Earnings Transcript for WOR.AX - Q4 Fiscal Year 2020

Chris Ashton: Welcome and thank you for joining Worley’s Full Year Results Presentation for the year ended 30 June 2020. The results presented today include for the first time the full twelve months of financials of Worley. But before we talk about the results, I’d like to acknowledge the devastation COVID-19 has caused to communities around the world. We felt this through the loss of six of our colleagues to the virus and we hold their families and friends in our thoughts. I'd like to thank each and every one of our people for their continued dedication to delivering outstanding outcomes for our customers or while managing through the rapidly changing global environment driven by the COVID-19 pandemic. These results have been achieved because of their agility and resilience that exemplifies the spirits of Worley. Turning to Slide 2, I’ll remind you to review our disclaimer shown here. Moving on to Slide 3. In terms of the agenda today, I’ll first start with an overview of the 2020 financial year results and then Tom will go through the detailed financials. I’ll then provide an update on our transformation strategy and sector updates and close with some final remarks on our outlook. Moving on to Slide 4. We are proud of the results delivered this year. Our aggregated revenue was up to $11.2 billion, up 75% from FY 2019 and up 7% on the FY 2019 pro forma due to the inclusion of the full year of ECR. We’ve generated an underlying EBITA growth of 80% from FY 2019 demonstrating an improved underlying performance. As a result of this performance, the Board has declared a dividend of $0.25 per share. I think the highlight of the year, particularly in the last six months is our improved financial strength. Our underlying operating cash flow was $881 million, up from $239 million in the prior financial year. Our leverage ratio continues to improve and it is 1.9 times and we renewed and established debt facility of a total of $945 million in April this year. We’ve delivered on the benefits of the ECR which is ahead of the expectations. Our business is more diversified with contribution from chemicals, almost doubling from last year and now providing 40% of our revenue. We’ve exceeded the previously announced cost synergy target having delivered $177 million of annual savings and today, we are now seeing the raised target of $190 million runrate. As we announced in June, we’ve accelerated our transformation to emerge stronger from the disruptive period we faced. We delivered $165 million with a runrate of operating savings today with a total of $275 million of runrate savings to be delivered by December 2021. This is in addition to our ECR cost synergies. Our increasing focus on sustainability is central to our strategy. And this could be seen in our refreshed purpose and values and amended climate change position statement. Our purpose is simple; ‘Delivering a more sustainable world’ for generations to come. This increased sustainability focus is demonstrated through our work related to the energy transition which represents a growing of our revenue. Moving on to Slide 5. I’d like to provide some context of these results. The pandemic has resulted in a rapidly changing environment for our business and it’s for all business – for all businesses across the globe. We ended this period of global disruption in a stable financial position and we improved that position delivering a strong cash results and securing debt facilities. We are proud of the decisive action we took to manage what we could control. We prioritized the protection of our people, modified field practices to keep our field-based people safe, quickly moved our office-based people to work-from-home and supported our customers and our communities. And we will continue to respond as the global impact of COVID-19 evolves and make adjustments to our business as required. Moving on to Slide 6. While it’s been a challenging time, we are very clear about path forward. We’ve demonstrated our resiliency and have continued to make progress on our transformation. The impact of COVID-19 and low oil prices have acted as a catalyst to accelerate our transformation plans. We’ve changed the way we work by transitioning over 40,000 people to work-from-home and our field-based people continue to support over 180 critical Energy, Chemicals and Resource infrastructure sites around the world. We’ve used our technology to help deliver this. As an example, we’ve seen our Microsoft team’s usage increased by 35 million minutes a month since March. The steps we took would prove our liquidity position and the focus we had on cash has seen us deliver a strong cash result supported by improved in our DSO of 13 days in the half. Our strong financial position has enabled us to increased our stake in the Transfield Worley Power Services to a 100% in July this year, supplement to the acquisition of 3sun in October 2109. These acquisitions contribute to our global power business expanding our already established O&M expertise and couples TWPS onshore wind capability with 3sun’s offshore wind capability to produce an industry-leading service offering in the global independent power market. We’ve continued to make progress on our acquisition cost synergies and our operational savings. We’ve released our revised climate change position statement which is core to our strategy and our future in ‘Delivering a more