First time trader - Multiplex issues!

[Aden_1]

Hey all, Great looking forum!

Im 20yo. and dove into the stock market about 2 months ago.
I bout some Multiplex shares (among others), based upon a bunch of different reports i read that they have a great portfolio, they have invested money away from just construction, lots of capital .etc .etc

I read about 5 sources that said BUY. Great oppertunity here.
So i bought while they were at the bottom of their mark. around the 4.25 mark.

Since then. They have slashed in price and are surrently -21% from what i bought them. Im really un sure of what to make of it...

If anyone can shed some light on what to do, or what to make of this.
Id be very very appreciative.

Ps. i know you wont give financial advice? im just asking for personal opinions!

 

[krisbarry]

Boom to Bust, it is as simple as that. Property prices are dropping dramatically, especially in the multiplex's.. Over supply of units/appartments in the big cities has lead to investors leaving the market, thus the prices drop and so does the share price. Not a wise move to invest in property, or companies within the property market at the moment.

A further note to add would be the crisis in skills shortage. Skilled labour is hard to find, and the cost of building has risen dramatically over the past few years thus eating into the profits of property developers.

It will only get worse b4 it gets better!

By the way a "Buy" signal doesn't always mean profit. VLL was a "Buy" from brokers and now look at it. Has gone from $2.90 to 48.5 cents (two profit downgrades), now suspended. I DO NOT HOLD VLL

 

[Aden_1]

Thanks for that mate!
So is it a good idea to HOLD and see out the property cricis?
Rather than sell at -21% and forfit so much money!!

(ps. no recomendation will be taken as financial advice! im jsut asking personal opinions!)

I invested in them also because they do a lot of work in England and the middle east! where business is booming. yet they fall here, because everyone is so scared!??

Thanks very much!

 

[It's Snake Pliskin]

Thanks for that mate!
So is it a good idea to HOLD and see out the property cricis?
Rather than sell at -21% and forfit so much money!!

(ps. no recomendation will be taken as financial advice! im jsut asking personal opinions!)

I invested in them also because they do a lot of work in England and the middle east! where business is booming. yet they fall here, because everyone is so scared!??

Thanks very much!

Hello Aden,

I'm sorry that you have learned about the market this way. It is good for you long term though because you now know what it is like to be in a position of facing a large loss. You can learn from this! How you go about mitigating your loss is the tough part though. I can't tell you what to do with your stock holding that is for you to decide. Some people have a rule of letting their holdings fall by 10% before they sell. Some let there holdings fall by 2% of total capital.

Generally, don't take advice! Do your own research and ask yourself questions about each stock. Why are people saying to buy? What's in it for them?

Get some trading and investing books and READ! Once you've read a few good books, you will be much wiser, but, green on experience. This you can only get by participating in the market, which you have already started doing.

20% of $2000 is not a big loss. 20% of 100,000 is though. Realise what you are getting into before you get into it. If you don't understand it, preserve your capital until you do.

I hope my thoughts have helped.

 

[ob1kenobi]

Hello Aden,

I'm sorry that you have learned about the market this way. It is good for you long term though because you now know what it is like to be in a position of facing a large loss. You can learn from this! How you go about mitigating your loss is the tough part though. I can't tell you what to do with your stock holding that is for you to decide. Some people have a rule of letting their holdings fall by 10% before they sell. Some let there holdings fall by 2% of total capital.

Generally, don't take advice! Do your own research and ask yourself questions about each stock. Why are people saying to buy? What's in it for them?

Get some trading and investing books and READ! Once you've read a few good books, you will be much wiser, but, green on experience. This you can only get by participating in the market, which you have already started doing.

20% of $2000 is not a big loss. 20% of 100,000 is though. Realise what you are getting into before you get into it. If you don't understand it, preserve your capital until you do.

I hope my thoughts have helped.

Hello Aden!
I agree with Tina! Some other points that you might not be aware of. If you have bought the stock in time to be eligible for a dividend payment which might carry a franking credit then it might be worth holding awhile longer. To be able to claim the franking credit, you have to have held the stock for 45 days + the day of acquisition + the day of sale. Likewise any loss you make here may be used as a capital gains loss to offset capital gains tax from profitable sales in the future. In short, it may still help you make money but in an indirect way! I only offer that as an insight not as advice. At the end it is your money and your decision. Read and research as much as you can before trading.

 

[mime]

What do they build?

