Worley Limited (OTCPK:WYGPF) Q4 2022 Earnings Conference Call August 23, 2022 8:00 PM ET
Company Participants
Chris Ashton – Managing Director and CEO
Tiernan O’Rourke – CFO
Conference Call Participants
Richard Johnson – Jefferies
Daniel Butcher – CLSA
Mark Samter – MST Marquee
Sandy James – Credit Suisse
Nathan Reilly – UBS
Scott Ryall – Rimor Equity Research
Operator
Thank you for standing by and welcome to the Worley 2022 Full Year Results Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]
I’d now like to hand the conference call over to Mr. Chris Ashton, Chief Executive Officer. Please go ahead, Sir.
Chris Ashton
Thank you. Welcome everyone and thank you for joining Worley’s full year results for FY2022. I am pleased to be presenting these today with Tiernan O’Rourke, our CFO.
Moving on to Slide 2. Before I begin, I want to acknowledge the traditional owners of the lands on which we meet, their unique ability to care for country and their deep spiritual connection to it. We join you today from our North Sydney office and the land of Cammeraygal people. The Aboriginal and Torres Strait Island of the People have cared for and maintained for thousands of years the lands where we provide business services. I pay respect to the elders past, present and emerging. Their knowledge and wisdom have made sure the continuation of culture and traditional practices. And I extend that respect to other Aboriginal and Torres Strait Island of the People, people on the call today.
Turning to Slide three; in terms of the agenda for today, I’ll provide an overview of our business performance over the period and our strategic progress in line with our transformation. Tiernan will then add some further detail on the full year results and finally, I’ll provide a market update and outlook statement before opening for Q&A.
Moving on to Slide 5; today, I want to leave you with three key messages. Firstly, our result was achieved from a focus on delivering our ambition, which has resulted in an improvement in key metrics, increasing customer investment across our sectors and particularly in sustainability has driven increased volumes and margins. Second, we’re executing our strategy with a focus on high margin work, building our sustainability pipeline and maintaining prudent capital management metrics. And third, our business is positioned for long-term success and we continue to see positive indicators of earnings growth.
Turning to Slide 6; I’ll take you through some of our business performance and so we’ll move straight onto Slide 7, keeping our people safe and well remains our highest priority. Our values guide us as we support one another and show the care, commitment and courage that exemplifies Worley’s culture. We’re placing particular emphasis on mental health and building a culture where people feel included and respected. And this year we’ve developed training programs to design, to strengthen our leadership vision and capabilities in these areas.
Moving on to Slide 8, momentum continues to build as we transform our business in line with our purpose, delivering a mortar sustainable world, the markets we serve are transforming with governments, investors and companies committing to net zero. Our ambition is that by 2026, we will be recognized globally in our sectors as a leader in sustainability solutions. Our strategy places us at the center of significant future investment and aligns with our customer’s own transformation journeys. We’re seeing investment by our customers in both their traditional business and sustainability areas as they transition to a lower carbon future.
Moving to Slide 9, a full financial year performance represents further market improvement and is consistent with the outlook we presented at the half year results. Our aggregated revenue is up 3% on FY ’21 and most encouraging is the increase over the second half of 8%. We’re continuing to see evidence from our customers that this trend is expected to continue as we solve their complex challenges in traditional and sustainability work using innovative solutions.
Our underlying EBITDA of $547 million is up 18% compared to the prior corresponding period on the back of an improved EBITDA margin, which is now 6% up from 5.3% at FY ’21.
Sustainability related work has been a key driver of our growth. At $3.2 billion sustainability work now accounts for 35% of our aggregated revenue and over the half, sustainability revenue increased by 26%. Sustainability related work is now well over 50% of our factored sales pipeline, which is an indicator of future revenue. Our backlog continues to build. It is now at $15.4 billion up 8% since FY ’21 and the Worley board is determined to pay a final dividend of $0.25 per share and franked.
Moving on to Slide 10, we’re evolving our environmental, social and governance practices to elevate our performance. We’re recognized for our ESG commitments and actions through our external ratings and we’re very pleased that MSCI rate us as a trend setter in the energy sector for climate and carbon transition.
This year, our Scope 1 and 2 emission are 29% lower than FY ’21 levels predominantly achieved through switching offices to renewable energy and improving energy efficiency. We’ve also expanded our Scope 3 reporting. To further embed our ESG commitments in our culture, we’ve increased the percentage waiting of ESG performance in our senior leader scorecards and we’re making progress on our gender diversity targets, maintaining our strong female graduate uptake.
