Carillion losses rise to £1.15bn due to more ‘problem contracts’
Carillion has announced it will take a further £200m hit, on top of the £845m reported in July.
The troubled firm said it had uncovered more “problem contracts”, this time in its support services business, pushing its total losses to £1.15bn.
There is no change in the status of the construction contracts which resulted in Carillion making an £845m provision two months ago, and led to the resignation of chief executive Richard Howson.
In its first-half results for 2017, the firm’s total revenue was flat at £2.5bn with full-year results expected to be “lower than current market expectations” at between £4.6bn and £4.8bn (previously £4.8bn to £5.0bn).
Average net debt in the first half was £694m, with full-year average net debt expected to be between £825m and £850m.
Carillion has also suffered a goodwill impairment charge of £134m on its UK and Canadian construction businesses.
The firm expects to raise £300m from disposals of “non-core” businesses – chiefly its PPP equity stakes – and has agreed a further £140m commitment from its banks.
New and “probable” orders in the first half were £2.6bn, with its total order book unchanged at £16bn.
Carillion interim chief executive Keith Cochrane said the firm had launched a cost-cutting drive and restructuring programme, which will cost £100m, with an initial cost reduction target of £75m by mid-2019.
The business plans to focus on its “core strengths and markets – support services, infrastructure and building”. It will have a new leadership team and operating model, with a “delayered structure, greater accountability and transparency”.
Cochrane said: “This is a disappointing set of results which reflects the issues we flagged in July and the additional £200m provision for our support services business that we have announced today. We now expect results for the full year to be lower than current market expectations.
“The strategic review that we launched in July has enabled us to get a firm handle on the group’s problems and we have implemented a clear plan to address them. Our objective is to be a lower risk, lower cost, higher quality business generating sustainable cash backed earnings.
“In the immediate short term, our focus is to complete the disposal programme, accelerate our action to take cost out of the business and get our balance sheet back to a place where it can support Carillion going forward.
“No one is in any doubt of the challenge that lies ahead. We have made an encouraging start and the ambition is there to build on that progress.
“At the heart of this company, there is a strong core. Supported by an operating model that manages risk much more effectively and led by a fresh management team with a mandate to drive cultural change, I am confident that a strong business can emerge.”