Good day and thank you for standing by. Welcome to the Worley Fiscal Year 2024 Results Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *1 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press *1 1 again. Please be advised that today's conference is being recorded. I want to hand the conference over to your speaker today, Chris Ashton, Chief Executive Officer. Please go ahead.
Good morning, everyone, and welcome, and thank you for joining our full year results today. I'm delighted to be able to present these with Tiernan O'Rourke. Many of you will know Tiernan, our CFO. On the call today, I plan to provide an overview of the business performance and the strategic progress we've made over the last year, and then Tiernan will add further detail on the full year results before I conclude with the outlook, and then after that, we'll open for any questions. Just turning to slide two, an Acknowledgement of Country. I'd like to acknowledge the Gadigal people of the Eora Nation as the traditional custodians of the land on which we meet today.
We value the strength, determination and resilience of all First Nations people and communities around the world, and we're committed to the ongoing journey of listening and learning, and I extend that respect to any First Nations people joining us today. Moving on to slide three, I want to leave with three key messages today, and the first of those is that we've delivered a strong and consistent growth in revenue, earnings, and margins, despite some of the headwinds that the world has faced this year. You'll note our strong cash result and earnings growth at a higher rate than revenue, despite that challenging macro environment. The second point is that we've consistently delivered on our commitments for three consecutive years through the disciplined execution of our strategy. And third, we expect a moderated growth in FY 2025 as macroeconomic headwinds continue.
However, we see evidence of the prolonged cyclical upturn that we've referred to over the last three years, and we continue to work toward our strategic target of achieving high single-digit EBITA margins in coming years and maintaining a double-digit EBITA CAGR as part of the group's strategy, subject, of course, to the impact of any market conditions. The Worley board is determined to pay a final dividend of AUD 0.25 per share unfranked. Moving on to slide four. What I want to do is take you through the business performance and the strategic progress, so we'll move on to slide five. The success of an organization such as Worley is down to our people, energized, capable and empowered, and that's something we work on as a leadership team each and every day as we lead the organization.
But the most important thing is about keeping them safe and keeping them well, and that remains our highest priority. Our total recordable frequency rate was 0.10 across the group, improving from 0.14 at the end of FY 2023. But it's not just about focusing on the physical well-being of our people. We're also creating a secure and supportive environment, leading to better mental health outcomes. We've improved the gender balance of our graduates, and our intake in FY 2024 is 56%, up from 48% last year. And we've improved gender representation in senior leadership positions to 17.7% from 16.3% last year. And importantly, voluntary annualized turnover for our professional services people continues to trend downwards across the business.
Our purpose, underpinned by our value, continues to guide and inspire our teams around the world, providing a strong value proposition for our people, as well as those who are seeking to join Worley. Moving on to slide six. We're consistently delivering on our strategy and the commitments we've made over the last three years. The evidence of this is through our increased earnings, margins, and cash flow. Our aggregated revenue is up 18% and underlying EBITA is up 24% on the prior comparative period. This year, our revenue and earnings represent the highest in Worley's history, with increases across all regions and each of the three segments of energy, chemicals, and resources contributing to the result. We've delivered EBITA margin excluding procurement of 7.9%, which is at the top end of our forecast range for FY 2024.
We've delivered double-digit EBITA compound annual growth rate and have grown earnings as we focus on higher value work, improve the terms and conditions under which we're executing that work, as well as focusing on project assurance and managing our overhead as we grow. And this is the result of our strategic actions and focus on the building blocks toward margin expansion. We've a disciplined approach to capital management, which continues to support our growth plans. This year, we've delivered a cash result above our target range with a normalized cash conversion ratio of 99%. All of this has been delivered against a backdrop of rising geopolitical tensions and uncertainty around government policy, persistent high inflation, which is preventing monetary policy from supporting business growth, as well as many more factors.
Worley's business model has shown incredible resilience, allowing us to achieve our FY 2024 result despite all of this, including the effects of delays such as that with Venture Global's CP2 project and scope reductions on Anglo American's Woodsmith project, as examples. This highlights the strength of our underlying business and our focus on active project assurance, a process which assists in the dynamic management of project changes across project mix changes across the portfolio, as well as dealing with any project opportunities and delays. I'm really pleased with our continued progress across our ESG business commitments. This year, we established our Human Rights and Diversity, and Equity and Inclusion Committee, a senior management body which drives and supports our continued progress in this area.
Modern slavery, an area of increasing importance, remains a focus area for our business, and we received an A rating from Monash University for our FY 2022 modern slavery statement. We're on track to meet our net zero Scope 1 and 2 greenhouse gas emissions reductions targets, and for the first time, we've disclosed our complete Scope 3 emissions across all relevant categories, in line with our focus on improving data availability and transparency. We've laid a solid foundation, which underpins our trajectory toward long-term growth. And looking forward, we remain focused on our target of double-digit EBITA CAGR and positioning Worley for enhanced earnings and margins. And we continue our commitment to deliver strong environmental, social, and governance performance and to operate responsibly, consistent with our purpose. Turning to slide seven.
FY 2025 is expected to deliver growth, but at a more moderate level compared to that of FY 2024, in line with our leading indicators, which show moderation in the short term. As we mentioned at Investor Day in May, we're seeing some projects in our pipeline pushing out to the right, impacting both the award date and opportunity factoring for the likelihood of the project proceeding. This has contributed to a slower pipeline growth than previous periods, although it's still up 12% on the prior corresponding period, and up 5% still, excluding VG. That's not unusual to be expected in a prolonged cyclical uptick. Net zero commitments of our customers remain intact across the globe, and many of our customers are navigating a path to net zero as they work through the economics of the transition amidst unprecedented geopolitical and macroeconomic circumstances.