Turning to Slide 11. The charts on this slide show our half on half trends. Our second half revenue was up 10% on the prior corresponding period and our second half earnings were up 16%, even with an increasing proportion of strategic investment. We’re starting to see our earnings growth become somewhat disconnected from our headcount as evidence by our productivity measure.
Our EBITDA per person is increased from around $11,000 to almost $12,000 over the past 12 months. Even as the rate of delivering backlog into revenue increases, our backlog continues to grow. This is the result of our growing factored sales pipeline, which is up 30% across FY ’22.
Turning to Slide 12; here, you can see our growth in pipeline, bookings and backlog across FY ’22. Our factored sales pipeline provides a snapshot in time of all open opportunities factored for the likelihood of the project proceeding and being awarded to Worley. Our rolling 12-month bookings represents the value of project wins at points in time and this chart indicates our project winds are clearly trending upwards.
In our sales pipeline, sustainability-related opportunities have increased by 57%. We’ve booked 67% more sustainability-related wins than an FY ’21 and this has resulted in sustainability backlog growth of 23%. Meanwhile, our traditional work is also growing, although at a lower rate than that of sustainability.
Turning to slide 13, our five-year ambition sets the direction for our business for the future and will continue to report on our progress against it. This year, I’m pleased with the progress we’ve made. We’ve sharpened our people strategy to focus on two key areas. The first area is strengthening the Worley experience. Our Worley culture is what we’re most proud of and it sets us apart. The second is that we’re building the right environment to both attract and retain critical capabilities at scale.
In our portfolio, the sustainability related component in our backlog and sales pipeline continues to grow. These are leading indicators showing we’re well on our way to achieving our aspiration of 75% of our revenue being derived from sustainability related work by 2026. We’re on track in delivering against our own net zero emissions targets. We’ve updated our climate change position statement with deeper commitments and these include developing a plan to support biodiversity and nature positivity in our project work.
Turning to Slide 14, we have a number of operational priorities in delivering our ambition. These include managing our cost base to deliver the operational leverage as we grow and delivering cash to support acceleration of that growth. The actions we’ve taken have contributed to our acceleration of that growth. The actions we’ve taken have contributed to our improved results and Tiernan will talk through some of these elements in more detail.
Turning to Slide 15; I remind you of our strategic portfolio, which defines where we do our business. We’re seeing accelerating investment by our customers across our core markets, our transitional markets and our breakthrough markets in both traditional and sustainability work.
Moving to Slide 16. We’re seeing further growth this year in sales with more than $11 billion in booked awards. This is up 28% on FY ’21. We continue to secure a high level of early phase sustainability project work with early phase projects making up 48% of our awards. We expect these will move into subsequent phases and the increasing size by revenue of our decarbonization wins in FY ’22 is evidence that this is already occurring.
We’ve listed a selection of our project announcements this calendar. I’m excited that the global scale and the strategic nature of many of these projects as they support our existing and emerging customers, as the world moves towards lower emissions. Our customers continue to bridge two worlds and many of our awards are with our longstanding customers in support of thier traditional businesses. We’re bringing digital solutions and their expertise to improve efficiency and drive cost effective solutions in the work we do for our customers.
I’d now like to share with you five case studies to provide some further color on some of these awards. Moving on to Slide 17; our extensive experience in integrated gas is a key strength of ours. We’re pleased to continue our long-term relationship with Saudi Aramco with the award of two major project management service contracts for their gas programs.
Turning to Slide 18, I’m delighted to share our newest award with 1.5 as we progress the EPC phase of their direct air capture project in the Permian Basin. This is expected to be the largest commercial scale development with this technology and we’re delighted again, really pleased to continue to grow our alliance with 1.5 and oxy low carbon ventures.
Turning to Slide 19; I’ve shared previously our Collaboration Agreement with ABB and IBM. Together, we’re creating a digital platform connecting asset, operation and enterprise with the intent of reducing the levelized cost of hydrogen. Our demonstration center shows how this can be achieved.
Turning to Slide 20. Our resource business is rapidly expanding and a significant project is Rio Tinto’s Gudai-Darri. After delivering the early phases, we moved into the project delivery and we continue to drive the deployment of unprecedented technology innovations, including the world’s first autonomous water trucks.
