Earnings Transcript for WOR.AX - Q2 Fiscal Year 2021

Operator: Thank you for standing by and welcome to the Worley 2021 Half Year Results Briefing. all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Mr. Chris Ashton, Chief Executive Officer. Please go ahead.

Chris Ashton: Welcome, and thank you for joining Worley's Interim Results Presentation for the Half Year Ended December 31, 2020. I'd like to begin by acknowledging the traditional owners of the land and Worley's [ph] their unique ability to care for country and deep spiritual connection to it. For me here in Houston, the land I'm on, it's long served as a site for meeting and exchange among a number of indigenous peoples, specifically the Apache Caddo, Comanche, Kiowa and Wichita nations. In Australia, the Aboriginal and Torres Strait Islander peoples have cared for and maintained for thousands of years the lands which provide our company with a place upon which our business provides its services. I'd like to pay respect to elders, past, present and emerging whose knowledge and wisdom has ensured the continuation of culture and traditional practices, and extend that respect to other Aboriginal and Torres Strait Islander people present on the call. I'd also like to thank each and every one of our people for their continued dedication to delivering outstanding outcomes for our customers all while managing through the rapidly changing global environment driven by the COVID-19 pandemic. Turning to Slide 2, I'll remind you to review our disclaimer shown here. Moving on to Slide 3, in terms of the agenda for the day, I'll talk through the half-year results and provide a market [ph] update, and Tom will add some more detail on the financials. I'll then close with some final remarks and our outlook before we open the floor for Q&A. Moving on to Slide 4. The COVID-19 pandemic has devastated communities around the world and while protecting our people through the pandemic has been our priority, we're deeply saddened, however, to have lost nine of our people through the virus. Our thoughts are with their families and with their friends. We've talked at our Investor days, the full-year results in the AGM [ph] last year about how we have to adapt to new ways of working during the pandemic and safety is no exception. Our teams use technology to conduct virtual site visits throughout the pandemic and I was involved with the virtual site visit in Latin America in November with four members of our board. It was great to talk with our people about the COVID safe practices they've implemented on site to keep themselves and each other safe. Our digital acceleration team have made these visits possible with specialized camera rolling tools clearly to visualize the on-ground activities and experience and simultaneously witness safety practices. We've maintained industry-leading safety performance this year, reporting a total recordable case frequency rate of 0.15. Turning to Slide 5. Global economic circumstances including the COVID-19 pandemic have impacted our customers particularly demand in their end markets, which is in turn impacted our own half-year results. Our aggregated revenue was down to $4.5 billion at 25% decline on the prior period and our underlying EBITA [ph] declined to $207 million from $366 million in the prior period. However, we delivered a strong underlying operating cash flow of $281 million and $125 million in annualized savings from our cost savings programs, which will flow into the second half of the financial year. To date, we've delivered $286 million in annualized savings in our operational savings program. We've exceeded our target at a day and now we've increased our targets to $350 million in annualized savings by June 22. Our sustainability pivot provides the structural framework for growth. The contribution of sustainability is defined by our sustainability domain is already sizable, delivering $1.2 billion in revenue this half, which is around 30% of group revenue. Energy transition and circular economy opportunities in particular are accelerating. The Board has declared an interim dividend payment of $0.25 cents per share. Now turning to Slide 6. I'd like to spend some time talking through the drivers of change of our EBITA from the second half of financial year 2020 and I'll do this when we move to Slide 7. We saw our net business decline of $279 million in half-year 2021 driven by pandemic-related economic circumstances. The main drivers were volume reduction and business mix. We delivered $109 million of cost savings in the period which partially offset the decline. Now turning to Slide 8, where we break down the net business decline further, I'll share more. The chart shows a summary of the net business decline drivers and as I mentioned the main drivers of decline were volume reductions and a change in business mix. As most of our earnings are in currency other than Australian dollars, we saw foreign exchange translation impact of $33 million. This is associated with the strengthening of the Australian dollar against the U.S., Canadian and UK currencies. Half and half phasing and other factors accounted for the rest of the decline. Rate and price changes did not have a material impact on our underlying EBITA. Moving to Slide 9. Volume reductions brought about by project deferrals and site access restrictions had the largest impact on our EBITA. The Americas has been significantly impacted with reduction also seen in EMEA. These are our largest regions. We saw a positive contribution in APAC through the acquisition of the remaining 50% of the TWPS [ph] services business. In discussions that we've had with our customers, they're indicating that deferred projects are