Worley Parsons puts away chequebook until Jacobs digested

Worley Parsons CEO Andrew Wood.

Worley Parsons has ruled out the possibility of further merger and acquisition activity until it fully integrates the Jacobs Engineering Group’s energy, chemicals and resources division.

The $6.82 billion listed Australian engineering company (WOR) that offers services to the resources industry outlaid $US3.2bn to buy the business in what was considered a transformational deal for the company announced last year.

But in an Ord Minnett research note, analysts said further mergers and acquisitions are likely on hold until the Jacobs acquisition is fully integrated.

When questioned at its investor day yesterday, Ord’s said management indicated that the Jacobs acquisition was announced after the acquisition of British oil and gas operator AFW Oil and Gas UK had been fully implemented.

“With a two-year integration program for Jacobs, management noted

further (merger and acquisition activity) is likely now on hold,” Ord Minnett said.

However, the analysts said that the company did indicate a successful track record of acquisitions and said Worley would remain opportunistic in terms of inorganic growth in future.

In terms of the company’s outlook, Ord Minnett said near term growth for the company appeared more anaemic, with customers displaying caution in the current macroeconomic environment, including the global trade dispute between the US and China.

Ord Minnett said that the most material announcement was the increase in the cost benefits target from the Jacobs acquisition (completed in April) to $150m from $130m per annum.

“Of this, 60—70 per cent is expected to be achieved as a run-rate within the next 12 months.”

Ord Minnett said the cost of the benefits was estimated to be $175m, including $55m of modernisation capital expenditure.