Worley Limited (WOR) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Worley Full Year Results 2021 Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Chris Ashton, Chief Executive Officer. Please go ahead.

Thank you. Welcome, and thank you, everyone, for joining Worley's full year results presentation. Today, I am joined by Charmaine Hopkins, our interim CFO. Before starting the full presentation, I would like to give acknowledgment of the country, and I'd like to begin by acknowledging the traditional owners of the land and waters, their unique ability to care for country and deep spiritual connection to it. For me, here in the U.S., I'm on the traditional lands of the Wicomico nation. Across Australia, the Aboriginal and Torres Strait Islander peoples have cared for and maintained for thousands of years that lands which provide our company with the place to provide our services. I'd like to pay respect to elders, past, present and emerging, whose knowledge and wisdom have ensured the continuation of culture and traditional practices and to extend that respect to other Aboriginal and Torres Strait Islander people present on the call today. Turning to Slide 3. I remind you to review our disclaimer shown here. And now moving on to Slide 4, the agenda. In terms of the agenda for today, I'll provide an overview of our business performance and how we are progressing against strategic transformation, and I'll then pass over to Charmaine, who will add some more detail on the full year results. And then finally, I'll provide a summary and our outlook before we open the floor for Q&A. Moving on to Slide 5. We've all been affected in some way by COVID-19. As waves of the pandemic continue to impact our people and their families across our operations, we are continuing to monitor and adjust our response to keep our people safe and of course, supported. I'm enormously proud of the care and support our people provided one another. The safety, health and well-being of our people remains our highest priority. Our processes for managing COVID-19 have helped to keep our people safe and shown our remarkable flexibility. Our people continue to work on site and remotely to support our customers' critical infrastructure projects. As part of our modified site practices, we've adopted technology to undertake virtual site visits and I've been involved in many of these along with our Board members and senior leaders. We found this has been a very effective way to keep connected, and we see this as a long-term opportunity to enhance our senior leaders' connection to site. Moving on to Slide 6 and the full year highlights, which will begin on Slide 7. The past year has been 1 of dynamic change across the world. Our business has felt the impact of the economic environment, including COVID-19, which saw worldwide activity slow and project sanctioning get deferred. Our full year aggregated revenue of $8.8 billion, down 22% on the prior period. We've delivered an underlying EBITA of $468 million, which is 37% down on the prior period. However, this year has been a story of 2 halves, and I'm pleased to say we've delivered a better second half in line with our expectations. We've maintained our financial strength during a period of subdued economic activity, and we've taken early and deliberate action in the areas we can control. These efforts contributed to an improved result in the second half in line with our expectations. Over the year, we reduced our net debt to the lowest level since the ECR acquisition with net debt now at $1.55 billion, down from $1.78 billion compared to the prior period. Our gearing ratio is 21.7%, which remains below our target range. And our leverage ratio has increased from 1.8x to 2x over the half. Our actions to lower our cost base continue with the completion of the $190 million ECR acquisition cost synergy target in April '21. In addition to this, we're well on track to deliver our target annualized savings of $350 million by June '22 from our operational cost-saving program. These are permanent structural changes to the way we run our business and will continue to deliver sustained benefits for years to come. Looking ahead, our backlog has increased over the last 6 months to $14.3 billion from $13.5 billion with growth from both traditional and sustainability projects. We made good progress on our strategic transformation and our sustainability work has grown over the year and currently accounts for 32% of our aggregated revenue, up from 29% at the half. And our sustainability portion of the sales pipeline is 47%, up from 45% in the half. And the Board has declared a dividend of $0.25 per share. Moving on to Slide 8. The global economic circumstances, including the COVID-19 pandemic, have impacted demand in our customers' end markets. The full year impact of the subdued economic activity led to a net business decline to $540 million, which was partially offset with $323 million in cost savings as represented by the full year chart on the left. The key drivers of net business decline were volume reductions, business mix and foreign exchange headwinds. We've seen site access restrictions and project delays, although as we've shared before, minimal project cancellations. We've seen the business begin to stabilize over the second half with activity levels starting to return on long-term contracts and strategic awards in the early phases. Looking at the second half, represented by the chart on the right, we secured an increase in net business growth of $30 million coupled with cost savings of $33 million, providing for a stronger second half. We saw increases through a combination of high professional services margin and the completion of some of our large projects. It's worth noting we achieved the better margin in the second half with a higher proportion of lower-margin construction work, and Charmaine will go through the key drivers of this in more detail later. Turning to Slide 9. As you can see from these charts, we've achieved a better second half across our key metrics. On a constant currency basis, our EBITA was up 32%, backlog was up 8%, and our revenue was holding. Our EBITA margin percentage increased to 6.1% from 4.6% in the prior half. And our factored sales pipeline is also up 16%. Turning to Slide 10. Our backlog has improved since the end of December 2020, increasing to $14.3 billion from $13.5 billion with growth across both our traditional and sustainability projects. Our diversification remains important to different sectors -- as different sectors and regions recover at different rates. Turning to our factored sales pipeline, we are seeing double-digit growth across both traditional and sustainability components since the end of the first half of this year. And we're seeing traction in our strategic shift to sustainability. When we look at awards by revenue over the fourth quarter of the year, it's up 1.5x when compared to the third quarter. Turning to Slide 11. The strategic awards announced provide a good insight into the diversity of projects we are winning, both in traditional and sustainability-related services. We're supporting our long-term customers in their own traditional businesses and also as they make their own sustainability-related investments. Additionally, we're winning work with new customers in emerging markets. Many of the strategic sustainability awards are in the early phases, which we expect to move into their subsequent phases later in FY '22. Moving on to Slide 12. The actions we've taken this financial year have set us up for the