Lendlease Group’s [ASX:LLC] share price has taken a sever hit at the start of trading this morning. At time of writing, LLC is down 15.19%, losing $2.65. Currently the share price is at $14.80.
LLC is an international property and infrastructure group with operations in Australia, Asia, Europe and the Americas. LLC’s core lines of business are designing, developing, constructing, funding, owning, and co-investing in operating and managing property and infrastructure assets.
What caused the free fall?
The company announced this morning it had identified further under performance in the financial position of its engineering and services business units. Lendlease anticipates that it will need to take a provision in the order of $350 million after tax to account for this under performance.
Lendlease’s engineering and services business accounts for the construction, operation and maintenance for some of Australia’s most significant infrastructure.
In a media release, the company cited the predominate cause for the underperformance relates to the deterioration in a number of smaller projects, as well as lower productivity in the post tunnelling phases of their NorthConnex project in Sydney. Excessive wet weather, access issues and remedial work arising from defective design, have also been attributed this underperformance.
The company says it is now undertaking a comprehensive review of the engineering and services business considering this underperformance.
What’s next for Lendlease?
Lendlease is now negotiating with third parties in order to mitigate anticipated losses but makes no promises to the success of this approach.
Despite this morning’s disappointing announcement, Lendlease CEO and Managing Director, Steve McCann remains positive about the company’s earnings prospects.
‘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.’
New Group Head of Building and Engineering, Hans Dekker has already begun identifying process to reset and strengthen operations, the company announced.
However, with the falling Australian property market and a cooling in Chinese investment, some may begin to wonder if this could be the end of LLC’s stellar run.
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