school students and best all-girl team
at the VEX IQ Robotics World Championships, the biggest and
at the VEX IQ Robotics World Championships, the biggest and
fastest growing youth robotics competition in the world. The girls
fastest growing youth robotics competition in the world. The girls
went on to place sixth in the world across 400 teams in the wider
went on to place sixth in the world across 400 teams in the wider
competition, in front of 20,000 spectators.
competition, in front of 20,000 spectators.
ENGINEERING WEEK, CANADA
ENGINEERING WEEK, CANADA
Our engineers in Sarnia teamed up with a local girl guides group for
Our engineers in Sarnia teamed up with a local girl guides group for
some fun and challenging engineering activities. All to celebrate
some fun and challenging engineering activities. All to celebrate
Introduce a Girl to Engineering Day, a movement to inspire girls to
Introduce a Girl to Engineering Day, a movement to inspire girls to
pursue STEM.
pursue STEM.
ENGINEERING WEEK, NORWAY
ENGINEERING WEEK, NORWAY
Our colleagues from Rosenberg Worley welcomed 30 students from
Our colleagues from Rosenberg Worley welcomed 30 students from
Godalen High School for an onsite tour arranged by our customer
Godalen High School for an onsite tour arranged by our customer
Equinor. During the visit, the students were encouraged to pursue
Equinor. During the visit, the students were encouraged to pursue
STEM careers and were also given a sneak peek of the newly
STEM careers and were also given a sneak peek of the newly
constructed bridge that is now ready to be transported to the Johan
constructed bridge that is now ready to be transported to the Johan
Sverdrup oil field in the North Sea.
Sverdrup oil field in the North Sea.
LEARNING AT WORK WEEK, UK
LEARNING AT WORK WEEK, UK
During Learning at Work Week Worley people were invited to
During Learning at Work Week Worley people were invited to
bring their children or young relatives into the office to learn more
bring their children or young relatives into the office to learn more
about what they do at work, and engage them in STEM learning.
about what they do at work, and engage them in STEM learning.
During Worley’s Parents’ and Children’s Evening, children had the
During Worley’s Parents’ and Children’s Evening, children had the
opportunity to get hands-on with several different STEM-related
opportunity to get hands-on with several different STEM-related
activity stations. This included exploring a real-life offshore facility
activity stations. This included exploring a real-life offshore facility
using virtual reality, trying on and learning about the importance
using virtual reality, trying on and learning about the importance
of PPE, testing their construction skills with LEGO® and creating
of PPE, testing their construction skills with LEGO and creating
working electrical circuits.
working electrical circuits.
POWER OF ENGINEERING, AUSTRALIA
POWER OF ENGINEERING, AUSTRALIA
Our Worley team proudly sponsored the Year 10 Western Australia
Our Worley team proudly sponsored the Year 10 Western Australia
(WA) Science and Engineering Challenge, where over 1,200 year
(WA) Science and Engineering Challenge, where over 1,200 year
10 students from 40 local schools across WA competed in
10 students from 40 local schools across WA competed in
STEM-related challenges to help encourage and inspire those
STEM-related challenges to help encourage and inspire those
students to build their future careers within this field.
students to build their future careers within this field.
Our team volunteered their time and supervised one of the challenges,
Our team volunteered their time and supervised one of the challenges,
which was to design and build an earthquake-proof apartment
which was to design and build an earthquake-proof apartment
block using limited materials, that
block using limited materials, that
then underwent seismic testing.
then underwent seismic testing.
ENVIRONMENTAL, SOCIAL AND GOVERNANCEWorley Annual Report 2019
Supporting Indigenous people across the world
Worley is committed to meaningful engagement with Indigenous
communities. We recognize that success depends on our demonstrated
understanding of and respect for cultural values and the environmental,
social and governance 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
During the period Worley commenced development of a Reconciliation
Action Plan (RAP) to provide a framework for cultural awareness,
engagement and inclusion across the organization in a co-ordinated
fashion. Worley will use the RAP to support development of respectful
relationships and create meaningful opportunities with Aboriginal
and Torres Strait Island peoples. Further to this, during the period
one of our Indigenous colleagues established an internal networking
and educational social networking group for sharing information and
activities relating to Indigenous Australians.
Since 2013, our Australia West operation has partnered with the
Governor Stirling Senior High School to facilitate a work experience
program for their Indigenous students in years 11 and 12 who
participate in the Follow the Dream Program, designed to help Aboriginal
students reach their career potential. Our work experience program
provides students with an opportunity to gain exposure to working
in an office and the different types of roles that exist to support their
decisions after graduating from high school.
This year, as an extension to our work experience, we are offering a year-
long traineeship program to students who show an interest in Business
Administration or workplace HSE.
Jennifer Moore and Jacqueline Keeshig at Indigenous Career Expo of
Nawash and Saugeen First Nation communities in Canada
Red Deer College, Montana First Nation, WorleyCord and the Government
of Canada formed a partnership to deliver a Flexibility and Innovation in
Apprenticeship Technical Training (FIATT) project in central Alberta. The
project combined the use of a redesigned curriculum delivery model and
learning technologies to prepare 50 Aboriginal learners for a career in
welding. Many of the students have completed their technical training
and are on their way to finding jobs in their chosen trades.
Worley participated in an Indigenous Career Expo in Saugeen First Nation
and Chippewas of Nawash Unceded First Nation communities, with a
goal to ensure that Indigenous individuals were given equal opportunity
to engage with suppliers and explore the potential career opportunities
coming into the Saugeen Ojibway Nation Traditional Territory.
Canada
South Africa
Worley Canada has a been a proud member of the Canadian Council for
Aboriginal Business (CCAB), a national, member-based organization
with the mission to foster sustainable business relations between
Aboriginal and non-Aboriginal peoples, businesses and communities,
for the past several years.
This year Worley Canada announced it is participating in the
Progressive Aboriginal Relations (PAR) Certification program through
the CCAB, which will involve development of a framework over three
years and external verification to determine progress and commitment.
During FY2019, Advisian announced a new joint venture with the
Mikisew Group of Companies, which is owned by the Mikisew Cree
First Nation (MCFN).The venture, Mikisew Advisian Environmental,
will focus on providing world-class environmental services in the
Athabasca region incorporating traditional knowledge and values into
program designs and scopes, while providing career opportunities for
MCFN members via the establishment of education-to-employment
programs and leadership opportunities.
The Mikisew Group of Companies service the Alberta oil sands
in various industries including site services, fleet maintenance,
transportation services, emergency medical response and fire
response, camp and catering services, construction services,
structural steel, electrical and instrumentation services, aerodrome
handling and facilities maintenance.
Worley understands that business, by creating employment, serves
a critical role in driving inclusivity and improving social equity in
communities. In South Africa, Worley’s Supplier Development (SD)
programme launched in 2013, calls for active participation in addressing
socio-economic challenges as well as transformation in the engineering
sector by partnering with independent, sustainable, small-scale
black-owned businesses to jointly deliver engineering services in the
energy, chemicals and resource sectors of South Africa. The Worley SD
programme demonstrates the positive socio-economic transformation
that business can foster.
United States
NANA WorleyParsons provides project delivery services to remote Arctic
and Subarctic communities through a joint venture partnership with
NANA,an Alaska Native corporation owned by the more than 14,500
Iñupiat shareholders who live or have roots in northwest Alaska. Now
270-people strong with a satellite office in Gulfport, Mississippi, NANA
WorleyParsons largely serves Anchorage, the North Slope and other
regions across Alaska through engineering, procurement, project and
construction management, commissioning and developing 3D scanning
solutions fit for polar and subpolar climates. Enabling local employment
opportunities and education programs throughout the state, NANA
WorleyParsons has become the leading brownfield and greenfield EPCM
services provider in Alaska. With the collective backing of both parent
companies, NANA WorleyParsons continues to secure a strong foothold
for operations in Alaska and beyond.
* Iñupiat are Inuit people whose ancestral heritage in the region dates
back to circa 1000 B.C.
25
Worley Annual Report 2019 Governance
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. 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.
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. An implementation program has commenced
to adopt the 4th Edition of the ASX Corporate Governance Council’s
Corporate Governance Principles and Recommendations and these will
be reported on when it takes effect for FY2021.
ESG reporting
We structure our corporate disclosure through an integrated process
aligned to leading international reporting standards. This year, our ESG-
related reporting aligns with:
•
the internationally-recognized Global Reporting Initiative (GRI)
Comprehensive standards;
•
our requirements as a signatory to the UN Global Compact; and
• our adoption of the UN Sustainable Development Goals.
In addition, we disclose our ESG-related performance via:
•
•
•
the Carbon Disclosure Project (CDP) sharing how we measure,
disclose and manage vital environmental information;
investor presentations; and
mandatory diversity reporting requirements, including Australian
and UK and relevant entities submitted Workplace Gender Equality
Reports for the reporting period.
Culture
Following the acquisition of ECR, Worley recognises the importance of
cultural transformation to build a new and common sense of identity
that engages our people, helps to influence and drive ethical behaviour,
and helps prepare Worley for sustainable growth.
Worley has begun a series of approximately 100 workshops across
our global business, designed to gather data and insight from across the
organization, at all levels, whilst also engaging and priming a large cross-
section of people for the next steps in the transformation journey. This
is part of a larger transformation plan that will accelerate and become
more visible in 2020 reaching further into the organization and across
boundaries to customers, partners and communities.
Corporate responsibility materiality review
A corporate responsibility materiality review was conducted in FY2018
where we asked over 500 of our stakeholders to share the sustainability
issues, risks and opportunities which were important to them. The
results were ranked and aligned to the UN Sustainable Development
Goals. We plan to complete materiality reviews biennially with the next
review to be conducted in FY2020.
Corporate responsibility policy
Worley 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.
High
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
Issues of most concern across
stakeholders with the highest
impact on Worley
• Affordable and clean energy
• Decent work and economic growth
•
Industry, innovation and infrastructure
• Climate action
• Clear water and sanitation
Low
Level of Stakeholder Concern
High
Communities
Supply Chain
Economic
Environment
Our People
26
ENVIRONMENTAL, SOCIAL AND GOVERNANCEWorley Annual Report 2019
Economic contribution through taxes paid
With approximately $429 million paid in effective tax contributions
in FY2018, there is a significant direct economic contribution made in
economies where we operate. As our people 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 over 50 countries
where we operate.
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 corporate responsibility 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 track contributions by our people.
The Group’s contributions are measured in terms of Australian dollar
contributions by operations and by our people, and volunteer time
contributions by our people.
Worley’s approach to the reporting of safety metrics is to include our
employees and also contractors and JV partner employees where
Worley has operational control. 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). Two separate figures for each of these
metrics are reported this year, to capture (1) data from WorleyParsons,
and (2) a figure calculated using 12 months of data from WorleyParsons
and data from ECR after it became part of Worley on 26 April 2019.
Only the TRCFR figure for the WorleyParsons business has been
subject to independent assurance.
The Group’s corporate responsibility indicators for FY2019 were:
Indicators1
2019
2018
Contributions by operations2
$0.71 million
$1.10 million
Contributions by personnel members2 $0.91 million
$0.76 million
Volunteer hours by personnel
members (community/internal)2
13,864 hours
25,501 hours
TRCFR2
LWCFR2
TRCFR3
LWCFR3
0.14
0.03
0.14
0.03
0.15
0.02
0.15
0.02
1 Definitions and clarifications, refer to https://www.worleyparsons.com/~/media/
Files/W/WorleyParsons/documents/cr/2019-cr-definitions.pdf
2 WorleyParsons only
3 Worley (includes combined WorleyParsons and ECR)
As we adopt the relevant recommendations of the TCFD, we have
chosen to disclose a climate change position statement and strategic
actions as part of our Climate Change Program. We will continue to
analyze our physical and transitional exposures to climate change and
disclose our progress in FY2020.
The Group completed a response for the CDP in FY2018 which was
reported in July 2019. 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.
An energy target for FY2020 was set at 5% reduction of total carbon
dioxide equivalents (tCO2-e) against base year FY2016. At the end of
FY2018 a reduction of 24% on the FY2016 baseline had been achieved.
Due to the acquisition of ECR and associated significant change in office
footprint and consolidation of office locations that is underway we
have not set a new energy reduction target but we continue to reduce
our emissions. 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 FY2018 and FY2017 were:
2018
2017
Per
personnel
member1
Total
Per
personnel
member1
Total
1.82
47,288
2.19
49,853
3.81
99,143
5.27
120,090
Indicators
Greenhouse gas
emissions tCO2-e
Energy consumption
MWh
1 Personnel include employees and contractors.
The Board has set measurable objectives for achieving gender diversity.
The Group is focused on increasing female representation within the
Group, women in senior executive positions and women non-executive
directors. The Group’s progress over time is included in the FY2019
Corporate Governance Statement and progress towards achieving the
objectives in FY2019 is set out in the table below:
Measures
Objectives
2019
2018
Women
employees1
Increase the proportion of
women employees to 30% by
2020
18%
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
4
3
1
This includes both the Group’s employees and contractors. This number was
comprised of 9% women in our crafts/hourly businesses and 22% women in
the remainder of our businesses. The gender data of ECR people is provisional
only at this stage and, due to the timing, has not been able to be verified.
There can be difficulties in the quality of gender data due to voluntary
self-reporting in some jurisdictions (notably the United States where the
Company now has a sizable footprint). The percentage women employees
metric is provided on this basis.
2
Senior executives comprise all employees and contractors at the CEO-1,
CEO-2, CEO-3 levels, as at 6 August 2019.
27
Worley Annual Report 2019 Responsible business assessments
We want to know that our customers take a responsible approach to
business, as we do. This year marked the first full year of completing
responsible business assessments for new projects and contracts
across our business. Triggers embedded in our sales and risk
assessment processes for new projects and contracts assess the risk
profile of customers and projects.
Ethics and whistleblowing
Our Code of Conduct training was delivered to more than 24,500
WorleyParsons contractors, employees and business partners during
the period. Approximately 16,000 ECR personnel undertook equivalent
Code of Conduct training over the period prior to migrating to Worley.
Code of Conduct training for field-based personnel is to be delivered
during first half of FY2020, and training of office-based personnel is
planned for the second half of FY2020.
An ethics helpline is available to all our people across 51 countries.
Worley has an Ethics Reporting and Whistleblower Standard which
provides protection to whistleblowers and encourages reporting
of contraventions. The key mechanisms for the protection of
whistleblowers are confidentiality, anonymity, protection of
employment conditions and appropriate support to prevent retaliation.
Worley complies with all applicable prevention of bribery and
corruption legislation, 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 standard, which
includes a strict protocol for registering gifts and entertainment.
Modern Slavery
In accordance with UK legislation, Worley provided its first annual
modern slavery statement in 2019. The statement describes the main
actions we have taken during the financial year to address modern
slavery risks in our business and in our supply chains. In FY2020,
further improvements will be made to our supply chain policies and
procedures including updates to our pre-qualification process, contract
selection and inspection/expediting supplier visits. We will also prepare
our first annual Australian modern slavery statement under the
Modern Slavery Act 2018.
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. The assurance
statement identifies the corporate responsibility performance data
that EY reviewed, and is linked within the Worley FY2019 Corporate
Responsibility Performance Report.
Limited assurance is planned for FY2020 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 standards.
Please refer to our company website for the FY2019 Corporate
Responsibility Performance Report.
Case study: Supporting human rights
Supporting human rights: access to employment
Worley is proud to champion access to employment for refugee
groups. One of our people arranged for a group of skilled refugee
engineers, new to Australia, to come to our Melbourne office
in September 2018 for tips on updating their resumé, writing
their cover letter and interview techniques. Overwhelmed with
volunteers, the workshop was a success with three engineers
finding employment with Worley and Advisian. A number of other
attendees found employment at other organizations through the
contacts made at Worley.
Six months later, a group of engineers with refugee backgrounds
including Jamila Alarkan and husband Tony Bitar arranged for a second
group of refugee engineers to come into our offices for job seeking
advice and mentoring. Following the success of these events, the
Melbourne office now utilizes personnel agencies who specialize in
the placement of refugee engineers, recognizing the rich experience
this diverse group brings to our country and our organization.
Jamila, now a graduate engineer in the Melbourne office summed
up her perspective well:
“I know first-hand how daunting it is to find employment in a brand new
country where English is not your first language. It can be overwhelming
and lonely, when you don’t know anyone. Contacts are important and
that is what we are trying to do here, help overcome the additional
barriers new arrivals have to face when looking for employment.
Thankfully we are able to use Worley networks to help overcome some of
the barriers for people who are in the same position I was in a year ago.”
28
Andrew Wood, Jamila Alarkan, Tony Bitar and Sue Brown talking to
refugees at event in Melbourne office, March 2019
ENVIRONMENTAL, SOCIAL AND GOVERNANCEWorley Annual Report 2019 Operating and Financial Review
1. OPERATIONS
1.1 OVERVIEW
In April 2019, Worley completed the acquisition of the ECR business. The
acquisition positions the new merged organization as a pre-eminent global
provider of professional project and asset services in energy, chemicals and
resources
We operate in four lines of business of Energy & Chemicals Services, Mining,
Minerals & Metals Services, Advisian and Major Projects & Integrated
Solutions including construction and fabrication yard activity. This
strengthens our capability in integrated Engineering, Procurement and
Construction (EPC) with the aim of extending this offering to existing and
new customers.
We report the four lines of business. We also service and report three
customer sectors, each of which is focused on customers involved in the
following activities:
1.
Energy - the extraction and processing of oil and gas as well as
projects related to all forms of power generation, transmission and
distribution;
Chemicals - the manufacture, processing and refining of chemicals (for
example, petrochemicals, polymers and speciality chemicals); and
2.
3. Resources - the extraction and processing of mineral and metal
resources, and resource projects related to water, the environment,
transport, ports and site remediation and decommissioning.
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.
A core strength of Worley is the diversity of our business in terms of
geography, industry and service offerings. We operate in 51 countries, with
no country individually representing more than 18% of aggregated revenue.
Our 10 largest customers account for 42% of aggregated revenue.
1.2 BUSINESS MODEL
Our business is based on our people providing key services to our customers
from within our lines of business. 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 Worley undertakes procurement on our customers’ behalf
with no exposure to financing costs or warranty obligations). We believe the
disclosure of revenue attributable to associates provides additional
information in relation to the financial position of the Group and include this
revenue within aggregated revenue.
Costs: Our two largest costs are staff costs, and administration costs, which
include office lease costs. We also have a significant amount of pass-
through costs reimbursed by our customers.
Assets and liabilities: The significant items on our balance sheet are mainly
project related, such as trade receivables, unbilled contract revenue,
provisions and borrowings. We also hold a number of intangible assets
generated through previous acquisitions. Our business is not capital
intensive. Our customers pay us at longer intervals than our payments of
expenses (e.g. staff salaries). This time differential, along with the time from
incurring the costs, to invoicing the customer, makes up the majority of our
working capital requirements.
1.3 REVIEW OF OPERATIONS
The result for FY2019 was a net profit after tax excluding the post-tax
impact of amortization on intangible assets acquired through business
combinations (NPATA) of $172.3 million, compared with $72.8 million in
FY2018. Underlying NPATA was $259.8 million for FY2019, up $77.8 million
on the previous corresponding period.
Aggregated revenue increased by 36% driven by the contribution of the ECR
business acquired in April 2019. Revenue grew 51% from the first half to
second half.
Worley completed the acquisition of ECR in April 2019. The transformation
includes reorganizing our sectors into energy, chemicals and resources. The
purchase also has resulted in several acquisition and transition charges
related to consultant fees and onerous lease fees relating to the
transformation program which are included in the statutory result.
We now employ 57,831 people and maintain a presence in 51 countries,
compared with 26,050 people across 42 countries at 30 June 2018.
Backlog at 30 June 2019 was $18 billion, compared to $16.4 billion1 at 30
June 2018.
Our financial position remains sound with the Company’s gearing ratio of
20.9% at 30 June 2019. The reconciliation of the underlying earnings before
interest, tax and amortization on intangible assets acquired through
business combinations (EBITA) and underlying NPATA results to the EBITA
and NPATA attributable to members of WorleyParsons Limited is shown in
the following table:
1 This includes Backlog attributable to the ECR business as at 30 June 2018.
Worley Annual Report 2019
29
OPERATING AND FINANCIAL REVIEW CONTINUED
EBITA
Acquisition costs
Transition costs
Onerous lease contracts
Bridging facility fee
Foreign exchange gain on term deposits
Impact of the arbitration award
Onerous lease (not related to acquisition activity)
Restructuring costs
Impairment of associate intangible assets
Underlying EBITA
NPAT attributable to members of WorleyParsons Limited
Impact of acquisition and transition activities, comprised of:
Acquisition costs
Transition and restructuring costs
Onerous lease contracts
Bridging facility fee
Interest income on term deposits, net borrowing cost write off
Foreign exchange gain on term deposits
US Foreign Tax Credits (FTC) write off due to acquisition of ECR
Other restructuring costs
Onerous lease contracts (non-acquisition related)
Impairment of associate intangible assets
Impact of arbitration award
Net tax expense on the items excluded from underlying earnings
Tax from changes in tax legislation
Underlying NPAT attributable to members of WorleyParsons Limited
Amortization of intangible assets acquired through business combinations
Tax effect on amortization of intangible assets acquired through business combinations
Underlying NPATA attributable to members of WorleyParsons Limited
FY2019
$’M
308.1
50.6
35.0
8.9
4.2
(3.4)
8.7
0.7
-
412.8
151.9
50.6
35.0
8.9
4.2
(27.4)
(3.4)
14.3
0.7
-
-
8.7
(7.5)
3.4
239.4
27.5
(7.1)
259.8
FY2018
$’M
278.0
5.9
-
-
-
-
12.2
14.2
2.7
313.0
62.2
5.9
-
-
-
-
-
-
14.2
12.2
2.7
-
(7.5)
81.7
171.4
14.2
(3.6)
182.0
THERE ARE THREE MEASURES THAT ARE KEY TO UNDERSTANDING OUR RESULTS:
1. AGGREGATED REVENUE;
2. EBITA (EARNINGS BEFORE INTEREST, TAX AND AMORTIZATION); AND
3. NPATA (NET PROFIT AFTER TAX AND AMORTIZATION) ATTRIBUTABLE TO MEMBERS OF WORLEYPARSONS LIMITED.
FY2019
$’M
FY2018
$’M
Comments
Movement
1. Aggregated revenue
$6,439.1
4,749.2 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.
30
Worley Annual Report 2019
Our aggregated revenue increased by 35.6% in FY2019 when
compared with that for FY2018, driven by the acquisition of the
ECR business.
2. EBITA
(statutory)
FY2019
$’M
FY2018
$’M
308.1
278.0
(underlying)
412.8
313.0
Comments
Movement
EBITA means earnings before
interest, tax and amortization on
intangible assets acquired through
business combinations.
Our statutory EBITA has increased by 10.8% in FY2019 when
compared with that for FY2018, due primarily to the acquisition
of ECR.
Our underlying EBITA has increased by 31.9% in FY2019 when
compared with that for FY2018. Underlying EBITA margins
have declined due to the inclusion of the ECR construction
business which has lower margins.
Statutory NPATA increased by 136.7% to $172.3 million in
FY2019 compared with $72.8 million in FY2018.
3. NPATA
(statutory)
172.3
72.8 NPATA means net profit after tax
excluding the post tax impact of
amortization on intangible assets
acquired through business
combinations.
(underlying)
259.8
182.0
Underlying NPATA increased by 42.7% in FY2019 with this
improvement largely attributed to the performance of the MPIS
line of business.
1.3.1 LINE OF BUSINESS PERFORMANCE
ENERGY & CHEMICALS SERVICES
The Energy & Chemicals Services includes (greenfield and brownfield) engineering, procurement, project management, program management and
operations. In cooperation with Worley’s Advisian and Major Projects & Integrated Solutions (MPIS) lines of business we support customers across the full
asset life cycle of their facilities, whether onshore, offshore or deep water. The Energy & Chemicals Services line of business reported aggregated revenue of
$2,854.2 million and segment result of $278.8 million (FY2018: aggregated revenue of $2,218.7 million and segment result of $227.0 million). The segment
margin decreased to 9.8% from 10.2%. Aggregated revenue increased through the acquisition of ECR and growth in North America and the Middle East.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2019
FY2018
$’M
2,854.2
2,218.7
Variance %
29
%
44
47
$’M
278.8
227.0
Variance %
23
Segment
margin
%
9.8
10.2
MINING, MINERALS & METALS SERVICES
The Mining, Minerals & Metals Services line of business combines extensive local experience and innovative, integrated solutions with technically-led centers
of excellence to explore process improvements, develop fit-for-purpose engineering and project execution, and accelerate the translation of customer
objectives into actions that drive production and project certainty. The Mining, Minerals & Metals Services line of business reported aggregated revenue of
$286.2 million and segment result of $31 million (FY2018: aggregated revenue of $151.7 million and segment result of $9.2 million). The segment margin
improved to 10.8% from 6.1%. Significant projects within Australia and Mongolia have driven aggregated revenue growth in FY2019.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2019
FY2018
$’M
286.2
151.7
Variance %
89
%
4
3
$’M
31.0
9.2
Variance %
237
Segment
margin
%
10.8
6.1
MAJOR PROJECTS & INTEGRATED SOLUTIONS
Major Projects focuses on successfully delivering those projects that pose a higher level of commercial and reputational risk for Worley by the nature of their
size, complexity and the scope of services we will be providing. Integrated Solutions delivers maintenance, modification, operations, engineering, fabrication,
construction, hook-up and commissioning services to existing assets around the globe. The Major Projects & Integrated Solutions lines of business reported
aggregated revenue of $2,745 million and segment result of $231.7 million (FY2018: aggregated revenue of $1,866.6 million and segment result of $172.4
million). The segment margin declined to 8.4% from 9.2%. Aggregated revenue increased with the acquisition of ECR, increased procurement revenue in the
UK Integrated Solutions business in the North Sea and an upturn in the Norway business.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2019
FY2018
$’M
2,745.0
1,866.6
Variance %
47
%
43
39
$’M
231.7
172.4
Variance %
34
Segment
margin
%
8.4
9.2
Worley Annual Report 2019
31
OPERATING AND FINANCIAL REVIEW CONTINUED
ADVISIAN
Advisian is a global consulting firm that provides a true end-to-end offering for clients, with approximately 2,800 consultants across 19 countries integrating
strategy, management and technical consulting expertise to clients in the hydrocarbons, resources and infrastructure sectors. Advisian reported aggregated
revenue of $553.7 million and segment result of $35 million (FY2018: aggregated revenue of $512.2 million and segment result of $17.5 million). The
segment margin improved to 6.3% from 3.4%. The increase in aggregated revenue was driven by increased project with undertaken by INTECSEA, specifically
with project work in India.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2019
FY2018
$’M
553.7
512.2
Variance %
8
%
9
11
$’M
35.0
17.5
Variance %
100
Segment
margin
%
6.3
3.4
1.3.2 SECTOR PERFORMANCE
ENERGY
The Energy sector reported aggregated revenue of $4,480.1 million and segment result of $437.1 million with a margin of 9.8% (FY2018: aggregated revenue
of $3,720.1 million, segment result of $347.7 million and segment margin of 9.3%). Energy's contribution to the Group’s aggregated revenue was 70%,
decreasing from last year as the increased exposure from Chemicals and Resources flows through from ECR. The increase in aggregated revenue is a result
of the ECR acquisition, increased project revenue from a key international oil company customer and increased project work in in Saudi Arabia. Strong growth
in Canada, Oman and Qatar have supported the increase to aggregated revenue in FY2019.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2019
FY2018
$’M
4,480.1
3,720.1
Variance %
20
%
70
78
$’M
437.1
347.7
Variance %
26
Segment
margin
%
9.8
9.3
CHEMICALS
The Chemicals sector reported aggregated revenue of $1,326.6 million and segment result of $94.3 million with a margin of 7.1% (FY2018: aggregated
revenue of $599.0 million, segment result of $43.0 million and segment margin of 7.2%). Chemicals contributed 21% to the Group’s aggregated revenue
increasing from last year. The Chemicals contribution to the group aggregated revenue increased with the acquisition of ECR. The sector saw continued
growth in the North American and Europe markets.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2019
FY2018
$’M
1,326.6
599.0
Variance %
121
%
21
13
$’M
94.3
43.0
Variance %
119
Segment
margin
%
7.1
7.2
RESOURCES
The Resources sector reported aggregated revenue of $632.4 million and segment result of $45.1 million with a margin of 7.1% (FY2018: aggregated revenue
of $430.1 million, segment result of $35.4 million and segment margin of 8.2%). Resources contribution to the Group’s aggregated revenue increased by 9.8%.
