UXC hit by insulation rebate scheme

But IT unit experiences growth with several customer wins in first half of the financial year

Services giant UXC (ASX:UXC) has commenced a strategic review to examine ways to unlock greater shareholder value for the company.

In its financial report lodged with the ASX, the company said the alternatives included turning to private equity and a possible demerger.

The news follows the release of its financial results for the half to 31 December 2009 which saw earnings before interest tax depreciation amortisation and corporate costs (EBITDAC) decline eight per cent year on year to $11.8 million.

According to the company this follows losses and charges of $16.8 million at the EBITDA level to cover major issues in the environmental area of its Field Solutions Group, including the collapse of the market price for Renewable Energy Certificates, the cancellation and/or abrupt revision of several government programs in the environmental sector, contractual disputes, and stock write-downs.

“Additionally, rebates available on the government’s home insulation and solar programs were abruptly cut, and the quoting mechanism on the insulation program was also changed after commencement of the program,” the report reads. “As a result, UXC’s insulation activities became economically unsustainable, and were closed in the first half after the incurrence of start up costs not recovered.”

However, company wide, year on year figures were up with revenue growing 15 per cent to $380 million and NPAT up 177 per cent to $3.2 million.

UXC’s Business Professional Services Group (BPSG) which offers services around Microsoft Business Solutions, Oracle, SAP, and CPM reported revenue of $220 million, with EBITDA growth of 283 per cent to $23.8 million year on year.

“BPSG has grown over the past five years from a niche IT business with narrow capabilities to now being recognised as the largest of the 'locally' owned IT services business in Australia and New Zealand and one of the top 3 IT consulting based organisations in Australia,” the ASX-report reads.

“The group has improved its attractiveness as a service supplier to medium to large corporate and government organisations in Australia and New Zealand, which is being recognized through the increasing number and size of customer engagements.”

New customer wins in the half included Fosters, PSN, the Department of Defence, and Queensland Health.

The Field Solutions Group (FSG), which provides services around asset and data management, capital works and maintenance, revenue was $159 million for the half, up 45 per cent year on year, though a net EBITDA loss of $11.9 million was recorded.

The company said its outlook for the second half of FY2010 was stronger, supported by continued solid trading and a strong order pipeline in the Business and Professional Solutions Groups and the commencement of work on recent contract wins.

“We now have a significant role to play in two of the three AMI smart meter contracts awarded to date,” Geoff Lord, Executive Chairman at UXC said in the ASX statement. “We are pleased to have become the market leader in this area in such a short time, and believe it will position us strongly for such work in other states when undertaken.”

UXC’s full year revenue target is $750 million.

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