Worley Limited (WOR) Earnings Call Transcript & Summary

Hello, and welcome to Worley's Full Year 2020 Results Presentation. I'm Verena Preston, Head of Investor Relations for Worley. I'll shortly hand over to Chris Ashton, our CEO; and Tom Honan, our CFO, to present the results, after which we will have a Q&A session. If you do have any technical issues throughout the presentation, please call the number that you'll see on your screen below. And in the spirit of reconciliation, Worley acknowledges the traditional custodians of country throughout Australia and their connections to land, sea and community. We pay our respects to the elders past, present and emerging and extend that respect to all aboriginal and Torres Strait Islander peoples today. Thank you again for joining us today, and I'll now hand over to Chris.

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, a full 12 months of financials of Worley. But before we talk about the results, I'd like to acknowledge the devastation COVID-19 has brought to communities around the world. We felt this through the lost 6 of our colleagues to the virus, and we hold their families and friends in our hearts. I'd 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. These results have been achieved because of their agility and resilience, exemplifying the spirit of Worley. Turning to Slide 2. I 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 update and close with some final remarks on our outlook. Moving on to Slide 4. We're proud of the results delivered this year. Our aggregated revenue was up to $11.2 billion, up 75% on -- from FY '19 and up 7% on the FY '19 pro forma due to the inclusion of the full year of ECR. We've generated an underlying EBITA growth of 80% from FY '19, 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 6 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 1.8x and we renewed and established debt facilities of a total $945 million in April this year. We've delivered on the benefits of the ECR acquisition 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 targets, having delivered $177 million of annual savings. And today, we're announcing the rate target of $190 million run rate. As we announced in June, we've accelerated our transformation to emerge stronger from the disruptive period we've faced. We've delivered $165 million of the run rate of operating savings to date, with a total of $275 million of run rate 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 portion 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 is for all businesses -- as it has for all businesses across the globe. We ended this period of global disruption in a stable financial position and have improved that position, delivering a strong cash result and securing debt facilities. We're proud of the decisive action we took to manage what we could control. We prioritize 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're very clear about our path forward. We've demonstrated our resiliency and have continued to make progress on our transformation. Impact of COVID-19 and lower oil prices have acted as a catalyst to accelerate our transformation plans. We changed the way we work by transitioning over 40,000 people to work from home and our field-based people have continued to score support over 180 critical energy, chemicals and resource infrastructure sites around the world. We've used that technology to help us to deliver this. As an example, we've seen our Microsoft Teams usage increase by 35 million minutes a month since March. The steps we took to improve our liquidity position and the focus we've had on cash has seen us deliver a strong cash result supported by an improvement in our DSO of 13 days in the half. Our strong financial position has enabled us to increase our stake in the transfer of WorleyParsons services to 100% in July this year, supplementing the acquisition of 3sun in October 2019. These acquisitions contribute to our global power business, expanding our already established O&M expertise and couples TWPS's onshore wind capability with 3sun's offshore wind capability to produce an industry-leading service offering in the global independent power lines. 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 expenditure accounting for almost 50% of our portfolio compared to less than 10% in 2017. And the chemical sector now contributes 40% of our revenue, up from less than 10% pre ECR acquisition. We do not have material on some contracts with most of our work being 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 CapEx exposure is in the long-term sustaining capital contract as opposed to major capital projects. Moving on to Slide 8. In FY '20, we won 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're proud of the fact that many of these long-term contracts or relationships that have been in place for over 20 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 11 years ago when we first became a member. We support and report our sustainability performance against the United Nations Sustainability Development Goals, like 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're committed to solving the world's most complex challenges, holding ourselves accountable with our own commitments and the role we can play in delivering a more sustainable world. Through the work our customer [Technical Difficulty] this is supported through the sustainability component of our leaders' 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 geography, sector or [ happening ]. These forces 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 how our customers see themselves and their 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 achievement of the Paris agreement. And we have an important role to play in all of this. We provide knowledge, intellectual property and technology solutions at scale to address some of the world's most complex sustainability challenge. Sustainability presents expanded opportunity for our business and is core to our future. Turning to Slide 11. Our commitment to sustainability is demonstrating our revised climate change position statement, which we launched at Investor Day. It's the single most clear signal of our commitment to getting behind the Paris agreement and the United Nations Sustainable Development Goals. It informs our strategy and articulate the role we will play, which type of projects we will work on and which ones we will 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 our fabrication yards and indirect emissions that come from purchased energy, such as the energy we use as to power our office buildings around the world. We're also committed to proactively supporting our customers to reduce their own emissions on that project and assets globally. To deliver the project 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 piloted our sustainable solutions process on selected projects in Europe and Australia with our Tier 1 customers and have strengthened our responsible business assessment standard. 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 hasn't. It's at the forefront of everything we do, building on the strong safety culture from both of our heritage organizations. We maintained industry-leading performance this year, reporting a recordable case frequency rate 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 a power cord fell and impacted the vehicle [ cover ]. Above all else, we remember our colleague and keep their family and friends in our hearts. In the pursuit of continuous improvement, we launched Life, our safety, health and well-being approach, which connects our health, safety and environment practices, systems and tools under 1 Worley program. In FY '20, we reduced 4 Life programs: life-saving rules; take bio safety; life conversations; and life matters. The safety, health and well-being of ourselves and those around us is fundamental 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: Our business is performing, with aggregated revenue up 75% from the prior corresponding period and underlying EBITA up 80%. We've improved our financial strength. Our underlying operating cash flow was $881 million, and our gearing is well below target range. We're delivering our ECR acquisition benefits ahead of expectations, and our diversified business has been more resilient since the acquisition of ECR. And we've achieved cost synergy savings of $177 million run rate, exceeding our previously announced targets. As I've shared, we've now raised this target to $190 million annual run rate. And we're transforming faster to emerge stronger. We're accelerating our transformation strategy, and we will deliver $275 million of annualized operational savings. I'm now going to hand over to Tom to run through the financials in more detail.

