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Operator: Good morning and thank you for standing by. Welcome to the Worley Half Year 2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chief Executive Officer, Chris Ashton.
Robert Ashton: Good morning, everybody, and welcome to the call today, and thanks for joining the half year results presentation for Worley for 2026 financial year. The results are defined by a solid revenue growth and resilient earnings outcome, once again showing our adaptability in the face of dynamic markets. As I start my seventh year as CEO, these results continue a pattern of consistent growth. Despite market disruptions, Worley continues to deliver. Our performance reflects deliberate decisions about portfolio, capability, where we compete and the agility with which we can adjust. And we have a dedicated team around the world who work to deliver the outcomes that our customers trust. Let me now give you an overview of our business performance for the period before our CFO, Justine Travers, takes you through the financial results in more detail. I'm pleased to share an early look into how we're positioning for the next phase of growth as we go through this presentation today with the strategy focused on increasing our total addressable markets and generating value for shareholders. Today, we reconfirm the outlook we provided to the market at our full year results in August last year. We continue to expect a year of moderated growth, but calendar '26 has started with renewed momentum. Some big wins recently include being provisionally named as EPCM partner on Glenfarne's Alaska LNG pipeline and appointed marine and port infrastructure technical adviser for the WA Westport program in Western Australia. We're already delivering Phase 1 of Venture Global CP2 LNG project in the U.S. and are continuing our partnership to deliver Phase 2. These wins on some of the largest projects in the world demonstrate the confidence customers have in our capability to execute major complex projects, and we continue to scale across a growing pipeline of these opportunities. Given this momentum, we're encouraged by the visible signs of growth for Worley beyond this financial year. Turning to Slide 2. I remind you to review the disclaimer shown here. I'd also like to take the time to acknowledge the Gadigal people of the Eora Nation, the traditional custodians of the land from which I'm calling today, and I pay my respects to the elders past, present and as well to the emerging leaders. Turning to Slide 3. Let me now turn to our business performance for the first half of the financial year. And so let's turn to Slide 4. As I said, revenue has grown even while navigating challenging market conditions and earnings have been resilient. The last 6 months, we've seen solid revenue growth of 5.4% over the prior corresponding period. A number of major projects in execution phase contributed to steady earnings and bookings are up 63% on the prior period. Venture Global CP2 Phase 1 was a major contributor, but I want to highlight some of the other significant wins across the sectors and regions, like the EPC for ConocoPhillips Scandinavia for their Norwegian Continental Shelf project, the FEED for OQ Refineries and Petroleum Industries decarbonization project for the Sohar refinery in Oman, and construction for ExxonMobil's major reconfiguration project of its integrated complex in Baytown, Texas. Momentum through increased wins in the first few months of this calendar year reinforce our confidence we can deliver a stronger second half. We've taken deliberate actions to enhance earnings quality. Our cost out and business restructuring initiatives are well advanced, and we're targeting more than $100 million of annualized savings from 2027 onwards, resetting our cost base and positioning the business for our next phase of growth. We acknowledge there's been $82 million of transformation and business restructuring costs this half, and Justine will talk to this later. And finally, our balance sheet remains strong. Disciplined working capital management drove strong first half cash performance, giving us the capacity to keep investing in growth. Turning to Slide 5. Our highest priority remains the safety of our people. Our safety performance has been maintained with a total recordable frequency rate of 0.10. At Rio Tinto's Rincon project in Argentina, for instance, we recently marked more than 1 million work hours with 0 safety accidents incidents. Visiting last year, I witnessed the discipline, care and pride the team brings to their work, and it's milestones like this that reflect the safety leadership on the ground and the commitment to looking out for one another each and every day. Positive ESG progress continues too. We've maintained leading external ESG ratings, and we've strengthened our approach to preventing modern slavery. And we remain on track with our own Scope 1 and Scope 2 emissions reduction targets. We're also well prepared for the new Australian sustainability reporting requirements. Bookings are up 63% compared to the prior 6-month period. And in the first half, bookings totaled $9.8 billion, including Venture Global CP2 Phase 1, which achieved FID last July. Sole source wins also increased, reinforcing customer confidence in Worley's capability and delivery. And as I've mentioned, a number of significant project awards already this calendar year build on this momentum. Energy and resource have both grown with the Americas