likely to return as economic circumstances improve. Moving on to Slide 10. A change in our business mix was the second largest impact on our EBITA. Our business is more diversified since the ECR acquisition with greater exposure to construction and fabrication work, which is historically less variable in periods of downturn. During the half, we've seen this be the case with our construction of fabrication revenue, less impacted than our professional services revenue. And as a result of the greater proportion of lower margin construction work, we've seen a business mix EBITA impact. Our professional services revenue segment margin was 6.8% and construction fabrication segment margin was 5.7%. And you'll find further segment result information on Slide 60 of the presentation. As I said, we expect the professional services revenue to previous proportions as global economic circumstances improve. Moving on to Slide 11. I'd now like to turn to our backlog which is $13.5 billion at the end of December 2020, down six down from $16.8 billion at the end of June 2020. And turning to slide 12, we'll share more of what's driven this. While project deferrals and site access restrictions have impacted our backlog as I mentioned on Slide 8, with most of our earnings in currencies other than Australian dollars, there's also been a foreign exchange impact. The deferral of projects as well as site access restrictions have also impacted activity levels on a long term contract which has led to a $1.2 billion impact in our backlog. We effectively revalued these contracts into the backlog definition based on our current activity level. And our customers are indicating that activity levels and our long-term contracts are likely to return as global economic circumstances improve. The impact of long-term contracts and effects translation alone account for almost 75% of the reduction in the backlog. And you can see there's been minimal impact from project cancellations, which is good news. The value of new awards and contract renewals has been impacted by the global economic circumstances as our customers defer spending decisions and project awards. However, our sales pipeline is increasing. You can see here the 12-month view of our sales pipeline. This is the value of known opportunities factor for the likelihood of the project proceeding and being awarded to Worley. And we're particularly excited about the number of emerging sustainability opportunity and recent awards. Turning to Slide 13. In addition to these strategic winds, we're positioned for the return of work which was deferred from this period and the majority of awards pushed to the right in the period of new expected award date in calendar year 2021, supporting our expectation of an improved second half. Our long-term contracts moving to Slide 14, include master service agreements framework agreements and operation maintenance service contracts and they're still in place and we continue to be awarded new contracts. To mention a few, awards in the Americas include four master service agreements for U.S. LNG facilities and a master site services and supply contract for a low emissions Canadian petrochemical complex. During the period, we renewed or extended all our contracts in Europe, Middle East and Africa that were due and we've seen secured long-term renewals of key O&M agreements through TWPS services, which will underpin our APAC power business over the coming years. This is another factor that gives us confidence of an improved second half. Moving on to slide 15. This morning we announced a significant sustainability award by Occidental Petroleum's Low Carbon Venture Business 1.5. We're very excited to be selected for the frontend engineering and design phase of 1.5's first Direct Air Capture facility in the U.S. Permian Basin. This is the first commercial-scale development using carbon engineering's Direct Air Capture technology to remove substantial volumes of carbon dioxide emissions from the atmosphere. Following on from the feed, it is intended that we move into the EPC phase of the first facility with plans for three more to follow. Oxy has publicly stated Direct Air Capture investment is significant. And with 1.5, we envision many of these facilities in the U.S. and around the world. This is a first-of-a-kind project which has the potential for upside in our backlog in the medium term. The next two slides provide further information on how this project contributes to limiting global warming to 1.5 degrees Celsius. These slides also company the announcement which was released at the ASX earlier this morning. Moving ahead to Slide 18. I'd now like to talk about the actions we've taken to set up our business for the future including our cost savings program and the strengthening of our balance sheet. Moving to slide 19. This slide summarizes our two programs, our operational savings program on the left and our ECR acquisition cost synergies on the right. Through these programs. We've delivered a total of $125 million in annualized savings in the half, which will flow into the second half and beyond. And I'll now take you through our progress on each of these programs. Starting on slide 20. Through our operational savings program, we delivered $121 million in annualized savings during the half including $44 million of in-period savings. These savings will flow into the second half and beyond and this brings the total savings delivered for the program to $286 million, exceeding our initial target of $275 million. And today, we announced we're increasing our target to $350 million in annualized savings to be delivered by June 2022. Turning to Slide 21. Our operational savings program comprises four categories

