Engineering and mining services company, WorleyParsons (WOR) shares enjoyed a nice bounce yesterday after the company revealed its promised cost cuts and other management moves had stabilised its weakened profit situation.
The company also revealed it had cut its interim dividend to 34c a share, down from the 41.5c a share in the first half of 2012-13.
As a result, the shares jumped 10.6%, to $17.17, still a long way from the most recent high of more than $24 a share late last September.
WorleyParsons told the ASX it expects to meet its financial year profit targets due to the cost cuts made in the face of weak market conditions.
Those problems were revealed in a controversial profit downgrade announcement last November which saw the shares plunge more than 20% in a single day.
Yesterday’s bounce in the share price can be seen as something of a ‘relief’ rally because there were no more surprises for investors.
The company said net profit in the first half of the 2013-14 year was $112 million, down 28% from $155 million in the previous corresponding period, and about what the lowered guidance last November suggested it would be.
The company said statutory revenue and other income of $4,823 million was up 9%, while total revenue of $3,793 million was down 2%.
Underlying earnings before interest and tax was $178.2 million was down 29%.
Underlying net profit in the half year was $101 million, 35% under the level of a year ago.
WOR 1Y – Worley Parsons interim down, as expected, dividend cut
Directors said in yesterday’s statement that it still expects to report an underlying net profit for the full year in the range of $260 million to $300 million, as it indicated last November.
Directors said revenue and earnings were down across its Australian business due to reduced activity in the oil and gas sector, ongoing weakness in minerals and metals and the resulting contraction in resource-related infrastructure projects.
Costs from restructuring efforts of $13.6 million, which included more than 500 job cuts across its global operations, also lowered earnings.
Chief executive Andrew Wood hinted at the possibility of more restructuring, saying the company was conducting an indepth review of its business to position the company for future earnings growth.
"Notwithstanding the impacts weaker than expected market conditions are having on our performance, the cost reduction program we implemented together with the momentum from recent contract awards should position us for medium term growth," Mr Wood said yesterday.
WorleyParsons has four business areas servicing the oil and gas, power, mining and infrastructure industries.
