What a difference a day makes.
The six trading days from February 15 to Tuesday of this week were pretty good for engineering and resources contracting group WorleyParsons (WOR).
The shares bottomed out at $3.11 on Monday of last week and by Tuesday night had risen 29% to $4.21 as oil prices enjoyed a modest rebound and there were some expectations of some good news in the interim profit report due out yesterday.
Well, there was nothing of the sort – as world oil prices fell 4% and more after the Saudis ruled out any cuts to their oil production, and the company’s board abandoned the dividend, down went the shares more than 13%.
They ended a gloomy day’s trading 13% at $3.66 – still with more than half the previous seven day trading gain intact.
WOR 1Y – WorleyParsons dumps dividend, shares dive
Not helping investor sentiment was the reported 78% slump in net profit to just $23.1 million. That was much weaker than market forecasts, with any analysts saying the company would keep, not eliminate, its dividend.
The interim dividend was scrapped for much the same reason as BHP trimmed its payout the day before – big falls in after earnings in its key hydrocarbons and minerals businesses and the need to hold on to as much cash as possible.
Previously the company had paid a dividend of 34 cents a share for the six months to December 2014, now zilch.
Group revenues fell 5.2% to $4.19 billion, but underlying net profit fell 29% to $73.9 million a sure sign of the collapse in profit margins in the half year.
WorleyParsons forecast trading conditions would “remain challenging” (another way of saying very tough and we need all the cash we can get, hence the division to abandon the dividend’).
The result included $86.8 million in losses and costs for job cuts and write-downs on engineering software licenses as well as costs related to closing offices and consolidating leased office space. Some $39 million of that figure was for redundancy payments as the company hacked into its work force.
Directors also said the company would sell “non-core assets” to strengthen its balance sheet.
But the company wouldn’t specify which of the “non core assets” it plans to sell, but said it has targeted a total $180 million in savings over the next 18 months.
CEO Andrew Wood said yesterday WorleyParsons had already delivered $120 million in annualised savings through initiatives including job cuts, the closure of 14 offices and stripping out a layer of management. And more are obviously on the way.
