WorleyParsons Limited (ASX: WOR) today released their half-year report for the period ending 31 December 2018 with a net profit after tax (NPAT) of $82.4 million.
WorleyParsons is a global professional services company which provides expertise in engineering, procurement and construction in the hydrocarbons, power, infrastructure, mining and minerals, and chemical sectors.
Key Results
WorleyParsons reported:
- Revenue up 9.8% to $2.65 billion
- NPAT $82.4 million (up from $1.4 million previously)
- Operating cash flow down 52.6% to $21 million.
Management Commentary
WorleyParsons CEO Andrew Wood said, “Our business has continued to grow through a combination of our focus on the resources and energy sectors, cost reductions delivering operating leverage and improved market conditions.”
Weaker Australian Dollar Hits WorleyParsons
The company’s net debt (excluding the impact of the proceeds from the capital raising) increased from $662.5 million at 30 June 2018 to $783.9 in the six-month period to 31 December 2018. The company’s debt increased $121.4 million or 18.32%, with most of the increase being driven by a weaker Australian dollar. Despite this, WorleyParsons seems happy with its gearing levels at 25.7% with the CEO stating it is “well within our targeted range of 25% to 35%”.
Jacobs ECR Acquisition
In October 2018 WorleyParsons announced the acquisition of Jacobs ECR, with the company today reporting it is on track to be completed by late March or April 2019, funded by a way of a $2.9 billion entitlement offer, $985 million of stock issued to the vendor and $895 million of debt.
While the company expects it to be profit/earnings per share accretive by 20% immediately and 50% post-acquisition from synergies, I wonder if this will translate into increased cash flow to help service the increased debt which will sit at around $1.6 billion to $1.7 billion.
Rask Perspective
I find it hard to be comfortable with a complex company that has operations spanning international markets. For this reason, is it not a stock I would look to add to my portfolio right now. If you’re looking for other companies to add to your watchlist please keep on below.
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