The increase in aggregated revenue was a combination of the acquisition of ECR combined with revenue generated by a major project in Australia.
Aggregated revenue
Contribution to Group
aggregated revenue
Segment result
FY2019
FY2018
$’M
632.4
430.1
Variance %
47
%
10
9
$’M
45.1
35.4
Variance %
27
Segment
margin
%
7.1
8.2
32
Worley Annual Report 2019
1.4 SIGNIFICANT CHANGES IN OPERATIONS
In October 2018, Worley entered into a binding agreement to acquire ECR from Jacobs. The acquisition was completed in April 2019 with the new merged
business employing 57,831 people across 51 countries. The acquisition was completed for a total consideration of US$3.2 billion (A$4.6 billion). The
acquisition was funded by a A$2.9 billion entitlement offer, and A$842.1 million stock issued to Jacobs and additional debt of A$895 million.
Create a pre-eminent global provider of professional project and asset services in resources and energy;
In combining the two complementary organizations, the transaction is expected to:
1. Generate material EPS accretion and returns for shareholders;
2.
3.
4. Deliver enhanced earnings diversification and resilience; and
5. Bring significant value upside through cost and revenue synergies.
Provide global sector leadership across hydrocarbons, chemicals, mining, minerals and metals;
Cost and Global Integrated Delivery (GID) synergies have increased from original expectation of $130 million to $150 million and are anticipated to be
delivered within two years, with further benefits expected to be achieved from optimization and revenue synergies.
Following the acquisition, the company has adopted 'Worley' as its new brand. The company name will be changed to Worley Limited, subject to the approval
of members at the Annual General Meeting in October 2019.
Worley Annual Report 2019
33
OPERATING AND FINANCIAL REVIEW CONTINUED
2. FINANCIAL POSITION AND CASH FLOW
2.1 MATTERS RELEVANT TO UNDERSTANDING WORLEYS’ FINANCIAL POSITION
OUR FINANCIAL CAPACITY REMAINS STRONG BASED ON CASH, GEARING AND DEBT POSITIONS.
FY2019
$’M
236.3
1. Operating cash
flow
FY2018
$’M
Comments
259.7 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
20.9%
23.0% Our gearing ratio is our net debt divided by the sum of
our net debt and our total equity, at the end of the
financial year. Refer to note 12 to the financial
statements for the calculation of the gearing ratio.
3. Debt facility
utilization
73%
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
2,962
1,677 Our loan, overdraft and lease facilities are the amount
of our debt facilities at the end of the financial year.
Movement
The operating cash flow decrease is mainly due
to the impact of items relating to the acquisition
of the ECR and related transition activities.
Our gearing ratio decreased by 2.1 percentage
points in FY2019 when compared with that for
FY2018.
This ratio is slightly below our gearing target of
25% to 35%.
Our debt utilization increase is due to increased
working capital requirements as well as due to
the impact of items relating to the acquisition of
ECR.
The amount of our loan, overdraft and lease
facilities increased during FY2019,
primarily due to the acquisition of ECR.
2.2 DIVIDENDS
Our directors resolved to pay a final dividend of15 cents per fully paid
ordinary share, including exchangeable shares, unfranked. This is in addition
to the interim dividend of 12.5 cents per share. As a result, 52.2% of our full
year underlying net profit after tax excluding the post-tax impact of
amortization on intangible assets acquired through business combinations
for FY2019 will be distributed to shareholders as a dividend.
2.3 SIGNIFICANT CHANGES IN WORLEYS’ FINANCIAL POSITION
An assessment of asset carrying values was conducted as part of the
normal process of finalizing the accounts.
During FY2019, we acquired the ECR business for a consideration of $4.6
billion. This purchase was funded by the proceeds from a capital raising from
shareholders, a stock issue to Jacobs Engineering Group Inc., and additional
debt.
During FY2019, a new syndicated debt facility was established that replaced
the previous facility as well as a debt bridge put in place for the ECR
acquisition. This USD1.3 billion provides improved liquidity and extends the
average debt tenor to almost four years.
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 8.5% 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
Worley has a strategy architecture that focuses on operational excellence
and growing the business. The architecture is a framework that integrates
all the strategic processes at Worley, 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;
34
Worley Annual Report 2019
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
The energy, chemicals and resources market indicators and growth in
backlog provide evidence of continued improvement in market conditions.
However, our markets are being tempered by macroeconomic global
uncertainty.
As a result of the ECR acquisition, we have enhanced the diversity and
resilience of our earnings. Worley has the global technical and financial
strength to support its Energy, Chemicals and Resource customers as they
navigate a changing world.
In FY2020 we expect to deliver the benefits of the acquisition of ECR
including the realization of cost, margin and revenue synergies.
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 an HSE 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. HSE
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 effective management of contractual requirements and 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 pursuit and 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
Worley 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 selection or 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, application of the Responsible Business Assessment on pursuits
and 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: Worley operates in a large number of countries. We have
seen examples of Governments in all parts of the world change their
approach to the regulation and collection of tax. Consequently, there is a
risk that the level of taxation imposed on our business could change
materially as a result of a change in legislation or approach in the countries
in which we operate. We have 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 is 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, macro
trends 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.
Integration risk: The acquisition of ECR provides our business with
substantial benefits and strategic gain. There is a risk that we do not realize
and grow the value from the acquisition if we do not successfully integrate
and deliver synergies. We seek to mitigate this risk though the
establishment of a dedicated Transition Management Office, lead by people
with deep acquisition and integration experience, to drive delivery of defined
integration objectives and synergies.
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. Worley
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 ASX Listing
Rules, disclaims any obligation or undertaking to publicly update such
forward looking statements.
Worley Annual Report 2019
35
Financial Report
For the financial year ended 30 June 2019
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
37
61
62
63
64
65
110
111
118
119
121
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
65
2. Summary of Significant Accounting Policies
65
Key Numbers
Provides 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
69
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
72
74
75
77
78
79
79
81
Capital
Provides information about the capital management practices of the Group and
shareholder returns for the year.
12. Capital Management
83
13. Interest Bearing Loans and Borrowings
14. Changes in Liabilities and Assets Arising from Financing Activities
15. Issued Capital
16. Reserves
17. Earnings Per Share
18. Dividends
84
85
85
88
89
90
36
Worley Annual Report 2019
Risk
Discloses 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
90
20. Fair Values
Structure
Defines the different aspects of the Group structure.
21. Investments in Controlled Entities
22. Equity Accounted Associates
23. Interests in Joint Operations
Unrecognized Items
Provides information about items that are not recognized in the financial
statements but could potentially have a significant impact on the Group’s
financial position and performance.
24. Commitments for Expenditure
25. Contingent Liabilities
26. Subsequent Events
96
97
99
101
102
102
103
Other
Notes required by Australian Accounting Standards and/or other regulatory
pronouncements and other information considered important for understanding
the results of the Group
27. Procurement
103
28. Property, Plant and Equipment
29. Deferred Tax
103
104
30. Defined Benefit Plans 106
31. Related Parties
32. Remuneration of Auditors
33. Key Management Personnel
34. Parent Entity Disclosures
106
107
107
108
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 2019.
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:
• Energy - the extraction and processing of oil and gas as well as projects
related to all forms of power generation, transmission and distribution;
• Chemicals - the manufacture, processing and refining of chemicals (for
example, petrochemicals, polymers and speciality chemicals); and
• Resources - the extraction and processing of mining, mineral and metal
resources, and resource projects related to water, the environment,
transport, ports and site remediation and decommissioning.
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 until retirement on 23
October 2018)
• Catherine Livingstone (Lead Independent Director from 24 October 2018)
• Thomas Gorman
• Christopher Haynes
• Roger Higgins (from 20 February 2019)
• Andrew Liveris (from 5 September 2018)
• Juan Suárez Coppel (from 27 May 2019)
• Anne Templeman-Jones
• Wang Xiao Bin
• Sharon Warburton (from 20 February 2019)
• Andrew Wood (Chief Executive Officer).
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
Catherine Livingstone
Thomas Gorman
Christopher Haynes
Roger Higgins
Andrew Liveris
Juan Suárez Coppel
Anne Templeman-Jones
Wang Xiao Bin
Sharon Warburton
NUMBER OF
SHARES
34,336,128
24,033
22,684
18,922
14,000
6,870
-
5,281
11,000
10,000
NUMBER OF
PERFORMANCE
RIGHTS
-
-
-
-
-
-
-
-
-
-
499,576
Andrew Wood
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.
1,403,950
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
12
7
12
12
12
2
8
1
12
12
2
12
12
7
11
12
12
2
8
1
12
11
2
12
2
6
1
6
6
2
2
5
1
6
5
2
7
2
7
7
7
3
6
1
7
7
3
7
2
6
7
7
3
5
1
7
6
3
6
6
6
2
6
6
6
2
6
6
6
2
6
6
6
2
DIRECTORS
John Grill
Erich Fraunschiel1
Catherine Livingstone
Thomas Gorman
Christopher Haynes
Roger Higgins2
Andrew Liveris3
Juan Suárez Coppel4
Anne Templeman-Jones
Wang Xiao Bin
Sharon Warburton5
Andrew Wood
1 Erich Fraunschiel retired on 23 October 2018.
2 Roger Higgins was appointed from 20 February 2019.
3 Andrew Liveris was appointed from 5 September 2018.
4 Juan Suárez Coppel was appointed from 27 May 2019.
5 Sharon Warburton was appointed from 20 February 2019.
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.
Worley Annual Report 2019
37
DIRECTORS’ REPORT CONTINUED
DIVIDENDS – WORLEYPARSONS LIMITED
Details of dividends paid in the current financial year and previous financial
year are as follows:
Final dividend for the full year 2019 of 15 cents per ordinary
share to be paid on 25 September 2019 (unfranked)
Interim ordinary dividend for half year 2019 of 12.5 cents per
ordinary share paid on 27 March 2019 (unfranked)
Final dividend for the full year 2018 of 15.0 cents per ordinary
share 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
2019
$’M
78.0
57.7
-
-
135.7
2018
$’M
-
-
41.1
27.3
68.4
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 (2018: 15.0 cents per share). In accordance with AASB
137 Provisions, Contingent Liabilities and Contingent Assets, the aggregate
amount of the proposed final dividend of $78 million is not recognized as a
liability as at 30 June 2019.
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:
Other restructuring costs
Onerous lease contracts (non-acquisition related)
Impairment of associate intangible assets
Net tax expense on the items excluded from underlying
earnings
Tax from changes in tax legislation
Underlying profit after income tax expense attributable
to members of WorleyParsons Limited
Amortization of intangible assets acquired through
business combinations
Tax effect on amortization of intangible assets acquired
through business combinations
Underlying profit after income tax expense and before
amortization of acquired intangible assets attributable
to members of WorleyParsons Limited2
Revenue and other income
Add: Impact of arbitration award2
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
CONSOLIDATED
2019
$’M
2018
$’M
Less: Interest income
Aggregated revenue3
CONSOLIDATED
14.2
12.2
2.7
(7.5)
81.7
171.4
14.2
(3.6)
0.7
-
-
(7.5)
3.4
239.4
27.5
(7.1)
259.8
182.0
CONSOLIDATED
2019
$’M
6,924.3
8.7
(608.0)
(32.4)
183.0
(36.5)
2018
$’M
4,835.8
-
(94.4)
(157.3)
170.6
(5.5)
6,439.1
4,749.2
Revenue and other income
6,924.3
4,835.8
Depreciation
Amortization
Earnings before interest and amortization and tax
(EBITA)
Net interest expense
Amortization of acquired intangibles
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
Impact of acquisition and transition activities, comprise
of:
Acquisition costs
Transition and restructuring cost
Onerous lease contracts
Bridging facility fee
Interest income on term deposits, net of borrowing
cost write off
Foreign exchange gain on term deposits
US FTC write off due to acquisition of ECR
Impact of arbitration award1
(23.1)
(70.1)
308.1
(35.2)
(27.5)
245.4
(81.4)
164.0
12.1
151.9
50.6
35.0
8.9
4.2
(27.4)
(3.4)
14.3
8.7
(18.1)
(49.9)
278.0
(58.4)
(14.2)
205.4
(129.7)
75.7
13.5
62.2
5.9
-
-
-
-
-
-
-
AGGREGATED REVENUE
EBITA
EBITA MARGIN
2019
$’M
2018
$’M
2019
$’M
2018
$’M
2019
2018
%
%
Energy & Chemicals
Resources Services
Mining, Minerals and
Metals Services
Major Projects &
Integrated Solutions
Advisian
Global support costs4
Interest and tax for
associates
Underlying EBITA
2,854.2
2,218.7
278.8
227.0
9.8
10.2
286.2
151.7
31.0
9.2
10.8
6.1
2,745.0
1,866.6
553.7
512.2
6,439.1
4,749.2
231.7
35.0
576.5
172.4
17.5
426.1
8.4
6.3
9.0
9.2
3.4
9.0
(157.6)
(110.7)
(6.1)
(2.4)
412.8
313.0
6.4
6.6
Aggregated revenue was $6,439.1 million, an increase of 36% on the prior
financial year. Underlying EBITA of $412.8 million was up 32% from the prior
financial year result of $313.0 million.
The underlying EBITA margin on aggregated revenue for the Group,
decreased to 6.4% compared with 6.6% in 2018. After tax, the members of
WorleyParsons Limited earned an underlying profit2, on aggregated revenue
of 4.0%, compared to the 2018 profit of 3.8%.
The underlying effective tax rate of 22.1% compared with 23.1% in 2018.
1 Reduction in revenue following lower than expected arbitration award in relation to a dispute with a
state owned enterprise.
2 The directors consider that underlying profit information, which excludes significant non-recurring
items and amortization of intangibles assets recognized on business combinations, is important in
order to understand the sustainable performance of the Company.
3 Aggregated revenue is defined as statutory revenue and other income less impact of arbitration
award 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.
4 Excluding global support related restructuring costs (refer to note 3 (E) to the financial statements).
38
Worley Annual Report 2019
The Group retains a strong cash position of $491.8 million (2018: $277.9
million) with gearing (net debt/net debt plus total equity) at financial year
end of 20.9% (2017: 23.0%).
Operating cash inflow for the period was $236.3 million, compared to
$259.7 million in 2018. Cash outflow from investing activities was $3,828.0
million (2018: $399.1 million).
EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
2019
2018
CENTS
(restated)1
CENTS
36.4
36.2
22.6
22.5
Underlying basic earnings per share was 62.2 cents, a decrease of 6.0% from
the previous financial year result of 66.2 cents1.
Underlying basic earnings per share is determined by dividing the underlying
profit attributable to members of WorleyParsons Limited (as set out on page
38) 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 22 October 2018, the Group entered into a Stock and Asset Purchase
Agreement to acquire ECR from Jacobs Engineering Group Inc,. (Jacobs). On
26 April 2019, the Group completed the transaction for a total
consideration, net of cash acquired, of $4.6 billion (US$3.2 billion).
During the period, the Group raised $2.9 billion through a 1 for 1.47 pro rata
fully underwritten non-renounceable rights offer for fully paid ordinary
shares in WorleyParsons Limited and incurred of $57.0 million of equity
raising costs. A further 58.2 million of fully paid shares in WorleyParsons
Limited totalling $842.1 million was issued to Jacobs on 26 April 2019.
In February 2019, the Group refinanced its core syndicated debt facility as a
result of the acquisition of ECR. The new multi-currency facility led by Wells
Fargo Bank, HSBC Bank and Standard Chartered Bank consists of a US$500
million revolving credit facility and a $800 million term loan. The facility
matures in February 2024.
The Group's merged business is a pre-eminent global provider of
professional project and asset services in energy, chemicals and resources
employing 57,831 people across 51 countries. From completion, the Group
operates four lines of business, Energy & Chemical Services, Mining,
Minerals & Metals Services, Major Projects & Integrated Solutions and
Advisian.
From 26 April 2019, the Group transitioned to the domain name
Worley.com.
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 (2018: 15.0 cents per share). In accordance with AASB
137 Provisions, Contingent Liabilities and Contingent Assets, the aggregate
amount of the proposed final dividend of $78 million is not recognized as a
liability as at 30 June 2019.
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 34.
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 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 $614,178.
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:
No other matter or circumstance has arisen since 30 June 2019 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.
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.
Worley Annual Report 2019
39
DIRECTORS’ REPORT CONTINUED
ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Corporations (Rounding in
Financial/Directors' Reports) Instrument 2016/191 issued by ASIC, 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 2019 may be accessed from the Company’s website at the Corporate
Governance page in the Investor Relations section.
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 owned by 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
Australian Government for 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.
CATHERINE LIVINGSTONE AO BA (HONS), HON DBUS (MACQUARIE),
HON DSC (MURDOCH), HON DBUS (UTS), HON DSC (UOW), HON DLITT
(SYD), FCA, FAICD, FTSE
LEAD INDEPENDENT DIRECTOR AND NON-EXECUTIVE DIRECTOR – DIRECTOR
SINCE JULY 2007
COUNTRY OF RESIDENCE – AUSTRALIA
Catherine joined the Board on 1 July 2007. She is the Lead Independent
Director of the Board and is a member of the Audit and Risk Committee and
Nominations Committee. Catherine is Chairman of Commonwealth Bank of
Australia and a director of Saluda Medical Pty Limited and 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
40
Worley Annual Report 2019
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
DATE OF
COMMENCEMENT
DATE OF
CESSATION
Commonwealth
Bank of Australia
Telstra
Corporation
Limited
Non-executive
director
Chairman
Non-executive
director
Chairman
1 March 2016
n/a
1 January 2017
30 November 2000
n/a
27 April 2016
8 May 2009
27 April 2016
THOMAS GORMAN BA (ECONOMICS AND INTERNATIONAL
RELATIONS), MBA (DISTINCTION) (HARVARD)
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE DECEMBER 2017
COUNTRY OF RESIDENCE – UNITED STATES OF AMERICA
Thomas 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 Chief Executive Officer 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 not-for-profit focused on
middle school education and a director of Orora Limited, effective from 2
September 2019. Thomas graduated, cum laude, from Tufts University with
degrees in Economics and International Relations and obtained an MBA,
with distinction, from the Harvard Business School. Thomas has been
appointed as a Non-Executive Director of Orora Limited, which is effective
from 2 September 2019.
Australian listed company directorships
LISTED
COMPANY NAME
NATURE OF
DIRECTORSHIP
DATE OF
COMMENCEMENT
DATE OF
CESSATION
Orora Limited
Non-executive
director
2 September 2019
n/a
CHRISTOPHER HAYNES OBE FRENG, BSC (HONS), DPHIL, CENG,
FIMECHE, FIE AUST
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE JANUARY 2012
COUNTRY OF RESIDENCE – UNITED KINGDOM
Christopher 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, United Kingdom. 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. Christopher
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,
Christopher assumed responsibility for the delivery of Shell’s major
upstream projects worldwide. He retired from Shell in August 2011.
Christopher 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.
Christopher 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
Officer of the Order of Australia for his services to international business in
2014 and was awarded an Honorary Doctorate in engineering from
Michigan State University in 2015.
Australian listed company directorships
LISTED
COMPANY NAME
NATURE OF
DIRECTORSHIP
DATE OF
COMMENCEMENT
DATE OF
CESSATION
Novonix Limited
Non-executive director
1 July 2018
n/a
ROGER HIGGINS BENG (HONS), MSC (HYDRAULICS), PHD (WATER
RESOURCES), FAUSIMM, FIEAUST
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE FEBRUARY 2019
COUNTRY OF RESIDENCE – AUSTRALIA
Roger was appointed to the Board effective 20 February 2019. He is a
member of the Nominations Committee and Health, Safety and
Environment Committee. He has extensive experience in mining and
operations and has previously held senior executive positions with Teck
Resources Limited, BHP Billiton and Ok Tedi Mining Limited. Roger is a non-
executive director of Newcrest Mining Limited and Ok Tedi Mining Limited,
the Chairman of Minotaur Exploration Limited and holds the position of
adjunct professor with the Sustainable Minerals Institute, The University of
Queensland. Roger holds a Bachelor of Civil Engineering (Hons), MSc
(Hydraulics) and a PhD (Water Resources). He is a Fellow of the Institution of
Engineers, Australia (FIEAust) and the Australasian Institute of Mining and
Metallurgy (FAusIMM).
Australian listed company directorships
LISTED
COMPANY NAME
NATURE OF
DIRECTORSHIP
DATE OF
COMMENCEMENT
DATE OF
CESSATION
Newcrest Mining
Limited
Non-executive director
1 October 2015
n/a
Metminco Limited
Non-executive director
8 October 2013
Minotaur Exploration
Limited
Non-executive director
1 July 2016
Chairman
31 January 2017
16 August
2019
n/a
n/a
ANDREW LIVERIS AO BENG (FIRST CLASS HONS), PHD (SCIENCE)
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE SEPTEMBER 2018
COUNTRY OF RESIDENCE – AUSTRALIA AND UNITED STATES OF AMERICA
Andrew was appointed to the Board effective 5 September 2018. He is a
member of the Nominations Committee and Remuneration
Committee. Andrew is the former Chairman and Chief Executive Officer of
The Dow Chemical Company and the former Executive Chairman of
DowDuPont. Andrew has over 40-years’ global leadership experience with
The Dow Chemical Company and his career spanned roles in manufacturing,
engineering, sales, marketing, and business and general management
around the world. Andrew is a director of IBM, Saudi Aramco and Novonix
Limited and on the advisory board of Sumitomo Mitsui Banking Corporation
and NEOM, an initiative driven by Saudi Vision 2030. He serves as a special
advisor to the Public Investment Fund (PIF) and the Crown Prince of Saudi
Arabia. He is the past Vice Chair of the Business Roundtable, an Executive
Committee Member and past Chairman of the United States Business
Council and a member of the Concordia Leadership Council and the
Australian Government’s Industry Growth Centres Advisory Committee. He
serves as a trustee for the King Abdullah University of Science and
Technology (KAUST), the California Institute of Technology and the United
States Council for International Business. In 2012, Andrew co-founded The
Hellenic Initiative (THI) to support economic renewal in Greece through
entrepreneurship, business development and investment, and serves as
Chairman of the Board. Andrew is a Chartered Engineer and a Fellow of the
Institution of Chemical Engineers, as well as a Fellow of the Australian
Academy of Technological Sciences and Engineering. He earned a
Bachelor's degree (first class honors) in Chemical Engineering from The
University of Queensland and was awarded the University Medal for that
year. In 2005, he was awarded an Honorary Doctorate in science by his
alma mater as well as being named Alumnus of the Year. He was appointed
JUAN SUÁREZ COPPEL BE (ECONOMICS), PHD (ECONOMICS)
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE MAY 2019
COUNTRY OF RESIDENCE – MEXICO
Juan was appointed to the Board effective 27 May 2019 and is a member of
the Nominations Committee and the Audit and Risk Committee. Juan has
extensive experience in energy and resources in the Americas and was
previously Chief Financial Officer and then Chief Executive Officer of
Petróleos Mexicanos (PEMEX), a senior executive with Grupo Modelo and an
independent non-executive director of Jacobs Engineering Group Inc. During
the 1990s, Juan was the Chief of Staff to the Minister of Finance Mexico, a
senior executive with Banamex (now Citi) and Head of Corporate Finance
and then Treasurer of Grupo Televisa, Mexico. Juan has a PhD in Economics
from The University of Chicago. During the 1980s, he held various academic
roles including as a full-time professor in the ITAM Department of
Economics, visiting professor at the Universidad Autónoma de Barcelona
Department of Economics and associate professor at Brown University in
Rhode Island.
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 Alzheimer’s
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
GUD Holdings Limited
HT&E Limited
(formerly APN News
& Media Limited)
The Citadel Group
Limited
Non-executive
director
Non-executive
director
Non-executive
director
Non-executive
director
DATE OF
COMMENCEMENT
DATE OF
CESSATION
5 March 2018
1 August 2015
n/a
n/a
20 May 2013
14 April 2018
8 September 2017
n/a
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
Worley Annual Report 2019
41
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 Executive 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.