I thought they build major projects like stadiums not general housing so they shouldn't be affected much by the downturn in the property market.

 

[DTM]

Thanks for that mate!
So is it a good idea to HOLD and see out the property cricis?
Rather than sell at -21% and forfit so much money!!

(ps. no recomendation will be taken as financial advice! im jsut asking personal opinions!)

I invested in them also because they do a lot of work in England and the middle east! where business is booming. yet they fall here, because everyone is so scared!??

Thanks very much!

Mate, they did a lot of bad work in England so why shouldn't their share price reflect that.

Other worrying thing too is that people in the building and finance industry are saying there's worse news to come.

This is not intended as advice.

 

[DTM]

Nice article about a bad company in the Age today.

Deconstruction
May 28, 2005


Multiplex is one of Australia's best-known construction companies, but a series of problems is rocking its very foundations. Kate Askew reports.

It's the seedy underbelly of the country's construction industry - corrupt former police, extortion threats and none-too-subtle reworkings of Mario Puzo's Godfather series in the form of severed kangaroo heads.

The more prosaic financial business pales in comparison.

But it's bad enough - litigation on three continents, a rash of property sales in the space of a month, waning broker support, and the Australian Securities and Investments Commission breathing down your neck.

The combination would be enough to leave the Roberts family wondering why they bothered taking their private company, Multiplex, public in the first place.

Investors were left wondering the same thing yesterday, when the Multiplex board acknowledged it had no idea how much money, if any, it would earn this year.

Executives and directors have bunkered down this weekend to sort out the mess.

It appears that company founder and family patriarch John Roberts, 72, had little choice but to take responsibility. The internal report delivered at Thursday's meeting on what is proving to be Multiplex's vice - the Wembley Stadium project - left the Multiplex board publicly exposed for the second time in three months. Not only were the Wembley losses burgeoning but astonishingly it couldn't say to what extent.

With the corporate watchdog already investigating Multiplex's disclosures over the past six months, the board decided that it, and therefore the market, was uninformed. It called a trading halt.

Roberts senior had "voluntarily resigned" from the executive chairmanship at a marathon board meeting on Thursday. That was in stark contrast to previous weeks when, in spite of health problems as a result of his diabetic condition, he had been "very much back in control", according to a company insider.

Roberts took the blame, and the lesser role of a director. Another boardroom casualty was Noel Henderson, head of the company's construction division with projects that include Wembley.

The board, which had already discussed appointing deputy chairman Allan McDonald as independent chairman, as well as another independent director, decided it was time to act.

Multiplex's problems at Wembley date back to last year with the start of litigation with a sub-contractor, specialist bridge engineering company Cleveland Bridge.

The fallout was so extensive that John Roberts offered to personally kick in $50 million to reimburse the company for any losses. Yesterday it admitted it couldn't be sure that the indemnity would cover the losses.

And all in the face of a British press that has been in uproar over whether the stadium will be delivered on time.

Multiplex's hard-ball tactics with sub-contractors have won it a tough reputation. But in Britain the rules of the game are different. A decade ago, a year-long government and industry-funded inquiry resulted in a construction bill being introduced in the British Parliament that protected sub-contractors.

And beyond Wembley there have been other simmering issues in Britain with concrete sub-contractor PC Harrington.

Henderson, a Multiplex director until Thursday, who retains the chair of its construction division, admitted earlier this week: "We've had a few issues there, but the issues there weren't enough to stop the contract on White City." White City, supposedly one of the jewels in the crown, was sold last week for what appeared to be a loss. The market was spooked and the company's securities tumbled to a record low.

But it is not only in Britain that Multiplex's relationships with sub-contractors have gone awry.

In Dubai, seven sub-contractors were suing the Nasa Multiplex/Al Futtaim Carillon joint venture responsible for the Dubai marina project, claiming more than ££10 million ($A24 million). In an interview last August with the trade magazine Construction News UK, Ashwani Sharma, managing director of one of the sub-contractors, Convergent, said the group would not work with Multiplex again "at any price".

"The report that we had two weeks ago was that it (the litigation) was inactive," says Multiplex's Henderson. "We have only one contractor that has an issue with us and we're still attempting to negotiate a settlement with him."

Henderson wants it known that Multiplex doesn't ever litigate against its sub-contractors, preferring to negotiate a settlement.

Patrick McMonagle's engineering company, Sun Engineering, is suing the Multiplex-Watpac joint venture over the construction of the roof of Brisbane's Suncorp Stadium.

