Lendlease faces two more class actions as US firms investigate

Lendlease could be hit with two further class action lawsuits related to its disclosures of problems in its troubled engineering division.

Lendlease chief executive officer Steve McCann. Picture: Britta Campion

Construction giant Lendlease could be hit with two further class action lawsuits related to its disclosures of problems in its troubled engineering division, after two US law firms announced they were investigating potential securities claims on behalf of the company’s US investors.

Lendlease in November 2018 took a $350m writedown on its struggling engineering and services business, blaming the underperformance of the division on a “further deterioration” in a small number of projects it had previously identified, including delays in its building of Sydney’s NorthConnex project.

The news shocked investors, who sent the firm’s shares plunging 18 per cent in a single day’s trade, followed by a further 9 per cent drop over the next two days.

Its American depository receipt price, meanwhile, slumped 24 per cent in the day after the announcement. ADRs are US securities that represent underlying holdings in overseas companies.

Two class actions were subsequently launched against Lendlease by Maurice Blackburn and Phi Finney McDonald, alleging it misled the market and failed to adequately disclose the problems in its engineering division.

After the class actions were filed last year, Lendlease denied any liability and said it would vigorously defend the proceedings in both instances.

US law firms Rosen Law Firm and Pomerantz LLP have now both commenced investigations into Lendlease for potential violations of US federal securities laws.

New York-based Rosen said its investigation had stemmed from allegations that Lendlease “may have issued materially misleading business information to the investing public”, while Pomerantz on Sunday said it was looking at “whether Lendlease and a certain (number) of its officers and/or directors have engaged in securities fraud or other unlawful business practices”.

Lendlease posted a 40 per cent plunge in profit to $467m for 2019, driven by a $337m loss in its engineering division.

In December last year the company announced plans to divest the engineering business, selling it to Spanish group Acciona for $180m.

The sale is expected to complete in the coming months but is still subject to outstanding conditions, including third party consents.

Lendlease last month revealed the toll the COVID-19 crisis had taken on its operations, with the construction giant flagging a 2020 full-year net loss of up to $340m as its projects were hit by delays due to the pandemic.

Lendlease said it expects profit after tax in its core business to be in the range of $50m-$150m.

It also put the estimated restructuring cost of exiting the engineering business at $550m, pre tax.

Lendlease shares were trading above $17 before it took the $350m provision in November 2018.

On Friday, its shares closed at $11.52. Its ADRs were trading at $US12.60 before the announcement and are currently at $US8.10.