DIRECTORS’ REPORT CONTINUED
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.
SHARON WARBURTON B BUS (ACCOUNTING AND BUSINESS LAW),
FCA, GAICD, FAIB
NON-EXECUTIVE DIRECTOR – DIRECTOR SINCE FEBRUARY 2019
COUNTRY OF RESIDENCE – AUSTRALIA
Sharon was appointed to the Board effective 20 February 2019. She is a
member of the Nominations Committee and Audit and Risk
Committee. Sharon has predominantly worked in the construction, mining
and infrastructure sectors throughout her 30-year career. She is a Chartered
Accountant with experience in strategy and accounting and has previously
held senior executive positions at Rio Tinto, Brookfield Multiplex, ALDAR
Properties PJSC, Multiplex and Citigroup. Sharon is Co-Deputy Chairman of
Fortescue Metals Group Limited, a non-executive director of NEXTDC
Limited, Gold Road Resources Limited and Wesfarmers Limited, and a part-
time member of the Takeovers Panel. She is on the board of not-for-profit
organization Perth Children’s Hospital Foundation and formerly the
Chairman of the Northern Australia Infrastructure Facility. Sharon holds a
Bachelor of Business (Accounting and Business Law) from Curtin University
and is a Fellow of the Institute of Chartered Accountants Australia and New
Zealand and of Australian Institute of Building. She is a Graduate of the
Australian Institute of Company Directors and a member of Chief Executive
Women. Sharon was awarded Western Australian Telstra Business Woman
of the Year in 2014 and was a finalist in 2015 for The Financial Review’s
Westpac 100 Women of Influence.
Australian listed company directorships
LISTED
COMPANY NAME
NATURE OF
DIRECTORSHIP
DATE OF
COMMENCEMENT
DATE OF
CESSATION
Fortescue Metals
Group Limited
Gold Road Resources
Limited
NEXTDC Limited
Wellard Limited
13 November 2013
8 November 2017
9 May 2016
Non-executive director
Co-Deputy Chairman
Non-executive
director
Non-executive director 1 April 2017
Non-executive
director
n/a
n/a
n/a
n/a
19 November 2015 26 August 2016
Wesfarmers Limited Non-executive director 1 August 2019
n/a
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 25 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.
42
Worley Annual Report 2019
Remuneration Report
"This has been an exciting year for Worley…the
ECR acquisition ushers in a new era for the
organization"
KEY MESSAGES FROM THE CHAIRMAN OF THE REMUNERATION COMMITTEE
Dear Shareholders
This has been an exciting year for Worley, a year defined by management's significant achievement in completing the ECR transaction. This acquisition
supports the Company's strategic plan and ushers in a new era for the organization.
Worley -A New Era
The transformative ECR acquisition now places Worley as a pre-eminent global provider of professional project and asset services in energy, chemicals and
resources. With a footprint now spanning 51 countries and over 57,831 people, the majority of the leadership team, drawn from the WorleyParsons and ECR
businesses, is located outside of Australia. With half of the Company's revenue now generated in North American-based business units, the Company's
major competitors, in business and for talent, are head quartered in non-Australian based countries across Europe and the Americas. This substantial change
places Worley as a company with true global presence and continuing strong Australian heritage. The transformation of our business, with a stronger United
States context, has led to a revision of our executive remuneration framework, which I will highlight below.
FY2019 Company Performance
In addition to the ECR acquisition, this year's performance also reflects revenue growth in a number of locations with managements continued focus on
delivering cost performance.
FY2019 Remuneration Outcomes
For FY2019, an adjustment was applied to our executives' fixed pay following an external market pay review. The Board also approved an increase to the
CEO’s fixed remuneration in recognition of the current CEO's experience and leadership capability relative to the market rate for a CEO of a business as
complex and large as the new Worley. On variable pay, for the cash based component, given our performance and the outcomes of the executives’ FY2019
key performance indicators, the Board has approved a cash payment as part of their variable pay. The share price performance rights (SPPRs) granted to
executives in 2016 vested during the period based on share price growth, continued employment and satisfactory performance during the two year vesting
period. The FY2016 long term equity performance hurdles of relative total shareholder return (TSR) has been achieved while earnings per share (EPS) growth
has not been achieved, resulting in a partial vesting for that grant. The UK Integrated Solutions acquisition was a significant area of focus for our
management team during FY2018 and the second tranche of the FY2018 grant was awarded based on the successful integration of the business and
realization of synergy goals. Remuneration outcomes associated with the ECR acquisition include the provision of a grant of performance rights with hurdles
linked to the ongoing success of the acquisition to two executives that were key to the transaction during FY2019. Cash payments were also awarded to two
executives and other key personnel for their critical role in the successfully completed acquisition of the ECR business.
ECR Arrangements
For former ECR executives joining as KMP of the Worley organization, their legacy remuneration arrangements have been maintained and carried forward, as
agreed in the acquisition purchase agreement. This includes maintaining current fixed pay and benefits as well as replacing any unvested equity with Worley
shares. Further details of the replacement awards are provided within the report (see page 58).
Changes for FY2020
For FY2020, the Board has approved the design of a new executive remuneration framework to support and drive group performance and maximize the cost
and revenue synergy benefits to be delivered via the merging of the WorleyParsons and ECR entities. The framework has also been developed to support the
global attraction, motivation, retention and mobility of executive talent across the Worley business. A key change is the replacement of share price
performance rights with deferred equity rights, which is internationally competitive, particularly in the United States, and focuses our executives on the long
term. Further details of the new executive remuneration framework are provided within the report (see page 46 and 48).
Your Board appreciates the ongoing support and feedback from shareholders. We will ensure our executives focus on, and are rewarded by, continuing to
deliver the benefits of the ECR acquisition and profitable business growth.
Kind regards
Thomas J Gorman
Chairman, Remuneration Committee
Worley Annual Report 2019
43
DIRECTORS’ REPORT CONTINUED
The Company’s directors present the Remuneration Report for the Company and for the consolidated entity for FY2019. 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 FY2019, 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
PAGE
44
47
52
4. Remuneration Governance Framework - Remuneration Decision Making, Executive Minimum Shareholding Requirement,
53
Hedging, Clawback and Malus Provisions, 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
55
Director Interests in Shares
1. REMUNERATION IN BRIEF
This section outlines the director and executive remuneration arrangements in place for the Company.
The list below of executives and non-executive directors (NEDs) comprised the Key Management Personnel (KMP) of the Company for FY2019, 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 FY2019, except where otherwise stated.
POSITION
COUNTRY OF RESIDENCE
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Lead Independent Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Lead Independent Director
Australia
Mexico
United States of America
United Kingdom
Australia
Australia and United States of America
Australia
Australia
Australia
China
Australia
Chief Executive Officer
Chief Operating Officer
President, Mining, Minerals and Metal Services
Chief Financial Officer
Group President, Energy and Chemical Services
President, Advisian (Consulting)
Group President, Major Projects and Integrated Solutions
Australia
United States of America
Canada
Australia
United States of America
United Kingdom
United State of America
KMP COVERED IN THIS REPORT
NAME
NON-EXECUTIVE DIRECTORS
John Grill
Juan Suárez Coppel1
Thomas Gorman
Christopher Haynes
Roger Higgins2
Andrew Liveris3
Catherine Livingstone
Anne Templeman-Jones
Sharon Warburton2
Wang Xiao Bin
FORMER NON-EXECUTIVE DIRECTORS
Erich Fraunschiel4
EXECUTIVES
Andrew Wood
Chris Ashton
Andrew Berryman5
Tom Honan
Vinayak Pai5
Adrian Smith
Karen Sobel6
1 Mr Suárez commenced on 27 May 2019
2 Mr Higgins and Ms Warburton commenced on 20 February 2019
3 Mr Liveris commenced on 5 September 2018
4 Mr Fraunschiel retired on 23 October 2018
5 Mr Berryman and Mr Pai commenced on 27 April 2019
6 Ms Sobel commenced as KMP on 27 April 2019
44
Worley Annual Report 2019
KEY SHAREHOLDER QUESTIONS
QUESTION
ANSWER
How is the
Company's
performance
reflected in the
Executive
remuneration in
FY2019?
Have any
changes been
made to the
remuneration of
NEDs?
What changes
have been made
to remuneration
components
during FY2019?
Are there
minimum
shareholding
requirements in
place for the
KMP?
Has Executives'
fixed pay been
reviewed in
FY2019?
The Board decided that the Company’s FY2019 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
41% and 57% of their target through the variable pay plan.
FY2016 long term equity award outcomes - the relative TSR minimum performance hurdles required for this award to
vest was achieved and EPS growth was not achieved. This results in a partial vesting on 30 September 2019. As no
retest applies to either measure, the EPS growth component of the grant will lapse on 30 September 2019.
SPPRs granted in FY2017 vested during FY2019, 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
2.00.
For the eighth consecutive year, there have been no increases to NED annual fees for FY2019.
Mr Grill's Chairman fee was reinstated for FY2019.
No changes have been made to any of the remuneration components for FY2019.
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;
• 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; and
• The minimum shareholding requirements are assessed each year.
Where Executives do not currently meet the minimum requirement, they build this through our remuneration
arrangements.
REFER
PAGE
See
pages
48, 49
See
page
53
See
pages
50, 51
See
pages
53, 57
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
53
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, Tom Honan and Adrian Smith all received an adjustment based on maintaining a competitive pay position
in the market.
During FY2019, the 10% reduction the CEO initiated to his fixed pay was removed. This reduction had been in place
since 1 July 2015.
Following completion of the ECR acquisition, the Board reviewed the CEO's fixed pay and approved an increase. This
increase is based on maintaining a competitive pay position relative to the international market benchmarks for a CEO
of a business as complex and large as Worley.
Worley Annual Report 2019
45
DIRECTORS’ REPORT CONTINUED
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 and malus provisions.
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
page
47
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?
What
remuneration
arrangements
apply to the
incoming ECR
Executives?
For FY2020 what
changes have
been planned to
the Executive
remuneration
framework?
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.
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.
SPPRs provide strong alignment to shareholders' interests and they also motivate our Executives to take action that
results in enhanced shareholder return.
For FY2019, the long term equity grant includes both relative Total Shareholder Return (TSR) and Earnings Per Share
(EPS) growth 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 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.
Full details of prior year grants are set out in the Remuneration Report for the relevant year.
Worley is committed to continuing the contractual entitlements of all ECR personnel including replacing unvested ECR
equity awards with similar Worley awards.
For Andrew Berryman and Vinayak Pai, their FY2019 remuneration includes a pro-rated cash incentive payment from
completion to 30 June 2019 based on their FY2019 ECR cash incentive plan arrangements. They have received an
equity grant replacing their unvested ECR equity awards.
For FY2020, incoming ECR Executives will commence on the new Worley Executive remuneration arrangements.
The Worley Board has approved the design of a new Executive remuneration structure that aligns with Worley's new
strategy, aims to drive the right behaviours and retain top talent across multiple jurisdictions. The key changes being
introduced are:
• For the cash or at risk plan, an increase to the maximum payout potential from 150% of target to 200% of target
variable. Incentive payments up to 200% will be subject to Board discretion and exceptional Company performance
• The SPPR plan will be discontinued and replaced with a new deferred equity plan. The plan will provide a grant of
restricted equity progressively released in equal tranches over three years with no performance multiplier
• The target remuneration pay mix has been designed to provide a greater weighting on 'at risk' remuneration, with
less on fixed and more on the LTI.
See
pages
49 to
51
See
page
50
See
pages
50, 51
See
page
48, 51
and
58
See
page
48
46
Worley Annual Report 2019
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 recognize 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 targets.
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 FY2019 and earlier), are set out below and on page 48.
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's 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.
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.
Worley Annual Report 2019
47
DIRECTORS’ REPORT CONTINUED
FY2020 EXECUTIVE REMUNERATION STRUCTURE
The FY2020 Executive remuneration structure has been designed to align with Worley’s new strategy, drive the right behaviours and attract, motivate and
retain top talent across multiple jurisdictions.
The key principles underpinning the new Worley remuneration framework include:
• Internationally competitive: The structure has been designed to be globally consistent given Worley is competing for talent in international markets and
the Board has looked to harmonize the existing Australian WorleyParsons and US ECR structures;
• Simplicity: The structure has been designed to be simple, to minimise change for Executives and align Executive efforts across the new global operating
model;
• Strong shareholder alignment: The structure has been designed to promote strong levels of alignment with shareholders via the delivery of a performance
based LTI and deferred equity to focus executives on the long-term; and
• Drive outperformance: The structure has been designed to drive strong overall performance by providing meaningful incentive for exceeding target
performance.
A summary of the FY2019 WorleyParsons Executive remuneration structure as compared to the FY2020 Worley Executive remuneration structure, is
outlined in the below table:
WorleyParsons
Worley
Cash at risk – annual cash award.
Maximum 150% of target
Cash at risk – annual cash award.
Maximum 200% of target, subject to Board discretion and exceptional
performance
SPPRs – medium term award tested over two years based on share
price performance, with a vesting multiple of up to 2.00 x of the grant
SPPRs discontinued
Deferred equity program – a grant of restricted rights progressively released
in equal tranches over three years with no multiplier
Long Term Incentive – three year performance period with TSR and
EPS growth measures plus an additional one year holding period
No change
Further details of the FY2020 Executive remuneration structure will be shared in detail in our next annual Remuneration Report.
REMUNERATION OUTCOMES IN FY2019
Variable pay outcomes - cash
Based on KPI outcomes for FY2019 and the
Company's financial performance for the period, the
Board decided to provide cash payments to the
Executives through the variable cash plan. The graph
to the right shows the strong alignment between
Company performance as measured by NPAT and
variable pay to Executives for the last five years.
Variable pay outcomes - SPPRs
SPPRs granted during FY2017 were tested against
their performance hurdles in FY2019. The SPPRs
vested as the closing share price at the end of the two
year performance period had more than doubled from
the opening share price. In addition, the satisfactory
performance and continued employment hurdles
were achieved. From
The opening share price was $8.11, and the closing
share price was $20.30; this reflects a 150%
improvement in the share price between date of grant
and date of vesting. This resulted in the SPPRs
converting to shares for the Executives during
FY2019. The details are provided on page 50.
48
Worley Annual Report 2019
1The 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
2Underlying NPAT has been selected as the company operating measure for the outcomes above. For FY2019 this outcome excludes
ECR.
Note: The cash payments apply to WorleyParsons Executives only.
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
FY2016 grant - this graph shows that growth in the Company’s TSR was above
the 75th percentile, which resulted in a full vesting for Executives for the FY2016
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 FY2016, resulting in nil vesting for Executives for the EPS
grant.
No retest applies to either measure.
'Special Acquisition' grant (only made to two executives) - This was in relation to the acquisition of the UK Integrated Solutions business during FY2018. A
strategically significant acquisition that has now helped build a global MMO business, provide entry into the UK North Sea market and provide additional
growth potential. Tranche 1 (half of the grant) was measured against progress made on a detailed scorecard across key workstreams during FY2019.
Performance outcomes were achieved and 50% of the award vested in full.
Tranche 2 will vest in September 2019 subject to continued employment and satisfactory performance up to the vesting date.
Summary of vested rights
The table below shows the recent history of vesting of Executives’ regular long term equity grants:
GRANT
FY20133
FY2014
FY2015
FY2016
PERFORMANCE PERIOD
01 Jul 12 – 30 Jun 16
01 Jul 13 – 30 Jun 17
01 Jul 14 – 30 Jun 18
01 Jul 15 – 30 Jun 19
TSR PERCENTILE
ACHIEVED1
11th
36th
65th
76th
CHANGE IN
EPS ACHIEVED2
(18.6%)
(21.5%)
(11.9%)
(12.6%)
% OF TOTAL
LTI GRANT
VESTED/EXERCISED
0%
0%
40%
100%
VESTING DATE
30 Sep 16
30 Sep 17
30 Sep 18
30 Sep 19
VALUE PER RIGHT
VESTED/EXERCISED
$
n/a
n/a
13.28
20.00
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.
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 FY2015
FY2016
Closing share price ($) 10.41
Dividends paid (cents) 56.0
7.20
-
FY2017
11.22
-
TSR portion of long term
equity
EPS portion of long term
equity
Cash portion of variable pay3
1 year TSR for the Company (%)
(36.4)
(30.2)
56.3
1 year TSR for 50th percentile of peer group
Vesting outcome of LTI (%) nil
(%)
(23.6)
Underlying EPS (cents) 1,2 98.4
Vesting outcome of LTI (%) nil
Underlying NPAT ($’m)4 243.1
(4.0)
nil
61.8
nil
153.1
3.8
nil
49.2
nil
123.2
FY2018
17.63
25.0
58
8.5
40
62.4
nil
171.4
FY2019
14.71
27.5
(9.8)
(9.8)
50
57.3
Nil
207.5
Average % of maximum cash portion awarded
to Executives (%) nil
nil
14
16.5
35.0
ANNUALIZED
GROWTH OVER
FIVE YEARS
9.0%
(16.3%)
(12.6%)
(3.9%)
1 Underlying EPS, which in the Board’s opinion reflects the Company’s operating results, has been used to calculate the outcomes.
2 FY2015-FY2018 underlying EPS was restated due to the capital raises for both AFW and ECR (refer to Note 17 financial statements).
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 Underlying NPAT reflects the Company’s operating results for FY2015-FY2019. We have applied it to calculate the remuneration outcomes for these financial years (refer to the Director's report for additional
information).
Worley Annual Report 2019
49
DIRECTORS’ REPORT CONTINUED
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.
FY2019 KPIs and their link to the Company’s strategy:
The FY2019 KPIs selected for the performance year (1 July 2018 to 30 June 2019) were chosen as they reflect and measure achievement against a number of
the Company's core operating KPIs.
Financial KPI outcomes (60% weighting for the CEO, 50% weighting for the other Executives)
Group NPAT, Business Line EBIT, Operating Expense Management and Group DSO have been chosen as they reflect and measure achievement against a
number of the Company's core financial KPIs. Significant focus has been on all these key metrics during the year and the outcomes for FY2019, are indicated
in the financial report. Group NPAT grew at both underlying and statutory levels, Business Line EBIT grew for every Business Line, Operating Expense
Management is being maintained and for Group DSO we continue to make good progress across the majority of business units.
Strategic KPI outcomes (40% weighting for the CEO, 50% weighting for the other Executives)
HSE (10% weighting) - 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 Strategic KPIs chosen (30% weighting for the CEO, 40% weighting for the other Executives), 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 lines of business and achieve
increased market share and market size outcomes; and
• 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 generally 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 Worley 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.
The FY2019 SPPR grant price was: $20.30.
The FY2019 SPPR grant is the last grant under this program. From FY2020 deferred equity rights will replace share price performance rights.
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.
50
Worley Annual Report 2019
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.
Grants made during FY2019 (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
Less than 50th percentile
At 50th percentile
PERCENTAGE OF RIGHTS THAT MAY BE EXERCISED IF THE RELATIVE TSR HURDLE IS MET
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 FY2019 grant includes: AECOM, Arcadis, Fluor Corporation, Fugro, Jacobs Engineering Group, JGC Corporation, KBR,
Petrofac, SNC Lavalin, Stantec, Tetra Tech, Wood Group and WSP Global.
The Board has discretion to adjust the peer comparator group to take into account events that happen during the performance period, e.g. takeovers or
mergers.
50% (i.e. maximum available under the plan)
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 FY2019 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 ECR business during FY2019 fundamentally unpins the achievement of our growth plans across our three strategic horizons and the
delivery of significant benefits to Worley's shareholders. It aims to generate material EPS accretion and returns for shareholders, creates a pre-eminent
global provider of professional project and asset services in resources and energy; delivers enhanced earnings diversification and resilience, and brings
significant value upside through cost and revenue synergies. A grant of performance rights has been awarded to Chris Ashton and Tom 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.
Cash bonus payments were awarded to Andrew Wood and Tom Honan and other key personnel for their critical role in completing the successful acquisition
of the ECR business. These amounts were paid on completion of the ECR transaction.
Transition of ECR personnel
Worley will honour the contractual entitlements of all personnel and has committed to replacing unvested ECR equity awards with similar Worley awards.
This includes Executives Andrew Berryman and Vinayak Pai. Their reported remuneration for FY2019 includes a pro-rated cash incentive payment from
completion to 30 June 2019. These payments were based on a formula consistent with the ECR cash incentive plan rules. They have received an equity grant
replacing their unvested ECR equity awards. Refer to vested, exercised and outstanding Rights table on page 58 for more details.
For FY2020, incoming ECR Executives will commence on the new Worley Executive remuneration arrangements
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 FY2014 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;
• 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 were explained on page 44 of the 2018 Remuneration Report; and
• for FY2018, the relative TSR and EPS growth performance hurdles shown above were used (50/50 weighting) and measured over a three year
performance period with an additional 1 year holding lock.
Worley Annual Report 2019
51
DIRECTORS’ REPORT CONTINUED
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 1.56% of the Company’s issued share capital (FY2018: 2.22%).
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 FY2019 are outlined on page 58 and 59.
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.
EMPLOYMENT ARRANGEMENTS
The key aspects of Executive contracts are outlined below:
EXECUTIVE DIRECTOR
Andrew Wood
GROUP EXECUTIVES
Chris Ashton
Andrew Berryman
Tom Honan
Vinayak Pai
Adrian Smith
Karen Sobel
CONTRACT DURATION
NON-COMPETE CLAUSES
NOTICE PERIODS1
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
12 months
12 months
6 months2
12 months
6 months
12 months
12 months
12 months
6 months
3 months
6 months
6 months
6 months
6 months
1 Notice period, whether given by the Executive or the Group is the same.
2 Effective from 1 July 2019.
The Executives' 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 54. 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, in relation to the discretions that the Board may exercise
when an Executive ceases employment.
The Company did not provide any sign-on or separation payments to Executives during FY2019.
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 FY2019, unless otherwise stated
on page 44.
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.
For FY2019, directors' fees remained constant. They have now been at the same amount for eight years in a row.
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, 82.92% ($2.55 million) was paid during FY2019 (for FY2018, this was 68% or $2.09 million). This increase was due
to an increase in the number of directors appointed to the Board and the reinstatement of John Grill's Chairman fees. NEDs are paid fees for services on the
Board and its Committees. The NEDs 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.
52
Worley Annual Report 2019
REMUNERATION STRUCTURE BOARD AND COMMITTEE FEES
Board and Committee fees for FY2018 and FY2019 are set out below. These amounts include superannuation contributions made on behalf of NEDs in
accordance with the Company’s statutory obligations.
ROLE
Chairman1
Member
Chairman / Member of Nominations Committee or Lead Independent Director
COMMITTEE
BOARD
AUDIT AND RISK
HSE
REMUNERATION
$520,0002
$194,000
nil
$47,000
$26,000
nil
$30,000
$12,000
nil
$37,000
$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. Mr Grill's fees
were reinstated effective 1 July 2018.
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 FY2019.
REMUNERATION OUTCOMES
The remuneration outcomes of the NEDs for FY2019 and FY2018 are set out in the Remuneration Tables section of the report, on page 60.
NON-EXECUTIVE DIRECTOR INTERESTS IN SHARES
The NED beneficial interests in shares of the Company as at 30 June 2019 are detailed in the Remuneration Tables section of the report, on page 60.
NED minimum shareholding requirement
A minimum shareholding requirement for NEDs exists to align NED 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 2019 multiplied by the five day volume weighted
average price of the Company’s shares up to and including 30 June 2019 ($14.68) or purchase price if higher.
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 FY2019, 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 FY2019.
Worley Annual Report 2019
53
DIRECTORS’ REPORT CONTINUED
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 57 shows a summary of the position of each Executive against the requirement as at 30 June 2019.
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 AND MALUS PROVISIONS
The Company maintains both a clawback and 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 or be clawed back 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.
54
Worley Annual Report 2019
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 56.
SHORT TERM EMPLOYEE BENEFITS
POST-
EMPLOYMENT
BENEFITS
OTHER LONG
TERM
BENEFITS
TERMINATION
BENEFITS
SHARE BASED PAYMENTS
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
%
NAME
YEAR
EXECUTIVE DIRECTOR
Andrew Wood
FY2019
1,662
1,399
FY2018
1435
407
GROUP EXECUTIVES
Chris Ashton
Andrew Berryman4
Tom Honan
Vinayak Pai4
Adrian Smith
Karen Sobel5
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
687
663
77
-
949
930
72
-
527
357
70
-
PREVIOUSLY REPORTED GROUP EXECUTIVE
None noted
Dennis Finn
Total remuneration
FY2019
FY2018
FY2019
FY20186
-
263
4,044
3,648
252
96
74
-
530
136
94
-
110
39
21
-
-
-
2,480
678
12
10
44
145
8
-
3
3
189
-
312
162
25
-
-
1
593
321
3,073
1,852
983
904
159
-
1,482
1,069
355
-
949
558
116
-
-
264
7,117
4,647
21
20
17
9
7
-
21
20
5
-
-
-
8
-
-
7
79
56
35
24
-
-
-
-
16
16
-
-
-
-
-
5
51
45
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
744
876
542
413
218
-
796
608
225
-
111
57
21
-
-
45
2,657
1,999
697
535
153
99
-
-
283
190
-
-
28
13
5
-
-
-
1,166
837
62.1%
55.0%
55.9%
42.7%
76.0%
-
61.9%
49.1%
54.5%
-
22.8%
17.3%
30.9%
-
-
n/a
4,570
3,307
1,695
1,425
384
-
2,598
1,903
585
-
1,088
628
150
-
-
321
11,070
7,584
1 The amount relates to the cash portion of the FY2019 variable pay plan typically payable in September 2019.
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 FY2019 is disclosed to the extent that it relates to Mr Berryman and Mr Pai's employment in the capacity as an Executive which commenced on 27 April 2019.
5 Remuneration for FY2019 is disclosed to the extent that it relates to Ms Sobel's employment in the capacity as an Executive which commenced on 27 April 2019.
6 The FY2018 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.
Worley Annual Report 2019
55
DIRECTORS’ REPORT CONTINUED
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 55.