We continue to selectively target higher quality work, which reflects the value we bring to our customers. Our gross margin trends indicate new work is routinely being won at higher average margins, and this is supportive of our earnings growing at a faster rate than revenue. We had a strong second half of bookings, which flow from the pipeline into backlog. Just moving on to slide 8 and the drivers of backlog change. Although we've seen some project delays and cancellations, we have a healthy backlog of AUD 13.8 billion, supporting the delivery of our strategy in FY 2025. Sustainability-related work is now 56% of our backlog at AUD 7.8 billion. We continue to win more work than we're delivering.
Over the second half of FY 2024, we delivered AUD 6.6 billion of backlog and added AUD 6.8 billion through new wins and scope increases. It's important to note that the majority of Venture Global CP2 project remains in the factored sales pipeline, with only a much smaller scope under a limited notice to proceed, booked in the backlog, and that will continue until we receive full notice to proceed. As I mentioned, we've seen a AUD 1.2 billion dollars in project cancellation and scope decreases this year. For example, Anglo American's Woodsmith project, which is slowing down. While this is more than FY 2023, it's remained steady since Investor Day, and the result is a 2% reduction on the prior corresponding period. However, importantly, the long-term demand for energy, chemicals, and resource contributions into the global economy is positive.
These thematics have not changed and reinforced the strategic direction we've taken and the strategic pivot we've made. Moving on to slide nine. The intersecting macro trends, including geopolitical shifts, the energy trilemma, cost of capital, project economics, are delaying some customer CapEx decisions in the short term. Over the past year, we've seen a number of our customers announce near-term rebalancing of their own portfolios towards transitional and traditional project investments. This is to maintain profitability and is in response to the variable support from governments for the energy transition. This rebalancing has not been symmetrical, with some of these capital allocation decisions being delayed while the world grapples with geopolitical issues. Customers in each of the sectors in which we will need to make capital allocations soon to ensure the success of the energy transition over the long term.
Importantly, we're not seeing a shift or a slowdown in the commitment to the energy transition from our customers. Worley is ideally placed to assist with all forms of such capital decisions: sustainable, transitional or traditional. As I mentioned earlier, the long-term fundamentals remain supportive of our strategy. Energy demand continues to grow, and we're seeing customers working to extract value from existing assets while they reevaluate their portfolios. The extraction of value from their existing assets provides great opportunity for Worley to grow. In the chemicals market, long-term growth is driven by the energy transition, increasing population and consumption, and tends to track a multiple of GDP. The longer-term outlook is particularly positive in petrochemicals, driven by the need to decarbonize and adopt lower intensity feedstock.... In resources beyond the short-term imbalance, demand will exceed supply across all future-facing commodities.
Copper, aluminum, and battery materials will be the big winners. Our response to navigating short-term market dynamics is to remain aligned with our customers. In 2020, we began the journey of a shift to working with our customers and not just for our customers, and we have a strong and diverse customer base who we continue to support across all their traditional, transitional, and sustainable work. We're developing differentiated solutions to drive down the levelized costs, particularly where project economics are challenged, and deliver lifetime value for our customers' assets. Moving on to Slide 10. In FY 2024, we had AUD 13 billion in bookings with AUD 8.1 billion in sustainability-related work. The board recently visited our JESA joint venture operation in Morocco, where we're working with OCP to deliver a Power-to-X green ammonia program.
When these projects are delivered, Morocco will become a global hydrogen hub, and we'll be one of the first companies to ever deliver a Power-to-X green ammonia project at the scale. We are seeing some energy transition projects moving to later phases. For example, the Shell Polaris carbon capture facility at Scotford, and we continue to partner with our customers to support their portfolio of projects across traditional, transitional, and sustainable work, and recently announced a new strategic alliance with BP for their global site projects. These wins highlight the diversity of our customer base and demonstrate our customers' long-term trust in our relationship and our expertise to deliver their capital projects. I'm now going to hand over to Tiernan, who's going to give us further details on the FY 2024 results.
Thanks, Chris, and hello, everyone. Our financial results today show three things. First, that positive earnings momentum continues, as Chris has outlined, in line with our longer-term aspirations. Second, margin expansion this year has positioned us for further upside in FY 2025, even in a moderated growth year. And third, the conversion of operating profit to cash is strong, indicative of ongoing effective capital management. Turning to Slide 12 on key financials. Our aggregated revenue of AUD 11.6 billion is up 18% on FY 2023 pro forma. A reminder that the pro forma reference here relates to the divestment of the North American turnaround and maintenance business in May 2023.
Our professional services revenue has increased 16% over the year, reflecting the quality of our underlying order book as we support our customers across their traditional, transitional, and sustainable portfolios. We also continue to see strong growth in our procurement revenue at margin, principally due to the current mix of projects, some of which have material procurement requirements. Looking at group profit, we've delivered an underlying EBITA of AUD 751 million, and this is double-digit growth of 24% on FY 2023 pro forma. This was predominantly driven by an increase in the quality of earnings from a bigger contribution from professional services revenue, improved pricing, and our continued focus on project assurance, while simultaneously maintaining cost discipline as we grow.
Statutory NPATA for the year is AUD 367 million, compared to AUD 104 million in the prior corresponding period. As discussed at the half, this was impacted by the write-off of the net exposure of AUD 58 million, or AUD 49 million net of tax, relating to the historic services provided in Ecuador. This is included in the statutory profit result, but has been excluded from the group's underlying result for the full year, as we did at the half, due to its one-off and historic nature. Importantly, there were no other adjustments made in arriving at the underlying result this year. Our underlying NPATA is AUD 416 million, up 27% on FY 2023 pro forma.