continue to deliver wins for our portfolio and the mix of bookings reflect increased construction, fabrication and procurement activity as these projects move into the execution phase. The quality of these bookings remains high. As noted, large complex projects where Worley is supporting customers across the full project life cycle underpin backlog quality and forward earnings visibility. Turning to Slide 7. I'll now turn to leading indicators. Backlog remained resilient at $6.7 billion (sic) [ $16.7 billion ], providing good visibility of revenue into the second half of FY '26 and into '27. Backlog is slightly lower than the reported period for June '25, and this reflects the delivery timing rather than a drop-off in demand. $6.3 billion has been added to backlog through scope increases and project wins during this period. And while work on the Baytown Blue project has paused, we've retained in the project backlog and continue to work closely with ExxonMobil on that. Project wins already in the first few weeks of calendar year '26 will add more than $3.5 billion to backlog. Our factored sales pipeline remains robust, and we continue to convert opportunities into backlog as we secure contract wins, and the pipeline keeps replenishing. Around 46% of these opportunities are expected to be awarded in the next 12 months, reflecting the extended project delivery time frame for major projects. As we target more of these projects, we're focused on opportunities in the early-stage consulting phase with potential for pull-through and consulting opportunities increased by 24% in our pipeline over the past 6 months. Turning to Slide 8. The slide shows the diversification and competitive strength underpinning our business model and earnings resilience. Our broad exposure across sectors, geographies and services reduces reliance on any single market or customer decision and revenue is well balanced across energy, chemicals and resource. It's geographically diversified with meaningful scale across the Americas, EMEA and APAC. Our services mix across professional services, construction and fabrication and procurement shows our increasing relevance to customers across the full project life cycle. And we're attracting a greater share of project capital with expanded capabilities. We also continue to differentiate through our use of digital and AI. Enterprise efficiency is a non-negotiable. Technology is transforming project delivery. Our digital and AI initiatives will reshape how we deliver projects and strengthen our competitive advantage. For customers, intelligent solutions will bring their assets into operation sooner and accelerate returns on capital. I'd now like to give an update on each of our sectors and turning to Slide 9. Aggregated revenue from energy work increased 8.8% over the prior corresponding half, and growth was driven by major projects moving into the execution phase, lifting construction, fabrication and procurement activity, particularly in the Americas. Integrated gas continues to be a growth driver. Demand for gas is supporting ongoing LNG import and export terminal developments and integrated gas work represented 25% of Worley's total revenue during the period. The variety of LNG projects we're working on around the world is notable in places like Germany, Indonesia and Australia as well as the U.S. While the outlook remains softer overall in oil, activity is increasingly concentrated in higher-margin offshore projects and selected onshore developments, particularly shale. And power is an important growth market. Structural change is driving energy demand and investment across gas-fired power generation, renewables and nuclear. Turning to Slide 10. The global chemicals market remains important to us. Near-term conditions are challenging, reflecting regional [Technical Difficulty]. Aggregated revenue declined 9% over the period with project cancellations in Western Europe and lower professional services activity across APAC and EMEA. This was partially offset by ongoing major project execution in the Americas, where construction and fabrication activity continues. Looking at specific subsectors, refined fuels remains promising, and it continues to attract investment in product slate optimization, decarbonization and asset life extension. Petrochemicals remain a major contributor to our chemicals revenue, although Western European plant closures related to global overcapacity have had an impact. Low carbon fuels present more selective opportunities where projects are commercially viable. Turning to Slide 11. Finally, resource have delivered growth for Worley in the first half and aggregated revenue has increased 12.3% over the prior corresponding period. Resources now represents 29% of our business. Population growth, urbanization and the energy transition are demand fundamentals, which will continue long term. Fertilizers remains our largest subsector. Here, demand is supported by population growth and food security. Demand for copper is driven by the need for energy transition materials and an increasing demand from data centers, cloud and AI infrastructure. In battery materials, there's been a resurgence in activity and sentiment with a focus on front-end work and commercialization of technology. And we're confident resources will make an important contribution to second half growth, and we expect this to continue beyond the next year. I'm now going to hand over to Justine for further details on the financial results. Justine?