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 to know that I'd like to start with cash. Underlying operating cash generation during the year hit $881 million, driven by a 13-day improvement in our DSO in the past 6 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 '19 or around 7% when compared to pro forma FY '19 numbers. Gearing is well below target range. Leverage has decreased to 1.8x, down from 1.9x at the half. We strengthened our liquidity position through the strong cash result and securing debt facilities. The strengthening of our liquidity position is especially pleasing given the external market situation. We've delivered $177 million of annual ECR synergies on a run rate basis at the end of June, and we increased our target run rate to $190 million and committing to bring the delivery of this forward to April '21, which is 6 months earlier than previously notified. We're also on track to deliver operational cost savings of $275 million run rate by December '21, in addition to the ECR synergies. And that's already having delivered a run rate of $165 million. I'll turn now to our statutory results on Page 16. Our statement of financial performance outlines our stat results. This has been released in the financial report launched with the ASX 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 costs of $121 million; and the amortization of intangibles at $109 million, we derived 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 '20. 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 '19 pro forma. Despite the economic circumstances we've experienced this year, our underlying EBITA margin was aligned with the FY '19 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 for cash collection across the group, with, as I said, our DSO dropping by 13 days in the last 6 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 for stable 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 '20, and the half year run rate 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 set 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've experienced. I'll describe our cost synergies and operational savings in more detail shortly. Of to Slide 20. Overall, aggregated revenue was up by 75% for the period, which was driven by reporting 12 months of the ECR business. Segment outcomes are up across all lines of business. It should be noted that in FY '20, certain global costs were reallocated to professional service costs and construction and fabrication costs, and we restated the FY '19 results for comparative purposes. Margin improvement in energy and chemical services reflect the higher relative contribution 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 and Metals segment margin is in line with the underlying FY '19 margin. The FY '19 result was affected by a 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 our P&L 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 an 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 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 our craft workforce impacted to a greater extent than our staff due to COVID-19-related site access restrictions and deferred turnaround activity. We continue to manage our staff utilization rate on target. This year, managing the things that within our control is something we're focused on, and utilization has been one of 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 '19 to 30 June 2020, although it's worth understanding the causes of that change. We're 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 effect of 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 and maintenance contracts every 6 months by applying the current work hours run rate over a 36-month period. There has been minimal impact from project cancellations. Other causes of change were foreign exchange translation impact 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 4, in line with contracts ordered in the same period in FY '19. I'll move now to Slide 24. The current market conditions have seen backlog declined mostly in the energy and chemical 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 $480 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 early 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 a 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'm pleased to report that the improved operating cash flow performance in both the first and second half of FY '20. There's no breakthrough practice or technology involved, just hard work and discipline. Firstly, for our teams to deliver quality work; then to invoice accurately and on time; and finally, to follow-up and collect the cash. The improvement in these practices since the businesses came 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'm very pleased to report continued improvement in balance sheet metrics, gearing at 8.5% and leverage defined as net debt-to-EBITDA of 1.8x. 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 our target of between 25% and 35%. Interest cover has declined to 6.3x. And as I described, leverage ratio is down to 1.8x. 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 3 receivables from current to noncurrent and have triggered dispute resolution mechanisms to cover repayment from those SOEs. Collection from the fourth SOE continues in line with expectations, and the balance is now just a few million dollars. Due to 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 run rate savings in June 2020. We've exceeded our previously announced target and has subsequently increased our target to $190 million run rate savings by April '21. 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 3 main buckets 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 costs 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 run rate 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 savings are across 4 main areas, which are discretionary spend, property rationalization, business restructure and shared services. In terms of discretionary spend, we are ahead of run rate for key spend categories in areas like travel. At the moment, we're 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 '21 are already reflective of the reduced spend, and we are embedding new ways of working to make this sustainable. We are well progressed in terms of property rationalization, which represents 30% of the target, with 65% of these savings to be realized by December '20. That has been in place since July 1, with the majority of the savings to be in place by October of 2020. In shared services, the program has commenced and will get impetus from the completion of our back office integration later this calendar year. We are on track to deliver the run rate savings of $275 million by our target date of December 2021. I'll turn now to Slide 30. We've achieved some important milestones in working as 1 organization on common platforms. Our back-office systems integration is on track. We recently went live with our CoreHR 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. UAT 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 owe a 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.

