UGL ready to play leading role in sector rationalisation

UGL intends to play a leading role in any efforts to make the engineering services sector more efficient, as it continues to cut costs and borrowings amid 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 2014-15, UGL said it has not ruled out acquisitions, despite reducing its borrowings as much as possible.

The company did not give any earnings forecast at Tuesday's annual meeting, and pointed to the severe impact of the downturn in the resources sector.

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

Revenues in the engineering division are "at similar levels" to last year, he said, with the outlook for the resources and engineering industries remaining "difficult".

The Australian market continued to be challenging, he told shareholders, saying the focus was on restraining costs and capital spending.

Chairman Trevor Rowe said UGL, as part of its cost and debt reduction program, was reviewing assets "that could be sold, or sold and leased back". It was "looking at every aspect of the business to improve efficiency".

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

On acquisitions, Mr Rowe said, "If an opportunity came our way, I believe we could either raise the debt or raise capital ... whichever suited us. At some stage, there's got to be some rationalisation in engineering contract services - and we'd like to be the aggregator."

UGL has signed up with consortiums that have been shortlisted for large projects such as gas export ventures in Queensland, the Gorgon project in Western Australia, urban projects such as the East-West link in Melbourne, the M2 to M1 (formerly F3) project in Sydney, and the North West Rail Link, shareholders were told.

The Ichthys gas project in Darwin will be an important contributor to earnings this financial year.

For 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 at some power projects.

The shares fell 19¢ to $7.72.