future. And moving on to Slide 13. We've continued our financial focus and discipline, particularly around cash collection. We've maintained utilization of the target while also building capability. We've increased our average debt maturity, issuing Australia's first sustainability linked bond and aligning our finances with our purpose, delivering a more sustainable world. Our cost programs resulted in annualized overhead savings of around 30% over the last 24 months. Turning to Slide 14. There are many elements to our strategic transformation, and I'm pleased with the progress we've made across all of these in the face of challenging global economic conditions. We've accelerated our transformation, and this places us in a strong position for future growth as markets recover. Turning to Slide 15. We remain focused on delivering long-term shareholder value. We have in-built resilience through diversification in our end markets and balanced exposure to our customers' capital and operating spend. We're applying low-risk commercial models. And importantly, we don't participate in material lump sum turnkey projects, and we will not do so in the future. We're focused on cash returns, and we have this financial strength to support growth initiatives. We believe with our leading positions in the sectors we serve and our long-term relationship with our customers that we're well positioned to benefit from the sustainability mega trend. Turning to Slide 16. Sustainability is core to our business. It is our purpose. Our biggest contribution to delivering a more sustainable world is in the work we do for our customers. Our skills and services are required to solve some of the biggest challenges on the planet, and we're working with our customers to do just that. We are rated as a leader both for our ESG performance and in our industry for the energy transition services we provide. Moving on to Slide 17. We operate consistent with our purpose of delivering a more sustainable world. In caring for our planet, we take strategic action on climate change. We've joined the business ambition for 1.5-degree C campaign, aligning our emissions reductions with the aims of the Paris Agreement. In terms of our commitments, we are making good progress against Scope 1 and 2 targets and are committed to achieving net zero Scope 3 emissions by 2050 via science-based targets. We've transitioned Houston and Perth to renewable energy with more offices to come. We've updated our property leasing criteria to include sustainability and our vehicle fleet in Brazil was transitioned to operate on biofuels. We've stayed focused on our people's physical and mental well-being as the world has moved in and out of COVID-19-related lockdowns. For our people and communities, we're working to create an even more diverse and inclusive environment. We also launched our inaugural reconciliation action plan and declared support for the principles in The Uluru Statement from the Heart. We operate responsibly, and we progressed action aligned with our material sustainability issues in line with the United Nations' sustainable development goals. Turning to Slide 18. Beyond the strategic actions we're taking in our own business, we're using our skills and partnering with others to catalyze breakthrough thinking at an industry and government level. Earlier this month, we launched a joint thought leadership paper with Princeton University's Andlinger Center for Energy and the Environment, exploring the 5 key shifts in thinking needed to deliver the infrastructure required to achieve net zero by 2050, and we discussed the critical role of companies like Worley. We described a new paradigm to enable delivery of engineered solutions at a pace and scale demanded by mid-century net zero targets. All of this is possible, and it needs to start now. Turning to Slide 19. I'll focus on the progress we're making on our execution strategy starting at Slide 20. I'm not going to go into this slide in detail other than to highlight our ambition to target sustainability-related services and solutions as being the largest portion of our revenue in the future. With the level of predicted spend in the sustainability arena, this represents expanded opportunities for growth, and our strategy positions us at the center of this investment. Moving to Slide 21. Sustainability now represents $2.8 billion of our aggregated revenue, which is up 32 percentage points from 29% at the half. In the pipeline, we're seeing increased opportunities in the energy transition and circular economy space growing from 11% to 25% over the half. We're pleased with the level of work we're winning with several key strategic awards in decarbonization, including hydrogen, carbon capture utilization and storage, renewable fuels and offshore wind. Sustainability project awards are increasing in volume and scale as well as complexity and many are expected to progress beyond the early phases in FY '22 -- late in FY '22. Turning to Slide 22. We've previously spoken about the sustainability margins and our pipeline being more favorable than our other services. And I'm pleased to share that we're also seeing this in our financial year results where sustainability projects delivered a more favorable gross margin percentage compared to our other services. We target complex projects, which involve a mix of technology integration, modification, challenging logistics and upscaling. We're seeing our customers seeking to engage in different ways. This involves partnering and using alternative commercial models, which recognize the value we bring while maintaining a similar risk profile. Turning to Slide 23. We have long-term relationships with many of the largest energy, chemicals and resource companies in the world. We're hearing from our customers that they will continue to invest in their traditional businesses given ongoing demand while also investing in decarbonization of existing assets and in emerging markets. Already having these established relationships allows us to assist these companies in the traditional areas of their business while also supporting them as they address the magnitude of the transition to a low carbon future. Turning to Slide 24. Our traditional business remains strong, and we will continue to maintain leading positions in the energy, chemicals and resource markets. We also deliver sustainable solutions across our traditional services. Beyond this, sustainability investment opens up new and emerging markets with existing and new customers. Turning to Slide 25, where we will highlight some strategic awards and case studies. Recently, we were awarded a front-end engineering services contract awarded by Shell for a large-scale carbon capture and storage project in Canada. This is one of the largest low-carbon opportunities Shell is exploring at Scotford and will capture and store around 750,000 tons of carbon dioxide a year. This is in addition to early engineering services contract award that will be the largest commercial green hydrogen production facility in the world located at the Port of Rotterdam near Shell's Pernis refinery. Turning to Slide 26. We've also recently been awarded a global professional services contract into our Advisian business by Chevron for early phase engineering services on global upstream and downstream projects, both onshore and offshore, which utilizes our proprietary digital design and optimization tools. This contract continues our long-standing global relationship with Chevron and supports our strategic focus on digital transformation. Moving