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wembley woes hit multiplex Wembley woes hit Multiplex
From: AAP
December 19, 2005

SHARES in construction group Multiplex Group plunged nearly 10 per cent in opening trade after the company revealed that losses on its $1.2 billion Wembley Stadium project could be worse than previously expected.

Multiplex (mxg.ASX:Quote,News) said a detailed review of the project indicated that the likely loss position was now expected to be "substantially adverse" from the position indicated at last month's annual general meeting.

The warning is the latest in a string of profit warnings from the beleaguered construction company over cost blow-outs at the more than $1 billion stadium reconstruction in London.

There will be more Wembley news to come, as Multiplex has not yet updated its forecasts of estimated losses or the potential impact on 2005-06 earnings.

Multiplex expects to provide those details over the coming weeks.

The company had previously forecast a $109 million loss on the project.

Multiplex made its latest warning today following a detailed review of the project as part of the normal course of the group's operations.

The company said the review indicated that the likely loss position was now expected to be "substantially adverse" from the position indicated at last month's annual general meeting in Sydney.

"The board advises that any additional losses on the Wembley project are likely to lead to a direct reduction in 2006 earnings guidance provided at the full year," Multiplex said in a statement.

Multiplex had told shareholders at its AGM that it forecast a profit of about $215 million for the current financial year, excluding inter-group transactions, up from the $148.1 million in 2004-05.

However the company's chief executive Andrew Roberts had also warned that rising expenses at the project could wipe off millions of dollars from that forecast.

He had suggested that under a worst-case scenario, steel costs on the Wembley project could blow out by another $60 million.

Today the company said that the final loss position on the project still depended upon a number of variables, including "the final outcome of steel costs, preliminary and acceleration costs, and final negotiation of numerous subcontractor claims, as well as finalisation of recoveries, including final settlement of variations with the client".

However Multiplex confirmed that the timetable for the project was still on track, with a progressive handover to begin on January 31.

The stadium is still expected to be completed in time for the FA Cup final in May.

Multiplex shares plunged on the news, down 23 cents or 6.7 per cent at $3.22 at 1119 AEDT.

Deutsche Asset Management head of property trusts Daniel Ekin said the latest warning had probably given some justification to investors that had chosen to wait on the sidelines until the Wembley problems were behind Multiplex.

But he said it was difficult to analyse the latest warning until the numbers were revealed.

"It's a bit early to know, now," he said.