UGL to split engineering and property arms

UGL will split its shrinking engineering business from its growing property arm to reflect the property division’s greater global focus.


UGL wants to complete the demerger into two independent Australian Securities Exchange-listed companies in fiscal 2015.

Chief executive Richard Leupen said separating the domestic engineering business and the DTZ global property services business was the best thing for the company’s future.

“There’s very little in common between the needs of both companies,” Mr Leupen said on Monday.

DTZ’s business was largely US-based and, outside of that, its biggest targeted markets were China, Singapore, Europe and Canada.

“This business (DTZ) needs to be an American business, it needs to be run in America, it needs to have a focus on the major global corporates,” Mr Leupen said.

He said that not many investors wanted to own both a property company and an engineering firm at the same time, given that they frequently had different economic cycles.

Property was now in an up-cycle and engineering was in a down-cycle.

Also, both businesses would be better able to pursue consolidation opportunities as stand-alone entities.

The split was announced as UGL booked a 72.8 per cent drop in net profit for the 2012/13 financial year.

Net profit was $36.5 million, down from $134.3 million for the prior year.

The result was skewed by the cost of an internal restructure, rebranding and underperforming power projects.

Underlying profit was $92.1 million, down from $168.3 million in the prior year but in line with company guidance.

UGL has forecast an annual underlying profit of $120 million to $130 million for the 2013/14 financial year, subject to a continued reasonable economic outlook.

Shares in UGL were 11 cents, or 1.49 per cent, higher at $7.51 at 1256 AEST on Monday.

Engineering’s revenue fell 30 per cent to $1.8 billion in the last financial year as capital investment in the resources and infrastructure sectors in Australia slowed down.

The underperformance of several power projects also impacted engineering’s earnings, but these projects were expected to be closed out over the coming months.

Operations and maintenance revenue fell 18 per cent to $489.4 million as big miners cut costs.

But, Mr Leupen said, engineering would not remain in the doldrums forever.

UGL was considering the expansion of engineering into Asia and had recently established an office in Mumbai, India.

DTZ’s annual revenue rose 21 per cent to a record $1.9 billion, helped by an improvement in the US property market and a strong performance from the Chinese and Asia-Pacific markets.

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