The Worley Ltd (ASX: WOR) share price is relatively flat this morning despite the professional services provider reporting a 110% increase in profits.
The company released its half-year results this morning showing strong growth in revenue and profits following the acquisition of ECR. Worley shares have risen 11 cents and are currently trading at $14.19.
Worley's 1H20 results
Worley reported that the benefits of the ECR acquisition are being realised with more consistent earnings through an increased proportion of operational expenditure, chemicals, and revenues from North America and Europe.
A 134% increase in aggregated revenue was reported, with revenue growing to $5,998 million from $2,566 million on improved market conditions and the inclusion of the ECR business for the full six months to 31 December.
The company's focus throughout the half-year has been on delivering the benefits of the ECR acquisition. The integration of the ECR business is now substantially complete and all remaining activities will be delivered as part of normal operations. The ECR cost synergy target has been increased to $175 million per annum from $130 million before the acquisition, with cost, margin and revenue synergies being delivered.
Worley is seeing more consistent earnings through increased exposure to operational expenditure and the chemical sector, in line with the ECR investment case. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew 126% to $366 million during the half, up from $162 million in the prior corresponding period (pcp).
Underlying net profits after tax and excluding amortisation (NPATA) increased 110% to $216 million from $103 million, reflecting strengthened market conditions. Tax rates, however, have increased due to higher earnings from relatively high tax jurisdictions (US, Canada, and Western Europe).
Underlying basic earnings per share increased to 41.5 cents, up 39% from 29.8 cents in 1HFY19. An interim dividend of 25 cents per share, unfranked, was declared.
Balance sheet
Worley's balance sheet remains strong with underlying operating cash flow of $277 million for the half, up $21 million from the pcp.
Its net debt to EBITDA ratio is 2.0x with gearing at 21.3%, below the target band of 25% – 35%. The average maturity of debt is 2.8 years.
Outlook
Worley has indicated that energy, chemicals, and resources market indicators provide evidence of continued strength in market conditions.
As a result of the ECR acquisition, it has enhanced the diversity and resilience of earnings and Worley will continue to realise the benefits of the ECR acquisition including the realisation of cost, margin, and revenue synergies.