to Slide 27. Worley will provide detailed engineering and procurement services for the expansion of production capacity at Syrah's active anode material facility in the U.S. The facility produces value-added natural graphite material used in lithium-ion batteries that power electric vehicles. Worley has previously partnered with Syrah to deliver other projects in its graphite supply chain. Moving to Slide 28. The BookraMEG project in Texas is a world-scale petrochemical facility. We provided services from concept planning through the start up and initial production. The project was delivered 7 months earlier than industry average while maintaining the highest safety standards. It was recognized by ENR as a global best of best project in March of this year. Moving to Slide 29. Nuclear small module reactors are key to meeting the world's climate change initiatives. And we've recently been awarded a contract with a confidential customer that positions us in the emerging small modular reactor market. Turning to Slide 30. I want to move on now to what's happening in our other markets. So just moving on to Slide 31. Our energy, chemicals and resource markets are evolving and provide expanded opportunities for growth. As I mentioned earlier, our customers will continue to invest in their traditional business, but we expect to see a balanced transition as investments increase into emerging ways such as hydrogen or renewable fuels. We are aligning how we describe these markets we serve with that of our customers while better reflecting our purpose and diversified business. As of the 1st of July this year, the markets we serve within the energy, chemicals and resources sectors are conventional energy, low carbon energy, chemicals and fuels and resources. But to clarify, we are not changing the way we report our segments. They will continue to be reported as energy, chemicals and resources. Turning to Slide 32. This is how we define where we do business. Energy includes producing energy from various conventional and low-carbon energy sources as well as projects related to power generation, transmission and distribution. Chemicals includes refining, renewable fuels, petrochemicals, polymers and specialty chemicals. And resources include minerals and metals resources, water and resource infrastructure. And as you can see from this slide, our sustainability pathways support all the markets we serve. Moving to Slide 33. In the area of conventional energy, global demand and supply of crude oil is on course to continue rebalancing this year after unprecedented demand destruction due to COVID 19. Oil prices have rebounded to a 2-year high above $70 a barrel, and higher oil price and potential supply crunch will lead to growth in CapEx investments to meet rising demand. However, oil markets remain subject to heightened volatility due to the risk of prolonged pandemic-related demand impact. Structural changes in the pure mix have started and combustion energy market remain dynamic as gas displaces higher carbon-intensive fossil fuels in power generation. In terms of sustainability themes, investments in clean energy technologies continue to rise steadily as the industry faces the challenge of balancing short-term returns with its long-term social license to operate. Turning on to Slide 34. The low-carbon energy sector is benefiting from the sustainability mega trend with a significant portion of the energy supply being electrified. There is strong growth in both transmission networks as well as power generation. Annual 0 carbon power system investment could amount to around $80 trillion over the next 30 years. LNG demand growth is also expected due to the availability of cheap, abundant feedstock and gas' role as a low-carbon fuel. And the U.S. will continue to be a dominant gas and LNG producer. Turning to Slide 35. In terms of chemicals, global industry demand and profitability has returned to 2019 levels with investment planning and funding reinstated. The chemicals market is integrating energy transition into investment decisions and committing to reduce energy intensity of feedstocks and production process. We are seeing a strong focus on modified manufacturing processes and technologies to address emissions reduction targets and end-of-life issues, particularly plastic waste. In the fuels market, demand for transportation fuel continues to recover through 2021. And by year-end, overall global refining throughput is expected to return to 2019 levels. The strong investment trend for refinery conversions to biofuels and petrochemical feedstocks is expected to continue. Turning to Slide 36. In resources, miners will benefit from commodity consumption growth as global recovery continues with many market indicators at multiyear highs. The 2021 CapEx forecast is up 18% than 2020, as delayed programs resume and activity ramps up spurred by strong metal prices. We are seeing miners making strong commitments to transform the industry with the drive towards decarbonization expected to generate a structural change in metal demand. Confidence in long-term demand for battery metals such as lithium, nickel and cobalt is increasing. Water stewardship is critical in the sustainable delivery of energy transition materials, and new technology solutions are being developed to support a sustainable resource industry. Turning to Slide 37. Our traditional business is an important part of our future with sustainability providing a higher rate of future growth. We have defined very clear sustainability pathways that support all the markets we serve and form the structural framework for growth. These pathways are supported by process technologies and the application of digital solutions to strengthen our competitive advantage and accelerate automation. In FY '22, we will report our sustainability revenues against the 4 pathways. Moving to Slide 38 and investing for the growth, for future growth. We are confident in our sustainability strategy, and we'll look to grow in 3 distinct ways: through organic growth; strategic partnering; and acquisition. Organic growth includes capability building through strategic hires or internal development, investing in digital enablement and solutions or technology selection and development. Partnering provides opportunities to build trusted relationships with technology providers to enter new markets or develop new solutions. Examples include our work with X1 Wind to develop emerging technologies in floating offshore wind as well as our partnership with MMA Offshore to build offshore operations and maintenance capabilities into new emerging markets in Asia. And of course, we will consider acquisitions where they help drive or accelerate our growth strategy. Turning to Slide 39. To accelerate our organic growth and build on our existing competency, we forecast to invest about $100 million over the next 3 years. We've identified specific growth areas such as offshore wind, low-carbon hydrogen, carbon capture utilization and storage and environmental and social consulting as areas we will focus on. We'll provide more detail on this at Investor Day later in the year. We have developed plans around new capabilities to accelerate the capture of sustainability opportunities and generate increased earnings over the medium and long term. We will closely track and monitor and report on what the growth areas and sustainability pathways are delivering. I'm now going to hand over to Charmaine, who will run through the financials in more detail, starting at Slide 40. Charmaine, over to you.