He says working for a Multiplex-Watpac joint venture was his worst experience in 30 years of business.

The design required re-engineering and, having signed an onerous contract making his company liable for the safety of the construction, McMonagle had to finance specialist structural engineering work. Multiplex claimed damages for the extra time it took for the roof.

Henderson says his group had been "unable to negotiate a settlement" because it had been acting on behalf of a division of the Queensland Government that was also involved in the stadium deal. "That's been the frustration for both Sun and us."

However, it's a source of frustration that McMonagle knows nothing about. "That's news to me," says McMonagle, who has never heard of Henderson and says there had never been any discussions of settlement. The Queensland Government was similarly ambivalent about a settlement.

A smaller sub-contractor, Tony Schepis, has been pursuing Multiplex since the early 1990s over two soured contracts in Sydney worth about $1.6 million.

His experience is a common one across the local building and construction industry, where sub-contractors regularly fall out with the bigger contractors. "Most people do get their lawyer to have a look at it (the contract). My lawyer warned me not to sign it; it was erroneous," Schepis says.

Why did he sign it? Schepis explains that Multiplex executive Jim McGreevy told him the provisions weren't aimed at him.

"We started putting together stainless steel parts to go in the kitchens," says Schepis. "(Then) they started changing the specs on us, different than what the original specifications of the contract were."

In building lingo, it's what they call "variations".

"We got on with the job (but) their programming was so unorganised and delayed that we were unable to take any other contract work on (and) we were facing massive, massive downtime."

In the end, according to Schepis, Multiplex was running 22 weeks late.

"Basically the builder creates a paper trail so it shows all the way along the sub-contractor was to blame - then they can sue for damages caused by delays," says a project manager who has worked for a range of construction companies in Sydney.

That, in the same lingo, is called liquidated damages. And given most builders require sub-contractors to put up bank guarantees (about 5 per cent of the total contract value), the onus is on sub-contractors to prove why they should get their money back.

Multiplex gave Schepis back his bank guarantee, but after he signed a deed of release.

Unlike other contractors who limp away from their experience with big construction companies and can't afford litigation, Schepis' obsession with what he sees as his mistreatment at the hands of Multiplex has seen him bombard the company with letters and emails for the past 14 years.

In 2003, Schepis flew to Perth with the now jailed former detective Roger Rogerson.

Schepis and Rogerson drove to the Roberts family's Swan Valley property and called Roberts on his mobile to announce their arrival. Roberts, says Schepis, said he was in London and couldn't see them.

Schepis won't let up. He and a group of sub-contractors are talking to a Sydney law firm about mounting a class action against Multiplex.

It doesn't take too much digging to find Multiplex has other distractions that most public companies don't.

In March, an extortion threat against Multiplex believed by police to be from a disgruntled sub-contractor became public. But in the inglorious building industry, threats against Multiplex and its employees haven't been restricted to a single occasion.

Multiplex employs an accountant, David Hicks, to audit sub-contractors and undertake mediation between itself and its sub-contractors. Last year, severed kangaroo heads were discovered in the hull of Hicks' catamaran, which is moored at Woolloomooloo Wharf, Sydney.

Multiplex has spent about $30,000 for new digital cameras at the Wharf Terraces following the threat against Hicks.

Multiplex doesn't advertise its relationship with Hicks, who works on a contractual basis for it, but there are myriad links.

Hicks often parks a Multiplex/Hicks sponsored rally car in his two car spaces underneath the Wharf Terraces. The terraces were developed by Multiplex and Walker Corp, and Hicks owns one of the apartments. The body corporate for the marina strata at the terraces paid $4000 in fees to David Hicks & Co in 2004 and the residential strata paid $5200 for services rendered.

Apart from Hicks and his troubles, the Wharf Terraces have been a headache for Multiplex since owners began taking up residence on completion of the development in 1998. Some residents have since been up in arms about defects to the properties.

In another threat of litigation against Multiplex, residents voted at a meeting on May 3 to take legal action within 14 days if Multiplex did not agree to fix the problems.

But it is the bigger financial questions that are distracting stockmarket investors. For all the much-touted plans for growth spruiked at the time of its 2003 float, Multiplex has spent the past month downsizing. Smaller is the new bigger at Multiplex.

Suddenly, after spruiking its growth opportunities in Britain to investors, Multiplex last week offloaded its minority stake in the London project White City, its prize British asset, which rival Westfield had been itching to get its hands on.

