Worley digging around for added value

Worley provides project delivery and consulting services to the resources sector.

Acquisitions may not have been on the agenda for engineering firm Worley, but that could be about to change.

At the Macquarie Australia Conference in Sydney last week, the company signalled that it was examining the market for smaller deals that would add value.

Worley boss Chris Ashton told DataRoom that such opportunities could be funded through its net debt, which was $1.8bn at February, and the potential opportunities were no doubt a line of questioning at Worley’s investor day on Tuesday.

Worley has not embarked on acquisitions since it purchased Jacobs’ Energy, Chemicals and Resources unit four years ago for $US3.2bn ($4.55bn)

The company said it believed it could achieve a higher margin when it came to earnings before interest, tax, depreciation and amortisation.

Two main global competitors are Scottish engineering firm John Wood Group and Texas-based multinational engineering and construction firm Fluor.

John Wood Group is reportedly in the crosshairs of private equity firm Apollo which has reportedly made a $US2bn-plus buyout proposal.

The company has no plans for any other major disposals after agreeing to sell its US-based maintenance and turnaround business to CAM Industrial Solutions business in the United States for $US125m in February.

The company said at the Macquarie Australia Conference that opportunities were too expensive in the past but were starting to come down.

The acquisitions considered would be those that would as some skill sets the company does not already have and would be accretive.

Sources say that Worley’s focus is on buying businesses that improve its technological capabilities.

Typically, Worley targeted a debt range of between 2 and 2.5 times its earnings, but Mr Ashton said the company would prefer debt to be at the lower end of its range in order to fund deals.

At February, it was 2.4 times its earnings before interest, tax, depreciation and amortisation.

Worley’s market value is close to $8bn, climbing in the past year as the oil price gains traction.

For the six months to December, it reported a $63m loss after it made impairments and booked restructuring costs.

It reported a $114m net profit after tax and amortisation in the previous corresponding period.