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Worley Delivers as-Expected Fiscal Second-Half Recovery. No Change to AUD 12.00 FVE.

Worley shares are hovering at just over AUD 11.00 and are currently only somewhat undervalued. Worley’s last traded price was 11.06 AUD, whereas its fair value estimate is 12 AUD, which makes it an undervalued stock. Worley paid out a final dividend of AUD 25 cents bringing the full fiscal year to better than expected AUD 50 cents, in line with fiscal 2020 thanks to a higher 94% payout ratio.

Underlying EBITDA fell 25% to AUD 649 million, marginally ahead of the expectations. And net operating cash flow fell by 24% to AUD 533 million. The robust cash performance facilitated a 10% reduction in net debt to AUD 1.24 billion. Worley is comfortably leveraged at 18% and 1.9 net debt/EBITDA at end fiscal 2021, that solid outcome delivered in a COVID-19-impacted period. The debt Worley does have is a hangover from its AUD 4.6 billion ECR takeover. 

Worley’s business has stabilized over the second half of fiscal 2021 including the work backlog increasing by 6% to AUD 14.3 billion at end June 2021 versus AUD 13.5 billion at end December 2020. Underlying fiscal second half EBITDA of AUD 386 million was nearly 50% ahead of the fiscal first half. And second-half EBITDA margin of 9.0% bettered the first half’s 5.9% by a considerable gap.

Company’s Future Outlook

It is forecasted AUD 45 cents for the full year, the higher payout sending a strong signal of the board’s confidence in the outlook. The full-year payout equates to an unfranked 4.5% yield at the current share price. Worley is expecting an improved fiscal 2022. However, different sectors and regions will recover at different rates. The company is starting to see activity levels increase with key awards in the early phases.

Company Profile

Worley is a leading global provider of professional services, such as engineering, procurement, and construction management, to the oil, gas, mining, power, and infrastructure sectors. Purchase of Jacobs ECR in April 2019 reduced revenue contribution from hydrocarbons to just over 50%, from a prior 75%-80% position. Metals and mining contributes 23% and infrastructure and chemicals the balance. Worley has a global presence with about 59,000 staff in more than 50 countries. It has a strong presence in many developing economies, including Africa.

(Source: Morningstar)

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