WorleyParsons Annual Report 2009

Annual Report 2009

WorleyParsons is a leading provider of professional services to the resources & energy sectors and complex process industries. Our services cover the full asset spectrum both in size and lifecycle – from the creation of new assets to services that sustain and enhance operating assets.

Our Vision

Leadership

Agility

WorleyParsons will be the preferred global provider of technical, project and operational support services to our customers, using the distinctive WorleyParsons’ culture to create value for them and prosperity for our people.

• Committed, empowered and rewarded people • EcoNomics™ – Delivering profitable sustainability • Integrity in all aspects of business • Energy and excitement • Minimum bureaucracy

•S mallest assignment to world scale developments • L ocal capability with global leverage •R esponsive to customer preferences •O ptimum solutions customized to needs

Relationships

Performance

• Rapport with all stakeholders • Open and respectful • Collaborative approach to business

• Zero harm •R esults for our customers and employees •C reating wealth for our shareholders •W orld-class resources, capability and experience

Contents Group Financial Highlights Chairman’s Review Chief Executive Officer’s Overview Indicative Projects Secured in FY09 Business Summary Chief Executive Officer’s Report Board of Directors Chief Executive Officer’s Committee Corporate Governance Directors’ Report Financial Statements Shareholder Information Corporate Information B

WorleyParsons Annual Report 2009

1 2 4 6 8 10 16 17 18 25 40 79 80

Annual General Meeting WorleyParsons’ 2009 AGM will be held on Tuesday 27 October 2009 commencing at 2.00pm (AEDST) at the Radisson Plaza Hotel, 27 O’Connell Street, Sydney, NSW 2000

Group Financial Highlights

Five year performance at a glance

$m 2005 2006 2007 2008

Aggregated revenue1 EBITDA EBITDA margin Net profit after tax Net profit margin Cash flow from operations Return on equity Basic EPS normalised2,3 (cents) Basic EPS (cents)3 Dividends (cents)

2,464.4 219.9 8.9% 139.1 5.6% 115.7 32.1% 66.9 66.3 41.0

3,534.6 353.4 10.0% 224.8 6.4% 195.9 31.3% 105.4 101.8 60.5

6,225.1 693.2 11.1% 390.5 6.3% 546.4 25.4% 172.8 161.1 93.0

4,900.7 587.0 12.0% 343.9 7.0% 198.8 24.5% 153.4 142.5 85.5

27.0 18.1 13.6 174.8 12.6 13.0 8.8

Aggregated revenue includes revenue from associates and excludes pass through procurement services for nil margin Before amortisation of intangibles including tax effect of amortisation expense 3 Basic and normalised EPS for the financial years to 2006 have been adjusted to be comparable to 2007 as a result of the rights issue in March 2007 where shares were issued at a discount to market price 1 2

EBITDA

Revenue

6,225.1m

$6,225.1m $6,225.1m $6,225.1m

Net profit

$693.2m

$693.2m $693.2m

Cash flow from operations

$390.5m $693.2m

$390.5m $390.5m

$343.9m $587.0m

m

$4,900.7m $4,900.7m

$587.0m $587.0m

$343.9m $343.9m

$587.0m

05 07 08

$224.8m $224.8m

$224.8m

$353.4m $139.1m

$219.9m

$1,379.5m

06 07

$353.4m $353.4m

$2,464.4m $219.9m $219.9m

$117.0m

09 06 05

$546.4m $546.

$3,534.6m $353.4m

$2,464.4m $2,464.4m

$546.4m

$390.5m $343.9m

$4,900.7m $224.8m

$3,534.6m $3,534.6m

9.5m $1,379.5m

5

1,379.5 117.0 8.5% 66.5 4.8% 91.1 24.5% 35.8 35.1 20.0

2009 Growth %

06 08 09

09 07

05 08

$117.0m $117.0m

06 09

07

The result was earned on aggregated revenue of Hydro Hydro Hydro $6,225.1 million, an increase of 27.0% on the $4,900.7 million reported in 2008.

08 05

09 06 05

$139.1m $139.1m

$219.9m $66.5m

$66.5m $66.5m

$195.9m $198.8m

$139.1m

$66.5m

$91.1m

$115.7m

$195.9m $198.8m $195.9m $198.8m

$115.7m $115.7m $91.1m $91.1m

$91.1m

$1

$115.7m

$117.0m

06 07

05 08 09 06 05 07 08 09 07 06

08 07

09 08 05

09 05 06

06 07

05 08 09 06 09 07 08

07

08

05 09

06

07

08 05

09 06 05

06 07

06 09 05 08 09 07 08

EBITDA for the year was The full year result for 2009 was Cash flow fromcASH operations was cASHcASH neT PROFIT neT PROFIT FLOW FLOW neT PROFIT neT PROFIT FLOW $693.2 million, an increase of $390.5 million, an increase of $546.4 million, an increase of 18.1% from the $587.0 million 13.6% over the $343.9 million net 174.8% from the $198.8 million EBITDA EBITDA EBITDA EBITDA reported in 2008. profit reported in 2008. reported in 2008.

WorleyParsons Annual Report 2009

1

Chairman’s Review

In one way or another the 2009 year has been an extraordinary year for all of us. For WorleyParsons it has also been a challenging year as it has for most companies operating through the global financial crisis. I am pleased to report that despite this challenging backdrop the Company has proven to be remarkably resilient, delivering good earnings growth for the year and also, importantly, improving our financial strength and capacity, which puts us in a very strong position for the future.

Right: John Grill Chief Executive Officer Left: Ron McNeilly Chairman and Non-Executive Director

2

WorleyParsons Annual Report 2009

This good performance has been underpinned by the global diversity of WorleyParsons’ operations and client base and the fact that the management team took early and decisive action to position the Company appropriately in advance of the deteriorating global economy.

Safety

During the year WorleyParsons was awarded a number of major contracts, some among the largest ever awarded in the Company’s history. We also achieved a successful refinancing of our syndicated banking facilities and delivered an exceptionally healthy cash flow performance.

Our focus in the 2009 year has been on implementation of new systems in this area, with a particular focus on extending our safety commitment to the many contractors with whom we engage.

The Company reported a net profit after tax of $390.5 million, up 13.6% on 2008. This encouraging performance reflects the fact that while some markets experienced weaker operation conditions, others remained buoyant.

We accept our responsibility in relation to communities with which we work and to the environment. This year we have made significant progress in implementing our policy of indigenisation of work wherever possible, with notable successes in both Australia and Alaska. We continue to be involved in a number of education initiatives around the world from sponsorship of students to sponsoring academic postings at universities. We also support organizations such as Engineers Without Borders which seeks to benefit disadvantaged communities through the implementation of sustainable engineering projects. Many additional initiatives are implemented at the local office level, reflecting the needs of those particular communities.

Performance The Board has declared a final fully franked dividend of 55.0 cents per share (up 15.8% from 47.5 cents per share last year), taking the total dividend for the year to 93.0 cents per share, up 8.8% from 85.5 cents last year. Particularly pleasing was the significant improvement in cash flow, the result of a focused effort from management and the Company’s continued commitment to prudent capital management. In keeping with this approach, the refinancing of syndicated debt facilities was brought forward to February when the Company increased and refinanced its core debt facilities with a new US$300million syndicated multi-currency term and revolving facility. WorleyParsons was awarded a number of key contracts during the period, several of which (such as the SAMREF clean fuels project for Saudi Aramco/ExxonMobil and the Kashagan full field development) are among the largest in the Company’s history. Importantly, the full impact of these new contracts will largely be realized in FY2010 and beyond. However, the impact of these significant contract wins has been partially offset by the deferral of a number of projects, mainly in the Minerals & Metals sector, particularly in Australia and in the Canadian oil sands market, as clients respond quickly to a combination of lower commodity prices and restricted access to capital. This is, however, being offset to some extent by growth in the US, UK, the Middle East and parts of Asia, where our locally differentiated offering allows us to continue to grow despite contracting markets. People

We place the highest importance on safety throughout the WorleyParsons group. Our safety performance compares very favorably with international best practice and has continued to improve this year.

Corporate Responsibility

Our EcoNomics™ initiative which delivers profitable sustainability to our customers also benefits communities by actively identifying and commercializing opportunities for improvement in design, technologies, projects and markets related to sustainability. In the past year we have had further successes in developing and progressing sustainability solutions, particularly in solar power and low emission coal technologies. As engineers, we no longer just respond to governments and industry. Now we are leading the way in shaping a more sustainable future. Corporate Governance The Board is satisfied that a robust governance structure is in place and is properly administered and the Board regularly reviews the governance structure and the way it is administered. Management has continued to upgrade our risk management capabilities and to reinforce global compliance with our agreed values and Code of Conduct. Finally, I would like to express my gratitude on behalf of the Board to John Grill, to management and to all staff for their commitment and dedication in constantly setting high standards and then achieving them. I would also like to extend my own thanks to my Board colleagues for their support and ongoing contribution.

This has been a challenging year for many of our people, particularly those in locations most affected by the economic downturn. The need for WorleyParsons to remain competitive in each market in which it operates has resulted in decisions to reduce our personnel numbers and remuneration in some regions. Despite the extremely difficult economic environment our people have responded to the many challenges presented by remaining focused on generating results for our clients and our shareholders. They deserve the whole hearted thanks of the Board on behalf of shareholders for their tireless efforts.

Ron McNeilly Chairman

WorleyParsons Annual Report 2009

3

Chief Executive Officer’s Overview

Hydrocarbons Full-scope global project delivery in deepwater, floating, subsea & conventional structures, topsides, onshore oil & gas, pipelines, LNG, and refining & petrochemicals.

Expanding role in LNG market New Doha Port project, Qatar

Infrastructure & Environment Complete solutions for the transportation, coastal & marine, water & wastewater, resources & energy, municipal and urban infrastructure sectors

4

WorleyParsons Annual Report 2009

Minerals & Metals Delivering comprehensive “pit to port” projects and solutions in base metals, alumina, aluminium, coal, iron ore, steel and chemicals across the world

Southern Peruvian minerals region

An exterior view of Bruce B - Nuclear Generating Station which is owned and operated by Bruce Power L.P.

Increased investment in renewable solutions such as nuclear, solar and wind

Power Renewable energy, clean coal, nuclear and natural gas generation, transmission networks and retrofit project solutions from pre-feasibility to asset operation and maintenance WorleyParsons Annual Report 2009

5

Indicative Projects Secured in FY09

WorleyParsons’ experience covers all five phases of the asset lifecycle. In each one of these phases we understand the critical issues and tailor our services to enable customers to Select and Deliver their projects and Improve their assets for optimal long term performance. Our phased approach enables consistent project delivery worldwide.

34

49

9

30

5

25,56,61,62

29 32

28,800 Personnel 120 Offices 37 Countries

19

Business Line Select Select & Deliver Deliver Improve

USA, Canada and South America

50

5 Keystone Pipeline System Expansion, Canada & USA, TransCanada 6 ESA, Canada, Shell Canada 9 Brownfield Services, California, USA, Shell 12 Jackfish 2, Alberta, Canada, Devon Energy 14 Shell Albian Sands, Edmonton, Canada, Suncor Energy

47 Coal to Liquids Facility Master Planning, South Africa, Sasol

2 Egyptian Nuclear Power Plant, Egypt, Egyptian Nuclear Power Plant Authority

51 Ibom Industrial City Master Plan, Lagos, Nigeria

34 Gas Treatment Plant, North Slope, Alaska, USA, Denali

3 Armenian Nuclear Power Plant, Armenia, Ministry of Energy and Natural Resources of the Republic of Armenia

52 Block 8 North Study, Secunda, South Africa, Sasol

35 Serra Sul Mining Infrastructure Study, Amazon, Brasil, Vale

8 Kashagan FFD & FFS Feasibility Study, Kazakhstan, Agip KCO

36 Jose Olefins Complex, Jose, Anzoategui, Venezuela, Polimerica

17 Belene Nuclear Plant, Belene, Bulgaria, Natsionalna Elektricheska Kompania (NEK)/Ministry of Energy and Energy Resources

32 MSA, USA, Westinghouse Electric 33 MSA, USA, Xcel Energy

18 ESA, Nanticoke, ON, Canada, Ontario Power Generation

41 Grass Roots Refinery/Olefins Complex (COMPERJ) , Rio de Janerio, Brazil, Petrobras

19 Mineco Greenfield Alumina Refinery, Jamaica, Century Aluminium and China MinMetals

43 Acid plant consulting services, Toledo, Ohio, US, Marsulex

22 CCRL Refinery Expansion Project, Regina, Canada, Consumers’ Co-operative Refineries Limited 28 MSA, Canada, Imperial Oil

WorleyParsons Annual Report 2009

35

Europe & Africa

29 MSA, USA, Pacific Gas & Electric 30 MSA, Canada, Petro-Canada

6

36

43

12,14

33

Local Office Global Hub

18 6 28

22

49 North Slope Renewals Project, North Slope, Alaska, USA, BP 50 Tia Maria Project, South Peru, Grupo Mexico

21 Sakhalin II Offshore Processing Facility follow on, Sakhalin Island, Sakhalin Energy 38 Vanykov Smelting Process Improvement, Europe, Kazakhmys 40 Achinsk SRU, Russia, Rosneft 42 Jasmine Offshore Complex, North Sea, UK, ConocoPhillips

53 ESA, Angola, Chevron 57 Climate Change Risk Assessment, Tanzania, International Finance Corporation 58 Climate Change Project, Albania and Azerbaijan, World Bank 59 Environmental and Social Impact Assessment, South West Libya, Repsol Exploración Murzuq S.A. 60 Air and Noise Dispersion Modelling, Spain, Solar Reserve 67 Offshore Project, Arkutun-Dagi, ExxonMobil

41

60 42

59

51

58

53

17

52 47 2

3

57

38

7,16, 20 23

8

1,15, 31 37,48

40 44 54

55

26

39,65 64 11,45 24 10 66

Middle East, China & South East Asia 1 Integrated Gas Development (IGD), Abu Dhabi, GASCO, ADMA OPCO and ADGAS 7 Clean Fuels Project, Saudi Arabia, Saudi Aramco Mobil Refinery Company 15 Fertil 2 EPC Phase, UAE, Fertil 16 Ma’aden Alumina Refinery, Al Jalamid, Saudi Arabia, Saudi Arabian Mining Company

37 Satah Field Re-Development, Offshore Abu Dhabi, ZADCO 39 Stage 2 Repowering OE, Singapore, Senoko Power 44 24 MW Biomass Plant, Sichuan, China, China EnerSave Limited 48 Borouge 3 Feasibility Study, Abu Dhabi, Abu Dhabi Polymers (Borouge - ADNOC & Borealis JV) 54 Vung Ang 1 1200MW Coal Plant, Vietnam, PetroVietnam 55 Exhibition Centre, China, Coca-Cola

20 Acid Gas Removal Plant, Kuwait, KNPC

63 Liwan 3-1 Development, China, Husky Oil

23 Petrochemical Complex Phase 4, AlJubail Saudi Arabia, National Chevron Phillips

64 CESC Contract, Indonesia, ConoccoPhillips

26 BMI/IVF Expansion Project, Zhangjiagang, China, Dow Corning 31 ESA, Sohar, Oman, Sohar Aluminium

65 Sulphur Recovery Unit, Singapore, Singapore Refining Company 66 Bien Dong, Vietnam, PetroVietnam

67 21

27

13 63

Australia, NZ & Pacific 4 PNG LNG, Papua New Guinea, Esso Highlands 10 Heng Shan, WA, Australia, Fortescue Metals Group 11 TW Improve, North West Shelf, WA Australia, Woodside 13 Engineering and Support Services, Darwin, Timor Sea, NT Australia, ConocoPhillips Australia 24 Southern Seawater Alliance Project, WA, Australia, Water Corporation of Western Australia 27 ISC, Goro Province New Caledonia, Goro Nickel New Caledonia 45 Wheatstone LNG Train 2 Gas Supply Identification, Offshore WA, Australia, Chevron 46 Solar Power Siting Study, Eastern Australia, Confidential Customer

4 46

Global 25 EPCM Agreement, Global, BP Exploration and Production 56 Generic Onshore LNG Study, Global, StatoilHydro 61 Strategic Analysis of the Global Status of Carbon Capture and Storage, Global Global CCS Institute 62 Pipelines and Terminals Agreement, Global, Chevron

LEGEND 1

Region 1  Project Name, Location, Customer Number on map

2

Business Line

SA: Master Services M Agreement ESA: E ngineering Services Agreement

WorleyParsons Annual Report 2009

7

Business Summary

Minerals & Metals

Business Summary

WorleyParsons provides one of the most comprehensive technical and project offerings in the market, extending from the earliest studies through mega-project execution to supporting sustaining capital programs.

Executing bankable feasibility studies or large integrated solutions, WorleyParsons has a proven track record for creating innovative and technically strong solutions for customers to optimize their resource.

Performance Overview

In a restrained hydrocarbons market, WorleyParsons’ capability in Program Management, Gas and LNG, long-term collaborative service agreements and new field developments (both onshore and offshore) were consistently recognized by customers as attractive.

Curtailed major project spend due to commodity prices resulted in a considerable increase in early phase study and feasibility work across the world. Our integration capability and “Pit to Port” experience and offering was strongly valued by customers.

Our expectation for earnings for 07 20 Hydrocarbons in 2010 is for a result similar to that reported in 2009 with expected $2,585.0m growth in the Middle East and USA offset by a number of factors.

Whilst the rate of new project development is likely to be 07subdued in 2010, early phase 20 study and feasibility work should position WorleyParsons when these projects $437.4m recommence. We are also encouraged by the $547.7m continuing spend in the Improve, brownfield Growth 16.7% asset services sector.

Future

9

200

Growth 31.5%

9

$4,749.1m

200

Hydrocarbons

$3,612.5m

Financials Revenue $m | Growth%

EBITDA $m | Growth% Margin %

Revenue

20

08 2009

$469.2m 2008

2007

4,749.1 31.5% 3,612.5 39.7% 2,585.0 555.1

26.6%

11.7%

438.5 12.1%

07

20

65.8%

264.4

2009 200

2008

8

589.2

25.1%

471.1

60.9%

292.7

44.8%

55.2%

85.6

0.4%

85.3

94.7%

43.8

51.6%

10.2%

14.5%

18.1%

07

07

20

20

07

9

Growth 16.7%

$342.6m $3,612.5m 20

08

8

WorleyParsons Annual Report 2009

20

08

$471.1m $469.2m 20

08

20

08

9

$589.2m $547.7m Growth 25.1%

Growth 31.5%

200

$292.7m $437.4m

2009

9

$367.6m Growth 7.3% $4,749.1m

15.0%

20

200

200

$219.6m $2,585.0m

2007

45.4%

Power

Infrastructure & Environment

Downturn in resource projects across the globe. A significant portion of the Infrastructure & Environment sector has been affected by the contraction in the resources sector, however, major projects with secured funding are continuing.

We anticipate seeing improved growth in the Power sector across the world. Key drivers in this performance will be our regional development in Europe and the increased investment in renewable solutions such as nuclear, solar and wind.

The outlook is improving in 2010. Solid demand in0water and wastewater 07 2 management, remediation services and carbon advisory services in conjunction $2,585.0m with the nascent recovery in major resource sector projects should result in increased $4,749.1m demand for our services. Growth 31.5%

07

20

9

$437.4m

$547.7m

Growth 16.7%

$3,612.5m 2009

2008

2007

2009 200

8

$469.2m

2008

2007

547.7

16.7%

469.2

7.3%

437.4

18.9%

367.6

7.3%

342.6

56.0%

219.6

73.2%

66.5

1.7%

65.4

3.3%

63.3

27.6%

35.0

-29.1%

49.4

121.5%

22.3

97.3%

12.1%

13.9%

9.5%

14.5%

07

14.4%

08

10.2%

20

2009

$589.2m

Growth 7.3%

Growth 16.7%

Growth 25.1%

$469.2m

08

$292.7m

9

$367.6m

200

$219.6m

9

$547.7m

07

20

200

$437.4m

20

20

07

20

9

The market continues to seek clarity in underpinning fundamentals, such as energy policy, carbon pricing and emissions trading. This year we experienced significant success in the emerging new build nuclear power market. Our capability in plant support, advanced coal and solar continues to be recognized as world class.

200

WorleyParsons’ ability to manage or masterplan the critical infrastructure and environmental elements of major projects – transport, water, waste water, coastal or marine – has been proven across the world.

200

From traditional generation and transmission solutions through to the latest renewable solutions involving nuclear, biomass, solar and wind WorleyParsons has the capability and experience to support customers.

$342.6m 20

08

$471.1m 20

08

WorleyParsons Annual Report 2009

9

Chief Executive Officer’s Report Despite the backdrop of the particularly challenging global economic environment, WorleyParsons has delivered a good financial performance for the 2009 financial year. The result reflects the diversity of the Group’s operations and the fact that we took early action to appropriately position the Company for the volatile and challenging conditions. In some markets in which WorleyParsons operates, particularly in oil sands in Canada and minerals and metals in Australia, the 2009 financial year has been quite challenging. However, in the United States, Europe, the Middle East and other markets in Canada and Australia we have continued to experience strong operating conditions. Over the past 12 months we have made significant progress towards consolidating our position in mega-project execution and management, with world-class systems and demonstrated experience in harsh and remote climates. We are currently involved in 57 multi-billion dollar mega-projects. We are also actively tracking a large number of potential new mega-projects and anticipate a significant pool of new work will be released as the global economic recovery translates into new capital investments in our markets. WorleyParsons’ performance has been underpinned by our extensive long-term contracting base which has proven to be an area of resilience. Over the past 12 months we secured 23 new long-term contracts and renewed nine contracts. We provide engineering and

project services to over 150 customers around the world through these long-term collaborative contracts and we continue to invest in our systems and processes in this area. Our investment in all areas of sustainability continues to be well received by customers, leading to numerous projects and opportunities with a significant EcoNomics™ component. We are the first in our peer group to fully embed and integrate sustainability into our core business and project management processes. A range of EcoNomics™ tools is used by customers across the world to address issues such as renewable energy, water and carbon management. This year also saw the initiation of Carbon EcoNomics™, our integrated approach to carbon capture and sequestration, energy efficiency, advanced coal and renewable energy services. Our EcoNomics™ service offering positions us particularly well to increase our presence in the public sector as governments globally focus on renewable energy targets. The management team reacted quickly to the dramatic shift in market conditions we experienced in Australia and Canada where capital investment in the minerals and metals and oil sands markets respectively were particularly affected in the year. Our other operations were less affected and we were pleased with our ability to support their continued growth and development. In response to the shift in market conditions we have ensured that our personnel numbers and costs are in line with demand and reviewed all internal costs and investments. SAFETY PERFORMANCE WorleyParsons applies the US OSHA (United States Occupational Safety and Health Administration) reporting requirements for Total Recordable Case Frequency Rate (TRCFR) and Lost Workday Case Frequency Rate (LWCFR). WorleyParsons’ safety performance for our personnel as reported under OSHA was a TRCFR of 0.11 for the 2009 financial year, an improved performance against the 0.14 reported in the 2008 financial year. Our LWCFR rate was 0.02, which is in line with the performance for the previous year.

From CO2CRC. Diagram supplied by the Global CCS Institute

Infrastructure & Environment / EcoNomics™ / Global / Select The Global Carbon Capture and Storage Institute commissioned WorleyParsons, with Schlumberger, Baker & McKenzie and EPRI, to complete a strategic analysis of the global status of carbon capture, transport and storage projects and technologies. This comprehensive baseline report covers the technical, regulatory, economic, geographical and research/development issues, together with an assessment of the status of announced projects.

10

WorleyParsons Annual Report 2009

Last year we announced a new safety initiative focused on our own people and the many contractors with whom we engage, sharing our goal of Zero Harm. We are currently implementing management systems to support this initiative. We received several safety-related awards and achieved a number of safety performance contract milestones. In summary, while progress in the area of safety performance has been pleasing, this remains a major focus for our business. PEOPLE Twelve months ago we were being challenged to meet customers’ expectations in an over-heated contracting market. The achievements of the WorleyParsons team in subsequently adjusting their focus and adapting to the new and volatile market conditions have been exceptional.

Hydrocarbons / Middle East / PMC / Deliver Abu Dhabi-based hydrocarbons and infrastructure leaders GASCO, ADMA OPCO and ADGAS awarded WorleyParsons six PMC contracts to manage engineering, procurement and construction contract packages of the Integrated Gas Development project. The packages include the new Habshan Platform, Ruwais 4th natural gas liquids train, Ruwais storage tanks, Habshan-5 process plant, and the Das Island site preparation, process and utilities projects.

Downstream Hydrocarbons / Latin America / Deliver Polimerica selected WorleyParsons to provide integrated project management and front-end engineering design services for a world-scale ethylene-based petrochemical complex to be located in Jose, State of Anzoategui, Venezuela. The Jose Olefins Complex will support the further development of the plastics industry in Venezuela and will export product to markets in North America, Europe, and Latin America.

At the end of July 2009 we had approximately 28,800 personnel in some 37 countries. In our half year report we predicted reduced personnel numbers in Canada and Australia due to likely project deferrals, and we have subsequently reduced our staff numbers in those regions.

FINANCIAL PERFORMANCE

An increasing number of projects require multiple offices to work together to integrate the expertise and deliver the cost effectiveness sought by customers. This was particularly the case in 2009, with over four million workshare hours completed across the global network.

The result was earned on aggregated revenue of $6,225.1 million, an increase of 27.0% on the $4,900.7 million reported in the previous corresponding period.

As a part of the cost reduction initiative undertaken in 2009, the three executive directors and the managing directors of Canada and Australia and New Zealand have undertaken reductions in base salary of between 10% and 15%. Non-executive directors’ fees have also remained fixed for the third consecutive year. Although the financial performance of the Company is strong and it is in excellent financial health, these moves are appropriate given the impact the global economic crisis has had on our customers and our people. To provide appropriate stretch targets for the Company’s growth over the next three years, the EPS growth hurdles for the 2010 financial year Performance Rights have been set at the same levels as Performance Rights issued prior to 2008 (compound EPS growth of CPI + 8% for three years is required for 100% vesting) rather than at the levels for the grants for the 2008 and 2009 financial years. The EPS growth hurdles of prior grants are unchanged.

The 2009 result again set new benchmarks that included a net profit after tax for the 12 months to 30 June 2009 of $390.5 million, an increase of 13.6% on the $343.9 million net profit reported for the same period to 30 June 2008.

EBITDA for the period was $693.2 million, an increase of 18.1% on the prior corresponding period. The EBITDA margin for the Group was 11.1%. Basic earnings per share (EPS) was 161.1 cents, an increase of 13.0% from the 142.5 cents per share reported in 2008. The result was underpinned by a strengthened balance sheet, with operating cash flow of $546.4 million (2008: $198.8 million), gearing of 25.5% (2008: 31.4%), a 0.7% reduction in average cost of debt to 5.5% and increased total available debt facilities of $1,376.1 million. The profit performance achieved in the year and underlying quality of assets utilized in the business have resulted in an increase in return on equity, that is, net profit after tax to shareholders’ funds, to 25.4% (2008: 24.6%). The Company’s strong financial performance has been achieved without the need to raise additional equity during the year. WorleyParsons continues to be well positioned to pursue further growth opportunities. WorleyParsons Annual Report 2009

11

CEO’s Report continued

SEGMENT PERFORMANCE HYDROCARBONS Hydrocarbons remains the largest contributor to the WorleyParsons business, generating 76% of the Group’s revenue in the 2009 financial year. The Hydrocarbons business reported aggregated revenue of $4,749.1 million for the 12 months to 30 June 2009, representing an increase of 31% from the previous corresponding period. Hydrocarbons contribution to the Group’s total aggregated revenue was 76%. Segment EBITDA was $555.1 million with a reported segment margin of 11.7% (2008: EBITDA $438.5 million; margin 12.1%). In a restrained hydrocarbons market, WorleyParsons’ capabilities in program management, gas and LNG, long-term collaborative service agreements and new field developments (both onshore and offshore) were consistently recognized by customers as attractive. Key awards for projects and mega-projects included: • Shell’s Kashagan full field oil development FEED • Support services for ExxonMobil’s LNG development in Papua New Guinea • ConocoPhillips’ Jasmine gas-condensate field FEED • Front end engineering for Husky Oil’s Liwan 3 China offshore development • Support services for TransCanada’s Keystone pipeline expansion

• Engineering and management services for the Tacaamol integrated chemical complex project in Abu Dhabi (previously ChemaWEyaat) • SAMREF’s reimbursable EPC Clean Fuels Project in Saudi Arabia • FEED for Polimerica’s Jose Olefins complex in Venezuela • Program Management Contracts for the Integrated Gas Development in Abu Dhabi We have also secured a number of new long-term contracts including: • A four year global contract with BP for the provision of engineering and project management services • Two strategic contractor relationships with Chevron for EPC contracts and pipelines and terminals • Frame agreements with CNOOC and CNPC in China • Regional agreements with ConocoPhillips Australia for services to the Bayu Undan facility and the Darwin LNG plant, ExxonMobil in Malaysia, ConocoPhillips in Indonesia and AGIP KCO in Kazakhstan We have renewed our contracts with customers representing two of our longest relationships, the CoSyn and Upstream contracts with Syncrude and Imperial Oil in Canada. Other contracts being renewed included Shell in Brunei, Shell Martinez and Deer Park in the US, Chevron in Angola and, across Canada, our agreements with Shell and Suncor. The TransfieldWorley joint venture is currently renegotiating its contracts for maintenance and project implementation for Woodside for the North West Shelf venture on a sole source basis. Our deepwater and subsea specialist business, INTECSEA, has secured over 120 small to medium sized projects, reflecting a strong endorsement from the market. POWER The Power business reported aggregated revenue of $547.7 million, an increase of 16.7% on the previous corresponding period. Segment EBITDA was $66.5 million with a reported segment margin of 12.1% (2008: EBITDA $65.4 million; margin 13.9%). The current economic crisis is affecting both demand and capital availability in the Power sector. Uncertainties around fuel choice and cost, technology selection, carbon policy and fuel security remain significant issues for our customers. However, we are continuing to see opportunities for growth in the sector. The governments of the United States and Australia have provided early direction of their energy policies, showing increased support for growth in renewable technology and advanced coal.

Hydrocarbons / LNG / Global / Select WorleyParsons is currently working on 16 LNG projects and facilities and has invested significantly in its specialist capability in this field. Within a consortium, our London based LNG team is currently providing engineering and procurement services associated with the liquefaction, refrigeration, fractionation, nitrogen removal and purification and refrigerant storage units for a major new facility for one of the world’s largest natural gas reserves. 12

WorleyParsons Annual Report 2009

Key project awards in 2009 include: • Power plant upgrade and infrastructure projects across the United States, Saudi Arabia, Singapore, Canada and Peru • Project management consultancy and engineering services for Vietnam Electricity’s Vung Ang 1 coal-fired thermal power plant in Vietnam • Owner’s engineering role for plants in Canada, the United States, Bulgaria, Mexico and Vietnam

Hydrocarbons / China / Select / Deliver Husky Oil China awarded WorleyParsons the first deepwater discovery and development offshore China. The Liwan 3-1 Area Development, south of Hong Kong, requires deepwater and offshore platform expertise, subsea pipelines and onshore gas plants capability. WorleyParsons will complete the front end engineering design, estimating, and planning for project execution from its Kuala Lumpur, Perth and Beijing offices.

Power/ Nuclear / Middle East / Select Egyptian Nuclear Power Plant Authority awarded WorleyParsons a consultancy services contract to support the delivery of the first nuclear power plant. The role, evolving over eight years, commences with site and technology selection studies and continues through to design, construction management, commissioning and startup. Execution will be led from WorleyParsons’ office in Sofia, Bulgaria and supported locally by our office in Cairo.

Our long-term contracts with major power utilities remain a key element of our Power business. Over the past 12 months we secured agreements with major American customers, including Pacific Gas & Electric, Tennessee Valley Authority, Public Services Enterprise Group, APS, Allegheny, Contra Cost Electric, Con-Edison and Enmax in Canada.

schedule is often associated with these developments as they move through approval processes, optimizing contracting strategies to safe operations and start up.

We are continuing to develop our relationships with selected original equipment manufacturers. We are working with GE on projects in all our regions across multiple technologies, including combustion turbines, aero-derivatives, wind, gasification and nuclear. WorleyParsons and Siemens have also created an alliance to deliver gas turbine projects around the world with the award of a 400 megawatt gas turbine/combined cycle power plant located in Belgium. We have made excellent progress in the renewables market in 2009. We believe we are the world’s largest provider of engineering services for utilities-scale solar power. We are currently supporting solar projects in 11 countries, including the world’s first solar tower in Spain.

Operating licence renewal is a critical element of the US nuclear industry. Our STARS License Renewal Project supports seven nuclear plants in performing the comprehensive analyzes and licensing submissions for plant life extension. We are seeking to extend our project relationships across the fleet of fossil plants to the owners’ nuclear portfolios. Outlook for Power Key drivers in the Power sector in 2010 will be continued good performance in our US operations, our regional development in Europe, nuclear and renewable, such as solar and wind. National and international carbon emissions policies have the potential, when implemented, to further encourage investment in the power market. Notwithstanding the likely negative anticipated foreign exchange impact of a higher Australian dollar, we would expect growth in earnings in the Power sector in 2010.

Another proposed carbon reduction solution is to increase reliance on nuclear energy as a major source of power. We are currently experiencing a significant increase in work for both operating and new-build nuclear plants. On the back of our role supporting the development of the 2,000 megawatt Belene facility in Bulgaria, we have been awarded similar contracts in Egypt and Armenia. A 10 year

WorleyParsons Annual Report 2009

13

CEO’s Report continued MINERALS & METALS The Minerals & Metals business increased aggregated revenue by 25% during the period to $589.2 million. Segment EBITDA was $85.6 million with a reported segment margin of 14.5% (2008: EBITDA $85.3 million; margin 18.1%).

