http://www.proactiveinvestors.co.uk Proactiveinvestors RSS feed en Fri, 27 Apr 2018 07:41:46 +0100 http://blogs.law.harvard.edu/tech/rss Genera CMS action@proactiveinvestors.com (Proactiveinvestors) action@proactiveinvestors.com (Proactiveinvestors) <![CDATA[News - Aspire Defence Finance says Army Basing Programme Works as normal despite impact of Carillion’s liquidation ]]> http://www.proactiveinvestors.co.uk/companies/news/193282/aspire-defence-finance-says-army-basing-programme-works-as-normal-despite-impact-of-carillions-liquidation-193282.html Aspire Defence Finance PLC (LON:85VK), the issuer for Project Allenby/Connaught has said the project continues to deliver services and the construction of the Army Basing Programme Works is as normal despite the impact of the compulsory liquidation of Carillion PLC (LON:CLLN).  

In a statement on 29 January 2018, Aspire Def Fin said the liquidation of Carillion had caused a potential event of default as such term is defined in the Project's financing documents.

READ: Carillion investor tells MPs it considered suing contractor after first profit warning

The company said today that it has submitted remedial plans to the monoline insurers of the Series A and Series B Bonds, Ambac Assurance UK Limited and Assured Guaranty (UK) PLC.

The finance group added the remedial plans have the support of the monoline insurers in-principle, and they are being put into effect.

It concluded, whilst good progress has been made to remedy the situation the revised arrangements are not complete, and the company has requested, and the Monolines have agreed to, an extension to that cure period to 30 April 2018.

The company said it will continue to provide further updates as appropriate.

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Fri, 16 Mar 2018 07:37:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/193282/aspire-defence-finance-says-army-basing-programme-works-as-normal-despite-impact-of-carillions-liquidation-193282.html
<![CDATA[News - Carillion investor tells MPs it considered suing contractor after first profit warning ]]> http://www.proactiveinvestors.co.uk/companies/news/191832/carillion-investor-tells-mps-it-considered-suing-contractor-after-first-profit-warning-191832.html A major shareholder of Carillion PLC (LON:CLLN) considered suing the collapsed contractor on the suspicion that managers had underplayed the deterioration of the business in the lead up to its first profit warning last July.

Kiltearn Partners, which held 10% in Carillion, told MPs that it mulled legal action against the company with a view to recover a proportion of its clients’ losses.

Carillion entered compulsory liquidation in January after failing to secure a rescue deal with lenders or the government.  

READ: Carillion's facilities management contracts in line to be transferred to Canadian firm, BGIS

Kiltearn is among a group of former shareholders who submitted evidence to the Work and Pensions and Business Committee conducting an inquiry into Carillion’s demise. The evidence was published on Monday.

The Scottish investment firm suspected Carillion’s directors knew it was in difficulty before announcing a £845mln writedown of key contracts and a profit warning in July. It sold its final shares on January 4, shortly before Carillion went into liquidation.

Investors raised concerns with management before collapse

MPs revealed that some investors held onto their stakes to influence executive decision-making while others cut their losses and fled.

Standard Life Aberdeen PLC (LON:SLA) told MPs that it started to reduce its 10.8% shareholding from December 2015 and completely exited the business in July 2017 on concerns about the way Carillion was managed.

The company had met with Carillion’s board on multiple occasions to raise issues about the outsourcer’s performance and mounting debts before selling its stake.

"It was felt that management was not giving sufficient weight to the probability that trading may deteriorate further, or to the downside risk from this scenario given the high level of debt," Standard Life Aberdeen said.

Canadian investor Letko Brosseau also attempted to meet Carillion's finance director on four occasions but was regularly snubbed until the company's first profit warning.

Shareholders were 'fleeing for the hills', says MP

Frank Field, chair of the Work and Pensions and Business Committee, said the evidence from investors suggested a “disconnect” with testimony given by directors.

“On one hand the Carillion directors told us all was sunny until a bolt of Qatari lightning hit them out of the blue,” Field said.

READ: Carillion boss tells MPs he's 'truly sorry' for collapse of construction contractor

“Their stewardship had, they proudly told us, been adjudged ‘best in class’ by their friends at KPMG.

“On the other hand, investors were fleeing for the hills and it appears those who looked closest ran fastest.”

MPs are due to question the company’s auditor KPMG at a hearing on Thursday.