Turning to Slide 21. Finally, our chemicals business is building a largest of its kind petrochemicals plant with Corpus Christi Polymers.
So now I am going to hand over to Tiernan, who will take you over some of the financial results in more detail. Tiernan?
Tiernan O’Rourke
Thanks, Chris, and good morning, everyone. I’m really enjoying my first nine months in the role. I’ve managed to get out and abiding to the business and it reinforces for me the difference Worley is making for our customers and in particular, what Chris just outlined in some of our bigger contracts.
My presentation today will focus on two broad areas. First, the drivers behind our results and in particular, the momentum that has been created from our second half performance and second, an update on a few of our other key strategic initiatives.
On Slide 23, our financial performance improved again in the second half, consistent with the outlook provided in February. As Chris has already mentioned, our aggregated revenue of $9 billion is up 3% on FY ’21 and importantly, we’ve delivered 8% of revenue growth, half on half. Our results demonstrate the normalization of the business environment, post pandemic. Our result, our revenue number — our revenue numbers are growing, reflecting the increased backlog and the factored sales pipeline gains that first emerged 12 months ago.
The Americas represent 46% of our aggregated revenue and has the largest proportion of construction and fabrication work. We’ve seen good professional services revenue growth, despite a slower ramp up in some key projects, a theme across the region in the year. The FY ’22 margin was impacted by business nicks. The EMEA and APAC region represents 54% of our aggregated revenue. We’ve seen volume increases continue from market activity and investment by our customers in line with the shift towards energy independence and the focus on achieving net zero by 2050.
Looking at group profit, we’ve delivered an underlying EBITDA of $547 million up 18% from $463 million in FY ’21. The changes we made to the business and the shift in revenue base towards sustainability is translating into improved growth in earnings.
Our capital management position continues to support our growth plans. We have good liquidity and continue to enjoy access to flexible debt. I’m getting to know our debt investors and looking to continue to strengthen and diversify our funding sources. We’ve taken a lot of costs out of the business as we scale it for growth. This is driving efficiency into our operations. The setup cost of these initiatives is excluded from underlying EBITDA and I will cover this later.
We spent $17 million on strategic investments in the second half, bringing our total spend for FY ’22 to $30 million in line with forecast. This cost has been included in our underlying EBITDA, as it will generate accretive underlying earnings going forward.
Moving to Slide 24, our underlying net profit after tax and before amortization was $329 million up 19% from FY ’21. Underlying net operating cash flow is $376 million. As advised in February, cash outflows in the first half were impacted by movements in working capital, which were temporary in nature. Our net operating cash flow for the second half more closely tracked earnings with 105% conversion rate. As a result, we concluded the year with an annual conversion rate of 88%.
Looking now at items excluded from underlying profit; at the half, we outlined the guidelines for our below the line disclosures. Specifically, while all business as usual, costs or income are included in underlying EBITDA. Any cost or income that is one off in nature, even when it is incurred over several reporting periods is reported below the line and we’ll continue to highlight this detail going forward.
In addition to our cost saving program, predominantly shared services transformation, three new items have been added below the line this half. First we incurred $14 million of cost because of our withdrawal from Russia. This included redundancies and the write-off of some balances. We will continue our orderly withdrawal in FY ’23.
Second as you know, we’ve had some long-dated receivables relating to work undertaken for state-owned enterprises many years ago, which have been the subject of long running legal processes. One of those matters concluded after year end with a final court ruling regarding amounts owing to us. After provisions, this settlement has resulted in a net loss of $16 million although our cash inflow of $21 million is expected this financial year. The final two outstanding matters remain subject to ongoing legal processes. Finally, there are two upsides totaling, $6 million from reversal of property leased asset impairments and international government subsidies.
Turning to Slide 25; here you can see are EBITDA and EBITDA margin walks over the second half. These demonstrate the quality of our results and the change that is occurring in margin as the backlog and factored sales pipeline grow and the market continues to focus on sustainability solutions.
In addition to typical seasonality impacts, we’ve seen margins improve driven by an increase in rate, particularly in sustainability related professional services, as well as benefits from the cost saving program, which are sustaining operational leverage.
This period, we are also showing underlying EBITDA margins before procurement revenue. This is important because we expect a higher level of procurement revenue in FY ’23 versus FY ’22. The average underlying FY ’22 EBITDA margin, excluding procurement was 6.4%.
