Multiplex faces a further £25m loss on Wembley stadium after it revealed that talks to agree a fixed price contract with steel subcontractor Hollandia might stall.
Hollandia has been working on a “cost plus” basis since it took over from Cleveland Bridge last year, but is now being asked to negotiate a fixed price contract, which would put a ceiling on the bill.
The Australian-owned contractor has admitted that a deal might not be reached and that Hollandia may continue on a cost plus basis. Multiplex said if the steelworks reached the predicted maximum cost the company would take a £25m hit, taking its full loss to £70m.
Multiplex chairman Allan McDonald said this week that negotiations with Hollandia were continuing, and were at an advanced stage, but had not been finalised.
He said: “In fact it is still possible that Multiplex will not conclude a mutually acceptable agreement with Hollandia.”
Mark Wilson, the company secretary of Multiplex, emphasised the importance of agreeing a maximum value for the works.
He said: “Such an agreement would significantly reduce the risk to Multiplex by providing a cap on the cost of this subcontract works package, which represents a large portion of the project cost.”
It is still possible that Multiplex will not conclude a mutually acceptable agreement with Hollandia
Multiplex chairman Allan McDonald
He added that under the cost-plus arrangement Multiplex was responsible for reimbursing the reasonable costs incurred by Hollandia in relation to its subcontract works package.
The Australian contractor has reiterated that the project will be ready for the FA Cup final next May. But it added that this prediction was dependent upon the severity of the winter, which is forecast to be the worst for many years. The firm also said that there were other uncertainties because of “the risk of adverse claims outcomes in respect of the client, the subcontractors on the project and on consultants”.
Site sources at Wembley this week claimed that the project was facing a materials shortage as a result of the extra labour that has been brought onto the site. Two M&E contractors, Phoenix Electrical and Honeywell, have drafted in extra workers over the past two months. The number of M&E workers on the project is presently in excess of 1000, and the total number of construction workers is believed to be in the region of 4000.
McDonald warned that the indicative figures put out in August on group profit after tax for the year ending next June were dependent on the Wembley project going ahead successfully.
He said: “Clearly an adverse impact on the Wembley position remains a material risk in relation to this.” The group had predicted an indicative pre-tax profit of Aus$215 (£90m) for the year ending 31 June 2006.