Tom Honan: Thanks, Chris. I'll begin by focusing on some of the highlights of the year. Starting on Slide 45, won't surprise anyone to know that I'd like to start with cash. Underlying operating cash generation during the year hit $281 million driven by strong invoicing and collection practices across the business. I'll talk later about how cash generation remains a key focus for the group. Both our aggregated revenue and underlying EBITDA were down period on period reflecting the impact of project deferrals and side restrictions as described by Chris earlier. Our gearing remains well below target range and leverage is stable at 1.8 times. We have strengthened our liquidity position through a strong cash result and securing their facilities. We've delivered a total of $181 million of ECR synergies on a run rate basis, and we are on track to achieve our target run rate of $190 million by April '21. We've increased our operational cost savings target to $350 million from the previously announced $275 million of annualized savings by June 22. And so far have achieved $286 million of those benefits. I'll now turn to our statutory results on Slide 46. A statement of financial performance outlines our stature key results. It has been released in the interim financial report lodged with ESX [ph] earlier today. Some points to note are global support costs decreased 13% driven by reductions in most corporate functions, including the removal of legacy ACR function costs, excluding the impact of FX at global support costs decreased 22%. Borrowing costs also decreased by around 30%, reflecting the reduction in our net debt and lower rates on that debt. Turning to Slide 47. We report our results excluding the impact of amortization of acquired intangibles to better reflect the operating performance of the company. You'll see references on this basis to EBITDA and input a throughout the document. After taking into account a number of adjustments, including transition and restructuring costs, we derive an underlying net profit after tax and before amortization of $117 million, down 46% from $216 million in the prior corresponding period. The transition and restructuring costs of $50 million includes a benefit of $41 million from international government subsidies consistent with $30 million during 2020 these are primarily in Canada with additional subsidies in the UK and Singapore. Turning to Slide 48. Here we've highlighted the statutory and underline key financials for the half year period. As Chris mentioned, the global economic circumstances, including COVID-19 impacted our statutory and aggregated revenue. We saw a reduction in underlying EBITDA due to reduction in volume, as well as a change in business mix and effects translation impacts. Our underlying operating cash flow of $291 million stems from strong invoicing and cash collection processes across the group. We are pleased with the DSO position even though it was slightly up over the period. After adjusting for annual leave taken in late December, DSO is definitely heading in the right direction. This is in line with the effort in cash collection and overall debt reduction seen in the period. Turning to Slide 49. As can be seen from the regional breakdown of results, there was a reduction in revenue across all regions. The Americas margin decrease was primarily driven by U.S Field Services which was impacted by COVID-19 with key sites inaccessible and curtail customer spending. Margin in AMEA was impacted by volume reductions in Middle East and Africa and the ramp of a major project in Central Asia. A Tech merger was stable and is higher than other regions due to a higher proportion of professional services work and the type of projects undertaken in the region. As Chris has already mentioned, rate and price changes did not have a material impact, or EBITDA. Moving to Slide 50. This slide provides a summary of their margins over the past few years on a P&L matrix. We have already covered the margin impacts but of note is that the group professional services segment margin has remained relatively stable compared with the prior corresponding period. As Chris has mentioned, we've had a high proportion of revenue from lower margin construction and fabrication work. And they've had margin impacts in US Field Services combined with the Norway business delivering lower margin because of the nature of projects. The underlying effective tax rate increase to 31% from 26% in the prior period, as fixed tax costs, and a greater impact to reduce profit before tax. A range of mid to high 20s is where we see as the more normalized effective tax rate for the business. Moving to Slide 51. Our headcount was approximately 48,400 at the end of January, down around 7% from June 2020. Total staff numbers decreased 6% since 30, September, with craft numbers increasing by 9% over the same period, we continue to manage our staff utilization right on target. Moving to Slide 52. In October 2012, we were confirmed as an eligible issuer, for the Bank of England's COVID-19 corporate financing facility for up to £300 million. And now liquidity position has been further strengthened for $291 million underlying operating cash flow. Turning to Slide 53, our gearing ratio was 18% excluding lease liabilities well below our target of 25% to 35%. Interest cover has increased to 7.2 times while leverage ratio is at 1.8 times. Our average maturity of debt is 1.8 years. As I've described previously, we have moved three receivables from current to non-current, and have triggered dispute resolution mechanisms to recover payment from those SLA. Collection from the fourth SLA has been completed. And net debt has decreased to $1.2 billion excluding risk liabilities. This is the lowest level of debt since the ECR acquisition. I'll close on Slide 54. Chris mentioned earlier that our action to set up the business for the future. And I just wanted to emphasize that point. The past number of years has seen a significant transformation of the business. We have simplified the business structure, develop the highly focused and disciplined approach to cash collection lowered our net debt position, implemented global common systems, including the finance CRP application, which went live in late 2020. And deployed cost saving and synergy initiatives across the business delivering hundreds of millions of dollars in benefits with more to come. The processes and systems are now in place to maximize the benefits that will flow from a return to top line growth. With that, I'll now pass back to Chris for his closing remarks.

