WOR

WOR’s AGM was generally well received, with the stock trading well, today.

There are 4 key points.

1. ESG credentials. WOR have made much of the transition to renewables, with ~1/3rd of group revenues coming from sustainable energy related work, and up to 50% of the factored sales pipeline.

2. Synergies. The ECR acquisition was big, with (at the time) sizeable forecast synergies. Mgmt have subsequently executed successfully on those synergies, which we can chalk up as a win for managements’ track record.

3. Project cancellations. Post COVID, the flow of work has picked up, with deferments, delays, cancelations moderating to more normal levels.

4. Cashflow generation. WOR have maintained their solid track record of free cashflow generation, which is a) a requirement for us, as investors but b) a good outcome given the declines in revenues associated with the COVID-induced slowdown in pipeline.

It is important to note that the below highlighted statement, would normally be associated with a stock disappointing the market. Whilst consistent, given previous guidance, it is nonetheless a comment akin to 2nd-half will be better, which is always a less certain proposition, and companies making that sort of view are said to be “joining the 2H club”.

In this case, rather than join, they were already there. The expectations for WOR are quite low, and so to is the valuation attached.

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Over the longer run, we see a reasonably robust outlook for WOR moving forwards, inline with a) legacy hydrocarbon work and b) future renewables work, and, given those attractive valuations, are happy holders in our direct equity portfolios.

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