Fulton Hogan seeks buyer for Australian civil construction unit
Fulton Hogan is looking to sell its Australian civil construction unit which has been a drag on earnings for the past 18 months.
The privately-held company has hired Macquarie Investment Bank to run a sale process with a view to flogging off the unit as a fully operational business. It aims to complete a transaction this year.
“The board believes that, under new ownership, Fulton Hogan Construction would be better placed to continue growing and to take advantage of the buoyant Australian engineering and construction sector," managing director Cos Bruyn said in a statement.
"In the meantime, we remain committed to business as usual as our 900-strong team continues to complete projects safely, on budget, and on time, and continues to bid on new work aligned to our current strategy."
The Australian unit, known as Fulton Hogan Construction, was singled out in the firm's 2018 annual report as the only division that didn't deliver a sound financial result. The board said then that it was considering all options to reduce the firm's risk exposure to those major projects.
The group reported a largely flat profit of $180.1 million in the year ended June 30, despite a 28 percent increase in revenue to $4.67 billion.
Fulton Hogan said in its half-year update to shareholders that the unit's problematic projects continued to be a drag, and the company is focused on managing its position in an environment where the large pipeline of infrastructure works is placing significant pressure on resources.
First-half pretax profit dropped 33 percent to $70.6 million in the six months through December, which Fulton Hogan attributed to several legacy projects in Australia which were at a stage where the final cost could be more reliably assessed. The construction firm said the result reflected its conservative approach in recognising costs and claims.
The Australian civil construction unit picked up two new projects with better risk profiles in the six months ended Dec. 31. One was a A$75 million Capricorn Highway project in Queensland and the other was a joint venture with BMD to build the first section of an inland rail project in New South Wales.
Fulton Hogan said any sale won't affect the rest of the business, and that revenue from its remaining Australian business would be more than A$2 billion.
In New Zealand, the company bought Stevenson Group's construction materials unit last year for about $300 million, and the half-year update showed net debt climbed to almost $700 million at a gearing ratio of a little more than 40 percent.
Chair David Faulkner and Bruyn told shareholders in the update that the company is focused on improving profitability, closing out challenging projects, integrating the Stevenson acquisition and reducing its debt profile.