sustainable world’. Turning to Slide 7. We’ve diversified our earnings with operating expenditures accounting for almost 50% of our portfolio, compared to less than 10% in 2017 and the Chemicals sector now contributes 40% of our revenue, up from less than 10% pre-ECR acquisition. We do not have material lump sum contract with most of our work been reimbursable. One of the biggest changes is our exposure to the oil and gas capital expenditure which is now approximately 20%, down from 65% historically. And the largest portion of our capital to CapEx exposure is in the long-term sustaining capital contract as opposed to major capital projects. Moving on to Slide 8. In FY 2020, we worked a significant number of long-term contracts, some of which are included here. As you can see, these contracts span the world and add to our expansive portfolio of OpEx and sustaining capital contracts. We are proud of the fact that many of these long-term contracts or relationships that have been in place for over twenty years. Turning to Slide 9. We continue to evolve our sustainability program as we transform our business. Our commitment to the United Nations Global Compact principles remains as strong as it was eleven years ago when we first became a member. We support and report our sustainability performance against the United Nations Sustainability Development goals. Life, our safety, health and well-being approach guide us as we support our people and the communities in which we serve. We have a mature system of governance and operational controls in place to instill and reinforce a culture of actively acting lawfully, ethically and of course responsibly. We are committed to solving the world’s most complex challenges holding ourselves accountable with our own commitments and the role we can play is delivering a more sustainable world. Through the work our customers [Technical Difficulty] This is supported through the sustainability components of our leaders in incentive program. Over the past year, the world has been responding to - sorry. Moving on to Slide 10. Over the past year, the world has been responding to forces more powerful than any one geographies. These focus include climate change, the energy transition and the increasing importance of the circular economy and the digitalization of our industries. These challenges are changing our markets as well as customers see themselves and the role in the Energy, Chemicals and Resource sectors. Sustainable economic growth is vital as the world recovers from the COVID-19 pandemic. It will put people back to work, help communities rebuild and support achieve the past agreements. And we have an important role to play in all of this. We provide knowledge, intellectual property, technology solutions at scale to address some of the world’s most complex sustainability challenge. Sustainability presents expanded opportunities for our business and it’s core to our future. Turning to Slide 11. Our commitment to sustainability is demonstrated in our revised climate change position statements which we launched at Investor Day. It’s the single most clear signal of our commitment to again trying the Paris Agreement and the United Nations Sustainable Development Goals. We formed a strategy and articulate the role we will play which type of project we will work on and which one we would choose not to work on and also in the decisions we make each and every day. We are committed to achieving net zero Scope 1 and 2 greenhouse gas emissions by 2030. These are direct emissions from sources that we own or control such as generators at yards and indirect emissions that come from purchased energy such as the energy we use as to power our buildings around the world. We are also committed to proactively supporting our customers to reduce their own emissions on their projects and assets globally. To deliver the projects and infrastructure required to transition the world’s energy system, this will require knowledge, technology and technical expertise and this is where we will have the biggest impact. We’ve made progress on our strategic actions. We’ve piloted our Sustainable Solutions process on selected projects in urban Australia with our tier-1 customers and have strengthened our responsible business assessment standards. Turning to Slide 12. Although the world in which we live has changed, our focus on safety, health and the well-being of our people haven’t. It’s at the full prism of everything we do building on the strong safety culture from both of our heritage organizations. We maintain industry-leading performance this year reporting – reportable case frequency rates of 0.16. This year however, we sadly lost a member of our team. One of our vehicles was traveling on a public road, when the power haul failed and it impacted the vehicle and so we lost a member of our colleague and keep that family and friends in our thoughts. In the pursuit of the continuous improvement we launched Life, our safety, health and well-being approach which connects our health, safety and environment practices systems and tools under One Worley program. In FY 2020, we introduced four Life programs, Life-saving rules, Take 5 for safety, Life Conversations, and Life Matters. The safety health, and well-being of ourselves and those around us is fundamentals to Life. Without this, nothing we do is worth doing. Moving on to Slide 13. Before I hand over to Tom, I’d like to highlight the following

