AUSTRALIAN contractor Multiplex yesterday warned that its 2006 profit was likely to be 77 per cent below what it had forecast, blaming cost setbacks at its troubled Wembley Stadium project.

The construction and property group said it expects a 165m Australian dollar (£69.6m) reduction in net profits for the year to June because of rising losses from the multi-million pound project to redevelop the stadium.

It said the likely loss on Wembley would be "substantially adverse" from previous indications, after costs were pushed up following a dispute with North-East engineering firm Cleveland Bridge.

Multiplex said its profits for 2006 are expected to be about 50m Australian dollars (£21m), against the company's previous forecast of a 215m Australian dollars (£90.6m) result.

In August, its construction division revealed full-year losses of 62 million Australian dollars (£26.1m), compared with profits of 73.2 million dollars (£30.8m) in 2004

Multiplex said it still targeted the completion of the project in time for the FA Cup final in May, with progressive handover of parts of the stadium expected to start next month.

However, shares in the firm, which issued three profit warnings between February and August, fell as much as 12 per cent yesterday.

Multiplex has been dogged by problems on the Wembley project, which has incurred litigation and higher costs after a change of steel contractor. The stadium, for which Darlington-based Cleveland Bridge built the showpiece arch feature, was initially expected to cost £757m. But Cleveland Bridge's workers walked off the site last August, as rows with Multiplex intensified.

Both companies then lodged claims in the Court of Technology and Construction, part of the High Court.

The case is expected to be heard next year.

Multiplex has already had to pay nearly £5m to Cleveland Bridge after mediation.

Steel contractor Hollandia replaced Cleveland Bridge, but no agreement was reached on the upper limit of the cost of steel and labour to Multiplex.

Multiplex said yesterday that its exact position on the project was still subject to "considerable variability" because of the final outcome of steel costs and negotiations in relation to numerous sub-contractor claims. It stressed that its forecast on group profits was ''preliminary and subject to material change''

Published: 20/12/2005