Carillion profit warning unearths £845m contract black hole

Grant Prior 2 years 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

Construction braced for freelance tax disruption

Self-employed professionals face major contractor move back to PAYE
1 hour ago

Rain halts BAM’s Carlisle flood defence job until Spring

Wet weather in August and September blamed for pause on £25m scheme
1 hour ago

Bristol student tower block trio approved

Work expected to start at Temple Island midway through next year
2 hours ago

Atkins names ex-HS2 ops boss as UK chief executive

Richard Robinson will lead Atkins UK's 10,000 strong team
19 hours ago

Procurement bodies team up for new consultants framework

North West and Southern framework groups call up multi-disciplinary consultants
2 hours ago

Materials giant sees brick and block sales weaken

Bison precast business hit by contract delays
2 hours ago

Wates kicks off York council house building programme

£27m Lowfield Green scheme will see 140 homes built
2 hours ago

L&G commits to £750m affordable homes investment

Affordable homes division hires former Capco director to deliver 3,500-home pipeline
18 hours ago

ISG names new UK construction chief

Zoe Price promoted to chief operating officer for construction
1 day ago

Interserve set for £36m Walsall hospital A&E upgrade

Work to start in April next year at Walsall Manor Hospital
1 day ago

London council to overhaul £370m housing upkeep

Lambeth council to give residents say in policing delivery by contractors
1 day ago

Carpenter falls through gap in safety deck

Badly installed safety system did not cover whole work area
1 day ago

Fusion21 launches £250m energy efficiency framework race

Firms installing PV panels, cladding and LED lighting called up for new framework
1 day ago

Boost your online presence – join the Enquirer Directory

Site for suppliers and buyers showcases products, services and latest stories
1 year ago

Construction safety test cheats caught in police raids

Crooked test centres in answers for cash scandal
4 days ago

Demolition giants land places on £50m framework

Housing Association Notting Hill Genesis confirms eight winners
4 days ago

Green light for £79m “Mancunian” tower

Planners approve major city centre regeneration scheme
4 days ago

FEC starts £470m Isle of Dogs twin tower project

JRL starts piling work on 65 and 35-storey hotel and flats project
5 days ago

£200m Lancashire waste incinerator approved

Heysham Gateway energy recovery facility will create 350 construction jobs
4 days ago

Common prequal standard adopted for HS2 subcontract bids

Main works civils contractors adopt new PQQ system to cut supply chain costs
5 days ago

Westridge to restart stalled Brighton Dome revamp

Contractor wins race to replace Britain's oldest builder on £21m renovation job
5 days ago

Laing O’Rourke returns to profit

Britain's biggest private contractor returns a £33m profit after stemming losses in Canada
5 days ago

Vast Elizabeth House London scheme to start next year

HB Reavis gets planning go-ahead for 1.2m sq ft project beside Waterloo Station
6 days ago

Digger driver jailed after builder crushed by excavator bucket

Ten month sentence after worker killed in trench
5 days ago

Winvic margin falls as revenue jumps 29% to £628m

Pre-tax profit drops a third to £20m as shed builder boosts workforce for growth
4 days ago

Interserve signs off £13m Oldham cultural hub deal

Firm lands heritage and art centre project where Gilbert Ash held a pre-construction services agreement
6 days ago

William Birch lands York housing scheme from local charity

Construction to start later this year on apartments for visually impaired people
5 days ago

Winner picked for £250m ‘Harrods of Bayswater’ job

London's Whiteleys shopping centre to be redeveloped
6 days ago

No win no fee service launched for construction disputes

New service to create "level playing field" for smaller contractors considering adjudication claims
6 days ago

Alun Griffiths lands £85m Cornish link road

Construction could start next year on St Austell scheme
6 days ago

Contractor services