Accountancy giant helping Carillion fight for survival
Infrastructure giant Carillion has drafted in accountancy giant Ernst and Young to help carry out a review of the business as it fights for its survival.
EY and Wolverhampton-based Carillion will focus on "cost reduction and cash collection" following a torrid seven days for the construction and support services firm.
Last week it suffered a dramatic collapse in its share price after announcing a profit warning which saw almost £600 million wiped from its value.
Interim chief executive Keith Cochrane said: "We are moving forward quickly with the actions outlined last week.
"Alongside our own efforts, EY will provide support across the business and bring an external perspective to our cost reduction and cash collection challenge. My priorities are to reduce the group's net debt and create a balance sheet that will support Carillion going forward.
"We need to simplify the business and demonstrate that value can again be created for shareholders by focusing the group on its core markets, including infrastructure and property services, in which it has good strengths and leading positions"
Carillion's market capitalisation has gone into freefall, falling from £826m to around £241m in a matter of days after it warned a week ago over earnings and revealed an £845m write-off on construction contracts.
Chief executive Richard Howson stepped down with immediate effect as the group said it would need to bolster its balance sheet and was struggling to stay within its borrowing limits.
He has been replaced by Mr Cochrane on an interim basis while a search is undertaken for a permanent boss.
In better news for the firm, Carillion was today named among the firms awarded contracts for the building of phase one of the HS2 rail line.
Shares in Carillion jumped by more than seven per cent off the back of the contract awards announcement to 60.1p, but still way off from the 191p they were trading at before the stock collapsed last week.
Neil Wilson, senior market analyst at ETX Capital, said: "This ought to help its share price but whether it can deliver these contracts is another matter.
"It could make it a slightly more attractive prospect to rescue if it comes to that.
"But it's hard to see an awful lot to be cheerful about. This stock could have further downside."
The Carillion board is undertaking a comprehensive review of the group’s business and capital structure, alongside taking immediate action to generate significant cashflow in the short term and achieve a reduction in average net borrowing.
The board has identified a number of actions to reduce average net borrowing including further cost efficiencies, an increased focus on managing working capital and on recoveries and cash collection.
Carillion, which employs 400 at its headquarters and 43,000 around the globe, has also drafted in the bank HSBC as an adviser and corporate broker working alongside Morgan Stanley, Lazard and Stifel.