In response to the change in market conditions many producers shifted their near-term focus to improvement and optimization of existing assets, providing a solid base of work in the Improve sector. Over the past 12 months we have secured the following long-term Improve contracts:

Despite the rapid slowdown in a number of markets in the second half of 2009, the result was supported by a strong first half and ongoing major project work in the Middle East.

• Goro Nickel in New Caledonia

Our continuing role on EMAL, the world’s largest single site aluminium smelter in Abu Dhabi, has been supported by eight offices and has achieved an excellent safety record to date of 10 million hours without a lost time injury.

OneSteel in Newcastle, one of our highest performing long-term contracts, was extended to include the Whyalla steelworks. The team was also awarded the OneSteel Safety Excellence Award. The Improve team at Worsley Alumina was assessed as ‘Top Quintile’ by BHP Billiton with the contract rated as best practice in three key areas.

Our role as EPCM contractor on the Ma’aden Phosphate project in Saudi Arabia continued in 2009. As a result of experience gained on this project we were commissioned to support major project developments for EgyPhos in Egypt, Legend Phosphate in Australia and Foskor’s project in South Africa. We were pleased to be awarded contracts in 2009 for: • Facilities integration at Southern Peru Copper’s Tia Maria copper mine in Peru • Execution planning and EPCM services for the Vale Serra Sul iron ore project in Brazil • A lead smelter pre-feasibility study for Nystar Port Pirie in Australia • A major coal expansion study for Sasol, South Africa

• Kazakhmys in Kazakhstan • OZ Minerals in Australia

Outlook for Minerals & Metals As confidence continues to grow in the sector on the back of some recovery and stabilization in commodity prices, there is renewed interest and activity in the progression of a number of previously deferred or stalled projects. While the rate of new project development is likely to be subdued in 2010, our early-phase study and feasibility work should ensure we are well positioned when these projects recommence. We are also encouraged by the continuing spend in the asset services sector. However, at this stage we expect earnings in this sector for 2010 to be materially below those reported for 2009. INFRASTRUCTURE & ENVIRONMENT The Infrastructure & Environment business delivered aggregated revenue for the year of $367.6 million, an increase of 7.3% from the $342.6 million reported in 2008. Segment EBITDA was $35.0 million with a margin of 9.5% (2008: EBITDA $49.4 million; margin 14.4%). The Infrastructure & Environment sector has been affected by the contraction in the resources sector, however, major projects with secured funding are continuing. We have successfully completed our role with the Fortescue Metals Group’s (FMG) iron ore development in Western Australia. The effort of the team to deliver this project at a time of an over-heated global construction market is worthy of particular mention.

Minerals & Metals / Brazil / Deliver Vale contracted WorleyParsons to meet the challenge of its multi-billion dollar Serra Sul Iron Ore Project in Brazil to bring new ideas in modularization to adapt their infrastructure requirements to the site-specific challenges of rugged port location with “first of a kind” solutions.

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WorleyParsons Annual Report 2009

WorleyParsons’ “Pit to Port” program management offering, which consolidates and resolves the complex infrastructure requirements to bring product from mine to the wharf via a rail link, has been well supported by customers. We first developed the concept on FMG’s development and are currently developing the project execution strategy for Karara Iron Ore and Oakajee Port and Rail in Western Australia. Our rail capability is becoming increasingly international, with a major award for an underground station in Singapore and program management services for the high speed rail between Mecca, Medina and Jeddah in Saudi Arabia. Our site and master planning capability resulted in the award of the Ibom Industrial City project in Nigeria, Sasol’s coal to liquids site in South Africa and a Coca-Cola facility site study in Beijing.

Introducing WorleyParsons Consulting Practices WorleyParsons has a long tradition of providing world class technical consulting services to our customers either from within our larger project teams or via stand-alone consulting engagements. This core technical consulting strength is a key component of the foundation on which the Company has been built and continues to be enhanced by the companies that have joined with WorleyParsons through our growth. Our in-house technical consulting staff range from those skilled in Advanced Analysis techniques to consultants seeking future Water Solutions; from a recognized world leadership position in Sulphur Technology to Flow Assurance of offshore deepwater gas fields; from Master Planning of new industrial cities to optimal selection of Mineral Processing technologies; from undertaking Environmental Impact Assessments to helping our customers future-proof their business via our Carbon Consulting service. This list of consulting practices is long and varied and will continue to grow as new markets emerge. It is due to this heritage consulting strength that we can offer our customers this specialist expertise in areas that are not traditionally associated with a global project delivery organization. A new look To better recognise and grow this key part of our business, we employ the branding above when delivering our technical consulting services.

Our environmental capability is required in nearly every project we perform, to assess the impact on water, wastewater, air quality and community sustainability. Outlook for Infrastructure & Environment The outlook for the Infrastructure & Environment sector is improving in 2010. Solid demand in water and wastewater management, desalination, remediation services and carbon advisory services, in conjunction with the nascent recovery in major resource sector projects, should result in increased demand for our services. We currently expect an improvement in earnings in this segment in 2010.

Benefits for our business Having these world class in-house technical consultants differentiates WorleyParsons within the broader EPCM and PMC industry. The consulting practices have the remit to pursue business growth on a global scale whilst supporting our projects across the regions. WorleyParsons remains committed to providing the opportunity for our consultants to pursue both their specialist area of technical expertise and to continue to broaden their careers within the many and varied project opportunities made available to them. It also aims to make WorleyParsons a more attractive employer to the type of industry-recognized consultants that we wish to attract. WorleyParsons acknowledges the choice made by many of our staff to pursue a career path of achieving technical excellence within one of our many consulting groups. The rapidly changing business environment is providing our customers with new challenges and some difficult problems. They recognise that solving the most difficult problems requires the best people. In uncertain times it pays to combine these people with an organization that has a proven project delivery track record. It is therefore essential that we continue the pursuit of technical excellence in combination with assured project delivery and program management.

pressure on margins and the likely negative impact of a higher Australian dollar. At this stage, the continuing uncertain market conditions make it unlikely that we can repeat this year’s result in the 2010 financial year. We expect, therefore, to report a modest decrease in earnings in 2010, with earnings weighted to the second half of the financial year. We are confident that our medium-term and long-term prospects remain very positive based on our competitive position and our strong financial capacity. The Company continues to evaluate opportunities for new business growth that will add to our existing capabilities and provide value for our shareholders.

OUTLOOK FOR WORLEYPARSONS GROUP Many of our key markets remain robust and we are encouraged by the evidence of some improvement in a number of the markets most affected in 2009 and by the continued award of significant contracts. However, the effects of extensive project deferrals and delays experienced through the second half of 2009 are expected to continue into 2010. Earnings will also be affected by ongoing

John Grill Chief Executive Officer

WorleyParsons Annual Report 2009

15

Board of Directors

Refer to pages 27 to 29 for Directors’ biographies

Peter Janu Company Secretary and Corporate Legal Counsel

David Housego Chief Financial Officer

John Grill Chief Executive Officer

Erich Fraunschiel Non‑Executive Director

Bill Hall Executive Director

Grahame Campbell

Ron McNeilly

Non‑Executive Director

Chairman

Catherine Livingstone, AO Non‑Executive Director

John Green

Larry Benke

Non‑Executive Director

Alternate Director

Eric Gwee Non‑Executive Director

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WorleyParsons Annual Report 2009

Chief Executive Officer’s Committee

Peter Meurs

Iain Ross

Managing Director EcoNomics™

Managing Director M&A, Strategy and CSGs

Andrew Wood

Mark Trueman

Brian Evans

Managing Director Australia / New Zealand

Managing Director Power

Managing Director Hydrocarbons

Stuart Bradie Managing Director Europe and Africa

Mark Southey

John Grill

Bill Hall

Managing Director Minerals & Metals

Chief Executive Officer

Managing Director Mega Projects

David Steele

David Housego

Larry Benke

Greg Clinnick

Managing Director Asia and Middle East

Chief Financial Officer

Managing Director Canada

Managing Director Risk Management

Robert Edwardes Managing Director US and Latin America

Craig Reeves Managing Director Corporate Services

Gordon Cowe Managing Director Infrastructure & Environment

The Chief Executive Officer’s Committee comprises the leaders of our regions, customer sector groups and key functional areas. Its core responsibilities include the development of cohesive strategies for the optimal use of our resources, the effective implementation of shared initiatives and the achievement of safety and performance targets, in line with our strategic objectives.

WorleyParsons Annual Report 2009

17

Corporate Governance INTRODUCTION The Board of Directors of WorleyParsons (Board) strives to ensure that the Company meets high standards of safety, performance and governance across its global operations. This is an ongoing commitment, requiring continual review, modification and enhancement of governance systems. The Company recognises that it has responsibilities to its customers, employees and suppliers as well as to the welfare of the communities in which it operates. The Board has authority for the ultimate oversight of the Company and regards corporate governance as a performance enhancement opportunity for WorleyParsons. Accordingly, WorleyParsons has adopted appropriate policies and codes and established a number of committees to discharge its duties. This statement outlines WorleyParsons’ approach to corporate governance for the financial year ended 30 June 2009. It addresses each of the ASX Corporate Governance Council Corporate Governance Principles and Recommendations (Principles) as revised and reissued in August 2007, and is divided into three parts:

WorleyParsons recognises that responsible, sustainable corporate performance is essential to the long term success of our business and desirable to all of our stakeholders. During the year WorleyParsons formalised its Corporate Responsibility policy. The Corporate Responsibility Statement can be found on page 26 of the Annual Report. PART 1 – COMPOSITION AND GOVERNANCE POLICIES OF THE BOARD Relevant policies and charters – Corporate Governance Code (see www.worleyparsons.com) and Board Charter 1.1 MEMBERSHIP The Board comprises nine directors in office at the date of this statement. Six of the directors, including the Chairman, are independent, non‑executive directors. The directors in office at the date of this statement are: Name Position

Ron McNeilly

Chairman

Grahame Campbell

Non‑Executive Director

Erich Fraunschiel

Non‑Executive Director

John Green

Non‑Executive Director

• g overnance policies that apply generally throughout the WorleyParsons Group.

Catherine Livingstone, AO

Non‑Executive Director

Eric Gwee

Non‑Executive Director

The “Corporate Governance” page in the “Investor Relations” section of the Company’s website (www.worleyparsons.com) contains most of the documents which are referred to in this statement. These charters, codes and policies are regularly reviewed to take account of recent changes in the law and governance practices. The following table indicates where specific ASX Principles are dealt with in this statement.

John Grill

Chief Executive Officer

David Housego

Chief Financial Officer

William Hall

Executive Director

Larry Benke

Alternate Director to Mr Hall

• t he composition of the Board and governance policies applicable to the Board; • t he operation and responsibilities of the Board and Board committees; and

ASX Principle

Location in Corporate Governance Statement

Principle 1 – Lay solid foundations for management and oversight

1.3, 1.7, 2.1, 2.2

Principle 2 – Structure the Board to add value 1.1, 1.2, 1.3, 1.4, 1.5, 1.6, 1.7, 2.2, 2.3

Details of the skills, experience (including the director’s period of office) and expertise, of each of the directors are contained in the profiles included on pages 27 to 29 in the Directors’ Report. 1.2 COMPOSITION PRINCIPLES The Board’s composition is determined in accordance with the following principles: • t he Board should comprise at least three members, and maintain a majority of independent and/or non‑executive directors; • t he positions of Chairman and Chief Executive Officer must be held by separate persons; • the Chairman must always be a non‑executive director;

Principle 3 – Promote ethical and responsible decision making

1.5, 2.4, 3.1, 3.2

Principle 4 – Safeguard integrity in financial reporting

• t he Board should comprise directors with an appropriate range and mix of qualifications and expertise;

2.3, 3.3, 3.4

• t he performance of the Board and its members should be reviewed annually and objectively;

Principle 5 – Make timely and balanced disclosure 2.4, 3.5 Principle 6 – Respect the rights of shareholders 3.5, 3.6 Principle 7 – Recognise and manage risk

2.3, 3.3, 3.4

Principle 8 – Remunerate fairly and responsibly

2.3, 3.7

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WorleyParsons Annual Report 2009

• a ll directors (except the Chief Executive Officer) must submit themselves for re‑election at regular intervals, and at least every three years; and • a ll non‑executive directors should serve a maximum of three terms, unless their tenure is extended by the Board.

1.3 APPOINTMENT, INDUCTION AND TRAINING The Board’s Nominations Committee sets and reviews the criteria for appointment of new directors having regard to the overall composition of the Board. The Committee may retain and supervise appropriate search firms to assist in the recruitment of new directors. Each non‑executive director receives a letter formalising the appointment and their letter outlines the key terms and conditions relative to their appointment. Senior executives, including the executive directors, each have a written position description and a service contract. Directors’ induction and ongoing training and education programs are incorporated into the Board program. Directors are encouraged, and are given the opportunity, to broaden their knowledge of the Company’s business by visiting offices in different locations and to remain abreast of developments impacting the business. 1.4 DIRECTOR INDEPENDENCE The Board recognises that whilst various principles and factors are relevant in determining independence, true independence is a matter of judgement having regard to the particular circumstances. Accordingly, when the Board exercises its judgement in determining independence it has regard to relationships between a director and third parties that may compromise the independence of the director. The Nominations Committee has the task of monitoring and undertaking an annual assessment of the independence of each and every non‑executive director in light of the commentary provided in the Principles, Australian corporations law and current corporate governance practice. At each Board meeting the Board determines the currency of independence of each non‑executive director. In determining independence, the Board has regard to the form of interest (for example, as shareholder, advisor, supplier or customer) and the materiality of any identified interest. The Board regularly reconsiders the materiality of any identified interest to make sure the original determination remains appropriate. This maintains the integrity of the original decision despite the constantly changing circumstances of the Company. The Board recognises that the Accounting Standards provide a useful guide to what is or is not material in a quantitative sense. The Accounting Standards define materiality as an interest of more than 10% of the relevant base (whether revenue, equity or expenses). Any interests between 5% and 10% of the base are treated as potentially material, depending on the circumstances. However, the Board also apply a qualitative assessment to ensure the director may act in the best interests of WorleyParsons. The Board considers whether there are any factors or considerations which may affect the director’s interest and could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of WorleyParsons. The Board has considered the positions and relationships of each of the six non‑executive directors and has formed the view that all six non‑executive directors are independent. The Board is of the opinion

that each non‑executive director is independent of WorleyParsons’ management and is free of any interest that may affect their free and unfettered judgement. Mr Erich Fraunschiel, the Chairman of the Company’s Audit and Risk Committee, is a director of Woodside Petroleum Limited which is a material customer of WorleyParsons in Australia. Mr Eric Gwee is a director of Singapore Power, which is a material customer of one of the Company’s Singaporean subsidiaries, WorleyParsons (DRPL) Pte Limited. Both Mr Fraunschiel and Mr Gwee are considered by the Board to be independent after application of the principles stated above. In the opinion of the Board, the judgement of Messrs Fraunschiel and Gwee has not been impaired or conflicted by virtue of their directorships of these other entities. Mr John Green and Mr Grahame Campbell are regarded as independent notwithstanding they each served on WorleyParsons’ Advisory Board prior to the Company’s initial public offering in 2002. 1.5 NOTIFICATION OF INTERESTS AND TREATMENT OF CONFLICTS Directors are required to notify the Chairman of any contracts, offices (including other directorships) held, and interests in other companies or transactions which might involve a potential conflict. In the event of a real or potential conflict, the Board acts appropriately and minutes its actions accordingly. The Corporate Governance Code and Board Charter details the process that WorleyParsons applies in the event that a conflict arises for one or more of its directors. In particular, a director who has a material personal interest will not, without the Chairman’s approval, receive relevant Board papers and/or be present during any discussion or vote on the matter. 1.6 INDEPENDENT ADVICE Each director is entitled to take independent professional advice at the Company’s expense, with the prior approval of the Chairman. 1.7 PERFORMANCE REVIEW WorleyParsons encourages excellence from all its personnel and the directors recognise that the performance of all personnel, including directors, is enhanced by a structured performance review process. Review of Board Performance The Nominations Committee oversees the conduct of a review of Board performance, policies and practice every 12 months. The review includes: • comparing Board performance against agreed criteria; and • examining the effectiveness and composition of the Board. Informal reviews are conducted as necessary and any director may suggest that the Board conduct an additional formal review earlier than the regular annual review. From time to time, the Board engages external consultants to undertake an independent review of the Board and individual director’s performance and effectiveness. The internal and external review processes complement each other and ensure that the Board, its committees and the individual directors are subject to appropriate review mechanisms.

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19

Corporate Governance continued Review of the performance of Senior Management The Nominations Committee establishes performance criteria for the Chief Executive Officer and conducts a performance review of the Chief Executive Officer at least annually. In turn, the Chief Executive Officer conducts annual performance reviews of senior executives and reports on their performance to the Remuneration Committee. The performance and reward of senior executives were reviewed in this manner during the year. PART 2 – OPERATION AND RESPONSIBILITIES OF THE BOARD AND BOARD COMMITTEES Relevant policies and charters – Corporate Governance Code (see www.worleyparsons.com) and Board Charter – Nominations Committee Charter – Remuneration Committee Charter – Audit and Risk Committee Charter – Continuous Disclosure Policy 2.1 BOARD RESPONSIBILITIES AND DELEGATION TO SENIOR MANAGEMENT The Board’s responsibilities and those matters delegated to senior management are encompassed in the Corporate Governance Code and Board Charter. The Board is responsible for approving the strategic direction and objectives of WorleyParsons. It monitors all aspects of WorleyParsons’ performance. The Board works with senior executives to formulate strategic direction, to set goals, budgets, plans and policies and to identify and mitigate risk. The deliberations of the directors in the Board meetings and the application of WorleyParsons’ policies are aimed at allowing the Board to critically and objectively review management’s performance and to ensure that senior management’s activities are aligned with the expectations of shareholders. The Board has delegated certain of its powers relating to the management of the Company’s operations to the Chief Executive Officer, with the mandate to drive the Company’s strategic direction and meet the goals determined by the Board. The Chief Executive Officer (CEO) is supported in his role by a number of management committees, including the CEO’s Committee and the Regional Management Committees. The CEO’s Committee supports the Chief Executive Officer by formulating and reviewing Group policies and initiatives which affect the global business, and also reviews items that are to be referred to the Board for approval. The five Regional Management Committees have an operational focus and are responsible for managing the business of specific geographic regions. These committees are also responsible for monitoring compliance with WorleyParsons’ codes and policies.

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WorleyParsons Annual Report 2009

2.2 BOARD MEETINGS The Board meets formally at least six times a year, with additional meetings held as required. Senior executives are invited to attend Board meetings on a regular basis, even if they are not members of the Board. This provides a direct line of communication between the directors and management. However, non‑executive directors meet at least twice a year in the absence of management. Details of the Board and committee meetings held and attendances at those meetings are set out in the Directors’ Report on page 27. Details of the qualifications of committee members are included on pages 27 to 29 in the Directors’ Report. 2.3 BOARD COMMITTEES To ensure the Board is well equipped to discharge its responsibilities and to assist the Board in carrying out its responsibilities, it has established three standing committees, the Audit and Risk Committee, the Nominations Committee and the Remuneration Committee. Each committee has a non‑executive director as Chairman and only non‑executive directors can be members of the committees. Each committee has a charter, which is reviewed annually by the relevant committee and the Board. Members of senior management may attend committee meetings upon invitation from the relevant Chairman. Audit and Risk Committee The Audit and Risk Committee assists the Board in its oversight of the integrity of financial reporting, the Company’s risk management framework and internal controls. The Committee has an important role in supervising and monitoring the progress of both the internal audit and risk management functions. It also manages the relationship with the external auditor including the appointment, removal and evaluation of the auditor and approval of the auditor’s contract, fees and audit plan. The Audit and Risk Committee also reviews and makes recommendations on the strategic direction, objectives and effectiveness of the Company’s financial and operational risk management processes. This includes consideration of the effectiveness of risk management processes in mitigating material business risks, compliance and internal control systems. The following directors were members of the Audit and Risk Committee throughout the year: Name Position

Duration

Erich Fraunschiel

Chairman of the Committee and Non‑Executive Director Whole year

Grahame Campbell

Non‑Executive Director

Whole year

Catherine Livingstone, AO Non‑Executive Director

Whole year

The Audit and Risk Committee, on behalf of the Board, ensures the integrity of the external audit function by not permitting:

• a ttract and retain executives, directors and employees who will create value for shareholders;

• t he partner managing the audit for the external auditor to serve for more than five consecutive years; and/or

• generate sustained business performance; and

• t he external auditor to be retained for non‑audit work where such retainer may detract, or be perceived to detract, from the auditor’s independence or impartiality. The Committee is responsible for nominating the external auditor to the Board.

• support WorleyParsons’ objectives, goals and values. Further details as to the operation of the Committee are set out in the Remuneration Report at page 29 of the Annual Report. The following directors were members of the Remuneration Committee during the year: Name Position

Duration

In accordance with the Company’s external audit rotation policy, the external audit partner was changed in the 2007 financial year.

John Green

Chairman

Whole year

Fees paid to the external auditor for non‑audit work are disclosed in the financial statements.

Ron McNeilly

Non‑Executive Director

Whole year

Eric Gwee

Non‑Executive Director

Whole year

Nominations Committee From August 2007 the Nominations and Remuneration Committee was split into two separate committees: the Nominations Committee and the Remuneration Committee. The role of the Nominations Committee is to assist and advise the Board on matters relating to the composition and performance of the Board, including director independence, and the appointment, performance review and remuneration of the Chief Executive Officer. The Committee reviews, assesses and advises the Board in relation to the necessary and desirable competencies of the Board and the Committee. It also oversees the selection and appointment practices for non‑executive directors. All of the non‑executive directors are members of the Nominations Committee. Name Position

Duration

Ron McNeilly

Chairman of the Committee and Chairman of the Board and Non‑Executive Director

Whole year

Grahame Campbell

Non‑Executive Director

Whole year

Erich Fraunschiel

Non‑Executive Director

Whole year

John Green

Non‑Executive Director

Whole year

Eric Gwee

Non‑Executive Director

Whole year

Catherine Livingstone, AO Non‑executive Director

Whole year

Remuneration Committee The role of the Remuneration Committee is to assist and advise the Board on matters relating to the remuneration of the Board, and the performance and remuneration of the Chief Executive Officer’s direct reports. The Committee is responsible for ensuring that WorleyParsons has and observes coherent remuneration policies and practices which enable it to:

2.4 OTHER COMMITTEES In addition to the CEO’s Committee and the Regional Management Committees, a number of additional committees assist the Board in monitoring and overseeing the Company’s policies and codes, with a view to reinforcing the Board’s commitment to a culture of good corporate governance and strong ethical standards and integrity. Disclosure Committee The Continuous Disclosure Policy provides for a Disclosure Committee to meet to consider issues which may be of interest to shareholders and the market in general. The role of the Disclosure Committee is to consider issues which are potentially material and price sensitive and to determine whether the matter needs to be disclosed to the market. The Disclosure Committee comprises the Chief Executive Officer and/or the Chief Financial Officer, the Company Secretary and at least one non‑executive director. Generally the Board will consider major disclosure decisions such as results, profit, guidance and major acquisitions. Ethics Committee The role of the Ethics Committee is to: • a ssess, develop, implement and oversee company ethics on a global basis; • p rovide the oversight necessary to guide senior management and employees in their collaborative efforts to adhere to activities that encourage and reinforce good business practices and maintenance of regulatory requirements; • r ecommend to the Chief Executive Officer and the CEO’s Committee the objectives, policies and procedures that best serve the Company’s interests in maintaining a business environment committed to high standards of ethics and integrity, corporate responsibility and legal compliance. The Ethics Committee comprises senior management representatives of Risk, Legal, Governance, Finance, and Internal Audit. It provides a centralised function through which ethical issues may be reported and investigated.

WorleyParsons Annual Report 2009

21

Corporate Governance continued PART 3 – GOVERNANCE POLICIES APPLYING TO THE WORLEYPARSONS GROUP Relevant policies and charters – Corporate Governance Code (see www.worleyparsons.com) and Board Charter – Nominations Committee Charter – Remuneration Committee Charter – Audit and Risk Committee Charter – Code of Conduct – Securities Dealing Policy – Continuous Disclosure Policy – Risk Management Policy 3.1 ETHICAL DECISION MAKING – THE CODE OF CONDUCT The Board has published various policies and codes to promote WorleyParsons’ approach to ethical and responsible decision making. The WorleyParsons Code of Conduct guides WorleyParsons personnel as to the standards of behaviour expected of all directors, executives, management, employees, contractors and agents of the Company. The Code has been translated into Chinese, Bulgarian, Russian, Kazakh, Romanian, Thai, Spanish, French, Arabic and Vietnamese. While the Code of Conduct seeks to prescribe standards of behaviour for all personnel to observe, it does not, and understandably cannot, identify every ethical issue that a director or employee might face. The objective of the Code is to provide a benchmark for professional behaviour throughout the Company, to support WorleyParsons’ reputation and make directors, employees and others aware of the consequences if they breach the Code. The Code of Conduct deals with many ethical issues, including: • W orleyParsons’ commitment to a safe and harassment‑free workplace; • good corporate citizenship and compliance with laws; • acting with professional integrity; and • p rotecting WorleyParsons’ reputation, assets, resources, information and records. The Code is provided to employees of WorleyParsons upon commencement of their employment and is accessible on the Company’s intranet or via their human resources representative. The Board regularly reviews the Code of Conduct and each of the policies which underlie and expand on the Code’s requirements to ensure they remain appropriate.

22

WorleyParsons Annual Report 2009

3.2 PREVENTING INSIDER TRADING AND HEDGING The Board has approved a Securities Dealing Policy that applies to all directors, employees and contractors of the Company and its subsidiaries. The Policy is designed to: • e xplain the type of conduct in relation to dealings in securities that is prohibited under the relevant law and by WorleyParsons; and • e stablish a best practice procedure for buying, selling or otherwise acquiring WorleyParsons securities by only allowing trading during specified trading windows or with prior approval from the CEO or CFO. Directors and executives are not generally permitted to hedge their shareholdings except as prescribed in the Securities Dealing Policy. Performance rights may not be hedged. “Hedging” includes entering into any transaction or arrangement in financial products which operates to limit the economic risk of a security holding in the Company, including equity swaps and contracts for difference. The Securities Dealing Policy requires that where there will be an unmet margin call, an event of default or other similar occurrence in relation to margin loans or similar funding arrangements, the director or executive must immediately disclose to the Company Secretary or the Chief Financial Officer the existence and terms of those arrangements, so the Company may comply with its continuous disclosure obligations. 3.3 MANAGEMENT OF MATERIAL BUSINESS RISKS During the year the Company applied a codified approach to risk management across the enterprise via its Global Risk Management Policy and Framework. The Risk Management Framework supports the Risk Management Policy and describes the objectives, strategies, resources and responsibilities for managing risk. WorleyParsons’ enterprise‑wide risk management approach is based on Australian Standard AS/NZS 4360:2004 Risk Management. This approach adopts best practice in risk management so far as it relates to WorleyParsons’ requirements. The Company’s Risk Management systems are mature and embedded throughout the operations via WorleyParsons Electronic Management System. WorleyParsons has processes to systematically identify, assess, and report on both financial and non‑financial material business risks. A Strategic and Operational Corporate Risk Management report is prepared and analysed by both management and the Board. This process enables the Board to consider the effectiveness of the Company’s risk management of its material business risks. The Board has also received a written assurance from the Chief Executive Officer and the Chief Financial Officer that the declarations provided by them in accordance with section 295A of the Corporations Act and ASX Corporate Governance Recommendation 7.2, is founded on a sound system of risk management and internal control and that the system is functioning effectively in relation to financial reporting and material business risks.

3.4 INTERNAL AUDIT The Internal Audit function is independent from management and is overseen by the Audit and Risk Committee. It provides assurance that WorleyParsons’ material business risks are being managed appropriately and that its internal control framework is operating effectively. In addition to its ongoing audit reports, the General Manager of Internal Audit provides an annual assessment of the adequacy and effectiveness of WorleyParsons’ control processes and risk management procedures in light of the nature, function and size of the Company’s operations to the Audit and Risk Committee. 3.5 CONTINUOUS DISCLOSURE The Board is committed to ensuring that WorleyParsons complies with its continuous disclosure obligations and has approved a Continuous Disclosure Policy that applies to all WorleyParsons personnel. The Board seeks to promote investor confidence by ensuring that trading in WorleyParsons’ shares takes place in an informed and competitive market. The Policy provides for a Disclosure Committee to meet to consider issues which may be of interest to shareholders and the market in general. The Continuous Disclosure Policy is designed to ensure that all WorleyParsons personnel are aware of WorleyParsons’ obligations and to ensure accountability at a senior management level for timely disclosure of material information. This means that shareholders and the market in general are kept properly informed of material price sensitive information affecting the Company, on a timely basis. WorleyParsons discharges this obligation by releasing material price sensitive information to the ASX in the form of an ASX release and disclosure in other documents distributed to shareholders, such as the annual or half‑year report.

The external auditor attends the Annual General Meeting and is available to answer shareholder questions about the conduct of the audit and the preparation and content of the Auditor’s Report. 3.7 REMUNERATION OF DIRECTORS AND SENIOR EXECUTIVES WorleyParsons seeks to attract and retain directors and executives with the appropriate expertise and the ability to create value for shareholders. The remuneration structure for the non‑executive directors is not related to performance; non‑executive directors receive fees which reflect their skills, responsibilities and the time commitments required from the non‑executive director in the discharge of their duties. The remuneration structure for senior executives reflects the Company’s performance culture: there is a direct correlation between the executive’s reward and individual and Company performance. Further details of the remuneration policies and practices of the Company (including those regarding retirement benefits for non‑executive directors and the Company’s hedging policy) and the remuneration paid to directors and senior executives are set out in the Remuneration Report on pages 29 to 39 of the Annual Report.

3.6 COMMUNICATING WITH SHAREHOLDERS The Board aims to ensure that the shareholders are fully informed of all material information relating to WorleyParsons by communicating to shareholders through: • continuous disclosure reporting to the ASX; • the Annual Report; • the half‑yearly report; and • m edia releases and other investor relations publications on the Company’s website. The Continuous Disclosure Policy outlines the procedures for disclosure of relevant information to the market (see above) and incorporates the Company’s Communications Policy. The Board encourages the full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and discussion of the Company’s performance and goals. The Chairman encourages questions and comments from shareholders and seeks to ensure that shareholders are given ample opportunity to participate. The Chief Executive Officer and/or the Chief Financial Officer with other executives occasionally meet with analysts and investors. Any presentations made to these groups are released to the market via the ASX and published on the investor section of the Company’s website.

WorleyParsons Annual Report 2009

23

Financial Contents

Financial Report Financial Year Ended 30 June 2009 Directors’ Report

25

Income Statement

40

Balance Sheet

41

Statement of Changes in Equity

42

Cash Flow Statement

43

Notes to the Financial Statements

44

Directors’ Declaration

76

Independent Auditor’s Report to the Members of WorleyParsons Limited

77

Shareholder Information

79

Corporate Information

80

WORLEYPARSONS LIMITED ACN 096 090 158

24

WorleyParsons Annual Report 2009

Directors’ Report The directors present their report on the consolidated entity consisting of WorleyParsons Limited (Parent Entity or Company) and the entities it controlled (consolidated entity or Group) at the end of, or during, the financial year ended 30 June 2009.

DIRECTORS

Since the end of the financial year, the directors have declared a final dividend of 55.0 cents per fully paid ordinary share, including exchangeable shares, fully franked based on tax paid at 30%. In accordance with AASB 137 “Provisions, Contingent Liabilities and Contingent Assets”, the aggregate amount of the proposed final dividend of $133.5 million is not recognized as a liability as at 30 June 2009.

The following persons were directors of the Company during the financial year and until the date of this report:

REVIEW OF OPERATIONS A detailed review of the operations for the financial year of the Group and the results of those operations are contained in the Chairman’s Letter and Chief Executive Officer’s Report.

Ron McNeilly (Chairman) Grahame Campbell Erich Fraunschiel

A summary of the consolidated revenues and results is as follows:

John Green

John Grill (Chief Executive Officer)

CONSOLIDATED

2009 $’M

2008 $’M

William Hall

Revenue and other income

5,851.8

4,670.1

David Housego

EBITDA

693.2

587.0

Catherine Livingstone, AO

EBITDA margin on statutory revenue

11.8%

12.6%

Eric Gwee

Larry Benke (alternate executive director for William Hall).

