UGL Group, is a diversified, multinational outsourced services public listed company in Australia with current stock price of $7.97.It is a leading company within the industry and maintains sound performance over its history. There is a major restructure plan from 2013 to 2015, which results in the fluctuation recently. The company finance itself from debt and equity, the current and optimal capital structure plan is:
1.Company and Industry Overview
1.1 Company Overview
UGL Group, since 1970, has grown from a Western Australian-based resources construction business to one of the most diversified, multinational outsourced services company in Australia. Its significant and sustainable business growth over time has been widely recognized and become a public listed company at ASX in 1994. Currently, Its major business, property (DTZ) and engineering, generates excess revenues of more than $2.00 billion respectively in FY2013.
UGL Group provides clients with a whole-of-life approach to asset delivery and management ensuring an asset’s performance is optimized and enhanced over its entire life cycle. The range of products and services offered by UGL is extensive yet all aspects are fully customizable to client requirements. (UGL Limited)
UGL partners with clients in demanding and complex sectors to create innovative, enduring solutions tailored to individual business needs. UGL offers highly specialized, customized solutions to diverse industries providing an individual approach & exceptional service to all. Their segments includes transport & technology system, property, rail, water, power, resources and defense. (UGL Limited)
A corporate structure review, in order to enhance shareholders’ value, (demerger of DTZ and engineering) is in process and aimed to be completed by FY2015.
1.2 Industry Overview
Industry’s overall performance
Australia’s multi-factor productivity growth has declined over the last decade and consequently, lags some international peers. However, property market, UGL’s major business, is booming due to high immigration inflow, government’s encouragement policy and low interest rate.
Cardno Limited (CDD), Monadelphous Group Limited (MND) and Clough Limited (CLO) are chosen as major competitors to UGL in this report. Although none of them are as diversified as UGL in business segments and geographical coverage. They are still leading public listed company in the overlapped industry such as engineering, infrastructure and environmental services. They are similar in capital structure, company size and public reputation.
Cardno Limited (CDD) is a professional infrastructure and environmental services company, with expertise in the development and improvement of physical and social infrastructure for communities around the world. Its current stock price is $6.74.
Monadelphous Group Limited (MND) is a leading Australian engineering group providing construction, maintenance and industrial services to the resources, energy and infrastructure sectors. Its current stock price is $18.71.
Clough Limited (CLO) is an Australia based integrated engineering, procurement and construction company. CLO delivers oil and gas projects across Australia, South East Asia and the USA. CLO's services range from concept development through design, construction, installation, commissioning, operations and maintenance. CLO’s operating structure includes Capital Projects, Asset Support and Forge. The current stock price of CLO is $1.47.
2. Capital Structure Analysis
2.1 Historical Company and Peer/Industry Leverage Analysis
Leverage position of UGL
Figure 1. Leverage Position of UGL 2009-2013($Millions), Source – Finanlysis
Figure 1 shows the recent trends and major ratios of UGL’s capital structure. Overall, UGL is a well levered firm. For the 5-year period, assets, debt…