Turning now to Slide 26. This slide shows the material progress made in returning the business to historical levels. Our underlying EBITDA has grown 17% since FY ’21, which was the trough year. Our aggregated revenue from sustainability work continues to build a stronger margins. While our headcount has grown by 7%, our productivity gains mean we expect earnings to grow at a higher rate supported by greater operational leverage.
The trends indicate we are heading in the right direction towards historical levels supported by increased customer capital investment across all sectors growing backlog and sales pipeline, and a high rate of growth in sustainability revenue. And on slide 30, there’s a build-up of the proportion of sustainability revenue in the backlogs.
Now on Slide 27, our cost savings initiatives are continuing to generate long-term benefits. Our focus is on completing the last of our recent initiatives, primarily the implementation of shared services, which combined with other completed projects will deliver a target of $375 million of recurring annualized savings by next year. Actual cumulative savings have risen from $345 million in FY ’21 to $361 million in FY ’22 and we are closing in quickly on the end target run rate. At the current time, no other new programs of this nature have commenced.
Now to Slide 28; building on the findings of the Worley Princeton Thought Leadership paper, we are now actively implementing new solutions to build infrastructure at scale that will drive incremental future earnings. We’re starting to put our design one, build many operating models into practice and are investing in strategic partnerships and technologies that will create new revenue streams.
Two examples Avantium and RAP are referenced here on this slide and are expected to reduce costs for critical energy infrastructure. Technology and digital solutions are also key enablers of improved performance for operating models. We are developing our own IP to deliver these solutions to our customers, including our new power [ph] B2B service. These type of initiatives are driving momentum in our growth.
Moving to slide 29. We’re investing a $100 million over three years organically to accelerate the strategic shift to sustainability. Expenditure this year focused on market assessments and planning, building teams and digital solutions to support growth areas and training. We estimate that the growth areas under this project are expected to have a total addressable market of over $100 billion by 2025. In FY ’23, we will continue to build our frontend, end capability whilst also exploring new partnerships and technologies to further scale growth.
And linking this slide to Slide 30, where you can see some of the key areas we’re targeting with this investment and the emerging value we are creating. On the left, we provide metrics for a few of our growth areas. Each of these has the potential to be around a $1 billion business in the future. The growing factored sales pipeline in these areas demonstrate the effectiveness of this investment and gives you an idea of the potential future scale.
Moving to the chart on the right; you can see we’re well on our way to achieving our ambition to derive 75% of our revenue from sustainability related business by 2026. Support for this includes sustainability revenue contributing to 38% of our second half result. Our factored sales pipeline now sits in at 56% representing more than half of the pipeline for the first time and importantly, a good proportion of this pipeline is scheduled to be awarded within the next 12 months. In summary, we are well positioned across the business to outperform our natural share of the market.
I’ll now hand back to Chris to complete the presentation. Chris?
Chris Ashton
Thanks, Tiernan. Look before I take you through our outlook for the next year and beyond, I’d like to just briefly just focus on the opportunities and challenges associated with the current macro context followed by what trends we’re seeing in our market.
So moving on to Slide 32; over the past year, we’ve seen continuing a new event shape our environment, society and economy and these events are providing us with opportunities that will drive incremental revenue and earnings. We’re well positioned to meet the opportunities and challenges of the current market. This is the decade of climate action. And as you can see from the results we’ve outlined today, our increasing sustainability related work reflects this. We have the agility to support our customers at every stage as their navigating balancing investments in their traditional businesses with those moving toward lower carbon — lower carbon future.
The Russia-Ukraine conflict is elevating the need for energy independence in diversification of supply and we’re seeing an acceleration in demand for our services in integrated gas and traditional work in the near term. Digital solutions are key to delivering the scale of low carbon infrastructure required as the world moves toward net zero, and we’re developing our own IP and partnering with technology leaders to develop and deliver leading solutions. We’re actively managing the macro challenges associated with the tight talent market, inflation and the under pressure supply chains.
Moving to Slide 33, we continue to see an upward trend in CapEx investment by our customers across all the sectors in which we operate. The charts presented here represent projected CapEx across — CapEx investments across our customer base. In low carbon energy, investment in renewables continues to build, reaching new records of investment each year. And this is expected to rise exponentially in the medium term.
