Shares of Worleyparsons Limited (ASX: WOR) soared 5% after the company released its full-year results, but don't let the market's response fool you (lower case 'f').
It was a shocking year for Worleyparsons, plagued by a downturn in the global commodities market and nearly $200 million in write-downs. The company provides professional services to the resources and energy sectors and, like others in the industry, has suffered as mining companies have increasingly taken their service roles in house to save on costs.
This was reflected by an 8.6% decline in statutory revenues to $8.8 billion for the year ended 30 June 2015 and a statutory net loss of $54.9 million, down from a $249.1 million profit during the prior year. This included a non-cash impairment of goodwill of $198.6 million with underlying net profit after tax (NPAT) also coming in at $198.6 million – down 24.6% compared to the prior year.
Commenting on the outlook, management said: "Our revenue has proven to be resilient through our strategy of sector and geographic diversification and our broad range of services. We remain focused on continuing to improve our delivery of services to our customers, taking costs out of the business, and improving returns to our shareholders as we adjust the business for the subdued market activity we expect in Financial Year 2016."
Although it is confident in its ability to continue improving over the coming years, investors ought to approach with extreme caution. With commodity prices tipped to fall even further, more projects are likely to be shelved or scrapped altogether which could have a negative impact on Worleyparsons, together with other companies in the industry such as Bradken Limited (ASX: BKN) and Monadelphous Group Limited (ASX: MND).
With the market currently trading near a two-year low level, investors would be best to explore other, more compelling opportunities instead.