Tom Honan: Thanks, Chris. I’ll begin by focusing on some of the highlights of the year starting on Slide 15. It won’t surprise anyone who knows me, so I’d like to start with cash. Underlying operating cash generation during the year hit $881 million, driven by a 13 day improvement in last year’s – of six months. I’ll talk later about how that was achieved, but just as a preview, it was hard work. Both our aggregate revenue and underlying EBITA were up over 75% when compared to FY 2019, more than 7% when compared to pro forma FY 2019 numbers. Gearing is well below target range. Leverage has decreased to 1.8 times, down from 1.9 times at the half. We strengthened our liquidity position through a strong cash result and securing debt facilities. The strengthening of the liquidity position is especially pleasing given the external market situation. We’ve delivered $177 million of annual ECR synergies on a runrate basis at the end of June and we increased our target runrate to $190 million and committing to bring the delivery of this forward to April 2021, which is six months earlier than previously notified. We are also on track to deliver operational cost savings of $275 million runrate by December 2021, in addition to the ECR synergies. And that’s already having delivered a runrate of $165 million. I’ll turn now to our statutory results on Page 16. As statement of financial performance outlines our stat results, this has been released in the financial report launched with the AS 6 earlier today. Some points to note are our statutory revenue has increased across all major lines of business. The statutory bottom-line result increased this year as a result of the addition of ECR for the full year and improved underlying performance. Turning now to Slide 17. 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 EBITA and NPATA throughout the document. After taking into account a number of adjustments, which include acquisition and transition costs relating to the ECR transaction of $147 million, transformation and restructuring cost of $121 million and the amortization of intangibles at a $109 million, we derive an underlying net profit after tax and before amortization NPATA of $432 million, up 66% from $260 million in the PCP. Turning now to Slide 18. Here we’ve highlighted the statutory and underlying key financials for FY 2020. We achieved improvement in revenue due to 12 months contribution from ECR. Not surprisingly, our EBITA and NPATA results also improved. Our EBITA and aggregated revenue also both improved on the FY 2019 pro forma. Despite the economic circumstances we have experienced this year, our underlying EBITA margin was aligned with the FY 2019 pro forma. At the underlying level, our EBITA margin reflects higher relative contribution from Chemicals, as well as synergy realization. Our underlying operating cash flow of $881 million stems from a strong company-wide push to cash collection across the Group, with as I said our DSO dropping by 13 days in the last six months. The effective tax rate increased from 22% to 28% compared to the prior corresponding period reflecting the higher proportion of earnings coming from relatively high tax, but aside from jurisdictions like the U.S., Canada, and Western Europe. We see this level continuing as a greater proportion of earnings comes from these parts of the world. I’ll turn now to Slide 19. This slide provides further analysis to demonstrate how the underlying business is performing. Firstly, we’ve shown the impact of synergies on this half. You’ll note that $14 million of benefits were already delivered in the first half of FY 2020 and the half year runrate of those benefits is $28 million. The benefits from actions delivered in the most recent half is $23 million. Added to this is the most recent shift of operating cost savings of $36 million achieved during the year relating to property rationalization and business restructure. Both of these factors more than offset the economic impact on Worley, which we calculated approximately $62 million. By focusing on the things within our control and taking action to manage costs, we’ve increased earnings in the half despite the economic circumstances we have experienced. I’ll describe our cost synergies and operational savings in more detail shortly. Off to Slide 20. Overall aggregated revenue was up by 75% for the period which is driven by reporting 12 months of ECR business. Segment outcomes are up across all lines of business. It should be noted that in FY 2020, certain global costs were reallocated to professional service costs and construction and fabrication costs and we reinstated the FY 2019 results for comparative purposes. Margin improvement in Energy & Chemicals Services reflects the higher relative contributions from Chemicals customers, as well as synergy realization. While Advisian margin improvement can be attributed to the strong performance of our sulfur business. The Mining, Minerals & Metals segment margin is in line with the underlying FY 2019 margin. The FY 2019 result was effected by positive project outcome on a relatively smaller aggregated revenue, which has amplified the result. The major projects in integrated solutions margin has decreased primarily to the increased volumes of lower margin construction revenue in North America. I’ll move now to Slide 21. This slide provides a summary of the progress over the past few years on NPATA metrics. The slight improvement in the EBITA margin reflects increased mix of revenue contribution from Chemicals, as well as synergy realization. This is against the backdrop of the increase in the proportion of revenue from lower margin construction work. The NPATA margin, while improved from the first half was impacted by the higher effective tax rate as I’ve described earlier from 28% versus 22% in prior period based on the increased earnings in high tax jurisdictions. Moving to Slide 22. Our headcount was approximately 51,900 at the end of June, down around 12% from January. We’ve seen a craft which was impacted to a greater extent than at staff due to COVID-19-related staff excess restrictions and deferred turnaround activity. We continue to manage our staff utilization rate on target. This year managing of things are within our control is something we are focused on and utilization has been one those things. I will note that there has been no significant change to headcount and utilization in July. I’ll move to Slide 23. Our backlog is down by 10% to $16.8 billion from December 2019 to 30, June, 2020 although it’s worth understanding the causes of that change. We are continuing to win work. Our contract wins and renewals in the half have exceeded the value of backlog consumed. Backlog has been impacted by the