Chris Ashton: Thanks, Tom. Look, I'd like to make some concluding comments before turning to our outlook statement which is on Slide 56. The first half of financial year '21 has been challenging for our business for the world at large. And the global economic circumstances, including the COVID-19 pandemic have impacted our customers in demand and they're in markets. But we've continued to prioritize protecting our people throughout the pandemic. That is been such an important aspect for our leadership to focus on over the last 12 months. The actions we've taken during the period have set the business up for the future. In the half, we've delivered a total of $125 million of annualized savings from our operational savings program, and our ECR cost synergies which will flow into the second half and beyond. We've generated strong operating cash flow, and then our net debt is at the lowest since the ECR acquisition. Affected sales pipeline is increasing. And we've recently announced significant sustainability awards, including the one this morning with Occidental Petroleum 1.5. This is a significant award for us. Energy transition and circular economy opportunities in particular accelerating and we've seen our factored sales pipeline increased from 11% to 18%, in this area since November of last year, as I've shared. So turning to the outlook on Slide 57, as a result of the global economic circumstances, including COVID-19 pandemic, we've seen project deferrals are low minimum project cancellations. Customer discussion indicates a third project to lighten the return of global economic circumstances improve. We believe our strong cash result, cost savings programs and our sustainability pivots have set the business up for the future. To date, we've delivered $286 million of operational savings increase the target to $350 million by June 22. We're also on track to deliver the $190 million ACR acquisition costs synergy targets by April '21. Our diversification will continue to be important as different sectors and regions recover at different rates. Our twelvemonth factored sales pipeline is increasing, which includes acceleration of sustainability related opportunities. We expect the improved EBITDA in the second half of the financial year compared to the first half due to recent project awards, as well as the impact of cost reductions implemented in the first half having a full year impact. Our sustainability pivot provides the structural framework for growth. And we're pleased with the level of work and the resulting margins we are winning in line with our strategy. We're seeing sustainability opportunities accelerate across all our sectors, and we are well positioned to capture these opportunities. Thanks for your time. I'd now like to hand back to the operator and to moderate a Q&A session.

Operator: [Operator Instructions] Your first question comes from Alex Karpoff with Goldman Sachs. Please go ahead.

Alex Karpoff : Good morning team. Look, first question of mine. I just want to focus in on margin. I appreciate the incremental color you gave around what's driving the declines. But I guess the big question is what to go for it looks like? And is there anything structural in the period that you notice with your customer discussions? Maybe if you go segment by segment that will lead you to believe that the earnings power of this company has changed when we look at a post COVID world?