AWARDED AND RECEIVED DURING
REPORTING PERIOD
RECEIVED DURING REPORTING PERIOD
DEFERRED FROM PREVIOUS PERIODS2
AWARDED DURING REPORTING PERIOD
DEFERRED FOR FUTURE PERIODS3
NAME
YEAR
SHORT TERM
CASH AND
BENEFITS
$000
(A)
OTHER
BENEFITS1
$000
(B)
EQUITY
INCENTIVE
$000
(C)
EXECUTIVE DIRECTOR
Andrew Wood
GROUP EXECUTIVES
Chris Ashton
Andrew Berryman6
Tom Honan
Vinayak Pai6
Adrian Smith
Karen Sobel7
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
PREVIOUSLY REPORTED GROUP EXECUTIVE
None noted
Dennis Finn
Total remuneration
FY2019
FY2018
FY2019
FY20188
3,073
1,852
983
904
159
-
1,482
1,069
355
-
949
558
116
-
-
264
7,117
4,647
56
44
17
9
7
-
37
36
5
-
-
-
8
-
-
12
130
101
LTI
$000
(D)
1,530
-
4,268
2,495
1,524
351
53
-
-
-
-
-
1,838
705
-
-
-
-
-
-
-
-
2,019
7,630
4,567
-
-
-
-
-
-
-
-
-
2,586
-
TOTAL REMUNERATION
RECEIVED DURING
REPORTING PERIOD
$000
(E)4
EQUITY
INCENTIVE
/SPPR
$000
(F)
LTI
$000
(G)
TOTAL REMUNERATION
AWARDED DURING
REPORTING PERIOD
$000
(H)5
8,927
4,391
2,875
966
166
-
4,062
1,105
360
-
949
558
124
-
-
2,295
17,463
9,315
800
727
1,360
1,236
640
530
1,058
-
873
855
1,288
-
129
142
113
-
-
-
354
315
-
-
582
570
-
-
103
89
90
-
-
-
4,901
2,254
2,489
2,210
5,289
3,859
1,994
1,758
1,224
-
2,974
2,530
1,648
-
1,181
789
327
-
-
276
14,637
9,212
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 47) 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 FY2019 is disclosed to the extent that it relates to Mr Berryman and Mr Pai's employment in the capacity as an Executive which commenced on 27 April 2019.
7 Remuneration for FY2019 is disclosed to the extent that it relates to Ms Sobel's employment in the capacity as an Executive which commenced on 27 April 2019.
8 The FY2018 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.
56
Worley Annual Report 2019
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 2019:
NAME
EXECUTIVE DIRECTOR
Andrew Wood
GROUP EXECUTIVES
Chris Ashton
Andrew Berryman
Tom Honan
Vinayak Pai
Adrian Smith
Karen Sobel
WEIGHTED
NUMBER OF SHARES
HELD AT 30 JUNE 20191
VALUE OF SHARES
HELD AT 30 JUNE 20192
$000
ANNUAL FIXED PAY AT
30 JUNE 20193
$000
PERCENTAGE
OF MINIMUM
REQUIREMENT ACHIEVED
1,623,876
24,137
145,193
34,914
227,966
42,507
28,967
16,560
2,222
529
3,484
644
457
271
2,100
845
555
1,086
969
526
627
>100%
>100%
48%
>100%
33%
43%
22%
1 Includes shares held in the Company plus a 50% weighting of unvested performance rights provided on page 58 and 59.
2 Calculated as the weighted number of shares held at 30 June 2019 multiplied by the volume weighted average price of the Company’s shares for the five trading days up to and including 30 June 2019 ($14.68)
or the price at which performance rights were allocated.
3 The Australian dollar equivalent of annual fixed pay as at 30 June 2019.
EXECUTIVE INTERESTS IN SHARES AND PERFORMANCE RIGHTS
Executives’ beneficial interests in shares and performance rights granted as at 30 June 2019 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 50 to 51 or are available in prior year Remuneration Reports.
NUMBER OF SHARES AND PERFORMANCE RIGHTS HELD IN WORLEYPARSONS LIMITED
NAME
TYPE
EXECUTIVE DIRECTOR
Andrew Wood
GROUP EXECUTIVES
Chris Ashton
Andrew Berryman4
Tom Honan
Vinayak Pai4
Adrian Smith
Karen Sobel5
Shares
Rights
Shares
Rights
Shares
Rights
Shares
Rights
Shares
Rights
Shares
Rights
Shares
Rights
PREVIOUSLY REPORTED GROUP EXECUTIVE
None noted
TOTAL
Shares
Rights
SHARES
RIGHTS
BALANCE AT
1 JULY 2018
1,091,043
642,305
14,181
140,297
n/a
n/a
11,000
211,848
n/a
n/a
11,591
17,310
n/a
n/a
-
-
1,127,815
1,011,760
GRANTED
PERFORMANCE
RIGHTS
ON EXERCISE OF
PERFORMANCE
RIGHTS1
CHANGE IN
STATUS
OTHER
TRANSACTIONS2
BALANCE AT
30 JUNE 2019
n/a
106,404
n/a
55,395
-
-
n/a
80,409
-
-
n/a
11,441
-
-
-
-
288,870
(199,194)
93,407
(72,419)
-
-
126,709
(91,568)
-
-
-
-
-
-
-
-
N/A
253,649
508,986
(363,181)
-
-
-
-
69,827
-
-
-
85,013
-
-
2,530
28,059
-
-
2,530
182,899
32,287
(49,939)
(15,287)
-
-
-
7,483
-
-
-
3,000
-
-
-
-
-
27,483
(49,939)
1,412,200
499,576
92,301
123,273
-
69,827
145,192
200,689
-
85,013
14,591
28,751
2,530
28,059
-
-
1,666,814
1,035,188
1 May include SPPRs which vested during FY2019 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 Retail Entitlement Offer on 22 October 2018.
4 Mr Berryman and Mr Pai commenced as KMP on 27 April 2019.
5 Ms Sobel commenced as KMP on 27 April 2019.
Worley Annual Report 2019
57
DIRECTORS’ REPORT CONTINUED
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
EXECUTIVE DIRECTOR
Andrew Wood
TYPE
LTI
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
31 Oct 18
30 Sep 22
33,498
6.62
31 Oct 18
30 Sep 22
33,497
13.19
31 Oct 17
30 Sep 21
46,168
9.72
31 Oct 17
30 Sep 21
46,168
13.13
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
76,225
76,225
85,148
85,149
41,616
5.96
6.41
2.62
4.75
6.50
30 Oct 14
30 Sep 18
41,616
10.73
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,293
668
33,293
668
8,323
54
20.0%
- 41,616
447
100.0%
222
442
449
606
454
489
223
404
271
447
370
933
983
58
115
114
154
104
112
190
190
173
177
98
242
230
109
166
375
392
39
95
189
207
279
209
225
258
258
288
296
135
366
385
229
586
345
18
-
-
-
-
-
-
-
-
-
-
-
89,676
1,800
89,676
1,800
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,747
256
12,747
256
-
-
-
-
-
-
20,988
21,194
421
425
20,988
21,194
-
-
421
425
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,285
427
21,285
427
-
-
-
-
-
-
-
-
35,141
705
35,141
705
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
SPPR
31 Oct 18
30 Sep 20
31 Oct 17
30 Sep 19
31 Oct 16
30 Sep 18
39,409
54,315
89,676
GROUP EXECUTIVES
Chris Ashton
LTI
31 Oct 18
30 Sep 22
31 Oct 18
30 Sep 22
8,716
8,716
31 Oct 17
30 Sep 21
11,763
9.40
17.18
10.96
6.62
13.19
9.72
31 Oct 17
30 Sep 21
11,763
13.13
31 Oct 16
30 Sep 20
31 Oct 16
30 Sep 20
Equity
31 Oct 18
30 Sep 20
31 Oct 18
30 Sep 19
31 Oct 17
30 Sep 19
31 Oct 17
30 Sep 18
SPPR
31 Oct 18
30 Sep 20
31 Oct 17
30 Sep 19
31 Oct 16
30 Sep 18
Andrew Berryman
Equity
29 Apr 19
30 Sep 21
Comb Incentive
30 Oct 15
30 Sep 18
29 Apr 19
30 Sep 20
29 Apr 19
30 Sep 19
29 Apr 19
28 May 20
17,490
17,490
13,752
13,752
12,747
12,747
10,459
14,115
20,988
21,194
12,546
27,072
27,395
2,814
Tom Honan
LTI
31 Oct 18
30 Sep 22
14,335
5.96
6.41
13.78
13.78
13.54
13.89
9.40
17.18
10.96
5.15
13.26
13.84
14.30
13.98
6.62
31 Oct 18
30 Sep 22
14,335
13.19
31 Oct 17
30 Sep 21
21,285
9.72
31 Oct 17
30 Sep 21
21,284
13.13
31 Oct 16
30 Sep 20
31 Oct 16
30 Sep 20
Equity
31 Oct 18
30 Sep 20
31 Oct 18
30 Sep 19
31 Oct 17
30 Sep 19
31 Oct 17
30 Sep 18
SPPR
31 Oct 18
30 Sep 20
31 Oct 17
30 Sep 19
31 Oct 16
30 Sep 18
29 Apr 19
30 Sep 21
29 Apr 19
30 Sep 20
29 Apr 19
30 Sep 19
29 Apr 19
28 May 20
35,141
35,142
18,702
18,702
21,285
21,285
14,335
21,285
35,141
17,250
42,342
24,153
1,268
5.96
6.41
13.78
13.78
13.54
13.89
9.40
17.18
10.96
13.26
13.84
14.30
13.98
Vinayak Pai
58
Worley Annual Report 2019
NAME
Adrian Smith
TYPE
LTI
Equity8
SPPR
Karen Sobel
LTI
Equity
SPPR
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 %
31 Oct 18
30 Sep 22
31 Oct 18
30 Sep 22
31 Oct 17
30 Sep 21
31 Oct 17
30 Sep 21
31 Oct 17
30 Sep 19
31 Oct 18
30 Sep 20
31 Oct 17
30 Sep 19
31 Oct 18
30 Sep 22
31 Oct 18
30 Sep 22
31 Oct 17
30 Sep 21
31 Oct 17
30 Sep 21
31 Oct 17
30 Sep 19
31 Oct 18
30 Sep 20
31 Oct 17
30 Sep 19
2,543
2,542
3,334
3,334
2,862
6,356
7,780
2,218
2,217
2,922
2,922
5,517
5,543
6,720
6.62
13.19
9.72
13.13
13.54
9.40
17.18
6.62
13.19
9.72
13.13
13.54
9.40
17.18
17
34
32
44
39
60
134
15
29
28
38
75
52
115
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 The service and performance criteria for the rights are discussed in the long term equity section on page 50 and 51. 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 50) 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 Berryman and Mr Pai are disclosed on page 55 to the extent that they were granted upon their commencement as an Executive.
8 The value of the rights issued to Ms Sobel are disclosed on page 55 to the extent that they were granted during her term as an Executive in the Company Performance Pay Plan (CPPP).
All vested rights are exercisable. There are no vested and unexercisable rights.
Worley Annual Report 2019
59
DIRECTORS’ REPORT CONTINUED
NON-EXECUTIVE DIRECTOR REMUNERATION OUTCOMES
Remuneration of the NEDs for FY2019 and FY2018 is set out below:
SHORT TERM EMPLOYEE BENEFITS
POST-EMPLOYMENT BENEFITS
NAME
John Grill
Erich Fraunschiel2
Juan Suárez Coppel3
Thomas Gorman
Christopher Haynes
Roger Higgins4
Andrew Liveris5
Catherine Livingstone
Anne Templeman-Jones
Sharon Warburton4
Wang Xiao Bin
Total remuneration
YEAR
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY2018
FY2019
FY20186
FEES
$000
499
-
63
200
20
-
243
131
245
245
67
-
156
-
199
213
220
141
72
-
199
200
1,983
1,336
TRAVEL ALLOWANCES
$000
10
-
-
10
-
-
25
15
35
25
10
-
10
-
10
10
10
10
10
-
25
30
145
110
SUPERANNUATION1
$000
21
-
7
20
-
-
-
-
-
-
6
-
10
-
21
20
21
13
7
-
21
20
114
81
TOTAL
$000
530
-
70
230
20
-
268
146
280
270
83
-
176
-
230
243
251
164
89
-
245
250
2,242
1,527
1 Superannuation contributions are made on behalf of the NEDs in accordance with the Company’s statutory superannuation obligations.
2 Mr Fraunschiel retired on 23 October 2018.
3 Mr Suárez commenced on 27 May 2019.
4 Mr Higgins and Ms Warburton commenced on 20 February 2019.
5 Mr Liveris commenced on 5 September 2018.
6 The FY2018 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.
NON-EXECUTIVE DIRECTOR INTERESTS IN SHARES
NED beneficial interests in shares of the Company as at 30 June 2019 are detailed in the below table:
NUMBER OF SHARES HELD IN WORLEYPARSONS LIMITED
NAME
John Grill
Erich Fraunschiel1
Juan Suárez Coppel2
Thomas Gorman
Christopher Haynes
Roger Higgins3
Andrew Liveris4
Catherine Livingstone
Anne Templeman-Jones
Sharon Warburton3
Wang Xiao Bin
TYPE
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
Shares
1 Mr Fraunschiel retired on 23 October 2018.
2 Mr Suárez commenced on 27 May 2019.
3 Mr Higgins and Ms Warburton commenced on 20 February 2019.
4 Mr Liveris commenced on 5 September 2018.
BALANCE AT
1 JULY 2018
27,909,392
218,631
-
13,500
13,139
-
-
14,302
2,250
-
11,000
CHANGE IN STATUS
-
(218,631)
-
-
-
14,000
6,870
-
-
10,000
-
OTHER
TRANSACTIONS
6,426,736
BALANCE AT
30 JUNE 2019
34,336,128
-
-
9,184
5,783
-
-
9,731
3,031
-
-
n/a
-
22,684
18,922
14,000
6,870
24,033
5,281
10,000
11,000
This Directors’ Report (including Remuneration Report) is made in accordance with a resolution of the directors.
JOHN GRILL AO
Chairman
Sydney, 21 August 2019
60
Worley Annual Report 2019
Statement of financial performance and other
comprehensive income
For the financial year ended 30 June 2019
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
Transition and 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
Items that will not be reclassified in future periods to the Statement of Financial Performance
Net movement in defined benefit reserve
Total comprehensive income, net of tax
Total comprehensive income, net of tax, attributable to:
Members of WorleyParsons Limited
Non-controlling interests
Basic earnings per share (cents)1
Diluted earnings per share (cents)1
CONSOLIDATED
2019
$’M
4,531.1
1,020.4
1,328.6
36.5
7.7
6,924.3
(4,156.5)
(992.0)
(1,215.6)
(154.2)
(50.6)
(48.8)
(71.7)
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)
(6,689.4)
(4,640.1)
10.5
245.4
(81.4)
164.0
151.9
12.1
(0.5)
1.8
(4.7)
160.6
150.9
9.7
36.4
36.2
9.7
205.4
(129.7)
75.7
62.2
13.5
35.8
(6.9)
-
104.6
93.4
11.2
22.6
22.5
NOTES
4
3(E)
21(B)
5
22(C)
6(A)
17
17
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.
Worley Annual Report 2019
61
Statement of financial position
As at 30 June 2019
ASSETS
Current assets
Cash and cash equivalents
Trade receivables
Other assets
Prepayments
Procurement assets
Income tax receivable
Derivatives
Total current assets
Non-current assets
Trade receivables
Intangible assets
Property, plant and equipment
Deferred tax assets
Equity accounted associates
Derivatives
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
Defined benefit obligations
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.
62
Worley Annual Report 2019
NOTES
7
8
8
27
19
8
10
28
29(A)
22(B)
19
9
27
11
13
19
9
13
30
29(B)
11
15
16
CONSOLIDATED
2019
$’M
2018
$’M
457.3
2,672.2
219.2
161.4
107.1
35.7
27.6
3,680.5
191.6
6,117.9
551.4
240.6
173.1
41.8
49.4
7,365.8
11,046.3
1,884.2
71.6
599.2
165.3
9.8
2.2
2,732.3
47.3
1,973.0
41.5
110.0
123.7
2,295.5
5,027.8
6,018.5
5,282.9
(267.6)
959.2
5,974.5
44.0
6,018.5
261.6
1,171.1
147.9
101.9
66.5
4.0
2.2
1,755.2
28.9
2,282.0
54.3
201.6
81.3
63.2
9.3
2,720.6
4,475.8
789.2
39.8
318.5
36.0
5.6
3.4
1,192.5
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
Statement of changes in equity
For the financial year ended 30 June 2019
ISSUED
CAPITAL
$’M
RETAINED
PROFITS
$’M
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$’M
HEDGE
RESERVE
$’M
PERFORMANCE
RIGHTS
RESERVE
$’M
DEFINED
BENEFITS
RESERVE
$’M
ACQUISITION
RESERVE
$’M
MEMBERS OF
THE GROUP
$’M
NON-
CONTROLLING
INTERESTS
$’M
TOTAL
$’M
CONSOLIDATED
As at 30 June 2018
1,589.9
910.5
(263.0)
Adoption of AASB 9 on 1 July 2018, net of tax
-
(4.4)
-
As at 1 July 2018
1,589.9
906.1
(263.0)
Profit after income tax expense
Foreign exchange movement on translation of
foreign controlled entities and associates
Net investments hedged, net of tax
Net gain on foreign exchange hedges, net of tax
Fair value gain on mark to market of cross currency
hedge, net of tax
Remeasurement gain/loss on defined benefit plans,
net of tax
Total comprehensive income, net of tax
-
-
-
-
-
-
-
151.9
-
-
-
-
-
-
19.3
(17.4)
-
-
-
151.9
1.9
Transactions with owners
Issue of share capital, net of transaction costs
Share based payments expense
Share based payments issued as business
combination purchase consideration
Non-controlling interest acquired on acquisition
Transfer to issued capital on issuance of shares to
satisfy performance rights
Decrease in ownership of controlled entity
Dividends paid
3,687.9
-
-
-
5.1
-
-
As at 30 June 2019
5,282.9
-
-
-
-
-
-
(98.8)
959.2
-
-
-
-
-
-
-
4.6
-
4.6
-
-
-
0.9
0.9
-
1.8
-
-
-
-
-
-
-
44.6
-
44.6
-
-
-
-
-
-
-
-
18.0
2.2
-
(9.5)
-
-
-
-
-
-
-
-
-
-
(4.7)
(4.7)
-
-
-
-
-
-
-
(62.6)
2,224.0
(11.2) 2,212.8
-
(4.4)
-
(4.4)
(62.6)
2,219.6
(11.2) 2,208.4
-
-
-
-
-
-
-
-
-
-
-
-
(0.9)
-
151.9
12.1
164.0
19.3
(17.4)
0.9
0.9
(4.7)
150.9
(2.4)
-
-
16.9
(17.4)
0.9
-
-
0.9
(4.7)
9.7
160.6
3,687.9
18.0
- 3,687.9
18.0
-
2.2
-
(4.4)
(0.9)
(98.8)
-
55.8
2.2
55.8
-
0.2
(10.5)
(4.4)
(0.7)
(109.3)
(261.1)
6.4
55.3
(4.7)
(63.5)
5,974.5
44.0 6,018.5
As at 1 July 2017
1,268.5
875.6
(301.1)
11.5
42.1
Profit after income tax expense
Foreign exchange movement on translation of
foreign controlled entities and associates
Net investments hedged, net of tax
Net loss on foreign exchange hedges, net of tax
Fair value loss on mark to market of cross currency
hedge, net of tax
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
-
-
62.2
-
-
-
-
-
-
62.2
-
-
-
-
(27.3)
108.2
(70.1)
-
-
38.1
-
-
(2.8)
(4.1)
(6.9)
-
-
-
-
-
-
-
`
-
-
As at 30 June 2018
1,589.9
910.5
(263.0)
4.6
-
-
-
-
-
-
-
8.2
(5.7)
-
-
44.6
-
-
-
-
-
-
-
-
-
-
-
-
-
(22.9)
1,873.7
(5.4) 1,868.3
-
-
-
-
-
-
-
-
-
(39.7)
-
62.2
13.5
75.7
108.2
(70.1)
(2.8)
(4.1)
93.4
315.7
8.2
-
(39.7)
(27.3)
(2.3)
-
-
105.9
(70.1)
(2.8)
-
(4.1)
11.2
104.6
-
-
315.7
8.2
-
(2.8)
(14.2)
-
(42.5)
(41.5)
(62.6)
2,224.0
(11.2) 2,212.8
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Worley Annual Report 2019
63
Statement of cash flows
For the financial year ended 30 June 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Dividends received from associates
Interest received
Borrowing costs paid
Income taxes paid
Net cash inflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for acquisition of controlled entities, net of cash acquired and other investments
Payments for purchase of property, plant and equipment, computer software and other intangible assets
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 from financing activities
Net increase 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
2019
$’M
2018
$’M
6,707.9
(6,437.4)
5,186.6
(4,849.7)
270.5
7.8
34.4
(40.8)
(35.6)
236.3
(3,791.6)
(37.2)
0.5
0.3
(3,828.0)
(3,096.3)
4,177.0
(19.1)
2.8
2,845.8
(98.8)
(10.5)
3,800.9
209.2
277.9
4.7
491.8
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
7
18(B)
7
64
Worley Annual Report 2019
Notes to the financial statements
For the financial year ended 30 June 2019
1. CORPORATE INFORMATION
The financial report of WorleyParsons Limited (Company or parent entity) for the financial year ended 30 June 2019 was authorized for issue in accordance
with a resolution of the directors on 21 August 2019.
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.
The Group has not early adopted any standards or interpretations not yet effective. These standards and interpretations and potential impacts are consistent
with those disclosed in the 30 June 2018 annual report except as disclosed in note 2(v).
(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;
• credit loss allowance, refer note 8;
• goodwill and intangible assets with identifiable useful lives, refer note 10;
• project, warranty and other provisions, refer 11;
• recovery and valuation of deferred taxes, refer note 29; and
• defined benefit obligations, 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
Effective 1 July 2018, the Group adopted AASB 9 Financial Instruments (AASB 9) and AASB 15 Revenue from Contracts with Customers (AASB 15). The impact of
the adoption of these standards is disclosed below.
The other new and revised standards, amendments or AASB interpretations did not have any impact on the Group.
The Group has not elected to early adopt any new or amended standards or interpretations that are issued but not yet effective.
Worley Annual Report 2019
65
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impact of adoption
(i) AASB 9 Financial instruments
AASB 9 Financial Instruments (AASB 9) replaces AASB 139 Financial Instruments: Recognition and Measurement (AASB 139), and the Group has adopted AASB 9
and the consequential amendments to AASB 7 Financial Instruments: Disclosures on 1 July 2018. The Group has applied AASB 9 retrospectively in accordance
with the transition provisions set out in AASB 9. The new standard does not have a significant impact on the financial position and/or financial performance
of the Group, with the details discussed below:
1.
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 has the following minor impact on the Group’s financial assets and liabilities with regards to their
classification and measurement:
• Financial assets classified as loans and receivables under AASB 139 that are measured at amortised cost as at 30 June 2018 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 continue to be classified and measured as
such under AASB 9; and
• Financial liabilities that are measured at amortised cost under AASB 139 as at 30 June 2018 continue to be classified and measured at amortised
cost under AASB 9.
2. Hedge accounting
The forward exchange contracts and cross currency swaps in place as at 30 June 2018 qualified as cash flow hedges under AASB 9 and the net
investment hedge in place as at 30 June 2018 qualified as a net investment hedge under AASB 9. The group’s risk management strategies and hedge
documentation have been updated to align with the requirements of AASB 9 and these relationships are therefore treated as continuing hedges. There
were no reclassifications or remeasurements arising from the application of AASB 9 hedge accounting.
3.
Impairment
The Group has the following financial assets that are subject to AASB 9’s expected credit loss model:
• Trade receivables;
• Unbilled contract revenue (contract assets); and
• Other receivables (specifically, related party receivables).
The Group assessed these financial assets as at 1 July 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 Group uses judgement
in making the assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well
as forward looking estimates.
In accordance with the transitional provisions in AASB 9, the adjustments arising from the new impairment rules are recognized in the opening retained
earnings in the statement of financial position on 1 July 2018. The impact on the group’s retained earnings as at 1 July 2018 is as follows:
Closing retained earnings under AASB 139 as at 30 June 2018
Additional recognition of expected credit loss allowance under AASB 9
Tax impact of additional recognition of expected credit loss allowance recognized
Opening retained earnings under AASB 9 as at 1 July 2018
$M
910.5
(5.7)
1.3
906.1
The Group applied the simplified approach to measure expected credit losses for trade receivables and unbilled contract revenue which applies a lifetime
expected loss model.
The reconciliation of the impairment allowance as at 30 June 2018 as calculated under AASB 139 to the opening impairment allowance as calculated under
AASB 9 is as follows:
As at 30 June 2018, as calculated under AASB 139
Adjusted through opening retained earnings
As at 1 July 2018, as calculated under AASB 9
IMPAIRMENT ALLOWANCE IN
RELATION TO TRADE
RECEIVABLES AND CONTRACT
ASSETS
IMPAIRMENT ALLOWANCE IN
RELATION TO OTHER
RECEIVABLES
$’M
86.0
5.4
91.4
$’M
-
0.3
0.3
The adjustment reflects the replacement of the incurred loss model under AASB 139 with its expected credit loss model under AASB 9.
66
Worley Annual Report 2019
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(ii) AASB 15 Revenue from Contracts with Customers
AASB 15 Revenue from Contracts with Customers replaced AASB 11 Construction Contracts, AASB 18 Revenue and related Interpretations and it applies, with
limited exceptions, to all revenue arising from contracts with customers. The new standard establishes a five-step approach to revenue recognition. Revenue
is recognized to the extent of the consideration the Group expects to receive for transferring goods or services to a customer. AASB 15 requires entities to
exercise judgement, taking into consideration all the relevant facts and circumstances when applying each step of the model to contracts with their
customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.
The application of AASB 15 did not have any impact on the financial position and/or financial performance of the Group and the cumulative effect of
adjustments recognized in equity under the modified retrospective approach is nil.
The disaggregation of revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by
economic factors is presented in Note 3 Operating Segments. The Group has retained existing terminology and continues to utilize unbilled contract revenue
to describe contract assets and billings in advance and deferred revenue to describe contract liabilities.
(iii) Changes in accounting policies on adoption of the new accounting standards
Accounting policies changed on adoption of AASB15 and AASB 9 and are disclosed in the following relevant notes:
• Revenue recognition and contract costs – refer to note 4;
• Trade and other receivables – refer to note 8;
• Trade and other payables refer to note 9; and
• Derivatives- refer to note 19.