Thank you, Chris. Good morning, everybody. Today, I'll be covering 3 key areas. First, the drivers behind our performance and in particular, what's behind the improvement in the second half; second, the results of our cost-saving programs and our strong financial position to support growth; and third, I'll discuss regional performance. Turning to Slide 41. I'm pleased to report we improved our performance in the second half of FY '21, in line with our expectations. The impact of project deferrals and site restrictions outlined by Chris did, however, lead to a decrease in our aggregated revenue and underlying EBITA in FY '21 compared to FY '20. We delivered a strong underlying operating cash flow of $621 million for FY '21. This was the result of our continued focus around our invoicing and collection practices across the group. We lowered our gearing further during the year, and it remains well below the target range. Our leverage ratio is currently at 2x. Our liquidity position has normalized post the nonrenewal of COVID facilities put in place last year. In April, we successfully completed our ECR synergies program, and we are on track to achieve our operational cost savings programs target. Turning to Slide 42. Our statement of financial performance outlines our statutory results. This was released in the annual report lodged with the ASX earlier today. I'd like to highlight that our global support costs decreased 14%. This was largely driven by reductions in most corporate functions and was enabled by our global integrated platforms. Excluding the impact of FX, our global support costs decreased 22%. Our borrowing costs also decreased by around 37%, reflecting the reduction in our net debt and lower interest rates on that debt. Turning to Slide 43. We report our results, excluding the impact of amortization of acquired intangibles to more accurately reflect our operating performance. So you will see references to EBITA and NPATA throughout the presentation. After considering underlying adjustments, including transition and restructuring costs, we delivered an underlying net profit after tax and before amortization of $281 million, which was down 35% from $432 million in FY '20. International government subsidies of $70 million have been excluded from the underlying results. Consistent with the prior year, these are primarily in Canada with some subsidies also in the U.K. and Singapore. Turning to Slide 44. Here, here we highlight the statutory and underlying key financials for the full year period. The COVID-19 pandemic and global economic circumstances have impacted our customers' end markets resulting in project deferrals as well as site access restrictions primarily in the Americas. Underlying EBITA decreased due to lower volume, along with the change in business mix and FX translation. This was partially offset by cost savings from our 2 programs. We're pleased to have delivered a strong underlying operating cash flow and note that our DSO has remained steady over the last 3 periods, reflecting the improvement in cash collection and debtors reduction in the period. Turning to Slide 45. Chris spoke about the story of 2 halves, and here, I'll delve a little deeper into the differences in performance over the full year and the contributing factors to the improved second half. The chart on the left shows the impact of the volume decline that I described previously as well as foreign exchange translation and business mix on the full year results. However, it also highlights that this decline was partially offset by the net benefits from our cost savings program. The business mix represents the change due to an increase in lower-margin construction work compared to the prior period. If we examine the half-on-half drivers in the second half, we faced similar headwinds to the first half with foreign exchange and changing business mix. However, while volumes were still impacted, we saw activity levels start to return on our long-term contracts. We delivered a net business growth of $30 million through rate improvement in our professional services contracts and the impact of the traditional first and second half phasing. We also delivered a $33 million benefit from our cost savings programs. Turning to Slide 46. The impacts I've just described were also the key drivers of EBIT margin improvement over the second half. The margin was up to 6.1% in the second half from 4.6% in the first half. We saw the business stabilize over the second half with revenue holding on a constant currency basis. Looking at the business mix component. We saw the impact of an increased proportion of lower-margin construction work as site access restrictions lifted and activity levels started to return. Our fabrication business in Norway delivered a stronger performance at a lower margin compared to prior periods due to the type of projects undertaken. In professional services, revenue was down mainly due to project deferrals. However, we are seeing key project awards. So it's important to note that many of these are still in the early phases. We expect that the business mix levels will rebalance over the medium to long term as conditions improve and projects move to later phases. However, it is expected to remain similar to FY '21 in the near term. Turning to Slide 47. Our cost discipline has been a core focus, and we've delivered strong results against our targets. These are deliberate actions that have improved our performance in FY '21 and will continue to drive benefit into FY '22 and beyond. We completed the ECR cost synergies program in April overdelivering by $60 million annualized savings against our original target. I'm also really pleased to report that we're well on the way to achieving the $350 million annualized savings target for the operational savings program, having