Australian firm UGL plans to split into two separate companies
UGL, the Australian company that acquired UK real estate broker DTZ Holdings in 2011, plans to split its operations into two listed companies by June 2015 to allow each to follow its own growth strategy.
UGL will create two companies, one focused on global property services and the other on engineering, construction and maintenance services in Australia, New Zealand and Asia, it said in a statement to the Australian stock exchange. At the same time, the company reported that underlying profit after tax in the 12 months to June 30 fell 45 per cent from a year earlier to A$92.1 million (HK$656 million).
While UGL's property division has been growing, recording a 21 per cent rise in revenue in the 12 months to June 30, its engineering services business has been struggling as Australia's mining boom slows, with revenue in that division down 30 per cent. UGL's engineering services unit - which includes resources, rail, power and transport systems - has been hit by cost cuts by major resources companies as Australia's mining investment slows, chief executive officer Richard Leupen said in the statement.
"The restructure could be a net positive for UGL and for the DTZ division," Evan Lucas, a Melbourne-based market strategist at IG Markets, said. The demerger gives the company "clear air to restructure bad performing assets without impairing what's obviously a very good division in the property space."
UGL in December 2011 bought the London-based DTZ for about £77.5 million (HK$931 million), gaining access to China, where DTZ has the biggest geographic presence among international real estate advisory firms. The plan to demerge the property division follows a 3.5 per cent drop in the company's share price this year as of August 9, compared with an 8.7 per cent gain in the benchmark S&P/ASX 200 index.
The company plans to complete the integration of DTZ globally and the property unit's global headquarters in the US and focus on reducing debt before the demerger, it said. The board proposes that Leupen will continue to lead the company.