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Mon May 17 2021

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More bad news from Carillion

17 Nov 17 Carillion has issued another profits warning and is set to breach its banking covenants.

In a trading update today Carillion said that money it was expecting to come into the business had, for various reasons, not yet materialised. This is impeding the company’s debt reduction battle.

Carillion said that while its cost-cutting initiatives implemented since July would eventually help to reduce debt, they were not enough to hit year-end targets.

The board is in talks with stakeholders on other ways to tackle the debt and repair the balance sheet. “This will require some form of recapitalisation, which could involve a restructuring of the balance sheet,” the company said.

A combination of delays to certain PPP disposals, a slippage in the start date of a significant project in the Middle East and lower than expected margin improvements across some UK support services contracts have conspired against the business.

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As a result profits for the year to 31st December 2017 will be “materially lower” than current market expectations.  Given the impact of delays in receipts and disposals, the board now expects full year average net borrowing in 2017 to be between £875m and £925m.

On this basis, it will be in breach of banking covenants at the end of next month and so it is in talks with its lenders to renegotiate.

Interim 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 2nd April 2018."

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