WorleyParsons (WOR) will not pay a dividend for another reporting period as it continues to battle the aftershocks of the great oil and gas investment boom and bust here and around the world.
In fact it too early for the rally in commodity prices in late 2016 to have had a positive impact on the contractors bottom line, or even its topline, but management is confident there are some green shoots appearing.
As a result there was no interim in yesterday’s half year profit report and none looks likely for the 2016-17 year either.
It scrapped its interim dividend a year ago with the aim of using spare cash to reduce debt and did not pay a final dividend in 2015-2016.
WorleyParsons’ shares dropped nearly 19% after reporting a net loss for the six months to the end of December of $2.4 million, as revenue slumped by more than a third to $2.7 billion thanks to fewer projects in the mining, oil and gas industries.
WorleyParsons made a net profit of just over $23 million the same time a year ago. The shares ended the day at $8.60, down 12.8%.
Chief executive Andrew Wood said the company had cut costs by $50 million over the half year and was targeting annual cost cuts of $450 million as the market contracted and engineering projects were completed or delayed.
He said he expected the cost savings to be reflected in the second half of the year. This is the third year of deep costing cuts at the company.
"Notwithstanding that market conditions remain challenging, customers’ sentiment is improving and they are informing us that their activity levels are not expected to deteriorate further," Mr Wood observed.
“In some areas, they are beginning to increase activity which we expect to flow through to the medium term.” (Green shoots?) Worley Parsons said it was chasing $230 million owed by four “slow paying" state-owned customers. “Collection of these funds is a critical priority going forward,” Mr Wood said in yesterday’s statement.
The company says it costs in the first half, but these cuts were not fast enough to offset the slide in demand for its services. As a result underlying net profits also fell, dropping 23% to $57.1 million.
Hydrocarbons earnings fell 20% to $137.7 million, while minerals, metals and chemicals earnings dropped 83% to $3.2 million. Infrastructure earnings were a small patch of blue sky up 20% to $36.2 million.
WorleyParsons said earnings from its consulting business, Advisian, plunged 93% to just $2.3 million.
Investors want WorleyParsons to reduce net debt, which is now running at $920 million. The company says it remains within its debt covenants.