effective COVID-19 on operations and maintenance contracts as a result of the postponement of the site shutdown season in the U.S. and site access restrictions. Under our backlog definition, we effectively revalue our long-term operations maintenance contracts every six months by applying the current work hours runrate over a 36 month period. There is a minimum impact from project cancellations. Other courses of change were foreign exchange translation impacts and the sale of an asset from a tier-1 to a tier-2 customer as previously announced. We continue to win work with around $2 billion of contracts awarded in quarter four in line with contracts awarded in the same period in FY 2019. I’ll move now to Slide 24. The current market conditions have seen backlog decline mostly in the Energy and Chemicals sectors in North America where the site shutdown season has been delayed and COVID-19 is impacting site access together with the previously mentioned foreign exchange translation and asset sales issues. I’ll turn now to Slide 25. As Chris mentioned previously, this year we have taken measures to strengthen our liquidity position. We extended $490 million of working capital for an additional 12 months and we secured an additional $465 million in 12 month facilities for a total of $945 million of renewed and established facilities. This was all achieved earlier in the calendar year. Our liquidity position has also been strengthened by our strong underlying operating cash result of $881 million. I’ll turn to Slide 26. This slide presents a number of our key balance sheet metrics over time. The main take out of this slide is the improvement in leverage and gearing over the last couple of years delivering a stronger balance sheet even while we have invested almost $5 billion in acquisitions. We are stronger, more diverse and resilient business through these acquisitions. And this hasn’t been done at the expense of increasing balance sheet risk or contract risk. Traditionally, the business has performed much better on cash metrics in the second half. I am pleased to report that the improved operating cash flow performance in both the first and second halfs of FY 2020. There is no breakthrough practice or technology involved, just hard work and discipline. Firstly, for our teams to deliver quality work and to invoice accurately and on time and finally to follow-up and collect the cash. The improvements in these practices in the businesses come together is a credit to all those involved. Net debt on a covenant basis declined to $1.3 billion from $1.6 billion. And I am very pleased to report continued improvement in balance sheet metrics. Gearing is at 18.5% and leverage defined as net debt-to-EBITA of 1.8 times. I’ll turn now to 27. Our gearing ratio as I said, is at 18.5% calculated on the net debt to net debt plus equity basis, which is well below at a target of between 25% and 35%. Interest covers declined to 6.3 times and as I described leverage ratio is down to 1.8 times. Our average maturity of debt is 2.4 years. As I described, DSO has improved in the half by 13 days. As we’ve previously described, we moved three receivables from current to non-current and have triggered dispute resolution mechanisms to cover repayment from those SOEs. Collection from the fourth SOE continues in line with the expectations and the balance is now just a few million dollars. Due to the adoption of AASB 16 Leases on 1 January, 2019, our statutory debt includes lease liabilities of $435 million. I’ll move now to Slide 28. Looking at cost synergies on Slide 28, we’ve delivered $177 million runrate savings at June 2020. We’ve exceeded our previously announced target and have subsequently increased our target to $190 million runrate savings by April 2021. This is $60 million or almost 50% higher than our initial synergy estimates at the time of the acquisition announcement. This increase comes from a broad review of the cost synergies with the three main markets continuing to be IT, property, and overhead rationalization. The remaining savings are related to the completion of the integration of back-office core systems and the activities relating to IT networks and systems. The estimated one-off cost associated with delivering the synergy target are approximately $125 million with an additional $15 million of CapEx. There are modernization cost of $45 million plus $35 million of CapEx. I’ll move now to Slide 29. In June, we announced $275 million in operational cost savings to be delivered by December 2021 in addition to the ECR cost synergies. And to-date, we have secured a runrate of $165 million of these savings as at the end of June 2020. Most of these were delivered at the very end of the year. The citings are across four main areas which is discretionary spends, property rationalization, business restructure and shared services. In terms of discretionary spend we are ahead of runrate for key spend categories in areas in like travel. At the moment we are obviously not traveling. But there is a baseline level of travel which will return. We have only included the savings down to a normalized level of travel in these numbers. Our budgets for FY 2021 are already reflective of the reduced spends and we are embedding new ways of working to make this sustainable. We are well progressing in terms of property rationalization which represents 30% of the target with 65% of these savings to be realized by December 2020 that has been in place since 1 July with the majority of the savings to be in place by October of 2020. In shared services, the program has commenced and we’ll get into this from a completion of our back-office integration later this calendar year. We are on track to deliver the runrate savings of $275 million by a target date of December 2021. I’ll turn now to Slide 30. We’ve achieved some important milestones in working as one organization with common platforms. Our back-office systems integration is on track. We recently went live with our core HR and expenses applications for our legacy WorleyParsons People and the rest of the business will follow soon. The Finance ERP application is on track to be fully integrated later this calendar year. The systems effort is progressing well and we have completed remote user acceptance testing as a result of the current environment. UIT was slightly delayed due to COVID-19, but we are still well on track for a successful rollout. Having common platforms has been a huge enabler for our people working from home during COVID-19 and we are – real debt of gratitude to all our people who have enabled us to report these results in such times. I’ll now pass back to Chris to discuss our transformation strategy and provide a market update. Thanks, Chris.