Depreciation

(28.4)

(23.4)

As at the date of this report, the interests of the directors in the shares and performance rights of the Company were:

Amortization

(59.5)

(43.6)

DIRECTORS

NUMBER OF SHARES AND PERFORMANCE RIGHTS

EBIT

605.3

Net interest expense

(43.6)

520.0 (31.7)

Profit before income tax expense

561.7

488.3

Income tax expense

(160.8)

(141.0) 347.3

Ron McNeilly

401,064

Grahame Campbell

508,199

Erich Fraunschiel

168,755

Profit after income tax expense

400.9

John Green

958,516

Profit attributable to minority interests

(10.4)

33,389,649

Profit attributable to members of WorleyParsons Limited

390.5

343.9

5,851.8

4,670.1

John Grill Eric Gwee

36,802

(3.4)

William Hall

101,683

Revenue and other income

David Housego

260,457

Procurement services revenue

(288.7)

7,600

Share of revenue from associates

812.9

855.9

1,196,763

Procurement services revenue of associates

(106.8)

(392.7)

Catherine Livingstone, AO Larry Benke (alternate executive director)

PRINCIPAL ACTIVITIES During the financial year, the principal activities of the consolidated entity consisted of the provision of engineering design and project services to the following sectors including provision of maintenance and reliability support services to these sectors: •

Hydrocarbons

•

Power

•

Minerals and Metals

•

Infrastructure and Environment

(44.1)

(36.5)

Aggregated revenue1

6,225.1

4,900.7

EBITDA margin on aggregated revenue

11.1%

12.0%

Hydrocarbons

Details of dividends paid in respect of the financial year are as follows:

Interim ordinary dividend for the financial year ended 30 June 2009 of 38.0 cents per ordinary share paid on 9 April 2009#

Share of net profits of associates

1 Aggregated revenue is defined as statutory revenue plus share of revenue from associates less procurement services revenue at nil margin. The directors believe the disclosure of revenue attributable to associates provides additional information in relation to the financial performance of WorleyParsons.

DIVIDENDS – WORLEYPARSONS LIMITED

2009 $’M

92.2

(196.1)

2008 $’M

–

114.8

–

Interim ordinary dividend for the financial year ended 30 June 2008 of 38.0 cents per ordinary share paid on 11 April 2008#

–

91.9

Final ordinary dividend for the financial year ended 30 June 2007 of 32.5 cents per ordinary share paid on 25 September 2007#

–

78.2

Total dividends paid

207.0

170.1

2009 $’M

EBITDA

EBITDA MARGIN

2008 $’M

2009 $’M

2008 $’M

2009 %

2008 %

4,749.1 3,612.5

555.1

438.5

11.7

12.1

Power

547.7

469.2

66.5

65.4

12.1

13.9

Minerals and Metals

589.2

471.1

85.6

85.3

14.5

18.1

Infrastructure and Environment 367.6

342.6

35.0

49.4

9.5

14.4

18.3

–

–

–

–

Other Unallocated/ eliminations

Final ordinary dividend for the financial year ended 30 June 2008 of 47.5 cents per ordinary share paid on 10 October 2008#

AGGREGATED REVENUE

5.7 (34.2) 6,225.1

(13.0) 4,900.7

(49.0) 693.2

(51.6) 587.0

–

–

11.1

12.0

The EBITDA margin on aggregated revenue was $6,225.1 million, an increase of 27.0% on the prior year. EBITDA of $693.2 million was up 18.1% from the prior year result of $587.0 million.

# Partly franked dividend.

WorleyParsons Annual Report 2009

25

Directors’ Report The EBITDA margin on aggregated revenue for the Group decreased to 11.1% compared with 12.0% in 2008. After tax, the Company earned a net margin on aggregated revenue of 6.3%, compared to the 2008 net margin of 7.0%. The effective tax rate was 28.6% compared with 28.9% in 2008. The Group retains a strong cash position and low level of gearing with net debt to net debt + equity at year end of 25.5% (2008: 31.4%). Cash as at 30 June 2009 was $178.3 million (2008: $86.0 million). EBITDA interest cover for 2009 was 14 times (2008: 12 times). Operating cash inflow for the period was $546.4 million, compared to $198.8 million in 2008. Cash outflow from investing activities was $133.4 million (2008: $325.6 million).

WorleyParsons Komex is a division of WorleyParsons Canada which provides environmental consulting and monitoring services to industrial customers. WorleyParsons Komex is also involved in remediation of contaminated sites for its customers and in the past acquired and remediated a brownfields site. WorleyParsons Komex itself still owns one remediated property. In the period WorleyParsons held ownership interests in pipeline and power station assets that held appropriate environmental licences. Compliance with these licences was managed through the operational systems which control and monitor the operation and maintenance of these assets. The licences are monitored and approved by independent experts on an annual basis. The Company is not aware of any breaches by WorleyParsons of any environmental regulations under the laws of the Commonwealth of Australia, or of a State or Territory.

EARNINGS PER SHARE 2009 2008 cents cents

Basic earnings per share

161.1

142.5

Diluted earnings per share

159.4

140.8

Basic earnings per share were 161.1 cents per share, an increase of 13.0% from the previous financial year result of 142.5 cents per share.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS In March 2009, the Group divested of its remaining equity interests in the Esperance power station and pipeline entities. The sale consideration provided for a small gain above the Group’s carrying value of the assets. On 21 February 2009, the Group refinanced US$190.0 million and A$115.0 million of loan facilities with a new syndicated facility limit of US$300.0 million, with US$60.0 million maturing in February 2010 and US$240.0 million maturing in February 2012.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR There has not arisen in the period between 30 June 2009 and the date of this report any item, transaction or event of a material and unusual nature likely in the opinion of the directors of the Company to affect significantly the operations of the Group, the results of those operations or the state of affairs of the Group, in future financial years.

CARBON AND ENERGY EMISSIONS AND CONSUMPTION PERFORMANCE During the year the Company completed its 2009 report under the Carbon Disclosure Project. As a result of this exercise the Company has been able to determine a benchmark against which it will be able to measure actions being taken to improve the global group’s carbon performance and decrease energy overheads. As a result of the Company’s ownership interests in power stations the Company is expected to register and report its emissions, energy consumption and energy production for the 12 month period ending 30 June 2009 under the Australian National Greenhouse and Energy Reporting Act. During the year the Company sold its interests in the Esperance power station.

CORPORATE RESPONSIBILITY STATEMENT WorleyParsons recognizes that responsible, sustainable corporate performance is essential to the long term success of our business and desirable to all of our stakeholders. We adhere to the following principles: •

Environment

– We work with our clients to assist in developing and implementing best practice in environmental performance in the design and delivery of all of their projects

– We take a leadership role in profitable sustainability through our EcoNomics™ initiative both for our clients and ourselves

– We are identifying the source of the carbon footprint of our business and will aim to reduce it

– We are in compliance with changing ecological and regulatory environments and adapt to meet these changing needs

•

Integrity and ethics

– We uphold the standards of behavior outlined in our Code of Conduct

At this stage, the continuing uncertain market conditions make it unlikely that the Company can repeat this year’s result in the 2010 financial year. Therefore, it is expected that the Company will report a modest decrease in earnings in 2010, with earnings weighted to the second half of the financial year.

– We maintain the highest standards of corporate governance and we report our governance performance annually

– We deal fairly with all suppliers, partners, customers and other parties we encounter in our business and we develop productive, co‑operative relationships

The directors are confident that the Company’s medium term and long term prospects remain very positive based on its competitive position and its strong financial capacity. The Company continues to evaluate opportunities for new business growth that will add to its existing capabilities and provide value for its shareholders.

– We ensure bids are conducted with integrity and transparency

– We apply and continuously improve our risk management procedures and protocols

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS Many of the Company’s key markets remain robust and the directors are encouraged by the evidence of some improvement in a number of the markets most affected in 2009 and by the continued award of significant contracts. However, the effects of extensive project deferrals and delays experienced through the second half of 2009 are expected to continue into 2010. Earnings will also be affected by ongoing pressure on margins and the likely negative impact of a higher Australian dollar.

ENVIRONMENTAL REGULATION In the majority of WorleyParsons’ business situations, WorleyParsons is not the owner or operator of plant and equipment requiring environmental licences. WorleyParsons typically assists its customers with the management of their environmental responsibilities, rather than holding those responsibilities directly. However, WorleyParsons has environmental responsibilities in terms of compliance with environmental controls and in exercising reasonable care and skill in its design, construction management and supervision activities. The risks associated with environmental issues are managed through WorleyParsons’ risk management and quality assurance systems.

26

WorleyParsons Annual Report 2009

•

Our people

– We respect human rights and have as our goal to create a work environment that is positive and safe for all employees and enables optimal performance. We have developed a number of comprehensive policies that set high standards of performance in the following areas and we implement them rigorously:

–

Personnel Policy

–

Equal Opportunity Policy

–

Prevention of Harassment Policy

–

Work and Life Balance Policy

– We do not employ, nor cause to be employed, forced or child labor

– We are committed to ongoing education and training of our people

•

Health & safety

MEETINGS OF DIRECTORS

– We have a comprehensive global Health, Safety and Environment Policy and are committed to continuous improvement in this area

– We are committed to our target of Zero Harm

The number of meetings of Directors (including meetings of committees of Directors) held during the financial year and the number of meetings attended by each director were as follows:

•

Community

– We support the development of local businesses and we use local people and other local resources wherever possible

– We support local communities in which we work through charitable contributions

– We encourage the giving of time and money by our employees and have policies in place to match or support these endeavors

BOARD DIRECTOR

AUDIT AND RISK COMMITTEE

NOMINATIONS COMMITTEE

REMUNERATION COMMITTEE

MEETINGS MEETINGS MEETINGS MEETINGS HELD HELD HELD HELD WHILE WHILE WHILE WHILE A NUMBER A NUMBER A NUMBER A NUMBER DIRECTOR ATTENDED MEMBER ATTENDED MEMBER ATTENDED MEMBER ATTENDED

Ron McNeilly

9

9

–

–

5

5

8

8

Grahame Campbell

9

9

7

7

5

5

–

–

Erich Fraunschiel

9

7

7

7

5

5

–

–

John Green

9

9

–

–

5

5

8

8

John Grill

9

9

–

–

–

–

–

–

NON‑AUDIT SERVICES

Eric Gwee

9

9

–

–

5

5

8

8

During the year, Ernst & Young, the Company’s auditor, has performed certain other services in addition to its statutory duties:

William Hall

9

8

–

–

–

–

–

–

David Housego

9

9

–

–

–

–

–

–

Total non-audit services provided by the external auditor

Catherine Livingstone, AO

9

9

7

7

5

5

–

–

•

Performance

– We commit to delivering outstanding corporate performance, delivering value to our customers, returns to our shareholders and prosperity to our people.

$868,885

The Board has adopted a policy outlining the provision of non‑audit services. The Board has considered the position and, in accordance with the advice received from the Audit and Risk Committee is satisfied that the provision of the non‑audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non‑audit services by the auditor, as set out above, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: •

ll non‑audit services have been reviewed by the Audit and Risk a Committee to ensure they do not impact the integrity and objectivity of the auditor; and

•

one of the services undermine the general principles relating to auditor n independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing and auditing the auditor’s own work, acting in a management or decision‑making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out below:

In addition to the above meetings five special purpose Board sub‑committee meetings were held during the year. The Board also met informally during the year by way of a telephone briefing on three occasions, as did the Remuneration Committee on two occasions. All non-executive directors who are not members of sub-committees are invited to and generally attend all sub-committee meetings.

INFORMATION ON DIRECTORS AND COMPANY SECRETARY RON McNEILLY CHAIRMAN AND NON‑EXECUTIVE DIRECTOR Ron is Chairman of the Board and the Nominations Committee and a member of the Remuneration Committee. Ron is currently the Deputy Chairman of BlueScope Steel Limited (previously BHP Steel) and has over 30 years’ experience in the steel industry. Ron joined BHP Billiton in 1962 and has held positions with BHP Billiton including executive director and President BHP Minerals, Chief Operating Officer, Executive General Manager and Chief Executive Officer BHP Steel, General Manager Transport, General Manager Long Products Division and General Manager Whyalla Works. Ron is the Chairman of the Melbourne Business School Limited and a director of Alumina Limited. He is a former Chairman of Ausmelt Limited and a former director of BHP and BHP Billiton, QCT Resources and Tubemakers of Australia. Australian listed company directorships

AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF Independent Auditor’s Report to the members of WorleyParsons Limited WORLEYPARSONS LIMITED

In relation to our audit of the financial report of WorleyParsons Limited for Report on the Financial Report have audited the accompanying financial reportbest of WorleyParsons which comprises the belief, balance the year We ended 30 June 2009, to the of myLimited, knowledge and there sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash flow statement for the ended on that date, a summary of significant accounting policies, other explanatory notes and the have been noyearcontraventions of the auditor independence requirements of directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the the Corporations Act or any applicable code of professional conduct. year’s end or from time2001 to time during the financial year.

LISTED COMPANY NAME

NATURE OF DIRECTORSHIP

Alumina Limited

Non-executive director

BlueScope Steel Limited

Deputy Chairman 10 May 2002 and non-executive director

DATE OF COMMENCEMENT

DATE OF CESSATION

11 December 2002 n/a n/a

Directors Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2B, the directors also state that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Ernst & Young

Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with

relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain Jeff Chamberlain reasonable assurance whether the financial report is free from material misstatement.

Partner An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on our judgment, including the assessment of the risks of Sydney, 24 August 2009 material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

Liability limited by a scheme approved

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our under Professional Standards Legislation audit opinion.

Independence In conducting our audit we have met the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.

WorleyParsons Annual Report 2009

27

Directors’ Report GRAHAME CAMPBELL NON‑EXECUTIVE DIRECTOR Grahame is a member of the Audit and Risk Committee and the Nominations Committee. Grahame was managing director of CMPS&F from 1987 to 1995, at the time one of the largest engineering and project management groups in Australia. Grahame has over 30 years’ experience in the management of major Australian and offshore infrastructure projects including oil, gas, road, rail, mining and minerals projects. Grahame is a director of Pacific Hydro Pty Limited and was previously a director of Iluka Resources Limited and a past President of the Association of Consulting Engineers Australia and the Australian Pipeline Industry Association. Prior to his appointment as a non‑executive director of the Company on listing in 2002, Grahame was a member of the advisory board for four years. Australian listed company directorships LISTED COMPANY NAME

NATURE OF DIRECTORSHIP

Iluka Resources Limited

Non-executive director

DATE OF COMMENCEMENT

DATE OF CESSATION

17 December 1998 21 May 2008

Australian listed company directorships NATURE OF DIRECTORSHIP

West Australian Newspapers Holdings Limited

Non-executive director

Woodside Non-executive Petroleum Limited director

DATE OF COMMENCEMENT

DATE OF CESSATION

2 May 2002

5 November 2008

1 December 2002

n/a

JOHN GREEN NON‑EXECUTIVE DIRECTOR John is Chairman of the Remuneration Committee and a member of the Nominations Committee. John is a company director and writer. Until August 2006, he was an investment banker at Macquarie Bank, where he was an executive director for 13 years. His professional career before investment banking was 17 years in law, including as a partner in law firms Freehills and Dawson Waldron. John is director of three not‑for‑profits: Macquarie Group Foundation, the General Sir John Monash Foundation and The Centre for Independent Studies. He was appointed a member of the Australian Government Takeovers Panel in May 2009. In past years, John was a member of the ASX National Listings Committee and held a number of posts in the Securities Institute of Australia (now Finsia). Prior to his appointment as non‑executive director of the Company on listing in 2002, John was a member of the advisory board for nine years prior to listing, including a period as its Chairman. JOHN GRILL CHIEF EXECUTIVE OFFICER John is the Chief Executive Officer of the Group. He joined ESSO Australia in 1968 and in 1971 became Chief Executive of the entity that ultimately became WorleyParsons Limited, Wholohan Grill and Partners. This specialized consulting practice acquired the business of Worley Engineering Pty Limited in Australia in 1987. Following group restructuring, in 2002 Worley Group Limited listed on the ASX. In 2004, Worley Group Limited acquired Parsons E&C Corporation, a US‑based global project services company, and changed its name to WorleyParsons Limited. In March 2007, WorleyParsons then 28

WorleyParsons Annual Report 2009

ERIC GWEE TECK HAI NON‑EXECUTIVE DIRECTOR Eric joined the Board in February 2005 and is a member of the Remuneration Committee and the Nominations Committee. Eric is a Singaporean national with extensive international experience in the hydrocarbons and power industries, including a career spanning more than 31 years with the ExxonMobil Group. Eric is currently a non‑executive director of Singapore Power Limited and Chairman of SP Services Limited. He is a non‑executive director of the three stapled entities that form SP Ausnet. Eric is a director of the Melbourne Business School Limited. Previously, he was the Chairman of CPG Corporation Pte Ltd and was a director of ExxonMobil Singapore Pte Ltd. Australian listed company directorships

ERICH FRAUNSCHIEL NON‑EXECUTIVE DIRECTOR Erich is the Chairman of the Audit and Risk Committee and a member of the Nominations Committee. Erich is a non‑executive director of Woodside Petroleum Limited and of the Australian and New Zealand subsidiaries of the Rabobank Group. He is Chairman of Wesfarmers General Insurance Limited, Lumley Corporation Pty Limited and the Western Australian Opera Company. Erich’s early business career was in the petroleum marketing and management consulting industries. In 1981, he joined the Australian Industry Development Corporation where he was involved in project lending, investment banking and venture capital investment. In 1984, he joined Wesfarmers to start the company’s projects and business development function. In 1988, he became General Manager of the group’s commercial division and from 1992 until his retirement in July 2002 was an executive director and Chief Financial Officer of the group. LISTED COMPANY NAME

acquired the Colt Group in Canada substantially increasing the Group’s capability in the upstream and downstream components of oil sands. John has personal expertise in every aspect of project delivery for projects in the resources and energy industries. He has been directly involved with most of WorleyParsons’ major clients and remains closely involved at Board level with WorleyParsons’ joint ventures.

LISTED COMPANY NAME

NATURE OF DIRECTORSHIP

DATE OF COMMENCEMENT

DATE OF CESSATION

SP Australia Networks (Distribution) Limited

Director

31 May 2005

n/a

SP Australia Networks (RE) Limited

Director

9 September 2005 n/a

SP Australia Networks (Transmission) Limited

Director

26 October 2005

n/a

WILLIAM HALL EXECUTIVE DIRECTOR William (Bill) joined the Board in 2004 following the Company’s acquisition of Parsons E&C Corporation. Bill was with the Parsons Group for 25 years. He became Chairman and CEO of Parsons Energy & Chemicals Group Inc. , in 2002. Prior to this position he served as President of Parsons Energy & Chemicals Group Inc. (1997‑2001), President of The Ralph M. Parsons Company (1992‑1995), and Senior Vice President and Manager of the Petroleum & Chemical (P&C) Division with the company (1989‑1991). Bill has 42 years’ experience in the global engineering field, holding a number of key project and other US and international management positions with Parsons. Bill has bachelor and master’s degrees in Chemical Engineering at Virginia Polytechnic Institute and has completed the Executive Program at Stanford University. He is also on the Board of Directors of the US‑Saudi Arabian Business Council. DAVID HOUSEGO CHIEF FINANCIAL OFFICER David has held the role of Chief Financial Officer of the Group since he joined the Company in July 1999. He led the corporate reorganization and initial public offering and listing on the ASX of Worley Group Limited (now WorleyParsons Limited) in 2002 and the subsequent capital raisings for the acquisition of Parsons E&C in 2004 and the Colt Group in 2007. He joined the Board as an executive director in 2002. CATHERINE LIVINGSTONE, AO NON‑EXECUTIVE DIRECTOR Catherine joined the Board on 1 July 2007 and is a member of the Nominations Committee and the Audit and Risk Committee. She is Chairman and a director of Telstra Corporation Ltd and a director of Macquarie Bank Ltd and Macquarie Group Ltd. She was Chairman of CSIRO from 2001 to 2006 and has also served on the Boards of Goodman Fielder Ltd and Rural Press Limited. Catherine was the managing director of Cochlear Limited from 1994 to 2000 taking it through to an Initial Public Offer in 1995. In 2000 Catherine received the Chartered Accountant in Business Award and in 2002 was elected a Fellow of the Australian Academy of Technological Sciences and Engineering. She was further awarded in 2003 the Centenary Medal for service to Australian Society in Business Leadership and the 2006 Macquarie

University Alumni Award for Distinguished Service (Professional). In 2008, Catherine was appointed an Officer of the Order of Australia (AO) for service to the development of Australian science, technology and innovation policies to the business sector. She has a BA (Hons) in Accounting, is a Chartered Accountant and was the Eisenhower Fellow for Australia in 1999. Australian listed company directorships LISTED COMPANY NAME

NATURE OF DIRECTORSHIP

DATE OF COMMENCEMENT

Macquarie Bank Limited

Director

19 November 2003 n/a

Macquarie Group Limited

Director

30 August 2007

Telstra Corporation Limited

Director

17 November 2000 n/a

Chairman

8 May 2009

DATE OF CESSATION

n/a

n/a

LARRY BENKE ALTERNATE EXECUTIVE DIRECTOR Larry joined the Board as alternate director for Bill Hall in March 2007 following the Company’s acquisition of the Colt Companies. He joined Colt Edmonton as a design engineer in 1977 and has undertaken engineering design, project management and other management roles within the business. In 1988, Larry established the Toronto and Sarnia offices as General Manager before returning to Calgary in 1999 as President of Colt. He has been successful in leading Colt through a period of substantial growth and expansion into the new disciplines of pipelines, power generation and geomatics. Larry graduated from the University of Alberta in 1973 with a Bachelor of Science in Electrical Engineering (Honours Standing). PETER JANU COMPANY SECRETARY and CORPORATE LEGAL COUNSEL Peter was appointed Company Secretary and Corporate Legal Counsel of WorleyParsons on 1 October 2008. He has broad experience across a range of disciplines including company secretarial, governance, legal, remuneration, project finance and corporate taxation. Peter was formerly a Company Secretary and General Manager Corporate Administration of Leighton Holdings Ltd, prior to which he held the roles of General Manager Project Finance and Group Taxation Manager with the same company. Peter has degrees in Law and Economics from the University of Sydney and is a Chartered Accountant and Chartered Secretary.

remuneration report REMUNERATION SNAPSHOT This remuneration snapshot sets out some of the key details regarding director and executive remuneration for financial year 2009 (FY2009) that are likely to be of interest to shareholders. It should be read in conjunction with the full Remuneration Report, which provides greater details regarding the remuneration structures, decisions and outcomes for WorleyParsons over the past financial year. GUIDING REMUNERATION PRINCIPLES Fairness and long term growth Fairness and long term growth are the cornerstones of WorleyParsons’ remuneration strategy. These principles balance the interests of customers, shareholders and executives by ensuring that executives are equitably paid, without compromising our commitment to our shareholders. Alignment of executive and shareholder interests The need to keep and find exceptional people remains critical to our success. Ensuring that our executives are directly accountable for the Company’s performance not only aligns remuneration with the creation of shareholder value, but provides a genuine incentive for our key people by giving them the opportunity to participate in, and be rewarded by, a rapidly developing business and entrepreneurial culture. The amount of remuneration actually received by executive directors and executives is dependent on the achievement of challenging short and long term performance targets which are designed to deliver superior, yet sustainable, growth to shareholders. Communication with shareholders The Board is committed to clear and transparent disclosure of the Company’s remuneration arrangements. For this reason, the Company has included this remuneration snapshot as part of its FY2009 Remuneration Report to provide a concise summary of the key remuneration details likely to be of most interest to shareholders. The Board welcomes feedback on the Remuneration Report from shareholders. OUTCOMES LINKED TO PERFORMANCE Company delivering on remuneration strategy Consistent with our remuneration strategy of linking rewards to the creation of shareholder value, executive directors and executives have been rewarded for achieving (since the Company’s listing on 28 November 2002 through to 30 June 2009): •

15% per annum compound earnings growth;

INSURANCE OF OFFICERS

•

in excess of a 1,000% increase in the Company’s share price;

During the financial year, WorleyParsons Limited paid insurance premiums to insure the directors, secretaries and executive officers of the Company and its subsidiary companies. The contracts of insurance prohibit the disclosure of the amounts of premiums paid.

•

arnings Per Share (EPS) growth of approximately 47% on an annualized E basis; and

•

Total Shareholder Return (TSR) exceeding 1,100%.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the Directors and officers in their capacity as Directors and officers of WorleyParsons Limited and its subsidiary companies, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

ROUNDING OF AMOUNTS The Company is of a kind referred to in Class Order 98/0100 issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the Directors’ Report and financial statements. Amounts have been rounded off to the nearest hundred thousand dollars in accordance with that Class Order. Amounts less than $50,000 that have been rounded down are represented by 0.0.

Despite the backdrop of the particularly challenging global economic environment, WorleyParsons has delivered good financial performance for FY2009. In some regions in which WorleyParsons operates, particularly Canada and Australia, FY2009 was challenging. However, in other regions, such as the US, the UK and the Middle East, we have continued to experienced solid operating conditions. The result reflects the diversity of the Group’s operations and the fact that early actions were taken to appropriately position the Company for the volatile and challenging conditions. Short term incentive (STI) payments continue to be aligned with shareholder interests which is reflected in lower payments for FY2009 compared with previous years. NEW ACTIONS In setting the remuneration strategy for FY2009, our aim was to strike a balance between incentivizing and rewarding executives, and exercising appropriate restraint in the current economic climate. Our commitment to ensuring remuneration remains appropriate in the current economic climate and to delivering long term shareholder value is evidenced by the decisions made in the past year. Initiatives taken in FY2009 include: •

i ntroducing a deferral component to the STI plan for the Chief Executive Officer (CEO) and all members of the CEO’s Committee (CEOC) to lengthen management’s assessment of the decision making horizons and allow for forfeiture of any deferred STI where sustained performance is not realized;

WorleyParsons Annual Report 2009

29

Directors’ Report •

•

i mposing a minimum shareholding requirement for the CEO and all members of the CEOC to ensure an ongoing, long term alignment between executive and shareholder interests; and freezing of non‑executive director (NED) fees at July 2007 levels.

LOOKING FORWARD Continued focus on fairness and long term growth in a changing market Our remuneration decisions for FY2010 will continue to focus on fairness, long term growth and profitability and will be guided by our desire to achieve outcomes which are rewarding for shareholders and executives. Remuneration initiatives which will be implemented in FY2010 include: •

15% reduction in the fixed pay of the CEO effective from a 1 September 2009;

•

10% reduction in fixed pay voluntarily taken by all executive directors a and the two regional directors being particularly affected by the changing global conditions;

•

t o provide appropriate stretch targets for the company’s growth over the next three years, the EPS growth hurdles for the FY2010 Performance Rights have been set at the same levels as Performance Rights issued prior to 2008 (compound EPS growth of CPI + 8% for three years is required for 100% vesting) rather than at the levels for the FY2008 and FY2009 grants. The EPS growth hurdles of prior grants are unchanged.

•

further freeze of NED fees at July 2007 levels, being the third a successive year in which non‑executive directors will be paid the same amounts; and

•

ue to uncertainty around the proposed legislation regarding the d treatment of share plans, the NED share plan is to be closed and replaced, with a minimum shareholding requirement to best provide continued alignment between directors and shareholder interests.

INTRODUCTION to remuneration report The directors of the Company present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001 for the Company and the consolidated entity for the year ended 30 June 2009. The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001. This Remuneration Report forms part of the Directors’ Report. This Report sets out remuneration information for the key people with the authority and responsibility for planning, directing and controlling the affairs of the WorleyParsons consolidated entity (Group) during FY2009, as listed in the table below. They include the directors of the Company and the five highest remunerated executives of the Company and Group for FY2009. All these key people held office for the whole of the FY2009. Name

Ron McNeilly Grahame Campbell Erich Fraunschiel John Green Eric Gwee1 Catherine Livingstone, AO

Chairman Director Director Director Director Director

Executive Directors John Grill Larry Benke2 William Hall3 David Housego

Chief Executive Officer Managing Director, Canada Managing Director, Mega Projects Chief Financial Officer

Executives Managing Director, Europe and Africa Stuart Bradie4 Robert Edwardes3 Managing Director, US, Latin America and the Caribbean Iain Ross Managing Director, Customer Segment Groups, Mergers and Acquisitions and Strategy David Steele5 Managing Director, Asia and Middle East Andrew Wood Managing Director, Australia and New Zealand Resides in Singapore. Resides in Canada and is alternative executive director for William Hall. Resides in the USA. Resides in the UK. Resides in Malaysia.

All other directors and executives reside in Australia. 30

Section 1: Overview of Company performance and remuneration; Section 2: Executive director and executive remuneration; and Section 3: Non‑executive director remuneration.

SECTION 1: OVERVIEW OF COMPANY PERFORMANCE AND REMUNERATION Consistent with our remuneration strategy of linking rewards to the creation of shareholder value, executive directors and executives have been rewarded for achieving (since the Company’s listing on 28 November 2002 through to 30 June 2009): •

15% per annum compound earnings growth;

•

in excess of a 1,000% increase in the Company’s share price;

•

arnings Per Share (EPS) growth of approximately 47% on an annualized E basis; and

•

Total Shareholder Return (TSR) exceeding 1,100%.

The table below contains a snapshot of WorleyParsons’ performance against key annual financial performance indicators over the past seven years: FINANCIAL YEAR ENDED 30 JUNE

2003

2004

2.04

2.88

7.89 20.10 34.00 37.86 23.81

Dividends paid1 (cent per share)

5.0

12.0

20.0

41.0

Basic EPS2 (cent per share)

17.6

21.6

35.1

66.3 101.8 142.5 161.1

EBIT ($m)

32.1

40.4 102.3 199.5 319.1 520.0 605.3

NPAT ($m)

25.9

30.7

Closing share price ($)

WorleyParsons Annual Report 2009

2005

2006

2007

60.5

2008

85.5

2009

93.0

66.5 139.1 224.8 343.9 390.5

1 The FY2009 final dividend has been announced and is scheduled to be paid on 28 September 2009.

SECTION 2: EXECUTIVE DIRECTOR AND EXECUTIVE REMUNERATION PART A: Remuneration Policy Strategy overview Our remuneration framework is designed to support the creation of long term shareholder value. The primary objective of our executive remuneration strategy is to create a framework which supports sustained growth over the long term – recognizing that this is in the interests of all stakeholders. Our remuneration framework aims to: •

rovide a fair level of reward in order to retain and attract high calibre p executives;

•

uild a culture of achievement by providing a transparent link between b reward and performance; and

•

romote mutually beneficial outcomes by aligning employee, customer p and shareholder interests.

Position

Non‑Executive Directors

1 2 3 4 5

The Report is presented in three sections:

When implemented in an environment that encourages employee engagement, entrepreneurship, learning and career advancement, this remuneration framework ensures that we continue to retain, attract and develop the best employees and increase their capacity to deliver long term value to our customers and shareholders and to have rewarding careers with the Company. Setting a “fair” level of reward We believe that remuneration should be competitive and fair; however, it is only one of many strategies utilized to retain and motivate high performing executives. Whilst executive reward is a contributor to executive performance and engagement, it is only one consideration and the Board believes that it is equally, if not more important, to motivate and reward senior executives by empowering them through meaningful and challenging work, providing them with development opportunities as well as coaching and feedback. However, as the Company is a truly global one (with operations in 37 countries) it is still important to ensure that the reward for our global roles is positioned competitively against the global market and that pay levels are sufficiently competitive and fair. Executive fixed remuneration is set around the market median, with the level of individual fixed remuneration based on an executive’s responsibilities, performance, qualifications and experience. The executive remuneration mix of fixed and variable incentive remuneration also has an eye to the global market in which we operate. The relevant market we look to is comprised of the organizations that we compete against for talent and who are considered as peers in the markets in which we operate. Some of our global comparators include AMEC, Fluor Corporation, Foster Wheeler, Jacobs Engineering Group, URS Corporation and Wood Group. Locally, our comparators include publicly listed Australian companies of a comparable size and market capitalization.

The targeted annual remuneration mix of each of the executive directors and executives is outlined below: REMUNERATION MIX FOR EXECUTIVES Fixed Remuneration

Short Term Incentive Remuneration

Long Term Incentive Remuneration

Executive Directors John Grill

35%

35%

30%

Larry Benke

45%

32%

23%

William Hall

39%

31%

30%

David Housego

43%

25%

32%

Executives Stuart Bradie

43%

25%

32%

Robert Edwardes

43%

25%

32%

Iain Ross

43%

25%

32%

David Steele

49%

24%

27%

Andrew Wood

43%

25%

32%

Target incentive remuneration refers to the incentive pay provided for meeting performance requirements and assumes the full vesting of long term incentives (LTI). Actual incentive remuneration can vary for individuals depending on the extent that they meet or exceed performance requirements. Further aligning employee and shareholder interests Executive directors and executives are also required to establish and maintain a minimum shareholding in the Company to reinforce their alignment to long term shareholder value.

Market remuneration data is sourced from independent consultants, Hay Group, Mercer and PricewaterhouseCoopers, and is reviewed by the Board Remuneration Committee annually. The Remuneration Committee recommends to the Board all amendments to executive remuneration policies.

During the year, the Company introduced an Executive Minimum Shareholding Requirement (Requirement) which applies to executive directors and executives. To satisfy this Requirement, the CEO and all members of the CEOC must:

Consistent with our focus on long term growth and profitability, there have been a number of steps taken with regards to remuneration levels both during FY2009 and planned for FY2010. These include reductions in fixed pay of:

•

ithin six years of their appointment to the CEOC, build a holding of w WorleyParsons ordinary shares that is equivalent in value to two times fixed remuneration, or four times fixed remuneration for the CEO; and

•

aintain this holding (taking into account annual changes in fixed m remuneration levels) for as long as they remain on the CEOC.

•

15% for the CEO effective from 1 September 2009;

•

0% voluntarily taken by all executive directors and the two regional 1 directors being particularly affected by the changing global conditions.

We believe that these steps help demonstrate our commitment to both shareholders and customers that we continue to manage our executive remuneration prudently in these globally difficult economic times. Linking rewards to performance A substantial proportion of executive remuneration is at risk based on performance, so executives only receive significant additional rewards where positive outcomes are achieved for shareholders. Executive remuneration comprises: •

•

f ixed remuneration, which consists of cash (or base) salary, superannuation/retirement contributions and any salary sacrifice components; and ariable incentive remuneration, which may be comprised of cash, v superannuation or equity and is dependent on corporate, regional and individual performance assessment.