Underlying EBITDA margin on revenue, excluding procurement, is 7.9%, as Chris has mentioned at the top end of our August 2023 results day forecast range, and of course, reconfirmed in other disclosures since. Turning to Slide 13 on drivers of EBITDA change. These EBITDA margin walks show our progress towards raising margins, excluding procurement, to high single digits. In both these walks, you can see that the margin is predominantly driven by rate improvements that continue to flow through from backlog. Our pricing discipline is being sustained. The other key contributor to our margin is our project mix, with professional services now making up over 80% of our EBITDA. Our focus on project assurance through the life cycle of all of our projects is also ensuring that sold margins are delivered efficiently. Turning to Slide 14 on investment strategy.
Our three-year, AUD 100 million strategic capital investment program in organic growth is now complete. We believe we've developed differentiated solutions from that, and this gives us an early mover advantage in these developing markets. We've won AUD 7.6 billion across our targeted growth areas since the start of the program, which demonstrates how it has been highly accretive for the business. At this point, of course, you'll be asking yourself: So, what's next? Well, we've created sustainable comparative advantages and intend to protect them. We'll continue to consider organic investment on an annual basis, where we see accretive returns aligned with our growth strategy. This includes continuing to scale these businesses we've already built. For FY 2025, we expect to allocate circa AUD 30 million of incremental capital across these areas, which will also contribute to our margin improvement.
We're able to do this because of our strong capital management position, which gives us a broad range of options to continue to invest through the cycle. We're being deliberate in identifying and investing in opportunities that create value for our customers, while delivering improved quality of earnings. We introduced our strategic levers at Investor Day, which helps frame our annual investment going forward, and the timeframes over which we expect these levers to contribute to earnings growth, but also to margin expansion. As Chris mentioned, we're anticipating moderated growth in FY 2025, but we recognize the importance of making investments now that will drive accretive returns in the future. This is particularly true for areas such as digital and AI, where we are planning to focus investment in FY 2025, and this positions us for returns over the medium to long term.
You can see other areas of investment focus in the graphic on the right-hand side of this slide. Turning to slide 15 on general capital management strategy. We continue to build on our strong capital management position, which is structured around funding our growth and delivering increased value to shareholders. We present our capital management plan in a consistent way, and have done for a few reporting periods now, so that you can see the decisions we're making regarding our free cash flow. Our reported cash conversion ratio for the year is 118% of underlying EBITA, which reflects strong underlying cash flows, positive cash flow behaviors, but also a transition to increased advanced billings on a number of important contracts, as we strive to achieve better terms and conditions in this market.
This improvement can obscure the underlying cash performance in the period in which they occur, so we also provide an underlying cash conversion ratio, normalized for the impact of the effect of advanced billings. This underlying ratio is 99% this period, above our target range of 85%-95%, delivering a very strong balance between investing in working capital for growth and prudent cash flow management across all our business activities. The reported days sales outstanding is down to 59.3 days from 63.0 days last year. Noting that the write-off of the net exposure to historic services provided in Ecuador contributed 3.4 days of this improvement. Even without this effect, DSO is at the lower end of our target range. We have good liquidity, we maintained our strong credit rating, and we have access to flexible, competitively priced debt.
Leverage is a standout in this result. It has reached 1.5 times support of a future growth, and importantly, down from 2.2 times in the prior corresponding period. For those of you who've been around a while, 2.5 times at thirtieth of June 2022. We have prudently used cash flow to reduce risk, increase liquidity, and provide appropriate funding for business growth. It gives us the capacity to not only invest in our future, but to reward shareholders with an appropriate dividend stream, and also, should we choose to do so, gives us the ability to undertake some other capital management activities to drive EPS accretion.
You can also see that we are creating future capacity with growth across a range of facilities, including substantial bank guarantees and surety bonds, essential for the success in large-scale project delivery that Worley does. Our weighted average cost of debt for the year is 4.3%, up from 3.9% last year, due to continued high interest rates, but within our FY 2024 target range. For FY 2025, we have adjusted the basis for calculating WACD, which is now on a gross basis to include deferred borrowing costs, and we expect it to be within the range of 4.3%-4.6% at FY 2025. Our underlying tax rate was 33.6% in FY 2024, in the middle of our target range, and we expect this to be similar in FY 2025. Turning lastly to Slide 16.
In conclusion, I'd like to remind you of our value proposition. Our diversification across the energy, chemicals, and resources markets, together with our global footprint, makes us more resilient to short-term impacts in any one of these sectors. I think our consistent delivery of earnings in recent years is testament to this. Our leading position in markets we serve enables us to benefit from the energy transition and demand shifts. As Chris highlighted earlier, the long-term fundamentals across all our markets remain strong, and we continue to support our customers across their traditional, transitional, and sustainable projects. Investment in the energy transition is still in early stage, with a significant increase yet to come. Our early mover advantage has positioned us in new and attractive sustainability-related markets with low competitive intensity and high barriers to entry. We've also seen a fundamental shift in how we do business.
We're partnering with our customers to help them bring down costs, as well as delivering projects in new and innovative ways. Importantly, we're delivering more value to them, and we're sharing in that value ourselves, and as I've mentioned, we have a strong capital position on which to execute all of these growth plans. I'm happy, therefore, to report that Worley's financial position is in very good shape. I'll now hand back to Chris to take us through the outlook. Chris?
Yeah, thanks, Tiernan. Look, I want to take you through the outlook, and we'll move to slide 18. Look, at a macro level, Worley is managing three key risks: the attraction and retention of highly skilled people to meet the demand, inflation and supply chain disruption and their impact on the economics of business, and the ongoing geopolitical tensions affecting normal operations of global markets. Higher cost of capital and variable support from governments for the energy transition is resulting in some projects being deferred and cancellations as customers rebalance their own portfolios and reassess capital allocation decisions. We're actively focused on mitigating these risks every day through the strength of our diversified global business, together with our focus on project assurance and our ability to rapidly deploy or redeploy our people to match our customers' needs as they rebalance their portfolio investment.