As soon as Multiplex announced the sale, its securities crashed. Not helping was the company's coyness about whether the sale was made at a loss. It hasn't just been the shrinking price of Multiplex securities and shrinking size of its property portfolio that has created unrest. The company also has been furiously rejigging its finances.

On May 9, the Multiplex Property Trust came out with a $1 billion refinancing. The commercial mortgage-backed securities are secured over various Multiplex Property Trust assets, from shopping centres to office towers.

"It indicates that none of the banks are happy lending on an unsecured asset," says a leading financier.

After questions were raised over Multiplex's financial security last week, the company's banker, ANZ, came out and defended its finances.

The sale of White City unlocks ££220 million in project retention funds.

And while the company's explanations in the wake of the announcements stemmed speculation of the extent of its financial difficulties, again investors questioned Multiplex's management of the move from private to public.

Not helping Multiplex's woes was the sale several weeks earlier of a swag of office assets in Multiplex Trust. Funds garnered from the sale were used to buy half of the World Square retail precinct from Multiplex's own development arm.

World Square was proving troublesome to fill. Multiplex was offering retailers all manner of incentives to take up space, not in the least helped by Westfield's plans to redevelop its city retail precinct.

If the market's twitchiness at the past month's decisions was unreasonable, as some stockbroking analysts have written, yesterday's announcement only served to prove that Multiplex itself can't be sure of the company's financial standing.

Certainly the press in Britain has not let up on speculation since Multiplex's shock announcement on Wembley that the stadium would not be delivered on time.

Earlier this month, The Guardian carried the headline: "New fears over Wembley delay". The story went on to say: "Wembley executives last night admitted that they are unable to guarantee that the stadium construction will be completed in time for the 2006 FA Cup final to be staged there a year tomorrow."

It based that statement on comments from Wembley's chief executive, Michael Cunnah, who it says "acknowledged there could be a delay in the project".

"Multiplex (the building contractors) tell us that everything is on schedule. If they are late, everyone will be disappointed but it will not really be the end of the world. The main thing is that we are building a magnificent stadium for an agreed price."

Multiplex's Henderson says that Wembley Stadium chairman Michael Jeffries called him personally to tell him that Cunnah had been misquoted.

Come Monday, the market will know if he was misquoted or not.

 

[Jikx]

Hey, Aden_1 - I'm in the same boat as you!

Recently started on the sharemarket, and though MXG was a good buy.. now with the market halt, seriously considering that is was a bad mistake. But as others have noted, if you're not in that deep, you can use the loss to claim deductions and what not in the future or hope that everything will stablise in a few years time. I'm hoping for the later.. need the money for a deposit on a home in ~5 years time :

 

[ob1kenobi]

Hey, Aden_1 - I'm in the same boat as you!

Recently started on the sharemarket, and though MXG was a good buy.. now with the market halt, seriously considering that is was a bad mistake. But as others have noted, if you're not in that deep, you can use the loss to claim deductions and what not in the future or hope that everything will stablise in a few years time. I'm hoping for the later.. need the money for a deposit on a home in ~5 years time :

Jikx, I hope it works out for you and that you will still have the deposit for a home when you need it. Always be prepared to learn from these experiences. If you have started out without a trading plan, take the time to develop one that is effective for you and then trade to it. Again I hope it works out.

 

[Aden_1]

Hey Jikx...
Now we are really stuffed arnt we!!!

Ive got 2000 Multiplex shares. About $8k worth. at $4.27
They were a great buy! (or so i read and researched.)
A bunch of magazines and articles suggested a great investment, industry is down, great time to buy in. .etc. etc

Im exactly the same as you.
That 8k is part of my savings for a home deposit.
Ive just bought in to Blusscope steel, and will this week look to buy into something else. (diversify. ill live by that word from now on!)

Im seriously scared at what this out come is.
Im just 20yo. but that was a **** load of hard work and savings.

cut my losses? to late for that.
Just hold on for the next 3-4 years i guess is the only option.
Or! Buy more while they are CRASHING DOWN! lol.

****!

 

[DTM]

Hey Jikx...
Now we are really stuffed arnt we!!!

Ive got 2000 Multiplex shares. About $8k worth. at $4.27
They were a great buy! (or so i read and researched.)
A bunch of magazines and articles suggested a great investment, industry is down, great time to buy in. .etc. etc

Im exactly the same as you.
That 8k is part of my savings for a home deposit.
Ive just bought in to Blusscope steel, and will this week look to buy into something else. (diversify. ill live by that word from now on!)