Justine Travers: Thanks, Chris, and good morning, everyone. Turning to Slide 13. Our half-year performance and execution of strategic priorities such as cost management and earnings quality, coupled with strong capital management positions us well to deliver moderate growth this year. I want to reemphasize 3 points in relation to the results we are delivering today. First, we continue to deliver aggregated revenue growth and solid earnings, supported by our global operations and strategic focus on major project delivery. Second, targeted actions to reset the cost base are underway and aim to strengthen earnings quality and resilience. And finally, we remain in a strong financial position to support growth and return capital to shareholders. Aggregated revenue for the half was $6.3 billion, up 5.4% on the prior corresponding period. We continue to see an increase in construction and fabrication revenue as we execute on major projects as well as an increase in procurement revenue. Supported by the contribution from our global operations and our major projects, underlying EBITA was steady at $377 million. Underlying NPATA was $207 million. A lower statutory NPATA at $152 million reflects the inclusion of transformation and business restructuring costs. While business as usual costs are included in underlying EBITA, these transformation and business structuring costs were beyond the scope of the normal course of business. Normalized cash conversion was 95.5%, a fantastic achievement. This continues to be an important focus for our business. Our balance sheet strength and strong cash position provide capacity to invest in growth and return capital to shareholders through our ongoing buyback and payment of dividends. Leverage at the end of the half was 1.5x, comfortably within our target range, reinforcing the strength of our financial position. Turning to Slide 14. Our aggregated revenue growth has supported steady earnings despite the challenging market backdrop. As I've highlighted, a driver of revenue growth this half was major project activity with increased volumes flowing through construction, fabrication and procurement, particularly across the Americas. This work is delivered under a lower risk contracting model and has supported a stable earnings outcome, reflecting both project delivery stage and disciplined delivery across the portfolio. As a reminder, we don't do competitively bid lump sum turnkey projects. On the right-hand side, the EBITA and margin walk highlights our continued focus on rate improvement. Margins reflect the combined impact of volume, mix and pricing with rate improvement partially offsetting mix impacts in the period. Importantly, this demonstrates an ongoing focus on margin discipline. While near-term earnings reflect project phasing, the underlying drivers of margin improvement continue to build through backlog, the cost-out program and disciplined execution. Turning to Slide 15. As communicated at the full year results in August, we're transforming the way we work by removing complexity, improving efficiency and driving consistency. This work is well underway. We acted proactively to reposition the business in response to softer conditions in chemicals and some project cancellations in Western Europe to strengthen margins and ensure ongoing business resilience. We've accelerated actions aligned with our strategic priorities, specifically resetting the cost base, scaling GID and expanding margins. During half one, we incurred $82 million of costs associated with these actions, much of this being severance and related costs, predominantly in Western Europe, where we have seen high restructuring costs due to local labor protections. We expect further costs in the second half as the program continues. However, we do anticipate these costs being lower than those already incurred in half one. The actions we've taken include repositioning capability to areas of higher demand and rightsizing where demand has softened. These restructuring actions together with our efforts to transform the way we work are setting the foundation for stronger earnings and margin quality. Our business will be supported by a leaner, more scalable operating model, supported by global integrated delivery, GID. In delivering this transformation, we are progressing at pace. With a disciplined cost-out program, we're targeting over $100 million annualized savings from FY '27 onwards. Our cost management efforts are focused on and include repositioning capability to areas of higher demand, increasing enterprise service center utilization, rationalizing our third-party contracts and adjusting our office network to reduce costs while supporting global delivery. We're also deploying digital solutions to simplify processes and improve productivity. Embedding AI across our business will be an ongoing part of our broader strategy to leverage technology and new ways of working to create sustainable value. I have been working closely with the business on this program, and it is clear to me that steps that we are taking strengthen our cost discipline and will enhance our earnings quality. We will ensure we retain the capability and capacity required to support growth and deliver for our customers with greater cost discipline, commercial agility and technology focus. Turning to Slide 17. Finally, I'd like to take you through our capital management position. Operating cash flow is strong. Normalized cash conversion of 95.5% is above our target range and continues to reflect strong underlying cash generation and a disciplined approach to working capital management. Day sales outstanding of 46.2 days remains well controlled and comfortably within our target. We have been consistently delivering returns to our investors through dividends and our buyback program. The Worley Board has determined to pay an interim dividend of $0.25 per share, which is unfranked. We continue to execute our share buyback program of up to $500 million, reflecting the confidence we have in our business. As at 31st of December, 2025, we had purchased over 24 million shares for a total consideration of $324 million. We will continue to execute on this program. During the half, we continued to invest in the business in a measured way while prudently managing debt and maintaining flexibility to invest in growth with capital directed towards initiatives aligned with our strategic priorities. Our balance sheet remains strong with leverage at 1.5x, comfortably within our target. We continue to use free cash flow to manage liquidity and support growth. We remain committed to maintaining a diversified funding base and proactively manage our debt maturity profile. We are looking at a variety of options for the group's euro medium-term note debt as it matures at the end of the year. I am getting to know our debt investors and we are confident and well placed to manage this upcoming maturity in June. Our weighted average cost of debt remains stable and our effective tax rate continues to track within our expected range. Overall, our disciplined approach to capital management remains a key differentiator and supports long-term value creation. I'd like to make a final comment on foreign exchange rates. The Australian dollar has moved over the past few weeks and we note the possibility of FX being a headwind in the second half if it remains at these levels. In summary, our solid half year performance and execution of strategic priorities, including cost management and earnings quality, coupled with consistent and strong cash conversion and balance sheet strength positions us well to scale for growth. I'll now hand back to Chris to take you through strategy and outlook.