(iv) New accounting standards not yet applicable
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
superseded the current lease guidance including AASB 117 Leases and the related interpretations when it became effective on 1 July 2019.
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 (‘RoU’) and a corresponding liability have to be recognized for all leases by lessees (i.e. all on balance sheet) except for short-term leases
and leases of low value assets.
The 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 leads to an
increase in depreciation and finance charges. These charges will replace the operating lease expense that is currently reported 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.
Subsequent to the financial year end, on 1 July 2019, the standard has been adopted by the Group. The modified retrospective approach has been applied on
adoption. The new standard has a material impact on the Group’s Financial Statements, with a lease liability of $450 million - $550 million recognized on
adoption. A corresponding RoU of a similar range will be recognized, net of impairment. The Group is finalizing the assessment of leases acquired with Jacobs
Energy, Chemicals and Resources ("ECR") and the recognized value may change following the finalization of the assessment. Low value or short term leases
are not recognized on the balance sheet as allowed under the practical expedients of AASB 16.
The key assumptions used to determine the RoU and the corresponding lease liability are:
• The lease terms;
• Options to extend the original lease terms;
• Discount rate used; and
• Termination options.
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.
This amendment is not expected to have a material impact on the Group's financial statements.
Worley Annual Report 2019
67
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
This amendment is not expected to have a material impact on the Group's financial statements.
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; and
• AASB 123 Borrowing Costs - borrowing costs eligible for capitalization.
This amendment is not expected to have a material impact on the Group's financial statements.
AASB 2018-2 Amendments to Australian Accounting Standards-Plan Amendment, Curtailment or settlement
This amendment amends AASB 119 Employee Benefits to specify how an entity accounts for defined benefit plans when a plan amendment, curtailment or
settlement occurs during a reporting period.
This amendment is not expected to have a material impact on the Group's financial statements.
Effective 1 July 2020:
Conceptual Framework for Financial Reporting and AASB 2019-1 Amendments to Australian Accounting Standards - References to the Conceptual Framework
The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities. The
framework clarifies some important concepts, including objectives of financial reporting, qualitative characteristics of financial information, measurement,
presentation and disclosures.
The Group is yet to assess the impact of this Framework.
AASB 2018-7 Amendments to Australian Accounting Standards - Definition of Material
The amendments clarify that materiality will depend on the nature or magnitude of information. An entity will need to assess whether the information, either
individually or in combination with other information, is material in the context of the financial statements. A misstatement of information is material if it
could reasonably be expected to influence decisions made by the primary users.
The Group is yet to assess the impact of this amendment.
(B) BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by WorleyParsons Limited as at 30 June 2019 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. 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.
68
Worley Annual Report 2019
3. SEGMENT INFORMATION
On 26 April 2019 the acquisition of Jacobs Energy, Chemicals and Resources division (“ECR”) from Jacobs Engineering Group Inc was completed. Due to the
significance of the acquisition, a new operating model was introduced resulting in a change in segments, as further described in note 3(G). Prior period
information was restated for comparative purposes.
(A) OPERATING SEGMENTS
Professional services revenue
Construction and fabrication revenue
Procurement revenue at margin
Other income
Total segment revenue 1
Segment result2
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
ENERGY AND
CHEMICAL
SERVICES
MINING, MINERALS
AND METAL
SERVICES
MAJOR PROJECTS
AND
INTEGRATED
SOLUTIONS
ADVISIAN
TOTAL
2019
$’M
2018
$’M
2,579.8 2,027.2
-
183.3
8.2
52.6
214.5
7.3
2019
$’M
273.1
8.8
3.9
0.4
2019
$’M
2018
$’M
2018
$’M
148.8 1,312.5 1,224.1
552.5
90.0
-
- 1,267.2
165.3
-
2.9
-
2019
$’M
2018
$’M
520.5 450.5
-
61.7
-
-
33.2
-
2019
$’M
2018
$’M
4,685.9 3,850.6
552.5
1,328.6
337.9
416.9
8.2
7.7
2,854.2 2,218.7
286.2
151.7 2,745.0 1,866.6
553.7 512.2
6,439.1 4,749.2
278.8
9.8%
227.0
10.2%
31.0
10.8%
9.2
6.1%
231.7
8.4%
172.4
9.2%
35.0
6.3%
17.5
3.4%
576.5
9.0%
426.1
9.0%
32.7
9.4
67.8
16.4
31.7
7.0
64.0
19.5
3.5
0.6
87.9
1.7
2.6
0.6
5.3
1.3
24.4
0.5
14.6
15.9
10.4
1.4
7.3
16.4
5.2
0.0
2.8
3.2
9.1
0.7
4.7
4.5
65.7
10.5
173.1
37.2
53.8
9.7
81.3
41.7
(B) CUSTOMER SECTOR GROUPS
Professional services revenue
Construction and fabrication revenue
Procurement revenue at margin
Other income
Total segment revenue
Segment result
Segment margin
ENERGY
CHEMICALS
RESOURCES
TOTAL
2019
$’M
3,102.2
1,061.5
308.7
7.7
2018
$’M
2,888.2
552.5
273.1
6.3
2019
$’M
1,064.7
171.6
90.3
-
4,480.1
3,720.1
1,326.6
437.1
9.8%
347.7
9.3%
94.3
7.1%
2018
$’M
552.4
-
46.6
-
599.0
43.0
7.2%
2019
$’M
519.0
95.5
17.9
-
632.4
45.1
7.1%
2018
$’M
410.0
-
18.2
1.9
2019
$’M
4,685.9
1,328.6
416.9
7.7
2018
$’M
3,850.6
552.5
337.9
8.2
430.1
6,439.1
4,749.2
35.4
8.2%
576.5
9.0%
426.1
9.0%
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.
Worley Annual Report 2019
69
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. SEGMENT INFORMATION (CONTINUED)
(C) RECONCILIATION OF SEGMENT REVENUE TO TOTAL REVENUE AND OTHER INCOME PER THE
STATEMENT OF FINANCIAL PERFORMANCE
Segment revenue
Impact of the arbitration award1 3
Procurement revenue at nil margin (including share of revenue from associates)2
Pass-through revenue at nil margin31
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
Total underlying earnings before interest, tax and amortisation of intangibles acquired through business combinations (underlying EBITA)
Total underlying EBITA margin on aggregated revenue for the Group
Impact of acquisitions, comprised of:
Acquisition costs
Transition costs
Onerous lease contracts4 2
Bridging facility fee
Foreign exchange gain on term deposits
Impact of the arbitration award1 i
Restructuring costs
Impairment of associate intangible assets
Total EBITA
EBITA margin on aggregated revenue for the Group
Amortization of acquired intangible assets
Net underlying borrowing costs53
Interest on term deposits, net of capitalized costs write off
Income tax expense
Profit after income tax expense per the Statement of Financial Performance
(E) RECONCILIATION OF GLOBAL SUPPORT COSTS TO THE STATEMENT OF FINANCIAL PERFORMANCE
Global support costs per segment information6 4
Foreign exchange gain on term deposits
Global support costs per the Statement of Financial Performance
1 Reduction in revenue following lower than expected arbitration award in relation to a dispute with a state owned enterprise.
2 The ECR procurement revenue is classified as procurement revenue at nil margin.
3 Pass-through revenue at nil margin refers to sub-contract packages for services or materials where the Group does not receive a margin.
4 Includes onerous lease costs incurred in equity accounted investments.
5 Net underlying borrowing costs exclude interest income on term deposits, net of capitalized costs write off due to one-off nature of such items.
6 Excludes all restructuring costs.
70
Worley Annual Report 2019
TOTAL
2019
$’M
6,439.1
(8.7)
608.0
32.4
(183.0)
36.5
2018
$’M
4,749.2
-
94.4
157.3
(170.6)
5.5
6,924.3
4,835.8
TOTAL
2019
$’M
576.5
(157.6)
(6.1)
412.8
6.4%
(50.6)
(35.0)
(8.9)
(4.2)
3.4
(8.7)
(0.7)
-
308.1
4.8%
(27.5)
(62.6)
27.4
(81.4)
164.0
2018
$’M
426.1
(110.7)
(2.4)
313.0
6.6%
(5.9)
-
(12.2)
-
-
-
(14.2)
(2.7)
278.0
5.9%
(14.2)
(58.4)
-
(129.7)
75.7
TOTAL
2019
$’M
157.6
(3.4)
154.2
2018
$’M
110.7
-
110.7
3. SEGMENT INFORMATION (CONTINUED)
(F) GEOGRAPHIC SEGMENTS1
Revenue from external customers2
2019
Australia, Pacific, Asia and China
Europe, Middle East and Africa
United States of America
Other Americas
Total
Other income
Interest income
ADD:
PROCUREMENT
REVENUE AT
NIL MARGIN
$’M
ADD:
PASS-THROUGH
REVENUE AT
NIL MARGIN
$’M
18.3
164.3
278.1
147.3
608.0
-
23.7
-
-
23.7
AGGREGATED
REVENUE
$’M
1,347.0
2,656.6
1,093.7
1,341.8
6,439.1
Total revenue and other income per the Statement of Financial Performance
2018
Australia, Pacific, Asia and China
Europe, Middle East and Africa
United States of America
Other Americas
Total
Other income
Interest income
ADD:
PROCUREMENT
REVENUE AT
NIL MARGIN
$’M
ADD:
PASS-THROUGH
REVENUE AT
NIL MARGIN
$’M
9.9
20.2
10.6
53.6
94.3
-
157.3
-
-
157.3
AGGREGATED
REVENUE
$’M
1,080.9
2,121.7
643.9
902.7
4,749.2
Total revenue and other income per the Statement of Financial Performance
Non-current assets by geographical location:3
Australia, Pacific, Asia and China
Europe, Middle East and Africa
United States of America
Other Americas
Non-current assets by geographical location
LESS:
SHARE OF
REVENUE
FROM
ASSOCIATES
$’M
(123.5)
(23.5)
(36.0)
-
(183.0)
LESS:
SHARE OF
REVENUE
FROM
ASSOCIATES
$’M
(119.1)
(22.8)
(28.7)
-
(170.6)
LESS:
OTHER
INCOME
$’M
(0.4)
(3.2)
(4.1)
-
(7.7)
LESS:
OTHER
INCOME4
$’M
(0.6)
(2.3)
(5.2)
-
(8.1)
2019
$’M
116.4
161.2
1,611.5
66.6
1,955.7
TOTAL
REVENUE
FROM
EXTERNAL
CUSTOMERS
$’M
1,241.4
2,817.9
1,331.7
1,489.1
6,880.1
7.7
36.5
6,924.3
TOTAL
REVENUE
FROM
EXTERNAL
CUSTOMERS
$’M
971.1
2,274.1
620.6
956.3
4,822.1
8.2
5.5
4,835.8
2018
$’M
56.2
124.4
172.0
35.2
387.8
1 Geographic locations are presented across all business lines. This is different to the internal reports presented to the chief operating decision makers.
2 Revenue is attributed to the geographic location based on the entity providing the services.
3 Excludes goodwill, deferred tax assets and derivative financial instruments. Intangible assets acquired with ECR are provisionally allocated to the United States of America as at
30 June 2019.
Worley Annual Report 2019
71
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. SEGMENT INFORMATION (CONTINUED)
(G) IDENTIFICATION OF REPORTABLE SEGMENTS
On 26 April 2019 the acquisition of the ECR division from Jacobs Engineering Group Inc was completed. Due to the significance of the acquisition, a new
operating model was introduced and consists of the following four lines of business:
• Energy & Chemical Services;
• Mining, Minerals & Metal Services;
• Major Projects & Integrated Solutions; and
• Advisian.
Prior to the change, the Group’s business model consisted of three business lines being Services, Major Projects & Integrated Solutions and Advisian. The
change in operating structure represents a change to the operating segments reported in the previous corresponding period. The previous reported segment
results for the year ended 30 June 2018 have been restated for comparison purposes as required by AASB 8 Operating Segments. The Group has also included
additional information segmented according to its customer sector groups, which were also changed from 30 June 2018 with comparative restated.
(H) ACCOUNTING POLICIES AND INTER-SEGMENT TRANSACTIONS
Segment revenues and expenses are those that are directly attributable to a segment and the relevant portion that can be allocated to the segment on a
reasonable basis.
Segment revenues, expenses and results include transactions between segments incurred in the ordinary course of business. These transactions are priced
on an arm’s length basis and are eliminated on consolidation.
The accounting policies used by the Group in reporting segments internally are the same as those contained in these financial statements and are consistent
with those in the prior period.
The segment result includes the allocation of overhead that can be directly attributed to an individual business segment. The following items and associated
assets and liabilities are not allocated to segments as they are not considered part of the core operations of any segment:
• global support costs;
• interest and tax for associates;
• amortization of acquired intangible assets;
• costs in relation to acquisitions and transition activities (acquisition costs, bridging facility fee, transition and restructuring costs, foreign exchange gain on
term deposits);
• other restructuring costs;
• impact of the arbitration award;
• certain onerous lease contracts not related to acquisitions;
• net borrowing costs;
• tax expense in relation to the ECR acquisition; and
• income tax expense and income tax charges in relation to tax reforms.
(I) MAJOR CUSTOMERS
The most significant customer accounted for 7.7% (2018: 10.1%) of aggregated revenue and is predominantly within the Energy & Chemical Services and
Major Projects & Integrated Solutions lines of business and is in the Energy and the Chemicals customer sector groups.
4. REVENUE AND OTHER INCOME
Professional services revenue
Procurement revenue
Construction and fabrication revenue
Interest income
Revenue
Other income
Total revenue and other income
CONSOLIDATED
2019
$’M
2018
$’M
4,531.1
1,020.4
1,328.6
36.5
6,916.6
7.7
6,924.3
3,837.3
432.3
552.5
5.5
4,827.6
8.2
4,835.8
The amount of revenue recognized in the financial year 2019 from performance obligations satisfied (or partially satisfied) in previous periods is $3.3 million
and is mainly due to the changes in the estimate of the stage of completion.
In addition to billings in advance balances, $0.9 billion of revenue (lump sum projects with an expected duration of one year or more) is expected to be
recognized in the future relating to performance obligations that are unsatisfied (or partially unsatisfied) at the reporting date.
72
Worley Annual Report 2019
4. REVENUE AND OTHER INCOME (CONTINUED)
RECOGNITION AND MEASUREMENT
The Group adopted AASB 15 on 1 July 2019, and the updated accounting policy is outlined below.
Revenue from contracts with customers is recognized when control of the goods or services is transferred to the customer at an amount that reflects the
consideration to which the Group expects to be entitled in exchange for those goods or services. Revenue is recognized and disclosed net of trade
allowances, duties and taxes paid.
The Group utilizes 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.
The Group exercises judgement, taking into consideration all the relevant facts and circumstances when applying each step of the model to contracts with it’s
customers.
The Group’s main revenue streams are as follows:
• Professional services revenue
The Group performs engineering design and project delivery services. These activities are usually highly integrated and accordingly where appropriate are
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, the Group recognizes revenue
for these service contracts over time. Payment terms depend on the contracts specifics and usually are within 30 to 60 day term.
• Construction and fabrication revenue
The Group performs construction and fabrication services. These activities are highly integrated and accordingly where appropriate are 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, the Group recognizes revenue for these construction
contracts over time. Payment terms are usually based on milestones achieved and are within 30 to 60 days from the date of the invoice.
• 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 executes procurement services as a principal and as an agent. Where the Group controls
the promised goods or services before transferring them to the customer, the Group is a principal and records revenue and costs on a gross basis. If the
Group does not control the promised goods and services before transferring to the customer, i.e. the Group’s role is to arrange for another entity to provide
the goods or services, then the Group is an agent and records revenue and costs at the net amount that it retains for its agency services (margin). The
performance obligation is satisfied over time and payment is usually due upon receipt of the equipment by the customer or as subcontractor services are
performed, depending on the terms of the contract. Payment terms are usually within 30 to 60 days.
The Group measures revenue on the basis of the effort expended relative to the total expected effort to complete the service. The Group considers the terms
of the contract, internal models and other sources when estimating the projected total cost and the stage of completion. The percentage of completion is
estimated by qualified professionals within the project teams. Estimates of revenues, costs or extent of progress toward completion are revised if
circumstances change.
Variable consideration, including performance incentives, is recognized from the outset of the contract but only to the extent that it is highly probable that a
significant revenue reversal will not occur. This estimate takes into account the facts and circumstances of each individual contract and historical experience
and is reassessed throughout the life of the contract.
The Group provides assurance warranties for general rework which are accounted for in accordance with AASB 137 Provisions, Contingent Liabilities and
Contingent Assets.
The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by
the customer exceeds one year. Therefore, the Group does not adjust any of the transaction prices for the time value of money.
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.
Contract costs
Costs to obtain or fulfil a contract (contract costs) include all costs directly related to specific contracts 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. The Group’s contract costs are
expensed as incurred unless they are allowed for capitalization under the accounting standards.
Worley Annual Report 2019
73
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
5. EXPENSES AND LOSSES/(GAINS)
Profit before income tax expense includes the following specific expenses and losses/(gains):
EXPENSES AND LOSSES
Short term employee benefits
Post-employment benefits
Share based payments
Total staff costs
Bridging facility fee
Transition and restructuring costs
Onerous lease contracts
Other restructuring costs
Total transition and other costs
Operating lease rentals- minimum lease payments
Amortization
Depreciation
MOVEMENTS IN PROVISIONS1
Employee benefits
Insurance
Onerous leases, excluding onerous leases due to transition
Warranty
Project losses and other
CONSOLIDATED
2019
$’M
2018
$’M
3,901.4
97.7
18.0
4,017.1
4.2
35.0
8.9
0.7
48.8
166.7
70.1
23.1
208.7
9.5
(5.6)
5.0
31.3
2,822.3
65.4
8.2
2,895.9
-
-
12.2
2
14.2
132.8
49.9
18.1
163.5
(2.7)
13.3
8.4
25.6
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.
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.
1 Excludes amounts utilised.
74
Worley Annual Report 2019
5. EXPENSES AND LOSSES/(GAINS) (CONTINUED)
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
7 years; and
3-15 years;
5-20 years;
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
(Over)/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
2019
$’M
85.0
3.1
(6.7)
81.4
11.8
(8.7)
3.1
2018
$’M
48.3
74.3
7.1
129.7
94.8
(20.5)
74.3
Worley Annual Report 2019
75
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6. INCOME TAX (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% (2018: 30%)
Tax effect of amounts which are non-deductible/(non-taxable) in calculating taxable income:
Non-deductible share based payments expense
Share of net profits of associates accounted for using the equity method
Tax losses not previously recognized
(Over)/Under provision in previous financial periods
Non-deductible costs from acquisitions
Write off of deferred tax asset due to acquisition
Tax expense in relation to changes in tax legislation
Difference in overseas tax rates and other
Income tax expense
CONSOLIDATED
2019
$’M
2018
$’M
245.4
73.6
5.5
(3.2)
(0.3)
(6.7)
11.5
14.3
3.4
(16.8)
81.4
205.4
61.6
2.6
(2.9)
(0.7)
7.1
1.8
-
81.7
(21.5)
129.7
(C) AMOUNTS RECOGNIZED DIRECTLY IN EQUITY
Aggregate amount of tax arising in the reporting period and not recognized in profit after income tax expense
but directly credited to equity:
Deferred tax - (debited)/credited directly to equity
(1.7)
21.0
(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%
190.8
57.2
81.9
24.6
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.
76
Worley Annual Report 2019
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' dividends received in excess of share of profits
Write-down of capitalised borrowing costs
Release 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
(Increase)/decrease in trade and other receivables
(Increase)/decrease in prepayments and other assets
Movements in deferred tax assets
Increase in income tax receivable
Increase/(decrease) in trade and other payables
(Decrease)/ increase in billings in advance
Movements in income tax payable
Movements in deferred tax liabilities
Movements in provisions
Net cash inflow from operating activities
NOTES
27
13
CONSOLIDATED
2019
$’M
457.3
36.7
494.0
(2.2)
491.8
164.0
70.1
23.1
18.0
8.7
(2.7)
3.4
-
3.1
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)
287.7
149.9
(283.6)
(15.6)
12.8
(17.6)
237.9
(1.5)
4.2
(11.7)
23.7
236.3
198.4
10.0
65.1
(0.9)
(163.3)
2.9
(2.9)
(25.3)
25.8
259.7
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 $3.8 million (2018: $1.5 million).
Included within procurement assets are cash and cash equivalents of $36.7 million (2018: $20.8 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 27). Restricted cash is held in
relation to guarantees (refer note 25(A)) and financing activities.
Worley Annual Report 2019
77
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
Movement in impairment allowance in respect of trade receivables and contract assets during the year was as
follows:
Balance at the beginning of the financial year as calculated under AASB 139
Additional recognition of the expected credit loss allowance on adoption of AASB 9 on 1 July 2019
Balance at beginning of the financial year as calculated under AASB 9
Additions through business combinations
Net remeasurement of loss allowance
Amounts written off against the opening allowance
Reclassification to non-current
Differences arising on translation of foreign operations
Balance at the end of the financial year
NON-CURRENT TRADE RECEIVABLES1
Trade receivables
Unbilled contract revenue
Allowance for impairment of trade receivables
OTHER ASSETS
Other assets
Amounts receivable from associates and related parties
NOTES
CONSOLIDATED
2019
$’M
2018
$’M
1,471.4
1,325.3
69.7
(123.8)
(70.4)
2,672.2
86.0
5.4
91.4
47.5
8.7
(11.4)
(14.5)
2.1
123.8
132.1
74.0
(14.5)
191.6
171.1
48.1
219.2
748.6
526.4
27.8
(86.0)
(45.7)
1,171.1
80.7
-
80.7
3.4
4.7
(4.2)
-
1.4
86.0
14.2
14.7
-
28.9
101.3
46.6
147.9
27
31(B)
Significant movements in unbilled contract revenue are primarily due to business combinations (refer note 21) as well as normal trading activity. Additionally,
a portion of trade receivables and unbilled contract revenue was reclassified to non-current1 during the financial year ended 30 June 2019.
SIGNIFICANT MOVEMENTS IN IMPAIRMENT ALLOWANCE
Apart from additions through business combinations, there has been no significant movements in the impairment allowance,
RECOGNITION AND MEASUREMENT
A trade receivable is recognized when the goods and services are delivered as this is the point in time that the consideration is unconditional because only the
passage of time is required before the payment is due. Trade receivables are generally on terms of 30 to 60 days. Receivables are stated with the amount of
GST included.
Unbilled contract revenue is initially recognized when the Group provides services or procures goods for a customer before the customer pays consideration
or before a payment is due. Unbilled contract revenue represents the Group’s contract assets at the reporting date. These assets are reclassified to trade
receivables when the customer is billed as stipulated in the contract, i.e. when the rights to consideration become unconditional. Unbilled contract revenue is
stated at the aggregate of contract costs incurred to date plus recognized profits less recognized losses and progress billings.
Trade and other receivables are measured at amortised cost as they are held to collect contractual cash flows that consist solely of payments of principals
and interest on the principal amounts outstanding. At initial recognition, the Group measures Trade and other receivables at transaction value with
subsequent measurement at amortized cost.
An allowance for impairment 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. The Group also assesses on a forward-looking basis the expected credit losses associated with its trade
and other receivables carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables and unbilled contract revenue, the group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses
to be recognized from initial recognition of the receivables.
1 Non-current trade receivables and unbilled contract revenue relate to projects where recovery is expected to take greater than twelve months and $47.3m of non-current
payables as at 30 June 2019 relate to these non-current trade receivables and unbilled contract revenue (30 June 2018: nil).
78
Worley Annual Report 2019
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
Trade payables1
Other payables
NOTES
31(B)
27
CONSOLIDATED
2019
$’M
2018
$’M
885.0
454.7
13.4
303.6
298.1
1.0
(71.6)
1,884.2
47.3
-
47.3
317.0
252.8
13.4
118.6
125.9
1.3
(39.8)
789.2
-
29.8
29.8
Significant movements in billings in advance are primarily due to business combinations (refer note 21) as well as normal trading activity. Additionally, a
portion of trade payables was reclassified to non-current during the financial year ended 30 June 2019.
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 measured 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.
Billings in advance or unearned revenue represent the Group’s obligation to transfer goods or services to a customer for which the Group has billed the
customer or received advance consideration from the customer. Billings in advance/unearned revenue are recognized as revenue when the Group performs
under the contract. Billings in advance are classified as measured at amortized cost subsequently to their initial recognition at fair value.
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
CONSOLIDATED
2019
$’M
2018
$’M
5,267.8
(200.2)
5,067.6
1,079.7
(222.6)
857.1
86.1
(81.5)
4.6
420.3
(251.9)
168.4
43.1
(22.9)
20.2
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
6,117.9
2,282.0
1 Non-current payables of $47.3m (2018: nil) relate to non-current trade receivables and unbilled contract revenue on projects where recovery is expected to take greater than
twelve months as disclosed in note 8.
Worley Annual Report 2019
79
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
10. INTANGIBLE ASSETS (CONTINUED)
RECONCILIATIONS
Reconciliations of intangible assets at the beginning and end of the current and previous financial years are set out below:
Balance at 1 July 2018
Additions through business combinations
Additions
Amortization
Differences arising on translation of foreign operations
Balance at 30 June 2019
Balance at 1 July 2017
Additions through business combinations
Additions
Amortization
Differences arising on translation of foreign operations
Balance at 30 June 2018
CUSTOMER CONTRACTS
AND
RELATIONSHIPS
$’M
CONSOLIDATED
TRADE
NAMES
$’M
COMPUTER
SOFTWARE
$’M
66.8
814.1
-
(24.7)
0.9
857.1
14.4
62.5
-
(12.5)
2.4
66.8
6.4
-
-
(1.7)
(0.1)
4.6
8.2
-
-
(1.7)
(0.1)
6.4
130.2
55.3
16.8
(34.1)
0.2
168.4
141.1
-
18.6
(29.5)
-
130.2
GOODWILL
$’M
2,068.0
2,904.8
-
-
94.8
5,067.6
1,832.8
174.6
-
-
60.6
2,068.0
OTHER
$’M
10.6
-
10.2
(0.6)
-
20.2
6.1
-
7.6
(3.1)
-
10.6
TOTAL
$’M
2,282.0
3,774.2
27.0
(61.1)
95.8
6,117.9
2,002.6
237.1
26.2
(46.8)
62.9
2,282.0
RECOGNITION AND MEASUREMENT
Goodwill
Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired at the time of acquisition of a business or
shares in controlled entities or associates. Goodwill on acquisition of controlled entities is included in intangible assets and goodwill on acquisition of
associates is included in investments in associates. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity
sold.