Im seriously scared at what this out come is.
Im just 20yo. but that was a **** load of hard work and savings.

cut my losses? to late for that.
Just hold on for the next 3-4 years i guess is the only option.
Or! Buy more while they are CRASHING DOWN! lol.

****!

I feel for you as my first mistake cost me 10k. That really hurt, but it helped me become a better investor/trader.

Welcome to the school of hard knocks. I'm sure you're on your way to making money now. You just have to start reading some of the threads to get smarter.

 

[Investor]

.... Or! Buy more while they are CRASHING DOWN!

Aden 1,

I do not know you and you do not know me ..... but since you are here in this forum, I will say something.

Buy more?????

This is a very sharp falling knife that you are trying to catch.

The Wembley stadium project was undertaken as a fixed price contract in a world of rising costs.

This could be a bottomless pit. To all those "reports" that you relied on for your purchase - I would say, they were not worth the paper they were written on.

 

[doitinsteel]

Will buy 2m at $1.50, although they say restart will be at $2.50 when stock is next traded - no doubt it will freefall below this. But I am apraised of good intel and am aware a number of developers will not allow the builder to free fall. Expect restructure and noisey support. Then sell at 3.00. And no I'm not full of it - a good lesson is to be familiar with the developers and there strategies, and not the builder. :goodnight

 

[Investor]

From London:

Wembley losses could increase 'significantly'
By Rhys Blakely, Times Online

Multiplex, the Australian construction giant, today announced the resignation of executive chairman John Roberts after revealing losses from its troubled Wembley Stadium project in London may be "significantly" higher than previously thought.

Multiplex sought a halt to trading in its shares in Australia. The stock has lost more than 40 per cent since the start of the year, when it traded at A$5.44. It last traded at A$3.26.

The Wembley Stadium development has been fraught with difficulties and controversy from its conception more than a decade ago. Mr Roberts, who founded Multiplex in 1962, is its latest casualty.

Multiplex today refused to confirm if the £500 million project in north London would still be completed on schedule by January. But a spokesman said the group expects to meet its contractual obligations which state that the stadium should be ready by April to host the 2006 FA Cup final.

In February, Multiplex warned that it would not make a profit on the project. Today the company announced losses on Wembley could exceed £20 million.

Multiplex said it had requested the suspension because of the possibility of a loss "significantly greater than that which would be covered" by a A$50 million (£20m) indemnity provided by the Roberts family.

The company's board is expected to hold a series of emergency meetings this weekend which analysts believe could could to a profit downgrade when it provides a further update on Monday.

The group said it was undertaking a review of key aspects of its operations to provide, by the end of May, market guidance on earnings for the 2006 fiscal year and also an update on 2005 earnings.

Mr Roberts, whose family is a key shareholder in the group, remains on the board while deputy chairman Allan McDonald, an independent director, becomes non-executive chairman.

Mr Roberts' resignation was announced as Multiplex said it had received an internal report indicating that the margin position on its Wembley Stadium upgrade project "may have deteriorated significantly".

In addition to the departure from the board of Mr Roberts, executive director Noel Henderson has also stepped down.

Multiplex said it hoped to appoint a new independent director, preferably with property experience in Britain.

The Wembley Stadium project has been plagued with contractual disputes and speculation over whether it will be finished on time.

The project has also been hit by rising costs associated with steel and jobs such as painting and tiling.

 

[Investor]

Multiplex to lose £45m on Wembley
By Andrew Ellson, Times Online

The Australian construction group building the Wembley football stadium today announced it would make a £45 million loss on the flagship project.

Multiplex also pushed back the expected completion date for the stadium by three months to March 2006, but it stressed it would still be ready in time for next year’s FA Cup Final in May. The projected loss is more than double the £21 million the Roberts family, which founded the firm, had agreed to cover.

As a result Multiplex has had to make a A$59 million (£24m) pre-tax write-down on the project. The problems at Wembley have also contributed to the group slashing its profits forecast for 2005 to A$170 million (£71m) from A$235 million (£98.2m).

"The Wembley result is unacceptable and completely overshadows the strong results from other parts of the business," Andrew Roberts, the chief executive, said in a statement.