Thanks, Tom. So let's turn to Slide 32. We've been on our transformation journey since we completed the ECR acquisition. We've diversified our markets and solidifying our leadership position, and we've been preparing for fundamental shifts at the industries that we work and are facing. COVID-19 is acting as a catalyst for our transformation, and we're now transforming faster to emerge stronger. We're driving a cultural change to shift how we work, and I believe the COVID-19 impact has brought this forward by as much as a decade. We're simplifying our business to better support our customers to drive new ways of working and to 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. We say purpose is what drives us, it's what pushes us, it's what gets us out of bed in the morning. And what emerged from that quest was 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 we have, whether it's with each other, our customers and also the communities in which we operate and the communities we serve. I'm excited to step into our future and make a difference in these communities, delivering a more sustainable world for the benefit of future generations. Turning to Slide 34. Sustainability is a driving force for Worley. I've been surprised at the rate of change over the past 6 months in the conversations I've been having with many of our customers around their own sustainability commitments. This market is continuing to grow, and our customers will need to invest to achieve their own sustainability goals. We have the knowledge, experience and scale to support our customers as they navigate a changing world. Turning to Slide 35. We believe we have a significant role to play in supporting our customers while they transform their own businesses, looking to more sustainable development investments and more sustainable outcomes for the world. Some of the focus areas for ourselves are the circular economy where we're delivering waste-to-energy solutions, developing a sustainable technology -- technologies. An example of this is our NextOre bulk 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 experience with you for some time, and it includes 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 to delivering a more sustainable world. We've seen some of our customers reduce the overall capital spend this year. However, they've retained their low carbon 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, [ in fact, order ] 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 and the role we have in the energy transition. Our energy transition work is growing and with the broader sustainability-related work and prospect pipeline also growing. Supporting both new and existing customers, energy transition revenues represent around half of our energy sector revenue. For example, we're 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 inspection and maintenance service provider, has expanded its reach since joining the group, extending beyond the North Sea into Europe. We've had 10 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 won over 31,000 micro grids 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 100%. TWPS is an operational and maintenance business, providing services to support critical power infrastructure across Australia and New Zealand and Southeast Asia. And TWPS has experience across a range of power technologies, including solar, wind and hydro. Now coupled with 3sun's offshore wind capability with an industry-leading service offering in the global independent wind power market and will 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're 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 their customers demand more sustainable products and how we will help emerging economies develop without locking them into a poor emissions future. These are big and complex challenges, and this is where Worley excels. Turning to Slide 40. We're proud of our Australian heritage, and we're supporting customers and governments locally in their sustainability journey across the full asset life cycle, drawing on our considerable global expertise. We hold vast intellectual property and data about the design, management, operation and maintenance of Australia's and the world's critical energy, chemicals and resource infrastructure. We provide operation and maintenance services to approximately 1/3 of Australia's baseload power generation fleet, and we're the largest independent wind farm operator in Australia. Turning to Slide 41. I'll 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 investment. However, markets are forecast to rebalance and investment is expected to continue. In the offshore market, deepwater investment 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 to hookup and commissioning as well as subsequent maintenance, modifications and operations. The onshore market has been particularly hard hit by demand destruction due to the pandemic and low oil prices. However, as seen on the chart on the top right, there is still significant brownfield and sustaining capital spend in this