A proportion of variable incentive remuneration is payable for short term performance, while the remainder is payable for longer term performance. The short term performance period is 12 months, increasing to up to 24 months for any part of the STI plan which is subject to deferral. Longer term performance is a minimum of three years.

Compliance with the Requirement will be assessed as at 30 June each year. Detailed below is a summary table of each executive director and executive’s positioning against the Requirement as at 30 June 2009: Percentage of minimum shareholding requirement achieved

Executive Directors John Grill

>100%

Larry Benke

>100%

William Hall

>100%

David Housego

>100%

Executives Stuart Bradie

77%

Robert Edwardes

64%

Iain Ross

>100%

David Steele

>100%

Andrew Wood

>100%

The Requirement is intended to reinforce the Company’s policy objective of aligning executive and shareholder interests, and to foster an increased focus on building long term shareholder value. Messrs Bradie and Edwardes have not yet reached the Requirement. Based on the date at which they were appointed to the CEOC they have another three years in which to comply.

WorleyParsons Annual Report 2009

31

Directors’ Report PART B: Remuneration Structure Fixed Remuneration As noted above, fixed remuneration consists of cash (or base) salary, superannuation/retirement contributions and any salary sacrifice components. It is set around the market median, with the level of individual fixed remuneration based on the executive’s responsibilities, performance, qualifications and experience.

Method of assessment

STI Plan The STI plan links specific 12 month targets or key performance indicators (KPIs) with the opportunity to earn cash incentives. The target value of the award for executive directors and executives ranges from 50% to 100% of their fixed remuneration, depending on the nature of their role and responsibilities.

Financial KPIs

Non‑financial KPIs

Based upon audited financial statements, to ensure the performance assessment for financial KPIs is aligned with business performance and the creation of value for shareholders.

Based upon an assessment of effectiveness against a set of agreed objectives. For example, performance against the health, safety and environment KPI is measured by the level of reduction in the number of reportable injuries and environmental incidents, and the completion of advanced safety audits.

Reflecting the importance of performance and its link with reward, the STI plan only operates if the Group’s net profit after tax (NPAT) reaches 90% or more of the budget approved by the Board. If this threshold is attained, executive directors and executives are also subject to pre‑agreed KPIs which are: •

critical to the Company’s success over the forthcoming 12 months;

•

r eflective of the key behaviors or results the Company seeks to attain; and

•

capable of measurement.

The specific KPIs selected reflect the accountabilities of the individual, while ensuring that payments to executive directors and executives under the STI plan are aligned with business performance and the creation of value for shareholders. STI payments are contingent on performance across a number of financial and non‑financial KPIs, which ensures that maximum STI can only be achieved for performance that is strong across a range of areas. A summary of the KPIs for FY2009 for executive directors and executives is outlined below: Financial KPIs

Non‑financial KPIs

Weighting

60%

40%

KPIs

The weighting of actual KPIs varies depending on the specific role of the individual, but included the following:

These may vary with executive responsibility, but usually include: •

erformance in health, p safety and environment;

•

roup NPAT applicable G to all executives;

•

eople management p and development;

•

c ash collection for executives with regional or financial accountability;

•

•

r egional earnings before interest and tax (EBIT), • applicable to executives with regional accountability; and/or

evelopment of d strategic and tactical responses to changed economic and business landscapes; and

•

ustomer Sector Group C EBIT, applicable to executives with customer sector accountability.

s uccessful implementation of the business plan for the business unit, location or function.

As far as possible performance is assessed against quantifiable, objective KPIs, with performance targets agreed at the start of the financial year, to ensure that STI outcomes are aligned with the creation of value. Discretionary assessment

An additional discretionary component of up to 60% of the target award is available to recognize the executive for exceptional performance in areas that include (but are not limited to) leadership, extraordinary effort or contribution exceeding expectations. Any extraordinary amount awarded under the discretionary assessment is deferred for 12 months as described below.

Tenure and forfeiture conditions

To be eligible for an STI payment, executives must have been employed for at least three months of the financial year and remain in employment at the date of payment. Forfeiture of any deferred STI element may occur under the conditions described below.

The KPIs for FY2010 will be similar; however, a greater weighting has been placed on Group NPAT to reflect the Company’s emphasis on more strongly driving global behavior. This has been achieved by the removal of Regional and Customer Group EBIT KPIs and replacing them with a Group NPAT KPI. Under the terms of the STI plan, executives have the ability to earn an additional 60% of their target STI in recognition of exceptional performance. Reflecting the increased emphasis on long term decision horizons and commitment to the Company, this additional amount will then be deferred (or held back) for a further period of 12 months after the end of the performance period. At the conclusion of the 12 month deferral period, the Board will review the performance conditions that resulted in the additional STI award. If the Board determines that the basis on which the award was made was incorrect, then the deferred component will be forfeited. LTI Plan The LTI plan links specific three year targets with the opportunity to earn equity incentives. The potential value of the award (assuming full vesting) for executive directors and executives is set at between 50% to 85% of their fixed remuneration, depending on the nature of their role and responsibilities. There are two specific targets. Each is based on a different measure and each is awarded independently. The measures are: •

relative total shareholder return (TSR); and

•

earnings per share (EPS) growth.

Relative TSR results determine up to 60% of the potential LTI reward, while EPS growth determines up to 40% of the potential LTI reward. The Remuneration Committee believes it is appropriate to assess executive performance based on both a relative hurdle linked to shareholder value (TSR) and an absolute hurdle more within the executive’s control (EPS).

32

WorleyParsons Annual Report 2009

LTI grants for FY2009 Performance rights (rights) are granted under the LTI plan. Each right entitles the holder to one fully paid ordinary share in the Company at a nil exercise price (i.e. a zero priced option). The number of rights issued is based on the executive’s target LTI. Rights vest and can only be exercised after a three year period, subject to minimum performance hurdles being satisfied. Where rights cannot be readily issued in certain overseas jurisdictions due to differing securities laws and taxation treatments, the LTI rules ensure an executive can still be rewarded for their contribution, whilst catering for the local restrictions on the issue of securities. We do this through cash settled rights. The terms and conditions for these are the same as for the equity settled rights as outlined above, except that rather than receiving one fully paid ordinary share in the Company at a nil exercise price, the executive receives the value of one fully paid ordinary share in the Company in cash (during FY2009, no cash settled rights were issued to executive directors or executives).

EPS performance hurdle (applies to 40% of potential LTI) Basic EPS is determined by dividing the operating profit attributable to members of WorleyParsons by the weighted average number of ordinary shares outstanding during the financial year. Growth in EPS will be measured by comparing the EPS in the base year and the measurement year. EPS has been chosen as a performance hurdle because it provides a clear line of sight between executive performance and Company performance. It is also a well recognized and understood measure of performance from both within and outside the organization. Executives will only derive value from the EPS component of the grants made in FY2009 if the Company achieves average compound growth in EPS of at least 10% per annum over the three year performance period. The vesting schedule of the rights subject to the EPS hurdle is as follows: Average compound growth in EPS over Percentage of rights that may be exercised the performance period if the EPS hurdle is met

Details of the rights granted to executive directors and executives as the LTI component of their remuneration are outlined in Part C below.

Less than 10% pa

0%

At 10% pa

20%

The Company is currently reviewing the LTI plan for Australian participants and recognizes that some changes may be required as a result of the Government’s proposed changes to the taxation treatment of employee equity plans.

More than 10% pa but less than 20% pa

Pro rated vesting between 21% and 40%

Relative TSR performance hurdle (applies to 60% of potential LTI) The TSR measure represents the change in capital value of the Company’s share price over a period, plus reinvested dividends, expressed as a percentage of the opening value. Relative TSR has been chosen as a performance hurdle because, in the opinion of the directors, it provides the most direct link between executive reward and shareholder return. Executives will only derive value from the TSR component of the grants made in FY2009 if the Company’s TSR performance is at least at the median of companies in the peer comparison group. For LTI grants made in FY2009, the peer comparison group comprises AECOM, Aker Solutions, AMEC, Fluor Corporation, Foster Wheeler, Jacobs Engineering Group, KBR, SNC‑Lavalin, URS Corporation and Wood Group. These companies were selected on the basis that they compete directly with WorleyParsons for customers, people and projects. As these companies are subject to similar challenges, opportunities and market sentiment, our performance in comparison to that of these companies should more fairly reflect the strength of our performance and so be better aligned with our remuneration philosophy. The Board has discretion to adjust the comparison group to take into account events including, but not limited to, takeovers or mergers that might occur during the performance period. The vesting schedule of the rights subject to the relative TSR hurdle is below: Percentage of rights that may be exercised Relative TSR percentile ranking if the relative TSR hurdle is met

Less than 50th percentile

0%

At 50th percentile

30%

Greater than the 50th percentile but less than the 75th percentile

Pro rated vesting between 31% and 60%

At 75th percentile or greater 60% (i.e. maximum available under the plan)

The initial test date of the rights subject to the relative TSR hurdle is at the end of year three. At the end of year three, executives can either: •

ccept the vesting outcome achieved (based on the schedule set out a above); or

•

lect to have their rights retested at the end of year four (in which case e the same vesting schedule applies but the retest period covers the entire four year period from the date the rights were granted).

Executives are not permitted to “double dip”, so by electing to have their rights retested at the end of year four they forfeit any entitlement to rights which otherwise would have vested at the end of year three. The Remuneration Committee allows one retest to reflect the volatile nature of the industry. The way in which the retest is applied maintains alignment with shareholder interests and the ability to retest has been in place since the Company listed, but has not been applied to date.

At 20% pa or greater 40% (i.e. maximum available under the plan)

To provide appropriate stretch targets for the company’s growth over the next three years, the EPS growth hurdles for the FY2010 Performance Rights have been set at the same levels as Performance Rights issued prior to 2008 (compound EPS growth of CPI + 8% for three years is required for 100% vesting) rather than at the levels for the FY2008 and FY2009 grants. The EPS growth hurdles of prior grants are unchanged. The table below shows the EPS growth hurdles for the FY2010 Performance Rights: Average compound growth in EPS over Percentage of rights that may be exercised the performance period if the EPS hurdle is met

Less than 4% pa above increase in CPI

0%

4% pa above increase in CPI

20%

More than 4% pa above increase in CPI, but less than 8% pa above increase in CPI An additional 5% of rights will vest for each additional 1% pa plus CPI increase 8% pa above increase in CPI 40% (i.e. maximum available under the plan)

Exercise of rights and allocation of shares To the extent that the performance hurdles have been satisfied, executives can exercise their rights and acquire shares in the Company at a nil exercise price. The rights must be exercised within 10 years from the date of grant. If they are not exercised within this time, they will expire. Shares allocated to executives upon exercise of rights rank equally with all other ordinary shares on issue. Whilst the shares allocated to executives remain subject to a restriction on dealing, executives can apply to have the restrictions lifted. Upon release of the restrictions, the executive can sell their shares, subject to compliance with the Company’s Securities Dealing Policy and minimum shareholding requirement. Cessation of employment and change of control Where an executive leaves the Company, the Board may exercise its discretion and allow a proportion (if any) of any unvested rights to remain in the plan, and subsequently vest and be exercised, having regard to such factors as it determines relevant. Such factors would include performance against applicable performance hurdles, as well as the performance and contribution that the relevant executive has made. In instances of fraudulent or dishonest behavior, the Board will generally deem all unvested rights held by the executive to have lapsed and may also deem any vested but unexercised rights to be forfeited. In the event of a change of control of the Company (i.e. where a third party unconditionally acquires more than 50% of the Company), the Board will exercise its discretion to determine whether any or all unvested rights vest,

WorleyParsons Annual Report 2009

33

Directors’ Report having regard to pro rata performance against applicable performance hurdles up to the date of the change of control.

•

Share trading and margin loans by directors and executives The Company’s policy on hedging of securities by directors and executives supports its other initiatives designed to create a meaningful alignment between executive and shareholder interests. Directors and executives are not permitted to hedge their shareholdings or performance rights except where each of the following requirements has been satisfied:

WorleyParsons treats compliance with its policies on securities dealing (including hedging and margin lending arrangements) as a serious issue and takes appropriate measures to ensure the policy is adhered to. Compliance with this policy is monitored through an annual declaration by directors and executives stating that they have complied with the policy. Breaches of the policy will be subject to appropriate sanctions, which could include disciplinary action or termination of employment.

•

permission has been obtained from the Chairman;

•

t he shares have fully vested and are not subject to any hurdles or transfer restriction including being part of a minimum shareholding requirement;

•

t he hedge transaction is treated as a sale or purchase of shares by the director or executive and the relevant approvals, disclosures (to the ASX, as appropriate) and notifications are made on this basis;

•

t he hedge transaction may not be entered into, renewed, altered or closed out when the director or executive is in possession of price sensitive information; and

ll costs or expenses associated with any hedging arrangement are to a the directors’ or executives’ own account.

In relation to margin loans, the Company has a policy that where there is (or the director or executive reasonably believes there will be) an unmet margin call, an event of default or another similar occurrence, the director or executive must immediately disclose to the Company Secretary or Chief Financial Officer the necessary information so the Company can comply with its continuous disclosure obligations.

PART C: Remuneration Outcomes Total remuneration of the executive directors and executives for the financial year ended 30 June 2009 Post Other employment long term Short term employee benefits benefits benefits

Share Based payments

Non‑ Long % of Total Total Cash Short term monetary Sub Super- service Equity Cash Remun- REMUN1 2 6 3 4 salary incentives benefits total annuation leave settled settled eration ERATION $ $ $ $ $ $ $ $

Total $

Executive Directors John Grill

2009 1,658,016

945,643

2008 1,427,256 1,033,125

Larry Benke

2009

725,595

175,761

10,184 2,613,843

90,832

– 2,460,381

13,129

24,166

816,194

–

24.6%

55.8% 3,313,870

–

11,476

141,172

–

13.3%

29.8% 1,062,759

8,755

910,111

29,090

884,921

–

24.5%

50.6% 3,618,686

2008

660,336

410,353

– 1,070,689

–

9,847

76,624

–

6.6%

42.1% 1,157,160

William Hall

2009

869,640

302,242

165,735 1,337,617

16,351

66,215

419,090

–

22.8%

39.2% 1,839,273

2008

684,852

623,704

43,751 1,352,307

18,026

39,761

414,248

305,090

33.8%

63.1% 2,129,432

David Housego

2009

665,518

259,621

11,024

936,163

59,197

12,051

350,890

–

25.8%

44.9% 1,358,301

2008

636,141

255,125

–

891,266

13,129

10,833

340,392

–

27.1%

47.4% 1,255,620

Executives Stuart Bradie5

2009 1,282,201

432,755

688,438 2,403,394

85,098

–

294,253

–

10.6%

26.1% 2,782,745

2008

257,043

961,894 2,062,647

–

–

231,400

398,328

23.4%

32.9% 2,692,375

581,987 1,393,573

843,710

Robert Edwardes5

2009

692,091

119,495

2008

481,871

187,988

–

Iain Ross

2009

710,874

293,478

2008

608,217

312,500

–

669,859

10,133 1,014,485 920,717

2,115

719

216,882

–

13.4%

20.9% 1,613,289

13,129

8,333

185,195

–

21.1%

42.6%

876,516

13,745

12,051

315,024

–

23.2%

44.9% 1,355,305

13,129

10,416

299,883

–

24.1%

49.2% 1,244,145

David Steele5

2009

576,035

169,497

162,242

907,774

4,719

777

183,397

–

16.7%

32.2% 1,096,667

2008

417,033

156,600

–

573,633

32,760

7,500

164,229

–

21.1%

41.2%

Andrew Wood

2009

674,834

186,184

9,956

870,974

13,745

11,442

323,638

–

26.5%

41.8% 1,219,799

581,487

276,000

–

10,000

306,091

–

25.8%

49.1% 1,186,707

778,122

2008

857,487

13,129

Totals

2009 7,854,804 2,884,676 1,648,454 12,387,934

285,802

143,821 3,129,267

– 15,946,824

2008 6,340,903 3,512,438 1,005,645 10,858,986

116,431

120,856 2,834,256

703,418 14,633,947

1 The 2009 amount relates to the FY2009 award under the STI plan, which will be paid to executives during September 2009 apart from any discretionary component on which payment is deferred for one year. The 2008 amount relates to the FY2008 award under the STI plan, which was paid in September 2008. 2 Non‑monetary benefits includes benefits such as expatriate benefits (i.e. housing, home leave etc.), health insurance, car parking, company cars or car allowances, fringe benefits tax, tax advisory services, life insurance and club memberships. 3 Remuneration includes a proportion of the fair value of equity compensation granted or outstanding during the year. The fair value of equity instruments which do not vest during the reporting period is determined as at the grant date and is allocated progressively over the vesting period. The amount included as remuneration is not related to, or indicative of, the benefit (if any) that individual executives may ultimately realize should the equity instruments vest. 4 The value disclosed as remuneration relating to cash settled performance rights granted to executive directors and executives, is the fair value at grant date and adjusted for the movement in the fair value of the liability during the reporting period. 5 In addition to their cash salary, Messrs Bradie, Edwardes and Steele each received an assignment uplift as part of their expatriate assignment terms and conditions. For these executives, this means that their total remuneration is higher relative to their peers due to the provision of these expatriate allowances. 6 The long service leave amounts disclosed in the FY2008 Remuneration Report were equivalent to the total accrual value. This year, the disclosure has been adjusted to reflect the increase in the long service leave accrual during FY2009. The FY2008 comparator has therefore also been adjusted to reflect the change in the long service leave accrual for FY2008.

34

WorleyParsons Annual Report 2009

Rewards derived from at risk remuneration The sections below contain further details of how the Company’s performance over the past five years has impacted on remuneration outcomes for executive directors and executives under the Company’s STI and LTI programs. STI outcomes As outlined in the description of the STI plan, reward outcomes for senior executives are linked primarily to performance against annual financial KPIs, although non‑financial (including individual) KPIs are also relevant. In general, the strong performance against financial KPIs over the past five years (in particular, NPAT which is the “gate opener” measure under the STI plan) along with steady improvement in performance against non‑financial KPIs such as safety, has resulted in STI payments for senior executives that demonstrate a strong correlation between Company performance and senior executive reward. The table below sets out the average percentage of maximum STI awarded to senior executives over the past five years: FINANCIAL YEAR ENDED 30 JUNE

2005

% of maximum STI awarded (average for senior executives1) 91.3%

2006

2007

2008

2009

However, for the LTI grants made for the two years prior to FY2009, the comparator group for the TSR performance hurdle comprised the companies ranked 50 to 150 by market capitalization in the ASX index at the start of the performance period. Based on the TSR growth achieved since the Company’s listing in 2002, and consistent with our stated remuneration policy of rewarding executives for delivering returns to shareholders, 100% of performance rights granted to senior executives under the LTI plan have vested to date. The tables below show the history of the grants that have vested to date: SUMMARY OF VESTED RIGHTS Value TSR % of total per right percentile LTI grant vested/ Performance ranking vested/ Vesting exercised2 Grant period achieved1 exercised date $

Equity settled 2004/05

1 Jul 04 – 30 Jun 07

99th

100%

30 Sep 07

37.87

2005/06

1 Jul 05 – 30 Jun 08

100th

100%

30 Sep 08

34.34

1 Jul 04 – 30 Jun 07

99th

100%

30 Sep 07

37.94

Cash settled 84.9%

94.6%

91.8%

53.2%

1 Senior executives for the purposes of this table are defined as executive directors and executives as disclosed in the corresponding year’s Annual Report.

The table below sets out the percentage of the maximum STI payment that was paid for each of the executive directors and executives in respect of FY2009:

2004/05

1 Represents WorleyParsons’ relative TSR ranking over the performance period compared to the comparator group (being the ASX 50‑150 ranked companies at the start of the performance period). 2 This amount is based on the volume weighted average share price of WorleyParsons shares for the 10 trading days following the annual results announcement for the year in which the performance rights vest (as there is no exercise price payable in respect of equity or cash settled performance rights).

FY2009 Percentage of maximum STI awarded

Executive Directors John Grill

54%

Larry Benke

37%

William Hall

46%

David Housego

60%

Executives Stuart Bradie

75%

Robert Edwardes

32%

Iain Ross

67%

David Steele

63%

Andrew Wood

45%

LTI outcomes Vesting outcomes under the LTI plan are directly linked to the Company’s relative TSR performance over the three year performance period. For the LTI grant made in FY2009 (which will not be tested until 30 September 2011), the TSR comparator group comprises the 10 companies listed previously, which compete with WorleyParsons for customers, people and projects.

WorleyParsons Annual Report 2009

35

Directors’ Report DETAILS OF VESTED GRANTS Number of Number of Value of Number of Value of YEAR of grant rights granted Vesting date rights vested rights vested1 rights exercised rights exercised $ $

EQUITY SETTLED Executive Directors John Grill

2005/06

78,657

30 Sep 08

78,657

2,701,081

78,657

2,701,081

2004/05

163,551

30 Sep 07

163,551

6,193,676

163,551

6,193,676

William Hall

2005/06

47,788

30 Sep 08

47,788

1,641,040

47,788

1,641,040

David Housego

2005/06

35,075

30 Sep 08

35,075

1,204,476

35,075

1,204,476

2004/05

70,093

30 Sep 07

70,093

2,654,422

70,093

2,654,422

Executives Stuart Bradie

2005/06

18,400

30 Sep 08

18,400

631,856

18,400

631,856

Robert Edwardes

2005/06

15,423

30 Sep 08

15,423

529,626

15,423

529,626

2004/05

38,941

30 Sep 07

38,941

1,474,696

38,941

1,474,696

Iain Ross

2005/06

30,721

30 Sep 08

30,721

1,054,959

30,721

1,054,959

2004/05

70,093

30 Sep 07

70,093

2,654,422

70,093

2,654,422

David Steele

2005/06

15,423

30 Sep 08

15,423

529,626

15,423

529,626

2004/05

15,576

30 Sep 07

15,576

589,863

15,576

589,863

Andrew Wood

2005/06

29,851

30 Sep 08

29,851

1,025,083

29,851

1,025,083

2004/05

70,093

30 Sep 07

70,093

2,654,422

70,093

2,654,422

699,685

699,685

25,539,248

699,685

25,539,248

Total CASH SETTLED Executive Director William Hall

2004/05

41,756

30 Sep 07

41,756

1,584,223

41,756

1,584,223

2004/05

54,517

30 Sep 07

54,517

2,068,375

54,517

2,068,375

96,273

96,273

3,652,598

96,273

3,652,598

Executive Stuart Bradie

Total 1

This amount is based on the WorleyParsons share price on the date of vesting (as there is no exercise price payable in respect of equity or cash settled performance rights).

All of the rights granted in FY2005 and FY2006 vested (i.e. the percentage of each grant forfeited was nil) and were exercised for a nil exercise price. No other rights granted to executive directors or executives vested or were exercised during FY2005 or FY2006.

36

WorleyParsons Annual Report 2009

In relation to the LTI grants that are still unvested, the following table sets out the outstanding equity settled performance rights for executive directors and executives, including those which were awarded in FY2009: UNVESTED GRANTS Number of Fair value YEAR of grant rights granted1 per right2 $

Fair value of grant First (at grant date)3 exercise date4 $

Expiry date

Executive Directors John Grill

2006/07

52,500

16.35

858,442

30 Sep 09

30 Sep 19

2007/08

32,546

30.48

992,156

30 Sep 10

30 Sep 20

2008/09

43,317

19.11

827,788

30 Sep 11

30 Sep 21

Larry Benke5

2007/08

9,105

30.48

277,564

30 Sep 10

30 Sep 20

2008/09

10,183

19.11

194,597

30 Sep 11

30 Sep 21

William Hall

2006/07

28,000

16.35

457,836

30 Sep 09

30 Sep 19

2007/08

14,847

30.48

452,607

30 Sep 10

30 Sep 20

2008/09

16,428

19.11

313,939

30 Sep 11

30 Sep 21

David Housego

2006/07

21,500

16.35

351,553

30 Sep 09

30 Sep 19

2007/08

12,873

30.48

392,450

30 Sep 10

30 Sep 20

2008/09

15,834

19.11

302,588

30 Sep 11

30 Sep 21

Stuart Bradie

2006/07

15,034

16.35

245,825

30 Sep 09

30 Sep 19

2007/08

12,109

30.48

369,140

30 Sep 10

30 Sep 20

2008/09

15,692

19.11

299,874

30 Sep 11

30 Sep 21

Robert Edwardes

2006/07

11,543

16.35

188,743

30 Sep 09

30 Sep 19

2007/08

8,582

30.48

261,620

30 Sep 10

30 Sep 20

2008/09

11,466

19.11

219,115

30 Sep 11

30 Sep 21

Iain Ross

2006/07

19,541

16.35

319,520

30 Sep 09

30 Sep 19

2007/08

10,727

30.48

327,010

30 Sep 10

30 Sep 20

2008/09

15,834

19.11

302,588

30 Sep 11

30 Sep 21

David Steele

2006/07

11,543

16.35

188,743

30 Sep 09

30 Sep 19

2007/08

6,536

30.48

199,249

30 Sep 10

30 Sep 20

2008/09

8,809

19.11

168,340

30 Sep 11

30 Sep 21

Andrew Wood

2006/07

19,569

16.35

319,978

30 Sep 09

30 Sep 19

2007/08

11,883

30.48

362,250

30 Sep 10

30 Sep 20

2008/09

15,288

19.11

292,154

30 Sep 11

30 Sep 21

Total outstanding

2006/07

179,230

2,930,640

2007/08

119,208

3,634,046

2008/09

152,851

2,920,983

451,289

9,485,669

Executives

Each right entitles the holder to one fully paid ordinary share in the Company at a nil exercise price (i.e. a zero priced option). 1 The service and performance criteria for the rights are discussed in Section 2 Part A above. Shareholders approved the FY2008 grant of performance rights to Messrs Grill, Benke, Hall and Housego at the 2008 Annual General Meeting (AGM). 2 Fair values at grant date are independently determined using an appropriate option pricing model in accordance with AASB 2 Share‑based Payment that takes into account the exercise price, the term of the right, the vesting and performance criteria, the impact of dilution, the non‑tradable nature of the right, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk‑free interest rate for the term of the right. This amount represents the actual cost to the Company. 3 Total grant value is calculated by multiplying the fair value per right by the number of rights granted. This does not represent the actual value the executive director or executive will derive from the grant, which will depend on the performance of the Company over the vesting period. The minimum grant value is zero where performance and/or service conditions are not satisfied. 4 This is the date at which rights first become exercisable, subject to meeting performance hurdles. Once vested, rights are exercisable up until the expiry date. 5 Larry Benke was appointed following the Company’s acquisition of the Colt Group in March 2007. As a result, Mr Benke did not receive an LTI grant in FY2007.

WorleyParsons Annual Report 2009

37

Directors’ Report Remuneration objectives achieved The analysis set out above indicates that, whilst senior executives (for these purposes, senior executives includes the executive directors and executives as disclosed in this Remuneration Report) have derived substantial rewards from the at risk components of their remuneration during the past five years, these rewards have flowed directly from the strong performance of the Company over this period and the high returns delivered to shareholders. Furthermore, the fact that senior executive remuneration as a percentage of revenue has decreased substantially since FY2005 shows that increases in Company profits over this period have outstripped senior executive remuneration growth. FINANCIAL YEAR ENDED 30 JUNE

Senior executive total reward as a percentage of revenue1

2005

2006

2007

2008

2009

0.6%

0.4%

0.4%

0.3%

0.2%

1 Senior executives for the purposes of this table are defined as executive directors and executives as disclosed in the corresponding year’s Annual Report.

PART D: Employment Arrangements Some key aspects of executive director and executive service agreements are outlined below:

SECTION 3: NON‑EXECUTIVE DIRECTOR REMUNERATION PART A: Remuneration Policy Fairness is also the key principle underpinning our remuneration philosophy for non‑executive directors. Reflecting the principles of fairness and shareholder alignment is a commitment to restraint. The Board has frozen both Board and Committee fees for the last two years. The date of the last fee increase was 1 July 2007 and the Board will not consider any further reviews of its fee structure until at least 1 July 2010. This means that FY2010 is the third successive year in which the non-executive directors have been paid the same fees. The aggregate amount of fees (which include Board and Committee fees) that may be paid to non‑executive directors in any year is capped at a level approved by shareholders at the AGM. The current maximum aggregate amount of $2,000,000 per annum was approved by shareholders at the 2008 AGM. Non‑executive directors do not receive performance related payments. PART B: Remuneration Structure Board and Committee fees Board and Committee fees for FY2009 are set out below. These amounts are inclusive of superannuation contributions made on behalf of non‑executive directors in accordance with the Company’s statutory obligations. ROLE

FY2009 FEES

Executive directors Contract Non‑complete and executives duration clauses Notice periods

Chairman

$437,500

John Grill

Non‑executive director

$175,000

Chairman of Audit and Risk Committee

$35,000

Member of Audit and Risk Committee

$17,500

Chairman of Remuneration Committee

$20,000

Member of Remuneration Committee

$12,000

Chairman/Member of Nominations Committee

Nil

Unlimited duration

Larry Benke 9 March 2010

6 months

12 months

2 years after Through contract contract duration, then expiration three months for any extended term

William Hall 5 October 2010

Remainder of 6 months the term of the contract

David Housego

Unlimited duration

6 months

Stuart Bradie

Unlimited duration

6 months

3 months

6 months

Robert Edwardes1 Unlimited duration

Nil

1 month

Iain Ross1

Unlimited duration

Nil

6 months

David Steele

Unlimited duration

6 months

6 months

Andrew Wood

Unlimited duration

6 months

6 months

1 The absence of a non‑complete clause reflects the terms of the original contract of employment.

The service agreements include the components of remuneration which are to be paid to executive directors and executives, but do not prescribe how remuneration levels are to be modified from year to year. In the event of termination all executive directors and executives are entitled to receive their statutory leave entitlements and superannuation benefits. In relation to incentive plans upon termination, where an executive has resigned, STI is paid only if the executive has been employed on the last day of the financial year. In relation to LTI, the treatment of vested and unvested performance rights, whether cash or equity settled, in all instances of separation remains the subject of Board discretion in accordance with the plan rules (as outlined in the LTI Plan discussion above). WorleyParsons did not pay sign‑on payments to any executive directors or executives during the financial year.

In recognition of the current economic climate and the need to exercise appropriate restraint in setting remuneration levels, the Board has resolved to freeze non‑executive director fees at their current levels again. Accordingly, non‑executive director fees for FY2010 will remain as set out above. This means that NED fees will remain the same in FY2010 as they were in July 2007. Other benefits Non‑executive directors are eligible to receive travel allowances and fees for special duties. Non‑executive directors are also entitled to be reimbursed for all business related expenses, including travel, incurred in the discharge of their obligations. During FY2009, the non‑executive directors received a travel allowance for attendance at Board meetings held overseas during the financial year. The travel allowance for attendance at overseas meetings is currently $5,000 per trip (effective 1 July 2009). WorleyParsons does not pay retirement benefits to non‑executive directors. Non‑Executive Director Share Plan WorleyParsons operated a non-executive director share plan (NED Share Plan) to reinforce a focus on long-term performance and growth. The NED share plan operated from FY2003 through to the end of FY2009. Under the terms of the NED share plan, non‑executive directors were required to sacrifice between 25% and 100% of their gross annual fees for an equivalent value of shares at the prevailing market price. These shares are subject to a restriction on dealing which expires on the earliest of: •

10 years from the date the shares were granted;

•

the time the director ceases to hold office; or

•

the time the Board decides in its discretion that any restrictions cease.

As previously mentioned, this plan is to be closed and replaced with a minimum shareholding requirement to best provide continued alignment between directors and shareholder interests. This minimum shareholding requirement is that within their first full term of three years as a director a NED must build a holding of WorleyParsons ordinary shares equivalent to that director’s annual fee.

38

WorleyParsons Annual Report 2009

Compliance with the requirement will be assessed as at 30 June each year. Details of the shares acquired by non‑executive directors under the NED share plan during FY2009 are set out below. These are shares that each non‑executive director has acquired through sacrificing a portion of their fees. Shares Shares Total acquired on acquired on shares acquired 1 2 Directors 20 August 2008 5 March 2009 during FY2009

Ron McNeilly Grahame Campbell

PART C: Remuneration Outcomes Remuneration of the non‑executive directors for FY2009 and FY2008 is set out below: Short term Post employee employment Share based benefits benefits payments Non‑executive Fees and Super- director allowances1 annuation2 share plan $ $ $

Total $

1,606

3,587

5,193

707

1,578

2,285

Ron McNeilly

2009

303,417

27,708

109,375

440,500

2008

304,033

27,092

109,375

440,500

Erich Fraunschiel

771

1,722

2,493

John Green

716

1,599

2,315

Grahame Campbell 2009

135,454

11,921

48,125

195,500

134,711

12,664

48,125

195,500

Eric Gwee

687

1,533

2,220

Catherine Livingstone, AO

707

1,578

2,285

1 The directors acquired these shares through the NED share plan by sacrificing part of their directors fees on 20 August 2008 at $34.05 per share. 2 The directors acquired these shares through the NED share plan by sacrificing part of their directors fees on 5 March 2009 at $15.24 per share.

All non‑executive directors have a beneficial interest in shares in addition to those above. Particulars of directors’ beneficial interests in shares of WorleyParsons Limited as at the date of this Report are set out in note 31 to the financial statements. All NEDs hold shares with a value that exceeds 100% of their annual fees, which exceeds the proposed NEDs minimum shareholding requirement.