We expect FY 2025 to be a year of moderate growth compared to that of the last financial year as these macroeconomic headwinds continue. Importantly, the world remains committed to achieving net zero, and we still see significant growth opportunity ahead as those commitments are met. The global commitment to net zero is creating a prolonged signal of upturn of activity in all of our key sectors of energy, chemicals, and resources. While there's expected to be peaks and troughs throughout the transition period, over time, the overall trend continues to be upward and positive. Moving on to slide 19, to the group outlook.
We're targeting low double-digit EBITA growth and expect the underlying EBITA margin, excluding the impact of procurement, to be within a range of 8%-10.5% for FY 2024, still projecting growth. We expect the second half of FY 2025 to be stronger than the first half as the rebalancing process proceeds during this financial year. We expect some growth on procurement volumes due to project mix and timing. As a leading global solutions provider in the markets we serve, we're encouraged by the new work we continue to win as we support our customers across their traditional, transitional, and sustainable work. Just on to slide 20 and the key messages, and you know, before we move into Q&A, I'd like to remind you of the key messages I opened up the today.
First, we've delivered strong and consistent growth in revenue, earnings, and margins despite headwinds. Second, we've consistently delivered on our commitments for three consecutive years through the disciplined execution of our strategy. And third, we expect moderated growth in 2025 as headwinds continue. However, we see evidence and continue to see evidence of a prolonged cyclical upturn. So, look, that ends the formal part of the presentation. Appreciate everybody joining. What we want to do now is open it up to questions, and Tiernan and I will share those between us. So over to the moderator to manage the question process.
Thank you, and at this time, we'll conduct a question-and-answer session. As a reminder, to ask a question, you will need to press *1 1 on your telephone and wait for your name to be announced. To withdraw your question, please *1 1 again. Please limit yourself to 2 questions, and if you have any further questions, you can rejoin the queue. Please stand by. We'll compile the Q&A roster. One moment for our first question. Our first question will come from the line of Richard Johnson from Jefferies. Your line is open.
Thanks very much. There's maybe one for you, Tiernan. I just wanted to ask you a little bit about the headcount, which was obviously up some. I think it was around 3%, off the top of my head, in last year. I'm trying to get a sense of what that means for the business going forward, particularly in relation, although it's above the target, obviously, utilization looks like it's dropped a little bit. So, I'm just really trying to understand, you know, how I should think about headcounts. And, you know, is the thousand-odd people you had on CP2, I mean, what's happening to them in the early part of this year? Should that be in our thinking, or have you stood people down?
Yeah. Thanks, Richard, for the question, and it's an important one. I mean, we've said consistently that whilst headcount remains an important driver of profitability, it's not the lead driver that it used to be. You've got to also look at how we mobilize people globally. You know, we have projects that are coming on stream. We've got projects that are finishing. So, our ability to mobilize people who are coming off projects onto new projects means that for every incremental project, we don't need to go out to the market and hire new people. So, you've just got to be a little careful at the increase in headcount reading through to you know, a 100% view on where revenue and earnings is going.
A couple of other really important matters. One is that attrition continues to fall. So, attrition has been falling all year through 2024, and of course, that means that we don't have to go out to the market. Not only does it mean we, it costs us less, but it means we don't have to hire additional people in the market. In addition to that, we also have been investing in better processes, in digitization, and that's just helping our people to do their jobs better. Our win rate is slightly down as well, so we are winning the projects we want to win. So, for all of those reasons, head count remains an important metric. Importantly, we don't have a problem in hiring people. We still have the ability to hire people on time when we need them.
But for all of those reasons, whilst a 3% increase is different to the increase you would have seen in FY 2023, which I think was 7%, it still hasn't prevented us from growing our EBITA and earnings the way we've just announced.
That's very clear. Thank you. And then just finally, and this might be one, because when we think about rates, which has obviously been such an important driver of growth, over the last few years, not least because of the structural change in the market, I mean, how much further is there to go on that? Or how are you thinking about it, particularly, if you were to assume at least parts of the business are showing some signs of slowing?
Oh, look, I guess the rate that we can, I guess, command from the market is a function of really two things: demand and supply, but also competitive intensity. And, you know, we're still operating in an environment, Richard, that's from a competitive intensity perspective, is the lowest it's been in my career, you know, thirty-five years in the industry. It's the lowest it's been. So, I still think that there's a way to go in terms of our ability to command the rates we've got or further enhance them. But it's the way we deliver the work that is becoming more important and our productivity and our efficiencies and being able to translate that higher margin work to even higher margin bottom line.
Richard, apologies, I didn't answer your, the second part of your question on Venture Global. Just to let you know that because we're still operating on a limited notice to proceed contract, we are still doing engineering work with the full cohort of engineering people. They're the only people that we brought onto the contract because we were only doing engineering. As you know, we hadn't started construction because we didn't get FERC approval, or the project didn't get FERC approval. So, that engineering work is forecast to continue for the rest of the calendar year, demobilizing towards the end of the calendar year. Our expectation is that we will remobilize those people to other work.
Got it. That's fantastic. Thanks, gentlemen. Appreciate it.
Thanks, Richard.
Thank you. One moment for our next question. Our next question comes from the line of Brooke Campbell-Crawford from Barrenjoey. Your line is open.
Yeah, thanks for taking my question. First one, just around the first half versus second half, sort of growth rates. Do you mind providing a little bit more color on that, as you've outlined on slide nineteen, and specifically for the first half, EBITA margin? Can you confirm if that will be in the range you're talking about for the full year, which is 8%-8.5%? Thanks.
