Abigroup executives stood down as Lend Lease investigates accounting 'discrepancies' on two road projects

Developer Lend Lease has stood down executives at its construction and engineering subsidiary Abigroup after identifying “certain discrepancies and issues in relation to the reporting and recognition of profits and losses on two projects”.

Lend Lease says the discrepancies involve the “potential under-reporting of the anticipated profit on one project and the potential under-reporting of the anticipated loss on another project” and relate to annual results to June 30.

A number of executives responsible for oversight and management of Abigroup have been stood aside while Lend Lease conducts a full investigation.

Responsibility for the operational and financial oversight of its construction business, including Abigroup, has been assumed by David Saxelby (chief operating officer) and Andrew Muller (chief financial officer), who will respectively report to Lend Lease Australia chief executive Mark Menhinnitt and Frank Krile, Lend Lease Australia CFO.

“We take seriously any potential reporting and compliance issues, and are committed to resolving this matter fully and as quickly as possible,” says Lend Lease Group CEO Steve McCann.

The discrepancies are being reviewed by the Lend Lease board and senior management but are not expected to have a net material impact on the group's full-year 2012 financial position or results or its outlook.

Lend Lease says it is conducting “an immediate and thorough investigation of these matters and all the surrounding circumstances in conjunction with the group’s external auditors".

The two projects where reporting discrepancies have been reported are the D2G joint venture in Queensland and the Peninsula Link Project in Victoria.

D2G is a $1.95 billion for the Queensland department of roads to upgrade eight kilometres of the Ipswich Motorway between Dinmore and Goodna, and the$759 million Peninsula Link Project is the construction of a 27 kilometre road link between EastLink at Carrum Downs and the Mornington Peninsula Freeway at Mount Martha with the aim of reducing travel times by up to 40 minutes.

According to Lend Lease, the group's full share of available profits  on the D2G project was not disclosed to senior group management, the board or the external auditors.

As a consequence, the extent of the anticipated profit on that project may not have been adequately recognised within the group's results.

In the case of the Peninsula Link Project, Lend Lease says “certain costs may not have been appropriately accounted for in determining the financial results of that project, and key information was not disclosed to senior group management, the board or the external auditors”.

“As a consequence, the extent of the anticipated loss on that project may not have been adequately recognised within the group's results."

Lend Lease reported an operating profit after tax of $507.2 million for the full year, a 4.5% increase on the prior year and a final distribution of 22¢ per security.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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