Robert Ashton: Thanks, Justine. Just moving straight on to Slide 19. But before I share the outlook for '26, I want to step through some of the fundamentals underpinning growth, and then I'll turn to our growth strategy. Worley is a diversified, resilient business with a robust foundation and demonstrated agility to adapt to market changes. And this foundation and agility gives us the confidence as we move into our next phase of growth. Our end markets are supported by strong structural tailwinds. Energy security, affordability, electrification, energy transition and decarbonization, along with the rapid progress of AI and digitalization are long-term demand drivers. And Worley's growth should be viewed independently of cyclical factors. Our growth has been secured across commodity cycles, not dependent on oil prices and continues to outpace customer capital expenditure. Turning to Slide 20. Our strategy has 3 pillars supported by disciplined capital management and operational excellence. One, we're strengthening leadership in our core markets; two, we're expanding into growth markets and along the value chain, including expanding EPC and EPCM capability; and three, we're innovating to differentiate delivery with technology. This strategy supports sustainable growth and resilient earnings. Moving to Slide 21. We remain committed to our purpose of delivering a more sustainable world, and Worley's next phase builds on our strengthen, expand and innovate strategy to secure both within and beyond our core markets. We've built a leading position across energy, chemicals and resources with sustainability solutions embedded now in the business. And now we'll grow our total addressable market by extending our project delivery capabilities to capture a greater share of spend across the customer asset life cycle. This positions us for more EPC and EPCM scopes with continued growth in consulting and value-added services from concept to completion. These capabilities mean we can target high-growth adjacent markets beyond ECR. We'll selectively expand into adjacent complex critical infrastructure where our skills are transferable. And the next phase of growth is supported by disciplined capital allocation, margin focus, which will ensure accretive and resilient growth. Turning to Slide 22. We're expanding our total addressable market by accessing a greater share of our customers' capital expenditure. The graphic on the left represents a typical customer capital program for an asset. As projects progress into execution, customer spend scales significantly. And by extending our EPC and EPCM delivery capability enabled by technology, we're positioning Worley to capture a larger share of this overall capital investment. And you can see the results of this focus as we turn to Slide 23. The major projects shown here in LNG, cement decarbonization and iron ore demonstrate our execution capability at scale and reward our deliberate shift to more EPC and EPCM scopes. And while major projects are reinforcing our confidence in this strategy, extending our ability to support customers across the asset life cycle is not just about project size. It's an evolution as we expand the services we offer all customers globally, deepening and broadening the capability of our workforce. EPC and EPCM have always been part of Worley. Consulting and other services along the value chain enabled by digital and AI differentiate how we deliver. And now we're leaning into scaling this full project delivery with intent, and we're excited by the early success shown in major projects. Turning to Slide 24. Backed by the capabilities I've described, our growth strategy seeks to strengthen our leadership in existing markets by growing market share and expanding into high-growth adjacencies. LNG and energy transition materials are areas where Worley has an established presence and a strong track record in execution, and we can further grow market share with more major projects. We're also expanding into new growth opportunities in complex critical infrastructure markets such as data center infrastructure, power, ports and marine terminals, and industrial water. These are capital-intensive markets where we have an existing or an emerging presence and can leverage transferable engineering services, EPC, EPCM and digital delivery capability. Importantly, these markets offer a clear pathway to scale. Together, these existing and new market opportunities reflect a balanced but deliberate approach, and they build on what we do well today while selectively expanding into adjacent areas of growth. And more detail of this will be shared at our Investor Day in May. Turning to Slide 25. Before I present the group outlook, I'd like to give a brief update on key focus areas. Our first is full project delivery, a key enabler for our growth strategy. And as I've outlined today, we're winning and delivering more of this work within a disciplined risk