2008

Erich Fraunschiel

2009

147,496

13,004

52,500

213,000

2008

123,413

37,087

52,500

213,000

John Green

2009

49,250

100,000

48,750

198,000

2008

49,250

100,000

48,750

198,000

Eric Gwee

2009

158,251

–

46,749

205,000

2008

167,250

–

46,750

214,000

Catherine Livingstone, AO

2009

132,454

11,921

48,125

192,500

2008

135,454

11,921

48,125

195,500

Total

2009

926,323

164,553

353,624

1,444,500

2008

914,111

188,764

353,625

1,456,500

1

Includes travel and similar allowances.

2 Superannuation contributions are made on behalf of the non‑executive directors in accordance with the Company’s statutory superannuation obligations. The superannuation figures also include additional (i.e. non‑statutory) contributions to superannuation and pension plans.

This Directors’ Report is made in accordance with a resolution of the directors.

Ron McNeilly Chairman Sydney, 24 August 2009

WorleyParsons Annual Report 2009

39

Income Statement For the financial year ended 30 June 2009

CONSOLIDATED

NOTES

PARENT ENTITY

2009 $’M

2008 $’M

2009 $’M

2008 $’M

Services revenue

5,794.7

4,607.1

–

–

Interest income

5.7

18.3

0.2

0.8

REVENUE AND OTHER INCOME

Dividends from controlled entities

–

–

167.1

294.5

Other

7.3

8.2

0.2

–

24(C)

44.1

36.5

–

–

Revenue and other income

5,851.8

4,670.1

167.5

295.3

Staff costs

(3,291.0)

(2,635.6)

–

–

Contract related reimbursable costs

(1,173.9)

(959.8)

–

–

Office and administration costs

(457.6)

(272.3)

–

–

Depreciation

(28.4)

(23.4)

–

–

Amortization

(59.5)

(43.6)

–

Borrowing costs

(49.3)

(50.0)

–

Other costs

(230.4)

(197.1)

–

Total expenses

(5,290.1)

Share of net profits of associates accounted for using the equity method

EXPENSES

Profit before income tax expense Income tax expense

5

Profit after income tax expense

(4,181.8)

–

561.7

488.3

167.5

(160.8)

(141.0)

400.9

347.3

(0.3)

– (0.2) – (0.2) 295.1 (0.2)

167.2

294.9

Profit attributable to minority interests

(10.4)

(3.4)

–

–

Profit attributable to members of WorleyParsons Limited

390.5

343.9

167.2

294.9

Basic earnings per share (cents)

21

161.1

142.5

Diluted earnings per share (cents)

21

159.4

140.8

The above income statement should be read in conjunction with the accompanying notes.

40

WorleyParsons Annual Report 2009

Balance Sheet As at 30 June 2009

CONSOLIDATED

NOTES

2009 $’M

PARENT ENTITY 2008 $’M

2009 $’M

2008 $’M

ASSETS Current assets Cash and cash equivalents

6

173.8

82.2

0.2

5.3

Trade and other receivables

7

1,210.1

1,217.2

355.3

340.9

Inventories

0.3

0.4

–

–

Prepayments

61.6

51.7

–

–

35

2.3

5.9

–

–

8

39.8

59.0

–

–

Total current assets

1,487.9

1,416.4

355.5

346.2

Derivatives Assets held for sale

Non‑current assets Equity accounted associates

24(A)

122.6

91.8

–

–

Shares in controlled entities at cost

23(B)

–

–

1,062.5

1,062.5 –

Property, plant and equipment

9

139.0

81.7

–

Intangible assets

10

1,663.1

1,562.4

–

–

Deferred tax assets

11

86.8

60.7

–

0.5

Derivatives

–

35

16.8

1.3

–

Other non‑current assets

1.3

3.2

–

–

Total non‑current assets

2,029.6

1,801.1

1,062.5

1,063.0

TOTAL ASSETS

3,517.5

3,217.5

1,418.0

1,409.2

0.5

LIABILITIES Current liabilities Trade and other payables

12

650.4

595.7

0.5

Interest bearing loans and borrowings

13

10.3

38.5

–

–

Income tax payable

61.5

53.1

57.2

27.1

Provisions

14

266.1

245.8

–

–

Derivatives

35

0.2

0.2

–

–

Liabilities held for sale

8

26.4

27.4

–

–

Total current liabilities

1,014.9

960.7

57.7

27.6

Non‑current liabilities Interest bearing loans and borrowings

15

707.2

672.9

–

–

Deferred tax liabilities

16

99.0

124.9

–

0.3

Provisions

17

41.3

32.1

–

–

Derivatives

35

–

10.4

–

–

Total non‑current liabilities

847.5

840.3

0.0

0.3

TOTAL LIABILITIES

1,862.4

1,801.0

57.7

27.9

NET ASSETS

1,655.1

1,416.5

1,360.3

1,381.3

1,142.6

1,132.5

1,142.6

1,132.5

EQUITY Issued capital

18

Reserves

19

(116.3)

(157.8)

Retained profits

20

622.3

Parent entity interest Minority interests TOTAL EQUITY

31.6

22.7

438.8

186.1

226.1

1,648.6

1,413.5

1,360.3

1,381.3

6.5

3.0

–

–

1,655.1

1,416.5

1,360.3

1,381.3

The above balance sheet should be read in conjunction with the accompanying notes.

WorleyParsons Annual Report 2009

41

Statement of Changes in Equity For the Financial Year Ended 30 June 2009

CONSOLIDATED

PARENT ENTITY

NOTES

2009 $’M

2008 $’M

2009 $’M

2008 $’M

Total equity at the beginning of the financial year

1,416.5

1,387.7

1,381.3

1,242.0

Net movement in foreign currency translation reserve

19(A)

32.5

(152.3)

–

–

Net movement in hedge reserve

19(B)

0.1

(8.3)

–

–

(160.6)

Net income/(expense) recognized directly in equity

32.6

–

–

Profit after income tax expense

400.9

347.3

167.2

294.9

Total recognized income and expense for the financial year

433.5

186.7

167.2

294.9

Performance rights expensed

18.7

14.4

18.7

Dividends paid

(207.0)

(170.1)

(207.2)

14.4 (170.3)

Contribution to equity

0.3

0.3

0.3

Minority interest movement

(6.9)

(2.5)

–

–

Total equity at the end of the financial year

0.3

1,655.1

1,416.5

1,360.3

1,381.3

Members of WorleyParsons Limited

423.1

183.3

167.2

294.9

Minority interests

10.4

3.4

–

–

433.5

186.7

167.2

294.9

Total recognized income and expense for the financial year is attributable to:

The above statement of changes in equity should be read in conjunction with the accompanying notes.

42

WorleyParsons Annual Report 2009

Cash Flow Statement For the Financial Year Ended 30 June 2009

CONSOLIDATED

NOTES

2009 $’M

PARENT ENTITY 2008 $’M

2009 $’M

2008 $’M

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of goods and services tax)

6,106.0

4,407.3

0.1

Payments to suppliers and employees (inclusive of goods and services tax)

(5,364.3)

(4,079.4)

–

0.1 (0.1)

741.7

327.9

0.1

24(B)

20.5

8.3

–

–

Dividends received from controlled entities

–

–

167.1

294.5

Interest received

5.3

17.9

0.2

0.8

Dividends received from associates

–

Borrowing costs paid

(47.5)

(47.6)

–

(0.2)

Income taxes paid

(173.6)

(107.7)

(56.4)

(14.8)

Net cash inflow from operating activities

546.4

198.8

111.0

280.3

–

–

–

–

–

–

26

CASH FLOWS FROM INVESTING ACTIVITIES Payments for purchase of equity accounted associates, net of return of capital

–

Proceeds from disposal of investments

22.5

(3.6) –

Payments for acquisition of controlled entities

(9.4)

(252.0)

Cash balances in controlled entities acquired, net of overdraft

0.2

9.0

–

–

Payments for purchase of property, plant and equipment and computer software

(147.2)

(79.5)

–

–

Proceeds from sale of property, plant and equipment

0.5

0.5

–

Loans to controlled entities

–

–

(612.9)

(199.3)

–

Loans from controlled entities repaid

–

–

704.0

97.0

Net cash (outflow)/inflow from investing activities

(133.4)

(325.6)

91.1

(102.3)

Repayment of borrowings

(1,102.4)

(417.3)

–

–

Proceeds from borrowings

1,002.6

699.3

–

– –

CASH FLOWS FROM FINANCING ACTIVITIES

Costs of bank facilities and proceeds from finance leases

(3.6)

(0.3)

–

Net loans to related parties

0.6

(6.4)

–

Dividends paid to the Company’s shareholders

22(B)

(207.0)

Dividends paid to minority interests

(6.7)

Net cash (outflow)/inflow from financing activities

(316.5)

(170.1) (3.8) 101.4

Net increase/(decrease) in cash

96.5

(25.4)

Cash at the beginning of the financial year

76.3

108.0

Effects of exchange rate changes on cash

5.5

Cash and cash equivalents at the end of the financial year

6

178.3

(6.3) 76.3

(207.2)

– (170.3)

– (207.2)

– (170.3)

(5.1)

7.7

5.3

(2.4)

–

–

0.2

5.3

The above cash flow statement should be read in conjunction with the accompanying notes.

WorleyParsons Annual Report 2009

43

Notes to the Financial Statements For the Financial Year Ended 30 June 2009 1 CORPORATE INFORMATION The financial report of WorleyParsons Limited for the financial year ended 30 June 2009 was authorized for issue in accordance with a resolution of the directors on 24 August 2009. WorleyParsons Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange (ASX: WOR). The nature of the operations and principal activities of the Group is described in note 32.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) BASIS OF ACCOUNTING (i) Basis of preparation This general purpose financial report has been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards (AAS) and other authoritative pronouncements of the Australian Accounting Standards Board. The Company is of a kind referred to in Class Order 98/0100 issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the financial statements and Directors’ Report. Amounts have been rounded off to the nearest hundred thousand dollars in accordance with that Class Order.

(ii) Historical cost convention The financial report has been prepared on a historical cost basis, except for derivative financial instruments and available‑for‑sale financial assets that have been measured at fair value. The carrying values of recognized assets and liabilities that are hedged with fair value hedges are adjusted to record changes in the fair values attributable to the risks that are being hedged. (iii) Critical accounting estimates In the application of AAS, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made: •

oodwill and intangible assets with identifiable useful lives, G see note 10;

•

Warranty provisions, see notes 14 and 17;

•

Share based payments, see note 2(D); and

•

Recovery of deferred taxes, see note 2(E).

Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods.

(iv) Adoption of new accounting standards There has been no significant change in accounting policies during the period. No AAS issued but not yet effective has been early adopted. It is not considered that early adoption of these standards would have a material impact on the results of the Group.

44

(v) New Standards not yet applicable Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ended 30 June 2009. The application date for these standards is 1 July 2009 and they are as follows:

WorleyParsons Annual Report 2009

1. AASB 8 and AASB 2007‑3 (Operating Segments and consequential amendments to other Australian Accounting Standards). New Standard replacing AASB 114 (Segment Reporting) which adopts a management reporting approach to segment reporting. The Group intends to apply this starting from 1 July 2009. 2. AASB 1039 (Revised) (Concise Reporting). AASB 1039 was revised in August 2008 to achieve consistency with AASB 8 Operating Segments. The revisions include changes to terminology and descriptions to ensure consistency with the revised AASB 101 Presentation of Financial Statements. The Group intends to apply this starting from 1 July 2009. 3. AASB 123 (Revised) and AASB 2007‑6 (Borrowing Costs and consequential amendments to other Australian Accounting Standards). The amendments to AASB 123 require that all borrowing costs associated with a qualifying asset be capitalized. This will have no impact to the Group, as the Group already capitalizes borrowing costs associated with qualifying assets. 4. AASB 101 (Revised), AASB 2007‑8 and AASB 2007‑10 (Presentation of Financial Statements and consequential amendments to other Australian Accounting Standards) introduces a statement of comprehensive income. Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifications of items in the financial statements, changes in the presentation requirements for dividends and changes to the titles of the financial statements. The Group intends to apply this starting from 1 July 2009. 5. AASB 2008‑1 Amendments to Australian Accounting Standard (Share‑based Payments: Vesting Conditions and Cancellations). The amendments clarify the definition of “vesting conditions”, introducing the term “non‑vesting conditions” for conditions other than vesting conditions as specifically defined and prescribe the accounting treatment of an award that is effectively cancelled because a non‑vesting condition is not satisfied. The Group intends to apply this starting from 1 July 2009. 6. AASB 3 (Revised) (Business Combinations). The revised Standard introduces a number of changes to the accounting for business combinations, the most significant of which includes the requirement to have to expense transaction costs and a choice (for each business combination entered into) to measure a non‑controlling interest (formerly a minority interest) in the acquiree either at its fair value or at its proportionate interest in the acquiree’s net assets. This choice will effectively result in recognizing goodwill relating to 100% of the business (applying the fair value option) or recognizing goodwill relating to the percentage interest acquired. The changes apply prospectively. The Group intends to apply this starting from 1 July 2009. 7. AASB 127 (Revised) (Consolidated and Separate Financial Statements). There are a number of changes arising from the revision to AASB 127 relating to changes in ownership interest in a subsidiary without loss of control, allocation of losses of a subsidiary and accounting for the loss of control of a subsidiary. Specifically in relation to a change in the ownership interest of a subsidiary (that does not result in loss of control) – such a transaction will be accounted for as an equity transaction. The Group intends to apply this starting from 1 July 2009. (B) STATEMENT OF COMPLIANCE The consolidated financial report of the Group and the financial report of the Company comply with International Financial Reporting Standards (IFRS) and interpretations as issued by the International Accounting Standards Board. (C) BASIS OF CONSOLIDATION The consolidated financial statements incorporate the assets and liabilities of all entities controlled by WorleyParsons Limited as at 30 June 2009 and the results of all controlled entities for the financial year then ended. WorleyParsons Limited and its controlled entities together are

referred to in this financial report as the consolidated entity or the Group. Investments in associates are equity accounted and are not part of the consolidated group (see note (C)(iv) below).

The effects of all transactions between entities in the consolidated entity are eliminated in full. Minority interests in the results and equity of controlled entities are shown separately in the consolidated income statement and consolidated balance sheet respectively.

(i) Controlled entities Where control of an entity is obtained during a financial year, its results are included in the consolidated income statement from the date on which control commences. Where control of an entity ceases during a financial year, its results are included for that part of the year during which control existed.

(ii) Jointly controlled operations and assets The proportionate interests in the assets, liabilities and expenses of jointly controlled operations and jointly controlled assets have been incorporated in the financial statements under the appropriate headings. Details of the jointly controlled operations have been set out in note 25.

(iii) Joint ventures The interest in joint ventures is carried at the lower of the equity accounted amount and the recoverable amount in the consolidated financial statements. The share of profits or losses of the entities is recognized in the consolidated income statement, and the share of movements in reserves is recognized in the consolidated balance sheet.

(E) TAXES (i) Income tax The income tax expense for the period is the tax payable on the current period’s taxable income based on the income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognized for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantially enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognized in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time did not affect either accounting profit or taxable profit or loss.

Profits or losses on transactions establishing joint ventures and transactions with the joint ventures are eliminated to the extent of the consolidated entity’s ownership interest until such time as they are realized by the joint ventures on consumption or sale.

(iv) Associates Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Under this method, the consolidated entity’s share of the post‑acquisition profits or losses of associates is recognized in the consolidated income statement, and its share of post‑acquisition movements in reserves is recognized in consolidated reserves. The cumulative post‑acquisition movements are adjusted against the cost of the investment. Associates are those entities over which the consolidated entity exercises significant influence, but not control. Details of the associates have been set out in note 24.

Deferred tax assets are recognized for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences. Deferred tax liabilities and assets are not recognized for temporary differences between the carrying amount and tax bases of investments in controlled entities where the Parent Entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

(v) Minority interests Minority interests not held by the Group are allocated their share of net profit after tax in the consolidated income statement and are presented within equity in the consolidated balance sheet, separately from parent entity interest.

(D) EMPLOYEE BENEFITS Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave, sick leave and any other employee benefits expected to be settled within 12 months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefits or liabilities are measured at the present value of the estimated future cash outflows to be made in respect of services provided by the employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, is used. Employee benefits expenses arising in respect of wages and salaries, non‑monetary benefits, leave entitlements and other types of entitlements are charged against profits on a net basis in their respective categories.

Equity based compensation scheme – performance rights Performance rights (rights) over the ordinary shares of WorleyParsons Limited are granted to executive directors and other executives of the consolidated entity for nil consideration in accordance with performance guidelines approved by the Board. The fair values of the rights are amortized on a straight line basis over their performance period. For share settled rights, the fair value of the rights is the share price at grant date adjusted for the impact of performance hurdles and other vesting or exercise criteria attached to the right. For cash settled rights, the fair value of the rights is recalculated at the end of each reporting period and amortized on a straight line basis over their vesting period. The accounting estimates and assumptions relating to rights would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.

Current and deferred tax amounts relating to items recognized directly in equity are also recognized in equity and not in the income statement.

(ii) Tax consolidation WorleyParsons Limited and its wholly owned Australian entities elected to form a tax consolidated group from 1 July 2003. On formation of the tax consolidated group, the entities in the tax consolidated group entered into a tax sharing agreement which, in the opinion of the Directors, limits the joint and several liability of the wholly owned entities in the case of a default by the head entity, WorleyParsons Limited. The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate WorleyParsons Limited for any current tax payable assumed and are compensated by WorleyParsons Limited for any current tax loss, deferred tax assets and tax credits that are transferred to WorleyParsons Limited under the tax consolidation legislation. The tax consolidated current tax liability or current year tax loss and other deferred tax assets are required to be allocated to the members of the tax consolidated group in accordance with UIG 1052. The Group uses an allocation method for this purpose where the allocated current tax payable, current tax loss, deferred tax assets and other tax credits for each member of the tax consolidated group are determined as if the company is a stand‑alone taxpayer but modified as necessary to recognize membership of a tax consolidated group. The funding

WorleyParsons Annual Report 2009

45

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

amounts are determined by reference to the amounts recognized in the wholly owned entities’ financial statements which are determined having regard to membership of the tax consolidated group. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognized as current inter‑company receivables or payables.

On consolidation, exchange differences and the related tax effect arising from the translation of borrowings and other currency instruments designated as hedges of the net investment in overseas branches and controlled entities are reflected in the foreign currency translation reserve. When an overseas branch, controlled entity or associate is sold or net investment borrowings are repaid, a proportionate share of such exchange differences is recognized in the income statement as part of the gain or loss on sale or repayment of borrowing. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing exchange rate.

For WorleyParsons Limited, there were no amounts recognized as tax consolidation contributions during the financial year (2008: $nil).

(iii) Goods and services tax (GST) Revenues, expenses and assets are recognized net of the amount of GST except where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority. In these circumstances, the GST is recognized as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

(G) ACQUISITION OF ASSETS AND BUSINESS COMBINATIONS The purchase method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given up, shares issued or liabilities undertaken or assumed at the date of acquisition plus costs directly attributable to the acquisition. Where equity instruments are issued in a business combination, the value of the instruments is their market price as determined by market valuation at the acquisition date. Transaction costs arising on the issue of equity instruments are recognized directly in equity. Except for non‑current assets or disposal groups classified as held for sale (which are measured at fair value less costs to sell), all identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of the business combination over the net fair value of the Group’s share of the identifiable net assets acquired is recognized as goodwill. If the cost of acquisition is less than the Group’s share of the net fair value of the identifiable net assets of the subsidiary, the difference is recognized as a gain in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.

Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, is classified as an operating cash flow. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (F) FOREIGN CURRENCY TRANSLATION (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in Australian dollars, which is WorleyParsons’ functional and presentation currency.

(ii) Translation of foreign currency transactions Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. Foreign currency receivables and payables at balance date are translated at exchange rates at balance date. Exchange gains and losses are brought to account in determining the profit and loss for the financial year. (iii) Specific hedges Hedging is undertaken to avoid or minimise potential adverse financial effects of movements in foreign currency exchange rates. Gains or costs arising upon entry into a hedging transaction intended to hedge the purchase or sale of goods or services, together with subsequent exchange gains or losses resulting from those transactions, are deferred up to the date of the purchase or sale and included in the measurement of the purchase or sale. Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognized directly in equity in the foreign currency translation reserve. At each balance date, the Group measures the effectiveness of its cash flow hedges. The effective portion of the gain or loss on the hedging instrument is recognized directly in equity, while the ineffective portion is recognized in the profit and loss.

46

(iv) Group companies Assets and liabilities of overseas branches, controlled entities and associates that have a functional currency other than Australian dollars are translated at exchange rates prevailing on the balance date. Income and expenses are translated at average exchange rates prevailing during the period. Other equity balances are translated at historical exchange rates. Exchange differences arising on translation are taken directly to the foreign currency translation reserve. WorleyParsons Annual Report 2009

Where settlement of any part of the consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the Company’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. (H) REVENUE RECOGNITION Amounts disclosed as revenue are net of trade allowances, duties and taxes paid. Revenue is recognized and measured at the fair value of the consideration received or receivable to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must be met before revenue is recognized:

(i) Engineering design and project services Contract revenue and expenses are recognized in accordance with the percentage of completion method unless the outcome of the contract cannot be reliably estimated. Where it is probable that a loss will arise from a contract, the excess of total costs over revenue is recognized as an expense. Where the outcome of a contract cannot be reliably estimated, contract costs are recognized as an expense as incurred, and where it is probable that the costs will be recovered, revenue is recognized to the extent of the costs incurred. Incentive payments on contracts are recognized as part of total contract revenue where it is probable that specified performance standards are met or exceeded and the amount of the incentive payment can be reliably measured. For fixed price contracts, the stage of completion is measured by reference to labor hours incurred to date as a percentage of estimated total labor hours for each contract. Revenue from cost plus contracts is recognized by reference to the recoverable costs incurred during the reporting period plus the percentage of fees earned.

(ii) Sale of goods Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the goods to the customer.

(iii) Interest Interest income is recognized as it accrues using the effective interest rate method.

(iv) Dividends Revenue is recognized when the Group’s right to receive the payment is established.

(I) TRADE AND OTHER RECEIVABLES All trade receivables are recognized at the original amounts less an allowance for any uncollectible debts. An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect debts. The recoverable amount of trade receivables is reviewed on an ongoing basis.

asset’s fair value less costs to sell, and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). (N) LEASEHOLD IMPROVEMENTS The cost of improvements to or on leasehold properties is amortized over the unexpired period of the lease or the estimated useful life of the improvement to the consolidated entity, whichever is the shorter. (O) LEASES The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Accrued receivables are stated at the aggregate of contract costs incurred to date plus recognized profits less recognized losses and progress billings. Contract costs include all costs directly related to specific contracts, costs that are specifically chargeable to the customer under the terms of the contract and an allocation of overhead expenses incurred in connection with the consolidated entity’s activities in general. (J) INVENTORIES (i) Raw materials and finished goods Raw materials and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labor and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the first‑in, first‑out basis. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(ii) Consumables and stores Consumables and stores are stated at the lower of cost and net realisable value and charged to specific contracts when used.

(iii) Work in progress Work in progress is valued at the lower of cost and net realisable value. Cost comprises staff salary costs and direct expenses together with an appropriate proportion of overheads. Net realisable value is based on estimated selling prices less further costs expected to be incurred to completion.

(K) RECOVERABLE AMOUNT Where the carrying amount of a non‑current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. In determining the recoverable amount, the expected cash flows have been discounted to their present value using a market determined risk adjusted discount rate. (L) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost less accumulated depreciation and impairment, if any. Depreciation is calculated on a straight line basis to write off the net cost or revalued amount of each item of property, plant and equipment (excluding land) over its expected useful life to the consolidated entity. The expected useful lives for plant and equipment range from three to ten years. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each annual reporting period. (M) IMPAIRMENT OF ASSETS Assets that have an indefinite useful life are not subject to amortization and are tested at least twice a year for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an

(i) Group as a lessee Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are as an expense in profit or loss. The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognized as an expense on a straight line basis. Lease incentives are recognized in the income statement as an integral part of the total lease expense.

(ii) Group as a lessor Leases where the Group transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee or a third party are classified as finance leases. A receivable at an amount equal to the present value of the lease payments, including any guaranteed residual value, is recognized. Income on finance leases is recognized on a basis reflecting a constant periodic return based on the lessor’s net investment outstanding in respect of the finance lease. Leases where the Group retains substantially all the risk and rewards incidental to ownership of an asset are classified as operating leases. Operating lease rental revenue is recognized on a straight line basis.

(P) INTANGIBLE ASSETS (i) Goodwill Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired at the time of acquisition of a business or shares in a controlled entity or an associate. Goodwill on acquisition of controlled entities is included in intangible assets and goodwill on acquisition of associates is included in investments in associates. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is not amortized; instead, it is tested at least twice a year for any impairment in the carrying amount or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is carried at cost less accumulated impairment losses. Goodwill is allocated to cash generating units for the purposes of impairment testing. Where the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is recognized.

(ii) Identifiable intangible assets Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets are not capitalized and expenditure is recognized in profit and loss in the year in which the expenditure is incurred. WorleyParsons Annual Report 2009

47

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the amortization period or method, as appropriate, which is a change in accounting estimate. The amortization expense on intangible assets with finite lives is recognized in profit or loss. The amortization period is between three to 15 years. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangible assets are not amortized. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis. Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognized only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. (Q) TRADE AND OTHER PAYABLES Liabilities for trade payables and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company. Payables to related parties are carried at principal amount. Interest, when charged by the lender, is recognized as an expense on an accrual basis. (R) INTEREST BEARING LOANS AND BORROWINGS Loans are initially recognized at fair value, net of transaction costs incurred. Loans are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in the income statement over the period of the loan using the effective interest rate method. (S) PROVISIONS Provisions are recognized when the consolidated entity has a legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation.

48

(i) Dividends payable Provision is made for the amount of any dividends declared, determined or publicly recommended by the Directors at or before the end of the financial year but not distributed at balance date. (ii) Insurance Provision for insurance liabilities is recognized in line with actuarial calculations of unsettled insurance claims, net of insurance recoveries. The provision is based on the aggregate amount of individual claims incurred but not reported that are lower in value than the insurance deductible of the consolidated entity. It is based on the estimated cost of settling claims and consideration is given to the ultimate claim size, future inflation as well as the levels of compensation awarded through the courts. (iii) Warranties Provision is made for the estimated liability on all products and services still under warranty at balance date. This provision is estimated having regard to prior service warranty experience. In calculating the liability at balance date, amounts were not

WorleyParsons Annual Report 2009

discounted to their present value as the effect of discounting was not material. In determining the level of provision required for warranties, the Group has made judgements in respect of the expected performance and the costs of fulfilling the warranty. Historical experience and current knowledge have been used in determining this provision.

(iv) Insurance claims on acquisition Provisions for insurance claims on acquisition are recognized based on the estimated liability at the date of acquisition.

(v) Deferred revenue The Group at times receives payment for services prior to revenue being recognized in the financial statements. Revenue is classified as deferred due to the criteria required for its recognition not being met as at the reporting date, in line with the accounting policy set out in note 2(H).

(vi) Expected losses on contracts Where the outcome for a services contract is expected to result in an overall loss over the life of the contract, this loss is provided for when it first becomes known that a loss will be incurred.

(vii) Restructurings Provisions for restructurings are recognized when the consolidated entity has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by: (a) starting to implement the plan; or (b) announcing its main features to those affected by it.

(T) REPAIRS AND MAINTENANCE Repairs, minor renewals and improvements, and the purchase of minor items of tools and equipment are charged to expense as incurred. Major renewals and improvements are capitalized to the respective asset and depreciated. (U) BORROWING COSTS Borrowing costs are recognized as expenses in the period in which they are incurred, except when they are included in the costs of qualifying assets. Borrowing costs include: (i) interest on bank overdrafts, and short term and long term borrowings; (ii) amortization of discounts or premiums relating to borrowings; and (iii) finance lease charges. (V) CASH AND CASH EQUIVALENTS Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are included within interest bearing loans and borrowings in current liabilities on the balance sheet. (W) OTHER INVESTMENTS All other non‑current investments are carried at the lower of cost or recoverable amount. (X) ISSUED CAPITAL Issued and paid up capital is recognized at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognized directly in equity as a reduction of the share proceeds received. (Y) EARNINGS PER SHARE (i) Basic earnings per share Basic earnings per share is determined by dividing the profit attributable to members of WorleyParsons Limited by the weighted average number of ordinary shares outstanding during the financial year.

(ii) Diluted earnings per share Diluted earnings per share is calculated as profit attributable to members of WorleyParsons Limited adjusted for:

contract and using market interest rates for similar instruments at the measurement date. The fair value of the cross currency swaps is calculated by discounting the cash flows with discount factors for the respective currency of flow incorporating the cross currency basis spread into the valuation methodology to be consistent with the market. This calculation is compared against broker quotes for reasonableness.

(a) costs of servicing equity (other than dividends); (b) the after‑tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognized as expenses; and

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. In respect of the liability component of convertible notes, the market rate of interest is determined by reference to similar liabilities that do not have a conversion option. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

(c) other non‑discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. (Z) SEGMENT REPORTING A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing products or services within a particular economic region and is subject to risks and returns that are different from those of segments operating in other economic regions. (AA) ASSETS HELD FOR SALE Non‑current assets and disposal groups are classified as held for sale and measured at the lower of their carrying value and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction. They are not depreciated or amortized. For an asset or disposal group to be classified as held for sale, it must be available for immediate sale in its present condition and its sale must be highly probable.

3 FINANCIAL RISK MANAGEMENT (A) OVERVIEW The Group’s principal financial instruments comprise receivables, payables, bank loans and overdrafts, finance leases, cash and short term deposits and derivatives. The Group has exposure to the following risks from its use of financial instruments:

(ii) Investments in equity and debt securities The fair value of held‑to‑maturity investments, financial assets at fair value through profit and loss, and available‑for‑sale financial assets is determined by reference to their quoted bid price at the reporting date. The fair value of held‑to‑maturity investments is determined for disclosure purposes only. (iii) Derivatives The fair value of forward exchange contracts is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk‑free interest rate (based on government bonds). The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated cash flows based on the terms and maturity of each

market risk.

Risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

(AB) DETERMINATION OF FAIR VALUES A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non‑financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions in determining fair values is disclosed in the notes specific to that asset or liability.

liquidity risk; and

•

The Board has overall responsibility for the establishment and oversight of the risk management framework. The Board has established the Audit and Risk Committee, which is responsible for developing and monitoring risk management policies. The Committee reports regularly to the Board on its activities.

The assets and liabilities are presented separately on the face of the balance sheet.

(i) Property, plant and equipment The fair value of property, plant and equipment recognized as the result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction of proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of plant, property, equipment, fixtures and fittings is based on quoted market prices for similar items.

credit risk;

•

This note presents information about the Group’s exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and the management of capital. Quantitative disclosures are included throughout this financial report.

An impairment loss is recognized for any initial or subsequent write down of the asset (or disposal group) to fair value less costs to sell. A gain is recognized for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognized. A gain or loss not previously recognized by the date of the sale of the non‑current asset (or disposal group) is recognized at the date of derecognition.

•

The committee also oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Committee. (B) CREDIT RISK Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. For the Company, it arises from receivables due from subsidiaries.

(i) Trade and other receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, have less of an influence on credit risk. Geographically and on a customer basis, there is no concentration of credit risk. The Group has a credit policy under which each new customer is analyzed for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings, when available, and in some cases bank references.

WorleyParsons Annual Report 2009

49

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

The Group has established an allowance for impairment that represents their estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures.

(ii) Guarantees Details of outstanding guarantees are provided in note 28. The Group is, in the normal course of business, required to provide guarantees and letters of credit on behalf of controlled entities, associates and related parties in respect of their contractual performance related obligations.

(C) LIQUIDITY RISK Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group ensures that is has sufficient cash on demand to meet expected operational expenses including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. (D) MARKET RISK Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Group enters into derivatives, and also incurs financial liabilities, in order to manage market risk. Generally, the Group seeks to apply hedge accounting in order to reduce volatility in profit and loss.

(i) Currency risk The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities. The Group uses forward exchange contracts and foreign currency options to hedge its currency risk, most with a maturity of less than one year from the reporting date. When necessary, forward exchange contracts are rolled over at maturity. Interest on borrowings is denominated in currencies that match the cash flows generated by the underlying operations for the Group, primarily AUD, CAD, GBP and USD. This provides an economic hedge and no derivatives are entered into.

(ii) Interest rate risk The Group adopts a policy of hedging interest rates on core levels of debt by either fixing the interest rate, entering into an interest rate swap arrangement or purchasing an interest rate option.

(E) CAPITAL MANAGEMENT The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board monitors the return on capital, which the Group defines as net operating income divided by total shareholders’ equity, excluding minority interests. The Board also determines the level of dividends that may be paid to ordinary shareholders. The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. The Board monitor this through the gearing ratio (net debt/net debt plus total equity), size of available banking facilities and the assessment of the outlook for the group operations. The target for the Group’s gearing ratio is between 25% and 35%. The gearing ratios at 30 June 2009 and 2008 were as follows:

50

WorleyParsons Annual Report 2009

CONSOLIDATED

2009 $’M

2008 $’M

Total interest bearing liabilities

745.2

726.2

Less cash and cash equivalents

178.3

76.3

Net debt

566.9

649.9

Total equity

1,655.1

1,416.5

Gearing

25.5%

31.4%

There were no changes in the Group’s approach to capital management during the year. Neither the Company nor any of its subsidiaries is subject to externally imposed capital requirements.