The spike in integrated gas is largely a result of the phasing out of Russian gas supply into Europe. In conventional energy, offshore oil is seeing steady growth to meet demand. In chemicals and fuels; we’re seeing rapid growth in low carbon fuels while chemicals growth has returned to tracking in line with global GDP. In resources; we’re seeing a disconnect between the overall market investment and the investment plans of our key customers. This is due to the high proportion of our resources sector revenue coming from high growth areas, such as iron ore and sustainability related markets.
The green line demarcated across all four charts represents the weighted average growth for our addressable market. It is weighted based on our FY ’22 percentage of revenue across our sectors. This weighted average growth rate of between 13% and 15% growth from ’22 to ’23 is indicative of the current upsides for our business.
Moving on to Slide 34, the group outlook; were well positioned to meet the opportunities and challenges of the current market. The geopolitical environment has elevating the need for energy independence and security of supply. We’re seeing opportunities in areas such as early phase work and integrated gas and renewable energy sources. We continue to manage inflationary impacts and we remain optimistic that without further deterioration and conditions, the outlaw will not be materially impacted.
We continue to attract and retain talent while building capability in support of our strategic transformation journey. Customer investment in both traditional and sustainability work continues to increase with sustainability investment drawing at a higher rate. We are seeing increasing activity levels and investments by our customers across all the sectors in which we operate; although each region is experiencing different rates of growth.
We expect our average FY ’22 underlying EBITDA margin excluding the impact of procurement to be sustained into FY ’23. We’re seeing positive indicators that supports our expectations for improved revenue again, excluding procurement in line with customer investment growth across all the sectors. This is further supported through our increased black backlog and the growth in the factored sales pipeline. Our cost savings program is continued to deliver operating leverage. And as part of this outlook, procurement revenue is expected to be higher in FY ’23, compared to that of FY ’22.
Moving on to Slide 35, before we move into Q&A, I’d like to remind you of our three key messages. Our results are underpinned by improvement in key metrics and are indicative of increasing investment by our customers in sustainability related work. Second, we’re executing on our strategy and seeing the benefits from our investment in the targeted growth areas. And finally, our business is well positioned for long term success, and we continue to see positive indicators of earnings growth.
That’s the end of the presentation and Tiernan and I will look forward to answering questions that you may have.
Question-and-Answer Session
Operator
[Operator instructions] We have our first question from the line of Richard Johnson with Jefferies. Please go ahead.
Richard Johnson
Thanks very much. Chris, can I just start by asking a question with regards to the second half of last year, particularly the backlog. It looks like the backlog in the June quarter was unchanged, but obviously the mix has changed quite a bit. So I’m just — so two questions. One, is that surprised — it didn’t move in that in the final quarter of the year. And secondly, to what extent is there categorization of your legacy business by sustainability? Obviously the legacy business has gone backwards in that quarter. Thanks.
Chris Ashton
In terms of just — thanks, Richard and look, the first thing is in the backlog. We’ve had like a couple of awards that would just came in after the close. So I’m not concerned about the backlog. The backlog continues to grow in excess of the burn that we’re delivering. Sometimes there’s just from a timing point of view, but the backlog continues to grow. So I’m not worried about that. And then the second one was so just, can you just repeat the second question, Richard,
Richard Johnson
Just around cannibalization given, and then you may have already answered it in your first answer, but given that the legacy business, the backlog went backwards in that quarter, but obviously you got good growth and sustainability. So just a question of, whether one’s offsetting the other.
Chris Ashton
No, we’re not seeing that. And the reason for that is we’re seeing emerging players come to the market as well. So, the overall level of spend is increasing. So I’m not concerned about cannibalization. Another one is if we look at the difference between FY ’22 and ’23, we took a whole bunch of backlog out in associated with Russia. So what you’re seeing is a bunch of revenue that we took outta the backlog from Russia. So yeah, that clearly has an impact.
Richard Johnson
Got it. Thanks. And then just finally on margins I’m just trying to make sure I understand properly your guidance on margins being sort of sustained into ’23 for the average of ’22, and to reconcile that with your comments around operational leverage and also the skew and the mix. So if you’ve got faster growth in sustainability relative to the legacy ostensibly that should see margins improve. So I’m just trying to reconcile all of that.
Chris Ashton
Yeah. So I’m going to ask Tiernan to get into the numbers.
Tiernan O’Rourke
Yeah, thanks. Richard. So the first thing about operational leverages, I mentioned we have already achieved the majority of the run rate in FY ’22. So part of it is that that run rate, the operational leverage has already built pretty significantly into FY ’22 and has been carried into ’23.