market. And we've been successful in increasing our proportion of revenue from brownfield investments and are well positioned for future growth opportunities in this area. Gas will remain a great fuel source, supported by the energy transition with global LNG 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 (sic) [ International Energy Agency ] 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're 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 space. Moving on to Slide 42. We've included some project case studies in the upstream and midstream sectors to provide some insight into how we're applying our entry transition and digital expertise to these market segments. I'm not going to go into these in detail. So moving on to Slide 43. Turning to the power sector. Investment has shown resilience during the COVID-19 pandemic, particularly in the renewables market. While power consumption overall has dropped by approximately 10% caused by shutdowns, generation from renewables was actually increasing by around 5% according to the International Energy Agency. Considering the resilience of the renewable sector, we anticipate continued increase -- a continued increase of investment in this sector. Offshore wind forecasts show 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 -- are forecasting significant investment in the renewables sector going forward. European governments have communicated their hydrogen strategy in the last weeks. This includes government support for the advancement of hydrogen technology and infrastructure to support the decarbonization of the industrial and transport sectors as part of the recovery plans under European Green Deal. Our power business will continue to drive growth in technologies of higher complexity and low risk for commoditization, including hydrogen, offshore wind and distributed energy systems. Moving on to Slide 44. The slide highlights some case studies in which we will apply our transition and digital expertise in the power sector. Moving on to Slide 45. This slide shows the trends in the refining and chemical sectors. You can see global refinery utilization rates in 2020 are expected to be the lowest since the 1980s according to the IEA. For transportation fuels, it's clear demand loss in aviation will last for an 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 and 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 both 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 [ silicons ] as well as reduced use in durable applications such as automotive and construction. But even as demand for chemicals and plastics starts to normalize, it's expected to be lower than pre-pandemic levels until economic and social confidence returns, at which point we expect it to rebound. Moving to Slide 46. The slide highlights some case studies in the refining and chemical 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 has had a modest and varied impact on mining commodities and metal prices, a combination of returning demand led by the restart of the Chinese economy and ongoing supply disruptions in some major commodities and, in most cases, seeing prices recover to levels that continue to encourage investments. Helped by a good base as well as precious metal and iron ore pricing, together with good operations performance, miners have maintained very strong free cash flow. And confidence in the long-term market outlook is expected to see the world's top 50 miners continue to invest in replacement capacity and high-return growth options. We're 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 toward their emissions carbon reduction commitments. Our customers have confidence in the long-term demand for energy transition commodities such as copper, lithium and nickel, and new technology are expected to play an increasing role as our customers look 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're seeing the push towards the adoption of new energy sources, technologies and applications as companies transition to a low carbon future. We're 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 actually turning to the outlook statement. So turning to Slide 50. I believe we've made significant progress during what has been one of the most disruptive periods in the recent history. Our revenue was up 75%, EBITA up 80% and NPATA is 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're an 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're a more resilient business following the completion of the acquisition of ECR with increased diversification across geographies and sectors as well as a greater exposure to our customers' operating expenditures. Our diversification will continue to be important as different sectors and regions recover at different rates. In FY '21, 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're 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 resource customers as they themselves navigate a changing world. Moving on to Slide 52. I'd just like to say thank you for the time, and Tom and I are now happy to take questions.

