Independant analyst view:Excellent niche business Rating Impact:...

Independant analyst view:

Excellent niche business Rating Impact: Initiate Coverage With Buy Rating
Worley Group have done a good job over several years prior to listing in managing a unique, highly regarded business. Since listing the momentum has continued and significant growth, particularly in emerging divisions such as Minerals, Metals & Chemicals as well Industrial and Infrastructure, has occurred. The move by many large companies over the last 10 years to increase outsourcing has given Worley Group a unique opportunity to grow.

Iraqi contract demonstrates world-class capabilities The Company received good news when as part of a joint venture with Parsons Corporation they were awarded a contract for the restoration of Iraq oil infrastructure by US Army Corps of Engineers. The value of the contract is for a minimum of US$500,000 to a maximum of US$800 million. Worley's participation is 35% in the joint venture. The awarding of the contract illustrates the expertise within Worley Group, particularly in Petroleum Industry related activities. In addition, considerable work has been done by Worley Group over the last 12 months on focusing on long term contracts and reducing the volatility of their earnings streams. This work combined with future efforts should help mitigate some of the volatility in earnings due to being involved in cyclical industries.

Earnings growth looks achievable Thematically there are lots of strong points about the potential for future growth of Worley Group. A buoyant oil exploration and production sector helped by high oil prices as well as increased mining development are both positives. Trading on a prospective price to earnings ratio of 15.3 times this year's earnings the value of Worley does not standout on a price to earnings basis. However, the predicted earnings per share growth of around 21% this year looks achievable despite an increasing Australian dollar. Consequently, we have initiated coverage of Worley Group with a Buy rating.




Earnings History & Forecasts

Financial Results For Six Months Ended 31 December 2003
Worley Group announced a 10.8% lift in net profit after tax to $12.8 million for the half year to 31 December 2003.

The result was earned on Aggregated Revenue of $242.3 million, an increase of 2.8% on the previous corresponding period of $235.8 million. Revenue from associates increased 43.3% to $72.2 million highlighting the strong performance of these joint venture companies.

The result to date has been reduced by the strong appreciation of the Australian Dollar against the US Dollar. Worley earned a net margin on Aggregated Revenue of 5.3%, an increase on the 2003 half year margin, which was 4.9%.

Earnings per share were 8.6 cents compared to the previous corresponding period of 8.4 cents. Earnings per share growth is lower than profit growth due to the higher weighted average number of shares in the current period than the previous corresponding period. This reflects shares issued in the IPO in November 2002.

The Directors have declared a fully franked interim dividend of 5.5 cents per share payable on Tuesday 6 April 2004 for shareholders on the register on Monday 22 March 2004. No dividend was paid for the corresponding period last year; a final dividend for 2003 of 5 cents per share was paid on 13 October 2003.

The Chief Executive Officer of Worley, Mr John Grill, said:

"The result for the half year is in line with our expectations and demonstrates the benefits of our increasingly diversified business. The Worley Parsons Energy Services joint venture has provided us with critical mass in the US market and is showing promising early results. We continue to see solid growth in our Minerals, Metals and Chemicals business and have experienced ongoing strong performance in a number of our joint ventures both in Australia and in our international business.

The contract for the restoration of Iraq Oil Infrastructure in the north of Iraq being executed by the Parsons Worley team reflects highly on Worley's capabilities and should provide us with additional growth opportunities in the Middle East.

Our Infrastructure development strategy is progressing well with the Esperance Power Project nearing commercial operation and the Power Purchase Agreement for the Exmouth Energy Project being signed during the Period."