Chris Ashton : Thanks, Tom. So, let’s turn to Slide 32. We’ve been on a transformation journey since we completed the ECR acquisition. We’ve diversified our markets and solidified our leadership position and we’ve been preparing for fundamental shifts that the industries that we work and are facing. COVID-19 has acted as a catalyst for our transformation and we are now transforming faster to emerge stronger. We are driving with control change to shift how we work and I believe the COVID-19 impact has probed this forward by much as decade. We are simplifying our business and support our customers to drive new ways of working and support the execution of our strategy. And part of the transformation strategy is about being clear on how we see ourselves and the role we play. Moving on to Slide 33. People from across the business have been involved in conversations about our purpose. Who we are? What we believe in? What we stand for and the difference we believe we can make. The safety purpose is what drives us, is what pushes, it’s what gets started better in the morning and we’ll emerge from that quest with a few simple words, ‘Delivering a more sustainable world’. It puts our passion, our skills and our beliefs at the center of some of the biggest challenges on the planet to help make the world sustainable for generations to come. Alongside our purpose are our values. Our challenge is to live these values in every interaction with each other, our customers, and also communities in which we operate and the communities we serve. I am excited to step into our future and make a difference in these communities delivering a more sustainable world for the benefit of the future generations. Turning to Slide 34. Sustainability is a driving force for Worley. I’ve been surprised with the rate of change over the past six months and the conversations I’ve been having with many of our customers around our own sustainability commitments. These markets continues to grow and our customers will need to invest to achieve that own sustainability goals. With the knowledge, experience and scale to support our customers as they are navigating the changing world. Turning to Slide 35. We believe we have a significant role to play in supporting our customers while they transform our businesses looking to more sustainable development investments and more sustainable outcomes for the world. Some of the focus areas for ourselves on the economies where we are delivering ways to energy solutions, developing a sustainable technology, technologies and a example of this is our NextOre ore sorting technology, which helps mining companies reduce energy consumption and site waste and of course the energy transition. We’ve been sharing our energy transition at speeds with efficient time and include a snapshot of some of our capability on the right-hand side of the slide. Moving on to Slide 36. The energy transition is critical for delivering a more sustainable world. We’ve seen some of our customers reduce their overall capital spend this year. However, they’ve retained a real part of investment which is reflected in our sales pipeline. Oil and gas will still be needed. They remain pivotal to our energy systems and through technologies their associated emissions will be reduced. Gas in particular will be used as a transition fuel for some time. Our customers’ existing assets will still need to be operated and still need to be maintained during this transition. But our customers will also required in order to deliver the required changes. New technologies and digital capabilities will be enablers for sustainability success and we have a role in supporting our customers in all of these aspects. Moving on to Slide 37. We’ve been clear on our strategy in the role we have in the energy transition. Our energy transition work is growing and with the broad sustainability-related work and prospect pipeline also grows. Supporting both new and existing customers, energy transition revenues represent around half of our Energy sector revenue. For example, we are now providing inspection and maintenance services to offshore wind farm operators, as well as supporting oil and gas majors in carbon capture and storage projects. As we look at our sales pipeline, we are seeing acceleration in electrification, decarbonization and the circular economy opportunities in particular. Moving on to Slide 38. We’ve been responding to our markets and building both energy transitions and sustainability capabilities for some time. 3sun, our offshore wind and inspection maintenance service provider has expanded its reach since joined the group extending on the North Sea to Europe. We’ve had ten contract awards and extensions since the acquisition including wins with new customers. Worley’s global reach together with 3sun’s expertise has been a key differentiator to secure many of these contracts. Our Veckta joint venture with XENDEE has long over 31,000 microgrids since inception and has delivered distributed energy system projects across North America and APAC. And most recently, we increased our stake in Transfield Worley Power Services to a 100%. TWPS is an operations and maintenance business providing service to support critical power infrastructure across Australia, New Zealand and Southeast Asia. TWPS has experience across a range of power technologies including solar, wind, and hydro. Now coupled with 3sun’s offshore wind capabilities, with an industry-leading service offering in the global independent wind power market and with the leverage TWPS’ leadership in digital technologies across our global operations and maintenance business. Moving to Slide 39. We’ve been supporting our customers around the world across the sustainability spectrum. A small sample across the industries we serve is shown here. These are transformative solutions. We are designing a flagship facility in The Netherlands supporting its transition to a bio-based economy for plastics. Our projects contribute over 50% of the renewable diesel capacity in the U.S. These are many complex sustainability challenges such as how businesses respond as customers demand more sustainable products and how we will help emerging economies develop without locking – to a clear emissions future. These are big and complex challenges and this is where Worley excels. Turning to Slide 40. We are proud of our Australian heritage and we are supporting customers and governments locally in that sustainability journey across the full asset life cycle drawing on our considerable global expertise. We hold vast intellectual property endangered by the design, management operation and maintenance of Australia’s and the world’s critical Energy Chemicals and Resource infrastructure. We provide operations and maintenance service to approximately a third of Australia’s base load power generation fleet and with the largest independent wind farm operator in Australia. Turning to Slide 41. I will now provide an update on our markets. In the upstream and midstream market the significant decline in oil and gas prices has led to a reduction in near-term investments. However, markets are forecast to rebalance and investment is expected to continue. In the offshore markets more investments continues to grow. Our post-acquisition capabilities improved our ability to deliver offshore projects across the full asset life cycle starting from concept and running through the commissioning, as well as subsequent maintenance modifications and operations. The onshore market has been particularly hard hit by the disruptions due to the pandemic and lower oil prices. However, as seen on the chart at the top right, there is still significant brand sales and sustaining capital spend in this market and we’ve been successfully increasing our proportion of revenue from Brownfield investments and