Yeah, what we expect is that the first half, second half will be similar to FY 2024 at 45%-55%. In terms of the mathematics around first half, second half EBITA margins, clearly, if you exit FY 2024 at a 7.9 average, it means that the exit run rate was higher than that. To get to an 8-8.5 for FY 2025, the first half EBITA margins, as normal, will be lower than the second half, just because the nature of the work that we do in the first half, second half, which means, again, that the average second half margin should be above that range.
Part of what we're seeing is that, and we have the visibility of all of this, of course, by looking at our backlog and our pipeline, and we know what we're, you know, how disciplined we are around our pricing. So yeah, mathematically, you can work out that the answer to your question is yes.
Thanks. And just the second one for me, with respect to the AUD 30 million in investment in FY 2025, you called out, most materially that will be driven by digital and AI enablement. Do you mind just providing some examples really of what, what's being done there? What are you investing in to help sort of improve the, the broader business? Thanks.
Yeah. The first thing I'll say, it's not the only part of our investment. In addition to the circa AUD 30 million in the strategic investments, we have another circa AUD 90 millions of transformative capex in the business, so this is improving processes and systems. So, we are making significant investments in the future in the business in FY 2025. In line with previous disclosures around the circa AUD 30 million in strategic investments, it will be more of the same: investments in training, in people, in systems around these growth units. But specifically in digital and in AI, in AI particularly, we have approximately 200 use cases that we're currently focusing on. That will take a long time, beyond 2025, for us to get through all of those.
But at the Investor Day, I think we mentioned a number of the examples of that. For example, an automated tendering process, which will have a significant reduction in the amount of time that billable engineers work on tender documents. The quality of those documents is significant, but it allows us to produce them much quicker and then redeploy those engineers onto billable work. So, they're the kinds of investments that we will make on a very disciplined basis. But the two hundred use cases, which, as I said, will take some time to deploy, will all have similar type of returns, and we will only invest if we have a return.
Makes sense, thanks.
Thank you. One moment for our next question. Our next question comes from John Purtell from Macquarie. Your line is open.
Good day, Chris and Tiernan. Hope you're both well. Just have a couple of questions, please. Just in terms of your backlog, it was down over the last six months. So how do we correlate that to expect in 2025? You know, appreciate your staff numbers are up slightly, but look, generally backlog and revenue, there, there's been a correlation there in the past.
Yeah, so let me maybe start, John, then Tiernan chime in. So, look, first of all, our book-to-burn is greater than one, so you know, while the backlog is down on what it was on at the prior corresponding period, our book-to-burn is above one. So, I'm not overly concerned around ability to deliver what we've talked about in FY 2025. Look, if we look at what makes up the delta between the last backlog we reported and this one, you know, it's... We've had a couple of big projects go into slowdown or canceled. So, you know, there were big ones or bigger ones. And so that's driving the impact.
If we look at what we're winning, we're actually still continuing to win above our burn rate, which is what obviously the important thing is. So look, obviously, we'd all like to see a continued trend of upwards, an upwards trajectory on the backlog, but in this specific case, John, I'm not overly concerned about the delta between what we previously reported and this one. Given the nature, given the fact it's a couple of bigger projects. Yeah. Tiernan?
Yeah. I'd add that the backlog, John, is still substantial in terms of supporting FY 2025. We have said that FY 2025 will be a moderated growth year, so you don't need the same extensive backlog that we went into FY 2024 with to deliver the result in 2025. Importantly, the phasing of that backlog is very similar to FY 2024. You know, about 58% of it will be-- is expected to be delivered in 2025. So that's a pretty good backing for FY 2025 from the start. We're clearly monitoring the activity in the first couple of months of the year, and our lead indicators are certainly confirming our expectation for FY 2025. Certainly not going to be an easy year, but it's certainly going to be a growth year.
The pipeline also is still healthy and growing, particularly around sustainability. You would have seen in the material. You may not have had chance to see it yet, but the number of sustainability wins is up yet again on the quarter. Very marginally up, but nonetheless, still at very high levels. And the phasing, whilst it has slightly changed, in that a lower percentage is expected to be awarded in the next twelve months, it's still over 60%. And that gives us some confidence that those back the FY 2024 outlook. Similarly, we're not a product-based business necessarily. We're close to our customers, and Chris mentioned it in his speech. We're close to our customers.
We're working with them, so it's not like we're just waiting for other people to be active with us. We are proactive with our customers, so we know how they're thinking, what they're thinking. We're helping them to think. And that also gives us some confidence about, you know, the intentions in FY 2025 to give us the ability to talk about the outlook that we have. The last thing I'll say is that in the outlook, you can see that again, and I remind everyone that, you know, we don't just lean into the basic ECR market. We address a much bigger market than that because of our focus on the energy transition.
So, that market, the bigger market that we lean into as a group, is growing at about 5% a year. That's what we need to deliver the outlook that Chris has just taken you through. John?
Thank you. And just a follow-up, specifically on resources, do you still see a positive outlook for your resources business despite the volatility we've seen? And maybe just more broadly, Chris, which regions of the world are you most positive on in terms of activity? Thanks.
So, look, on the resources side, we know that the long term, we know what the long-term trajectory is, but look, in the near term and the immediate term, we're seeing some pretty exciting projects, and it's not just in the traditional areas of, say, you know, Western Australia. We're seeing Latin America, Argentina, Chile, interesting. The Middle East, John, the Middle East, and is seeing, you know, an opportunity set growth there. So, look, I'm comfortable that there is sufficient growth opportunity, not just with the plays that we work with traditionally, but also in the more traditional areas geographically, but in some of the emerging geographies as well.
Thank you. One moment. One moment for our next question.
Our next question will come from the line of Rohan Sundram from MST Financial. Your line is open.
