It has been a difficult few months for Worley on the S&P/ASX 200 Index (ASX: XJO), with its share price seeing a downward slide, which began well before the current bear market. Since early January, Worley’s share price has declined by over 60% from $16.06 to $5.96.
Worley has also recently been negatively impacted by falling oil prices.
Response to the crisis
Worley has advised it is responding to the crisis by taking prudent measures to realign its cost base. This includes a review of all non-essential business activities and related expenditures and stricter management of cash flows. There has also been a freeze on all external recruitment, and it has adopted a work from home policy, utilising the global platforms that it put in place recently.
Worley noted that it believes that it is better positioned to ride out the crisis following last year’s Jacob ECR acquisition, through greater diversification and lower exposure to oil and gas capital expenditure, while benefiting from more exposure to the chemicals sector, which is less cyclical. It advised that 50% of the company’s overall revenues are now derived from this new segment of its business.
Relatively stable financial position
Worley noted that its total liquidity amounted to $1.36 billion at the end of last year and (as at the end of February) there has been no significant change to this position.
The company also pointed out that at the time it released its H1 FY2020 results in late February, around $580 million of its working capital facilities were on track to be renewed in the coming 6-month period. Worley has received bank approval to extend around $480 million of this amount for a further 12-month period. The company believes that it will be able to renew the remaining $100 million by June and also has no other near-term debt maturities due.
Worley also noted its operating expenditure contracts are typically longer term over several years, providing it with some short term insulation to the coronavirus crisis.
CEO Chris Ashton commented:
We are taking immediate actions to control costs and manage cashflow while closely monitoring customer expenditures and adjusting plans accordingly. We have successfully refinanced a significant portion of the working capital facilities expiring in FY2020, maintaining the strength of our liquidity position.
Worley has adapted to a new operating environment that supports the safety and wellbeing of our people and business continuity. This involves working from home for most of our ordinarily office-based people.
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