Chris Ashton : Well, look, let me talk with the first part of the question. Look, if we look at the margins on the first half, we shouldn't take this as a proxy for go forward margins. Kind of things, one is I've talked about the ratio of our field work to the professional services work, that ratio shifters declines have come up. But also, there's a rate at which we can take out cost, which is always going to be slower than the rate at which revenues can come down. But we've taken out a lot of that cost down, we'll see the benefit of it in the second half. So we do expect to see the benefit of the actions that we've taken in the first half run through. In terms of structural shift, look I think if we looked at the underlying margins coming from the business in the first half the underlying from each of the sectors, they've not changed. You know, what the bottom line margin we've seen is not a result of an erosion of the margins would generate the project level from the customer. The contractual terms have not in any way shifted in any material fashion. What we're just seeing is an impact of declining revenues in the cost of programming, you know the cost of program, there's a rate at which you can drive change in an organization drive the cost out. And if you go beyond that, you'll disrupt the very thing you're trying to achieve. We think we hit the right balance. We went in with $275 million of cost out as a target, we've increased that to $350 million. If you go back to October 18, when we announced the ECR acquisition, we said, $130 million, we've delivered $190 million. And so look, we've got the track record of delivering the cost out programs, but what you're seeing is the impact of just a lag in the two, but we're not seeing any shift in the underlying margins from the project. In terms of the structural shift your shift going forward, I think it's really important to emphasize the nature of the project work or the investment going forward. You know, when we talk about the energy transition or sustainability, we often and many people think of offshore wind or onshore wind or solar. Sustainability and the energy transition is far more than that. It's far more complex. If you look at the award we've received today from Occidental's [ph] low carbon venture business 1.5. This is more typical of the complexity associated with delivering projects for our customers, whether it's in the upstream midstream, refining chemicals in the power sector, or in fact in the mining, minerals and metal sector. And what we're seeing is not just our traditional customers in this space, but also emerging customers. And, you know, with the advent of automation, you're seeing an ability to bring in different models, alternative commercial model. So I don't see a negative shift structurally, in how we pursue or how we generate margins from our customers going forward. And the complexity of many of the projects we're doing in the sustainability space, actually offer an opportunity for favorable margin, more favorable margin rather. I hope that answers your question.

Alex Karpoff : No, thanks. That's really helpful color. And just so I'm clear on modern this a little bit, you know, you talked about the incremental synergies delivered in the first half an incremental cost out that we should be modeling about a $60 million EBIT, step up just from the cost program run rate in the second half, half over half?

Chris Ashton : Tom, do you want to answer that question?

Tom Honan: Alex, this documents, information on page 63 of the deck. So if you read all the way through to that, you'll get a much better sense of what leads for the second half, Alex.

Alex Karpoff : Perfect. And one more in mind, if I can you talk about the big step up in the sustainability pipeline and appreciate that color there? Can you give us a sense of the base? Realize that's a percentage of total number? Is there any kind of you know, how much of that is growth in the pipeline versus declines and the rest of the pipeline? That makes sense?

Chris Ashton : Well, I'm not going to talk about revenue numbers, because it could be a proxy to a forecast or guidance. But look, there's both are growing. Okay, we're seeing recovery, as you can see from the curve, or the graph in the pack data, all of that is growing, or across all of our sectors. But what we're seeing is the proportion of sustainability domain related opportunities are also increasing. And so if you go to, I think it's page 25, in the pack of 23, this, you'll see the sustainability domain graph, and if you look at each of those categories in aggregate, that's what we're referring to as the sustainability domain. And when we're categorizing revenue going forward, it's out of those. So we're seeing both the absolute quantum in the fact that pipeline increase and the proportion of sustainability domain related opportunities within that also grow.

Alex Karpoff : Thanks. That's it for me. Thank you.

Operator: Your next question is from Richard Johnson with Jefferies. Please go ahead.

Richard Johnson : Thank you very much. Tom, can I just ask a couple of questions on the slides on Pages 12 and 13, please? If I start on Page 13, I just want to make sure I understand. Well, if you can help me understand exactly what that chart is. Is some of those columns, the 1.2 at the top chart on Page 12. I you're going to get all the 1.2 back by the end of the December half 2022. Is that right?

