Portfolio Changes - Adding Worley (WOR)

Recent Changes to Blended Australian Equities Portfolio

We have recently initiated a position in Worley (WOR), a global engineering and professional services business operating across energy, chemicals, and resources sectors. The company continues to deliver steady margin improvement, strong cash generation, and disciplined capital allocation, while gradually increasing its exposure to sustainability-linked infrastructure. As at 1H25, 58% of revenue was classified as sustainability-related, up from 52% at FY24.

Worley delivered a solid 1H25 result, with underlying EBITA up 9% to $376m and EBITA margins (ex procurement) expanding 90bps to 8.4%. Normalised Cash conversion remained high at 116%, supporting a $500m buyback and 25cps dividend. While backlog declined to $12.7bn due to the cancellation of the Northvolt Sweden project, the book-to-bill ratio remained >1.0x, and the sales pipeline (~$15bn) remains heavily weighted to execution-phase energy transition work.

Earnings growth was strongest in Energy (+38.5% EBITA), supported by transitional infrastructure (e.g. LNG, CCUS), with margin uplift from detailed design and delivery work. Resources also performed strongly, led by demand in mining and fertilizers. Chemicals was softer, reflecting broader deferrals in industrial capital projects.

The bulk of Worley’s revenue—around 82%—is derived from reimbursable contracts, in which the client bears actual project costs and pays a margin-based fee. This structure reduces earnings volatility, limits working capital exposure, and supports reliable cash flow. Operational delivery is supported by a regional client model, ensuring customer proximity and local accountability, alongside Global Integrated Delivery hubs in lower-cost jurisdictions such as India and LATAM. This structure helps the company scale efficiently and maintain cost discipline across large, multi-region projects.

At ~13x forward earnings—26% below its 5-year average—and ~8x EV/EBITDA, Worley trades at a discount despite improved earnings quality, balance sheet flexibility, and growing exposure to long-cycle energy transition projects. We believe the combination of capital efficiency, contract resilience, and upside from project conversion supports a constructive view on the stock.