The second thing is that we’ve had a very significant increase in margins during FY ’22, from five point — on a pre-procurement basis from 5.3% to 6.4%. So it’s a pretty significant movement in one year. And what we’re saying is that we’re going to sustain that increase through into ’23 with the similar seasonalization. So you’ll see a similar seasonalization around that average of 6.4% in FY ’23, as we did in FY ’22. So I think we were well set up in FY ’22 on a margin basis to bring ourselves into the new year.
I think a couple of other things to think about in terms of margin. Obviously mix is always an issue year on year. So you have to look at mix. You’ve got to look at the increase in the traditional work that’s occurring because of energy security that obviously has an impact on margin and will have in FY ’23. Chris has mentioned the exit from Russia, which is only a small part of it. And then just the timing of the starts and the migration from studies and feasibility work into the full blown project. So all of that has an influence, but what we’re saying is we believe that the platform we created in ’22 is sustainable into FY ’23 on average.
Operator
Thank you. We have next question from the line of Daniel Butcher with CLSA. Please go ahead.
Daniel Butcher
Thanks guys. Look my two main questions were just asked, but maybe just to drill down a little bit more on that, with the backlog and also your statements about procurement revenue growing, should we take it as there’s more blue collar work and construction work in the mix going forward for execution in FY ’23, and estimating why that P&L average isn’t coming through with margins growing further?
Tiernan O’Rourke
Well, it’s definitely, as we refer in the outlook as well, and a couple of times during the presentation, there is going to be more procurement revenue in FY ’23. And that’s just a function. It’s not necessarily a blue collar. Some of it is, but, during EPCM projects where the customer wants us to buy on their paper is a factor. So it can be a mixture of both blue collar work and procurement associated with the reimbursable EPC contracts we do, but also just procurement on our paper, on the EPCM contracts we do.
Daniel Butcher
All right. Thanks very much. I’ll leave there. My, two questions were asked. Thank you.
Operator
Thank you. We have next question from the line of Mark Samter with MST. Please go ahead.
Mark Samter
Yeah. Morning guys. Couple of questions if I can. First, can we just talk about, I know you alluded in slides to cost inflation, but obviously when we think about what’s happening in the world, your ability to pass that on to customers, some of the wage inflation you’re seeing, and I guess just keen to get your view on as Europe potentially, literally, and metaphorically previously through winter, how that impacts you.
Chris Ashton
So from an inflation point of view, 80% of our work is reimbursable, right? So that cost just flows through. And then when we’re not doing reimbursable work, we look at some of the lump sum work, which often starts off as reimbursable and through, then we’ll convert then for contracts that are being one in the current environment, we just — will put inflation factors in there. We’ll put cost in cost increase factors into those, and that those will be passed on the customers.
So I’m not concerned about inflation impacts on our ability to — or our ability to pass through the customers and then, Europe — Europe freezing. Yeah, look, so obviously Europe has a few opportunities, obviously, reducing mandate reduction in consumption for various parts of the demand side, whether it’s an industry, domestic constraints, but yeah, I think the domestic reserves — the reserves are under-storage, underground storage reserves are about 83%, 84%.
So there’s time for them to, get up to full capacity but look, it is going to be it — could be a challenge, but for us, it’s an opportunity because what we’re seeing is increased interest from our customer base in high — in accelerated high pace, putting steel in the ground to get reification facilities built and get new supply into the market.
Mark Samter
Okay. Then just a really, really quick one that you said you foresight $13 million of EBITDA in Russia, post the 10th of March. At the same run rate, that’s about $20 million you would’ve made up to that point in the year. Can you just confirm obviously you’ve stripped out from underlying the cost of exiting Russia, but did the first eight months of EBITDA generated in Russia, that still included in that underlying earnings, is that correct?
Chris Ashton
Yeah, Mark, we would’ve earned reasonably consistently the nature of that project. It does have some lumpiness, because it was a particularly on Torres Strait Island. It was a sort of a more maintenance kind of focus project. So it would’ve had more lumpiness. So you can’t quite extrapolate on a linear basis, but it’s not unreasonable what you’ve said.
Mark Samter
Okay. So, so it hasn’t been stripped out the previous eight months hasn’t been stripped out of?
