Shares plunge as Wolverhampton-based Carillion warns on profits again
Shares in Carillion have plummeted more than 40 per cent and were temporarily suspended this morning after the troubled construction group warned over profits and flagged up major problems with its debts.
Shares were down to 17p at one point. A year ago they were worth £2.54.
The Wolverhampton-based outsourcing and construction group said annual profits looked set to be "materially lower than current market expectations" as it grapples with a string of delays and smaller-than-expected improvements to margins on certain contracts.
Carillion has been in crisis since June, when it revealed major losses on some building projects, and at the end of September revealed half year losses had passed the £1 billion mark.
The company employs around 400 at its headquarters on Wolverhampton's Ring Road St Mark's. Around 20,000 of its 43,000 strong workforce is based in the UK, where it has major contracts working on road and rail schemes and maintaining military bases.
It is also building the new Midland Metropolitan Hospital in Smethwick and is working on the huge Paradise redevelopment in Birmingham city centre.
It has continued to win work, however, including part of the HS2 railway line construction and new building projects in the Middle East.
Despite efforts to drive down costs, haul in cash and push through disposals, the group said it would fail to hit its net debt to earnings ratio of 1 to 1.5 times by the end of 2018.
As a result, the firm expects to breach its financial covenants by the end of December this year, with annual average net borrowing to come in between £875 million and £925 million.
The covenants are agreements Carillion has with its lenders that its earnings can cover its debts by an agreed amount. The company is now saying it can't meet those targets.
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 April 2 2018."
Since the crisis was revealed this summer Carillion has been trying to slash costs, collect more of the money it is owed for work and selling off parts of the business as it tries to restructure itself into a more profitable company.
It is looking to sell off its Canadian operations, which employ around 6,000 people, and has already sold off businesses such as its healthcare facilities management operation, bought by Serco for £50m.
But the attempt to shore up its finances isn't going fast enough. It is now in discussions with stakeholders regarding a broad range of options to further reduce net debt and repair and strengthen the group's balance sheet.
The company said: "This will require some form of recapitalisation, which could involve a restructuring of the balance sheet. The board expects to commence steps to implement the chosen option during the first quarter of 2018 and a further announcement will be made in due course."
But it warned that it had been hit by delays to selling off some of its public private partnership (PPP) contracts and to a major project in the Middle East, as well as lower than expected profit improvements on some support services contracts, which will drag down profits overall this year.