[Operator Instructions] And our first question comes through from Richard Johnson from Jefferies.

Could 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's obviously been quite a big change in the final quarter. And I'm just trying to get a sense of what proportion of that change might be just preemptive moves or what proportion is due to various projects completing.

Richard, I'm guessing you can -- my microphone is turned on. But the vast majority is project related. What you described as preemptive moves, part of the corporate restructure, if you like, might have been 100 or so roles so far. There are some more that people know about, and they'll come out later on this year. But the vast majority is, as you described, projects completing or in some cases, some of that turnaround work in particularly North America not commencing and so work 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 directly chargeable people, Richard.

Perfect. And then on the backlog, if you -- at the -- again, going back to the Investor Day numbers, if you've done the O&M adjustment at that point, would it have had a sort of similar impact? Or is there something unusual that happened right at the end of the year?

It's probably slightly -- it would have been a slightly less impact then. 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 greater account of the most recent level of activity. So some of it would have been in the investment that has most impacted the year-end numbers.

Got it. And then on the synergies, is the incremental amounts that you're taking out 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?

That's right, Richard. So the vast majority of that additional $13 million that is to come is some very long-standing projects that really commence, in some cases, before the transaction closed. And they'll come through. It won't surprise you to know that our target has always been about this level. And we -- the last time we updated the market to $175 million, we were concerned about a few things coming to play and being able to extract value from those synergies and what's happened in the past 6 months, we've been able to do that. And so that gives us a lot of confidence that we can get to the $190 million by April of '21.

Got it. That's very helpful. And then 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.

Well, look, we're a very different business now. 40% of our revenues are operational. And so that is ongoing spend that customers will need to continue going. Look -- and we're much more diversified. The big impact we talked about the oil and gas, the demand destruction there, but that's only 20% of our business now. Yes, it's a lot less than it was, 65% historically. Upstream, midstream CapEx now is only 20%. And 45% of our work is in the chemicals sector. So it's the diversity of earnings. And we talked about the MMM business, mining, minerals and metals. And so it's the mix of the work where, I think, the opportunity was to continue to move forward with optimism.

[Operator Instructions] Our next question comes through from Mark Samter from MST Financial.

A couple of questions, if I can. Just thinking about you've obviously flagged before about that fall in the backlog from the asset sale by...

Excuse me, Mark, can you speak up a little bit? Thanks.

Sorry. You flagged -- and you said you flagged it before, but the loss in the backlog from the asset sale by a 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 Tier 1 customers' hands and that's probably accelerating over the next few years that there's more work you potentially lose as some of these assets slip into customers' hands?

