HS2 contractor Carillion has issued a profit warning, saying it could breach its loan covenants due to fourth quarter profits forecast to be “materially lower than current market expectations”.
Shares in Carillion dropped by more than 50 per cent to 15p this morning as the embattled construction company issued its third warning of the year. It has been attempting to reduce costs, collect cash, execute a disposals programme and implement a new operating model since July. Shares had picked up by the afternoon and were trading at 28p.
The group blamed delays to the start date of a “significant” project in the Middle East, lower than expected margin improvements across some UK support service contracts and delays to PPP disposals.
Interim results on 29 September suggested it was forecast to be in compliance with financial covenants at the end of this year. The group now expects the full year net borrowing to be between £875M and £925M and a covenant breach as of 31 December.
Former Carillion boss Richard Howson stepped down in July after a shock profit warning which caused its share price to collapse. The construction and support services company reported a £1.15bn loss in the first half of this year and a further writedown of £200M covering support services contracts.
Carillion 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.
“Constructive dialogue is continuing with our financial stakeholders to rebuild the Group’s balance sheet, and I am grateful for their support.
“I remain focused on addressing this issue before my successor, Andrew Davies, takes up the role on 2 April 2018.”