delivered $327 million annualized savings as at the end of the financial year. Continued savings from our cost-out program was a contributing factor to improved EBITA supporting our delivery of an improved second half in line with our expectations. It will be a key priority of mine to ensure the remaining operational cost savings program remains on target, and we will maintain a strong discipline. These programs represent permanent structural changes in how we run our business and set Worley up to continue to invest for future growth. Turning to Slide 48. We have maintained strong capital management discipline with our gearing ratio at 21.7%, well below our target range. Interest cover has increased to 9.2x while leverage ratio is at 2x, and our average maturity of debt has increased to 2.9 years. Net debt has decreased from $1.78 billion to $1.56 billion and is at the lowest levels of debt since the ECR acquisition. As we've outlined previously, dispute resolution mechanisms are in place to recover payments from 3 nonpaying state-owned enterprises. These receivables are classified as noncurrent and recovery action is underway, although COVID-19 has slowed this process. Turning to Slide 49. Looking at our balance sheet metrics over time, our key ratios show positive trends, demonstrating our strong capital management as we accelerate our strategic transformation. Today, the business is more resilient and diverse with a strong balance sheet to support our medium- and long-term growth strategy, and this is despite the challenges of the global pandemic. We continue to have a strong level of discipline around cash. This involves a rigorous approach to completing quality work, efficient invoicing and following up to ensure payment is received in line with contract terms. Turning to Slide 50. I'm proud to say we successfully issued Australia's first sustainability-linked bond under the euro medium-term note program, embedding our commitment to sustainability into our finance strategy. It is a EUR 500 million issuance with a 5-year maturity, extending our average debt maturity to almost 3 years. This maintains our strong liquidity position post retirement of COVID-19 facilities. We remain in a strong financial position with $621 million of underlying operating cash flow and improved debt metrics. Turning to Slide 51. We continue to manage headcount in line with project requirements. Our headcount has stabilized over the second half and is now at 48,000 as at 31 July 2021. Utilization remains above target in line with change in business mix to more construction and fabrication services, where the proportion of our craft headcount has increased. Turning to Slide 52. Backlog is at $14.3 billion, up from $13.5 billion at 31 December last year, with growth in both our traditional and sustainability components. Activity on long-term contracts is returning, and we're continuing to win work. We continue to see minimal cancellations. Our contract wins and renewals in the half exceeded the value of backlog consumed. Many of these are key strategic wins in both traditional and sustainability projects with many in early phases. There are signs of recovery in our end markets, but we anticipate our customers will retain a targeted approach to capital expenditure over FY '22, which may result in ongoing delays in project sanctioning. Many of our strategic awards are expected to progress beyond the early phases late in the second half of FY '22. Turning to Slide 53. Before I hand back to Chris, I'd like to focus briefly on our 2 regions. The Americas represents 44% of our aggregated revenue and has the largest proportion of construction and fabrication work. Performance over the year was impacted by COVID-19, with access restrictions to key sites and curtailed customer spending across the region. Activity levels are returning on long-term contracts. The factored sales pipeline is expanding but varies by sector. There's a significant amount of sustainability opportunities with these representing 52% of the factored sales pipeline. We have seen key awards in our traditional business with long-term contracts in refining and petrochemicals. And in sustainability, we are seeing things such as the contract with 1PointFive Direct Air Capture and Phillips 66 renewable fuels refinery conversion project. Strategic focus for the region is consolidating our leading market position in areas such as carbon capture utilization and storage, renewable fuels and large-scale logistically challenging solar development. In addition, we're planning to expand into new areas by leveraging global capabilities. Examples of this include offshore wind and hydrogen. Turning to Slide 54. The EMEA and APAC regions represent 56% of our aggregated revenue. The full year results were impacted by reduced volumes in the Middle East and Africa from project deferrals, coupled with a ramp down of a major project in Central Asia. The region had an improved second half performance with volumes starting to return and securing major long-term contract extensions and renewals, primarily in our traditional services. Overall, EMEA and APAC margins remained relatively stable in FY '21 compared to FY '20. In APAC, the margins were stable and higher than other regions due to a greater proportion of professional services work and the type of projects undertaken in the region. However, APAC volumes decreased due to the sale of the Capital Projects Advisory business during the second half of this financial year. The sustainability portfolio is growing in the areas of asset decarbonization, carbon capture, utilization and storage, hydrogen, circular economy, low-carbon fuels and offshore wind. Sustainability represented 37% of aggregated revenue and 42% of the factored sales pipeline. Thank you, and I'll now pass back to Chris.

