Carillion announce £1.15billion half-year loss | City & Business | Finance

Carillion announce £1.15billion half-year loss | City & Business | Finance

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The construction and support services group admitted it would breach its agreements with lenders this year as it sounded its third profit warning in five months.

Its finances have come under pressure after it took a £845million hit on problem construction contracts and wrote off £200million more on under-performing support service deals, sending it to a £1.15billion half-year loss.

It now expects average net borrowing of £875-925million, up from a previous estimate of £850million, with slow progress on the sale of its public-private partnership assets and delays to a Middle East contract meaning its annual profits will be “materially lower than current Market expectations”.

Carillion, which is part of a consortium which won £1.34billion of contracts on the HS2 rail scheme, recently secured £140million of extra credit from lenders.

It wants to delay a covenant test from December to April next year while it builds its financial strength. Shares plunged 20p to 21½p amid fears that efforts to rebuild its finances will leave the company in the hands of its banks.

Interim chief executive Keith Cochrane said: “While we continue to reduce costs, executive 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 next April.”

Peel Hunt’s Andrew Nussey warned: “We see little value currently for equity holders.” Neil Wilson, senior Market analyst at ETX Capital, said: “Disposals aren’t enough, particularly as Carillion is selling things on the cheap.

“In offloading its healthcare business in the UK it’s also ditched a very high margin business for peanuts. It has to get net debt to about £350million.

“Asset sales might fetch about £300million, leaving the best part of another £300million to fi nd. The numbers are increasingly not adding up.


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