appetite. As Justine said, we will not do lump sum turnkey EPC. We'll seek to balance the portfolio with high value early-stage consulting, study, FEED and scale as we pull through to more execution phase construction and procurement work. Alongside this, we're resetting the cost base to build a more efficient technology-enabled business, targeting $100 million plus exit run rate annualized savings. We continue to focus on margin growth by targeting higher quality work and delivery excellence, scaling global integrated delivery and deploying digital, embedding AI across the business to drive capability efficiency and differentiation. And together, these deliberate efforts set us up for the next phase of our growth. Turning to Slide 26. Geopolitical uncertainty and shifting market dynamics are a reality of today's market. Nevertheless, we've continued to deliver growth in revenue and steady earnings in the first half. This speaks to our business model resilience, portfolio diversification and disciplined execution strategy. We reconfirm our moderate growth outlook for the current financial year on a constant currency basis. We're targeting higher growth in aggregated revenue than FY '25 and growth in underlying EBITA and expect the underlying EBITA margin, excluding procurement, to be within the range of 9% to 9.5%. We continue to benefit from favorable long-term macro tailwinds, and these support demand in our existing end markets with high-growth adjacent markets also identified to support Worley's growth beyond FY '26. A diversified business model, increased cost focus, commercial and financial discipline and a strong balance sheet positions us well for both the short and the long term. That concludes the formal presentation today. Justine and I are now happy to take any questions from those on the call.
Operator: [Operator Instructions] And our first question comes from the line of Scott Ryall of Rimor Equity Research.
Scott Ryall: Chris, thanks for the presentation and some of the color. I just wanted to follow up on your comments on Slide 24 and the energy and power slide that you were talking about before. And I'm just wondering, you've moved into new markets historically and you've had to invest money a couple of years ago. You did that across a range of different industries. Are there investments you need to make in terms of expanding into some of these new areas? How long do you think it will take? And can you just remind us on -- you mentioned nuclear in the presentation. What's Worley's nuclear capability or experience, please?
Robert Ashton: Well, let's start with the nuclear first. So Worley is the engineer of record for 15% of the U.S.'s nuclear commercial power generation capacity. We're currently doing a nuclear project for -- in Egypt, the El Dabaa project, that's over 2 gigawatt nuclear facility where we own as engineer. We're currently doing nuclear work for Canada OPG. So we have a long track record of doing nuclear. So it's expanding into that. In terms of investing, we invested -- when we did the transition or the push into sustainability, we committed $100 million of investment over 3 years to support that transition. And look, and where we have -- we've got effectively there's 3 growth pathways: organic, strategic partnering and M&A. And where we need to develop -- invest in ourselves then, we're actually going to -- we're absolutely going to make sure that we commit to building the incremental capability. The reality is when it comes to power, just even look at the thermal power, we're currently doing the U.S.'s largest thermal -- in construction, the largest thermal power generation facility, over 2 gigawatts, that happens to be in the CP 2. So we've got a long history in power out of our Reading office in Pennsylvania. So power, nuclear, long history. Industrial water, we do a lot of industrial water. It's integrated part of the offering to our customers, but we see that is going to be an increasingly important part of our future. And so it's about putting focus on it. And our data center infrastructure, if you look at this really through the lens of data factories, these are becoming increasingly complex in terms of needing independent power generation and also cooling. So you look at the water and the power needs for some of these multi-gigawatt data factories, that's in the sweet spot. So we've got capability in these areas. It's about expanding them. And certainly, should it require organic investment for organic growth, we'll do that. And more will come in Investor Day.
Operator: Our next question comes from the line of John Purtell of Macquarie.
John Purtell: Look, just in terms of what you're seeing from customers, Chris, obviously tariffs impacted decision-making through calendar '25. What are you seeing on the ground? And maybe if you could just provide some commentary on the different segments there for you as far as Energy Resources and Chemicals.