Tom Honan: No, they're there not the same things. The $1.2 billion on Page 12 is the impact of the revaluation of the work that we do on under longer term contracts, the items on Page 13, things where the work has been deferred from the current period. So it's not about long term contracts. It's about that much shorter term contracts and one off type opportunities that have been deferred. So that, more of a reflection of the fact that there's a difference between the 4.5 on Page 12, and the 3.7 on Page 12. The 1.2 is purely the revaluation, the approach that we use to value in the backlog at our long term contracts. And when we do we do that based around the work that's been performed over the previous six months. And given site restrictions and other things, we effectively revalue that number down. Now that will get revalued up when the economic circumstances recover. Yeah, I think you have another question. Richard.

Richard Johnson : Got it. So just so just to clarify the chart on Page 13 embedded in the 3.7 or the drop from 4.5. Correct?

Tom Honan: Correct.

Richard Johnson : Compared to 12. Okay, good. I mean, if I think about 13, is there any, any significant lag between the effective reward of those contracts when it translate into revenue? Is anything that sort of [indiscernible] in that regard?

Tom Honan: Not significant, Richard. I mean, every project is different. Every contract is different, but there's not a significant lag. I mean, this chart is based around, you know, I had discussions with customers when they expect that work to return. And I think the important thing here is the bottom line is 85% of opportunities diverge from 121 is made up of the addition of those bars [ph].

Richard Johnson : Right, thanks. That's very helpful. And then when I think about the very helpful, monthly chart you've got on the headcount, I mean, would we expect headcount to start to rise again, on the basis of Chart 13?

Tom Honan: Chris?

Chris Ashton : Well, look, you know, we manage headcount as a direct function of the work that we win, and the work that we burn, and look, we will expect, obviously, if the booking outstrips the burn rate, then we'll see it increase. But, it really depends on the rate of recovery, as well as over the next few months. And, I think we're going to see a rate recovery in different jurisdictions. You read a lot of the press and the same to think in certain jurisdictions that they're seeing a statistically significant downward trend in COVID transmission, but it's going to be a function of the rate of recovery. I read an article just last week, I think it was from one of the firm's on the call JP Morgan talked about the US being [ph] see recovery by the middle of the year. But, it's going to vary by vary by region, and just vary by how the government and how society sees the recovery, and how consumer demand rolls into the confidence for our customers to invest. But you know, we will see when we start getting obviously bookings in excess of burn, we will see work levels increase.

Richard Johnson : Got it. Thank you. And just finally on headcount. Tom, could you give me a feel for what proportion of the headcount reduction is sort of directly linked, was duplication related to ECR and what's market related?

Chris Ashton : Look, none of this is actually duplication. This is just market related. So there's no dis synergy. This is just purely as a result of the market came down. We've been working together. I mean, we've been one company now for 22 months. So any dis synergy is out the business and to be honest, because of the emphasis of Worley Parsons being upstream midstream. Really, the emphasis VCR being chemical refining them, we were both fairly well positioned in the mining minerals and metals. There wasn't any real duplication of the kind that would lead to an erosion of opportunity because of overlap.

Tom Honan: Richard, in terms of the business response program, the restructuring there were about 500 people that came out of the business based around that see the vast majority of the changes are as Chris said, market-related.

Richard Johnson: Got it. Thank you very much. I appreciate all the help.

Chris Ashton: Thanks, Richard. You're welcome.

Operator: Your next question comes from Scott Ryle with Equity Research. Please go ahead.

Scott Ryle: Hi. Thank you very much. I'm just going to continue on slides 12 and 13, if that's all right. Can I just confirm with respect to the $1.2 billion that you've talked about taking down your backlog under your definition? Can I just mathematically state on an annualized basis, the last six months, you effectively did $400 million less work under those contracts than you would have expected previously?

Tom Honan: I need to check the mess, Scott, but your logic makes sense. It's a revaluation across the future 36 months. Again, I think that logic makes sense to me.

