UGL closes WA operation

UGL has shut down its Steelplan engineering design business in Perth as part of the company’s response to the low volume of work in the resources sector and cost blowouts on some of its big projects.

Sydney-based UGL has reported an underlying net profit of $30.3 million in FY15, down from $111.7 million in the prior year.

However, it slumped to a net loss of $236 million after accounting for large impairments, provisions and restructuring costs.

This included a $175 million provision on the power station it is building at the Ichthys LNG project near Darwin – unchanged from a market update released in early June.

UGL also raised impairments of $84.9 million in response to the slowdown in the resources sector, and incurred $38.1 million of restructuring costs, including a significant reduction in “overhead as well as the associated surplus office space and facilities”.

Chief executive Ross Taylor said FY15 was a critical year for UGL to ensure it took the necessary steps to reposition the business for the future.

“Despite the sustained slowdown in the resources cycle, the business continued to sell well in FY15, maintaining a stable order book of $4.7 billion,” he said.

The group secured $2.1 billion in new contracts and renewals, in sectors including transport infrastructure and LNG plant maintenance.

Recent wins include maintenance contracts for Chevron and BP, but the good news on project wins was offset by margin pressure in the coal sector and “low work volumes in UGL’s Western Australian resources focused engineering design business”.

As a result, the Steeplan design business in WA was closed in June.

UGL acquired Steelplan in 2009, as part of its strategy to offer a single-point solution for big resources and infrastructure construction projects.

The closure of Steelplan is likely to be a boost for its competitors, led by PDC Consultants and smaller firms Austruct Group, CADStruction Drafting, Minstruct Drafting and Westplan Drafting, which formed Rapid Alliance in 2012 to bid for work on larger projects.

A UGL spokesperson said the Steelplan closure resulted in the loss of 40 jobs, but added that the group was hiring to fill 56 other positions in WA.