Carillion profit warning unearths £845m contract black hole

Grant Prior 1 year ago
Share

Carillion has set aside £845m to cover problem contracts as it issued a shock profit warning to the City this morning.

Richard Howson has also stepped down as chief executive while a complete review of the business gets underway with “all options to optimise value for the benefit of shareholders under consideration.”

Carillion said it will be “only undertaking future construction work on a highly selective basis and via lower-risk procurement routes.”

The company is also pulling out of PPP construction deals and overseas markets in Qatar, the Kingdom of Saudi Arabia and Egypt.

The problems have been unearthed following an earlier review of contracts with accountants KPMG by the new group finance director.

Carillion said: “Deterioration in cash flows on a select number of construction contracts led the Board to undertake an enhanced review of all of the Group’s material contracts, with the support of KPMG and its contracts specialists, as part of the new Group Finance Director’s wider balance sheet review.

“This review has resulted in an expected contract provision of £845m at 30 June 2017, of which £375m relates to the UK (majority three PPP projects) and £470m to overseas markets, the majority of which relates to exiting markets in the Middle East and Canada.

“The associated future net cash outflows in respect of these contracts is £100m-£150m (primarily in 2017 and 2018).”

Carillion is now fighting to keep a lid on debt as net borrowing hit £695m in the first half of this year compared to £586.5m throughout 2016.

Dividends have also been suspended to shareholders this year in a bid to save £80m.

Philip Green, Non-Executive Chairman said: “We have concluded that we must take immediate action to accelerate the reduction in average net borrowing and are announcing a comprehensive programme of measures to address that, aimed at generating significant cashflow in the short-term.

“In addition, we are also announcing that we are undertaking a thorough review of the business and the capital structure, and the options available to optimise value for the benefit of shareholders.

“We will update the market on the progress of the review at our interim results in September.

“Richard Howson has stepped down as Group Chief Executive and from the Board with immediate effect and Keith Cochrane, previously our Senior Independent Non-Executive Director, will take over as interim Group Chief Executive, while a search is underway for a new Group Chief Executive.”

Carillion’s share price fell up to 40% during early morning trading.

Latest news

Willmott homes arm fined £1.25m over gas blunder

Court hears how residents were put at risk of carbon monoxide poisoning
1 day ago

Eggborough gas-fired power station gains consent

Work could start by summer next year at North Yorkshire site
1 day ago

£100m Aberdeen Broadford Works village plan approved

Demolition work to start at historic former textile factory site
1 day ago

Go-ahead for £160m Leeds Monk Bridge scheme

McAlpine is on board as preferred contractor for the project
2 days ago

Opinion: Safety fines are getting out of control

We need more effective ways to improve safety than ever higher penalties
2 days ago

Shake-up for £2.9bn MoD hard FM contracts

Post-Carillion bid race for MoD estate and housing regional FM contracts
2 days ago

Wates set to start on £53m Portsmouth sports centre

Contractor understood to have won contract race for new university complex
3 days ago

Lack of skilled roofers prompts Marley new launch

Easy to install roofing roll compensates for lack of skilled workers
2 days ago

Caddick takes workforce plastic-free

Workers given aluminium drinks bottles in bid to bin single-use plastics
2 days ago

Wates wins 7th Leeds Wellington Place job

Work will start of £35m 4 Wellington Place project next month
3 days ago

Kier targets £50m disposals to cut £375m debt

Firm sets out debt reduction plan in robust year-end results
3 days ago

Betting Spy: Spurs to shrug off recent troubles

Tottenham can kick-start a win treble with Leicester and Crystal Palace
2 days ago

Keltbray concrete structures boss exits

Keltbray Structures MD Gordon Dunne on gardening leave
3 days ago

141 jobs axed as M&E specialist George Birchall fails

Larger FM business George Birchall Service avoids administration
3 days ago

Morgan Sindall bags £384m London scheme first phase

Hackney scheme includes an academy, leisure centre and six blocks of flats
3 days ago

Mace confirms £180m Olympic Park East Village deal

Firm will fine-tune its 'rising factory' method on the No6 East Village project
3 days ago

Contractor trials mixed reality headsets on school site

BIM and Microsoft HoloLens used to check M&E work
4 days ago

PM pledges extra £2bn for housing associations over 10 years

Longterm funding will be made available from 2022-2029
4 days ago

Jacobs to lead Edinburgh city centre transformation plan

Team will set out plan for historic overhaul of streets and public space
4 days ago

Costain and Galliford Try fined £2.8m after worker loses toes

Massive fine after accident at Cheshire water treatment works
4 days ago

Boost your online presence – join the new Enquirer Directory

New site for suppliers and buyers will showcase their products, services and latest stories
5 months ago

Van Elle shareholders stage AGM revolt

Shareholders block board's ability to issue new shares for acquisitions
4 days ago

£100m Bristol sports arena plan at Ashton Gate stadium

Sports and convention centre will be attached to Lansdown Stand
4 days ago

Balfour Beatty raises £43m from hospital stake sale

Balfour sells 50% stake in Fife Hospital PPP
4 days ago

Kier offloads pensions unit for £3.5m

Third party pension management business administers half of all police pension
5 days ago

Willmott Dixon clinches £38m Winchester sports centre

Work to start in Spring 2019 on major leisure and sports complex
4 days ago

Architect TP Bennett reaches record turnover

Manchester office grows on back of city building boom
4 days ago

Brexit migration plan would “cripple construction”

Industry pleas ignored over need for steady flow of low-skilled site workers
5 days ago

Wates wins £16m Stockport college revamp

Work is due to start in the early new year on Wellington Road Campus
4 days ago

Balfour Beatty pioneers plastic pylons in Scotland

140 composite poles installed by new helicopter crane in just five days
5 days ago

Contractor services