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Construction group Galliford Try looks to raise £150m in wake of Carillion collapse

By Simon Penfold | Business | Published:

The sharp contrast between winners and losers in the collapse of Carillion was sharply exposed today.

Carillion's collapse is leaving Galliford Try needing to raise £150m

Galliford Try, the Wolverhampton construction group's partner on the troubled £550 million Aberdeen bypass project, is having to raise an extra £150 million in the wake of the collapse, partly to cover additional costs on the road contract.

But services group Serco has revealed it will now pay less than expected in its deal to buy Carillion's healthcare business.

That deal was struck last year as Carillion tried to sell off assets to stave off the growing crisis at the company.

Serco said it would now pay £29.7 million - down from the £47.7 million price first agreed in December, before Carillion's dramatic collapse into liquidation.

The move reflects the fact the contracts will have no working capital and will come with none of the usual warranties in place as a result of Carillion's failure, according to Serco.

But it said the potential revenues and profitability of the contracts being bought are "substantially unchanged" from its original announcement in December.

Carillion went into liquidation on January 15 after talks to rescue the company failed, leaving in its wake a £900 million debt pile, a £590 million pension deficit, and hundreds of millions of pounds in unfinished public contracts.

A total of 989 jobs have been lost since, with 6,668 saved out of the previous directly employed workforce of 18,000.

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Serco's deal will bolster its healthcare business, seeing it add a string of healthcare contracts spanning five acute hospital trusts and another 20 public sector organisations.

Just under 1,500 employees work on the contracts being acquired under the deal.

Meanwhile financial burdens linked to Carillion's collapse have pushed construction firm Galliford Try to raise a further £150 million to strengthen its balance sheet.

The company had been part of a joint venture with both Balfour Beatty and Carillion to construct the Aberdeen Western Peripheral Route (AWPR), but its partner's liquidation means Galliford Try is likely to have to contribute an extra £30 million to £40 million to the project.

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It has now booked a £25 million exceptional charge for the six months to December 31 and announced plans to raise £150 million in new equity capital in the coming weeks to "strengthen" the group's balance sheet and "ensure that the group's businesses can continue to pursue their respective growth opportunities".

Galliford Try went on to report an 11 per cent drop in pre-tax profits for the half year to £56.3 million, despite seeing revenues jump 14 per cent to £1.5 billion.

But the company assured that it was making "good progress" on both AWPR –which is expected to be completed this summer – as well as other legacy contracts and was otherwise in good financial standing.

"The group has sufficient financial resources to meet its obligations, including the estimated impact of Carillion's liquidation," Galliford Try said in a statement.

"However, this would involve diverting capital away from the Linden Homes and Partnerships & Regeneration businesses, thereby reducing their ability to capitalise on the material growth opportunities these businesses would otherwise be well positioned to exploit."

The company said it no longer takes on fixed price or "all risk major projects of this nature" and has also improved its tendering and project selection process.

Simon Penfold

By Simon Penfold
Business Editor - @SPenfold_star

Business Editor based at the Express & Star's head office in Wolverhampton, looking for stories big & small.

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