Lendlease’s troubled engineering arm has reached the end of its life in Queensland, where the regulator on Tuesday suspended it for failing to maintain the minimum amount of capital required to sustain a business of its size.
The suspension by the Queensland Building and Construction Commission of Lendlease Engineering Pty Ltd’s building licence meant that division of the ASX-listed developer could no longer carry out building work.
Even after selling most of its operations to Acciona in a $180 million deal in December, Lendlease Engineering remained responsible for projects including the Melbourne Metro Rail and Brisbane’s $501 million Kingsford Smith Drive road widening upgrade.
But the suspension won’t affect Lendlease’s ability to complete the road project that was awarded in 2015, as it can transfer the remaining work to its building arm, which remained licensed. The project is due for completion this year.
“The licence that has been suspended relates to the company’s engineering business only. This latter licence is not necessary for the works undertaken by the Lendlease Engineering business,” a Lendlease spokesman said.
“In December 2019, Lendlease announced the proposed sale of its engineering business. As part of this process, the Kingsford Smith Drive project will be novated across to Lendlease Building and the project remains on track for completion this calendar year.”
Kingsford Smith Drive and Gateway Upgrade North projects in Brisbane – along with Sydney’s NorthConnex – were three underperforming projects that triggered a $500 million pretax loss for Lendlease in the final six months of 2018, triggering the strategic review that led to the sale of the engineering and services business.
The spectre of the troubled engineering division has hung over Lendlease, which has sought to emphasise its profitable residential development and building businesses following the engineering sale. But it remains saddled with potentially problematic projects that Acciona did not want, and they remain a potential drag on profit.
At its last earnings announcement in February, the shares jumped after Lendlease told investors that Melbourne Metro was unlikely to cost them any more money.
Queensland’s suspension of the Lendlease division follows earlier action against Laing O’Rourke in March last year and the cancellation of Grocon boss Daniel Grollo’s builder’s licence earlier this year.
“The QBCC has today suspended the builder-open licence of Lendlease Engineering Pty Ltd because it has failed to demonstrate compliance with the minimum financial requirements,” a QBCC spokesman said.
“Minimum financial requirements require licensees to have sufficient working capital for their turnover.”
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