It’s amazing what an early strike at a company by the regulators can do when a sharp price change is noticed. It can bring forth added disclosure of the kind that will make shareholders wince.
The Australian Stock Exchange forced Lend Lease to come clean on new asset write-downs after querying the company about the fall in its share price from $6.90 on Tuesday afternoon to a low of $6.30 on Wednesday.
The ASX asked the now standard question in its letter to Lend Lease:
"We have noted a change in the price of the Company’s securities from a close of $6.90 on Tuesday, 27 January 2009 to low of $6.30 today. We have also noted an increase in the volume of trading in the securities over this period." It then asked follow up questions in specific areas about profits etc.
That query forced a detailed preliminary update that contained what amounts to the third effective write-down in asset values since midway through last year for the floundering property giant.
One of the write downs in early August related to the 2008 profit, one in November to 2009 and the second, yesterday, was again for the 2009 result (Source).
Yesterday’s write-downs of $290 million after tax, took the total announced since November to more than a $70 million. There was a further 4120 million after tax revealed in August for the 2008 year.
Lend Lease joined another property major in West field in revealing write-downs in the value of assets this week.
In its reply to the ASX query, Lend Lease company warned that further write downs of about $290 million after tax were likely on the value of its assets.
"Based on current estimates this impairment could be in the region of A$290 million after tax (in addition to the expected reductions announced in November 2008).
"While this would reduce the Group’s Statutory Profit this would be a non-operating charge and therefore excluded from net operating profit after tax.
"Current estimates indicate this amount may comprise a reduction in the carrying value of goodwill relating to Delfin Lend Lease of approximately $80 million after tax, and a potential reduction of approximately A$210 million after tax relating to the carrying values of commercial assets in the UK and residential assets in the US and Australia.
"Operating profit after tax for the full year is expected to be in line with guidance provided to the market in November 2008 of 10% to 15% below operating profit after tax for the previous financial year of $447.1m.
"However, there are a number of transactions that are expected to contribute to achieving this profit guidance including capital recycling and reaching financial close on projects in which Lend Lease is preferred bidder.
"While some capital recycling initiatives included in this year’s guidance have already occurred, these further transactions account for approximately 30% of this year’s guidance.
"In light of the continuing lack of liquidity in debt markets and current economic conditions, Lend Lease cannot be certain that these transactions will occur in the current financial year.
"The Board will review its dividend policy in the normal course in February 2009 but no change to the dividend policy is expected at this stage."
Seeing the likes of Devine, a much small Brisbane developer, chopped its dividend lower yesterday and the housing products supplier, Alesco, suspended its payout, Lend Lease’s reluctance is hard to understand.
Westfield warned that its 2009 distribution could fall to around 97 A cents from the 106.5 cents of 2008."
Lend Lease said it was reviewing its accounts but there was the potential for further impairment to the carrying values of tangible assets and goodwill.
Lend Lease said it expected to complete its review by February 5.
Last November it revealed a series of write-downs that would impact its statutory profit:
"The combination of the above items, which are non-operating and primarily of a non-cash nature, will impact Lend Lease’s FY09 Statutory Profit after tax by approximately A$490 million.
"Given these charges are primarily non-cash in nature, they will have no impact on dividend policy, which will be determined by the Board in the ordinary course in February 2009.
"The valuation of Bluewater shopping centre in the UK will also be impacted. This will not be included in the Lend Lease profit and loss account or balance sheet as Lend Lease’s interest in this asset is carried at cost (June 08: £250m)," the company said in August.
The shares rose 34 cents yesterday to $6.65, still under the close on Tuesday before the plunge started. At least the rot was stopped.