Thanks, Charmaine. Look, I'll move on to Slide 56 and the summary. Look, our full year results reflect the impact of the global economic circumstances and COVID-19. But we're pleased to have delivered improved earnings in the second half of this financial year in line with our expectations, and we've seen positive indicators over the half in EBITA margins, headcount, backlog and factored sales pipeline. We're seeing activity levels returning on long-term contracts and strategic new awards in their early phases. However, we're still experiencing some ongoing delays in project sanctioning. Our business mix is expected to remain at similar levels in the near term while professional services revenue is expected to return to previous proportions in the medium to long term as global economic circumstances improve. We're in a strong financial position, delivering a solid cash result and meeting our ECR acquisition and operating cost savings targets. Our business is set up for the future and positioned to benefit as markets recover, but there is still some ambiguity around the ongoing effects of the global pandemic. Our traditional business continues to be an important part of our future and is growing in our backlog and pipeline. We are delivering on our sustainability strategy with sustainability revenue and opportunities growing across all sectors as we support our customers' transition to a low-carbon future. We continue to accelerate our strategic transformation by investing in our sustainability pathways, digital enablement and process technology. I'm going to now turn to the outlook statement on Slide 57. We have seen our business stabilize over the second half of FY '21 with positive indicators in increasing backlog and factored sales pipeline. However, we continue to navigate the changing effects of COVID-19 on global economic circumstances. Our strong cash result and ongoing benefits from our cost savings programs have set the business up for the future, and we're well positioned to benefit as markets recover. Our sustainability pivot is gaining momentum, and we are pleased with the work we're winning. Many of our strategic awards are expected to progress beyond the early phases in FY '22 -- late second half of FY '22. Our traditional business continues to be an important part of our future with sustainability providing a higher rate of growth in the future at more favorable margins. To further accelerate our strategic transformation, we will invest in sustainability, digital and process technology. We are expecting an improved FY '22, however, different sectors and regions where we cover at different rates. And we anticipate that the capital expenditure discipline exhibited by our customers will continue for the rest of FY '21. With that said, we'll -- we can now open up for questions, and I'll hand over to the moderator to manage that process.