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Mon, 19 Feb 2018 08:30:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/191832/carillion-investor-tells-mps-it-considered-suing-contractor-after-first-profit-warning-191832.html
<![CDATA[News - Carillion's facilities management contracts in line to be transferred to Canadian firm, BGIS ]]> http://www.proactiveinvestors.co.uk/companies/news/191706/carillion-s-facilities-management-contracts-in-line-to-be-transferred-to-canadian-firm-bgis-191706.html Carillion’s former rivals continue to pick over its bones, with Canadian firm BGIS the latest to peck at the collapsed firm's carcass.

The Canadian company is negotiating with Carillion PLC’s (LON:CLLN) liquidators to take on the fallen construction and support services giant’s facilities management contracts.

If negotiations are successful, in excess of 2,500 Carillion employees could transfer over to Brookfield Global Integrated Solutions (BGIS).

The contracts cover the justice, transport, education, hospital and emergency services markets.

Carillion: a month on, employees, partners and rivals feel the pain https://t.co/cD4XuIkQPo

— Guardian news (@guardiannews) February 14, 2018

"This deal provides continuity of services for a large number of customers providing critical infrastructure within the UK market,” said Gord Hicks, the chief executive of BGIS.

“Our team is looking forward to engaging both customers and employees in the days ahead to effect the transaction and ensure a smooth transition,” Hicks added.

BGIS’s chief commercial officer Mark Marquis put in a quick plug for a company few in the UK have heard of, saying BGIS has a long-established track record of serving federal and regional government.

“With this transaction, we look forward to building a large presence in the UK facilities management market and providing customers with the same industry leading service and capabilities that we do throughout the globe,” he added.

READ: J Murphy & Son's buys Carillion's UK power framework business

Gail Cartmail, the assistant general secretary of the Unite union, told the BBC the union would look to meet immediately with BGIS to ensure that workers transfer over on contracts offering the same pay, terms and conditions.

The collapse of Carillion left the UK government scrabbling to find companies to take on public services that had been outsourced to private operators in the belief that they would do them more efficiently and more cost-effectively.

READ: Serco takes on Carillion's NHS contracts for £50mln and buys US radar business

British engineering and construction company J Murphy recently bought the UK power framework business of Carillion while outsourcing giant Serco Group PLC (LON:SRP) has also been, in the words of some observers, feasting on Carillion’s corpse.

Serco secures large discount on Carillion's failed healthcare contracts i.e. they got some privatised pieces of our NHS, for a song.
https://t.co/kD1u97OWTc

— Helen121 (@Helen121) February 15, 2018

For others, such as Galliford Try and Balfour Beatty, the fall-out from Carillion’s collapse has been less beneficial.

READ: Galliford Try slumps as it raises capital and reports profit drop after Carillion collapse

Galliford, Balfour and Carillion were working together on a new road in Aberdeen, while the latter two hade a couple of other ongoing projects as well; on Wednesday Galliford Try announced plans to raise £150mln as it had been obliged to increase its cash commitments to the joint venture on the Aberdonian project.

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Thu, 15 Feb 2018 09:44:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/191706/carillion-s-facilities-management-contracts-in-line-to-be-transferred-to-canadian-firm-bgis-191706.html
<![CDATA[News - J. Murphy & Son's buys Carillion's UK power framework business ]]> http://www.proactiveinvestors.co.uk/companies/news/191309/j-murphy-son-s-buys-carillion-s-uk-power-framework-business-191309.html British engineering and construction company J. Murphy & Son’s Limited has bought the UK power framework business of collapsed Carillion PLC (LON:CLLN).

Carillion went into liquidation last month after the contractor failed to secure a rescue deal in talks with lenders and the government.

READ: Carillion boss tells MPs he's 'truly sorry' for collapse of construction contractor

The deal will see Murphy take over Carillion’s position on National Grid’s (LON:NG.) overhead electricity lines, substation and underground cable framework contracts.

Murphy will also become the new joint venture partner of Swedish infrastructure services provider, Eltel, on overhead line and T-Pylon framework contracts

Carillion’s employees will join Murphy as part of the deal.

Financing details not disclosed

The amount Murphy is paying for the business was not disclosed.

The UK’s Official Receiver, which manages insolvencies for the British government, has been seeking alternative contractors to complete the tasks under the contracts Carillion held and has made 829 staff redundant so far.

On Monday, Carillion sold some of its Canadian assets to insurer Fairfax Holdings Ltd for an undisclosed amount.