Robert Ashton: Yes. Look, I would say in the latter part of '25 calendar year and now coming into '26, we're seeing a different tone of voice coming from our customers. Clearly not across every sector, every geography, but certainly on the resources side. We're seeing a lot of interest in the major project delivery capability. But our customers in the Middle East, North Africa, definitely a sense of, I guess, stability. Last year was a lot of uncertainty around the tariffs and the customers working through that. And we did say we thought by the end of the calendar year '25, things would have settled down. I would say that's occurred. Look, the single area of softness continues to be the conventional chemical side in Western Europe and just generally as a result of overcapacity. But on the energy side, integrated gas, power, oil, that that continues -- certainly seeing a renewed interest and a renewed, I would say, buoyancy in that. On the resource side, whether it's on iron ore, copper, lithium, on the [Technical Difficulty] materials, we're seeing a return in interest or a continued buoyancy there. So I think generally, John, the tone has shifted with our customer base, from last year where everybody was thrust into a period of uncertainty as a result of what was happening in the U.S. But that seems to have [Technical Difficulty] been normalized with the decisions that our customers are making.
Operator: The next question comes from the line of Nathan Reilly of UBS.
Nathan Reilly: Just a few questions in relation to the restructuring activity. The number came in probably a little bit higher than what I was expecting. Was there a decision made to maybe accelerate/even increase the level of restructuring activity when you sort of previously flagged that back at the AGM? And can I just get a little bit of an update [indiscernible], I guess, the nature of some of that restructuring activity in the first half, but also what you're expecting to undertake in the second half?
Justine Travers: Sure. Yes. And Nathan, you're right. The amount of work that we've done around restructuring is greater than we had anticipated. And I would say the cost of both the cost and scale is higher than what we would have initially thought we would have incurred for the first half. It is really driven by predominantly severance and associated costs that we've seen in Western Europe as we've looked to restructure that workforce and move into areas of higher demand. And so what we've seen is the scale and duration that it's taken to actually move on that restructuring was longer than anticipated. We've also taken the opportunity, though, as we looked at this, it was a real catalyst to take deliberate decisions around accelerating that shift of moving from higher cost location to areas where we would see higher demand. You'd note within a number of our priorities, we talk about scaling GID. This has really been an opportunity to say how do we accelerate in doing that and actually driving a lower cost base through the business. In terms of what we would expect for the second half of this year, we do expect continued restructuring costs in the second half. We're doing work looking across our enterprise services as part of that restructuring. We do, however, expect those costs to be lower than what we've incurred in the first half. And what we want to do is not continue to have a multiyear program of restructuring. We're really saying what can we do in FY '26 to reset the cost base and reposition ourselves strongly as we go into FY '27.
Operator: Our next question comes from the line of Gordon Ramsay from RBC Capital Markets.
Gordon Ramsay: Chris, just wanted to ask you about where you stand in terms of project cancellations or scope reductions. I know there were none in the second half of FY '25. Is there anything you can comment on in the first half for FY '26?
Robert Ashton: I mean the only one as we talked about before was the Shell Red Green project in Europe, but that was announced at the time. So we've not seen a continuation or any sort of trend around cancellations other than the ones that we've talked about previously. And I think that's just -- that reflects a shifting confidence in the market. But yes, we've not -- there's no trend of continued cancellations.
Gordon Ramsay: Just on deferrals, are you seeing companies, especially in what I call the green energy or renewable transition area, it looks like a lot of companies are kind of slowing down investment there. Are you seeing that in your work at all?
Robert Ashton: I think it depends on which region you're talking about. Certainly, in the U.S., the extreme green has slowed down, but not in Europe. You saw just this week, we announced a hydrogen backbone pipeline project in Europe. So it just depends by region. But certainly, in the U.S., the more extreme green has seen a slowdown in that. And that's reflected in our future factored sales pipeline. We've actually reflected the slowing down of that. But again, no material trend around cancellations. Now there's always deferrals. And I would say the deferrals are no more or less material than they are historically at this point, yes. Certainly, in '25, as what was happening in the U.S. with the U.S. changing its position, you saw a ripple effect, but I would say that's really dropped off now. And I think we're probably in a much more -- well, we are in a much more stable environment.
Operator: And our next question comes from the line of Megan Kirby-Lewis of Barrenjoey.