are well positioned for future growth opportunities in this area. Gas will remain a dry fuel source supported by the energy transition with global energy demand expected to double by 2040 as shown in the chart to the bottom right. Even with the rapid change in the energy mix in the International Energy Authority Sustainable Development Scenario , gas will continue to play a major role in energy markets for decades to come. Together with our customers and our industry partners we are supporting the electrification and decarbonization of facilities and the development of technologies such as carbon capture, carbon capture utilization, and storage and the rapidly emerging hydrogen states. Moving on to Slide 42. We’ve included some project case studies in the upstream and midstream sectors providing some insights into how we are applying our energy transition and digital expertise to these market segments, I am not going to go into these in detail. So moving on to Slide 43. Turning to the power sector. Investment has shown resilience due to the COVID-19 pandemic, particularly in the renewables markets while power consumption overall has dropped by approximately 10% by shutdowns generated from renewable was actually increasing by a 5% according to the International Energy Agency. Considering the resiliency of the renewable sector, we anticipate continued increased of investment in this sector. Offshore wind farm forecast capacity is set to increase by at least 15 fold worldwide by 2040 and that any negative impact from COVID-19 is expected only to be temporary. All of the European oil majors are focusing and forecasting significant investments in the renewable sector going forward. European governments have communicated their hydrogen strategy in the last weeks that includes government support for the advancement of hydrogen technology and infrastructure support for decarbonization of the industrial and transport sectors as part of the recovery plans and the European Green Deal. Our power business will continue to drive growth in technologies of high complexity and low risk with commoditization including hydrogen offshore wind and distributed energy systems. Moving on to Slide 44. The slide highlights some case studies in which [Indiscernible] transition and digital expertise in the power sector. Moving on to Slide 45. This slide shows the trends in the refining and chemicals sectors. You can see global refinery utilization rates in 2020 are expected to be the lowest since the 1980s according to the IDA. The transportation fuels it’s clear demand loss and aviation will last for extended period of time with the International Air Transport Association reporting air travel is not expected to return to pre-pandemic levels until 2024. With reduced demand in new capacity entering the marketplace, refining overcapacity will be around 3 million barrels a day and rationalization is inevitable in 2020 to 2021, especially for older, small refineries in developed countries. The chemical industry has experienced some supply side impacts both supply side impacts from change, availability or refinery feedstocks, as well as demand side impacts with increased use for packaging, medical supplies and surfactants, as well as reduced use in durable applications such as automotive and construction. With either the demand for chemicals and plastics starts to normalize, it’s expected to below the pre-pandemic levels until economic and social confidence returns at which point we expect it to revamp. Moving to Slide 46. This slide highlights some case studies in the refining and chemicals sectors, again highlighting how companies in these industries are contributing to the energy transition. Moving on to Slide 47. This slide captures Mining Minerals and Metals and resource infrastructure work. COVID-19 had a moderate and varying impacts on mine commodities and metal prices. The combination of returning demand led by the restart of the Chinese economy and supply disruptions in some major commodities and in most cases same price recover to levels that continue to encourage investments helped by a good basis by both precious metals and iron ore pricing, together with good operations performance miners has maintained very strong free cash flows and confidence in the long-term market outlook is expected to see the world’s top-50 miners continue to invest and replace some capacity and high return growth options. We are seeing increased focus from our customers on the electrification of their operations and energy source switching as they look to benefit from low cost renewable and work to lower their emissions in carbon reduction commitments. Our customers have confidence in the long-term demand for energy transition commodities such as copper, lithium and nickel and new technologies are expected to play an increasing role as our customers love to produce low Co2 metals. Moving to Slide 48. The slide highlights some case studies of Worley in action in the mining minerals and metals sector. Across all sectors, we are seeing the push toward the adoption of new energy sources, technologies in our locations as companies transition to a low carbon future. We are also getting involved in using new energy technologies to help communities progress where these operations are based. Moving on to Slide 49 and the outlook. I’d like to make some concluding comments before I turn to the outlook statement. So, turning to Slide 50. I believe we made significant progress during what has been one of the most disruptive periods in the recent history. Our revenue is up 75%, EBITA is 80% and NPATA is up 65%. We’ve delivered a notable operating cash flow of $881 million. We’ve improved our financial strength and we continue to deliver on our ECR acquisition commitments, while also accelerating our transformation. Our diversified business is providing us with resilience as we accelerate our transformational strategy. We are industry leader on a global scale in the Energy, Chemicals and Resource sectors and are delivering solutions for our customers during this period of change. We are well positioned to deliver on the expanded sustainability opportunities that are emerging. We have a critical role to play in the future supporting our customers and governments both nationally and globally in delivering a more sustainable world. Moving to Slide 51. The current economic circumstances have led to a rapidly changing environment for Worley's business. We have managed business fundamentals with agility and we will continue to adjust as the global disruption evolves. We are a more resilient business following the completion of the acquisition of ECR with increased diversification across geographies and sectors as well as greater exposure to our customers' operating expenditures. Our diversification will continue to be important as different sectors and regions recover at different rates. In FY2021 we will continue to prioritize protecting our people, maintaining financial and operational integrity and supporting our customers, to create value for all of our shareholders. We are on track to deliver the ECR acquisition cost synergy target, as well as the operational savings target as we accelerate our transformation. We will consider balance sheet capacity for high return opportunities in line with our transformation strategy. The long-term market continues to indicate that sustainability, including the energy transition, and the digitalization of our industries will open up opportunities across all of the sectors we serve. Worley has the global scale, and the technical and financial strength to support our Energy, Chemicals and Resources customers as they themselves navigate a changing world. Moving on to Slide 52, I would just like to say thank you for the time and Tom and I are now happy to take questions.