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Wed, 07 Feb 2018 13:18:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/191309/j-murphy-son-s-buys-carillion-s-uk-power-framework-business-191309.html
<![CDATA[News - Carillion boss tells MPs he's 'truly sorry' for collapse of construction contractor ]]> http://www.proactiveinvestors.co.uk/companies/news/191219/carillion-boss-tells-mps-he-s-truly-sorry-for-collapse-of-construction-contractor-191219.html Carillion’s interim chief executive Keith Cochrane told MPs on Tuesday that he was “truly sorry” for the collapse of the construction firm.

The construction and services company entered liquidation on January 15 after the failure over talks over its debt pile with lenders and the government.

Carillion held a number of contracts across education, the NHS and the rail industry, so the company’s demise forced the government to step in to ensure these public services were upheld.

Cochrane, who took over the reins on a temporary basis last July after Richard Howson stepped down as chief executive following multiple profit warnings, faced questions from MPs over the company’s failure on Tuesday.

"I‘m truly sorry," he said. "It was the worst possible outcome. This was a business worth fighting for and that’s certainly what I sought to do during my time as chief executive."

Board should have asked more questions, says Cochrane

Cochrane, a non-executive director and former chief executive of Weir Group and Stagecoach before stepping up as boss of Carillion, said net debt was too high at the end of 2016.

The company was working to cut its debt before it faced a deterioration of cash flow after March 2017, he said.

While the problems started well before he took the helm, Cochrane said he wished he had done something sooner to prevent Carillion’s collapse.

"Clearly with the benefit of hindsight should the board have been asking further, more probing questions? Perhaps," he said.

Carillion employed 43,000 people, including about 20,000 in the UK.

READ: Carillion collapse: True scale of fundamental flaws being revealed, says Unite union

On Monday, the company announced a further 452 job losses on top of the 277 already being made redundant.

Carillion's auditor under investigation 

Towards the end of January, the Financial Reporting Council (FRC) said it has decided to open an investigation in relation to KPMG's audit of the Carillion’s financial statements.

READ: Carillion's troubles continue as accounting watchdog says to probe KPMG audits after profit warning

The investigation will cover the years ended 31 December 2014, 2015 and 2016, and additional audit work carried out during 2017.

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Tue, 06 Feb 2018 11:16:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/191219/carillion-boss-tells-mps-he-s-truly-sorry-for-collapse-of-construction-contractor-191219.html
<![CDATA[News - Carillion collapse: True scale of fundamental flaws being revealed, says Unite union ]]> http://www.proactiveinvestors.co.uk/companies/news/190846/carillion-collapse-true-scale-of-fundamental-flaws-being-revealed-says-unite-union-190846.html The true scale of the fundamental flaws that allowed construction contractor Carillion PLC (LON:CLLN) to collapse earlier this month began to be revealed on Tuesday, leading the UK’s largest union to call for the urgent reform of company and pension laws.

Gail Carmel, assistant general secretary of the Unite union, said: “The developing picture of the level of incompetence and mismanagement at Carillion is simply staggering.”

Read: Carillion's troubles continue as accounting watchdog says to probe KPMG audits after profit warning

She added: “It is frightening that the legal framework in the UK is so weak that no one was able to intervene to prevent the company’s collapse, despite it now becoming apparent its financial problems began a decade ago. This was not a small company it employed 20,000 workers, with thousands more in its supply chain.

“The government needs to act swiftly and introduce new laws to ensure that other companies are not allowed to collapse in the same manner as Carillion.”

Her comments came as the first joint hearing by the UK parliament’s Business and Work and Pensions select committees into the collapse today heard from several witnesses including Stephen Haddrill, chief executive officer of the Financial Reporting Council (FRC), Sarah Albon, chief executive officer of the Insolvency Service, and Robin Ellison, chair of Trustees of Carillion’s Defined Benefit Pension Schemes.

During the hearing Rachel Reeves MP, chair of the business select committee revealed that the largest item on Carillion’s balance sheet was “goodwill”.

No money to pay administrators cost

In her testimony, Albon confirmed that “uniquely” the Insolvency Service had to be brought in following Carillion’s collapse as the company had no money to pay administrators cost. The total cost for the legal winding up Carillion is likely to be around £50mln, principally paid for by the taxpayer.

She added that the Insolvency Service investigation into whether Carillion’s directors should be disqualified or prosecuted is being hampered by “the incredibly poor standard of Carillion’s record keeping”.

