Now that wasn’t too hard, was it?
A day after providing a partial, badly written update to the market, Lend Lease yesterday attempted to ‘clarify’ Monday’s announcement.
A 7.5% slide in the shares on Monday probably forced the company’s management to have another go at updating investors yesterday.
The company tried to reassure investors that its earnings will grow this financial year, despite restructure to its Australian construction division aimed at cutting costs as the local construction sector continues to contract.
Job cuts are tipped in the restructuring, but the company left that alone yesterday.
Lend Lease said on Monday that earnings from its construction businesses in Australia, Europe and the Middle East had fallen due to softer construction markets in those regions.
Yesterday, the company said its overall earnings in the year to June 30 would meet analyst expectations.
"Lend Lease confirms it is on track to deliver a solid result in line with market expectations for FY13," it said in a statement.
"This is based on a range of published analyst earnings expectations which converge on $540-$550 million and the published Bloomberg median of $547 million."
Lend Lease made a net profit of $501.4 million in the 2011/12 financial year.
Despite the second statement, Lend Lease shares again weakened yesterday, losing 17c or nearly 2% to end at $8.47.
Had it been, Lend Lease would have spared itself the agony of the market questioning its commitment to transparency.
The near 10% fall this week is all down to the management’s poor communication skills.
Some rare good news for embattled Sydney based engineer and services group, Downer EDI – the Fitch ratings group has raised the company’s rating to BBB with a stable outlook.
The shares added 2 cents to $3.41, ending nasty 39% fall since March 7 when they peaked at $5.56 as shareholders abandoned the stock after profit warnings.
DOW YTD – Fitch news steadies share price
Fitch said the rating upgrade reflects Downer’s improved financial risk profile, earnings diversification, risk and return discipline around the vetting of project bids.
The company’s project delivery governance has improved, the board of directors has oversight over the delivery of work to particular projects worth more than $250 million, and bidding for projects has to clear internal legal, accounting, treasury and tax examination. This may enable Downer to minimise potential contract losses, Fitch said.
Downer has also improved contract formation (risk-sharing arrangement) across its portfolio of projects as is evidenced by its minimal exposure to lump-sum construction risk other than that of the nearly completed Waratah Train project’s rolling stock manufacturing contract.
"Any losses suffered have been contained within the initial estimate of AUD430M and the project is expected to turn cash positive in 2014," Fitch said in yesterday’s release.
That troubled contract is now 80% complete and Fitch expects the train contract to turn cash positive next year.
The ratings form said that Downer’s mining services division’s existing contracts will keep the company busy for two years even if the company wins no new contracts.
The mining sector accounts for 32% of Downer’s current work. More than 80 per cent of this work is in iron ore and metallurgical coal.
"Downer’s metrics do not fall materially below Fitch’s negative rating guidelines even under the extreme stress case scenario of a AUD200m loss each and every year to FY2016, a combined loss of AUD 600m directly impacting operating EBITDAR and a mining contracts order book at 10% per annum.
"This demonstrates the diversity of earnings associated with Downer’s multiline business offering as well as its robust financial profile," Fitch said.
