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UGL Cutting Jobs to Offset Write-Down Charges

UGL Cutting Jobs to Offset Write-Down Charges
Jun 01, 2015 By Simon Herrmann

Engineering and property services company UGL Limited (ASX:UGL) is preparing to cut 200 jobs to help offset write-down charges. In its Market Update Briefing released on Monday, the company said it second-half profits results would be impacted by $74m of one-off charges and provisions. The report noted that the write-down was initiated to help complete the reset of the business, including restructuring and consolidation costs, removal of prior year capitalised tender costs, and further write-offs associated with continued settlement of long-dated WIP and dispute claims.

By 30 June 2015, UGL will have cut 200 FTE employees with the aim to save $33m annually by FY2016. “UGL has undertaken a thorough assessment of the performance of its underlying businesses and functions to determine the optimal operating model going forward,” the report said. The report went further to say that the downsizing was necessary to remove redundant and duplicate job positions. The company also noted $2.1bn in new contract wins and renewals. At the end of the March quarter, the company posted a committed order book of $5.1bn.

UGL expects revenue of $3.1bn and underlying earnings before interest and tax of $75m for FY2015. The company has able to reduce gross WIP and dispute claims to about $165m to $175m, which was down from the $257m at the end of the December quarter 2014. The report also said the company expects to receive $66m in cash from claims settled in the second-half FY2015. Shares of UGL are up 16c, or 6.90 per cent, at $2.48 per share around 1:42pm on Monday. Shares of the company have fallen 62.35 per cent in the last 12 months but have risen 12.79 per cent so far this year.

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Simon Herrmann Author: Simon Herrmann Jun 01, 2015

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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