The group said productivity levels that had previously been assumed on the project were not currently being achieved. It added that there still several major risks to the project, including its ability to recover claims against third parties, costs associated with completing the steel work, being able to meet the project’s programme and the weather.

On Friday the Australian construction giant announced the resignation of executive chairman John Roberts after it was first revealed that losses on the project would be "significantly" higher than previously thought.

The only previous indication of problems came in in February, when Multiplex warned that it would not make a profit on the project.

The Wembley Stadium development has been fraught with difficulties and controversy from its conception more than a decade ago. Mr Roberts, who founded Multiplex in 1962, is its latest casualty.

The group said it was undertaking a review of key aspects of its operations to provide, by the end of May, market guidance on earnings for the 2006 fiscal year and also an update on 2005 earnings.

Mr Roberts, whose family own 26 per cent of the group, remains on the board while deputy chairman Allan McDonald, an independent director, becomes non-executive chairman.

The group is involved in a number of projects in the UK, including a site in Stratford, east London, which could become the home of the 2012 Olympic village if the London bid is successful.

Earlier this month it made profits of £10 million after selling its 12.5 per cent stake in the White City shopping centre development in London. The company’s portfolio also includes Sydney’s Telstra Stadium and Federation Square in Melbourne.

Multiplex shares have lost more than 40 per cent in value since the start of the year.

 

[Investor]

Curse of Wembley strikes again

Two sports ministers, the chief executive of the FA and the chairman of the stadium development company have all lost their jobs over the continuing saga that is Wembley. But the Multiplex founder's loss is the greatest of all, reports Steven Downes

So, the Curse of Wembley has claimed yet another victim. In Australia today, John Roberts, who founded construction firm Multiplex 43 years ago, was forced to stand down as executive chairman as the company was forced to admit that its losses on the benighted project would be at least £20 million.

Mr Roberts is in good company.

The Curse of Wembley might first have been detected in the mid-1990s, affecting Sir Brian Wolfson. During his reign as chairman of Wembley plc, the company which operated the old stadium and owned the site, Sir Brian had to deal with many of the costly business problems one might expect from running a dilapidated sports venue that, instead of being "the Stadium of Legends" of repute, was more often regarded as the stadium of fag-ends.

But at least the plc managed to sell off the site for £120 million of Lottery cash and Sir Brian got out with his reputation reasonably intact.

Not so Kevin Keegan, whose last match as manager of the England football team was an ignominious defeat against Germany, in the final game played at the old Wembley.

Sports ministers Chris Smith and Kate Hoey later lost their jobs, largely because they were unable to pull together the disparate interests of the numerous sports bodies who laid claim to a stake in the new National Stadium.

And even when one sports body, the Football Association, took on principle responsibility for the project, its chief executive, Adam Crozier, paid for the move with his job, as his board grew squeamish about the mounting costs.

It should not be forgotten that the new Wembley was conceived as a multi-sport, multi-purpose 100,000-seater venue which was to be the centrepiece of London’s Olympic bid, and was to have staged its first major event in 2003 with the world athletics championships.

Ken Bates, the colourful hotelier and property developer and then owner of Chelsea, was the man appointed by the Football Association to head up Wembley National Stadium Ltd once the site had been bought for the nation.

Mr Bates made short work of kicking out what he saw as expensive elements of the project – such as the running track – and instead introduced schemes for lavish hotel and conference facilities that saw the development price soar at one point to approaching £1 billion. It should be noted that in the time it took to discuss what might be included in the Wembley Stadium redevelopment, the Millennium Stadium in Cardiff was planned, designed and built, and all for £110 million.

It was Mr Bates, during his time in charge, who appointed Multiplex as contractors. It was to be the Australians’ first project of such scale in Europe, although they had built Sydney’s Olympic Stadium.

Multiplex clearly got the contract on price, as British contractors shied away from the irksome project and none believed it could be delivered for less than £650 million. Multiplex (who coincidentally at the time had offices at Stamford Bridge, the home of Mr Bates’s Chelsea, where they were building a new stand), said that they could build the new Wembley for just £500 million. There were gasps of disbelief from their rivals.

Yet even after delivering such a favourable deal, Mr Bates was not immune from the Curse of Wembley, as he soon lost his position with the FA, famously accusing his detractors as he left, saying, "Even Jesus Christ suffered only one Pontius Pilate - I had a whole team of them."

Mr Bates’s Wembley vision was thereafter stripped of some of its more expensive elements, such as the hotel.

