LendLease’ shareholders proceed with class action over $350-mn write-down on its engineering business

The Sydney-based LendLease Group (ASX:LLC) is a global property and infrastructure company with presence across Australia, Asia, Europe, and the Americas. It operates through three key segments including Development, Construction and Investments.

Of late, the company is facing a class action from its investors over its share price plunge in November 2018 caused, perhaps by the announcement of the delay in schedule of the multibillion-dollar NorthConnex road development project in Sydney which is a part of a surprise $ 350-million write-down on its engineering business. The project is now expected to be delivered six months after schedule and estimated to be completed by 2020.

The investors, represented by Maurice Blackburn, have alleged the Group for failing to abide by the Corporations Act whereby the shareholders should have been appropriately and timely informed about the severe issues in its engineering and services division. The incidence depicts misleading and deceptive conduct at the company’s end as claimed by the stakeholders.

On November 9th, 2018, the stock price of Lendlease nosedived to $ 14.25 following the write-down announcement after strongly closing the market trading at $ 17.45 on the prior day. The share price dip subsequently eroded billions from Lendlease’s market valuation over the course of five trading days.

Furthermore, the company updated the market in late February 2019 about the exclusion of the engineering and services business from its future strategy, and it would book a restructuring cost of $ 450 million-$ 550 million accordingly. LendLease claimed that the concerned business division had been deterred by a couple of factors including wet weather and other project issues.

The investors who bought the company’s ordinary shares between February 21 and November 8, 2018, can participate in the claim. These shareholders had to pay an inflated price and will hopefully be reimbursed via the proposed class action. Meanwhile, LendLease has refuted occurrence of any such development, and the company would defend any such action.

Regardless, the company’s recent presentation at the Credit Suisse Asian Investment Conference in Hong Kong suggested that it has a current $ 59.3-billion urbanisation pipeline including 20 significant projects across 10 gateway cities reflecting long term earnings visibility. Besides, the annual growth in funds under management since FY2014 has been recorded at 17.8% growth.

For the first half of 2019 ended December 31st, 2018, the funds under management were valued at $ 34.1 billion with the construction backlog revenue of $ 21.4 billion. The company reportedly has a total development pipeline of around $ 74.5 billion. The net assets at the end of the period were valued at ~ $ 6.43 billion, including net cash and cash equivalents of about $ 1.55 billion. The operating activities and investing activities resulted in net cash inflows of approximately $ 340.4 million and $ 484.8 million respectively. On the other hand, the financing activities led to $ 532.9 million of net cash outflows on account of repayment of borrowings and distribution of dividends.

Currently, the Group’s market valuation stands at AUD 6.95 billion. On April 5th, 2019, the LLC stock is trading at AUD 12.185, down 1.096%. Also, LLC has generated a positive YTD return of 10.89%.

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