Thank you. Hi, Chris and Tiernan. Just one for me around, Chris. Are you able to give us a bit of color on how your conversations with customers have changed over the last six months, and with customers reassessing their portfolios and pivoting back to traditional to some extents, how are you seeing that impacting your business?
Well, the conversation with the customers, you know, are still a mix of sustainable, transitional, and traditional. And when we talk about transitional, a lot of that is how do you, you know, how do you make your traditional assets more sustainable? Could be CCUS, could be water usage, energy efficiency, whole slew of things. But what they're talking about is the need to continue to grow, need to continue to address the energy transition. But the challenge with some of the pure sustainability projects, for example, in hydrogen, currently, there's not enough scale take of the hydrogen. And the economics of some of the hydrogen projects are not quite there.
So, they're talking about the need to, while they've got to continue to look at and work on their portfolio of sustainability. If you look at the near, or immediate term and near-term investment, there's definitely a rebalancing or a focus on near-term returns associated with the traditional and transitional. But there's a sense of calm with them, you know, with our customers. There's not a sense of panic. You know, there's no backing away from their commitment to net zero. It's just a question of being very pragmatic in how they're gonna get there.
I think I'd say the conversations are steady, with maybe a little bit of a different emphasis across the three buckets of sustainable, transitional, and traditional. You know, it's something which is same to all customers. You know, they're all having a sensible revisit of what they need to be doing from an investment perspective. I'm not seeing any panic, and I'm not seeing any backing away of their ultimate commitment to net zero.
All right. Thanks, Chris.
Thank you. One moment for our next question. Our next question will come from the line of Scott Ryall from Rimor Equity Research. Your line is open.
Great. Thank you. My two questions are on slide 41 and 42, just so you can prepare. On 41, you know, this goes through, I think, Tiernan, some of the stuff you were talking about before around the ability to grow profit ahead of headcount. And in that chart, I note it hasn't got a scale, but it obviously is moving in the right direction. I was wondering if you could just touch on. You gave a little bit of color around the automation side of things, but just touch on how much further you think Worley can go, through GID can go, and what are the more...
Leaving aside automation of tender documents, which is something you talked to before, is there any other areas of automation that you're seeing particularly interesting, please?
Yeah. What's interesting about this, Scott, is that the GID and automation does overlap, so it's not easy to divorce one from the other. But let's start with GID, because it's more immediate. At the full year, GID contributed 14.9% of total hours worked to the business. In FY 2025, we're stepping that up again. So, we can continue to increase the headcount in India, and in fact, you know, we will continue to consider alternative locations in a sort of a follow the sun mechanism to spread the risk a bit, because we do have a lot of people in India now, over 5,000, about 5,600.
But it's possible, given the quality of the engineers and the number of engineers that universities in India produce, to increase the total number of hours anywhere be up between 15% and 20% of total hours worked. You know, the customers, increasingly, as the economics of projects become an obstacle, are willing to allow us to utilize GID in a greater way. And we have ongoing discussions internally as a group, as a group executive to make sure that that happens. It doesn't affect the quality at all of the work, and in fact, customers like it because we share the benefit. So, I think you, you know, you'll see a continuation of that.
Meanwhile, if we are investing in automation, then that also will have an effect on the amount of work that that every individual has to do. I mean, we talked about this in the Investor Day, that it would be nice to think that 50,000 people that we currently have could do the work of 75,000 people. I mean, that's an aspiration that one has to have in an environment where resources ultimately will be constrained. And as I said in answer to Richard's question, you know, we don't have a problem in hiring people at the moment, but that's because our value proposition is very different. As you mentioned, we don't provide the scale, but importantly, the EBITA per head count has increased. It increased 15% this year.
and that means that what we're doing is we're getting much better at choosing the right projects working on the projects the right way, using technology appropriately, and working with our customers to do all this properly. I mean, this is a, this is a piece of partnerships, and that has produced that improvement. So, I think. And look, I think, the attrition rate says a lot because, you know, we are starting to invest in our people. I shouldn't underestimate the environment that we provide to our people, particularly around development. And the more we develop our people, perversely, you know, that has a positive impact on our productivity and our ability to grow.
They're the kind of things that not only dislocate somewhat headcount growth from earnings growth but also should give you some confidence that we can scale the business effectively into the future.
Mm-hmm. Okay, great. Thank you. And then the second question is on slide 42, with all the helpful charts on backlog and change in backlog. And maybe it's an extension of John's question from before, but EMEA looks like the area where you've seen the most pronounced drop on a geographic basis. And I was just wondering if you could talk to that specifically and what you're seeing there. But also, given your definition of backlog on slide 44, can you just explain to me how, you know, what happens when a client cancels a project? Do they... presumably, there's some, you know, remuneration for any work you've done for them already. But what's the basis on which someone cancels a project?
'Cause that usually, I would have thought, would have come after the project's fully funded. It'd be great just to get some color around that, please.
The first thing to say, Scott, is that it's normal that cancellations occur in this sector. I mean, this is just the nature of contracting. So, a cancellation typically occurs in the early phases of the contract life cycle. So, we will do an early study. First of all, we do consulting, and we would hope that in our effective sales pipeline, we're telling our customers honestly that a contract will be economic or it won't be. So, you cut out a lot of things at the contracting side, but then you do the early studies and some feasibility work and some FEED work. So, a contract can be canceled at any time during that period. The
But you're not including the value of the contract in your backlog at that stage, right?
That's right. Yeah. But if-
I'm just wondering, you've got AUD 1 billion, you know, more than AUD 1 billion worth of scope decreases and cancellations in your backlog walk in the second half. So that's... I'm just trying to get a-
Yeah, I'm getting-
Sense of the circumstances. Sorry, I've interrupted you.