But even with the pared down version, today Multiplex was forced to admit that it would not be able to deliver Wembley, at least in terms of cost, as it anticipates a costs overrun of at least £20 million. Whether they deliver the stadium in time for next year's FA Cup final remains moot.

The hit to Multiplex's bottom line saw the company suspend its stock from the Sydney exchange earlier today after seeing its shares lose some 42 per cent of their value so far this year – equivalent to A$2 billion in total.

Poor old Mr Roberts. Not only has his shareholding been hit and his job been lost, but his family has even guaranteed to cover Multiplex’s losses on the project of up to £20 million. Maybe this was one contract that Multiplex could have done without winning.

 

[Investor]

Sydney - Monday - May 30: (RWE Australian Business News) -
Multiplex Group has revised its forecast aggregated group profit after
tax and before stapling eliminations for FY2005 to $170 million.

This compares to previous guidance of $235 million, which
specifically excluded the accounting impact of Multiplex's investment in
Duelguide.

The forecast result has been affected substantially by the
Wembley National Stadium project and the accounting impact of
Multiplex's investment in Duelguide.

This can be reconciled with the earlier guidance as follows:
* Previous guidance $235m
* Accounting impact of Duelguide investment (after tax) ($18m)
* Additional Wembley writedown (after tax and indemnity) ($41m)
* Other ($6m)
* Leaving $170m.

Multiplex has made a pre-tax provision on its Wembley National
Stadium project in the United Kingdom of 24 million pounds ($59
million pre-tax or $41 million after tax), from a previous break-even
position.

As previously advised, Multiplex completed a detailed review of
program and costs relating to Wembley National Stadium in February.

Following that review, Multiplex recognised a material increase
in the expected cost to complete the project and subsequently wrote the
project back to a break-even position.

At that time, the scheduled completion date was December 2005.

Multiplex has introduced various enhanced risk procedures since
February, including a process whereby all of its major construction
contracts (exceeding $100m contract value) are to be subjected to an
additional internal review on a regular basis.

Most particularly, an internal peer review has been undertaken
on the Wembley project.

This review has highlighted that the productivity levels that
had been assumed previously are not currently being achieved.

The peer review has concluded that while Wembley is now expected
to be completed by the end of March 2006, in time for the FA Cup Final
to be played in May 2006, the costs associated with completion of this
program are anticipated to have further increased which is expected to
result in a loss on the project.

Multiplex anticipates being able to commence a staged handover
of the project to its client in January 2006.

Multiplex estimates the loss in relation to Wembley to be 45
million pounds ($109 million) excluding the $50 million Roberts Family
indemnity, announced in February 2005.

As a result of the review, Multiplex is now recognising a
pre-tax provision on the project of 24 million pounds ($59 million
pre-tax or $41 million after tax) including allowance for receipt of the
Roberts Family indemnity.

This position assumes no change in the level of claims
recoveries previously advised.

Multiplex Chief Executive Officer and Managing Director, Mr
Andrew Roberts, said: "The Wembley result is unacceptable and completely
overshadows the strong results from all other parts of the business.

"Since February, we have implemented a range of measures to
isolate and address problems at Wembley including a peer review that has
just completed, the appointment of new senior management and new risk
management procedures.

"However, this latest result is extremely disappointing and we
acknowledge it will take some time to earn back investors' confidence.

"Despite the disappointing revision to our earnings forecasts,
all other operating divisions within the company and Multiplex Property
Trust continue to perform at or above expectations.

"We have completed a review of a significant number of major
projects and no material issues have been identified other than
Wembley," he said.

 

[Knobby22]

There, you are already a better trader.
If a bad report comes out and the loss is not readily quantifiable - Sell!.
9 times out of 10 you will have done the right thing.

Secondly, don't read reports from stockbrokers, everyone else has read them first and and you are getting old info and prob. paying too much. Look for companies not in favour at present.

Thirdly, don't catch a falling knife unless you are sure it is a good buy. Otherwise you will cut your capital.

 

[Investor]

From the company's interim report as at 31/12/04:

Current Assets $1,553 million.
Current Liabilities $1,998 million.

Liquidity position is very poor.

Total Liabilities $3,342 million.
NTA $2,443 million.

The gearing position is very high risk for a construction company of this size and nature.

In my opinion, the financial risk for equity investment, is very high.

Warning: This post is not investment advice. I do not hold a licence to provide financial advice.