Carillion warns on profits again as it breaches banking covenants

Grant Prior 2 years ago
Share

Carillion will breach its banking covenants next month as the debt-stricken contractor announced another profit warning this morning.

Carillion has been forced to ask for extra time from its lenders while it fights to restore its balance sheet as full year debts are forecast to rise to up to £925m.

The company has been desperately trying to reduce costs and collect cash on contracts since the summer.

A disposals programme has also started with the £50m sale of its healthcare business.

But the moves have not proved sufficient and a major recapitalisation programme will take place in the first quarter of next year.

Carillion said: “In its interim results on 29 September 2017, Carillion confirmed that it was forecast to be in compliance with its financial covenants as at 31 December 2017. 

“As then indicated, compliance with its financial covenants was dependent on achieving its underlying forecasts, which assume that the normal pattern of receipts and payments continue alongside the completion of a number of PPP disposals and settlement receipts on contracts. 

” The Group now expects that a combination of delays to certain PPP disposals, a slippage in the commencement date of a significant project in the Middle East and lower than expected margin improvements across a small number of UK Support Services contracts will lead to profits for the year to 31 December 2017 being materially lower than current market expectations. 

“Given the impact of delays in receipts and disposals, the Group now expects full year average net borrowing in 2017 to be between £875m and £925m.

“Based on its latest forecasts, reflecting the items mentioned above, the Board now expects a covenant breach as at 31 December 2017. 

“Following discussions with its principal lenders and with their support, the Board has concluded that it is necessary to amend the relevant agreements to defer the test date for both its financial covenants from 31 December 2017 to 30 April 2018 by which time it expects to be implementing its recapitalisation plan.”

Wates chief executive Andrew Davies is set to take over at Carillion as its new chief executive from April.

Veteran turnaround specialist Alan Lovell has also been drafted in as a non-exective director.

Interim Chief Executive, Keith Cochrane said: “Whilst we continue to target cash collections, reduce costs, execute disposals and focus on delivering for our customers, it is clear that significant challenges remain and more needs to be done to reduce net debt and rebuild the balance sheet. 

“Constructive dialogue is continuing with our financial stakeholders, and I am grateful for their support. 

“I remain focused on addressing this issue before my successor, Andrew Davies, takes up the role on 2 April 2018.”

Carillion’s share price crashed more than 50% in early trading to just 18p – valuing the business at £73m.

Latest news

Galliford Try confirms 350 construction job cuts

Slimmed-down division to focus on building,water and highways
13 hours ago

Site inductions to contain modern slavery warnings

How to spot labour exploitation now explained alongside traditional health and safety briefing
4 hours ago

Dawnus went down owing supply chain more than £40m

Subcontractors left in the lurch again following latest collapse
13 hours ago

Plastic road built on new housing development

Springfield Properties recycles waste plastic to help build new road
9 hours ago

Interserve benched on £1bn Welsh framework

SEWSCAP 3 deal: Details of latest winners
1 day ago

BAM Nuttall profit hits 10-year high

Operating margin back to 3% as profit tops £26m
1 day ago

Diversification shields Keltbray from demolition slowdown

Contractor looking at new markets as core commercial workloads fall
14 hours ago

Robertson lures property boss from Henry Boot

Nick Harris joins from one of contractor's biggest clients
1 day ago

Esh gears up for £36m Sunderland road job

Esh mobilises to start phase 3 of city strategic corridor
22 hours ago

London office work shifts towards major refurb projects

London crane survey shows little sign of Brexit blues
2 days ago

US consultant Tetra Tech to buy WYG for £43m

WYG board backs 55p a share offer at big premium to 16p share price
2 days ago

Boost your online presence – join the Enquirer Directory

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

Prater soars past £100m revenue

Envelope specialist optimistic 2019 will see another year of growth
2 days ago

Construction to start on new Farringdon scheme this year

Helical and AshbyCapital acquire Charterhouse Place
2 days ago

VolkerFitzpatrick wins £27m rail station upgrade

Two stations to be upgraded in Cambridge and King’s Lynn enhancements
2 days ago

Joiner hit in face by falling steel beam

House builder fined £60,000 for lack of site supervision
2 days ago

Major contractors going cool on road maintenance market

Highways England taking more work in-house and looking to work direct with supply chain
5 days ago

Infrastructure project final costs average 80% above bid prices

Success measures for projects should shift from an over-focus on costs towards whole-life benefit
5 days ago

Newcastle firm targets £50bn London rooftop homes sector

High Street Group buys London rooftop penthouse firm
5 days ago

London Bridge 39-storey student tower approved

Student accommodation projects return to the Capital
5 days ago

Kier clinches £22m Paisley town hall revamp

Main construction to start early next year
5 days ago

Consultation opens on £1bn trans-Pennine A66 dualling

Plan to dual eight stretches of highway from Penrith and Scotch Corner
5 days ago

Kier project and commercial teams at loggerheads

Insiders reveal tension between teams on major projects
6 days ago

Lords call for HS2 rethink to secure northern upgrades

Warning that HS2 costs are out of control
6 days ago

Margins rising as nmcn enjoys strong start to the year

Water business surging ahead as new housing division expands
6 days ago

Durkan names new CEO as revenue rises to £165m

Ronan Murphy promoted and plans to double revenue in five years
6 days ago

Wates submits first phase of £1bn London housing plan

Havering Council and Wates Residential submit plans for Napier and New Plymouth House site
6 days ago

Affordable and build to rent homes lift Countryside

House builder's modular timber panel factory in Warrington now fully operational
6 days ago

Partner wanted for £800m Salford Crescent plan

Preferred bidder to be named before the end of this year
7 days ago

Interserve staff ‘left in the lurch’ as fit-out division scaled down

Paragon staff left to see out contracts as managers jump ship
1 week ago

Contractor services