I'm getting to answer the nub of your question. One part of your question was, do we get compensated? In most cases, we, because of the answer to an earlier question, because we have the ability to mobilize people, we are able to demobilize and mobilize people to other contracts. You can see that in our productivity level. I mean, our productivity level doesn't change. It's about 88%-89%. So, we have been very effective in the cases where contracts are this, whether it's a scope decrease or a cancellation, we've been very effectively able to remobilize people to other places. One of the reasons for that, Scott, is that we don't. We sell most of our projects out of multiple offices.
It would be a problem if all of the people on one contract were out of one office, because it would be harder to mobilize those people to a new contract. But when you're mobilizing people from multiple offices, virtually and physically, mostly virtually, you're able to demobilize people at no cost. But there are cases where the contract style allows us to be reimbursed for demobilization costs, if the cancellation was on the part of the customer. The last part of your question was around EMEA, and you know I should also say that that AUD 1.2 billion of scope decreases in cancellations, the vast majority of that was scope decreases. About AUD 200 millions of that was cancellations, which means that the cancellations were very small projects.
AUD 200 million for us in across multiple projects, and we're probably five or six projects there, is a very, very. They are very small projects, indicative of early phase contracts, which leaves us with the bulk of it. As you say, a lot of it is in EMEA, which, you know, really relate to just different economics, different timings, different directions, different strategies of our customers. And again, the same issues apply to us in terms of having to demobilize people that originally were mobilized for the scope that was originally intended.
So, it's really about AUD 1 billion of scope decreases that we've been dealing with, and I think all of the other metrics tell you that because they're stable and because headcount is still growing and because productivity is flat, we haven't had a problem in redeploying those people.
Yeah. Okay. No, great. That's all I had. Thank you.
Thank you. One moment for our next question. Our next question will come from the line of Nathan, Nathan Reilly from UBS. Your line is open.
Thank you. Morning, James. Just, I guess a couple of questions around the CP2 LNG project. Sounds like you're planning to, so I guess, push ahead with that project later this calendar year. Can I just get an update? Is that sort of FID outlook subject to DOE export approvals, or is there something else that's giving you the confidence that that project moves forward?
So, DOE approval is not required to move to site. DOE approval is only required to export the LNG, and VG have always said they would move to site and begin building without export approval from the DOE. You know, what we've been asked to do is plan around an end of year mobilization to site, Nathan. So that's the plan. But the project moving to field was subject to FERC approval. It's export of the LNG that's subject to DOE approval.
Okay, and you've given some comments there, just in terms of earnings contribution expectations for 2025. But, you know, assuming this hits your order book, you know, at the end of this year, calendar year, can you maybe talk through how you're expecting revenue phasing for the project as it moves to, delivery phase through 2026 and 2027? And extending on that, can you just give us an idea of how you think the project will impact your, your margin targets, your high single-digit margin targets? Just trying to get a sense of whether the project would actually be dilutive to that target.
Yeah. Nathan, on the first question, the reason we've provided specific guidance on CP2 for FY 2025 is because we originally intended to mobilize the site in February this year, or at least late last year, or early this year. So, we were going to have a different profile of earnings delivery in 2025, because we would have been ramping up from early calendar 2024 into construction, and then we would have been simultaneously doing engineering work and construction work. Because of the delay and because of the later mobilization to site, that means that the engineering work will ramp down, as I mentioned to Richard earlier, and the construction work will either ramp up from late calendar 2024 or early calendar 2025. So, no overlap.
That does affect them marginally, and it's not. It's marginal for the group, but it affects what we had originally planned for CP2 and FY 2025. We really need to get to site to really start to deliver earnings in a consistent way for the next few years. I think it really will be FY 2026 before you will see a full run rate of CP2 in our earnings. You know, for all the reasons I mentioned, it's why you know, we wanted to mention that the EBITA contribution in FY 2025 will be lower than 2024.
The purpose of that is that we talk to all of you about what you've included in your models, and a lot of you don't model it specifically, but if you do, you know, we just think that that's important that you get that information. In terms of margin, we always said when we won the contract that it would be supportive of our margin journey, and that remains. You know, clearly, we've got to ensure that we renegotiate the contract once we get full notice to proceed. That will happen sometime in the next six months. Our expectation is that the project, you know, all signs are the project is moving forward. Obviously, FERC approval is a very good start.
You know, we'll be able to give more color on that at the half year, but we're very positive about, you know, our ability to deliver the contract, certainly the experience we've had so far, and the size of the project and its contribution to our not only our earnings in dollar terms, but also in margin terms.
Understood. Thanks for answering the question.
Thank you. One moment for our next question. Our next question comes from the line of Alistair Rankin from RBC Capital Markets. Your line is open.
Oh, good morning, team, and thank you for taking my question. Just first one, actually, on the normalized cash conversion for the year. You had a really solid conversion of 99%. Can you just run through what the key drivers were for this, and how that your strategy has sort of contributed towards achieving such a strong conversion?
Yeah, thanks, Alistair. Look, I think prima facie, we're just getting better at managing our customers and at managing the cash flow cadence within the group. One of the things that I've been very pleased about during FY 2024 is the focus on cash conversion, rather than just on DSO. Chris changed behaviors by incentivizing those who matter around incentivization by focusing on cash conversion, which means we have to not only look at cash inflows, but also cash outflows. And I think that changed the way we focus, and I mentioned it quite a few times in what I said earlier, that it changed our behaviors as a group. Which meant that our DSO and our DPO were consistent throughout the year. So that was a really big driver.
We also are educating our customers. I mean, Chris and I are out there talking to our customers about, you know, we're not a bank. They, they've got to pay their bills. You know, we have consistently delivered DSO at the low end of our target range in the early sixties. That's a very good rate, particularly when you work where we work. You know, we work a lot in the Middle East, where DSOs are higher than the average for the group. So that means there are many places where we're doing even better. And then I think the processes, the investment and the processes that I've talked about, you know, it's giving us more visibility of the forecasts around cash, cash flow.
