Carillion warns on profits

Marco Green
November 17, 2017

The board said that with a rise in net debts to between £875m and £925m it expected to breach its financial covenants by the end of the year. This will require some form of recapitalisation, which could involve a restructuring of the balance sheet. It expects to implement the chosen option in the first quarter of 2018 with a further announcement in due course.

But it said that since then "delays to certain public private partnership 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 United Kingdom support services contracts. will lead to profits for the year to 31 December 2017 being materially lower than current market expectations".

Shares in Carillion are down 89% this year as the company struggles to deal with mounting costs on its construction contracts. The troubles have been compounded by its debt burden, pension obligations and delays in collecting cash from clients.

Shares in the company tumbled 44% in early trading to 23.5p on the news. They were down 34% at 27.3 pence at 1027 GMT. Equity does not normally have much value in these circumstances, ' he said.

The industry is also suffering from delays in United Kingdom public spending decisions after Britain voted to leave the European Union.

A fresh profits warning has seen Carillion shares slump again today
A fresh profits warning has seen Carillion shares slump again today

But elsewhere in the Middle East Carillion has had difficulties.

Carillion, which employs around 43,000 people, is involved in high-profile projects such as work on London's Battersea power station, Liverpool's Anfield stadium and Toronto's Union station.

A start date for a major project in the Middle East had also been pushed back while improvements in profit margins on some United Kingdom support services contracts had been lower than expected.

"The board discussions with stakeholders regarding a broad range of options to further reduce net debt and fix and strengthen the group's balance sheet". Given the impact of delays in receipts and disposals, the Group now expects full year average net borrowing in 2017 to be between 875 million pounds and 925 million pounds.

Analysts have estimated Carillion's debts including provisions, pensions and accounts payable at about 1.5 billion pounds (US$1.98 billion). Cochrane had been serving as interim CEO since Richard Howson stood down in July after a dividend cut and a further profit warning from the company.

Other reports by Click Lancashire

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