Chris Ashton
Not out of the reported numbers. No…
Mark Samter
And then yes what you’re seeing is the growth that we are expecting to see in FY ’23 obviously doesn’t include Russia, but the FY ’22 includes eight months of Russia.
Chris Ashton
Yes.
Operator
Thank you. We have next question from the line of Sandy James with Credit Suisse. Please go ahead.
Sandy James
Good morning, Chris and team. Thanks for taking my question. Just having a look at Slide 33; I can see that you’ve said that the weighted average of growth for accessible markets across all sectors is between 30% and 15%. Does that mean we can expect a 13% to 50% revenue growth in that same period?
Chris Ashton
Which graph are you looking at there, Sandy?
Sandy James
Just the comment on the top of Slide 33, top right hand side.
Chris Ashton
Oh yeah.
Sandy James
That 13%, 15% growth? I’m just wondering if that translates to a revenue growth on FY ’22 level.
Chris Ashton
It would not be unreasonable for you to assume that.
Sandy James
Yeah. Great. Thank you. And then a follow up, if I may on a different topic, I was wondering if Wally has any ambitions to enter into LNG electrification side of the market, given the increased interest, I suppose, post Russia and the US wave appears to be underway on the construction side.
Chris Ashton
So if we look at the traditional model for liquefaction, it’s been hard money, lump sum turnkey EPC. And as we know, and we’ve said in the past, that’s not a market we pursue. However, however, there are customers out there who are breaking the mould in terms of that model. And we are in discussions with one of those customers where if it was to proceed, it would be a liquifaction plant on a reimbursable basis. So the answer is, yes, it is a mark we’re interested in, but only where it is not competitively bid lump sum, turnkey EPC.
Sandy James
Okay. That’s clear. Thank you very much.
Operator
Thank you. We have next question from the line of Nathan Reilly with UBS. Please go ahead.
Nathan Reilly
Yes. Good morning. Just a couple of questions. Chris, maybe just in relation to the order book, just your thoughts around embedded margin in that order book with an increasing proportion of sustainability work coming into the book. Is it still safe to assume that the sustainability work is coming into that book at a, at a higher gross margin than traditional work?
Chris Ashton
That’s correct. Yeah, that’s correct. Nathan.
Nathan Reilly
Okay. And, and then just finally on your point around sustaining the margin into FY ’23, just to check that takes into account the increase in your strategic investment OpEx; doesn’t it?
Chris Ashton
That’s correct.
Tiernan O’Rourke
Yes. It’s in the underlying number. Yes.
Nathan Reilly
Okay. That was it for me. Thanks very
Operator
Thank you. We have next question from the line of Scott Ryall with Rimor Equity Research. Please go ahead.
Scott Ryall
Hi, thank you very much. Chris, I was wondering if you could just give us a little bit of bit more of your thoughts on the nature of your work changing with geopolitical uncertainty, and I’m hoping you can split it into short term, which you addressed a little bit in one of the earlier questions, but also how you are seeing governments and your main customers repositioning themselves, perhaps with some of the geopolitical uncertainty?
Chris Ashton
Well, if we look at geopolitical uncertainly let’s take US, China, Taiwan, no impact. Okay. Just to be clear, no impact there at all. We’ll look at obviously Russia, Ukraine, clearly decisions being made by European countries, the governments there to present opportunity for us. So, I’m pretty excited about that.
I think that the recent decision, whether it’s geopolitics or not, but I guess it’s around the pressure that governments are coming under to get on the energy transition train is the recent Inflation Reduction Act in the US and the $350 billion plus dollars that has been committed to accelerating the energy transition sustainability journey. And what I can say, even though that announce was only made over two plus weeks ago, it is already making an impact on US customer based investments.
So if you look at the European countries, the European Union and the UK, they’re already well committed to the energy transition sustainability journey. The US has been behind that but with this Inflation Reduction Act, we’re seeing — we’re already seeing a positive impact on the pace at which decisions are being made by our customers.
So the big geopolitical factors at the moment you’ve delivered Taiwan, China, US, no impact Russia, Ukraine into Europe opportunity. Obviously, we’re seeing inflation around the world. We’re seeing that, we’ve talked about it, but we’re not seeing it impact us. So look, I think overall, the geopolitical tensions, if anything, would bring opportunity to us.
Scott Ryall
And, can I just follow up on that with respect to the Russia Ukraine stuff that you mentioned? There’s been a lot of discussion around a shift, at least in the near term back towards a focus on energy security and affordability and away from the sustainability angles. Are you saying that that hasn’t changed many of your customer’s investment intentions? And actually it’s just made them think, I guess a little bit more strategically perhaps about how they move towards sustainability?