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 4% 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.
80
Worley Annual Report 2019
10. INTANGIBLE ASSETS (CONTINUED)
KEY ESTIMATES
As at 30 June 2019, the purchase price allocation of ECR remains provisional, and goodwill recognized on the acquisition of ECR of $2,904.8 million cannot be
reasonably allocated by CGUs as the acquisition was significant and completion occurred close to year end. The Group will complete the ECR goodwill
allocation within the next 12 months in accordance with the accounting standards.
As a result of the acquisition of ECR and the restructure of the Group operating model, the composition of each CGU changed. The goodwill, other than
goodwill originated on the acquisition of ECR, has been reallocated to the revised CGUs and the key assumptions used for the value in use impairment testing
are as follows:
2019
Opening balance (as at 26 April 2019)
Closing balance - allocated goodwill
Risk-weighted pre-tax discount rate
Risk-adjusted growth rate beyond five years
ENERGY &
CHEMICAL
RESOURCES
$’M
MINING,
MINERALS AND
METAL SERVICES
$’M
MAJOR PROJECTS
& INTEGRATED
SOLUTIONS
$’M
1,018.3
1,034.3
13.7%
2.5%
81.0
82.2
19.3%
2.5%
825.7
838.6
12.3%
2.5%
ADVISIAN
$’M
204.3
207.5
11.9%
2.5%
Prior to the acquisition of ECR on 26 April 2019, the Group’s CGU’s used for goodwill allocation and the key assumptions used for the value in use impairment
testing were as follows:
2018
Services - Americas
Services - Australia, Pacific, Asia and China
Services - Europe. Middle East, Africa
Major Projects and Integrated Solutions
Advisian
GOODWILL
$’M
PRE-TAX
DISCOUNT
% PA
313.7
526.9
368.7
591.3
267.4
12.2
13.3
13.4
11.6
12.8
In the FY2018 the risk-adjusted growth rate beyond 5 years was 3.0% across all CGU’s presented above.
SENSITIVITY ANALYSIS
The combined fair value in the all CGUs (excluding fair value of ECR) exceeds the carrying value by $1,085.1 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 0.5% 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.
11. PROVISIONS
CURRENT
Employee benefits
Project losses
Insurance
Onerous leases
Warranty
Other
NON-CURRENT
Employee benefits
Onerous leases
Warranty
Other
CONSOLIDATED
2019
$’M
2018
$’M
355.3
120.9
41.1
25.3
7.0
49.6
599.2
71.8
30.7
15.0
6.2
123.7
180.1
86.3
22.1
14.7
8.5
6.8
318.5
30.3
24.8
10.1
1.5
66.7
Worley Annual Report 2019
81
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11. PROVISIONS (CONTINUED)
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 2018
Provisions from acquired entities
Additional provisions
Transfers
Release of unused provision
Amounts utilized
Differences arising from translation of foreign operations
Balance at 30 June 2019
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
NON-CURRENT
Balance at 1 July 2018
Provisions from acquired entities
Transfers
Additional provisions
Release of unused provision
Amounts utilized
Differences arising from translation of foreign operations
Balance at 30 June 2019
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
CONSOLIDATED
EMPLOYEE
BENEFITS
$’M
PROJECT
PROVISIONS
$’M
INSURANCE
$’M
ONEROUS
LEASES
$’M
WARRANTIES
$’M
OTHER
$’M
180.1
156.1
212.0
-
(6.6)
(189.3)
3.0
355.3
170.8
1.1
228.3
(70.6)
(154.3)
4.8
180.1
86.3
26.3
27.9
-
(1.2)
(19.7)
1.3
120.9
44.4
21.2
29.9
(4.0)
(6.2)
1.0
86.3
22.1
18.1
9.5
-
-
(9.5)
0.9
41.1
25.9
-
-
(2.7)
(0.3)
(0.8)
22.1
14.7
10.0
17.1
-
(4.2)
(11.8)
(0.5)
25.3
20.8
-
7.2
(1.9)
(12.2)
0.8
14.7
8.5
2.8
1.6
-
(1.0)
(5.2)
0.3
6.8
38.6
5.0
5.0
(0.4)
(5.4)
-
7.0
49.6
14.3
-
8.2
(5.6)
(8.8)
0.4
6.4
0.4
0.8
(1.1)
(0.2)
0.5
8.5
6.8
CONSOLIDATED
EMPLOYEE
BENEFITS
$’M
ONEROUS
LEASES
$’M
WARRANTIES
$’M
OTHER
$’M
30.3
37.5
-
3.3
-
-
0.7
71.8
31.7
5.8
-
(8.2)
1.0
30.3
24.8
20.3
(5.0)
-
(9.6)
-
0.2
30.7
22.6
9.7
(1.7)
(6.2)
0.4
24.8
10.1
-
-
4.4
-
-
0.5
15.0
4.2
5.8
-
-
0.1
10.1
1.5
4.5
-
-
-
-
0.2
6.2
3.1
-
-
(1.6)
-
1.5
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 provisions
Where additional costs are expected to be incurred on a project but where timing and exact magnitude are uncertain, a provision is recognized using
management's best estimate based on the project circumstances. Additionally, 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.
82
Worley Annual Report 2019
11. PROVISIONS (CONTINUED)
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
The Group provides a general warranty for rework which are accounted for in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets.
The provision is estimated having regard to prior 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.
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 2019 and 30 June 2018
was as follows:
Total interest bearing loans and borrowings1
Less: derivatives2
Less: cash and cash equivalents3
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.
CONSOLIDATED
2019
$’M
2,153.1
(66.1)
(494.0)
1,593.0
6,018.5
20.9%
2018
$’M
1,008.1
(63.2)
(282.4)
662.5
2,212.8
23.0%
1 Excluding capitalized borrowing costs.
2 Only includes mark-to-market cross currency swaps.
3 Includes procurement cash.
Worley Annual Report 2019
83
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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
Finance lease liability
Capitalized borrowing costs
CONSOLIDATED
2019
$’M
107.0
57.1
2.2
0.1
(1.1)
165.3
542.2
1,444.4
0.1
(13.7)
1,973.0
2018
$’M
-
31.7
4.5
0.1
(0.3)
36.0
618.7
353.1
-
(8.7)
963.1
In February 2019, the Group refinanced its core syndicated debt facility as a result of the acquisition of ECR. The new multi-currency facility led by Wells
Fargo Bank, HSBC Bank and Standard Chartered Bank consists of a US$500 million revolving credit facility and a $800 million term loan. The facility matures
in February 2024.
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 175.0
DATE OF ISSUE
September 2012
September 2012
March 2011
DATE OF MATURITY
September 2022
September 2019
March 2021
FIXED COUPON PER ANNUM
4.00%
3.45%
5.56%
Cross currency swaps have been entered into, swapping USD 195.0 million (2018: USD 195.0 million) of notes payable into CAD 194.3 million (2018: CAD
194.3 million). This represents 42.9% (2018: 42.9%) 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.
84
Worley Annual Report 2019
14. CHANGES IN LIABILITIES AND ASSETS ARISING FROM FINANCING ACTIVITIES
The movements in financial liabilities and related financial assets are as follows:
2019
Current interest bearing loans and borrowings
Non-current interest bearing loans and borrowings
Finance lease liability
Liabilities
Derivative asset
Assets
2018
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
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
RECLASSIFICATION
$'M
CASHFLOWS
$'M
FOREIGN EXCHANGE
MOVEMENTS
$'M
FAIR VALUE AND
OTHER
$'M
102.0
(102.0)
-
-
-
-
-
-
-
-
-
-
16.6
1,061.8
-
1,078.4
-
-
(238.5)
102.8
(0.1)
(135.8)
(31.0)
(31.0)
11.5
55.0
-
66.5
0.5
0.5
4.5
36.2
-
40.7
1.9
1.9
-
-
-
-
2.4
2.4
(3.0)
-
-
(3.0)
4.6
4.6
15. ISSUED CAPITAL
Ordinary shares, fully paid1
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 amendments2
Ordinary shares issued from WorleyParsons Limited Plans Trust
Less: transaction costs of equity issue
2019
NUMBER OF SHARES
2018
NUMBER OF SHARES
$’M
CONSOLIDATED
520,041,806
1
520,041,807
2019
NUMBER OF
SHARES
273,936,033
244,749,038
60,000
(60,000)
1,205,277
151,459
-
5,282.9
-
273,936,032
1
5,282.9
273,936,033
2018
NUMBER OF SHARES
$’M
1,589.9
3,744.9
1.6
(1.6)
5.1
-
(57.0)
248,189,087
24,788,418
267,475
(267,475)
861,160
97,368
-
Balance at the end of the financial year
520,041,807
5,282.9
273,936,033
AS AT
30 JUNE
$'M
166.3
1,986.6
0.1
2,153.0
66.1
66.1
36.2
971.8
0.1
1,008.1
63.2
63.2
$’M
1,589.9
-
1,589.9
$’M
1,268.5
322.0
7.2
(7.2)
5.7
-
(6.3)
1,589.9
In the current financial year, the Group issued 186.6 million shares at $15.56 each to fund the ECR acquisition. The issue was a 1 for 1.47 fully underwritten,
pro-rata, accelerated non-renounceable entitlement offer for $2.9 billion. The attributable costs of the issuance of shares were $57.0 million and have been
charged to equity as a reduction in issued capital. Additionally, 58.2 million shares valued $14.47 each on the date of the transaction were issued to Jacobs
Engineering Group Inc as part of the ECR purchase consideration totalling $842.1 million (refer to note 21 (B)).
During the prior year, 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 $6.3 million
and were 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.
1 Included in ordinary shares are 1,036,193 (2018: 1,096,193) 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 nil (2018: 151,459) shares in the Company, which have been consolidated and eliminated in accordance with the accounting standards.
2 Includes nil (2018: 44,673) employee bonus shares and 127,825 SPPR amendments (2018: 34,773)
Worley Annual Report 2019
85
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
15. ISSUED CAPITAL (CONTINUED)
(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 2019 60,000 (2018: 267,475) 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.
86
Worley Annual Report 2019
NUMBER OF
PERFORMANCE RIGHTS AND
SPPR
2019
2018
3,571,039
2,404,637
(1,299,058)
(307,185)
3,137,954
1,598,773
(781,714)
(383,974)
4,369,433
3,571,039
nil
$nil
nil
$nil
15. ISSUED CAPITAL (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 2019 is represented by:
• 198,277 performance rights, vesting on 30 September 2019 and expiring on 28 October 2022;
• 312,954 performance rights, vesting on 30 September 2019 and expiring on 30 October 2023;
• 756,527 performance rights, vesting on 30 September 2019 and expiring on 29 October 2024;
• 32,454 performance rights, vesting on 30 September 2019 and expiring on 29 October 2025;
• 525,222 performance rights, vesting on 30 September 2019 and expiring on 27 April 2026;
• 165,397 performance rights, vesting on 30 September 2020 and expiring on 28 October 2023;
• 262,044 performance rights, vesting on 30 September 2020 and expiring on 30 October 2024;
• 55,807 performance rights, vesting on 30 September 2020 and expiring on 19 October 2025;
• 514,774 performance rights, vesting on 30 September 2020 and expiring on 29 October 2025;
• 511,147 performance rights, vesting on 30 September 2020 and expiring on 27 April 2026;
• 239,337 performance rights, vesting on 30 September 2021 and expiring on 29 October 2024;
• 186,863 performance rights, vesting on 30 September 2021 and expiring on 29 October 2025;
• 289,334 performance rights, vesting on 30 September 2021 and expiring on 27 April 2026;
• 175,773 performance rights, vesting on 30 September 2022 and expiring on 29 October 2025;
• 5,143 performance rights, vesting on 30 September 2022 and expiring on 27 April 2026;
• 129,067 performance rights, vesting on 30 September 2022 and expiring on 27 April 2026;
• 4,653 performance rights, vesting on 5 April 2021 and expiring on 27 April 2026; and
• 4,660 performance rights, vesting on 5 April 2022 and expiring on 27 April 2026.
Weighted average remaining contractual life
The weighted average remaining life for the rights outstanding as at 30 June 2019 is 5.9 years (2018: 5.4 years).
Weighted average fair value
The weighted average fair value of rights granted during the financial year was $13.30 (2018: $14.51).
KEY ESTIMATES
Pricing model
The following table lists the inputs to the models used for the financial years ended 30 June 2019 and 30 June 2018:
Dividend yield (%)
Expected volatility (%)1
Risk-free interest rate (%)
Expected life of rights (years)
Rights exercise price ($)
Weighted average share price at measurement date ($)
PERFORMANCE RIGHTS
PLAN TSR, EPS AND SPPR
2019
2018
3.03-3.52
30
1.96-2.05
2-4
nil
14.59
1.77-2.28
55
1.75-2.09
2-4
nil
14.01
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.
Worley Annual Report 2019
87
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
16. RESERVES
Foreign currency translation reserve
Hedge reserve
Performance rights reserve
Defined benefits reserve
Acquisition reserve
CONSOLIDATED
2019
$’M
2018
$’M
(261.1)
6.4
55.3
(4.7)
(63.5)
(267.6)
(263.0)
4.6
44.6
-
(62.6)
(276.4)
(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 2019 (2018: 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. The following effectiveness criteria are applied:
• An economic relationship exists between the hedged item and hedging instrument;
• The effect of credit risk does not dominate the fair value changes; and
• The hedge ratio applied for hedge accounting purposes should be the same as the as the hedge ratio used for risk management purposes.
(C) PERFORMANCE RIGHTS RESERVE
The performance rights reserve is used to recognize the fair value of performance rights issued but not vested.
(D) DEFINED BENFITS RESERVE
The defined benefits reserve is used for remeasurements of the net defined benefit liability, which comprise actual gains and losses, the return on plan
assets (if applicable) and any asset ceilings where applicable.
(E) 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 decreased its share in Jacobs Matasis Pty
Ltd from 74% (acquired 26 April 2019) to 65% in May 2019. The Group increased its share of WorleyParsons Oman Engineering LLC to 100% during the year
ended 30 June 2018.
88
Worley Annual Report 2019
17. EARNINGS PER SHARE
In the reporting period the Group issued 186.6 million shares at $15.56 each to fund the ECR acquisition. The issue was a 1 for 1.47 fully underwritten, pro-
rata, accelerated non-renounceable entitlement offer for $2.9 billion (30 June 2018: the Group issued 24.8 million shares at $13.0 each to fund the UK
Integrated Solutions acquisition).
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 1.03 (30 June 2018: 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 share1
Performance rights which are considered dilutive1
CONSOLIDATED
2019
CENTS
2018
CENTS RESTATED
36.4
36.2
$’M
151.9
22.6
22.5
$’M
62.2
Number
417,630,937
1,876,622
Number
274,735,278
2,253,001
Adjusted weighted average number of ordinary securities used in calculating diluted earnings per share
419,507,559
276,988,279
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 257,920 (2018: 253,228 - adjusted by a bonus factor of 1.03).
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 and performance rights considered dilutive is calculated by multiplying the original weighted average number of shares by the above mentioned
bonus factor of 1.03.
Worley Annual Report 2019
89
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
18. DIVIDENDS
(A) FINAL DIVIDEND PROPOSED
Dividend in respect of the six months to 30 June 2019:
15.0 cents per share (unfranked)
Dividend in respect of the six months to 30 June 2018:
15.0 cents per share (unfranked)
CONSOLIDATED
2019
$’M
2018
$’M
78.0
-
-
41.1
The directors have resolved to pay a final dividend of 15.0 cents per fully paid ordinary share, including exchangeable shares, unfranked (2018: 15.0 cents per
share). The Company will make total dividend payments of 27.5 cents per share for the financial year ended 30 June 2019 (2018: 25.0 cents per share). The
final dividend will be paid on 25 September 2019 for shareholders on the register at the record date, being 28 August 2019.
In accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the aggregate amount of the proposed final dividend of $78.0 million is
not recognized as a liability as at 30 June 2019.
(B) DIVIDENDS PAID DURING THE FINANCIAL YEAR
12.5 cents per share (unfranked) dividend in respect of the six months to 31 December 2018
15.0 cents per share (unfranked) dividend in respect of the six months to 30 June 2018
10.0 cents per share (unfranked) dividend in respect of the six months to 31 December 2017
Nil dividend in respect of the six months to 30 June 2017
57.7
41.1
n/a
n/a
98.8
n/a
n/a
27.3
-
27.3
19. FINANCIAL RISK MANAGEMENT
(A) OVERVIEW
The Group’s principal financial instruments comprise receivables, payables, bank loans and overdrafts, finance leases, cash and short term deposits and
derivatives. The Group has exposure to the following risks from its use of financial instruments:
• credit risk;
• liquidity risk; and
• market risk.
This note presents information about the Group’s exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk,
and the management of capital. Quantitative disclosures are included throughout this financial report.
The Board has overall responsibility for the establishment and oversight of the risk management framework. The Audit and Risk Committee assists the
Board in overseeing the integrity of the Group’s financial reporting risk management framework and internal controls.
Risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks
and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The
Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.
The Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and
procedures, the results of which are reported to the Committee.
(B) CREDIT RISK
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. 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.
90
Worley Annual Report 2019
19. FINANCIAL RISK MANAGEMENT (CONTINUED)
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 expected credit losses that represents its estimate of expected credit losses in respect of trade and other
receivables.
Guarantees
Details of outstanding guarantees are provided in note 25A. 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, net of credit loss allowance
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:
0-60 days
Past due 61-120 days
Gross aged receivables 0-120 days1
Gross receivables more than 121 days
Total
GROSS
2019
$’M
2,201.0
329.2
2,530.2
542.3
3,072.5
IMPAIRMENT
ALLOWANCE
2019
$'M
-
-
(5.7)
(132.6)
(138.3)
CARRYING AMOUNT
CONSOLIDATED
2019
$’M
494.0
2,934.2
171.1
48.1
69.4
3,716.8
GROSS
2018
$’M
880.6
55.0
935.6
396.1
1,331.7
2018
$’M
282.4
1,245.7
101.9
46.6
65.4
1,742.0
IMPAIRMENT
ALLOWANCE
2018
$'M
-
-
-
(86.0)
(86.0)
The Group applies the simplified approach under AASB 9 to measure expected credit losses for trade receivables and unbilled contract revenue which applies
a lifetime expected loss model. The Group uses judgement in making the assumptions and selecting the inputs to the impairment calculation, based on the
Group’s past history, existing market conditions as well as forward looking estimates.
The allowance amounts 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.
1 FY2019 includes $5.7 million additional expected credit loss allowance recognized on adoption of AASB 9 on 1 July 2018.
Worley Annual Report 2019
91
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19. FINANCIAL RISK MANAGEMENT (CONTINUED)
(C) LIQUIDITY RISK
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Group’s reputation.
The Group ensures that it has sufficient cash on demand to meet expected operational expenses including the servicing of financial obligations; this excludes
the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
The Group has unrestricted access at balance date to the following lines of credit.
The Group's main facility was refinanced in February 2019 as detailed in note 13.
NOTES
CONSOLIDATED
2019
$’M
2018
$’M
UNSECURED FACILITIES
Total facilities available:
Loan facilities
Overdraft facilities
Bank guarantees and letters of credit
Facilities utilized at balance date:
Loan facilities1
Overdraft facilities
Bank guarantees and letters of credit
Facilities available at balance date:
Loan facilities
Overdraft facilities
Bank guarantees and letters of credit
The maturity profile in respect of the Group's total unsecured loan and overdraft facilities is set out below:
Due within one year
Due between one and four year(s)
Due after four years
SECURED FACILITIES
Total facilities available:
Finance lease facilities
Facilities utilized at balance date:
Finance lease facilities
The maturity profile in respect of the Group's secured facilities is set out below:
Due within one year
Due between one and four year(s)
2,806.1
155.7
1,539.5
4,501.3
2,150.7
2.2
894.0
3,046.9
655.4
153.5
645.5
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
1,454.4
1,370.5
599.8
542.2
1,819.8
2,961.8
87.6
1,310.6
278.8
1,677.0
0.2
0.2
0.2
0.2
0.1
0.1
0.2
0.1
0.1
0.1
0.1
0.1
-
0.1
1 Excludes capitalized borrowing costs.
92
Worley Annual Report 2019
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 2019
Due within one year
Due between one and four year(s)
Due after four years
As at 30 June 2018
Due within one year
Due between one and four year(s)
Due after four years
TRADE AND OTHER
PAYABLES
$’M
AMOUNTS PAYABLE
TO ASSOCIATES AND
RELATED PARTIES
$’M
INTEREST BEARING
LOANS AND
BORROWINGS
$’M
EXPECTED
FUTURE
INTEREST PAYMENTS
$’M
DERIVATIVES
$’M
CONSOLIDATED
886.0
47.3
-
933.3
318.3
29.8
-
348.1
13.4
-
-
13.4
13.4
-
-
13.4
166.4
542.3
1,444.4
2,153.1
22.7
706.6
278.8
1,008.1
0.9
61.6
-
62.5
-
40.4
46.9
87.3
2.2
-
-
2.2
3.4
-
-
3.4
TOTAL
FINANCIAL
LIABILITES
$’M
1,068.9
651.2
1,444.4
3,164.5
357.8
776.8
325.7
1,460.3
(D) MARKET RISK
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income or the
value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimizing the return. The Group enters into derivatives, and also incurs financial liabilities, in order to manage market risk. Generally, the
Group seeks to apply hedge accounting in order to reduce volatility in the profit and loss.
(i) Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies
of Group entities. In the ordinary course of business, the Group structures its contracts to be in the functional currency of the country where the work is
performed and costs incurred.
The Group uses forward exchange contracts and foreign currency options to hedge its currency risk, most with a maturity of less than one year from the
reporting date. When necessary, forward exchange contracts are rolled over at maturity.
Interest on loans and borrowings is denominated in currencies that match the cash flows generated by the underlying operations for the Group resulting in
an economic hedge. Interest is primarily AUD, CAD, GBP and USD denominated.
A number of the Group controlled entities have a functional currency other than AUD. The exchange gains or losses on the net equity investment of foreign
operations are reflected in the foreign currency translation reserve within the equity attributable to members of WorleyParsons Limited. Currency exposure
arising from the net assets of the Group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.
(1) CROSS CURRENCY SWAPS
The Group uses cross currency swaps to hedge its foreign currency interest rate risk, most with a maturity of greater than one year from the reporting date.
At balance date, the details of cross currency swaps (CCS) were as follows:
Contracts to buy USD and sell CAD
Maturing 13 September 2019
Maturing 24 March 2021
WEIGHTED AVERAGE
EXCHANGE RATE
AMOUNT
RECEIVABLE/(PAYABLE)
AMOUNT
RECEIVABLE/(PAYABLE)
2019
1.01
0.99
2018
1.01
0.99
2019
$’M
2019
$’M
2018
$’M
2018
$’M
USD 75.0
USD 120.0
CAD (76.0)
CAD (118.3)
USD 75.0
USD 120.0
CAD (76.0)
CAD (118.3)
The following gains and losses have been deferred at balance date:
Fair value gain on cross currency hedge
Foreign exchange loss on hedge relationship
Net gain/(loss) pre-tax in hedge relationship
CONSOLIDATED
2019
$’M
66.1
(65.2)
0.9
2018
$’M
63.2
(69.1)
(5.9)
The timescale (future cash flow timings) of the CCS contracts is in line with the forecasted (and contractual) cash flows in foreign currencies (the coupon and
debt repayments), with this 1:1 economic relationship which makes this an effective hedge.
Worley Annual Report 2019
93
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19. FINANCIAL RISK MANAGEMENT (CONTINUED)
(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 2019
Buy AUD and Sell CAD
Buy CAD Sell AUD
Buy AUD and Sell USD
Buy EUR and Sell AUD
Buy EUR and Sell USD
Buy GBP and Sell USD
Buy GBP and Sell AUD
Buy GBP and Sell KWD
Buy GBP and sell PLN
Buy IDR and Sell USD
Buy INR and Sell USD
Buy MYR and Sell AUD
Buy NOK and Sell AUD
Buy NOK and Sell CAD
Buy NOK and Sell GBP
Buy NOK and Sell USD
Buy SGD and Sell AUD
Buy USD and Sell GBP
Buy USD and Sell NOK
Maturing in the next 6-12 months to 30 June 2020
Buy EUR and Sell USD
Buy IDR and Sell USD
Maturing in the next 12-18 months to 31 December 2020
Buy IDR and Sell USD
Maturing in the next 18-24 months to 30 June 2021
Buy IDR and Sell USD
WEIGHTED AVERAGE
EXCHANGE RATE
AMOUNT
RECEIVABLE/(PAYABLE)
AMOUNT
RECEIVABLE/(PAYABLE)
2019
2018
2019
$’M
2019
$’M
2018
$’M
2018
$’M
1.1
1.0
1.4
-
0.9
0.8
-
-
-
-
-
-
-
6.4
11.0
8.5
1.0
-
-
-
-
-
0.7
0.8
0.7
0.6
2.5
0.2
13,589.6
65.1
3.2
6.2
6.3
-
8.0
1.0
1.3
0.1
AUD 26.9
-
AUD 38.5
-
EUR 31.8
GBP 37.2
-
-
-
-
-
-
-
NOK 80.0
NOK 97.6
NOK 375.0
SGD 12.7
-
-
CAD (24.7)
-
USD (26.8)
-
USD (36.2)
USD (48.2)
-
-
-
-
-
-
-
CAD (12.3)
GBP (8.9)
USD (43.8)
AUD (13.4)
-
-
-
CAD 25.3
-
EUR 7.5
EUR 7.3
GBP 59.9
GBP 16.5
GBP 1.9
GBP 5.0
IDR 25,592.4
INR 376.0
MYR 14.6
NOK 15.0
NOK 38.0
-
NOK 47.0
SGD 8.0
USD 7.0
USD 13.1
-
AUD (25.7)
-
AUD (11.8)
USD (8.5)
USD (79.6)
AUD (29.6)
KWD (0.8)
PLN (24.2)
USD (1.8)
USD (5.7)
AUD (4.9)
AUD (2.5)
CAD (6.1)
-
USD (5.7)
AUD (7.9)
GBP (5.3)
NOK (106.0)
0.9
14,453.1
-
13,589.6
EUR 2.8
IDR 27,428.4
USD (3.2)
USD (1.8)
-
IDR 27,428.4
-
USD (1.8)
14,453.1
13,589.6
IDR 27,671.4
USD (1.8)
IDR 27,671.4
USD (1.8)
14,453.1
13,589.6
IDR 28,013.4
USD (1.8)
IDR 27,671.4
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 timescale (future cash flow timings) of the foreign exchange forward contracts is in line with future detailed forecasted cash flows in foreign currencies.