CONSOLIDATED 2009 $’M

PARENT ENTITY

2008 $’M

2009 $’M

2008 $’M

4 EXPENSES AND LOSSES/(GAINS) Profit before income tax expense includes the following specific net gains and expenses/losses: NET GAINS Ineffective hedges

–

5.3

–

–

EXPENSES AND LOSSES Operating lease rentals – minimum lease payments

120.4

69.0

–

–

Retirement benefits

100.8

82.1

–

–

19.1

19.9

–

–

6.5

–

–

–

Performance rights expense Ineffective hedges Provisions Deferred revenue

16.2

29.5

–

–

Warranties

(7.2)

7.5

–

–

Insurance

3.4

1.4

–

–

Current tax

204.0

157.3

0.1

0.2

Deferred tax

(35.4)

(12.5)

0.2

(0.8)

5 INCOME TAX (A) INCOME TAX EXPENSE

(Over)/under provision in previous financial periods Income tax expense

–

0.8

160.8

(7.8)

141.0

(3.8)

0.3

0.2

(24.2)

(21.3)

0.5

(0.4)

(0.3)

(0.4)

0.2

(0.8)

Deferred income tax expense/(revenue) included in income tax expense comprises: (Increase)/decrease in deferred tax assets (Decrease)/increase in deferred tax liabilities

(11.2)

8.8

Deferred tax

(35.4)

(12.5)

CONSOLIDATED 2009 $’M

PARENT ENTITY

2008 $’M

2009 $’M

2008 $’M

At the Group’s statutory income tax rate of 30% (2008: 30%)

561.7

488.3

167.5

295.1

Non‑assessable dividends

168.5

146.5

50.2

88.5

–

–

2.0

2.4

(50.1)

(88.4)

–

–

(10.0)

–

–

Research and development concession

(1.6)

(2.1)

–

–

Plant and machinery rebate

(2.0)

(0.8)

–

–

Tax losses not previously recognized

(0.2)

(0.1)

–

–

Over provision in previous financial periods

(7.8)

(3.8)

–

Difference in overseas tax rate*

(5.0)

9.5

–

(0.6)

0.2

0.1

0.3

0.2

Other

20.1

Income tax expense

160.8

173.8

82.2

0.2

5.3

Cash at bank and on hand

173.8

82.2

0.2

5.3

Cash and cash equivalents

5.3

173.8

82.2

0.2

8

4.5

3.8

–

–

13

–

(9.7)

–

–

Balance per cash flow statement

178.3

0.2

5.3

Bank overdraft

76.3

141.0

(9.0)

16.6

–

(16.8)

–

–

Trade receivables

713.6

704.1

–

–

Unbilled contract revenue

390.0

408.0

–

–

Retentions

11.2

13.5

–

–

Allowance for doubtful debts

–

–

1,086.1

1,109.1

–

–

–

Other receivables

67.5

47.9

0.3

0.2

–

Amounts owing by related parties and associates 30(C)

56.5

60.2

355.0

340.7

1,210.1

1,217.2

355.3

340.9

Balance at the beginning of the financial year

16.5

13.8

–

–

Net charge to income statement

11.4

0.1

–

–

Difference arising on translation of foreign operations

0.8

2.6

–

–

Balance at the end of the financial year

28.7

16.5

–

–

(C) AMOUNTS RECOGNIZED DIRECTLY IN EQUITY Aggregate amount of tax arising in the reporting period and not recognized in net profit or loss but directly (debited)/credited to equity: –

(1.0)

(D) TAX LOSSES The Group has tax losses for which no deferred tax asset is recognized on the balance sheet:

Potential tax benefit at 30%

2008 $’M

* Represents income tax expense for foreign tax rate differential and international withholding taxes.

Unused tax losses for which no deferred tax asset has been recognized

2009 $’M

7 CURRENT ASSETS – TRADE AND OTHER RECEIVABLES (13.2)

Deferred tax – credited/(debited) directly to equity

Cash and cash equivalents

Cash held for sale

Share of profits of associates accounted for using the equity method

Current tax – debited directly to equity

PARENT ENTITY

2008 $’M

The above figures are reconciled to cash at the end of the financial year as shown in the cash flow statement as follows:

Tax effect of amounts which are not (taxable)/deductible in calculating taxable income: Non‑deductible performance rights

2009 $’M

6 CURRENT ASSETS – CASH AND CASH EQUIVALENTS

(B) RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE Profit before income tax expense

CONSOLIDATED

NOTES

(28.7)

(16.5)

Allowance for doubtful debts:

The Group’s exposure to currency and liquidity risk for trade receivables and unbilled contract revenue is disclosed in notes 34 and 35.

14.3

12.4

–

–

4.3

3.7

–

–

The benefit for tax losses will only be recognized if: (i) the consolidated entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realized; or (ii) the losses are transferred to an eligible entity in the consolidated entity; and (iii) the consolidated entity continues to comply with the conditions for deductibility imposed by tax legislation; and (iv) no changes in tax legislation adversely affect the consolidated entity in realizing the benefit from the deductions for the losses.

WorleyParsons Annual Report 2009

51

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

8 ASSETS AND LIABILITIES HELD FOR SALE

The Exmouth power station is presented as assets held for sale. It is expected that the sale of this investment will proceed within the next year. In 2008, assets and liabilities held for sale included the Exmouth power station and the equity investments in the Esperance power station and pipeline entities. The Esperance power station and pipeline entities were sold in March 2009.

CONSOLIDATED 2009 $’M

2008 $’M

CONSOLIDATED 2009 $’M

PARENT ENTITY

2008 $’M

2009 $’M

2008 $’M

9 NON‑CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT LAND AND BUILDINGS At cost

2.0

2.0

Accumulated depreciation

–

–

(0.1)

(0.1)

–

–

1.9

1.9

–

–

Cash

4.5

3.8

Trade and other receivables

1.0

3.4

At cost

92.4

45.7

–

–

Inventories

0.3

0.3

Finance lease receivable

33.8

31.8

Accumulated amortization

(32.8)

(20.0)

–

–

Equity accounted investments

–

19.3

59.6

25.7

–

–

Deferred tax assets

0.2

0.4

39.8

59.0

At cost

122.4

86.2

–

–

LEASEHOLD IMPROVEMENTS

PLANT AND EQUIPMENT

Trade and other payables

3.3

2.5

Interest bearing loans and borrowings1

22.6

23.6

Accumulated depreciation

(64.9)

(48.8)

–

–

57.5

37.4

–

–

Deferred tax liabilities

0.5

1.3

26.4

27.4

The above assets and liabilities are included in the Power business segment in note 32.

1 Interest bearing liabilities – secured bank loan The secured bank loan of $22.6 million (2008: $23.6 million) is a fixed and floating interest rate term loan facility. This bank loan is secured by the assets of Exmouth Power Station Pty Limited. The terms of the loan facility preclude the assets from being used as a security for other debt within the Group. The loan facility requires the assets to be insured.

COMPUTER EQUIPMENT At cost

63.3

51.9

–

–

Accumulated depreciation

(43.3)

(35.2)

–

–

20.0

16.7

–

–

Total property, plant and equipment

139.0

81.7

–

–

RECONCILIATIONS Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current and previous financial years are set out below:

CONSOLIDATED

LAND AND BUILDINGS $’M

Balance at 1 July 2008 Additions

LEASEHOLD IMPROVEMENTS $’M

COMPUTER EQUIPMENT $’M

TOTAL $’M

1.9

25.7

37.4

16.7

81.7

–

63.8

41.8

8.5

114.1

Disposals

–

(12.6)

Amortization

–

(16.2)

Depreciation

–

Differences arising on translation of foreign operations

–

Balance at 30 June 2009

PLANT AND EQUIPMENT $’M

– (1.1)

(0.7) – (22.5)

(0.5) – (5.9)

(13.8) (16.2) (28.4)

1.5

1.2

1.6

1.9

59.6

57.5

20.0

139.0

Balance at 1 July 2007

0.9

17.1

27.1

18.2

63.3

Additions due to the acquisition of entities

1.2

1.4

4.5

1.4

8.5

Additions

–

14.1

25.2

6.2

45.5

Disposals

–

(0.4)

Amortization

–

(5.2)

–

–

(0.1)

Differences arising on translation of foreign operations

(0.1)

(1.3)

(2.0)

(2.8)

1.9

25.7

37.4

16.7

52

WorleyParsons Annual Report 2009

(17.0)

–

Depreciation

Balance at 30 June 2008

–

(0.4)

(6.3)

(0.8) (5.2) (23.4) (6.2) 81.7

CONSOLIDATED

PARENT ENTITY

2009 $’M

2008 $’M

2009 $’M

2008 $’M

1,489.2

1,395.8

–

–

–

–

1,394.8

–

–

10 NON‑CURRENT ASSETS – INTANGIBLE ASSETS GOODWILL At cost Accumulated impairment

(1.0) 1,488.2

(1.0)

CUSTOMER CONTRACTS AND RELATIONSHIPS At cost

95.8

90.9

–

–

Accumulated amortization

(38.0)

(20.4)

–

–

57.8

70.5

–

–

TRADE NAMES At cost

70.2

68.3

–

–

Accumulated amortization

(28.8)

(19.6)

–

–

41.4

48.7

–

–

COMPUTER SOFTWARE At cost

105.8

64.7

–

–

Accumulated amortization

(37.8)

(26.2)

–

–

68.0

38.5

–

–

FAVORABLE PROPERTY LEASES At cost

10.1

9.7

–

–

Accumulated amortization

(4.7)

(2.5)

–

–

5.4

7.2

–

–

OTHER At cost

3.7

3.5

–

–

Accumulated amortization

(1.4)

(0.8)

–

–

2.3

2.7

–

–

Total intangible assets

1,663.1

1,562.4

–

–

RECONCILIATIONS Reconciliations of intangible assets at the beginning and end of the current and previous financial years are set out below:

CONSOLIDATED

GOODWILL $’M

Balance at 1 July 2008 Additions due to the acquisition of entities Additions Differences arising on foreign controlled entities Amortization

CUSTOMER CONTRACTS AND RELATIONSHIPS TRADE NAMES $’M $’M

COMPUTER SOFTWARE $’M

FAVORABLE PROPERTY LEASES $’M

OTHER $’M

TOTAL $’M

1,562.4

1,394.8

70.5

48.7

38.5

7.2

2.7

3.3

–

–

–

–

–

3.3

–

–

–

40.8

–

–

40.8

90.1 –

4.9

2.4

0.4

0.4

0.2

98.4

(17.6)

(9.7)

(11.7)

(2.2)

(0.6)

(41.8)

Balance at 30 June 2009

1,488.2

57.8

41.4

68.0

5.4

2.3

1,663.1

Balance at 1 July 2007

1,331.6

74.5

54.1

14.2

9.8

3.7

1,487.9

174.4

17.7

4.6

0.4

–

–

197.1

–

–

–

34.7

–

–

(111.2)

(5.4)

(1.8)

(0.1)

(0.6)

(0.3)

–

(16.3)

(8.2)

(10.7)

(2.0)

(0.7)

38.5

7.2

2.7

Additions due to the acquisition of entities Additions Differences arising on foreign controlled entities Amortization Balance at 30 June 2008

1,394.8

70.5

48.7

34.7 (119.4) (37.9) 1,562.4

WorleyParsons Annual Report 2009

53

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

10 NON‑CURRENT ASSETS – INTANGIBLE ASSETS (continued) Impairment testing Identifiable intangible assets with finite lives are carried at cost less accumulated amortization and adjusted for any accumulated impairment loss. The assets are assessed at each reporting date as to whether there is any indication that the asset may be impaired. Goodwill is an intangible asset with an indefinite life which is tested at least twice a year for impairment. The recoverable amount test is based on a value in use calculation. These calculations use cash flow projections based on financial forecasts of how the business is expected to operate based on current performance and the business environment but taking into account expected future changes. The cash generating units that have significant goodwill are hydrocarbons in Canada of $829.2 million and hydrocarbons in the United States of $232.0 million. Key assumptions used for impairment testing in these cash generating units for the year ended 30 June 2009 include pre‑tax discount rates of 13% and 15% per annum respectively, expected future profits, future nominal growth rates of between 5% and 23% per annum respectively, for the first five years without reinvestment. The growth rate beyond five years is assumed to be 3% per annum. Key assumptions have been based on management’s understanding of the short and long term prospects for the industry and previous experience. The calculation of value in use for the cash generating units is most sensitive to the following assumptions •

Growth rates used in years one to five

•

Change in discount rates

•

Long term growth rate

With regard to the assessment of the cash generating units, the sensitivity analysis indicates that the recoverable amount exceeds the carrying value of the assets. Goodwill is not impaired at reporting date. The business segments form the basis of the cash generating units. Intangible assets including goodwill are disclosed by segment in note 32.

CONSOLIDATED 2009 $’M

2008 $’M

PARENT ENTITY 2009 $’M

2008 $’M

–

–

11 NON‑CURRENT ASSETS – DEFERRED TAX ASSETS The balance comprises temporary differences attributable to: Amounts recognized in the income statement: Allowance for doubtful debts Employee benefits provision

2.8

2.9

44.8

14.1

–

–

Warranty provision

4.1

4.0

–

–

Project provisions

12.8

2.3

–

–

Interests in partnerships

–

9.8

–

–

Fixed assets

4.0

2.5

–

–

Sundry accruals

6.0

10.2

–

–

Recognized tax losses

2.8

2.9

–

–

Other

9.5

9.4

–

0.5

86.8

58.1

–

0.5

–

2.6

–

–

Net deferred tax assets

86.8

60.7

–

0.5

Balance at the beginning of the financial year

60.7

43.4

0.5

1.1

4.5

(2.2)

–

–

Amounts recognized directly in equity – cash flow hedges

Differences arising on translation of foreign controlled entities Credited to the income statement

24.2

21.3

Charged to equity

(2.6)

(1.4)

–

(0.4)

–

–

–

0.5

Transfer to assets held for sale (note 8) Balance at the end of the financial year NOTES

– 86.8

60.7

CONSOLIDATED 2009 $’M

2008 $’M

(0.5)

0.4 (1.0)

PARENT ENTITY 2009 $’M

2008 $’M

12 CURRENT LIABILITIES – TRADE AND OTHER PAYABLES Trade payables

194.3

173.8

–

–

Accruals

260.6

261.2

–

–

Payables to related parties and associates 30(C)

29.7

42.1

–

–

Billings in advance

30.1

11.8

–

–

Accrued staff costs

135.7

106.8

0.5

0.5

650.4

595.7

0.5

0.5

The Group’s exposure to currency and interest rate risk for trade and other payables is disclosed in notes 35 and 36.

13 CURRENT LIABILITIES – INTEREST BEARING LOANS AND BORROWINGS Bank overdraft

–

9.7

–

–

Unsecured bank loans

–

18.2

–

–

Promissory note

10.2

9.9

–

–

0.1

0.7

–

–

10.3

38.5

–

–

Lease and hire purchase liabilities

54

WorleyParsons Annual Report 2009

Bank overdraft The bank overdraft facilities can be drawn at any time subject to the terms and conditions set out in the facility agreement.

MOVEMENTS IN PROVISIONS 2008

Unsecured bank loans Refer to note 15 for terms and conditions. Promissory note The promissory note of $4.5 billion (2008: $4.5 billion) Chilean pesos A$10.2 million (2008: A$9.9 million) is an unsecured fixed interest rate facility.

CONSOLIDATED

2009 $’M

PARENT ENTITY

2008 $’M

2009 $’M

2008 $’M

14 CURRENT LIABILITIES – PROVISIONS Employee benefits

148.1

112.5

–

–

Deferred revenue

71.2

78.9

–

–

Insurance

18.6

15.1

–

–

Warranties

20.1

26.9

–

–

Deferred consideration

0.2

5.8

–

–

Other

7.9

6.6

–

–

266.1

245.8

–

–

MOVEMENTS IN PROVISIONS 2009

CONSOLIDATED

EMPLOYEE DEFERRED BENEFITS REVENUE INSURANCE WARRANTIES $’M $’M $’M $’M

DEFERRED CONSIDERATION $’M

OTHER $’M

Carrying amount at 1 July 2008

112.5

78.9

15.1

26.9

5.8

6.6

Provision from entities acquired

3.2

–

–

–

–

–

39.6

0.3

3.4

–

–

–

Additional provision Differences arising from translation of foreign operations Release of unused provision Amounts utilized

CONSOLIDATED

EMPLOYEE DEFERRED BENEFITS REVENUE INSURANCE WARRANTIES $’M $’M $’M $’M

6.9

1.5

1.9

–

1.3

–

–

–

(7.2)

–

–

(16.0)

(14.9)

(1.4)

(1.5)

(5.6)

–

Carrying amount at 30 June 2009 148.1

71.2

18.6

20.1

0.2

7.9

OTHER $’M

Carrying amount at 1 July 2007

86.1

56.9

16.1

22.8

19.6

7.0

Provision from entities acquired

2.2

7.0

–

–

–

–

38.0

29.5

1.4

7.5

1.3

0.3

Additional provision Transfer from non‑current liability (note 17)

–

–

–

0.2

5.1

0.7

Differences arising from translation of foreign controlled entities

(4.1)

(5.2)

(1.5)

(1.9)

0.1

(1.4)

Amounts utilized

(9.7)

(9.3)

(0.9)

(1.7)

(20.3)

Carrying amount at 30 June 2008 112.5

8.8

DEFERRED CONSIDERATION $’M

78.9

15.1

26.9

CONSOLIDATED 2009 $’M

2008 $’M

5.8

–

6.6

PARENT ENTITY 2009 $’M

2008 $’M

15 NON‑CURRENT LIABILITIES – INTEREST BEARING LOANS AND BORROWINGS Notes payable

613.2

515.4

Unsecured bank loans, net of borrowing costs

–

–

93.9

157.4

–

–

Lease liabilities

0.1

0.1

–

–

707.2

672.9

–

–

Notes Payable in US$ Unsecured notes payable were issued in the United States private debt capital market in May 2007 and April 2008. The issue in April 2008 comprised US$144.5 million maturing in 2018 with a fixed coupon of 6.5% per annum. The issue in May 2007 comprised US$40.0 million at floating rates maturing in May 2012, US$140.5 million maturing in May 2014 with a fixed coupon of 5.61% and US$169.5 million maturing in May 2017 with a fixed coupon of 5.75%. Refinance On 21 February 2009, the Group refinanced US$190.0 million and A$115.0 million of loan facilities with a new syndicated facility limit of US$300.0 million with US$60.0 million maturing in February 2010 and US$240.0 million maturing February 2012. Unsecured bank loans Unsecured bank loans are floating interest rate debt facilities. These facilities are subject to negative pledge arrangements which require WorleyParsons to comply with certain minimum financial requirements.

WorleyParsons Annual Report 2009

55

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

CONSOLIDATED

2009 $’M

MOVEMENTS IN PROVISIONS 2009

PARENT ENTITY

2008 $’M

2009 $’M

2008 $’M

16 NON‑CURRENT LIABILITIES – DEFERRED TAX LIABILITIES

EMPLOYEE BENEFITS CONSOLIDATED $’M

CLAIMS ACQUIRED ON ACQUISITION $’M

DEFERRED REVENUE AND DEFERRED WARRANTIES CONSIDERATION $’M $’M

OTHER $’M

The balance comprises temporary differences attributable to:

Carrying amount at 1 July 2008

8.5

10.7

12.5

–

0.4

Amounts recognized in the income statement:

Additional provision

3.2

–

9.9

–

–

Identifiable intangible assets and goodwill

49.9

52.4

–

–

Unbilled contract revenue

19.1

43.5

–

–

Differences arising from translation of foreign operations

0.1

2.1

(0.7)

–

Amounts utilized

(1.5)

(0.4)

(3.3)

–

(0.2)

Carrying amount at 30 June 2009

10.3

–

0.2

DEFERRED REVENUE AND DEFERRED WARRANTIES CONSIDERATION $’M $’M

OTHER $’M

Fixed assets

8.1

0.8

–

–

Unrealized foreign exchange gain

5.1

2.3

–

–

Prepayments

5.6

–

–

–

Other

9.7

8.3

–

0.3

MOVEMENTS IN PROVISIONS 2008

97.5

107.3

–

0.3

EMPLOYEE BENEFITS CONSOLIDATED $’M

Amounts recognized directly into equity: Unrealized foreign exchange gain on currency loans not denominated in functional tax currency

–

16.9

–

–

Other

1.5

0.7

–

–

Deferred tax liabilities

99.0

124.9

–

0.3

124.9

100.4

0.3

0.7

Balance at the beginning of the financial year Differences arising on translation of foreign controlled entities

4.5

(2.8)

–

–

5.7

11.8

13.3

5.1

1.1

Additional provision

2.8

–

–

–

–

–

–

(0.2)

(5.1)

(0.6)

Transfer to current liability (note 14) Differences arising from translation of foreign controlled entities

–

(0.7)

Amounts utilized

–

(0.4)

Carrying amount at 30 June 2008

(11.2)

8.8

Charged/(credited) to equity

(19.2)

15.4

–

–

18 ISSUED CAPITAL

4.4

–

–

Acquisition of controlled entities Transfer to assets held for sale (note 8) Balance at the end of the financial year

–

(0.4)

8.5

10.7

– 99.0

(1.3) 124.9

–

–

–

0.3

Employee benefits

10.3

8.5

–

–

Claims acquired on acquisition

12.4

10.7

–

–

12.5

–

–

Other

Deferred revenue and warranties 18.4 0.2

0.4

–

–

41.3

32.1

–

–

Nature and timing of provisions Employee benefits: Refer to note 2(D) for the relevant accounting policy and a discussion of the significant estimations and assumptions applied in the measurement of this provision. Claims acquired on acquisition: The Group recognized a provision for claims acquired as a result of the acquisition of purchased entities. Deferred revenue: The Group at times recovers payment for services prior to revenue being recognized in the financial statements. It is expected that this revenue will be accrued within two years of the balance sheet date. Warranties: Provision is made for the estimated liability on all products and services still under warranty at balance date. It is expected that these costs will be incurred within two years at the balance sheet date.

WorleyParsons Annual Report 2009

(0.7)

–

–

–

–

–

12.5

–

0.4

CONSOLIDATED

17 NON‑CURRENT LIABILITIES – PROVISIONS

56

CLAIMS ACQUIRED ON ACQUISITION $’M

18.4

Carrying amount at 1 July 2007

Charged/(credited) to the income statement

(0.3)

12.4

–

2009

2008

NUMBER OF SHARES $’M

Ordinary shares, fully paid1,2 242,743,025

NUMBER OF SHARES

$’M

1,142.6

241,779,455

1,132.5

1

–

1

–

242,743,026

1,142.6

241,779,456

1,132.5

Special voting share

1 Included in ordinary shares are 8,900,755 (2008: 10,114,322) exchangeable shares. The issuance of the exchangeable shares and the attached special voting share replicate the economic effect of issuing ordinary shares in the Company. Accordingly, for accounting purposes, exchangeable shares are treated in the same single class of issued capital as ordinary shares. In addition, the Australian Securities Exchange (ASX) treats these exchangeable shares to have been converted into ordinary shares of the Company at the time of their issue for the purposes of the ASX Listing Rules. 2 The WorleyParsons Limited Plans Trust holds 267,173 (2008: 283,964) shares in the Company which has been consolidated and eliminated in accordance with the accounting standards.

(C) PERFORMANCE RIGHTS The policy in respect of performance rights is outlined in note 2(D).

CONSOLIDATED

2009

2008

NUMBER OF SHARES $’M

NUMBER OF SHARES

$’M

(A) MOVEMENTS IN SHARES Balance at the beginning of the financial year 241,779,456 Ordinary shares issued Ordinary shares on redemption of exchangeable shares

16,791

NUMBER OF PERFORMANCE RIGHTS

2009

2008

Balance at the beginning of the financial year

2,825,627

3,153,851

1,132.5

240,572,287

1,128.5

Rights granted

1,021,076

895,492

0.3

9,248

0.3

Rights exercised

58.3

Balance at the end of the financial year

Rights lapsed or expired 1,213,567

Exchangeable shares exchanged for ordinary shares (1,213,567)

32.5

2,192,177

CONSOLIDATED 2009 $’M

2008 $’M

(946,779) (1,197,921) (355,729) 2,544,195

(25,795) 2,825,627

PARENT ENTITY 2009 $’M

2008 $’M

(32.5)

(2,192,177)

(58.3)

946,779

9.8

1,197,921

3.7

Balance at the end of the financial year 242,743,026

Foreign currency translation reserve

(145.5)

(178.0)

–

–

1,142.6

241,779,456

1,132.5

Hedge reserve

(3.6)

(3.7)

–

–

Transfer from performance rights reserve on purchase and issuance of shares

19 RESERVES

(B) TERMS AND CONDITIONS OF ISSUED CAPITAL Ordinary shares Ordinary shares have the right to receive dividends as declared and, in the event of the winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Exchangeable shares The exchangeable shares were issued by WorleyParsons Canada SPV Limited as part of the consideration for the acquisition of the Colt Group. Exchangeable shares may be exchanged into ordinary shares of the Company on a one for one basis (subject to adjustments) at any time by the exchangeable shareholders, subject to escrow arrangements. Exchangeable shares have the right to receive the same cash dividends or cash distributions as declared on the ordinary shares into which they are convertible. In the event of the winding up of the Company, the exchangeable shares would convert to ordinary shares, which would participate in the proceeds from the sale of all surplus assets pro rata with other ordinary shares.

Asset revaluation reserve Performance rights reserve

1.2

1.2

–

–

31.6

22.7

31.6

22.7

(116.3)

(157.8)

31.6

22.7

(A) FOREIGN CURRENCY TRANSLATION RESERVE The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign controlled entities and associates, and the net investments hedged in these entities. Balance at the beginning of the financial year

(178.0)

Foreign exchange movement on translation of foreign controlled entities and associates 116.2

(25.7)

–

–

(191.8)

–

–

Net investments hedged, net of tax

(83.7)

39.5

–

–

Balance at the end of the financial year

(145.5)

(178.0)

–

–

The exchangeable shares, through a voting trust which holds a special voting share in WorleyParsons, entitle their holders to vote at WorleyParsons’ general meetings as though they hold ordinary shares. During the financial year ended 30 June 2009, 1,213,567 (2008: 2,192,177) exchangeable shares were exchanged.

(B) HEDGE RESERVE The hedge reserve is used to record gains or losses on hedging instruments used in the cash flow hedges that are recognized directly in equity, as described in note 2(F)(iii). Amounts are recognized in profit and loss when the associated hedged transaction affects profit and loss.

Special voting share The special voting share was issued to Computershare Trust Company of Canada Limited (Trustee) as part of the consideration for the acquisition of the Colt Group. The special voting share does not have the right to receive dividends as declared, and in the event of the winding up of the Company, is unable to participate in the proceeds from the sale of all surplus assets. The special voting share has a right to vote together as one class of share with the holders of ordinary shares in the circumstances in which shareholders have a right to vote, subject to WorleyParsons’ constitution and applicable law. The Trustee must vote in the manner instructed by an exchangeable shareholder in respect of the number of votes that would attach to the ordinary shares to be received by that exchangeable shareholder on exchange of its exchangeable shares. The special voting share has an aggregate number of votes equal to the number of votes attached to ordinary shares into which the exchangeable shares are retracted.

Balance at the beginning of the financial year Transfer of ineffective foreign exchange hedges, net of tax

(3.7)

–

4.6

–

–

(3.7)

–

–

Net gain on foreign exchange hedges, net of tax

1.1

1.9

–

–

Fair value gain/(loss) on mark to market of cross currency hedge, net of tax

2.7

(7.5)

–

–

Net (loss)/gain on interest rate hedges, net of tax

(1.8)

0.5

–

–

Share of interest rate hedges recognized in associates

(1.9)

0.5

–

–

Balance at the end of the financial year

(3.6)

(3.7)

–

–

WorleyParsons Annual Report 2009

57

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

19 RESERVES (continued)

CONSOLIDATED

2009 $’M

PARENT ENTITY

2008 $’M

2009 $’M

2008 $’M

(C) ASSET REVALUATION RESERVE The asset revaluation reserve is used to record increments and decrements in the value of non‑current assets. The reserve can only be used to pay dividends in limited circumstances.

CONSOLIDATED 2008 $’M

2009 $’M

2008 $’M

133.5

–

133.6

–

–

114.8

–

114.9

22 DIVIDENDS (A) FINAL DIVIDEND PROPOSED Dividend in respect of the six months to 30 June 2009: 55.0 cents per share (55.0 cents franked)

Balance at the beginning of the financial year

1.2

1.2

–

–

Balance at the end of the financial year

Dividend in respect of the six months to 30 June 2008:

1.2

1.2

–

–

47.5 cents per share (33.7 cents franked)

(D) PERFORMANCE RIGHTS RESERVE The performance rights reserve is used to recognize the fair value of performance rights issued but not vested.

Dividends will be paid on 28 September 2009. Dividends paid by the parent entity are franked at the corporate tax rate of 30%. The record date for the 2009 final dividend will be 3 September 2009.

Balance at the beginning of the financial year

22.7

12.0

22.7

12.0

(B) DIVIDENDS PAID DURING THE YEAR

Performance rights expense

18.7

14.4

18.7

14.4

Transfer to issued capital on purchase and issuance of shares to satisfy performance rights

Dividends in respect of the six months to 31 December 2008:

(9.8)

(3.7)

(9.8)

Balance at the end of the financial year

31.6

22.7

CONSOLIDATED

NOTES

2009 $’M

31.6

(3.7) 22.7

PARENT ENTITY

2008 $’M

2009 $’M

2008 $’M

20 RETAINED PROFITS Balance at the beginning of the financial year Profit attributable to members of WorleyParsons Limited

38.0 cents per share (28.9 cents franked)

265.0

226.1

101.5

92.2

–

92.3

–

114.8

–

114.9

–

–

91.9

–

92.0

Dividend in respect of the six months to 30 June 2008: 47.5 cents per share (33.7 cents franked) Dividends in respect of the six months to 31 December 2007: 38.0 cents per share (11.4 cents franked)

438.8

PARENT ENTITY

2009 $’M

Dividend in respect of the six months to 30 June 2007: 32.5 cents per share (9.5 cents franked)

–

78.2

–

78.3

207.0

170.1

207.2

170.3

390.5

343.9

167.2

294.9

(207.0)

(170.1)

(207.2)

(170.3)

(C) FRANKING CREDIT BALANCE OF THE PARENT ENTITY

622.3

438.8

186.1

226.1

The amount of franking credits available on a tax paid basis for future distributions is:

2009

Dividends paid

22

Balance at the end of the financial year

CONSOLIDATED 2008

21 EARNINGS PER SHARE ATTRIBUTABLE TO MEMBERS Basic earnings per share (cents)

161.1

142.5

Diluted earnings per share (cents)

159.4

140.8

The following reflects the income and security data used in the calculation of basic and diluted earnings per share: Earnings used in calculating basic and diluted earnings per share ($’M) Weighted average number of ordinary securities used in calculating basic earnings per share

390.5

343.9

242,423,531 241,410,336

Bonus element of performance rights which are considered dilutive

2,567,947

2,833,922

Adjusted weighted average number of ordinary securities used in calculating diluted earnings per share 244,991,478 244,244,258

The weighted average number of converted, lapsed or cancelled potential ordinary shares used in diluted earnings per share was 396,605 (2008: 1,233,716).

58

WorleyParsons Annual Report 2009

– franking credits balance as at the end of the financial year at the corporate tax rate of 30% (2008: 30%)

7.0

9.6

7.0

9.6

– franking credits arising from the payment of income tax provided in this financial report

57.3

25.4

57.3

25.4

Franking credits available for distribution

64.3

35.0

64.3

35.0

Franking debits that will arise from the payment of the final dividend

(57.2)

(35.0)

(57.2)

(35.0)

Franking credits available for future dividends

7.1

–

7.1

–

23 INVESTMENTS IN CONTROLLED ENTITIES (A) WORLEYPARSONS LIMITED GROUP ACCOUNTS INCLUDE A CONSOLIDATION OF THE FOLLOWING ENTITIES:

BENEFICIAL INTEREST HELD BY CONSOLIDATED ENTITY

BENEFICIAL INTEREST HELD BY CONSOLIDATED ENTITY

COUNTRY OF ENTITY INCORPORATION

2009 %

2008 %

INTECSEA Pty Limitede

Australia

100

100

INTECSEA Sdn Bhdf

Malaysia

100

100

John Thompson Engineering Pty Limited Australia

100

100

COUNTRY OF ENTITY INCORPORATION

2009 %

2008 %

A.C.N. 009 009 643 Pty Limited5

Australia

100

100

John Wilson & Partners Pty Limited

Australia

100

100

A.C.N. 009 265 927 Pty Limited5

Australia

100

100

Australian Biodiesel Pty Limited1

Australia

51

51

John Wilson & Partners (Services) Pty Limited

Australia

100

100

75

Jones & Jones Engineering Design Pty Limited

Australia

100

100

100

Komex (Cyprus) Limited

Cyprus

100

100

100

100

100

–

55

55

Beijing MaisonParsons Engineering & Technology Co Limited2

People’s Republic of China

Braeside Properties Ltd

Canada

75 100

Cadskills Pte Limited

Singapore

100

100

Komex Environmental (Ireland) Limited2 Ireland

Colt‑CGSL Partnership, TheI

Canada

100

100

Colt Companies L.P., TheII

Canada

100

100

Lyneham Planning & Management Consultants Pty Limited8

Australia

Colt Construction Inc.6

Canada

–

100

Mar WorleyParsons, S.A. de C.V.

