Shares in engineering and property services firm UGL have fallen more than 10 per cent after the company booked a 15 per cent fall in reported net profit and said the outlook for the next two years was “tough”.
UGL on Monday posted a 15.3 per cent fall in net profit to $134.3 million in the year to June 30, down from $158.5 million in the prior year.
The result included $34 million in costs relating to the $119 million acquisition of global real estate services company DTZ Holdings plc in December 2011, and restructuring costs.
Underlying net profit, which excludes one-off financial items, was $168.3 million, up two per cent from $164.4 million.
In May, UGL had said it was continuing to forecast around five per cent growth in underlying profit.
UGL shares were $1.37, or 10.65 per cent, lower at $11.49 on Monday.
UGL chief executive Richard Leupen said global economic uncertainty made it difficult to predict trading outcomes for 2013.
“We’re of the view that times ahead are somewhat rough or tough,” he said in a market briefing on Monday.
In the past six months, numerous projects had been deferred or cancelled and capital expansion programs pulled back.
“We’re just taking the conservative view that says the next 12 to 24 months are going to be tough, and we intend to be ready for that,” Mr Leupen said.
UGL expected trading conditions in 2013 to result in similar outcomes to the 2012 financial year, with stronger growth to return when global economic conditions stabilise and confidence improves.
UGL said an increasing number of manufacturing and industrial companies were outsourcing operational and maintenance activities as they sought to cut costs in a challenging economic environment.
But uncertainty in the Australian resources and infrastructure sectors due to approval delays and project cancellations, plus increased international competition limited the growth outlook in these sectors.
In the 2012/13 financial year, UGL’s four divisions – property services, infrastructure, rail and resources – will formally become three divisions: engineering, operations and maintenance, and property.
UGL expects its property services business to grow strongly, with the DTZ acquisition on track.
Since the acquisition of DTZ, new international business had increased strongly.
The operations and maintenance business is expected to deliver modest growth from a strong pipeline of contacts and recent wins in mining and defence services.
Strong growth in iron ore and coal export volumes – despite weakening commodity prices – is expected to underpin a strong performance in rail operations.
Mr Leupen said UGL had delivered a solid result in 2011/12.
During the year, UGL was awarded $6.1 billion in new contract wins and extensions, increasing the order book to $9.6 billion as of June 30, 2012.
Mr Leupen said the results contained some highs and lows.
The biggest low was the weakening performance of the infrastructure division, with lower margins on some power projects.
The high point was the very solid result from the property services, which had delivered a record financial performance.
The rail and resources divisions had delivered “stable” earnings results.