Megan Kirby-Lewis: My question is just on the margins and by activity. So it just looks like professional services and construction dipped slightly year-on-year, but procurement has held steady. So I guess just keen for you to talk through the dynamics for each of those areas and how we should be thinking about them going forward?
Justine Travers: Yes. Thanks, Megan. We don't see a structural issue with margins. And we don't see a decline in the quality of work that we're being engaged to do. I think what we are seeing is, as you said, procurement margins have hold relatively steady. Construction and fabrication, we see that more as a phasing around the execution stage of the projects that we're undertaking at this point in time. And with the portfolio of major projects, we expect to see that really normalize over a period. In terms of professional services, again it's largely driven by how we would see in terms of the stage of the projects that we're undertaking. But we're not seeing anything structural within that margin profile that gives us a cause for concern. And I think on top of that, the actions that we're doing around cost management, the efficiency within the organization, removing some of that legacy complexity that we've had is really all in service of ensuring that we maintain that margin resilience as we go through and over the next 12 to 18 months.
Megan Kirby-Lewis: And I guess just as a follow-up on that, like more focused on the construction piece, but you are continually talking about moving more into EPCM and EPC. I guess just how like that will start to flow through to margin. Is there anything sort of to think about in terms of risk sharing between customer and contract -- customer and Worley and how that might impact the margins there?
Robert Ashton: Well, as we grow the EPC business, the mix of what we do across, the phasing of those, the phasing of engineering against another major being in the procurement phase or in the construction phase. So it's the mix that will -- the mix of the phase of projects that will drive the margin rather than EPC alone. I think you've got to look at it as always a portfolio of projects, which, yes, we'll do more engineering procurement and construction. But it's just driven by mix, Megan. I mean, yes, I mean, I'm not sure what more.
Justine Travers: No. And I'd say, Megan, we're holding our outlook position on the margin, excluding procurement, between 9% and 9.5%. So looking at that from a mix perspective, we think that's able to be maintained. I know you've covered Worley for a long time, and you will have seen over the course of the last few years that we've really gone from strength to strength in terms of our margin profile across the portfolio. So something absolutely that we're mindful of in terms of that composition of volume, mix and rate. And so we need to be doing the things that we can proactively manage around quality of what we bring into our pipeline and then through to backlog, and we need to be resilient around the work we're doing on cost discipline and margin expansion. So yes.
Operator: Our next question comes from the line of Cameron Needham of Bank of America.
Cameron Needham: Just one quick question for me, just on Baytown. Could you talk me through the logic of leaving that in your backlog, please? And then just more generally, could you talk through the process that you guys go through internally in terms of deciding if a project meets requirements to actually stay in the backlog versus what comes out as a cancellation?
Robert Ashton: Yes. Baytown Blue has not been canceled. So it remains in the backlog. If you look at Exxon's announcement, it's been paused. And until it's been canceled, it will remain in backlog. So we have a very rigorous process of what goes in or comes out of backlog, and we consistently apply that. But Baytown Blue, if you read ExxonMobil's announcement, has been paused, not canceled.
Operator: And our next question comes from the line of Tom Wallington of Citi.
Tom Wallington: A quick question on customer mix and growth adjacencies. So just noting 28% of the backlog is associated with traditional work, including oil and gas. And I appreciate you've highlighted these complex critical infrastructure scalable opportunities in your priority markets. Can I just get a bit of color as to how these early customer engagements have been and how we should think about the mix of Worley customers evolving over time?
Robert Ashton: I would say that the early engagement has been very, very positive. And the customer mix, I think it's an important point because we often, in conversations, have the conversation pivots around capital expenditure of customer base is shrinking or dropping off or may not be as big as the previous year. And I'm speaking generally. And it may be for the majors. But if you look at the number of customers that we're working with that are outside of that analysis, it's significant. You look at Glenfarne, Venture Global as 2 examples. These are not necessarily companies that attract when the overall market or the overall capital spend is being considered. So look, early phase conversations are fantastic and certainly a lot of interest in what we're offering, whether it's in the full project delivery side or on the power ports or marines or industrial water or even on the data factory infrastructure side. So good early engagement, very positive early engagement, I would say. And in terms of opportunity to grow, I think that there's significant opportunity to grow outside of the addressable market that are traditionally sort of assessed and associated with Worley. So we do a lot of work for customers that are -- that is outside of the majors, outside of the Rios, outside of the BHPs, outside of the ExxonMobils or Chevrons, outside of the BASFs. And we see increased opportunity for growth in that space.
