Ann: Presentation, page-2

1H17 result very close to what i had expected/forecast with couple of exceptions. As all my posts have stated the engineering macro remains weak and it is something WOR has no control over. Tomitigate WOR has focused on cutting costs and they have done well. Yet margins are lessthan i had expected.

The statutory results show WOR made a EPS loss of 1.o cents and operating cash flow was a negative 84.8m! But i've used 'underlying' figures in my calcs and forecasts and lets stay on that.

All the figures are down (hence brackets).
Aggregated rev (30.3%)
U. EBIT (21.5%)
U. EBIT margin 5.4%. my calcs estimated 5.9%.
U. NPAT (22.7%)
U. Net margin 2.6% which is up 0.2pp but below my estimate of 2.9%.
U. EPS 23 cents which fits my estimate of 20-24c 1H and 50 -55c for FY17.

So no surprises there. Bottom line helped enormously by paying 50m less tax.

But i hadn't expected such a large 'slow payment' of $230m. WOR don't state which countries but all are from 'state owned' enterprises and i suspect they are largely from ex Soviet Union nations. FY will reveal how much has been received and perhaps a partial payment is most likely outcome with more to follow in fy18?

Hence, despite paying down debt by 115m in October , net debt has jumped to 920m (prev 776m) and gearing stands at 32.5%. This is high for a firm where 90% of mkt Cap is 'goodwill'. I didn't see any write down in goodwill and as expected zero div will be paid out.

OUTLOOK: "Nonwithstanding that market conditions remain challenging, customers' sentiment is improving and they inform the company that activity levels are not expected to deteriorate further. In some areas they are beginning to increase activity, which the company is expected to flow through in the medium term. The benefit of cost reductions achieved in first half are expected to be reflected in 2nd half earnings."

i.e. Outlook is tough and not even a range of earnings estimates provided. 'Medium term' usually means 2-3 yrs.

Summary: I'm sticking with 50-55c for full year with risk to the downside. Hence, i continue to reckon current SP of close to $10 is too high.

What do other feel about today's result?