Citex looks to pull out of region as industry experts predict that downturn could lead to exodus of UK firms.
Consultant citex is considering the disposal of its Hong Kong arm, Citex Asia, as the bottom begins to fall out of the Hong Kong property services market. KPMG Corporate Finance circulated a memorandum to possible bidders for Citex Asia last month.

The move comes after developments at two of Citex Asia's principal clients, telecoms provider, PCCW and HSBC. The telecoms firm decided to bring its facilities management operations in-house at the end of last year, and Citex Asia's FM and project management deal with HSBC expires in 2004.

The KPMG memorandum outlines possible strategies for Citex Asia. It says the loss of the PCCW deal will lead to a fall in turnover of about one-third. The firm is predicted to have a turnover of £17m in the year to 30 April 2002. KPMG says this is likely to fall to £11m in 2003.

It goes on to recommend that Citex dispose of the subsidiary or seek to merge it with a local partner.

A source who had seen the memo said: "It says the board wants a new owner that has complementary operations to enter the Asian outsourcing market and to help it through its next phase of development."

The memo lists Citex Asia's rivals – and potential buyers – as Jardine Property Management, Trammell Crow Savills, Jones Lang LaSalle and Johnson Controls.

Although Citex has yet to decide finally on the future of its arm, it is understood that the document has aroused interest.

Citex chief executive Oliver Jones confirmed that the future of Citex Asia was being considered. He said: "We have been looking at options for further development of our business in Asia."

Citex's decision to consider the position of its subsidiary had been expected by many in the region. One industry source said: "It's not a surprise to me. Citex Asia has had some problems on major contracts."

We have been looking at ways of developing our business in Asia

Oliver Jones, chief executive, Citex

Sources said the FM and construction market was still suffering from a hangover after the completion of the £1bn Chek Lap Kok airport terminal (above).

One source said: "The Hong Kong market is not good at the moment. We're battening the hatches down. There are fewer jobs for the Brits since the airport claims were finished. I can see others pulling out soon."

Citex acquired its Hong Kong arm when it took over Bucknall Austin in 1998. Bucknall Austin had set up in the region in 1948.

Citex Asia grew significantly in the 1990s as a result of work on Chek Lap Kok.

The possible exit from Hong Kong coincides with Citex's expansion into Cyprus. It has formed a joint venture firm, Citex Cybarco, to target the banking, transport and airport sectors.

Citex said last year that it aimed to increase its turnover by more than half to £92m for the year to 30 April 2002. The 900-strong firm is targeting corporate outsourcing work in the management, IT and cleaning services.

The firm is also pitching against contractors Amec, Bovis Lend Lease and Carillion for a £1bn scheme to upgrade the armed forces' single living accommodation. A winner for the 10-year scheme is due to be announced in July.