Chris Ashton
Well, if you look at Europe, the European Union commitments to their green deal, there hasn’t been a dilution of the commitment and that commitment has to is rolling through other that commitment is rolling through into customer decisions. What you’re seeing is a near term spike, a near term increase in conventional energy investment.
It is not detracting from the long term strategic plans of our customers or the government policies within which, for the countries within which they operate. So what we’re seeing is continued strategic progress around their own energy transition sustainability plans, but they’re taking advantage of a near term opportunity for the increased demand in gas given the withdrawal of Russian supply into Europe.
Scott Ryall
Okay. Very clear. Thank you. That’s all I had.
Operator
Thank you. We have next question from the line of John Perle [ph] with Macquarie Group. Please go ahead.
UnidentifiedAnalyst
Oh, good day, Chris and team. And how are you?
Chris Ashton
Yeah. Good. Thanks John. Good.
UnidentifiedAnalyst
Just had a couple questions, sorry. I might have missed it before, but just in terms of the increase in procurement revenue that you are sort of mentioning, what’s actually driving that and is that sort of mix of work?
Chris Ashton
It’s some of the award — it’s mix, but it’s some of the awards that we’ve gotten John, that I’ve got just a procurement on our paper and yeah, when we do procure for a customer, it’s got because it’s really low risk. It’s got low margin and it just tends to skew the results. So what we’re trying to do is kind of, in the interest of being transparent, trying to raise the fact that is we do more procurement revenue, it can skew the numbers, but the real message is the underlying margins coming from our services outside of procurement, continue to perform, continue to deliver.
UnidentifiedAnalyst
Thank you. And just the second question, just coming back to the just an earlier one around the 13% to 15% growth in your sort of key in markets and that’s sort of being a reasonable proxy for revenue growth. So, your second half revenue growth was 10% on PCP. So are you expecting an acceleration in revenue growth in ’23? Just to clarify that.
Chris Ashton
Yeah, look, we continue — I can say with confidence, I expect to see revenue growth across ’23 first half I am saying. We’ve all got, as, John, we’ve all got seasonality. We’ve all got seasonality just due to the Northern hemisphere. Actually it’s vacation holiday times during the Northern Hemisphere summer, and then the Christmas period, but yeah, we’re expecting to see revenue growth and Tiernan…
Tiernan O’Rourke
Yeah, well, I was just going to add that increase in addressable market doesn’t necessarily get delivered in one year. So it will be delivered over the average contract term. So just because the addressable market is increasing, we just got to be tempered that by our average contract length. So it will be spread. But we do have a good win rate at the moment.
Chris Ashton
Can, so I might just want to mention that. We have what we call corporate top prospects, which are key strategic opportunities that we put a lot of effort in to pursuing positioning for prepositioning positioning, pursuing, and then hopefully winning. And to Tiernan’s just last point there, we’ve got a very good track record now over the last 12, 18 months of bringing those strategic wins, getting the strategic opportunities across the line.
Operator
Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. If you have any further questions, please contact the Investor Relations team at Worley. I will now like to hand the conference back over to Mr. Ashton for closing remarks. Over to you, sir.
Chris Ashton
Thanks. Look, thanks everyone for joining the call today. Look again, look, the three messages that I left with were that we’ve got good results. The improvement in key metrics is there. We’re seeing a continued increase in investment from our customers in the sustainability related work and traditional given, what’s going on in the world. We’ve got strong delivery of our strategy and we’re seeing the benefits of the investment that we’ve been talking about.
And I do believe given what’s going on in the world that we’re positioned for FY ’23 and I think we’re positioned well to continue to deliver improved performance and that beyond. Tiernan, anything from you to close out.
Tiernan O’Rourke
Yeah. I think, we have a very strong balance sheet. We’re in a very good position financially and really looking forward to continuing to get into FY ’23. We’re excited about proceeding on the basis of the outlook that we have.
Chris Ashton
So thanks everyone for your time. Deeply appreciative. If you have any further questions, please get them to Verena Preston, and we’re happy to answer them. Clearly, I’ve got a meeting with a few of you over the next week and look forward to seeing you in person in here in Sydney or in Melbourne.
Operator
Thank you very much Sir. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect.
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