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SYDNEY-Australian developer Multiplex has issued a warning that 2006 profits are likely to be 77% below what it had forecast, blaming mainly cost over-runs at the troubled Wembley stadium project in London. Shares in Multiplex, which issued three profit warnings between February and August, fell by 12% after the board announced that the likely loss on Wembley would be “substantially adverse” to what it had flagged. In tandem with this news, Multiplex issued another statement saying group profits would be slashed by about A$165 million ($122 million). One senior analyst dubbed the announcements as “diabolical.”

Two law firms announced in September that they were investigating on behalf of current and former shareholders whether Multiplex had misled investors over previous profit warnings linked to soaring costs at Wembley. The company has declined to comment on the investigations.

Multiplex officials also said the firm had disposed of certain interests and rights on both London’s Stratford project and the UK data company Global Switch. Receipts from these amount to about A$300 million ($223 million).

“Multiplex will maintain the potential to participate in the development and construction opportunities in the Stratford project,” assistant company secretary Alan Shedden reports. Last month, the development firm retained its profit forecast for the year ending June 30 of A$215 million ($159 million), but it did warn it might fall short if steel costs for the Wembley project kept rising.

Multiplex officials say the latest profit warning was only preliminary because it was yet to finalize the steel costs and conclude negotiations with various parties, including subcontractors. “Depending on the progress of negotiations, the board hopes to be in a position to provide revised assessment of the impact on 2006 earnings over the next few weeks,” Shedden says.

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