Scott Ryle: Okay. And then on Slide 13, I just want to check that out, or I understood this correctly. It shows quite a sharp award date, expectation for February 21, which were 23 days through and five days left. In January, if I just look at your ASX releases, you announced five contracts in January, you've announced two so far in February. In the context of that chart, how do I think about contract awards? Have you missed out on a lot in February? Or [indiscernible] size in looking at the numbers in contracts?

Tom Honan: Yes, the announced contracts that are very small proportion of the total contracts that we win.

Chris Ashton: Yes.

Tom Honan: The number of contracts in January…

Scott Ryle: Award date one [ph].

Chris Ashton: Yes.

Tom Honan: [Indiscernible].

Chris Ashton: Yeah, that's right. I think it does and that's really important point. Across the world, we're winning hundreds, if not thousands of projects a month. We only announced the ASX, those which meets certain criteria and which obviously the larger, we'll consider more material contracts such as the award with Occidental Petroleum's 1.5. This is a this is a complex project, it's a Direct Air Capture, it's decarbonization, it's a feed for one unit moving into EPC. And there'll be four of them. This is a massively complex project, which is right in the wheelhouse of our organization and it's more typical of what we'll be seeing going forward. And it's announced because it's a materially significant project. But thousands of projects on a monthly basis have booked into the organization that we don't announce.

Scott Ryle: Okay. So being 23 days into the month and having quite a sharp increase in February, you've won your fair share in February, according on the basis of that chart on Page 13?

Tom Honan: I'm very pleased with the award, especially the other one today -- I've been with the company 23 years, I've been in the business in the sector for over 30 years. This is one of the most exciting awards I've been part of in my career. If you look at Occidental's own release, on their media release this morning in Sydney time, we overlaid that on our ASX release, we overlaid that on the information that's in the pack today. You'll get an indication, you'll get a better understanding of strategically, just how impactful and how important this opportunity is that we've been awarded. And I think it's another opportunity that cements Worley's leadership role as we move increasingly towards sustainability.

Scott Ryle: All right. You guys know your engineering behind that more than I do, but that is a very impressive contract. My point was trying to just get a sense of you painted a very near-term picture around the new award date. So, opportunities deferred from the first half and with a big spike in February, and March, and April, and given were mostly through February, I was trying to get a sense of whether you are comfortable that you've won your fair share of those contracts that would defer from the first half of 2021.

Chris Ashton: Look, you said about paint painting a rosy picture? We get outward of thousands of projects a month, we announced the large ones. A lot of this will be backlog. At this time of the year, we're at the end of February, we got four months to close -- a project that we get awarded, some of it will be booked and delivered entirely and burned in the year. Some will be booked, and burned in large portion this year, and somewhat will be booked and only a portion of it burned this year. So, we've got there is just a profile. But obviously, the book-to-burn ratio will depend on the lifespan of each individual project and that's obviously the massive amount of variation on that. So, what we're trying to show here is just projects have slipped to the right from half-one and a half-two. And if you look at the fact that sales pipeline, the reason we put that there is again to show the pipeline came down and then as projects are pushed to the right, you can see the fact that sales pipeline reflect the deferral of investment from our customer base. We're trying to paint a picture and to communicate, give as much transparency as possible around what the market looks like. The pandemic isn't over. The pandemic isn't over and I consider Australia to be in a very fortunate and blessed position, given it's the way it's been able to manage the impact of the pandemic. But I would consider then New Zealand in a unique position. Many parts of the world over have lived in pretty tough conditions for 12 months now and so, I want to leave you with we're ready for recovery, we're seeing deferrals, conversation with our customers say that they're going to come back, but I'm not going to predict economic recovery. There are smarter people than me out there, who are better at it than I could ever be and they still get it wrong.

Tom Honan: And just one thing I'd add to that, Scott -- I was just going to add one thing, Scott. Many of those deferrals have already been won. So, it's not as though we are repeating work, it's that the customer has awarded us the work and they've deferred the project, but the project doesn't then go out for rebid. So, you comment about are we winning that work? I think many cases, we've already won it in prior periods.

Chris Ashton: Yes, that's right.

Scott Ryle: Okay, right. That's all I had. Thank you very much.