Operator: [Operator Instructions] And our first question comes through from Richard Johnson from Jefferies. Please go ahead, Richard. Your line is now open.

Richard Johnson: Thank you very much. Can I just start with a couple for Tom please? And before I do that, just – I just want to say thank you very much for all the detail which is fantastic on the numbers. But my first question, Tom, is really around the headcount. When I compare the year-end number to the numbers you were talking about at the Investor Day, there is obviously quite a big change in the final quarter. And I am just trying to get a sense of what proportion of that change might be just preemptive moves or what proportion is due to there as projects completing?

Tom Honan: Richard, I am guessing you can mark – but the vast majority is project-related. What you described is preemptive moves part of the corporate restructure if you like. It might have been a 100 or so roles so far. There are some more people know about and they’ll come later on this year. But the vast majority is, as you described projects completing or in some cases, some of that’s turnaround work in particularly North America not commencing and so it works that they were previously engaged on – it’s a team of people – teams of people who sort of come in and out throughout the year. So, most of it is related to a directly chargeable type of origin.

Richard Johnson: Okay. Thanks. And then, on the backlog, if you – I think, going back to the Investor Day numbers, if you done the O&M adjustment at that point, would it had a sort of similar impact or is there something unusual that happened right at the end of the year?

Tom Honan: It’s probably slightly - it would have been slightly less impacted. And that’s because the work that they would typically be doing in April, May and June, particularly in June, they didn’t do because of site restrictions and other reasons. And so, when we do the revaluation, it takes a greater - at the most recent level of activity. So, some of it would have been in the business – impacted the year-end numbers.

Richard Johnson: Got it. Thanks. And then, on the synergies, is the incremental amounts that you are taking, are all projects that were in place originally? So any adjustments you might be making because of any change in trading conditions falls into the cost out program rather than the synergy buckets?

Tom Honan: Yes. That’s right, Richard. The vast majority of that additional $13 million that is to come is some very low standing projects that really commenced, in some cases full the transaction cost that now come through. It won’t surprise you to know that that target has always been about this level and we – the last time we updated the market to 175, we were concerned about a few things, coming to play and being out we stretched value from those synergies and what’s happened in the past six months we’ve been able to do that. And so that gives us a lot of confidence that we can get to the 190 by April of 2021.

Richard Johnson: Got it. That’s very helpful. Thanks, Tom. And just final quick one for Chris, if I may? Chris, just thinking about your comments on the near-term outlook, and I was just wondering whether there was any reason at all why your revenues in the short-term won’t reflect the changes in the spending plans of your major customers.

Chris Ashton: Well, you look – we are in 30 different business. 40% of our revenues are operational and so, that is ongoing spend that what customers will need to continue going. Look, and we are much more of a feel that that’s the impact we talked about the oil and gas the demand restriction there. But that’s only 20% of our business now. Yes, it’s a little less than what 65% historically upstream, midstream, CapEx now it’s only 20% and 45% of our work is in the Chemicals sector. So, it’s the diversity of earnings and the triple net business mining, minerals and metals and so, it’s the mix of the work what I think is, the opportunity was to continue to move forward with optimism.

Richard Johnson: Got it. Thanks very much. That’s all for me. Thank you.

Operator: Thank you, Richard. [Operator Instructions] Our next question comes through from Mark Samter from MST Financial. Mark, your line is now open. Please go ahead.

Mark Samter: Good morning guys. I have couple of questions if I can. Just thinking about you’ve obviously like – about that – it’s all in the backlog from the asset sale.

Chris Ashton : Mark, excuse me. Mark, can you speak up a bit?

Mark Samter: Okay, sorry. You flagged and you said you had four, but they lost in the backlog from the asset sale by Tier-1 customer. I appreciate you might get some benefit from the other side of that change in strategy, but obviously a lot of the European majors are pretty allergic to hydrocarbons at the moment. Did you see that as a risk as some of these assets transition out of the Tier-1 customers’ hands and that’s probably accelerating over the next few years, but there is more work to be potential lose as some of these slip into to tier-2 customers’ hands?

Chris Ashton : Yes, Tom, can I maybe answer that one?

Tom Honan: Yes.