Tom Wallington: That's very helpful. And potentially a second question, if I can, a follow-up to Nathan's question around the restructuring costs. Noting that the scale and the scope of these costs has likely exceeded initial expectations. Just curious, going into the result, we thought that these costs would be taken above the line, noting that they are taken below the line now given they have exceeded those initial expectations. Can you give us, I guess, any color as to why the change of thinking as to how this would be treated for from an accounting purpose and potentially what this might have implied if all of these costs were taken above the line?
Robert Ashton: I don't think the -- in terms of -- well, I'm going to let Justine answer the technical side. But look, there's a lot of things that go into the decision-making around this and clearly, and I have communicated, we've communicated that the cost will be taken above the line. What changed was as we got into the -- toward the end of the year, as we got into the detail of the restructuring costs, we saw an opportunity to restructure parts of the business more deeply than we initially assessed with an objective of relocating that work when the markets -- when the opportunities and the projects present themselves, repositioning and relocating it to India. So rather than keep people on the bench and do a moderate restructure, we took a strategic decision to do a deeper restructure with the intent of moving the work to a higher profit location such as India or Bogota at our GID center there. So it was a strategic decision. Now in terms of the accounting side, I think I'm going to hand over to Justine.
Justine Travers: Thanks, Chris. And Tom, clearly, the costs that we've seen in the first half of the year around this transformation and restructuring are outside the normal course of business. And putting them below the line for us really and hopefully for the market provides a much clearer and more transparent view of our underlying operating performance. It also makes it much easier to look at the comparability of our results across periods. And it is a very typical treatment of costs of this nature for Worley historically, but also if we looked at our customers and/or other peers that are undertaking similar programs of work to have treated them in this way. So we believe that is very comparable to what the industry would do, what we have done historically. And it is important that it does provide a more transparent view around our underlying operating performance of the business.
Operator: Our next question comes from the line of Rohan Sundram of MST Financial.
Rohan Sundram: Just one for me. Following on from John's questions around the tone of customer discussions. Take on board, there's a renewed buoyancy in the market. But Chris, just can you hear your thoughts on how that's translating into higher sole sourcing on the back of all of that?
Robert Ashton: Well, it is. I mean what it is, is the customers that we have strong deep relationships with and have historically looked at sole sourcing is their capital -- is their confidence around investment returns, then it's leading to an increased level of sole-source work. And sole-source work is now up to 48% of what we do. And so we actually look at this very closely. And so you look at the percentage of sole-source work, it's increased compared to the prior corresponding period. And I think that's a great sign that the customer confidence is returning and the confidence they have in Worley in terms of supporting them.
Operator: Our next question comes from the line of Ramoun Bazar of Jefferies.
Ramoun Lazar: Just a couple from me for Justine. Just in terms of the treatment of the restructuring costs now below the line, how should we think about the seasonality in the business in the second half? Is that going to look more like what it did last year now?
Justine Travers: Yes. Ramoun, we do expect the phasing to be broadly similar with what we've seen in FY '25. We know and traditionally have seen a strengthening in the second half. And so you can assume that that would be a similar profile to what we've had if you're looking at the underlying result, just consider that phasing broadly similar.
Ramoun Lazar: Yes. Got it. And within that, are you assuming any benefits from the restructuring coming through in the second half out of that $100 million annualized number?
Justine Travers: The $100 million, really we see as an exit run rate, and we see the real benefit of that coming through into FY '27. We will see a little bit into the second half as we start to see the translation of that cost come through that resetting of the cost base. But the $100 million is really a reset for FY '27 and should be considered in that way.
Operator: I'm showing no further questions at this time. I would now like to turn the call back over to Chris Ashton, CEO, for any closing remarks.
Robert Ashton: I just want to thank everyone for joining today. And I know over the next 4 days, 5 days, we've got a number of meetings with yourselves and others on the call or on the -- dialing in on the Internet. So look, we look forward to having the conversations, answering further questions after you've had an opportunity to digest what we presented today. Look, I do think that it is a strong first half result. And look, I look forward to -- Justine and I look forward to talking to you and hopefully being able to answer the questions that you've got. So we'll be connecting with you over the next few days and today as well. So thanks, everyone, for your time and look forward to meeting.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.