Engineering Opportunities 'still limited' UGL on hunt for takeovers
UGL intends embarking on a takeover spree to rebuild the company once it has finished the spinoff of its property services arm, DTZ.
"Everyone should consider themselves a takeover target - but not the three [engineers] larger than us," chief executive Richard Leupen said on Monday.
He was speaking after the release of poor year-to-June earnings, with the net profit slumping to $41.7 million from $135.4 million a year earlier, and earnings a share diving to 21.9¢ from 80.8¢. Revenue declined 14.3 per cent to $3.8 billion.
An unfranked final 5¢ a share dividend was declared, giving a 39¢ a share total payout for the year.
UGL intends to spin off DTZ to shareholders during fiscal 2015, depending on market conditions.
The spinoff will be via an in-specie distribution to shareholders and UGL will not retain any holding in the property services arm once it is completed.
DTZ is in the process of establishing its head office in Los Angeles, on the US west coast, and while its initial listing will be on the ASX, the company could in the future move to a US exchange.
DTZ has expanded by acquisition and now has operations in Europe, along with the US and Asia, opening the door for global property mandates from international groups such as Yahoo, Rolls-Royce and Texas Instruments, Mr Leupen said.
After the reorganisation, UGL would be a $2.4 billion company, which was "not enough to stand alone", Mr Leupen said.
The reorganisation comes as UGL is moving to select a new chief executive to run the company with the looming end to Mr Leupen's contract.
The selection process was "well advanced", Mr Leupen said, although he said he would remain until the demerger had been completed.
The brunt of the earnings downturn was borne by the company's engineering arm, which was hit by slumping orders, although the downturn might now be easing. "One positive sign is Australian coalminers are seeking tenders for maintenance," Mr Leupen said. "We've not seen that for 12 months."
He said companies moved swiftly a year ago to curtail discretionary spending although in areas such as maintenance the cuts could not continue indefinitely.
"We're making the best of limited opportunities," Mr Leupen said.
UGL has submitted tenders for work valued at $8 billion, with tenders for a further $2 billion of projects being prepared.
Any revival in demand was "probably two to three years away" in its locomotive division, where it has a dominant market share nationally.