Chris Ashton : Yes. So, look, with that particular transfer of the Tier-1 to Tier-2 was very specific and it’s much driven by the strategy of the Tier-2 rather than the Tier-1. But look, this – if you look at, if there was a movement from Tier-1 to Tier-2s, we operate very successfully in the Tier-2 markets, very successfully. So, I wouldn’t be concerned as somebody got assets moving from a Tier-1 on to Tier-2, because we work in that space now. So, the example that we use the only reason we quoted that was because it was a – there is a very specific strategy in place for that Tier-2 customer.

Mark Samter: Okay. Thank you. And then, just a second question that I guess, one of the challenges of delivering of a good set of numbers in this most recent half is listed businesses, your margins were pretty open book to your customers. On that OpEx work I guess in particular, there is such – some stable part of your business as you say, can you give us a feel for the work that is, I guess, cycling off of repricing at the moment. Are you seeing some pretty strong impression for your customers who have on the own offset as well as you guys on margins you reprice some of that OpEx work?

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

Tom Honan: Yes. What realistically, Mark, with the work that as you call cycling off and being replaced, I wouldn’t say there is a material difference in the margins. What change that happened is there is a difference between the type of work. So, the O&M work, the construction type related activity is obviously at a much lower margin than the engineering work, the design work, construction management type work that we do. And if you break it up between those, there is not a significant difference. As you know, in a couple of markets, there might be some pricing pressure, but across the board, we don’t see a large change. Anything you want to add to that, Chris?

Chris Ashton : Yes. And that’s right. It’s this all was pricing dynamics in the marketplace, but I think you also got to look at the shift on the supply side. If you look at the last few years, there was cost. There was changes. Those three companies are no longer in play there. So, pricing isn’t all about the customer side. It’s about the customer supply side and what we are finding is, throughout this process, the reach out from our customers are senior – the senior executives of our customers reaching out to reinforce that commitment to us, reinforcing in parts of the relationship, has been very positive and more frequent than I’ve seen in very well back to 2014 to the current environment, we are seeing far great level of reach out and the customers look – they reassure us that they are committed to continuing to work on the relationships. So, it’s a balance.

Mark Samter: Great. Thank you guys.

Operator: Thank you, Mark. Our next question comes through from Rohan Sundram from MST Financial. Rohan, your line is open. Please go ahead.

Rohan Sundram : Thanks guys. Good morning. A couple of questions. Firstly, on the cash flow. Mindful of a very strong conversion in the second half, will that have any representation and flow through into the first half of 2021. I am just mindful that first half is seasonally a weaker conversion half, but is there anything you’ve done structurally that could drive higher than historical conversion in this next period?

Tom Honan: I wouldn’t say structural I think couple. So, we’ve been working for a number of years to improve that cash conversion and that clearly has delivered significant benefits in the second half. I wouldn’t shy away from the first half. It was also very good, much better than it has been previously and I think this is just a continuation of that. So I wouldn’t call it any structural changes, but as I said, I think it’s more cultural than it is.

Chris Ashton : Yes. Maybe let me add to that as well, I think it is cultural. The way our organization responded to the pandemic and our work go parallel to collecting cash, we empowered our frontline leaders to do the right thing and we supported them with whatever they needed to be supported with to ensure that in this case we’ve protected our people. And then, with the empowerment of our frontline leaders, in the case of the cash and Tom and I and the corporate team supported those frontline leaders all the way through the organization to the frontline leaders, we empowered them and test them with the challenge and they embraced that challenge. They embraced the concept of being empowered to go there and collect and focus on collections and getting it out of the past. And like Tom said, there was great cash collection in this second half, there is a phenomenal cash collection. And it stands to the focus, the resilience, the determination of the frontline leaders feeling empowered and committed just delivering what you are seeing. So, it is in our case more cultural than it is structural.

Rohan Sundram : Okay. Thank you. And on the managing the cash balance of $500 million versus the prospect of further debt reduction, how do you manage that? And have you made any further debt pay downs in post the reporting date?

Chris Ashton : Nothing, Rohan. No, nothing significant in either draw down or pay down since the reporting date. What effectively this is the $500 million is lots of small amounts across the group for working capital purposes. We obviously have significant salary bills, every week, every fortnight, every month depending where we are in the world and we obviously keep those accounts refreshed and able to meet those salary bills. So, we are probably a little bit conservative in the most part of keeping in little bit more cash in and we would prefer to do, but uncomfortable with that sort of bill embraces type approach.

Rohan Sundram : Okay. Thank you guys.

Operator: Thank you, Rohan. And as that we have no further questions, I’d like to hand back over to Chris and Tom.

Chris Ashton: Okay. Thanks. Look, at this time, we want to say thanks everyone for your continued support. WE appreciate it and Tom and I will be following this session with more sessions and if there is any questions, we are happy to take them now before we close. Tom?

Tom Honan: Yes. Just, thanks everybody and stay safe. We’ll got yourself especially those like you who are in – and like me in stage four restrictions and we look forward to seeing you in person soon or rather later. Thank you.

Chris Ashton: Alright. Thanks everyone. Take care.