[Operator Instructions] The first question will come from Mark Samter of MST.

Chris, I've got a couple of questions, if I can, around your definition of underlying earnings. I looked at this morning over the last 7 years, and there's been about $940 million cumulatively over 7 years post tax and $1.34 billion pretax of transition costs, restructuring costs, problem contracts. I guess I've got 2 questions around that. First of all, at what stage does something have to repeat itself to be deemed an ordinary part of the business, not a one-off? And also on that line, are you able to guide us what you're going to have in FY '22 for restructuring and transition costs because otherwise, everyone is just going to keep massively overestimated cash flow because, yes, you can strip those out of underlying earnings, but it's real cash coming out of the business.

Well, I'll answer the first and then ask Charmaine to answer the second. But look, on the first one, Look, I think if you look at the last 7 years and some of the discontinuities that we face, if you look at the oil price collapse that happened in '14 and the impact of that on us we had to take -- have a major restructuring to address it. Then if you look at things like the acquisition of Fossil -- of Amec and then the ECR. And then obviously, the global pandemic. So the -- I understand why you're saying what you're saying. But look, they've been triggered by sort of discontinuity. And it's not a normal part of our business. I think us taking over from February last year and the restructure I put in place, I think we've got a very simple structure in the organization. I think we have -- as a result of that, an organization strategy that is supported by that structure that will allow us to move forward. Look, in terms of putting costs below the line as part of restructures or other activities, look, we're very open, we're very clear about what we've done and when we do it. But I don't see any more ahead of us other than those that we've announced. Now we have talked about investment, and the investment is something that we're going to be very clear on. The investment costs are above our business as usual. But we're going to be very clear on where we're investing. And I don't see -- I see that being slightly -- or different to take cost below the line from a restructuring point of view. We're really going to be investing I talked about the $100 million over the next 3 years. That is an investment to really accelerate the strategic growth of the organization. But to answer your question in essence, we don't plan any more than those which we've always shared, Mark. And on the second question, maybe I'll hand it over to Charmaine to talk about the impact on our estimating and how you look at cash flow.