What's really pleasing about 99% normalized cash conversion is that we are still investing in incremental working capital and delivering 99% in normalized cash conversion, so I think it's a whole range of things, but I think it's just discipline, and you know, we look at the competitive environment, and you know, a lot of our competitors are not faring as well as we are. It certainly helps that our contract strategy is around reimbursable style. That reimbursable style lends itself to a better cash production if you are disciplined around focusing on it.
That's very helpful. I might just shift across to the Americas, where on slide 31, you show that there was a very material increase in margins from first half to second half, and you mentioned that the increase is driven by project mix, plus an increase in procurement and construction. Could you just give a little bit more color on what has been the driver of this material increase, and maybe even extend it to the APAC region as well? Because I know that that had a pretty solid increase in margin, half on half as well.
So, I think there's a combination of matters here. Interestingly, APAC has very limited construction and fabrication while it has a reasonable margin, it's much lower than professional services. I think across the board, in both these places, it's mainly because the percentage of professional services revenue has increased, and professional services revenue has the highest contribution of margin. It's diluted by the involvement of construction and fabrication, and in North America, that's where we have the most of construction and fabrication. But what's really interesting is the construction and fabrication market margin has also increased, and it's increased because of scarcity. I mean, if you look at our Canadian construction and fabrication yards, they're full.
65 acres of yard full of construction activity because there's just a huge amount of activity in North America. So, I think you've got this combination of matters that you get increased PSR contribution. You've got an increased focus on contracts where you know we get the most value because we're pricing up. You get a better contribution from construction and fabrication. Yeah, I think the combination of all of that has certainly allowed us to improve. In APAC, it's the same issue, even though they don't have construction and fabrication. It's the... Chris answered a question earlier around resources.
You know, it's a focus on a number of the growing areas like iron ore and copper and battery materials, for example. You know, all just evidence of the ongoing discipline around pricing.
Okay, thanks. That's very helpful.
Thank you. One moment for our next question. Our next question will come from the line of Saurabh Viswanathan from Bank of America. Your line is open.
Morning, Chris. Morning, Tiernan, and thanks for taking my questions, and congrats on the results. Chris, just a couple of minutes on your capital management, right? Now, if I look at your leverage at one and a half times, well below the low end of your target range, how should we be thinking about the use of that capital? I had a follow-up post that but perhaps let you go first.
You know, there's a number of avenues, and if you look at the capital management slide, which is. Let me just go to it. There's a slide in the pack which talks about capital management.
15, 9, 5.
Slide 15. You know, we're looking at whether it's, you know, we haven't made any acquisitions, and, you know, Worley has not ever had a, an acquisition strategy. We've got a growth strategy, and if an acquisition helps us drive that, we'd consider it. We haven't made one, but look, you know, bolt-on acquisitions are still something that we would consider. We have an M&A team. We look at, you know, monthly, we look at the universe of potential acquisitions. So, there's that. Obviously, we talk about net debt reduction, dividends, organic investment, which Tiernan's talked about, and, obviously, the other one is: Does it make sense to look at our leverage ratio and what we've got and consider buybacks?
So, you know, we think that there's a range of options available to us. I think the leverage being at one point five gives us access to an opportunity set, which has been different in the past. And so, we're gonna consider the full range of options and look at what makes sense from an accretive point of view in terms of allocation of that capital. Tiernan?
I would just add a bit tongue in cheek that it was you guys who didn't want us to operate between two and two and a half. I was very comfortable with our cash flow at two to two and a half times leverage, but I couldn't convince you that that cash flow was sustainable, but I think we are now. So, we decided to move down the debt load, and we wanted to trend to around two times. But as Chris said, we were always gonna do that on the basis that we would invest inorganically, organically, et cetera for whatever EPS accretive opportunities that we had. So, we are not uncomfortable at 1.5 .
It gives us a lot of firepower, and we want to put capital to use, so, you know, we're looking for opportunities, but as we've been doing for three years, discipline is the name of the game. We have to be disciplined. We're looking at lots of opportunities, but, you know, in this environment, with high interest rates, multiples are high, accretion is difficult to get. So, while we can, we'll enjoy the low leverage, but, but it's, it-- don't assume it'll stay there forever.
We're looking at the full range of options.
Thanks for that. That's very helpful. Kieran, really quick one for you. Just one quick clarification on your backlog. So, I'm just looking at the slide, slide 8, right? That AUD 1.2 billion dollar , can you just clarify, did you say that of that, it only AUD 200 million was cancellations, and the AUD 1 billion was related to Anglo's Woodsmith? Is that reading, okay?
No, that's incorrect, and by the way, this, we're gonna have to move on after this question. That'll be the last question. But no, just to clarify, what I said was that about AUD 200 million relates to cancellation. The other AUD 1 billion is scope decreases, which includes a whole range of contracts as normal, right? It's higher than it was the same time last year, for sure, but we've evidenced that and talked about that as to why the outlook is where it is. But it's not just Woodsmith, it's a whole range of other contracts in the energy transition across the group, not just. There's no concentration.
So, look, I know that we need to bring this to a close. We're a little bit over the scheduled time, but I wanna just leave you with a reminder that we've had a phenomenal FY 2024. It's been really a tremendous year in an environment that has not been without its challenges, not just for Worley, but, you know, for many companies in many regards. FY 2025, we are still projecting an improvement in quality of earnings, and I think that's a great statement to be able to make as we head into FY 2025. Appreciate your interest, appreciate your time, appreciate your support, and look forward to talking to you, many of you, over the next few days. Thank you.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.