Carillion’s former chairman had “no grip on reality”, MPs have claimed, as it emerged that he assessed the company as a “compelling and attractive proposition” in the days leading up to its first profit warning.
In board meeting minutes from 5 July 2017, former chairman Philip Green said “work continued toward a positive and upbeat announcement for Monday [10 July], focusing on the strength of the business as a compelling and attractive proposition”.
The company announced a £845M profit warning on 10 July, five days after the comments were made.
The minutes have been published by a joint parliamentary inquiry into the collapse of the contractor.
Morgan Stanley, which had acted as joint corporate broker to Carillion since January 2006, refused to underwrite a rights issue to raise equity for the firm in April 2017, it also emerged today.
A letter from the investment bank to the inquiry said: “[Morgan Stanley was] increasingly of the view that Carillion’s senior management could neither produce nor deliver an investment proposition that would convince shareholders and new investors to support the potential rights issue.”
Carillion stopped working with Morgan Stanley after the July write down and appointed HSBC as joint corporate broker.
Work and pensions committee chairman Frank Field MP said: “Carillion’s chair appeared to lack even a tenuous grasp on the reality of the company’s situation.
“Five days before the profit warning that heralded the firm’s public spiral into insolvency, Philip Green stands like the Mayor of Pompeii – smoke billowing from the volcano behind him, lava cascading down the slopes – trumpeting the forthcoming revelries of the village fete.
“It is difficult to believe the Chairman of the company was unaware of its position, but equally difficult to comprehend his assessment if he was.”
Business, energy and industrial strategy committee chairwoman Rachel Reeves added: “A good board should be asking difficult questions. By contrast, the Carillion board, when faced with difficult answers, declined to face up to facts and did nothing to address the causes of the company’s decline.
“Its chairman, Philip Green’s assessment of Carillion as “a compelling and attractive proposition” shows either woeful lack of leadership or no grip on reality.”