So in terms of the second part of the question in relation to FY '22, the underlying cost that we will see is still in relation to our transformation program. So there's 4 parts of the transformation program. The organization restructure was completed this year and the discretionary spend was also completed this year, but there's a further bit to come on the property rationalization, and shared services transformation will also happen in FY '22. So underlying costs in relation to transformation will predominantly relate to shared services and the finalization of the property rationalization. In terms of cash flow, we also look at the transformation or the underlying cash flow, excluding any of the transformation costs. But we can't also forget the benefits that these costs also bring both in the current year that we've seen and these costs -- and these benefits will be seen also in the future years.

Can I push you to give us a bit of a number around it, Charmaine, possibly for this year, just so we've got a rough understanding?

No, I'm not going to give you any information around forecast.

Okay. Do you guys have an internal forecast? I mean, just obviously skepticism from the market would be that those numbers can certainly be revisited at the end of the year rather than the start of the year. Do you guys have a clear picture of what it looks like?

Yes, we do. Let me answer that. Look, we've got very, very clear, established criteria, and the criteria is audited by EY, our audit partner. So there's no -- there's nothing that is done across the year that doesn't meet preestablished criteria, Mark. So there's no budging of numbers.

The next question comes from Richard Johnson of Jefferies.

Can I just follow on from Mark's question, please? And maybe just drill down a little bit more because the one thing that stands out, and I may be wrong in this, but stand up to me is the jump in onerous contract write back in fiscal '21. So really, my question is around how much did that number change? Was that the number what you thought it was going to be at the start of the program? And what I'm really trying to understand is what proportion of the transformation program has been delivered by the onerous contract line.

Well, it's -- look, we were -- when you say about the onerous contract, you're talking about the lease space, yes, the office lease space, yes.

Yes, I'm not sure what it is. So yes, any information you can give on -- give us that would be great.

Yes. Look, well, we got 4 areas: the operational cost savings, cost of restructure, we've got discretionary spend, we've got the reduction -- permanent reduction in lease costs as we rationalize our office space and then we've got the shared services. And I think we've -- I think in the past, we've shared some of that detail. But Charmaine, can you confirm what we shared across those 4 areas?

So the onerous contracts predominantly relate to the impairment of property assets. So as we've rationalized our property footprint, we have impaired the right-of-use leased assets, and along with that, recognized onerous provisions for the facility costs associated with those lease contracts where we won't be able to recover them in full through subleasing. So that's what the onerous contracts line item relates to. And it's linked with the impairment of property assets line of $38 million. But the impact of transformation and restructuring that we've outlined on Page 43 of the presentation, all links back to the 4 pillars of our transformation being the discretionary spend, shared services, property rationalization and organizational restructure.

That's very helpful. And then, Chris, on a more positive note, the utilization chart that you've shown, which is obviously pretty impressive in fiscal '21. My question is really around what sort of revenue growth can you -- or what leeway is there from where you sit today, which is obviously at a relatively high level, have you got to generate revenues in fiscal '22 or by definition, the headcount number start to move?

Look, let me by definition, the headcount numbers will move. When you look at the utilization, you always want a bit of headroom. You've never got a 100% perfect sort of an individual coming off a project going on the project. So you've always got some sort of capacity to grow with your existing -- room to grow with your existing capacity. But look, we will -- we do -- without getting into detail, we will have to recruit going forward to support the work that we've got in our backlog and for the work that we'll pursue and expect to win.

Great. And then finally for me, just on the backlog itself. It looks like it's being led by the upstream businesses with chemicals and resources lagging. I just wondered if you could talk a little bit around resources, in particular, given the fairly bullish macro picture that you painted.

Look, it's just we've had a couple of really big projects come to a close, yes. And that's all it is, yes. It just -- we've had a couple of mega projects come to a close, and that's what you're seeing the impact of. But still very optimistic around investment in that space.