UGL keeps options open on acquisitions

Engineering and property services group UGL intends to play a leading role in any rationalisation of the engineering services sector, as it continues to cut costs and borrowings amid continued soft trading conditions.

As it proceeds with the planned demerger of its property services arm DTZ – which will probably take place via a scheme of arrangement in fiscal 2015 – UGL said it was alive to acquisition possibilities, notwithstanding the fact it has been cutting borrowings as hard as possible.

At Tuesday’s annual meeting, the company refrained from giving any earnings forecast for the year ahead.

But it pointed to the severe impact of the resources sector downturn.

Operations in the ‘‘short term [are being] impacted by the downturn in the resources sector’’, said chief executive and managing director, Richard Leupen.

Revenues in the engineering division are ‘‘at similar levels’’ to last year, he said, with the outlook for the resources and engineering sectors ‘‘continuing’’ to look ‘‘difficult’’.

The Australian market ‘‘continues to be challenging’’, he told shareholders, with the focus on restraining costs along with limiting capital spending.

As part of the cost and debt reduction program, UGL was reviewing the assets held, ‘‘that could be sold or sold and leased back,’’ said chairman Trevor Rowe. UGL was ‘‘looking at every aspect of the business to improve efficiency’’.

‘‘Initiatives include the divestment of non-core property, restriction of expansionary capital expenditure and reduced working capital requirements through improved management of debtor days,’’ Mr Leupen said.

The company hasn’t ruled out acquisitions, with Mr Leupen saying he wanted to be an aggregator in any wave of mergers. ‘‘If an opportunity came our way, I believe we could either raise the debt or raise capital ... whichever suited us,’’ Mr Rowe said. ‘‘At some stage there’s got to be some rationalisation in engineering contract services – and we’d like to be the aggregator.’’

In the year to June, UGL’s net profit slumped to $92 million from $168 million a year earlier, hurt by project delays and cancellations along with difficulties from some power projects. UGL shares fell 19¢ to close at $7.72.