Mexico

Colt Engineering CorporationIII

Canada

100

100

Maxview Engineering Limited2

Hong Kong

100

100

Parsons E&C de Mexico S.A de C.V

Mexico

100

100

100

Parsons E&C United Limited

Saudi Arabia

100

100

Parsons Energy & Chemicals Group Limited

Cayman Islands

100

100

Parsons Group International Zagreb d.o.o2

Croatia

100

100

Parsons Proceso y Asociados SA1

Colombia

71

71

Patterson Britton & Partners Pty Limited Australia

100

100

Colt Engineering (International) LimitedIV

Canada

100

Colt Engineering (Ontario) Corporation

Canada

100

100

Colt Engineering Inc.3,V

USA

100

100

Colt Geomatic Solutions Ltd.VI

Canada

100

100

Colt Technical Services Ltd.6

Barbados

–

100

Colt Technologies Inc.VII

Canada

100

100

Canada

100

100

CTR Solutions Pty Limited

Australia

100

100

Damit WorleyParsons Engineering Sdn Bhd

Brunei

70

70

EFC Capital Limited

Cyprus

100

100

III

Cord Projects Ltd.VIII 1

1

Energy Resourcing Australia Pty Limited

Australia

100

Energy Resourcing Singapore Pte Limited

Singapore

100

PCT Pollution Control Technologies Ltd

Canada

100

100

Perancang Lestari Sdn Bhd

Malaysia

100

100

Perunding Utama Sdn Bhd

Malaysia

100

100

Polestar GB Limited1

United Kingdom

100

100

Pollution Control Technologies Inc

USA

100

100

100

Pollution Control Technologies Limited

United Kingdom

100

100

PT WorleyParsons Indonesia

Indonesia

100

100

100

Sinn Phan Thavee Co Limited

Thailand

100

100

SolarRem Corporation1

USA

100

100

EnergySkills Recruitment (Thailand) Limited5

Thailand

100

100

Engineering Securities Pty Limited atf The Worley Limited Trust

Worley & Partners Engineering Consultancy LLC1

Oman

100

60

Australia

100

100

Worley Astron Pty Limited

Australia

100

100 100

Exmouth Power Station Pty Limited

Australia

100

100

Worley International Inc

USA

100

Fraser Worley Pty Limited5

Australia

100

100

Worley Maunsell Pty Limited1

Australia

100

100

Heerema EPS1 LLC

USA

100

100

Worley No 2 Pty Limited4

Australia

100

100

Heerema EPS2 LLC

USA

100

100

Worley SAFF Qeshm Limited1

Iran

HEPS (US) Inc

USA

100

100

Worley SPV1 Pty Limited

Australia

Worley SPV2 Pty Limited Worley UK Finance Pty Limited Worley US Finance Pty Limited

Holbourn Pty Limited atf The WorleyParsons Limited Plans Trust INTEC Asia Pacific Sdn Bhd INTEC Consulting & Engineering Services Nigeria Ltd1

Australia Malaysia Nigeria

100 100 100

60

60

100

100

Australia

100

100

Australia

100

100

Australia

100

100

WorleyParsons (AES) Pte Limited1

Singapore

100

100

100

WorleyParsons (DRPL) Pte Limited

Singapore

100

100

100 100

INTEC do Brasil Limitada

Brazil

100

100

WorleyParsons (Thailand) Limited

Thailand

100

100

INTEC Engineering LLC

USA

100

100

WorleyParsons Acquisitions Pty Limited Australia

100

100

INTEC Engineering Mexico S.A. de C.V.

Mexico

100

100

INTEC Engineering Services Inc

USA

100

100

WorleyParsons Africa Holdings Pty Limited

Australia

100

100

WorleyParsons Angola Limitada

Angola

51

51

WorleyParsons Asset Management Pty Limited

Australia

100

100

INTECSEA (UK) Limiteda

United Kingdom

100

100

INTECSEA, Inc.b

USA

100

100

INTECSEA B.V.c

The Netherlands

100

100

INTECSEA Group B.V.d

The Netherlands

100

100

WorleyParsons Annual Report 2009

59

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

23 INVESTMENTS IN CONTROLLED ENTITIES (continued) (A) WORLEYPARSONS LIMITED GROUP ACCOUNTS INCLUDE A CONSOLIDATION OF THE FOLLOWING ENTITIES (continued):

BENEFICIAL INTEREST HELD BY CONSOLIDATED ENTITY

COUNTRY OF ENTITY INCORPORATION

2009 %

2008 %

WorleyParsons Australia Inc1

USA

100

100

WorleyParsons Belgium NV

Belgium

100

100

WorleyParsons Canada Callco Ltd.

Canada

100

100

WorleyParsons Canada Finance Pty Limited

Australia

100

100

WorleyParsons Canada Finance No 2 Pty Limited

Australia

100

100

WorleyParsons Canada GP Ltd.

Canada

100

100

WorleyParsons Canada Holdings Pty Limited

Australia

100

100

WorleyParsons Canada Ltd.

Canada

100

100

WorleyParsons Canada LP Ltd.

Canada

100

100

WorleyParsons Canada Pty Limited

Australia

100

100

WorleyParsons Canada SPV Ltd.

Canada

100

100

WorleyParsons Canadian Finance Sub Limited

Canada

100

100

WorleyParsons Chile Limitada

Chile

100

–

WorleyParsons Constructors Inc

USA

100

100

7

WorleyParsons Corporation

USA

100

100

WorleyParsons Czech Republic s.r.o7

Czech Republic

100

–

WorleyParsons Developments Pty Limited

Australia

100

100

WorleyParsons do Brasil Engenharia Limitada WorleyParsons E&C of Canada Limited10

Brazil Canada

100 –

BENEFICIAL INTEREST HELD BY CONSOLIDATED ENTITY

COUNTRY OF ENTITY INCORPORATION

2009 %

2008 %

WorleyParsons Infrastructure & Environment Limitedh

United Kingdom

100

100

WorleyParsons Infrastructure (M) Sdn Bhd

100

Malaysia

100

WorleyParsons Infrastructure Holdings Pty Limited

Australia

100

100

WorleyParsons International Inc

USA

100

100

WorleyParsons International Infrastructure Pty Limited

Australia

100

100

WorleyParsons Italy S.R.L.

Italy

100

100

WorleyParsons Jamaica Limited

Jamaica

100

100

WorleyParsons Kazakhstan LLP2

Republic of Kazakhstan

100

100

WorleyParsons Komex Inc

USA

100

100

WorleyParsons Kuwait WLL

Kuwait

WorleyParsons Limitada

Chile

75

75

100

100

WorleyParsons Malta Holdings Limited5

Malta

100

100

WorleyParsons Malta Limited5

Malta

100

100

WorleyParsons Netherlands BV

The Netherlands

100

100

WorleyParsons North Africa Engineering & Project Management JSC Libya WorleyParsons of Michigan Inc

USA

85

85

100

100

WorleyParsons of New York, Inc

USA

100

100

WorleyParsons of North Carolina Inc1

USA

100

100

WorleyParsons of Virginia Inc1

USA

100

100

WorleyParsons Oman Engineering LLC

Oman

51

51

100

WorleyParsons Peru S.A.C.7

Peru

100

–

100

WorleyParsons PetroVietnam Engineering Joint Stock Company

Vietnam

51

51 100

WorleyParsons EAMES Holdings Limited United Kingdom

100

100

WorleyParsons Philippines Inc

Philippines

100

WorleyParsons Egypt Limited

100

100

WorleyParsons PNG Limited7

Papua New Guinea

100

–

WorleyParsons Polestar, Inc.1

USA

100

100

Egypt

WorleyParsons Energy Services Company

USA

100

100

WorleyParsons Engineering (India) Pvt Limited

WorleyParsons Polestar Technical Services, Inc.7

USA

100

–

India

100

100

WorleyParsons Projects Pty Limited

Australia

100

100

WorleyParsons Engineering Pty Limited4

Australia

100

100

WorleyParsons Engineering Pvt Limited9,m

India

100

50

WorleyParsons Engineers Egypt Limited Egypt

100

100

WorleyParsons Engineers Limited

Cayman Islands

100

100

WorleyParsons Environmental Sdn Bhd

Malaysia

100

100

WorleyParsons España S.L.2,g

Spain

100

100

WorleyParsons Europe Energy Services Limited2

Bulgaria

100

100

WorleyParsons Europe Limited

United Kingdom

100

100

WorleyParsons Project Services LLC

Russia

100

100

WorleyParsons Pte Limited

Singapore

100

100

WorleyParsons Qatar WLL

Qatar

100

100 100

WorleyParsons Risk Management Limited

Bermuda

100

WorleyParsons Romania S.R.L.

Romania

100

100

WorleyParsons Sdn Bhd

Malaysia

100

100

WorleyParsons Sea, Inc

USA

100

100

WorleyParsons Sea India Pvt Limited

India

100

100

WorleyParsons SEA Pty Limited

Australia

100

100

WorleyParsons Services Inc

USA

100

100

WorleyParsons Financial Services Pty Limited4

Australia

100

100

WorleyParsons Services Pty Limited4

Australia

100

100

WorleyParsons GCT Inc

USA

100

100

WorleyParsons Services Sdn Bhd

Malaysia

100

100

WorleyParsons Germany GmbH6

Germany

100

100

WorleyParsons Global Pty Limited

Australia

100

100

WorleyParsons Singapore Holding Pte Limited

Singapore

100

100

WorleyParsons South America Holdings Pty Limited

Australia

100

100

WorleyParsons South Carolina Inc1

USA

100

100

WorleyParsons Group Inc

USA

100

100

WorleyParsons HK Limited

Hong Kong

100

100

WorleyParsons Holding Pty Limited atf the WP Holding Trust5

Australia

100

100

60

WorleyParsons Annual Report 2009

(B) WORLEYPARSONS LIMITED PARENT ENTITY ACCOUNTS INCLUDE INVESTMENTS IN THE FOLLOWING ENTITIES:

BENEFICIAL INTEREST HELD BY CONSOLIDATED ENTITY

COUNTRY OF ENTITY INCORPORATION

2009 %

2008 %

WorleyParsons Technologies Pty Limited

Australia

100

100

WorleyParsons Trinidad Limited

Trinidad

100

100

WorleyParsons Ukraine LLC

Ukraine

100

100

Engineering Securities Pty Limited atf The Worley Limited Trust Australia

94.7

94.7

WorleyParsons UK Finance Sub Limited

United Kingdom

100

100

WorleyParsons Canada Callco Ltd Canada

329.8

329.8

WorleyParsons US Finance Sub Limited

USA

100

100

WorleyParsons UniField, Inc.j

USA

100

100

WorleyParsons Canada Holdings Pty Limited Australia

197.9

197.9

WorleyParsons US Holding Corporation

USA

100

100

WorleyParsons Venezuela, C.Ak

Venezuela

100

100

WorleyParsons Financial Services Pty Limited Australia

440.1

440.1

Total

1,062.5

1,062.5

WorleyParsons West Inc

USA

100

100

WorleyParsons Westmar Corpl

USA

100

100

WP Infrastructure Developments Pty Limited

Australia

100

100

WP Management Pty Limited atf The WP Management Trust

Australia

100

100

WPES International LLC6

USA

–

100

WPES Tecnica de Venezuela CA6

Venezuela

–

100

1 2 3 4 5 6 7 8 9 10 a b c d e f g h i j k l m I II III IV V VI VII VIII

Dormant company. Balance date is 31 December, being the balance date at the time the entity was acquired. Balance date is 31 January, being the balance date when the entity was acquired. Entities subject to Class Order relief. In liquidation. Liquidated during the financial year. Incorporated during the financial year. Acquired during the financial year. Previously an equity accounted associate. Amalgamated with WorleyParsons Canada Ltd on 29 June 2009. Previously named INTEC Engineering (UK) Limited. Previously named INTEC Engineering Partnership Ltd. Previously named INTEC Engineering BV. Previously named INTEC Engineering Group BV. Previously named INTEC Engineering Pty Limited. Previously named INTEC Engineering (SEA) Sdn Bhd. Previously named WorleyParsons Komex S.L. Previously named WorleyParsons Komex Limited. Previously named Polestar Applied Technology, Inc. Previously named UniField Engineering, Inc. Previously named Parsons Tecnica de Venezuela, CA. Previously named Westmar Consultants Corp. Previously named WorleyParsons Kirpalaney Engineering Pvt Limited. Effective 1 July 2009 name change to WorleyParsons Geomatics Partnership. Effective 1 July 2009 name change to WorleyParsons Canada Services L.P. Effective 1 July 2009 amalgamated and name change to WorleyParsons Canada Services Ltd. Effective 1 July 2009 name change to WorleyParsons Canada (International) Ltd. Effective 1 July 2009 name change to WorleyParsons Services (USA) Inc. Effective 1 July 2009 name change to WorleyParsons Geomatics Ltd. Effective 1 July 2009 name change to WorleyParsons Canada Technologies Ltd. Effective 1 July 2009 name change to Cord WorleyParsons Ltd.

COST OF PARENT ENTITY’S INVESTMENT COUNTRY OF ENTITY INCORPORATION

COST OF PARENT ENTITY’S INVESTMENT 2009 $’m

2008 $’m

(C) CLOSED GROUP

Pursuant to Australian Securities and Investments Commission Class Order 98/1418, relief has been granted to Worley No 2 Pty Limited, WorleyParsons Engineering Pty Limited, WorleyParsons Financial Services Pty Limited and WorleyParsons Services Pty Limited, from the Corporations Act 2001 requirements for preparation, audit and lodgement of their financial reports. As a condition of the Class Order, WorleyParsons Limited together with the parties noted entered into a Deed of Cross Guarantee on 26 May 2003. The effect of the deed is that WorleyParsons Limited has guaranteed to pay any deficiency in the event of the winding up of the abovementioned controlled entities. The controlled entities have also given a similar guarantee in the event that WorleyParsons Limited is wound up. The consolidated income statement and balance sheet of the entities which are parties to the Deed of Cross Guarantee and The Worley Limited Trust (Closed Group) are as follows:

CLOSED GROUP 2009 $’M

2008 $’M

Profit before income tax expense

327.6

342.8

Income tax expense

(94.5)

INCOME STATEMENT (57.6)

Profit after income tax expense

233.1

285.2

Profit attributable to members of WorleyParsons Limited

233.1

285.2

Retained profits at the beginning of the financial year

218.9

103.8

Dividends paid

(207.0)

(170.1)

Retained profits at the end of the financial year

245.0

218.9

WorleyParsons Annual Report 2009

61

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

23 INVESTMENTS IN CONTROLLED ENTITIES (continued)

24 INVESTMENTS IN ASSOCIATES

(C) CLOSED GROUP (continued)

(A) DETAILS OF INVESTMENTS IN ASSOCIATES ARE AS FOLLOWS: CLOSED GROUP 2009 $’M

2008 $’M

OWNERSHIP INTEREST CONSOLIDATED

ENTITY PRINCIPAL ACTIVITY

BALANCE SHEET ASSETS Current assets Cash and cash equivalents

9.7

10.9

Trade and other receivables

1,294.0

1,000.5

Prepayments

34.7

23.5

Other current assets

7.2

0.6

Total current assets

1,345.6

1,035.5

Non‑current assets

CARRYING VALUE CONSOLIDATED

2009 %

2008 %

2009 $’M

2008 $’M

Aluminium Smelter Developments Pty Limited7

Dormant

50

–

–

–

ARA Administracion Limitada

Infrastructure & Environment

50

50

–

–

ARA Limitada

Infrastructure & Environment

50

50

–

–

ARA WorleyParsons Peru S.A.C.7

Minerals & Metals

50

–

–

–

ARA WorleyParsons Infrastructure & SA Environment

50

50

13.7

11.4

Bay Atlantic Limited

49

49

–

–

Beijing Maihuasheng Infrastructure & E&T Co Ltd Environment

50

50

0.3

–

Current liabilities

Beijing Maison WorleyParsons Engineering & Technology Co Limited1

Minerals & Metals

50

50

14.6

16.1

Trade and other payables

CIARA SA

Minerals & Metals

50

50

–

–

Clyde‑WorleyParsons Pte Limited Minerals & Metals

50

50

–

–

DeltaAfrik Engineering Limited

Hydrocarbons

49

49

11.0

5.3

Esperance Pipeline Company Pty Limited5

Power

–

50

–

11.5

Esperance Power Station Pty Limited5

Power

–

50

–

7.8

Hydrocarbons

50

50

0.7

0.6

Equity accounted associates

17.2

Property, plant and equipment

22.7

10.8 10.0

Intangible assets

94.5

92.5

Deferred tax assets

69.7

27.6

Other non‑current assets

1,611.1

1,524.6

Total non‑current assets

1,815.2

1,665.5

TOTAL ASSETS

3,160.8

2,701.0

LIABILITIES 1,596.8

1,192.5

Provisions

109.5

57.9

Total current liabilities

1,706.3

1,250.4

3.7

28.9

Non‑current liabilities Interest bearing loans and borrowings Deferred tax liabilities

45.5

35.3

Provisions

10.8

7.0

Total non‑current liabilities

60.0

71.2

Facilities ownership

TOTAL LIABILITIES

1,766.3

1,321.6

NET ASSETS

1,394.5

1,379.4

Gazneft Engineering LLC1 I&E Systems Pty Limited

Hydrocarbons

50

50

1.4

1.6

KDPC Limited

Hydrocarbons

50

50

–

–

K‑WAC Limited7

Hydrocarbons

45

–

–

–

Motor Rent SA

Minerals and Metals

50

50

–

–

EQUITY Issued capital

1,142.6

1,132.5

Reserves

6.9

28.0

Retained profits

245.0

218.9

TOTAL EQUITY

1,394.5

1,379.4

62

WorleyParsons Annual Report 2009

NANA WorleyParsons, LLC3,a Hydrocarbons

50

50

11.2

11.6

NWKC LLC

Hydrocarbons

50

50

0.1

0.4

Pacific Waterworks LLC

Infrastructure & Environment

50

50

–

–

Perunding Ranhill Worley Sdn Bhd

Hydrocarbons

50

50

0.8

0.8

Petrocon Arabia Co Limited1

Hydrocarbons

50

50

8.1

6.3

PFD International LLC

Hydrocarbons

50

50

9.9

8.1

PFD (UK) Limited

Hydrocarbons

50

50

–

–

Protek Engineers Sdn Bhd

Hydrocarbons

49

49

0.4

0.3

Ranhill Worley Engineering Sdn Bhd4

Hydrocarbons

–

40

–

0.1

OWNERSHIP INTEREST CONSOLIDATED

ENTITY PRINCIPAL ACTIVITY

Ranhill WorleyParsons Sdn Bhd Hydrocarbons

CARRYING VALUE CONSOLIDATED

2009 %

2008 %

2009 $’M

2008 $’M

49

49

19.1

10.8

Sakhneftegaz Engineering1

Hydrocarbons

50

49

0.4

0.2

Transfield Worley Limited2

Hydrocarbons

50

50

5.7

5.2

Transfield Worley Power Services Pty Limited Transfield WorleyParsons Nouvelle Caledonie SAS WorleyParsons Academy (Pty) Limited

Power

Minerals & Metals Power Hydrocarbons

50

50

50

50

50

0.9

1.5

–

–

0.7

–

–

WorleyParsons Arabia Limited Company

Hydrocarbons

50

50

19.7

8.9

WorleyParsons Bahrain WLL

Hydrocarbons

50

50

0.1

–

CONSOLIDATED 2009 $’M

2008 $’M

Carrying amount at the beginning of the financial year

91.8

86.2

Addition of new investments

–

3.6

91.8

89.8 36.5

(B) CARRYING AMOUNT OF INVESTMENTS IN ASSOCIATES

Net profits of associates

44.1

Dividends received from associates

(20.5)

(8.3)

Movement in hedge reserves of associates

(3.0)

0.5

Movement in foreign currency translation reserve of associates

10.2

122.6

Equity accounted investments transferred to assets held for sale

–

Carrying amount at the end of the financial year

122.6

(7.4) 111.1 (19.3) 91.8

(C) NET PROFITS ATTRIBUTABLE TO ASSOCIATES Profits before income tax expense

55.4

50.0

Income tax expense

(11.3)

(13.5)

Net profits of associates

44.1

36.51

(D) RESERVES ATTRIBUTABLE TO ASSOCIATES FOREIGN CURRENCY TRANSLATION RESERVE

WorleyParsons Engineering Consultancies Company7

Hydrocarbons

50

–

–

–

WorleyParsons Engineering Pvt Limited6,b

Hydrocarbons

–

50

–

0.4

Balance at the beginning of the financial year

67.2

39.0

–

Share of profits of associates accounted for using the equity method

44.1

36.5

Dividends paid

(20.5)

(8.3)

Balance at the end of the financial year

90.8

67.21

19.2

10.3

16.7

16.8

WorleyParsons Momin Sdn Bhd WorleyParsons SA (Proprietary) Limitedc

Balance at the beginning of the financial year

(13.0)

(5.6)

Effect of decrease/(increase) in reserve

10.2

(7.4)

Balance at the end of the financial year

(2.8)

(13.0)

(E) RETAINED PROFITS ATTRIBUTABLE TO ASSOCIATES

Dormant Power Hydrocarbons

50

50

50

–

50

3.0

3.0

122.6

111.1

Performance related guarantees issued

Equity accounted investments transferred to assets held for sale Equity accounted associates

(F) SHARE OF ASSOCIATES’ CONTINGENT LIABILITIES

(G) SHARE OF ASSOCIATES’ EXPENDITURE COMMITMENTS – 122.6

(19.3) 91.8

Operating lease commitments Capital expenditure commitments

–

0.5

16.7

17.3

209.2

(H) SUMMARY OF FINANCIAL POSITION OF ASSOCIATES

1

Balance date is 31 December, which was the balance date when the entity was acquired.

2

Balance date is 31 March, which was the balance date when the entity was acquired.

3

Balance date is 30 September, which was the balance date when the entity was acquired.

4

Liquidated during the financial year.

Current assets

217.5

5

Interest divested March 2009, classified as held for sale at 30 June 2008.

Non‑current assets

21.6

6

Acquired control during financial year.

Current liabilities

(132.9)

7

Incorporated during the financial year.

a

Previously named NANA Colt Engineering, LLC.

b

Previously named WorleyParsons Kirpalaney Engineering Pvt Limited.

Net assets

c

Previously named Pangaea WorleyParsons Pty Limited.

Identifiable intangible assets, net of amortization

0.4

0.9

Goodwill

17.4

16.3

Carrying amount at the end of the financial year

122.6

91.8

The consolidated entity’s share of aggregate assets and liabilities of associates is:

Non‑current liabilities

1

16.8 (150.9)

(1.4) 104.8

(0.5) 74.6

Includes associates as disclosed as held for sale in note 8.

WorleyParsons Annual Report 2009

63

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

25 INTERESTS IN JOINT VENTURE OPERATIONS AND ASSETS Controlled entities have entered into the following joint venture operations:

OWNERSHIP INTEREST CONSOLIDATED

JOINT VENTURE ENTITY PRINCIPAL ACTIVITY

2009 %

2008 %

AMEC‑Colt Joint Venture

Hydrocarbons

50

50

AMEC‑Colt (Fort Hills) Joint Venture

Hydrocarbons

50

50

ANSTO WorleyParsons Joint Venture

Infrastructure & Environment

50

50

APE Joint Venture2

Hydrocarbons

–

50

ARUP‑WorleyParsons Joint Venture

Hydrocarbons

50

50

The consolidated entity’s interests in the assets and liabilities employed in the joint ventures are included in the consolidated balance sheet under the following classifications:

CONSOLIDATED 2009 $’M

2008 $’M

ASSETS Current assets Cash and cash equivalents

10.3

12.8

Trade and other receivables

148.5

147.8

Other financial assets

0.1

0.2

Total current assets

158.9

160.8

Non‑current assets

Bechtel WorleyParsons Joint Venture

Minerals & Metals

50

50

Colt/KBR Joint Venture1

Hydrocarbons

50

50

Plant and equipment

0.4

0.6

–

0.1

Eos Joint Ventures

Hydrocarbons

50

50

Other non‑current assets

Fluor WorleyParsons Arctic Solutions Joint Venture

Total non‑current assets

0.4

0.7

Hydrocarbons

50

–

TOTAL ASSETS

159.3

161.5

Foster Wheeler WorleyParsons Joint Venture (Browse LNG)

Hydrocarbons

50

50

Foster Wheeler WorleyParsons (BPV) Joint Venture

Hydrocarbons

50

50

124.3

Foster Wheeler WorleyParsons (LNG Phase V) Joint Venture

Hydrocarbons

25

25

Foster Wheeler Energy WorleyParsons (Pluto LNG) Joint Venture

Hydrocarbons

40

40

FWP Joint Venture1

Hydrocarbons

50

50

G*UB*MK Constructors Joint Venture

Power

34

34

Hazco/Komex Grande Prairie Joint Venture

Infrastructure & Environment

50

50

Iraq Power Alliance Joint Venture

Power

50

50

John Holland BRW Joint Venture

Infrastructure & Environment

50

50

MMM WorleyParsons Joint Venture

Power

50

50

NLP AMEC‑Colt Joint Venture

Hydrocarbons

–

50

Parsons Iraq Joint Venture

Hydrocarbons

85

85

Select‑Granherne (B2B) Joint Venture

Hydrocarbons

50

50

SNC‑Lavalin WorleyParsons Joint Venture

Hydrocarbons

33

33

Transfield Services WorleyParsons Malaysia Joint Venture

Hydrocarbons

50

–

Transfield Worley Joint Venture

Hydrocarbons

50

50

50

50

2

Transfield Solutions Joint Venture Transfield Worley TRAGS Joint Venture

Hydrocarbons

27.5

27.5

TW Water Joint Venture

Infrastructure & Environment

50

50

WorleyParsons Arabian Industries Joint Venture

Hydrocarbons

50

50

Worley Dome Joint Venture

Hydrocarbons

51

51

Worley Maunsell Joint Venture

Minerals & Metals

50

50

–

50

WorleyParsons SNC‑Lavalin Joint Venture2 Minerals & Metals 1

Balance date is 31 December.

2

Closed.

64

WorleyParsons Annual Report 2009

LIABILITIES Current liabilities Trade and other payables

129.5

Provisions

11.9

10.1

Total current liabilities

141.4

134.4

Non‑current liabilities Other non‑current liabilities

1.6

0.9

Total non‑current liabilities

1.6

0.9

TOTAL LIABILITIES

143.0

135.3

NET ASSETS

16.3

26.2

CONSOLIDATED 2009 $’M

2008 $’M

PARENT ENTITY 2009 $’M

2008 $’M

CONSOLIDATED 2009 $’M

26 NOTE TO THE CASH FLOW STATEMENT

27 COMMITMENTS FOR EXPENDITURE

Reconciliation of profit after income tax expense to net cash inflow from operating activities:

(A) OPERATING LEASES

Profit after income tax expense 400.9

347.3

167.2

294.9

NON‑CASH ITEMS Depreciation

28.4

23.4

–

–

Amortization

59.5

43.6

–

–

Performance rights expense

19.1

19.9

–

–

Doubtful debts expense

11.4

0.1

–

–

(23.6)

(28.2)

–

Share of associates’ net profit in excess of dividends received

2009 $’M

2008 $’M

–

–

Commitments for minimum lease payments in relation to non‑cancellable operating leases are payable as follows: 170.7

115.8

Later than one year and not later than five years

Within one year

454.9

295.5

–

–

Later than five years

152.1

60.7

–

–

–

Commitments not recognized in the financial statements

777.7

472.0

–

–

Net (gain)/loss on foreign exchange

(9.0)

4.5

–

–

(B) CAPITAL EXPENDITURE COMMITMENTS

Other

1.2

(1.0)

–

–

Cash flow adjusted for non‑cash items

487.9

167.2

294.9

Estimated capital expenditure contracted for at reporting date but not provided for payable as follows:

409.6

PARENT ENTITY

2008 $’M

CHANGES IN ASSETS AND LIABILITIES ADJUSTED FOR EFFECTS OF PURCHASE OF CONTROLLED ENTITIES

Within one year

19.8

0.3

–

–

Later than one year and not later than five years

2.6

–

–

–

Decrease/(increase) in trade and other receivables

73.3

Commitments not recognized in the financial statements

22.4

0.3

–

–

Decrease in inventories

0.4

0.2

–

–

(C) OPERATING EXPENDITURE COMMITMENTS

Increase in prepayments

(8.9)

(27.0)

–

–

Decrease/(increase) in deferred tax assets

9.4

(19.4)

(0.5)

0.6

Estimated commitments for operating expenditure in relation to software are as follows:

(448.5)

(80.1)

(43.3)

Increase in trade and other payables

9.9

187.7

–

–

Increase in income tax payable

2.8

21.9

24.7

28.5

(Decrease)/increase in deferred tax liabilities

(27.1)

30.8

(0.3)

Increase/(decrease) in billings in advance

17.2

(5.8)

(0.4)

–

–

(Decrease)/increase in other provisions

(17.9)

49.6

–

–

Decrease in hire purchase liabilities

(0.6)

(0.3)

–

–

111.0

280.3

Net cash inflow from operating activities

546.4

198.8

Within one year

3.6

10.0

–

–

Later than one year and not later than five years

4.1

–

–

–

Commitments not recognized in the financial statements

7.7

10.0

–

–

WorleyParsons Annual Report 2009

65

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

CONSOLIDATED

2009 $’M

2008 $’M

30 RELATED PARTIES

PARENT ENTITY 2009 $’M

2008 $’M

28 CONTINGENT LIABILITIES

(A) DIRECTORS The names of persons who were directors of WorleyParsons at any time during the financial year were as follows:

(A) GUARANTEES

Ron McNeilly (Chairman)

The Group is, in the normal course of business, required to provide guarantees and letters of credit on behalf of controlled entities, associates and related parties in respect of their contractual performance related obligations.

Grahame Campbell

These guarantees and letters of credit only give rise to a liability where the entity concerned fails to perform its contractual obligations. Bank guarantees outstanding at balance date in respect of financing facilities

19.6

25.5

19.6

239.2

174.9

129.2

106.1

264.7

194.5

154.7

125.7

The Group has entered into a deed of guarantee for an associate, DeltaAfrik Engineering Limited. Under the terms of the guarantee, the Group has guaranteed the repayment of bank loans and performance guarantees outstanding in respect of an external borrowing facility taken on by the associate. The amount of borrowing and performance guarantee in the associate at 30 June 2009 was $25.5 million (2008: $16.8 million). (B) ASBESTOS

Certain members of Parsons E&C Group and other subsidiaries of Parsons Corporation, have been, and continue to be, the subject of litigation relating to the handling of, or exposure to, asbestos. Based on its due diligence investigations during the acquisition of Parsons E&C Corporation from Parsons Corporation, including an analysis of available insurance coverage, and in light of the continuation and extension of the existing indemnity and asbestos claims administration arrangements between Parsons Corporation and Parsons E&C Corporation, WorleyParsons is not aware of any circumstance that is likely to lead to a material residual contingent exposure for WorleyParsons in respect of asbestos liabilities. CONSOLIDATED 2009 $

2008 $

PARENT ENTITY 2009 $

2008 $

29 REMUNERATION OF AUDITORS

Acquisition related assurance services

Larry Benke (alternate executive director for William Hall) (B) WHOLLY OWNED GROUP TRANSACTIONS The wholly owned Group consists of WorleyParsons and its wholly owned entities listed at note 23. Aggregate amounts included in the determination of profit before income tax expense that resulted from transactions with entities in the wholly owned group were as follows:

CONSOLIDATED

PARENT ENTITY

2009 $’M

2008 $’M

2009 $’M

2008 $’M

Dividend revenue

–

–

167.1

294.5

–

–

167.1

294.5

20.5

8.3

–

–

–

–

222.9

203.0

2.6

7.4

–

–

–

–

0.6

88.5

3.2

0.4

–

–

(C) OTHER RELATED PARTIES Aggregate amounts included in the determination of profit before income tax expense that resulted from transactions with each class of other related parties were as follows: Dividend revenue Controlled entities Associates and related parties Aggregate amounts brought to account in relation to other transactions with each class of other related parties: Controlled entities Loan repayments from: Controlled entities

2,286,797

–

–

437,307

109,278

–

–

3,190,314

2,396,075

–

–

251,011

80,642

–

–

Amounts received for other services: Tax related services

David Housego

Associates and related parties

Auditor of the Parent Entity 2,753,007

Eric Gwee

Loans advanced to:

Remuneration for audit or review of the financial reports of the Parent Entity or any other entity in the consolidated Group: Other auditors of controlled entities

John Grill (Chief Executive Officer)

Catherine Livingstone, AO

The Group is subject to various actual and pending claims arising in the normal course of business. The directors are of the view that the consolidated entity is adequately provided in respect of these claims.

John Green

William Hall 25.5

Bank guarantees outstanding at balance date in respect of contractual performance

Erich Fraunschiel

Associates and related parties Aggregate amounts receivable from, and payable to, each class of other related parties at balance date were as follows: Current receivables Controlled entities Associates and related parties

85,010

167,923

–

–

Current payables

–

–

355.0

340.9

56.5

60.2

–

–

29.7

42.1

–

–

Other non‑audit services

532,864

204,591

–

–

Associates and related parties

868,885

453,156

–

–

4,059,199

2,849,231

–

–

Related entities provide specific advisory services to controlled entities in the normal course of business. These transactions are made on normal terms and conditions and at market rates. (D) CONTROLLING ENTITIES WorleyParsons Limited is the ultimate Australian parent company.

