Engineering, Freight Rail, Passenger Rail, Rail Supply

UGL to axe jobs, refocus on transport

UGL Rail. Photo: UGL

UGL will slash 200 jobs under a major restructure move, as the engineering and services company looks to win over investors and lift profits.

The company, which manufactured hundreds of the locomotives and carriages on Australia’s freight and passenger networks, and maintains manufacturing and maintenance interests in several states, has seen its share price fall since an all-time high of almost $22 a share in 2007, to a low of $1.33 a share earlier this year.

But after Monday’s announcement, the company’s share price surged to a six-month high of $2.45.

UGL said it would cut 200 full-time-equivalent employees by June 30, at a cost of $36.7 million against the 2014/15 balance sheet. By 2015/16, UGL anticipates the restructure to result in a $33 million per annum saving.

“UGL has undertaken a thorough assessment of the performance of its underlying businesses and functions to determine the optimal operating model going forward,” the company told the ASX on Monday.

“We are well advanced in a significant overhead restructure program to right size the organisation for a new business structure which removes the duplication of roles as the company has transitioned to a standalone engineering company following the sale of DTZ.”

DTZ, a real estate business acquired by UGL in 2011, was sold to private equity firm TPG Capital in November 2014.

The restructuring move will not only remove excess staff following that sale, but will also allow the company to focus on transport infrastructure and LNG maintenance, chief executive Ross Taylor explained.

“A significant amount of work has been undertaken to reposition UGL for its future,” Taylor said.

“UGL is very well positioned in the current growth markets of transport infrastructure and LNG maintenance with future growth underpinned by our strong order book of $5.1 billion.”

Along with the $36.7 million cost associated with the employee cutbacks, UGL will incur a few other one-off charges in 2014/15, bringing its total one-off impact to $74 million. But Taylor is confident the company will benefit in the future.

“We expect that in FY17 there will be a substantial step change in revenue of at least $300 million driven by UGL’s exposure to transport infrastructure and LNG maintenance,” he said.

“We have already secured or are preferred on new contracts which underpin this growth.”

Founded in the late 1960s as a Perth-based engineering construction business, UGL dramatically expanded its role in the Australian rail industry with the acquisition of Alstom Transport Australia and New Zealand in 2005.

Alstom has since re-entered the Australian rail business under its own banner.