'All options on the table': Lendlease shares dive as it takes $350m hit on engineering business
Global infrastructure and development giant Lendlease has taken a hit of $350 million to its ailing engineering and service business which includes the NorthConnex and Melbourne Metro rail projects.
Investor reaction was swift, with the share price falling 16.1 per cent to $14.65 in morning trade.
The new provision is in addition to the $200 million made in the full year results and is due to a range of issues such as including lower productivity in the post tunnelling phases of NorthConnex; and excessive wet weather, access issues and remedial work arising from defective design on other projects.
Lendlease is now undertaking a ''robust'' review of the business, with ''all options on the table''. That has been interpreted as a potential sale if a third party can be found.
The group said the provisions do not involve the Melbourne Metro project, although its is under the control of the engineering division.
Lendlease chief executive Steve McCann, who said ultimate responsibility stops with him, added that measures are being undertaken to mitigate the anticipated losses including negotiations with third parties.
''However, at this stage it is unclear as to the extent to which these negotiations will be successful to
mitigate the underperformance,'' Mr McCann said.
“Today’s announcement about the engineering and services business is extremely disappointing particularly given the underlying performance across Lendlease’s other businesses.
''Our international pipeline of landmark urbanisation projects, especially those in Europe has materially grown in the last 12 months giving us earnings visibility well into the future.''
On a call to analysts Mr McCann said he does not make earnings forecasts but said with Lendlease's 2019 results ''skewed to the second half'', the first half results, due in February 2019, will reflect the provisions.
''We need to make sure we are demonstrating to the market that we have robust project management. This is not the sort of announcements we want to make to investors,'' he said.
Macquarie analyst said on their calculations of $2 billion worth of affected projects, the total $550 million provision is about a 30 per cent impairment.
Mr McCann said the company ''had a lot of work to do to win back market confidence''.
More to come
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