re: mxg - to get hammered Multiplex crisis fells chairman
Paddy Manning and Robert Clow
28may05
THE drama engulfing Multiplex Group deepened yesterday as billionaire executive chairman John Roberts stepped aside and the corporate regulator confirmed a formal investigation of the international construction group amid mounting losses at the flagship Wembley Stadium development.
Multiplex shares were placed in a trading halt yesterday morning after the company announced it faced significant losses on the pound stg. 757million ($1.8 billion) Wembley project in London.
The company said the "margin position on the Wembley project may have deteriorated significantly" and possible outcomes included losses "significantly greater" than the $50 million indemnity offered by the Roberts family in February.
Multiplex shocked the market at the time by announcing it would only break even on the project and writing back $68 million in profits already reflected in the accounts.
A spokesman for the Australian Securities and Investments Commission told The Australian yesterday that the regulator was formally investigating Multiplex after starting preliminary inquiries in February. It is believed the investigation concerns a potential breach of continual disclosure requirements in relation to the Wembley project.
Multiplex shares have plunged from a high of $6.07 in February to $3.26. The company will update the market on Monday about the extent of the Wembley losses and its earnings guidance for 2004-05 and 2005-06.
Mr Roberts remains a director of the company he founded 40 years ago and son Andrew Roberts remains chief executive. Multiplex deputy chairman and non-executive director Allan McDonald becomes chairman. Multiplex's London-based chief operating officer Noel Henderson has resigned from the board but remains chairman of the British construction business.
The latest delays at Wembley are believed to be over concrete. British magazine Construction Plus reported on Thursday that Australian subcontractor PC Harrington had been doing concrete remediation and hydro demolition work for six weeks.
A senior industry source said Multiplex's problems at Wembley were "unbelievably bad" and questioned the ability of management to fulfil the company's global expansion strategy.
While Multiplex would not comment, it is understood delays on the Wembley project would cost the company through loss of performance bonuses already taken up in the company's accounts, and payment of penalties if the project is not delivered on time.
A Multiplex spokesman said the stadium would be finished in time for the next FA Cup on May 13, 2006. It is expected to hand over the stadium on January 30. This week The Times, London, reported the Football Association had been given until September 30 to decide on a fall-back position of holding the game at the Millennium Stadium in Cardiff, Wales. There is continued speculation the Roberts family may reprivatise part or all of the Multiplex construction and development business, though Andrew Roberts last week dismissed this as "absolute nonsense".
There is much uncertainty about Multiplex's financial position, though its stapled property trust has net tangible asset backing of $2.60 a share after goodwill. This asset backing is reduced by loans from the trust to the stapled corporation. At December 31, 2004, the trust had loaned the corporation $413 million. But this is understood to have grown by more than 60per cent since an issue of hybrid equities late last year.
Multiplex recently sold its interest in the White City development to Westfield in a deal said to have been forced by the company's bankers, led by ANZ.
ANZ this month arranged a $1 billion commercial mortgage-backed securities issue for Multiplex to refinance existing bank facilities. ANZ property finance head Chris Rees denied the bank wished to reduce its exposure or had sought asset sales. Mr Rees did not return calls yesterday.
A union source said there was no evidence Multiplex had missed payments to suppliers or subcontractors in Australia.
Phil Green, managing director of Babcock & Brown, which is working with Multiplex on the $700 million Royal Melbourne Showground redevelopment, said he hoped Monday's announcement was "nothing more serious than a downgrade". There is speculation Multiplex could face cost overruns on other projects, including White City and West India Quays in Britain and Riparian Plaza in Brisbane.
MXG
multiplex group
