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Multiplex develops new game plan

AGENDA - Its flagship project has turned into a millstone for Multiplex, with serious implications for its future over here. David Rogers looks at how it failed to appreciate UK practices and where it goes from here

CONSTRUCTION companies live and die by their reputations. So, by that yardstick, Wembley Stadium has shredded Multiplex's to bits. As simple as that.

While the Football Association dithered before finally admitting to what everybody already knew ? this year's FA Cup Final would be played in Cardiff ? Multiplex bosses here and in Sydney were preparing much grimmer news.

Not only had it missed the deadline to hand over the new Wembley Stadium but accountants were also totting up the losses: over £200 million blown on the scheme so far. It is an astronomical loss, one of the biggest hits a company has ever taken on a UK construction job.

The job that was supposed to launch the Australian firm in this country could end up breaking it. Multiplex's reputation here is not quite ruined but the firm admits it has much to do to repair confidence from investors, clients and subcontractors.

It has some job on its hands. This is the company that on February 24 last year said it was writing down its financial position on Wembley to a break even situation.

Four days later, when company founder John Roberts pledged nearly £21 million of his own fortune 'in respect of any loss that emerges on the Wembley project', the company still managed to add: 'The Roberts family have nevertheless advised they do not believe losses will emerge on the project.' Fast forward 12 months and Andrew Roberts, the top Roberts now after his father John stood down as executive chairman last May, was forced to concede that the break even situation had blown out to a £183 million loss. Add John Roberts's £21 million and this works out at a £17 million a month loss in the year.

The Australian Securities & Investments Commission is investigating Multiplex. If it finds the company or some senior individuals in breach of the country's Corporations Act, aggrieved shareholders might find it tempting to launch a class action.

They claim the value of their shares nosedived on the back of the Wembley debacle, which, they allege, Multiplex knew was worse than it was prepared to admit to at the time. The key questions are: what did the Multiplex top brass know, and when? Two Melbourne law firms are still deciding whether to launch legal action against the firm, claiming it misled shareholders ? something Multiplex has consistently denied ? about the problems at Wembley.

One firm, Maurice Blackman Cashman, said: 'We consider that for a lengthy but as yet unknown period prior to May 30 2005 [when Multiplex said it would lose £45 million on the job] Multiplex had not properly disclosed to shareholders and potential shareholders the full story regarding huge cost increases and delays, or the real risk of huge costs and delays, in the construction of the Wembley National Stadium.' One former Multiplex employee agrees that, whatever the outcome, shareholders are making a valid point, namely that Multiplex ? a company that only listed on the Australian stock exchange in December 2003 ? still had problems with openness, which only now are being addressed.

He said: 'John Roberts is a deal-maker. The way he works is great if you have a privately owned company.

It's different when you have to observe the corporate governance of a public company.

'The problems were building up and up on Wembley, there was simmering discontent with Cleveland Bridge and the people in charge at the time weren't willing to conciliate. The culture was to sack and sue. If they had got rid of certain people at the time then they wouldn't be in the mess they are in now.' This is believed to be a reference to Matt Stagg, the Australian in charge of Wembley at the time of the bustup with Cleveland. He was the man behind the notorious 'fix and fuck them later?' email of May 2004 which Cleveland alleges was proof Multiplex concocted a plan to bust the company under a strategy called the 'Armageddon Plan'.

Mr Stagg left the Wembley project shortly afterwards but has not broken all ties with Multiplex. Last August he set up a project management company called MPP International Development in a joint venture with Multiplex.

But the source claims it was only in late 2004 that Multiplex's Australian bosses finally woke up to the fact that they had to get British management into its blue chip headquarters in London's Berkeley Square. This shift in policy has seen men like UK boss Martin Tidd and director Simon Cook subsequently take up more prominent roles.

He said: 'The Aussies would never say it, of course, but the Brits are starting to sort it out. For the Aussies to admit that would be like saying to your wife that she should sleep with the guy next door because he's better in bed.

'The Australian judgement of the UK market was naïve. They didn't understand that the power over here lies with the trades. You can't sack the steelwork contractor halfway through rebuilding Wembley Stadium.

In terms of a commercial judgement it was a dreadful decision. The signal it sent out to the market generated awful publicity and did incalculable damage to Multiplex.

'Wembley has severely tarnished their reputation with the trade contractors here. In the UK, the trades are king but the supply chain doesn't trust Multiplex at the moment. They trust the Brits like Martin Tidd and Simon Cook but they're suspicious of Andrew Roberts and his dad. The attitude is 'why work for Multiplex when you can have an easier time with Bovis?' ' What senior figures in Multiplex admit is the need to get Wembley finished as quickly as possible. Or, as one put it recently: 'We need to get the thing out of the way.' This comment is a measure of just how much a burden 'that thing' ? the highest-profile construction job in the country and arguably the most glamorous ? has become.

Another former employee said: 'Since day one, all Martin Tidd has done is firefight Wembley. They need it finished and to stop being associated with Wembley.

The key for them now is what Multiplex's development arm can do over here.' This division is headed by Jayne McGivern, who was lured from US entertainment group Anschutz just before Christmas. Anschutz is the company behind the redevelopment of the Millennium Dome.

Multiplex has withdrawn from bidding for work on a competitive basis because this doesn't fit in with its way of doing things. In truth, the firm never did much competitive tendering but what Multiplex wants is to mimic what it does back in its homeland. Another former Multiplex employee said: 'Multiplex makes its money in development and investment, not in construction.

Ultimately the Australian stock exchange will determine that Multiplex concentrates on where it makes money ? you don't have to be a genius to work this out.'

Its method of making money is through its integrated business model which sees the development arm win work and the construction arm carry it out. One source said: 'The key is can the development arm convert the work they've been incubating over the past two years into real work for the construction arm. Not all of it will go to Multiplex's construction arm but that's how they like to work. They know they can't compete with Bovis and Laing O'Rourke over here on price.' Development occupies one half of the two floors it has in Berkeley Square and the division has been steadily staffing up over the past year. Work in the pipeline includes retail schemes in Aberdeen and Newcastle upon Tyne. It has already started work revamping the commuter town of High Wycombe.

Add to this Multiplex's work on the White City retail development and its forthcoming PFI hospital scheme in Peterborough and it seems the firm will be sticking around in the UK. It is also hopeful of securing the deal to build the Shard tower in London.

It has, the company stresses, a post-Wembley future.

But for now Multiplex's immediate priority is finishing the stadium. It won't be an easy project to escape. It has a court date with Cleveland Bridge coming up in April.

This will last four weeks and more legal action seems certain to follow.

How it handles this and, in particular what sort of leeway the Australian bosses allow its local, British management team, would seem key to its future success.