Interesting reading. I agree with the sentiment about acquisitions. Both Worley and Ausenco, not to mention numerous smaller engineering companies, have gone down the same path during the boom times, but are now struggling.
What a lot of people miss with these companies is there has been a fundamental shift in the way their customers are working. Gone are the days you could charge what you like for any engineer that walks off the street and sits in a chair. Clients are squeezing margins and demanding more performance.
The problem for Worley and the like is the good engineers are in demand by clients, often by name, and have not dropped their costs, yet the rates they are being charged out for is being squeezed. Unfortunately, they are also struggling to sell the less in-demand resources at a premium rate to cover improve the margin.
Add to that fixed overheads that are no longer being covered by the number of hours sold, and the downside is pretty big.
All the engineering companies are suffering and not sure what to do. Have a look at the senior management and boards of a lot of these companies and see how many of them are ex-Worleys. Lots of them were bought up in the Worley way, made their name in the boom times, but don't know anything different. They don't know what to do differently other than acquire or perish.
I suspect the PE ratios of these companies is heading towards 12x and less and that will be for the ones who work out a new strategy quickly.
WOR Price at posting:
$16.00 Sentiment: Sell Disclosure: Not Held
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