66

WorleyParsons Annual Report 2009

31 KEY MANAGEMENT PERSONNEL DISCLOSURES (A) PARTICULARS OF KEY MANAGEMENT PERSONNEL (KMP) INTERESTS IN SHARES Particulars of KMP’s beneficial interests in shares of WorleyParsons as at 30 June 2009 are as follows:

SHARES ON ISSUED AS EXERCISE OF REMUN- PERFORMANCE ERATION1 RIGHTS

ON MARKET PURCHASE/ SALE

BALANCE AT 30 JUNE 2009

EXECUTIVE AND NON‑EXECUTIVE DIRECTORS John Grill

33,102,629

–

78,657

16,138

–

47,788

William Hall David Housego

80,000 33,261,286 (21,518)

balance at balance at 1 JULY 2008 granted exercised 30 june 2009

EXECUTIVE DIRECTORS

NUMBER OF SHARES HELD IN WORLEYPARSONS LIMITED

BALANCE AT 1 JULY 2008

(B) PARTICULARS OF KMP PERFORMANCE RIGHTS Particulars of KMP’s equity settled performance rights granted as at 30 June 2009 are as follows:

42,408

John Grill

163,703

43,317

(78,657)

William Hall

90,635

16,428

(47,788)

128,363

Larry Benke

9,105

10,183

–

19,288

David Housego

69,448

15,834

(35,075)

50,207

Sub total

332,891

85,762

(161,520)

257,133

45,543

15,692

(18,400)

42,835

59,275

EXECUTIVES

175,175

–

35,075

–

210,250

Larry Benke2

1,177,475

–

–

–

1,177,475

Robert Edwardes

35,548

11,466

(15,423)

31,591

Ron McNeilly

395,871

5,193

–

–

401,064

David Steele

33,502

8,809

(15,423)

26,888

Stuart Bradie

Grahame Campbell 505,914

2,285

–

–

508,199

Iain Ross

60,989

15,834

(30,721)

46,102

Erich Fraunschiel

166,262

2,493

–

–

168,755

Andrew Wood

61,303

15,288

(29,851)

46,740

John Green

942,851

2,315

–

13,350

958,516

Sub total

236,885

67,089

(109,818)

194,156

4,582

2,220

–

30,000

36,802

Grand total

569,776

152,851

(271,338)

451,289

Eric Gwee Catherine Livingstone, AO Sub total

5,315

2,285

–

36,492,212

16,791

161,520

–

7,600

101,832 36,772,355

Stuart Bradie

–

Robert Edwardes

82,110

– –

18,400

11,600

15,423

(84,432) (24,097)

30,000 13,101

David Steele

110,930

–

15,423

Iain Ross

536,870

–

30,721

–

567,591

Andrew Wood

834,331

–

29,851

–

864,182

Sub total

All performance rights vested during the year were exercised in full. (C) SUMMARY OF KMP REMUNERATION

EXECUTIVES

Grand total

No cash settled performance rights were granted as at 30 June 2009.

102,256

1,564,241

–

109,818

(96,929) 1,577,130

38,056,453

16,791

271,338

4,903 38,349,485

CONSOLIDATED 2009 $

2008 $

Short term employee benefits 12,387,934 10,858,986 Post employment benefits

285,801

116,431

Other long term benefits

143,821

120,856

Share based payment

3,129,267

3,537,674

Total compensation 15,946,823 14,633,947

1 Shares purchased by directors in the WorleyParsons Limited Plans Trust by directors sacrificing their salary. 2

Larry Benke received exchangeable shares as part of the Colt consideration.

WorleyParsons Annual Report 2009

67

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

32 SEGMENT INFORMATION The Group operates in four primary business segments: Hydrocarbons, Power, Minerals & Metals and Infrastructure & Environment. The Hydrocarbons segment incorporates the Oil and Gas, and Refining, Petrochemicals and Chemicals business units. PRIMARY REPORTING – BUSINESS SEGMENTS HYDROCARBONS POWER MINERALS & METALS 2009 $’M $’M $’M

Sales to external customers

INFRASTRUCTURE & ENVIRONMENT $’M

OTHER $’M

ELIMINATIONS $’M

CONSOLIDATED $’M

4,111.9

519.0

408.7

289.1

–

–

5,328.7

376.6

48.0

12.9

28.5

–

–

466.0

9.0

1.4

6.2

17.6

–

(34.2)

–

4,497.5

568.4

427.8

335.2

–

(34.2)

5,794.7

Interest

5.7

Procurement services revenue Inter‑segment sales Total revenue

5.7

–

5.9

0.5

0.5

0.4

–

–

7.3

30.5

4.7

7.7

1.2

–

–

44.1

4,533.9

573.6

436.0

336.8

5.7

(34.2)

5,851.8

521.1

63.3

81.4

30.3

–

–

696.1

–

–

(41.8)

Unallocated corporate expenses

(49.0)

Net borrowing costs

(43.6)

Other Share of net profits of associates Revenue and other income Segment result Amortization expense

Profit before income tax expense

(36.1)

485.0

(2.8)

60.5

(1.3)

80.1

(1.6)

28.7

–

–

561.7

Income tax expense

(160.8)

Profit after income tax expense

400.9

Segment assets

1,011.7

158.9

128.3

91.0

–

–

1,389.9

Goodwill

1,261.5

112.0

23.6

91.1

–

–

1,488.2

166.6

3.1

–

5.2

–

–

174.9

Unallocated corporate assets

464.5

Identified intangible assets

Consolidated total assets Segment liabilities

2,439.8

274.0

151.9

187.3

–

–

3,517.5

758.0

116.5

62.8

50.2

–

–

987.5

Unallocated corporate liabilities Consolidated total liabilities Investments in associates included in segment assets Purchase of non‑current assets Depreciation and amortization expense Revenue and other income

758.0

116.5

62.8

874.9

50.2

–

–

1,862.4

77.7

5.2

33.2

6.5

–

–

122.6

106.9

19.9

17.9

10.2

–

–

154.9

70.1

6.0

5.5

6.3

–

–

87.9

4,533.9

573.6

436.0

336.8

5.7

(34.2)

5,851.8

Share of revenue from associates

596.0

23.0

160.9

33.0

–

–

812.9

Procurement services revenue of controlled entities

(243.5)

(44.2)

–

–

–

(288.7)

Procurement services revenue of associates

(106.8)

–

–

–

–

(106.8)

–

–

5.7

(34.2)

Less: share of net profits of associates Aggregated revenue

68

WorleyParsons Annual Report 2009

(30.5) 4,749.1

(4.7) 547.7

(7.7) 589.2

(1.0) – (1.2) 367.6

(44.1) 6,225.1

PRIMARY REPORTING – BUSINESS SEGMENTS HYDROCARBONS POWER MINERALS & METALS 2008 $’M $’M $’M

Sales to external customers Procurement services revenue Inter‑segment sales Total revenue Interest

INFRASTRUCTURE & ENVIRONMENT $’M

OTHER $’M

ELIMINATIONS $’M

CONSOLIDATED $’M

–

4,299.4

–

307.7

3,166.6

435.7

394.9

302.2

–

203.4

49.6

21.8

32.9

–

7.7

3.3

1.8

0.2

–

(13.0)

–

3,377.7

488.6

418.5

335.3

–

(13.0)

4,607.1 18.3

–

–

–

–

18.3

–

5.6

0.4

1.4

0.8

–

–

8.2

28.3

2.3

5.3

0.6

–

–

36.5

3,411.6

491.3

425.2

336.7

18.3

(13.0)

4,670.1

423.9

61.9

81.0

42.6

–

–

609.4

–

–

(37.8)

Unallocated corporate expenses

(51.6)

Other Share of net profits of associates Revenue and other income Segment result Amortization expense

(34.2)

(1.3)

(1.0)

(1.3)

Net borrowing costs Profit before income tax expense

389.7

60.6

80.0

41.3

–

–

(31.7) 488.3

Income tax expense

(141.0)

Profit after income tax expense

347.3

Segment assets Goodwill Identified intangible assets

927.3

136.3

150.3

107.4

34.9

–

1,356.2

1,188.3

96.4

22.7

87.4

–

–

1,394.8

156.7

3.6

–

7.3

–

–

167.6

Unallocated corporate assets

298.9

Consolidated total assets

3,217.5

Segment liabilities

535.2

91.2

64.2

43.4

76.4

–

810.4

Unallocated corporate liabilities

990.6

Consolidated total liabilities

1,801.0

Investments in associates included in segment assets Purchase of non‑current assets Depreciation and amortization expense Revenue and other income

63.4

23.2

19.1

5.4

–

–

111.1

159.5

32.5

3.6

80.7

–

–

276.3

48.8

4.8

5.3

8.1

–

–

67.0

3,411.6

491.3

425.2

336.7

18.3

(13.0)

4,670.1

Share of revenue from associates

750.9

28.2

61.8

15.0

–

–

855.9

Procurement services revenue of controlled entities

(131.7)

(48.0)

(8.1)

(8.3)

–

–

(196.1)

Procurement services revenue of associates

(390.0)

(2.5)

(0.2)

–

–

(392.7)

(5.3)

(0.6)

–

–

18.3

(13.0)

Less: share of profits of associates Aggregated revenue

(28.3) 3,612.5

– (2.3) 469.2

471.1

342.6

(36.5) 4,900.7

Aggregated revenue is defined as statutory revenue and other income plus share of revenue from associates less procurement services revenue at nil margin. The directors believe the disclosure of revenue attributable to associates provides additional information in relation to the financial performance of the Group. SECONDARY REPORTING – GEOGRAPHICAL SEGMENTS 2009

Total revenue Aggregated revenue Segment assets Purchase of non‑current assets 2008

ASIA AND MIDDLE EAST $’M

AUSTRALIA AND NEW ZEALAND CANADA $’M $’M

EUROPE AND AFRICA1 $’M

UNITED STATES AND LATIN AMERICA $’M

TOTAL $’M

856.9

1,434.8

1,468.5

646.0

1,388.5

5,794.7

1,086.0

1,422.2

1,580.0

877.2

1,259.7

6,225.1

299.0

603.3

1,632.5

279.4

703.3

3,517.5

9.4

56.6

27.8

11.1

50.0

154.9

AUSTRALIA AND NEW ZEALAND CANADA $’M $’M

EUROPE AND AFRICA1 $’M

UNITED STATES AND LATIN AMERICA $’M

TOTAL $’M

ASIA AND MIDDLE EAST $’M

Total revenue

521.9

1,292.0

1,304.9

504.8

983.5

4,607.1

Aggregated revenue

724.9

1,337.8

1,390.0

563.8

884.2

4,900.7

Segment assets

242.3

730.9

1,467.7

257.7

518.9

3,217.5

8.9

79.5

68.7

43.8

75.4

276.3

Purchase of non‑current assets

1 In the 2008 Annual Report, Africa was included in the Asia, Middle East and Africa region result. The 2008 result has been restated in this report to include Africa in the Europe and Africa region for comparability with 2009. In the 2009 annual report the Group’s assets and liabilities have been fully allocated to segments for the first time based on the Group’s segment accounting policies.

WorleyParsons Annual Report 2009

69

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

Based on historic default rates, the Group believes that no impairment allowance is necessary in respect of trade receivables not past due or past due by up to 30 days other than for specifically identified accounts. The Group’s typical payment terms are 30 days from date of invoice.

32 SEGMENT INFORMATION (continued) The segment results include the allocation of overhead that can be directly attributed to an individual business segment. Those expenses that cannot be attributed to a business segment are recorded as unallocated corporate expenses.

The allowance amounts in respect of trade receivables are used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point, the amount is considered irrecoverable and is written off against the financial asset directly.

The Group provides engineering design, project services, and maintenance and reliability support services to a number of markets. The consolidated entity’s activities also include infrastructure developments within the Power sector.

34 LIQUIDITY RISK

The Group’s operations are organized and managed separately according to the nature of the services they provide, with each segment serving different markets.

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they will fall due. The Group’s approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

Geographically, the Group operates in five predominant segments: Asia and Middle East, Australia and New Zealand, Canada, Europe and Africa, and the United States and Latin America. Outside of Australia, activities are predominantly in the Hydrocarbons and Power segments.

The Group had unrestricted access at balance date to the following lines of credit:

SEGMENT ACCOUNTING POLICIES Segment accounting policies are the same as the Group’s policies described in note 2. During the financial year, there were no changes in segment accounting policies that had a material effect on the segment information.

CONSOLIDATED

Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can be allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment and consist primarily of receivables and plant and equipment. Segment revenues, expenses and results include transactions between segments incurred in the ordinary course of business. These transactions are priced on an arm’s length basis and are eliminated on consolidation.

2009 $’M

PARENT ENTITY

2008 $’M

2009 $’M

2008 $’M

SECURED FACILITIES Total facilities available: Loan facilities

22.6

23.6

–

–

22.6

23.6

–

–

Facilities utilized at balance date: Loan facilities

22.6

23.6

–

–

33 CREDIT RISK

22.6

23.6

–

–

The financial assets of the Group comprise cash and cash equivalents, trade and other receivables, available‑for‑sale financial assets and derivative financial instruments and off balance sheet guarantees and letters of credit. The Group’s exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note. Credit exposure of derivatives is considered to be any positive market value.

Facilities available at balance date: Loan facilities

–

–

–

–

–

–

–

–

The maturity profile in respect of the Group’s secured loan and overdraft facilities is set out below: Due within one year

1.2

1.1

–

–

Due between one and four years

4.0

3.7

–

–

The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was:

Due after four years

17.4

18.8

–

–

22.6

23.6

–

–

UNSECURED FACILITIES

CONSOLIDATED CARRYING AMOUNT

Total facilities available:

2009 $’M

2008 $’M

Loan facilities

1,295.2

1,025.0

661.6

475.5

Cash and cash equivalents

173.8

82.2

Overdraft facilities

58.3

45.4

36.5

38.2

Trade receivables and unbilled contract revenue

1,086.1

1,109.1

Amounts owing by related parties and associates

56.5

60.2

Bank guarantees and letters of credit

452.5

221.9

185.7

150.2

1,806.0

1,292.3

883.8

663.9

Derivatives

19.1

7.2

Bank guarantees and letters of credit

25.5

19.6

1,361.0

1,278.3

Loan facilities*

722.6

702.6

99.2

178.1

The ageing of the Group’s trade receivables and unbilled contract revenue at the reporting date was:

Overdraft facilities

–

9.7

–

8.5

GROSS 2009 $’M

IMPAIRMENT 2009 $’M

GROSS 2008 $’M

IMPAIRMENT 2008 $’M

Bank guarantees and letters of credit

239.2

171.5

129.2

108.9

961.8

883.8

228.4

295.5

Facilities available at balance date:

Unbilled contract revenue

390.0

–

408.0

0‑30 days

487.3

(4.9)

604.1

(2.0)

Loan facilities

572.6

322.4

562.4

297.4

Past due 31‑60 days

95.5

(5.2)

48.7

(0.5)

Overdraft facilities

58.3

35.7

36.5

29.7

Past due 61‑90 days

49.6

(1.9)

26.0

(1.9)

Past due 91‑120 days

29.4

(8.0)

11.9

(0.5)

Bank guarantees and letters of credit

213.3

50.4

56.5

41.3

More than 121 days

63.0

(8.7)

26.9

(11.6)

844.2

408.5

655.4

368.4

(16.5)

* Amounts disclosed for the Parent Entity represent total facilities available and drawn by all borrowers under the common terms deed poll entered into with the Group’s bankers. The Parent is a listed borrower under the common terms deed poll and as such has access to the total facilities shown as available.

70

1,114.8

WorleyParsons Annual Report 2009

(28.7)

1,125.6

–

Facilities utilized at balance date:

The maturity profile in respect of the Group’s unsecured loan and overdraft facilities is set out below:

CONSOLIDATED 2008 $’M

PARENT ENTITY

2009 $’M

2009 $’M

2008 $’M

Due within one year

367.7

98.2

325.5

56.9

Due between one and four years 422.2

456.8

372.6

456.8

Due after four years

563.6

515.4

–

–

1,353.5

1,070.4

698.1

513.7

The table below analyzes the Group’s financial liabilities into relevant maturity groupings based on the remaining period from balance date to the contractual maturity date. As the amounts disclosed in the table are the contractual undiscounted cash flows, their balances will not necessarily agree with the amounts disclosed in the balance sheet. payables to TRADE related parties 2009 PAYABLES and associates

Due within one year

INTEREST BEARING LOANS AND BORROWINGs

EXPECTED FUTURE INTEREST PAYMENTS DERIVATIVES

TOTAL FINANCIAL LIABILITIES

194.3

29.7

10.2

40.5

0.2

274.9

Due between one and four years

–

–

148.8

102.3

–

251.1

Due after four years

–

–

563.6

116.4

–

680.0

194.3

29.7

722.6

259.2

0.2

1,206.0

payables to TRADE related parties 2008 PAYABLES and associates

INTEREST BEARING LOANS AND BORROWINGs

EXPECTED FUTURE INTEREST PAYMENTS DERIVATIVES

TOTAL FINANCIAL LIABILITIES

Due within one year

173.8

42.1

38.5

32.8

0.2

287.4

Due between one and four years

–

–

157.5

125.0

–

282.5

Due after four years

–

–

515.4

100.8

10.4

626.6

173.8

42.1

711.4

258.6

10.6

1,196.5

WorleyParsons Annual Report 2009

71

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

35 CURRENCY RISK The Group is exposed to currency risk on sales, purchase, investments and borrowings that are denominated in a currency other than the respective functional currencies of Group entities. (i) Forward exchange contracts The Group is exposed to exchange rate transaction risk on foreign currency sales, purchases and loans to and from related entities. The most significant exchange rate risk is US dollar receipts by Australian and non‑US entities. When required, hedging is undertaken through transactions entered into in the foreign exchange markets. Forward exchange contracts have been used for hedging purposes. Forward exchange contracts are generally accounted for as cash flow hedges. At balance date, the details of outstanding contracts were: CONTRACTS MATURING DURING THE SIX MONTHS ending

WEIGHTED AVERAGE EXCHANGE RATE

AMOUNT RECEIVABLE/(PAYABLE)

2009 2008

2009 $’M

AMOUNT RECEIVABLE/(PAYABLE)

2009 $’M

2008 $’M

2008 $’M

31 December 2009 contracts to: Buy AUD and sell USD

0.65

0.83

AUD 11.3

USD (7.4)

AUD 22.5

USD (18.6)

Buy SGD and sell USD

0.67

0.74

SGD 2.2

USD (1.5)

SGD 5.5

USD (4.0)

Buy SGD and sell GBP

0.46

0.38

SGD 1.1

GBP (0.5)

SGD 2.7

GBP (1.0)

Buy SGD and sell AUD

0.90

0.77

SGD 7.0

AUD (6.3)

SGD 6.5

AUD (5.0)

Buy CAD and sell USD

0.85

–

CAD 4.6

USD (4.0)

–

–

Buy MYR and sell USD

0.28

–

MYR 1.3

USD (0.4)

–

–

Buy THB and sell AUD

0.04

–

THB 33.0

AUD (1.3)

–

–

Buy AUD and sell HKD

4.92

–

AUD 0.1

HKD (0.3)

–

Buy GBP and sell AUD

–

2.06

–

–

–

GBP 0.8

AUD (1.6) EUR (1.6)

Buy AUD and sell EUR

–

0.61

–

–

AUD 2.6

Buy USD and sell EUR

–

0.66

–

–

USD 4.0

EUR (2.6)

Buy KWD and sell USD

–

3.78

–

–

KWD 1.0

USD (3.8)

Buy USD and sell AUD

–

0.94

–

–

USD 3.1

AUD (3.3)

Buy AUD and sell USD

–

0.77

–

–

AUD 15.0

USD (11.5)

Buy USD and sell EUR

–

0.67

–

–

USD 2.0

EUR (1.3)

–

0.74

–

–

AUD 3.4

USD (2.5)

30 June 2010 contracts to:

31 December 2010 contracts to: Buy AUD and sell USD

As these contracts are hedging anticipated future receipts and sales to the extent that they satisfy hedge accounting criteria, any unrealized gains and losses on the contracts, together with the cost of the contracts, are deferred and will be recognized in the measurement of the underlying transaction provided the underlying transaction is still expected to occur as originally designated. Included in the amounts deferred are any gains and losses on hedging contracts terminated prior to maturity where the related hedged transaction is still expected to occur as designated.

72

WorleyParsons Annual Report 2009

The gains and losses deferred in the balance sheet were:

CONSOLIDATED 2009 $’M

2008 $’M

Ineffective accounting hedge – unrealized gains

–

5.3

Effective hedge – unrealized gains

2.3

0.6

Effective hedge – unrealized losses

(0.2)

(0.2)

Net unrealized gains, pre‑tax

2.1

5.7

(ii) Cross currency swaps The Group uses cross currency swaps to hedge its foreign currency interest rate risk, most with a maturity of greater than one year from the reporting date. At balance date, the details of cross currency swaps were:

WEIGHTED AVERAGE EXCHANGE RATE

2009 2008

AMOUNT RECEIVABLE/(PAYABLE) 2009 $’M

AMOUNT RECEIVABLE/(PAYABLE)

2009 $’M

2008 $’M

2008 $’M

USD 144.5

CAD (144.5)

Contracts to buy USD and sell CAD Maturing 30 April 2018

1.00

1.00

USD 144.5

CAD (144.5)

The following gains and losses have been deferred at balance date:

CONSOLIDATED

2009 $’M

2008 $’M

Fair value gain/(loss) cross currency hedge

16.8

(10.4)

Foreign exchange loss on hedge relationship

(23.7)

(1.3)

Net unrealized loss pre‑tax in hedge reserve

(6.9)

(11.7)

(iii) Consolidated foreign currency risk exposure The Group’s year‑end balance sheet exposure to foreign currency risk was as follows, based on notional amounts. The following are financial assets and liabilities (unhedged amounts) in currencies other than the functional currencies of the entity in which they are recorded. 2009

CAD1

GBP1

USD1

OTHER1

Cash and cash equivalents

0.2

3.6

39.7

24.9

Trade receivables and unbilled contract revenue

0.4

8.3

45.4

17.8

Derivative assets

–

–

1.6

–

Trade payables

(4.0)

(6.6)

(29.0)

Gross balance sheet exposure

(3.4)

5.3

57.7

2008

CAD1

GBP1

USD1

(32.3) 10.4 OTHER2

Cash and cash equivalents

0.3

3.3

30.8

13.0

Trade receivables and unbilled contract revenue

3.8

9.9

115.7

31.8

Derivative assets

–

–

5.2

Trade payables

(5.9)

(8.4)

Gross balance sheet exposure

(1.8)

4.8

1

Represented in currency million as indicated.

2

All other currencies are in AUD million at the relevant year‑end spot rate.

–

(47.7) 104.0

(19.1) 25.7

The Parent Entity does not have significant exposure to movement in foreign currency and hence this is not separately shown. (iv) Currency sensitivity analysis A 10% weakening of the Australian dollar against the following currencies at 30 June 2009 would have increased/(decreased) equity and profit by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed and shown on the same basis for 2008.

CONSOLIDATED 2009 EQUITY $’M

PROFIT $’M

CONSOLIDATED 2008 EQUITY $’M

PROFIT $’M

Effects in millions of AUD CAD

–

(0.3)

–

(0.1)

GBP

–

0.8

–

0.7

USD

–

5.4

–

4.8

Other

–

0.8

–

2.5

A 10% strengthening of the Australian dollar against the above currencies at 30 June 2009 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. The following significant exchange rates applied during the year:

WEIGHTED AVERAGE EXCHANGE RATE 2009

2008

REPORTING DATE SPOT EXCHANGE RATE 2009

2008

CAD

0.8714

0.9056

0.9296

0.9680

GBP

0.4629

0.4478

0.4907

0.4860

USD

0.7492

0.8963

0.8065

0.9595

WorleyParsons Annual Report 2009

73

Notes to the Financial Statements For the Financial Year Ended 30 June 2009

36 INTEREST RATE RISK Interest rate risk is the risk that changes in interest rates will affect the Group’s income or the value of its holdings of financial instruments. (i) Consolidated interest rate risk exposures The Group’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods are set out in the following table:

FIXED INTEREST MATURING IN:

AS AT 30 JUNE 2009

WEIGHTED AVERAGE FLOATING NON‑ INTEREST INTEREST 1 YEAR 1 TO 2 TO 3 TO 4 TO MORE THAN INTEREST RATE RATE OR LESS 2 YEARS 3 YEARS 4 YEARS 5 YEARS 5 YEARS BEARING % PA $’M $’M $’M $’M $’M $’M $’M $’M

TOTAL $’M

FINANCIAL ASSETS Cash and cash equivalents Trade receivables and unbilled contact revenue

0.62

173.8

–

–

–

–

–

–

–

173.8

–

–

–

–

–

–

–

–

1,086.1

1,086.1

Amounts owing by related parties and associates

–

–

–

–

–

–

–

–

56.5

56.5

Derivatives

–

–

–

–

–

–

–

–

19.1

19.1

Total financial assets

173.8

–

–

–

–

–

–

1,161.7

1,335.5

FINANCIAL LIABILITIES Bank loans

4.7

93.9

10.2

–

–

–

–

–

–

104.1

Notes payable

5.6

49.6

–

–

–

–

174.2

389.4

–

613.2

Other interest bearing loans and borrowings

–

0.1

0.1

–

–

–

–

–

–

0.2

Trade payables

–

–

–

–

–

–

–

–

194.3

194.3

Payables to related parties and associates

–

–

–

–

–

–

–

–

29.7

29.7

Derivatives

–

–

–

–

–

–

–

–

0.2

0.2

Interest rate swap

–

(22.0)

1.1

1.2

1.3

1.4

1.5

15.5

–

–

11.4

1.2

1.3

1.4

175.7

404.9

224.2

941.7

Net financial assets

393.8

Total financial liabilities

121.6

FIXED INTEREST MATURING IN:

AS AT 30 JUNE 2008

WEIGHTED AVERAGE FLOATING NON‑ INTEREST INTEREST 1 YEAR 1 TO 2 TO 3 TO 4 TO MORE THAN INTEREST RATE RATE OR LESS 2 YEARS 3 YEARS 4 YEARS 5 YEARS 5 YEARS BEARING % PA $’M $’M $’M $’M $’M $’M $’M $’M

TOTAL $’M

FINANCIAL ASSETS Cash and cash equivalents Trade receivables and unbilled contract revenue

2.3

82.2

–

–

–

–

–

–

–

82.2

–

–

–

–

–

–

–

–

1,109.1

1,109.1

Amounts owing by related parties and associates

–

–

–

–

–

–

–

–

60.2

60.2

Derivatives

–

–

–

–

–

–

–

–

7.2

7.2

Total financial assets

82.2

–

–

–

–

–

–

1,176.5

1,258.7

FINANCIAL LIABILITIES Bank overdraft

4.8

9.7

–

–

–

–

–

–

–

9.7

Bank loans

3.4

175.6

9.9

–

–

–

–

–

–

185.5

Notes payable

515.4

5.7

41.7

–

–

–

–

–

473.7

–

Other interest bearing loans and borrowings

–

–

0.7

0.1

–

–

–

–

–

0.8

Trade payables

–

–

–

–

–

–

–

–

173.8

173.8

Payables to related parties and associates

–

–

–

–

–

–

–

–

42.1

42.1

Derivatives

–

–

–

–

–

–

–

–

10.6

10.6

Interest rate swaps

–

1.1

1.1

1.2

1.3

1.4

17.0

–

–

11.7

1.2

1.2

1.3

1.4

490.7

226.5

937.9

Net financial assets

320.8

Total financial liabilities

74

WorleyParsons Annual Report 2009

(23.1) 203.9

Parent entity interest rate risk The parent entity’s financial assets and liabilities, with the exception of cash and cash equivalents in the current year and bank overdraft in the prior year, are non‑interest bearing. The weighted average interest rate for cash and cash equivalents in 2009 was 2.0% per annum and in 2008 was 6.25% per annum. (ii) Interest rate swap contracts Exmouth Power Station Pty Limited, 100% owned by a wholly owned subsidiary of WorleyParsons, built and operates the Exmouth power station and has drawn down on a loan facility which currently has a floating interest rate. It is policy to protect part of the loan from exposure to increasing interest rates. Accordingly, the entity has entered into an interest rate swap contract under which it is obliged to receive interest at variable rates and to pay interest at fixed rates. The contract is settled on a net basis and the net amount receivable or payable at the reporting date is included in other receivables or other payables. The contract requires settlement of net interest receivable or payable six monthly. The settlement dates coincide with the dates on which interest is payable on the underlying debt.

37 FAIR VALUES Fair values versus carrying amounts The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:

2009

2008

CARRYING AMOUNT FAIR VALUE $’M $’M

CARRYING AMOUNT $’M

FAIR VALUE $’M

Consolidated Assets Cash and cash equivalents

173.8

173.8

82.2

82.2

Trade receivables and unbilled contract revenue

1,086.1

1,086.1

1,109.1

1,109.1

Amounts owing by related parties and associates

56.5

56.5

60.2

60.2

Derivative assets

19.1

19.1

7.2

7.2

Liabilities

Swaps currently in place cover approximately 97.5% (2008: 97.5%) of the loan principal outstanding and are timed to expire as each loan repayment falls due. The fixed interest rate is 5.89% per annum (2008: 5.89%).

Interest bearing loans and borrowings

717.5

822.8

711.4

751.3

Trade payables

194.3

194.3

173.8

173.8

At 30 June 2009, the notional principal amounts and periods of expiry of the interest rate swap contracts were as follows:

Payables to related parties and associates

29.7

29.7

42.1

42.1

Derivative liabilities

0.2

0.2

10.6

10.6

393.8

288.5

320.8

280.9

CONSOLIDATED

2009 $’M

2008 $’M

Less than one year

1.1

1.1

Parent Entity

Later than one year but not later than five years

5.4

5.0

Assets

Later than five years

15.5

17.0

Cash and cash equivalents

0.2

0.2

5.3

5.3

23.1

Amount owing by related parties and associates

355.0

355.0

340.7

340.7

Trade and other payables

0.5

0.5

0.5

0.5

354.7

354.7

345.5

345.5

22.0

As this contract is hedging anticipated future receipts and sales, any unrealized gains and losses on the contract, together with the cost of the contract, are deferred and will be recognized in the measurement of the underlying transaction provided the underlying transaction is still expected to occur as originally designated. Included in the amounts deferred are any gains and losses on hedging contracts terminated prior to maturity where the related hedged transaction is still expected to occur as designated. This contract has been accounted for as a cash flow hedge.

Liabilities

The basis for determining fair values is disclosed in note 2(AB).

(iii) Cash flow sensitivity analysis for variable interest bearing financial assets and liabilities A change of 100 basis points (BP) per annum in interest rates at the reporting date would have increased/(decreased) equity and profit by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2008.

Other receivables Inventories

Prepayments

Effect in millions of AUD 2009

EQUITY 100BP INCREASE

PROFIT

100BP DECREASE

100BP INCREASE

100BP DECREASE

1.0

2009 $’M

2008 $’M

PARENT ENTITY 2009 $’M

2008 $’M

RECONCILIATION OF NET FINANCIAL ASSETS/(LIABILITIES) TO NET ASSETS Net financial assets/(liabilities)

393.8

320.8

354.7

345.5

67.5

47.9

0.3

0.2

0.3

0.4

–

–

61.6

51.7

–

–

Non‑financial assets and liabilities:

Assets held for sale Equity accounted associates

39.8

59.0

–

–

122.6

91.8

–

–

Variable rate instruments

–

–

Interest rate swaps

0.2

(0.2)

Cash and overdraft

–

–

1.2

(1.2)

Other assets

Cash flow sensitivity (net)

0.2

(0.2)

0.2

(0.2)

Provisions Liabilities held for sale

(26.4)

(27.4)

–

–

Deferred tax liabilities

(99.0)

(124.9)

–

–

Other liabilities

(426.4)

(436.6)

–

–

1,360.3

1,381.3

(1.0)

CONSOLIDATED

–

EQUITY

–

PROFIT 100BP INCREASE

139.0

81.7

–

–

1,663.1

1,562.4

–

–

88.1

63.9

1,062.5

1,063.0

(368.9)

(274.2)

(57.2)

(27.4)

Effect in millions of AUD 2008

100BP INCREASE

100BP DECREASE

Variable rate instruments

–

–

Interest rate swaps

0.1

(0.1)

Cash and overdraft

–

–

0.5

(0.5)

38 SUBSEQUENT EVENTS

Cash flow sensitivity (net)

0.1

(0.1)

(1.0)

1.0

No other matter or circumstance has arisen since 30 June 2009 that has significantly affected, or may significantly affect:

(1.5) –

100BP DECREASE

Property, plant and equipment Intangible assets

1.5

Net assets per balance sheet

1,655.1

1,416.5

–

The parent entity does not have significant variable interest bearing financial assets and liabilities and the Board does not believe that there is a significant risk to the parent entity cash flows from interest rate movements.

(i) the consolidated entity’s operations in future financial years; or (ii) the results of those operations in future financial years; or (iii) the consolidated entity’s state of affairs in future financial years. WorleyParsons Annual Report 2009

75

Directors’ Declaration In accordance with a resolution of the directors of WorleyParsons Limited, we state that: (1) in the opinion of the directors:

(a) the financial report and the additional disclosures included in the Directors’ Report designated as audited, of the Company and of the consolidated entity are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2009 and of their performance for the financial year ended on that date; and

(ii) complying with Accounting Standards and the Corporations Regulations 2001; and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;

(2) this declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2009; and (3) in the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group in note 23 will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee. On behalf of the Board

Ron McNeilly Chairman Sydney, 24 August 2009

76

WorleyParsons Annual Report 2009

Independent auditor’s report to the members of WorleyParsons Limited Report on the Financial Report We have audited the accompanying financial report of WorleyParsons Limited, which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2B, the directors also state that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit we have met the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.

Liability limited by a scheme approved under Professional Standards Legislation

WorleyParsons Annual Report 2009

77