another profit downgrade Multiplex Says Wembley Loss to Be Worse Than Forecast
Dec. 19 (Bloomberg) --
Multiplex Group widened its forecast loss from building London's new Wembley stadium for a fifth time, sparking a slump in its shares, Australia's worst-performing property stock this year.
The further loss would force Multiplex to reduce its A$215 million ($160 million) profit forecast for the year ending June 30, 2006, the Sydney-based company said in a statement today. A new forecast will be provided in the coming weeks.
The 90,000-seat stadium, which features a 133-meter steel arch towering over the complex, has been beset by a dispute with contractors and surging costs. Multiplex founder John Roberts quit in May and his family, which controls the business, covered A$50 million of losses.
``Shareholders must be disappointed seeing that the project continues to hang around their neck,'' said Stuart Stuckey, who manages property stocks at Pengana Capital Ltd. in Sydney. ``The potential for losses from this single project to wipe out the good work that's being done elsewhere is particularly problematic.''
The stock slumped 19, or 5.5 percent, to A$3.25 at 1:39 p.m. in Sydney, making it the biggest decliner on the Morgan Stanley Capital International World Index during Asian trading hours. The shares have plunged 40 percent this year.
Cup Final
Multiplex last month said the steel bill for Wembley, the most expensive sports stadium in the world, may be 25 million pounds ($44 million) more than previously forecast and it was negotiating with contractor Hollandia to split the cost.
Benchmark European steel prices are about 88 percent higher now than five years ago, according to Metal Bulletin Plc.
The talks with Hollandia ended without a resolution, Multiplex spokesman Mathew Chandler said today. Claims against some contractors and negotiations over the final price it will get for the project will also determine the size of the loss.
The stadium will cost 757 million pounds, five times the initial forecast. Multiplex says construction is on target to allow the FA Cup final to be played at Wembley May 13.
The London-based Football Association says it needs two months after building ends to prepare Wembley for the Cup final. The governing body has Cardiff's Millennium Stadium on standby for the showpiece.
Multiplex today said it will start handing over the stadium in January. Some investors, including Pengana's Stuckey, said they were skeptical it will be ready.
``Look forward to watching the FA Cup Final at Cardiff,'' Stuckey said.
New Contracts
The Wembley problems haven't affected the company's ability to win new work. Earlier this month it announced a A$389 million contract to build an 86-storey apartment and office tower in Dubai, and a 100 million pound ($173 million) residential complex in London's Elephant & Castle district.
The Australian Securities & Investments Commission said in May it had started an investigation into Multiplex. The probe is continuing, spokeswoman Angela Friend said today. She declined to give further details.
Multiplex also today said it sold its stakes in storage company Global Switch and in London's Stratford City project to U.K. billionaire brothers David and Simon Reuben for a total of about A$300 million .
London-based Global Switch runs data warehousing centers that provide data storage rooms. A venture between Multiplex and the Reuben brothers owned a 75 percent stake in the company valued at 248 million pounds.
Multiplex also had a 25 percent interest of the residential and retail development at Stratford International Channel Tunnel rail terminal, a transport hub adjacent to London's 2012 Summer Olympic Games venues.
The company will retain potential rights to the development of Stratford valued at 1.5 billion pounds, Chandler said.
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