Start dates and completion dates are tracked and the transactions are based on won projects and are highly probably to occur, resulting in immaterial
ineffectiveness. The change in fair values between the hedging instrument and item are materially the same, with the proportion of the risk that is hedged
been at or near 100%.
The gains and losses deferred in the Statement of Financial Position were as follows:
Effective hedge – unrealized gains
Effective hedge – unrealized losses
Net unrealized gains/(losses), pre‑tax
94
Worley Annual Report 2019
CONSOLIDATED
2019
$’M
1.7
(0.7)
1.0
2018
$’M
-
(4.0)
(4.0)
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 2019
Cash and cash equivalents
Trade receivables
Trade payables
Gross Statement of Financial Position exposure
As at 30 June 2018
Cash and cash equivalents
Trade receivables
Trade payables
Gross Statement of Financial Position exposure
CAD
$’M
2.8
1.5
(1.2)
3.1
0.3
-
(0.7)
(0.4)
GBP
$’M
7.0
2.3
(4.6)
4.7
4.4
3.1
(4.6)
2.9
CONSOLIDATED
USD
$’M
81.6
80.3
(93.7)
68.2
53.6
49.2
(67.5)
35.3
EUR
$’M
12.0
18.0
(11.3)
18.7
3.6
20.7
(5.5)
18.8
OTHER1
$’M
13.5
14.4
(6.1)
21.8
15.0
16.9
(16.0)
15.9
(4) CURRENCY SENSITIVITY ANALYSIS
A 10% weakening of the Australian dollar against the following currencies at 30 June 2019 in relation to the preceding foreign currency exposures would have
increased equity and profit by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The
analysis is performed and shown on the same basis for 2018.
CONSOLIDATED
2019
2018
EFFECTS IN MILLIONS OF AUD
EQUITY
PROFIT
EQUITY
PROFIT
CAD
GBP
USD
EUR
Other
-
-
-
-
-
0.3
0.6
7.6
2.4
1.5
-
-
-
-
-
0.0
0.4
3.7
2.3
1.1
A 10% strengthening of the Australian dollar against the above currencies at 30 June 2019 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
2019
0.9470
0.5528
0.7154
0.6268
2018
0.9842
0.5763
0.7756
0.6502
2019
0.9180
0.5530
0.7008
0.6164
2018
0.9749
0.5624
0.7354
0.6360
1 Represented in AUD currency millions as indicated.
Worley Annual Report 2019
95
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19. FINANCIAL RISK MANAGEMENT (CONTINUED)
(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.
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:
WEIGHTED
AVERAGE
INTEREST
RATE
% PA
FLOATING
INTEREST
RATE
$'M
1 YEAR
OR LESS
$'M
1 TO
2 YEAR(S)
$'M
2 TO
3 YEARS
$'M
3 TO
4 YEARS
$'M
4 TO
5 YEARS
$'M
MORE THAN
5 YEARS
$'M
NON-INTEREST
BEARING
$'M
TOTAL
$'M
AS AT 30 JUNE 2019
Cash and cash equivalents
Bank loans 1
Notes payable
Finance lease liabilities
AS AT 30 JUNE 2018
Cash and cash equivalents
Bank loans
Notes payable
Finance lease liabilities
3.0
4.4
4.5
4.1
3.5
4.4
4.5
4.2
494.0
-
-
-
282.4
-
-
-
-
57.1
107.0
0.1
-
31.7
-
0.1
-
-
-
-
249.7
292.5
0.1
-
-
102.0
-
-
-
353.1
237.9
-
-
-
-
-
-
-
-
-
-
1,444.4
-
-
-
-
278.8
-
-
-
-
-
-
-
-
-
-
494.0
- 1,501.5
-
-
-
-
-
-
649.2
0.2
282.4
384.8
618.7
0.1
As the largest component of interest bearing liabilities, being bank loans, is at floating interest rates, the effect of changes in interest rates by 1% will change
interest expense by approximately 1%. In FY2018, as the largest component of interest bearing liabilities, being notes payable, was at fixed interest rates, the
effect of changes in interest rates was 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 $2,197.7 million (2018: $1,060.7 million) and a carrying value of $2,153.1 million (2018: $1,008.1 million).
The Group uses the following hierarchy for determining the fair value of a financial asset or liability:
• Level 1 – the fair value is calculated using quoted prices in active markets; and
• Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices). The Group's interest bearing loans and borrowings and derivative instruments including interest rate swaps
and forward exchange contracts fall within Level 2 of the hierarchy.
Derivative instruments including interest rate swaps and forward exchange contracts are restated to fair values at each reporting date based on market
observable inputs such as foreign exchange spot and forward rates, interest rate curves and forward rate curves.
Fair values of the Group’s interest bearing loans and borrowings are determined by discounting future cash flows using period-end borrowing rates on loans
and borrowings with similar terms and maturity.
There were no transfers between Level 1 and 2, and no financial instruments were measured at Level 3 (where fair value is measured using unobservable
inputs for the asset or liability), for the periods presented in this report.
1 Excludes capitalized borrowing costs.
96
Worley Annual Report 2019
21. INVESTMENTS IN CONTROLLED ENTITIES
ENTITY
(A) SIGNIFICANT ENTITIES
Worley No 2 Pty Limited1
Worley Canada Services Ltd
WorleyCord Limted
WorleyParsons Engineering Pty Limited1
Worley Europe Limited
Worley Financial Services Pty Limited1
Worley Group Inc
Worley International Services Inc
Worley Oman Engineering LLC
Worley Services Pty Limited1
Rosenberg Worley AS
Beijing Maison Worley Engineering & Technology Co Limited
Worley Services UK Limited (Note 21B)
WorleyParsons Kazakhstan LLP
Acquired in FY2019 (refer to Note 21B)
Jacobs Consultancy Incorporated
Worley Field Services Incorporated
Worley Nederland BV
CH2M Hill Equipment Incorporated
Jacobs Engineering India Private Limited2
BENEFICIAL
INTEREST HELD BY
CONSOLIDATED
ENTITY
2019
%
100
100
100
100
100
100
100
100
100
100
100
80
100
100
100
100
100
100
100
2018
%
100
100
100
100
100
100
100
100
100
100
100
80
100
100
-
-
-
-
-
COUNTRY OF INCORPORATION
Australia
Canada
Canada
Australia
United Kingdom
Australia
USA
USA
Oman
Australia
Norway
China
United Kingdom
Kazakhstan
USA
USA
Netherlands
USA
India
In accordance with the accounting standards, the Group discloses only significant entities identified on the basis of materiality.
(B) ACQUISITION OF CONTROLLED ENTITIES
FY2019:
On 26 April 2019 the acquisition of ECR from Jacobs Engineering Group Inc was completed for a total consideration of $4.6 billion (net of cash acquired). ECR
is a global technical services provider across Hydrocarbons, Chemicals and Mining & Minerals with significant operations in the US, Canada, the Middle East
and India. The business has around 29,400 employees.
The financial report includes the results of ECR for the two-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 $34.5 million (this includes certain
transition costs), and the reported contribution to revenue was $1,253.6 million. If the acquisition had occurred on 1 July 2018, management estimates that
the contribution to the Group's profit after income tax would have been $207.0 million, and to revenue would have been $6,684.2 million for the year ended
30 June 2019.
The Group incurred acquisition related costs of $50.6 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.
FY2018:
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 $383.9 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 for the year ended 30 June 2018.
1 Entities subject to ASIC Corporations Instrument 2016/785.
2 As at 30 June 2019, the entity is still under a demerger process.
Worley Annual Report 2019
97
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21. INVESTMENTS IN CONTROLLED ENTITIES (CONTINUED)
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.
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 $1.9 million has been recognized from the
purchase price allocation and allocated to the Services-EMEA cash generating unit.
CONSOLIDATED
FAIR VALUE
RECOGNIZED ON ACQUISITION
ASSETS
Cash and cash equivalents
Trade receivables
Other receivables
Prepayments
Income tax receivable
Deferred tax assets
Equity accounted associates
Property, Plant and equipment
Computer software
Other assets
Total assets
LIABILITIES
Trade and other payables
Provisions
Defined benefit obligations
Deferred tax liabilities
Other liabilities
Total liabilities
Identifiable customer contracts and relationships
Identifiable intangibles - software
Deferred tax liability arising on intangible assets
Total identifiable net assets acquired at fair value
Non-controlling interests
Total identifiable net assets acquired at fair value, WorleyParsons' share
Goodwill arising on acquisition
Total consideration, excluding acquisition costs expensed
TOTAL CONSIDERATION
CASH CONSIDERATION PAID
Consideration in shares
Replacement performance rights
Total consideration
CASH FLOWS
CASH CONSIDERATION PAID
Cash and overdrafts included in the net assets acquired
Total investing activity outflow on the business combination
Transaction costs of the acquisition
Net cash outflow
PROVISIONAL
2019
$’M
249.8
1,461.7
69.2
43.9
16.0
51.8
80.3
497.3
9.7
30.0
2,509.7
(881.6)
(314.2)
(34.8)
(10.1)
-
(1,240.7)
814.1
45.6
(100.7)
2,028.0
(55.8)
1,972.2
2,904.8
4,877.0
4,032.7
842.1
2.2
4,877.0
4,032.7
(249.8)
3,782.9
50.6
3,833.5
FINAL
2018
$’M
64.6
259.1
-
8.2
8.4
-
-
5.3
-
4.4
350.0
(137.5)
-
-
-
(51.5)
(189.0)
62.5
-
(11.9)
211.6
-
211.6
172.3
383.9
383.9
-
-
383.9
383.9
(64.6)
319.3
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. As at 30 June 2019, goodwill has not been allocated to any CGUs as the acquisition was significant and completion occurred close to year end. The
Group will complete the ECR goodwill allocation within the next 12 months in accordance with the accounting standards. 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.
98
Worley Annual Report 2019
21. INVESTMENTS IN CONTROLLED ENTITIES (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.
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.
ENTITY
Significant investments
Jacobs Engineering SA (JESA)
DeltaAfrik Engineering Limited
TW Power Services Pty Limited
Nana WorleyParsons LLC
PRINCIPAL
PLACE OF
BUSINESS
Morocco
Nigeria
Australia
USA
PRINCIPAL ACTIVITY
Chemicals
Energy
Energy
Energy
Ranhill WorleyParsons Sdn Bhd
Malaysia
Energy & Chemicals
Other investments
OWNERSHIP INTEREST
CONSOLIDATED
CARRYING AMOUNT
CONSOLIDATED
2019
%
50
50
50
50
49
2018
%
-
50
50
50
49
2019
$’M
82.3
28.4
19.7
12.2
9.5
21.0
173.1
2018
$’M
-
21.8
21.1
11.0
8.9
18.5
81.3
Worley Annual Report 2019
99
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
22. EQUITY ACCOUNTED ASSOCIATES (CONTINUED)
(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
Acquired through business combinations
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 expense1
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
Movement in reserve
Balance at the end of the financial year
(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
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
2019
$’M
81.3
10.5
(7.8)
80.3
8.8
173.1
16.1
(5.6)
10.5
2018
$’M
77.3
9.7
(4.9)
-
(0.8)
81.3
12.5
(2.8)
9.7
183.0
170.6
(25.7)
8.8
(16.9)
89.0
10.5
(7.8)
91.7
2.6
2.1
326.5
65.4
(207.3)
(11.5)
173.1
173.1
(24.9)
(0.8)
(25.7)
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.
1 Includes impairment of intangible assets in an associate of $2.7 million in FY2018.
2 Revenue as defined in note 3, Operating segments.
100
Worley Annual Report 2019
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
Energy
OWNERSHIP INTEREST
CONSOLIDATED
2019
%
50
2018
%
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:
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
CONSOLIDATED
2019
$’M
18.9
59.2
78.1
78.1
70.1
70.1
70.1
8.0
2018
$’M
8.1
61.3
69.4
69.4
63.8
63.8
63.8
5.6
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.
Worley Annual Report 2019
101
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. 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
CONSOLIDATED
2019
$’M
2018
$’M
154.6
318.3
26.4
499.3
52.2
16.7
68.9
153.7
241.1
12.1
406.9
33.6
11.7
45.3
Commitments are disclosed net of the amount of GST payable to the taxation authority.
25. CONTINGENT LIABILITIES
(A) GUARANTEES
The Company is, in the normal course of business, required to provide guarantees and letters of credit on behalf of controlled entities, associates and related
parties in respect of their contractual performance related obligations.
These guarantees and letters of credit only give rise to a liability where the entity concerned fails to perform its contractual obligation.
Bank guarantees outstanding at balance date in respect of contractual performance
Commitments not recognized in the financial statements
CONSOLIDATED
2019
$’M
894.0
894.0
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.
102
Worley Annual Report 2019
26. 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 (2018: 15.0 cents per share).
In accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the aggregate amount of the proposed final dividend of $78.0 million is
not recognized as a liability as at 30 June 2019.
Unless disclosed elsewhere in the financial statements, no other material matter or circumstance has arisen since 30 June 2019 that has significantly
affected, or may significantly affect:
• the consolidated entity’s operations in future financial years;
• the results of those operations in future financial years; or
• the consolidated entity’s state of affairs in future financial years.
27. PROCUREMENT
In certain situations, the Group will enter into contracts with its customers which require the Group to procure goods and services on behalf of the customer.
Where the risks and rewards associated with the procurement activities are assumed by the Group, the revenues and expenses, and assets and liabilities are
recognized on a gross basis in the Statement of Financial Performance and Statement of Financial Position.
The following procurement revenues and costs, and assets and liabilities have been recognized on a gross basis in the Statement of Financial Performance
and Statement of Financial Position:
CONSOLIDATED
REVENUE AND EXPENSES1
Procurement revenue at margin
Procurement costs at margin
Procurement revenue at nil margin
Procurement costs at nil margin
ASSETS AND LIABILITIES
Cash and cash equivalents
Trade and other receivables
Trade and other payables
28. PROPERTY, PLANT AND EQUIPMENT
Land and buildings
At cost
Accumulated depreciation
Leasehold improvements
At cost
Accumulated amortization
Plant and equipment
At cost
Accumulated depreciation
IT equipment
At cost
Accumulated depreciation
Total property, plant and equipment
CONSOLIDATED
2019
$’M
2019
$’M
412.4
(384.0)
608.0
(608.0)
36.7
70.4
71.6
425.3
(58.3)
367.0
296.9
(228.1)
68.8
364.8
(273.5)
91.3
185.9
(161.6)
24.3
551.4
2018
$’M
337.9
(322.9)
94.4
(94.4)
20.8
45.7
39.8
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
1 Revenue and expenses exclude procurement revenue and expenses from associates.
Worley Annual Report 2019
103
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
28. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
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 2018
Additions through business combinations
Additions
Disposals
Other movements
Depreciation
Amortization
Differences arising on translation of foreign operations
Balance at 30 June 2019
Balance at 1 July 2017
Additions
Disposals
Other movements
Depreciation
Amortization
Differences arising on translation of foreign operations
Balance at 30 June 2018
CONSOLIDATED
LAND AND
BUILDINGS
$’M
LEASEHOLD
IMPROVEMENTS
$’M
PLANT AND
EQUIPMENT
$’M
COMPUTER
EQUIPMENT
$’M
9.9
359.2
0.2
(0.1)
-
(3.6)
-
1.4
367.0
4.9
3.0
(0.2)
3.1
(1.1)
-
0.2
9.9
17.1
45.4
17.0
(0.3)
(2.4)
-
(9.0)
1.0
68.8
18.6
6.1
(0.5)
(4.2)
-
(3.1)
0.2
17.1
22.4
73.6
7.7
(1.0)
2.3
(15.4)
-
1.7
91.3
24.5
10.3
(0.4)
2.0
(14.4)
-
0.4
22.4
4.9
19.1
6.3
(0.4)
0.1
(4.1)
-
(1.6)
24.3
4.3
4.0
-
(0.9)
(2.6)
-
0.1
4.9
TOTAL
$’M
54.3
497.3
31.2
(1.8)
-
(23.1)
(9.0)
2.5
551.4
52.3
23.4
(1.1)
-
(18.1)
(3.1)
0.9
54.3
RECOGNITION AND MEASUREMENT
Property, plant and equipment are stated at cost less accumulated depreciation, amortization and impairment, if any.
29. DEFERRED TAX
(A) DEFERRED TAX ASSETS
The balance comprises temporary differences attributable to:
Amounts recognized in the Statement of Financial Performance
Allowance for impairment of 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
104
Worley Annual Report 2019
CONSOLIDATED
2019
$’M
2018
$’M
7.8
49.2
3.8
40.0
77.3
16.1
16.6
126.8
3.3
9.4
0.7
(4.7)
346.3
(114.0)
232.3
8.3
240.6
201.6
51.8
(11.8)
(2.3)
1.3
240.6
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
29. DEFERRED TAX (CONTINUED)
(B) DEFERRED TAX LIABILITIES
The balance comprises temporary differences attributable to:
Amounts recognized in the Statement of Financial Performance:
Identifiable intangible assets and goodwill
Unbilled contract revenue
Property, plant and equipment
Unrealized foreign exchange gains
Prepayments
Other
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
2019
$’M
2018
$’M
160.6
29.2
3.8
3.0
5.0
21.1
222.7
(114.0)
108.7
1.3
110.0
10.9
110.8
(8.7)
(0.6)
(2.4)
110.0
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
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.
Worley Annual Report 2019
105
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. DEFINED BENEFIT PLANS
The Group operates defined benefit pension plans which requires contributions to be made to a separately administered fund. Also, the Group provides
certain post-employment healthcare benefits to employees (unfunded). All plans are closed to the new participants.
The balances in relation to defined benefit plans are as follows:
Amounts recognized in the Statement of Financial Position:
Net defined benefits liability
CONSOLIDATED
2019
$’M
41.5
2018
$’M
-
RECOGNITION AND MEASUREMENT
Defined benefit obligation calculation is performed by qualified actuaries using the projected credit method.
The Groups net obligation in respect of defined benefits plans is calculated separately for each plan by estimating the amount of future benefit that
employees have earned, discounted with the fair value of the plan assets deducted.
Remeasurements of the net defined benefit liability, which comprise actual gains and losses, the return on plan assets and any asset ceilings where
applicable are recognized in OCI. Remeasurements are not reclassified to profit or loss in subsequent periods.
Net interest expense and other expenses relating to defined benefit plans are recognized in profit and loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on
curtailment is recognized in profit and loss. Gains and losses on settlement of a defined benefit plan are recognized when settlement occurs.
KEY ESTIMATES
The cost of the defined benefit pension plan and other post-employment medical benefits and the present value of the pension obligation are determined
using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These
include the determination of the discount rate, future salary increases, mortality rates and future pension increases. All assumptions are reviewed at each
reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate, management considers the interest rates of AA
corporate bonds in countries where the defined benefit obligations are recognized along with the yield curve to correspond with the expected term of the
defined benefit obligation. The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change
only at intervals in response to demographic changes. Future salary increases and pension increases are based on expected future inflation rates for the
respective countries.
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)
Erich Fraunschiel - retired 23 October 2018
Catherine Livingstone, AO (Lead Independent Director)
Thomas Gorman
Christopher Haynes, OBE
Roger Higgins - appointed 20 February 2019
Andrew Liveris - appointed 5 September 2018
Juan Suarez Coppel - appointed 27 May 2019
Anne Templeman-Jones
Wang Xiao Bin
Sharon Warburton - appointed 20 February 2019
Andrew Wood (Chief Executive Officer)
106
Worley Annual Report 2019
31. RELATED PARTIES (CONTINUED)
(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:
Net 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
2019
$’000
2018
$’000
(2,800)
(1,400)
7,800
4,900
48,100
46,600
13,400
13,400
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
2019
$
2018
$
3,916,233
146,752
3,164,184
167,783
4,062,985
3,331,967
478,005
136,173
614,178
237,679
153,533
391,212
4,677,163
3,723,179
CONSOLIDATED
2019
$
2018
$
9,245,000
193,000
51,000
3,823,000
6,093,000
137,000
45,000
2,836,000
13,312,000
9,111,000
Worley Annual Report 2019
107
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
Worley SPV1 Pty Limited
Worley Financial Services Pty Limited
Worley Canada Holdings Pty Limited
Worley Canada Callco Ltd
WorleyParsons Engineering Pty Limited
Engineering Securities Pty Limited atf The Worley Limited Trust
Australia
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 before income tax expense
Income tax (expense)/benefit
Loss after income tax
Loss attributable to members of WorleyParsons Limited
Retained profits at the beginning of the financial year
Adoption of AASB 9 on 1 July 2018, net of tax
Dividends paid1
Retained (losses)/profits at the end of the financial year
STATEMENT OF COMPREHENSIVE INCOME
Loss 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 (losses)/profits
Total equity
2019
$’M
2,976.7
440.1
197.9
121.0
100.0
94.7
3,930.4
2019
$’M
(6.0)
(3.6)
(9.6)
(9.6)
69.3
(1.3)
(98.8)
(40.4)
(9.6)
(9.6)
1,801.0
5,635.5
319.0
337.7
5,297.8
5,282.9
55.3
(40.4)
5,297.8
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
The parent entity has bank guarantees in respect of contractual performance outstanding at 30 June 2019 for the amount of nil (2018: $nil). 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.
108
Worley Annual Report 2019
34. PARENT ENTITY DISCLOSURES (CONTINUED)
(B) CLOSED GROUP
WorleyParsons Limited together with Worley No 2 Pty Limited, WorleyParsons Engineering Pty Limited, Worley Financial Services Pty Limited, Worley
Services Pty Limited, Engineering Securities Pty Limited, Advisian Group Pty Limited, Advisian Pty Ltd, Worley SPV1 Pty Limited, Worley EA Holdings Pty
Limited, Worley Infrastructure Holdings Pty Limited, Worley SEA Pty Limited, Worley South America Holdings Pty Limited and Worley 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
Adoption of AASB 9 on 1 July 2018, net of tax
Retained profits of entities that became party to the Deed during the financial year
Dividends paid1
Retained profits at the end of the financial year
STATEMENT OF FINANCIAL POSITION
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Deferred tax assets
Intangible assets
Property, plant and equipment
Other non-current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Provisions
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
2019
$’M
116.6
(25.1)
91.5
91.5
831.0
(51.8)
-
(98.8)
771.9
20.8
2,097.5
62.3
2,180.6
61.3
260.4
3.5
5,273.4
5,598.6
7,779.2
1,475.1
66.7
0.4
1,542.2
6.1
182.8
10.8
199.7
1,741.9
6,037.3
5,282.9
(17.5)
771.9
6,037.3
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
1 Dividends paid by the Closed Group exclude dividends paid to holders of exchangeable shares.
Worley Annual Report 2019
109
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Directors’ Declaration
In accordance with a resolution of the directors of WorleyParsons Limited, I state that:
4.
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 2019 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 2019.
On behalf of the Board
JOHN GRILL, AO
Chairman
Sydney, 21 August 2019
110
Worley Annual Report 2019
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent Auditor's Report to the Members of WorleyParsons Limited
Report on the Audit of the Financial Report
Independent Auditor's Report to the Members of WorleyParsons Limited
Opinion
Report on the Audit of the Financial Report
We have audited the financial report of WorleyParsons Limited (the Company) and its subsidiaries (collectively
the Group), which comprises the consolidated statement of financial position as at 30 June 2019, the
Opinion
consolidated statement of financial performance and other comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial
We have audited the financial report of WorleyParsons Limited (the Company) and its subsidiaries (collectively
statements, including a summary of significant accounting policies, and the directors' declaration.
the Group), which comprises the consolidated statement of financial position as at 30 June 2019, the
consolidated statement of financial performance and other comprehensive income, consolidated statement of
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial
2001, including:
statements, including a summary of significant accounting policies, and the directors' declaration.
a)
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
b)
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2019 and of
its consolidated financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2019 and of
its consolidated financial performance for the year ended on that date; and
Basis for Opinion
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
Basis for Opinion
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Code.
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the
Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
Key Audit Matters
opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial report of the current year. These matters were addressed in the context of our audit of the
Key Audit Matters
financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on
these matters. For each matter below, our description of how our audit addressed the matter is provided in
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
that context.
of the financial report of the current year. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial
these matters. For each matter below, our description of how our audit addressed the matter is provided in
Report section of our report, including in relation to these matters. Accordingly, our audit included the
that context.
performance of procedures designed to respond to our assessment of the risks of material misstatement of the
financial report. The results of our audit procedures, including the procedures performed to address the
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial
matters below, provide the basis for our audit opinion on the accompanying financial report.
Report section of our report, including in relation to these matters. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement of the
financial report. The results of our audit procedures, including the procedures performed to address the
matters below, provide the basis for our audit opinion on the accompanying financial report.
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111
Worley Annual Report 2019
1. Revenue Recognition and Measurement
1. Revenue Recognition and Measurement
Why significant
Why significant
The Group recognises revenue from
contracts with customers as performance
The Group recognises revenue from
obligations are fulfilled over time. This
contracts with customers as performance
occurs when control of the goods or services
obligations are fulfilled over time. This
are transferred to the customer at an
occurs when control of the goods or services
amount that reflects the consideration to
are transferred to the customer at an
which the Group expects to be entitled in
amount that reflects the consideration to
exchange for those goods or services.
which the Group expects to be entitled in
exchange for those goods or services.
When the revenue is recognised, estimates
are required due to the nature and extent of
When the revenue is recognised, estimates
varying contract conditions, which are
are required due to the nature and extent of
unique and can be complex.
varying contract conditions, which are
unique and can be complex.