Tom, can I maybe answer that one?

Yes.

Yes. So look, that particular transfer from a Tier 1 to Tier 2 was very specific and as much driven by the strategy of the Tier 2 rather than the Tier 1. But look, if we look at -- if there was a movement from Tier 1 to Tier 2s, we operate very successfully in the Tier 2 market, very successfully. So I wouldn't be concerned necessarily about assets moving from a Tier 1 onto Tier 2 because we work in that space now. So the example that we used, the only reason we quoted that was because it was a -- there's a very specific strategy in place for that Tier 2 customer.

And then just a second question that, I guess, one of the challenges of delivering a very good set of numbers in this most recent half as a listed business is your margins are pretty open book to your customers. On that OpEx work, I guess, in particular, that is such a more stable part of your business, as you say. Can you give us a feel for the work that is, I guess, cycling off or repricing at the moment? Are you seeing some pretty strong pressure from your customers who have, on the whole, not fared as well as you guys on margins as you reprice some of that OpEx work?

Tom, do you want to answer that one?

Yes. What -- realistically, Mark, the work that, as you call, cycling off and being replaced, I wouldn't say there's a material difference in the margins. What tends to happen is there's 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's not a significant difference. In a couple of markets, there might be some pricing pressure. But across the board, we don't see a large change. Anything you'd like to add to that, Chris?

No, I think that's right. Look, it's -- there's always pricing dynamics in the marketplace. But I think you've also got to look at the shift on the supply side. If you look at the last few years, there's Amec, Foster Wheeler. There was Jacobs, those 3 companies are no longer at play there. So pricing isn't all about the customer side. It's about the customer supply side. And what we're finding is throughout this process, the reach out from our customers, our senior -- the senior executives of our customers reaching out to reinforce that commitment to us, reinforce the importance of the relationship has been very, very positive and more frequent than I've seen in -- back to 2014 to the current environment, we're seeing far greater level of reach out. And the customers look to reassure us that they are committed to continuing to work on the relationship. So it's a balance.

Our next question comes through from Rohan Sundram from MST Financial.

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 '21? I'm 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?

I wouldn't say structural. I think cultural, Rohan. 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 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. As I said, I think it's more cultural than anything else.

Yes. Let me add to that as well. I think it is cultural. The way our organization responded to the pandemic, and I'm going to draw 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 protected our people. And it was 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 through to the frontline leaders. We empowered them and tasked them with the challenge. And they embraced that challenge. They embraced the concept of being empowered to go in there and collect and focus on collections different than that of the past. And look, like Tom said, first half was a great cash collection. This second half is a phenomenal cash collection. And it's down to the focus, the resilience, the determination of the frontline leaders feeling empowered and committed just to delivering what you've seen. So it is -- I would say it's more cultural than it is structural.

Okay. 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 paydowns in -- post the reporting date?

Nothing, Rohan. No, nothing significant in either drawdown or paydown since the reporting date. What effectively it is, 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 on where we are in the world. And we obviously keep those accounts refreshed and able to meet those salary bills. So we're probably a little bit conservative in the most part of keeping a little bit more cash there than we would prefer to do. But I'm comfortable with that sort of [ build embraces ] type approach.

And as we have no further questions, I'd like to hand back over to Chris and Tom.

Okay. Thanks. Look, I just want to say thanks, everyone, for your continued support. We appreciate it. And look, we -- Tom and I will be following up this session with further sessions. And if there's any questions, we're happy to take them now before we close, Tom.

Yes. Just thanks, everybody, and stay safe. Look after yourself, especially those like you who are in -- unlike me in Stage 4 restrictions. And we look forward to seeing you in person sooner rather than later. Thank you.

All right. Thanks, everyone. Take care.

Thank you, ladies and gentlemen. This concludes the call for today. Thank you for your attendance. You may now disconnect.