Operator: Your next question comes from John Cuttle with Macquarie Group. Please go ahead.

John Cuttle: Oh, good morning, guys. Just had a couple of questions, please. Just in terms of thinking about to the first half, second half skews for the business, is there still a material second half skew both in terms of revenue and margin? There certainly used to be, but it appeared that that has moderated post-ECR?

Tom Honan: It's moderated, John, it's still there. And the biggest reason is because of the lower level of activity in July and August compared to weather months. So it's northern summer-related. Endemic in our business, which is mostly northern hemisphere [ph].

Chris Ashton: Yes.

John Cuttle: Thank you. And the second question, Chris, you've commented on EBITA, but do you expect in terms of second half versus first -- do you expect second half revenue to be higher than the first half? I'm talking about a sort of constant currency basis there.

Chris Ashton: Tom, do you want to answer this one? Or do you want to let me?

Tom Honan: Yes, probably slightly, John. Constant currency basis, we expect it to be stronger than the first half, but probably not to the same extent that we expect EBITA to be stronger because we don't have the benefit of the obviously the legs cost reductions coming into the community second half.

Chris Ashton: And to just bolster what Tom said, the team did a fantastic job of taking cost out but as I said, there's, there's a rate that you go beyond taking costs out, you'll disrupt your business and you'll start compromising the quality of what we do for our customers. But all I can make work in the first half is going to benefit the second half and that will improve -- we're sharing and we believe that will improve margins in the second half of the year.

John Cuttle: Thank you. And sorry, just a follow up. That revenue is a part of that seasonal and part of that are some of these awards that you flagging here.

Chris Ashton: That's right.

Tom Honan: Correct.

Chris Ashton: Yes, you're right, John.

John Cuttle: Okay. Thanks very much.

Operator: Your next question comes from Nathan Reilly with UBS. Please go ahead.

Nathan Reilly: Good morning, gents. I'm just trying to reconcile slides 20 and 22 and also 63. I'm not sure if that's possible, but I guess what I'm trying to work out here in the end is with respect to your second half earning's growth outlook, can you just try and help me bridge that out from the first half results? For instance, what are the incremental cost there and [indiscernible] benefits that you're going to realize during the half based on the savings that you've already banked?

Tom Honan: Yes. I think if you look at Page 63, the information is all there, Nathan. So rather than sort of laboring through a reconciliation process, we'll come back to you after the call. We're getting close to the end of the call, I think. But it's all there on Page 63.

Nathan Reilly: Got it. And then just with respect to the upgraded -- sorry, you go.

Chris Ashton: Yes. Well, I was just going to say what we try to do in the pack is be as transparent and as open as possible to help you understand in sort of whatever your analysis and understanding of the business. So you'll see at the back, we've put a lot more information in what has been in the core of the presentation that we've talked about. But obviously, anything beyond that, as Tom said, we'll answer questions.

Nathan Reilly: I appreciate the initial disclosures. Just want to make sure that we're interpreting that correctly. So, I'll follow up after the call. But with respect to the upgraded $350 million operational savings target, Chris, how should we think about that program? I guess the point is, how much of that target is effectively cost-base right-sizing to match your revenues, versus permanent cost savings that should boost operating leverage in a revenue growth environment going forward?

Chris Ashton: Well, if we look at the where we are at now, the $286 million and the $350 million, it's really the balances about moving to an increased level of shared services. So, we've got an incredible capability and capacity in India [ph] for the technical delivery of our work and what we want to do is replicate that on all the functions of HR, finance, assurance. So, when we do that, when we deliver that, that cost will be out permanently. So, when we're looking at the $350 million, this is a long-term commitment to take that cost out. Now, what we factored into that -- there will be some things that will return. We've talked about travels and example we know in a post-COVID world, people are going to begin to travel. But we've already taken that into account. So, the $350 million is a number we're comfortable committing to that you can put in your model in terms of long-term cost out.

Nathan Reilly: Got it. Appreciate that color. Thanks very much.

Operator: There are no further questions at this time. And that does conclude our conference for today. Thank you for participating. You may now disconnect.