The accurate recording of revenue is highly
dependent upon the following factors:
The accurate recording of revenue is highly
dependent upon the following factors:
Appropriate knowledge of individual
Appropriate knowledge of individual
contract characteristics and status of
work - key characteristics would be the
contract characteristics and status of
industry and/or geography of the project
work - key characteristics would be the
and length and type of contract (lump
industry and/or geography of the project
sum basis or time and materials basis);
and length and type of contract (lump
sum basis or time and materials basis);
Determination of variable consideration,
including performance incentives, which
Determination of variable consideration,
are recognised from the outset of the
including performance incentives, which
contract but only to the extent that it is
are recognised from the outset of the
highly probable that a significant revenue
contract but only to the extent that it is
reversal will not occur; and
highly probable that a significant revenue
reversal will not occur; and
Determination of claims received from
customers, including an assessment of
Determination of claims received from
when the Group believes it is probable
customers, including an assessment of
that such claims will result in an outflow
when the Group believes it is probable
of economic resources.
that such claims will result in an outflow
of economic resources.
This matter was considered a key audit
matter given the complexity of the contracts
This matter was considered a key audit
and the level of judgement required to
matter given the complexity of the contracts
estimate the amount of revenue recognised.
and the level of judgement required to
estimate the amount of revenue recognised.
The Group’s disclosures are included in Note
4 of the financial report.
The Group’s disclosures are included in Note
4 of the financial report.
How our audit addressed the key audit matter
How our audit addressed the key audit matter
We assessed whether the methodology used to recognise
revenue met the requirements of Australian Accounting
We assessed whether the methodology used to recognise
Standard AASB15, which applied to the Group for the first
revenue met the requirements of Australian Accounting
time this year.
Standard AASB15, which applied to the Group for the first
time this year.
In relation to the adoption of AASB15 on 1 July 2018, we:
o considered the Group’s assessment of the impact of
In relation to the adoption of AASB15 on 1 July 2018, we:
adopting the new standard and revisions to its
o considered the Group’s assessment of the impact of
revenue recognition policies; and
adopting the new standard and revisions to its
o selected a sample of contracts across type (lump sum
revenue recognition policies; and
basis or time and materials basis), segment and
o selected a sample of contracts across type (lump sum
geographical location and reviewed management’s
basis or time and materials basis), segment and
analysis of the revenue recognition under AASB 15.
geographical location and reviewed management’s
We assessed the effectiveness of the Group’s controls by
analysis of the revenue recognition under AASB 15.
testing a sample of controls in the following areas:
testing a sample of controls in the following areas:
We assessed the effectiveness of the Group’s controls by
initiation, processing and approval of new customers
and/or contract;
initiation, processing and approval of new customers
and/or contract;
o
o
o review and approval of project costs incurred;
o authorisation of monthly project variations;
o review and approval of project costs incurred;
o review and assessment of significant changes in work
o authorisation of monthly project variations;
o review and assessment of significant changes in work
o review of unapproved variations and claims.
o review of unapproved variations and claims.
quantitative factors and performed the following
procedures:
quantitative factors and performed the following
procedures:
We selected a sample of contracts based on qualitative and
We selected a sample of contracts based on qualitative and
in progress balances; and
in progress balances; and
o reviewed contract terms and conditions and assessed
whether the individual characteristics of each
o reviewed contract terms and conditions and assessed
contract were appropriately accounted for;
whether the individual characteristics of each
o assessed the Group’s ability to deliver budgeted
contract were appropriately accounted for;
contract margins by analysing the historical accuracy
o assessed the Group’s ability to deliver budgeted
of forecasting margins and the relationship of
contract margins by analysing the historical accuracy
contract cost versus billing status;
of forecasting margins and the relationship of
o agreed material contract revenue and cost variations
contract cost versus billing status;
and claims to information provided by third parties;
o agreed material contract revenue and cost variations
o assessed any variable consideration and the basis for
and claims to information provided by third parties;
recognition and measurement; and
o assessed any variable consideration and the basis for
o for contracts accounted for using the percentage of
recognition and measurement; and
completion method, we assessed the forecast cost to
o for contracts accounted for using the percentage of
complete calculations.
completion method, we assessed the forecast cost to
complete calculations.
We evaluated the adequacy of the related disclosures in
the financial report including those made with respect to
We evaluated the adequacy of the related disclosures in
judgements and estimates.
the financial report including those made with respect to
judgements and estimates.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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Liability limited by a scheme approved under Professional Standards Legislation
112
Worley Annual Report 2019
2. Impairment of trade receivables
2. Impairment of trade receivables
Why significant
Why significant
An allowance for impairment of receivables is made
by the Group for the expected credit losses
An allowance for impairment of receivables is made
associated with its trade receivables and unbilled
by the Group for the expected credit losses
contract revenue. The Group has $542.3 million of
associated with its trade receivables and unbilled
trade receivables and unbilled contract revenue as
contract revenue. The Group has $542.3 million of
at 30 June 2019 that are more than 121 days past
trade receivables and unbilled contract revenue as
due with an associated impairment allowance of
at 30 June 2019 that are more than 121 days past
$132.6 million, as disclosed in Note 19(B).
due with an associated impairment allowance of
$132.6 million, as disclosed in Note 19(B).
This was a key audit matter due to the judgement
involved in assessing the recoverability of project
This was a key audit matter due to the judgement
outcomes through trade receivable collection
involved in assessing the recoverability of project
and/or satisfaction of project warranty and other
outcomes through trade receivable collection
obligations.
and/or satisfaction of project warranty and other
obligations.
The Group’s disclosures are included in Notes 8 and
19(B) of the financial report
The Group’s disclosures are included in Notes 8 and
19(B) of the financial report
How our audit addressed the key audit matter
How our audit addressed the key audit matter
We assessed whether the process for recognising
impairment of trade receivables met the
We assessed whether the process for recognising
requirements of Australian Accounting Standard
impairment of trade receivables met the
AASB9 which applied to be Group for the first time
requirements of Australian Accounting Standard
this year.
AASB9 which applied to be Group for the first time
this year.
In relation to the adoption of AASB 9 on 1 July
2018, we:
In relation to the adoption of AASB 9 on 1 July
considered the Group’s methodology for
2018, we:
o
determining expected credit losses; and
considered the Group’s methodology for
o
o assessed the Group’s calculation of the
determining expected credit losses; and
expected credit losses on transition, with
o assessed the Group’s calculation of the
reference to historical losses and the ageing of
expected credit losses on transition, with
trade receivables and unbilled contract
reference to historical losses and the ageing of
revenue.
trade receivables and unbilled contract
revenue.
We selected a sample of trade receivables and
We selected a sample of trade receivables and
unbilled contract revenue based on qualitative and
quantitative factors and performed the following
unbilled contract revenue based on qualitative and
procedures:
quantitative factors and performed the following
o We analysed the ageing of trade receivables past
procedures:
payment and credit history of the customers;
o We analysed the ageing of trade receivables past
o We assessed the economic environment
payment and credit history of the customers;
applicable to these customers;
o We assessed the economic environment
o We considered the historical accuracy of
applicable to these customers;
forecasting expected credit losses;
o We considered the historical accuracy of
o Where applicable we evaluated evidence from
forecasting expected credit losses;
legal and external experts; and
o Where applicable we evaluated evidence from
o We evaluated the Group’s assessment of
legal and external experts; and
collectability considering the process to achieve
o We evaluated the Group’s assessment of
recovery, the likely timing of these processes
collectability considering the process to achieve
and events that could delay or impact the
recovery, the likely timing of these processes
collectability.
and events that could delay or impact the
collectability.
We evaluated the adequacy of the related
We evaluated the adequacy of the related
disclosures in the financial report including those
made with respect to judgements and estimates.
disclosures in the financial report including those
made with respect to judgements and estimates.
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A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
113
Worley Annual Report 2019
1. Revenue Recognition and Measurement
3. Acquisition of ECR
Why significant
Why significant
How our audit addressed the key audit matter
How our audit addressed the key audit matter
The Group recognises revenue from
On 26 April 2019, the Group completed the
contracts with customers as performance
acquisition of the Energy, Chemicals and Resources
obligations are fulfilled over time. This
division from Jacobs Engineering Group Inc.
occurs when control of the goods or services
(“ECR”) for a total consideration of $4.9 billion.
are transferred to the customer at an
As outlined in Note 21 (B), the fair values of the
amount that reflects the consideration to
acquisition balances are provisional as the
which the Group expects to be entitled in
acquisition was significant and completion occurred
exchange for those goods or services.
close to year end.
When the revenue is recognised, estimates
are required due to the nature and extent of
The results of ECR were consolidated into the
varying contract conditions, which are
Group results from 26 April 2019 to 30 June 2019.
unique and can be complex.
The accurate recording of revenue is highly
The accounting for the acquisition was considered a
dependent upon the following factors:
key audit matter due to the significance and
complexity of the acquisition and the impact on the
Appropriate knowledge of individual
Group’s assets, liabilities, revenues and expenses.
The Group’s disclosures are included in Note 21(B)
of the financial report.
contract characteristics and status of
work - key characteristics would be the
industry and/or geography of the project
and length and type of contract (lump
sum basis or time and materials basis);
Determination of variable consideration,
including performance incentives, which
are recognised from the outset of the
contract but only to the extent that it is
highly probable that a significant revenue
reversal will not occur; and
Determination of claims received from
customers, including an assessment of
when the Group believes it is probable
that such claims will result in an outflow
of economic resources.
This matter was considered a key audit
matter given the complexity of the contracts
and the level of judgement required to
estimate the amount of revenue recognised.
The Group’s disclosures are included in Note
4 of the financial report.
We assessed whether the methodology used to recognise
Our audit procedures in respect of the acquisition
revenue met the requirements of Australian Accounting
Standard AASB15, which applied to the Group for the first
time this year.
of ECR included the following:
o We assessed the accounting acquisition date
with reference to achievement of control over
In relation to the adoption of AASB15 on 1 July 2018, we:
the acquired business interests;
o We evaluated the Group’s determination of the
o considered the Group’s assessment of the impact of
purchase consideration paid with reference to
adopting the new standard and revisions to its
the contracts and consideration paid;
revenue recognition policies; and
o We tested a sample of costs classified as
o selected a sample of contracts across type (lump sum
acquisition and transition costs to supporting
basis or time and materials basis), segment and
documentation;
geographical location and reviewed management’s
o For a sample of ECR entities based on
analysis of the revenue recognition under AASB 15.
materiality, we performed procedures on the
We assessed the effectiveness of the Group’s controls by
timing of recognition of revenue, by performing
procedures consistent with those described in
initiation, processing and approval of new customers
the Revenue Recognition and Measurement Key
and/or contract;
Audit Matter and performed procedures on the
o review and approval of project costs incurred;
timing of expense recognition by testing
o authorisation of monthly project variations;
samples to supporting documentation; and
o review and assessment of significant changes in work
o We evaluated the adequacy of the related
testing a sample of controls in the following areas:
o
in progress balances; and
disclosure in the financial report.
o review of unapproved variations and claims.
We selected a sample of contracts based on qualitative and
quantitative factors and performed the following
procedures:
o reviewed contract terms and conditions and assessed
whether the individual characteristics of each
contract were appropriately accounted for;
o assessed the Group’s ability to deliver budgeted
contract margins by analysing the historical accuracy
of forecasting margins and the relationship of
contract cost versus billing status;
o agreed material contract revenue and cost variations
and claims to information provided by third parties;
o assessed any variable consideration and the basis for
recognition and measurement; and
o for contracts accounted for using the percentage of
completion method, we assessed the forecast cost to
complete calculations.
We evaluated the adequacy of the related disclosures in
the financial report including those made with respect to
judgements and estimates.
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A member firm of Ernst & Young Global Limited
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4.
2. Impairment of trade receivables
Impairment of Goodwill
Why significant
Why significant
How our audit addressed the key audit matter
How our audit addressed the key audit matter
An allowance for impairment of receivables is made
In accordance with the requirements of
by the Group for the expected credit losses
Australian Accounting Standards, the
associated with its trade receivables and unbilled
Group performed an annual impairment
contract revenue. The Group has $542.3 million of
test after allocating goodwill to groups of
trade receivables and unbilled contract revenue as
cash-generating units (CGUs) that are
at 30 June 2019 that are more than 121 days past
expected to benefit from the synergies of
due with an associated impairment allowance of
the related business combination.
$132.6 million, as disclosed in Note 19(B).
As a result of the acquisition of ECR and
This was a key audit matter due to the judgement
the restructure of the Group operating
involved in assessing the recoverability of project
model, the goodwill, other than goodwill
outcomes through trade receivable collection
on the acquisition of ECR, was reallocated
and/or satisfaction of project warranty and other
to the new groups of CGUs. At 30 June
obligations.
2019, the purchase price allocation of
ECR remains provisional, and goodwill
The Group’s disclosures are included in Notes 8 and
recognized on the acquisition cannot be
19(B) of the financial report
reasonably allocated to the CGUs and
remains unallocated.
o
Our audit procedures in respect of the impairment of goodwill
We assessed whether the process for recognising
included the following:
We assessed whether the methodology used by the Group met
impairment of trade receivables met the
requirements of Australian Accounting Standard
AASB9 which applied to be Group for the first time
this year.
the requirements of Australian Accounting Standards.
We assessed the change in the Group’s CGUs following the
o
2018, we:
In relation to the adoption of AASB 9 on 1 July
ECR acquisition based on our understanding of the nature of
the Group’s business, how earnings streams are monitored
and reported and the interdependency of cash flows.
considered the Group’s methodology for
determining expected credit losses; and
o assessed the Group’s calculation of the
goodwill on the acquisition of ECR, to the new groups of CGUs.
We assessed the reallocation of the goodwill, other than the
expected credit losses on transition, with
reference to historical losses and the ageing of
We involved our valuation specialists in performing the
trade receivables and unbilled contract
revenue.
following procedures relating to the forecast cashflows of the
Group’s CGUs, other than those relating to ECR:
A value in use model based on cash flow
forecasts, growth rates and discount
rates is used to calculate the recoverable
amount of each group of CGUs. The
model excluded forecast cash flows
related to ECR as the goodwill was
unallocated.
This was considered to be a Key Audit
Matter due to the level of judgement
required to forecast cash flows and
discount rates used to calculate the
recoverable amount of each Group of
CGUs.
The Group’s disclosures are included in
Note 10 of the financial report.
o
o
o
We selected a sample of trade receivables and
We assessed the basis of preparing cash flow forecasts
unbilled contract revenue based on qualitative and
considering the accuracy of previous forecasts and
quantitative factors and performed the following
budgets and current trading performance;
procedures:
We assessed the appropriateness of other key
assumptions such as the discount rates and growth
o We analysed the ageing of trade receivables past
rates with reference to publicly available information on
payment and credit history of the customers;
comparable companies in the industry and markets in
which the Group operates;
We tested the mathematical accuracy of the cash flow
o We considered the historical accuracy of
models; and
forecasting expected credit losses;
We performed sensitivity analyses and evaluated
o Where applicable we evaluated evidence from
whether a reasonably possible change in assumptions
could cause the carrying amount of the cash generating
o We evaluated the Group’s assessment of
unit to exceed its recoverable amount.
o We assessed the economic environment
legal and external experts; and
applicable to these customers;
collectability considering the process to achieve
recovery, the likely timing of these processes
In relation to the goodwill on the acquisition of ECR, we
and events that could delay or impact the
collectability.
assessed management’s determination of any indicators of
impairment with reference to performance of ECR subsequent
to acquisition.
We evaluated the adequacy of the related
disclosures in the financial report including those
made with respect to judgements and estimates.
We evaluated the adequacy of the related disclosure in the
financial report including those made with respect to
judgements and estimates.
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115
Worley Annual Report 2019
1. Revenue Recognition and Measurement
Information Other than the Financial Report and Auditor’s Report Thereon
Why significant
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2019 Annual Report, but does not include the financial report and our auditor’s
report thereon.
How our audit addressed the key audit matter
We assessed whether the methodology used to recognise
revenue met the requirements of Australian Accounting
Our opinion on the financial report does not cover the other information and accordingly we do not express any
Standard AASB15, which applied to the Group for the first
form of assurance conclusion thereon, with the exception of the Remuneration Report and our related
time this year.
assurance opinion.
The Group recognises revenue from
contracts with customers as performance
obligations are fulfilled over time. This
occurs when control of the goods or services
are transferred to the customer at an
amount that reflects the consideration to
which the Group expects to be entitled in
exchange for those goods or services.
In relation to the adoption of AASB15 on 1 July 2018, we:
In connection with our audit of the financial report, our responsibility is to read the other information and, in
o considered the Group’s assessment of the impact of
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
adopting the new standard and revisions to its
revenue recognition policies; and
When the revenue is recognised, estimates
are required due to the nature and extent of
varying contract conditions, which are
unique and can be complex.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
o selected a sample of contracts across type (lump sum
information, we are required to report that fact. We have nothing to report in this regard.
basis or time and materials basis), segment and
geographical location and reviewed management’s
analysis of the revenue recognition under AASB 15.
Responsibilities of the Directors for the Financial Report
Appropriate knowledge of individual
The accurate recording of revenue is highly
dependent upon the following factors:
We assessed the effectiveness of the Group’s controls by
The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
o
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
initiation, processing and approval of new customers
and/or contract;
contract characteristics and status of
work - key characteristics would be the
industry and/or geography of the project
and length and type of contract (lump
sum basis or time and materials basis);
o review and approval of project costs incurred;
o authorisation of monthly project variations;
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a
o review and assessment of significant changes in work
going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
testing a sample of controls in the following areas:
in progress balances; and
o review of unapproved variations and claims.
Determination of variable consideration,
including performance incentives, which
are recognised from the outset of the
contract but only to the extent that it is
highly probable that a significant revenue
reversal will not occur; and
Auditor's Responsibilities for the Audit of the Financial Report
We selected a sample of contracts based on qualitative and
quantitative factors and performed the following
procedures:
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
whether the individual characteristics of each
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
contract were appropriately accounted for;
accordance with the Australian Auditing Standards will always detect a material misstatement when it exists.
o assessed the Group’s ability to deliver budgeted
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
o reviewed contract terms and conditions and assessed
contract margins by analysing the historical accuracy
of forecasting margins and the relationship of
contract cost versus billing status;
Determination of claims received from
customers, including an assessment of
when the Group believes it is probable
that such claims will result in an outflow
of economic resources.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment
and maintain professional scepticism throughout the audit. We also:
o agreed material contract revenue and cost variations
and claims to information provided by third parties;
o assessed any variable consideration and the basis for
This matter was considered a key audit
matter given the complexity of the contracts
and the level of judgement required to
estimate the amount of revenue recognised.
The Group’s disclosures are included in Note
4 of the financial report.
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
o for contracts accounted for using the percentage of
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
completion method, we assessed the forecast cost to
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
complete calculations.
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
recognition and measurement; and
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
We evaluated the adequacy of the related disclosures in
the financial report including those made with respect to
judgements and estimates.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
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A member firm of Ernst & Young Global Limited
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116
Worley Annual Report 2019
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial report or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are responsible for
the direction, supervision and performance of the Group audit. We remain solely responsible for our
audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most significance in
the audit of the financial report of the current year and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report because
the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 43 to 60 of the directors' report for the year
ended 30 June 2019.
In our opinion, the Remuneration Report of WorleyParsons Limited for the year ended 30 June 2019, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on
the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Ernst & Young
Scott Jarrett
Partner
Sydney
21 August 2019
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
117
Worley Annual Report 2019
Shareholder Information
TOP 20 HOLDINGS OF FULLY PAID ORDINARY SHARES AS AT 5 AUGUST 2019
NAME
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
WILACI PTY LIMITED
BNP PARIBAS NOMS PTY LTD
CS THIRD NOMINEES PTY LIMITED
SERPENTINE FOUNDATION PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR JOHN MICHAEL GRILL
CITICORP NOMINEES PTY LIMITED
JUHA PTY LIMITED
HAJU PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
TAYLOR SQUARE DESIGNS PTY LTD
AVANTEOS INVESTMENTS LIMITED
NETWEALTH INVESTMENTS LIMITED
AMP LIFE LIMITED
Total
Total number of current holders for all named classes is 22,016.
SHARES
% OF ISSUED CAPITAL
RANK
161,945,940
92,839,464
75,768,809
51,423,124
25,018,487
11,959,085
11,014,851
5,826,944
5,749,354
5,400,000
3,228,355
2,826,277
2,415,197
2,080,000
1,715,000
1,619,615
1,423,641
1,203,605
1,151,102
1,128,602
465,737,452
31.14
17.85
14.57
9.89
4.81
2.30
2.12
1.12
1.11
1.04
0.62
0.54
0.46
0.40
0.33
0.31
0.27
0.23
0.22
0.22
89.56
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
SUBSTANTIAL HOLDERS OF 5% OR MORE OF FULLY PAID ORDINARY SHARES AS AT 5 AUGUST 2019*
NAME
Dar Al-Handasah Consultants Shair and Partners Holdings Ltd (Dar)**
Jacobs Engineering Group Inc
John Grill & associated companies
* As disclosed in substantial shareholder notices received by the Company.
NOTICE DATE
26 April 2019
24 June 2019
15 November 2018
SHARES
104,973,977
51,381,257
34,336,128
** 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 13,612,743 shares
(equivalent to approximately 2.62% 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 5 AUGUST 2019
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 $14.52 per unit
HOLDERS
14,150
6,526
816
452
72
22,016
5,586,022
14,339,311
5,786,397
10,921,662
483,408,414
520,041,806
MINIMUM PARCEL SIZE
35
HOLDERS
785
1.07
2.76
1.11
2.10
92.96
100.00
SHARES
11,783
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.
118
Worley Annual Report 2019
111
Worley Annual Report 2019
Shareholder Information
TOP 20 HOLDINGS OF FULLY PAID ORDINARY SHARES AS AT 5 AUGUST 2019
NAME
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
WILACI PTY LIMITED
BNP PARIBAS NOMS PTY LTD
CS THIRD NOMINEES PTY LIMITED
SERPENTINE FOUNDATION PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
MR JOHN MICHAEL GRILL
JUHA PTY LIMITED
HAJU PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
TAYLOR SQUARE DESIGNS PTY LTD
AVANTEOS INVESTMENTS LIMITED
NETWEALTH INVESTMENTS LIMITED
AMP LIFE LIMITED
161,945,940
92,839,464
75,768,809
51,423,124
25,018,487
11,959,085
11,014,851
5,826,944
5,749,354
5,400,000
3,228,355
2,826,277
2,415,197
2,080,000
1,715,000
1,619,615
1,423,641
1,203,605
1,151,102
1,128,602
31.14
17.85
14.57
9.89
4.81
2.30
2.12
1.12
1.11
1.04
0.62
0.54
0.46
0.40
0.33
0.31
0.27
0.23
0.22
0.22
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total
NAME
Total number of current holders for all named classes is 22,016.
SUBSTANTIAL HOLDERS OF 5% OR MORE OF FULLY PAID ORDINARY SHARES AS AT 5 AUGUST 2019*
465,737,452
89.56
Dar Al-Handasah Consultants Shair and Partners Holdings Ltd (Dar)**
Jacobs Engineering Group Inc
John Grill & associated companies
* As disclosed in substantial shareholder notices received by the Company.
NOTICE DATE
26 April 2019
24 June 2019
15 November 2018
SHARES
104,973,977
51,381,257
34,336,128
** 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 13,612,743 shares
(equivalent to approximately 2.62% 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 5 AUGUST 2019
HOLDERS
14,150
6,526
816
452
72
22,016
5,586,022
14,339,311
5,786,397
10,921,662
483,408,414
520,041,806
MINIMUM PARCEL SIZE
35
HOLDERS
785
1.07
2.76
1.11
2.10
92.96
100.00
SHARES
11,783
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.
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
UNMARKETABLE PARCELS
Minimum $500 parcel at $14.52 per unit
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
VOTING RIGHTS
exchangeable.
SHARES
% OF ISSUED CAPITAL
RANK
Glossary
$, $m Australian dollars unless otherwise stated, Australian millions of 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 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.
ECR Energy, Chemicals and Resources division acquired from Jacobs in FY2019.
EMEA Services business line region encompassing Europe, Middle East and Africa.
SHARES
% OF ISSUED CAPITAL
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.
Worley Annual Report 2019
111
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Worley Annual Report 2019
GLOSSARY
FEED (front end engineering design) 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.
FY2018 and FY2019 financial year 2018 and financial year 2019.
Group or Worley means WorleyParsons Limited and the entities it controls.
HSE Health, Safety and Environment.
Jacobs Jacobs Engineering Group Inc.
KMP (key management personnel) 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.
NPAT (net profit after tax) 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.
NPATA (net profit after tax before amortization of acquired intangibles) The net profit
after tax excluding the post tax impact of amortization on intangible assets acquired
through business combinations. From time to time, in determining outcomes under the
incentive plans, the Board may use its discretion to apply the underlying NPATA which in
the Board’s opinion reflects the Company’s operating results.
NED (non-executive director) Non-executive directors of the entity have authority and
responsibility for planning, directing and controlling the activities of the entity, directly or
indirectly.
TSR (Total shareholder return) 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.
WorleyParsons refers to the Company as it comprised prior to the ECR acquisition.
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Worley Annual Report 2019 Corporate Information
WorleyParsons Limited
ACN 096 090 158
DIRECTORS
John Grill, AO (Chairman)
Anne Templeman-Jones
Thomas Gorman
Christopher Haynes, OBE
Roger Higgins
Catherine Livingstone, AO (Lead Independent Director)
Wang Xiao Bin
Andrew Liveris, AO
Sharon Warburton
Juan Suarez Coppel
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
Arab Banking Corporation
Bank of America Merill Lynch
Bank of China
Barclays Bank
BMO Harris Bank
BNP Paribas
China Merchants Bank
Commonwealth Bank of Australia
Credit Agricole Corporation and Investment Bank
First Abu Dhabi Bank
HSBC
ING Bank
Intesa Sanpaolo Bank
JPMorgan Chase
Mizuho Bank
Macquarie Bank
Royal Bank of Canada
Standard Chartered Bank
State Bank of India
UBS AG
U.S. Bank National
Wells Fargo
Westpac Banking Corporation
LAWYERS
Herbert Smith Freehills
SHARE REGISTRY
Computershare Investor Services Pty Limited
Level 3, 60 Carrington Street
Sydney NSW 2000
Australia
Phone: 1300 850 505
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