Engineering firm Worley has decided to cut 5% of its staff as it continues to deal with the fallout from the COVID-19 pandemic.
The company said it had seen a contraction in the business from customers’ delays, deferrals and cancellations, particularly in field-based work and, more specifically, in lower margin construction-related activities.
This has seen headcount drop to 56,000 as at March 31, 2020, down 5% from 59,000 as at January 31, 2020.
Worley explained: “The current economic circumstances have led to a rapidly changing environment for Worley’s business. To date, the impact of these changes has been limited.”
As a result of the acquisitions of AFW UK in 2017 and Jacobs ECR in 2019, Worley says it is a “more diversified business” in the energy, chemicals and resources sectors, with reduced exposure to both oil and gas and general capital expenditure.
Despite the economic outlook and customers’ responses being difficult to predict, the company said it was preparing for a range of scenarios.
“Worley is delivering projects and providing services to support our customers with most of our office-based people working from home,” it said. “Worley also continues to provide field-based services to build, improve, maintain and operate critical infrastructure in Australia and around the world.”
In response to the current economic circumstances, and recognising it is still early, Worley says it has and will continue to implement measures to adjust both operational and support cost structures; postpone all non-essential capital expenditure; protect cash, manage receivables and minimise discretionary spend; optimise staffing levels and costs while retaining capability; and maintain productivity on projects and operational support services.
“Worley is closely monitoring developments and opportunities in each of the regions in which we operate and will consider additional initiatives as appropriate, recognising the current economic circumstances present opportunities to work smarter and more cost effectively in the future business environment,” it said.
On top of having a strong financial position, Worley said it was better prepared to face any potential fallout from COVID-19 following the strategic acquisitions of AFW UK in 2017 and Jacobs ECR in 2019.
Around 20% of Worley’s revenue is derived from exposure to customers’ upstream and midstream oil and gas capital expenditures, down from 65% prior to the acquisitions. Meanwhile, 45% of Worley’s revenue is derived from customers’ operating expenditures, up from 10-15%, it said. “Operating expenditure contracts tend to be longer term, multi-year contracts,” the company noted. Lastly, 37% of Worley’s revenue is derived from the chemicals sector, up from less than 10%. The chemicals sector has shown in previous cycles to be less cyclical than others, Worley said.
Chris Ashton, Chief Executive Officer of Worley, said, “We are responding with agility to the rapidly changing environment. We are ensuring the safety and wellbeing of our people, we have increased our liquidity position and we continue to review and adjust the business operationally.
“I am proud of our people as they demonstrate resilience and harness their ingenuity and expertise supporting customers, colleagues and communities.”