Worley: Middle East Disruption and FX Mask a Deeper Pivot to Power and Data Centers
FY26 results show a company resetting costs and shifting to reimbursable EPC, with backlog timing noise but a growth pipeline that points to FY27 recovery.
WOR.AX · Earnings Call · 2026-08-25
A year of two halves
Worley's FY26 was a study in contrasts – resilient first half, then a second half marred by the Middle East conflict and an adverse foreign exchange translation impact. As CEO Chris Ashton put it, “The main factor impacting our growth in this financial year was the conflict in the Middle East, together with foreign currency translation impact, we weren't able to achieve our FY '26 outlook expectations.” — Robert Ashton, Chief Executive Officer · 2026-08-25 Aggregated revenue came in at $12 billion, flat on a reported basis but up 2.3% in constant currency. Underlying EBITA fell to $734 million from $823 million, with the Middle East directly reducing earnings by $58 million. The disruption was not about project cancellations but deferrals, as CEO noted in Q&A: "it's a result of deferrals... we didn't see the growth to deliver the incremental $58 million." This nuance is critical: the company did not let people go; it simply saw a pause in new awards and some delays in existing ones.Strategic reset and the growth pivot
What changed beneath the surface is more consequential. Worley used the year to reset its cost base, completing a restructuring that delivered $132 million in savings against a $100 million target, and sharply repositioning resources toward future-facing markets. “We've taken targeted actions to simplify the business, reduce structural costs and improve efficiency.” — Justine Travers, Chief Financial Officer · 2026-08-25 The company's biggest growth bets are now on growth market such as power and data centers, where it has booked over $10 billion of wins in FY26. In the call, management emphasized the move toward reimbursable EPC and project delivery, a deliberate strategy to capture more of the project value chain. This is a meaningful shift from Worley's historical professional-services-heavy model, and it carries a different margin mix – the EBITA margin including procurement dipped to 6.3%, but the ex-procurement margin held at 9% within the target range. The pivot was already hinted at in the February call, where CEO Chris Ashton noted “We're seeing a lot of interest in the major project delivery capability.” — Robert Ashton, Chief Executive Officer · 2026-02-26 Margin discipline has been a consistent theme, echoed by CFO Justine Travers in August 2025: “We've seen margin growth, you're right, in construction and fabrication and procurement margin really given work the teams have done over the last 24 months.” — Justine Travers, Chief Financial Officer · 2025-08-27Backlog noise vs. pipeline momentum
The one metric that drew analyst attention was the sharp drop in backlog from $16.7 billion at half-year to $13.8 billion at year-end. CFO Justine Travers explained that the decline reflects execution burn, removal of the Baytown Blue project, and FX translation. But she pointed to the pipeline: “You are right to look to pipeline and bookings. As a really strong and key indicator of where we see that growth profile, not just in the next 12 months, but over the longer term.” — Justine Travers, Chief Financial Officer · 2026-08-25 Indeed, sales pipeline grew 24% and bookings hit $15.5 billion, with 45% of backlog now in active EPC/EPCM projects. The CEO highlighted large near-term catalysts like the Connah's Quay power project and TC Energy, both expected to hit FID in FY27 and meaningfully expand backlog.FX and the currency question
Worley is seriously considering moving its reporting currency from Australian dollars to U.S. dollars to reduce translation volatility – a recognition that 93% of revenue is generated outside Australia. The AUD strength cost the company $39 million in reported EBITA versus FY25 average rates. The potential shift, flagged for FY28, is a structural move to align the financials with the underlying business. It also underscores the persistent translation impact that has confounded comparisons for years.Outlook
For FY27, management guides mid- to high single-digit growth in both revenue and underlying EBITA, with a pronounced second-half weighting. The assumed recovery in the Middle East is gradual but visible:The tone is one of guarded confidence, with the company positioning itself to benefit from a global power buildout and data center boom while working through a cyclical chemical trough. The contrast with prior quarters is stark: in early 2026, management was more optimistic about the customer tone, but the Middle East conflict was not yet a major factor. By year-end, the narrative has shifted to resilience and repositioning rather than broad-based growth. For investors, the opportunity lies in the quality of the project pipeline and the strategic pivot to data centers and power – areas with structural demand tailwinds. The market will be watching whether the backlog recovers as promised and whether the cost reset translates into margin resilience.We're seeing deferred projects that were deferred, in the meanwhile start to come back on the table... So we're actually seeing for '27 growth in the Middle East.