Meanwhile, Haddrill of the FRC - the organisation responsible for regulating auditors, accountants and actuaries which launched a probe into KPMG’s audits of Carillion on Monday - told the committee that despite having had concerns about Carillion’s previous auditing process, its audit had not been reviewed since 2013.

He admitted that there was extremely poor corporate governance at Carillion, but this was not the responsibility of the FRC to investigate.

And, during Ellison’s evidence, it was confirmed that at the same time that Carillion was refusing to pay increased pension contributions it was borrowing money in order to pay shareholder dividends.

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Tue, 30 Jan 2018 14:57:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/190846/carillion-collapse-true-scale-of-fundamental-flaws-being-revealed-says-unite-union-190846.html
<![CDATA[News - Carillion's troubles continue as accounting watchdog says to probe KPMG audits after profit warning ]]> http://www.proactiveinvestors.co.uk/companies/news/190728/carillion-s-troubles-continue-as-accounting-watchdog-says-to-probe-kpmg-audits-after-profit-warning-190728.html Carillion PLC’s (LON:CLLN) problems were magnified today after the Financial Reporting Council (FRC) said it has decided, following enquiries made since a profit warning in July 2017, to open an investigation in relation to KPMG's audit of the collapsed construction contractor’s financial statements.

In a statement, the FRC said the investigation will cover the years ended 31 December 2014, 2015 and 2016, and additional audit work carried out during 2017.

READ: Carillion collapse confirmed as firm takes steps to enter compulsory liquidation

It added that the investigation will be conducted by the FRC's Enforcement Division, and will consider whether the auditor has breached any relevant requirements, in particular the ethical and technical standards for auditors.

The regulator said several areas of KPMG's work will be examined including the audit of the company's use and disclosure of the going concern basis of accounting, estimates and recognition of revenue on significant contracts, and accounting for pensions.

The FRC added that it will conduct the investigation as quickly and thoroughly as possible.

It also said it is liaising closely with the Official Receiver, the Financial Conduct Authority, the Insolvency Service and The Pensions Regulator to ensure that there is a” joined-up approach to the investigation of all matters arising from the collapse of Carillion.”

Implied pension deficit rises

Separately, according to Parliament's Work and Pensions Select Committee, Carillion attempted to "wriggle out of its obligations" to pensioners for the last decade.

The influential committee’s chair, Frank Field, has condemned the firm’s inability to perform its pension obligations while "shelling out dividends and handsome pay packets for those at the top."

In a letter published on Monday by the committee and written by Carillion Pension Trustee Limited Chair Robin Ellison, it is implied that the scheme's deficit may be about £990mln compared to the £587mln figure quoted in an earlier letter.

Carillion entered compulsory liquidation on January 15 after the failure of talks over its debt mountain with financial and other stakeholders, including the UK government.

The firm - which issued three profit warnings in less than six months last year and saw its market value collapse by more than 90% - is a major supplier to the government with contracts across education, the NHS and the rail industry, including HS2.

Carillion shares have been temporarily suspended on the London Stock Exchange since that date.

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Mon, 29 Jan 2018 07:41:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/190728/carillion-s-troubles-continue-as-accounting-watchdog-says-to-probe-kpmg-audits-after-profit-warning-190728.html
<![CDATA[News - Carillion directors to be questioned by MPs over contractor's collapse ]]> http://www.proactiveinvestors.co.uk/companies/news/190567/carillion-directors-to-be-questioned-by-mps-over-contractor-s-collapse-190567.html Carillion's PLC (LON:CLLN) former directors will be questioned by MPs to explain what led to the collapse of the construction and outsourcing firm.

The company went into liquidation last week after failing to secure a rescue deal in talks with lenders and the government.

A series of profit warnings and large debts led to Carillion’s demise, putting several of its contracts with the government in doubt. Contracts included the construction of schools, roads and the HS2 rail line.

READ: Carillion collapse confirmed as firm takes steps to enter compulsory liquidation

Two committees of lawmakers have called on Carillion’s former chief executive Richard Howson, who left after a profit warning in July, interim chief executive Keith Cochrane and chairman Philip Green, to give evidence.

A joint inquiry by the Work and Pensions and Business, Energy and Industrial Strategy (BEIS) will first take evidence on January 30 from accountancy watchdog, the Financial Reporting Council, about KPMG’s audit of the company.

READ: Carillion debacle - Six lessons investors can draw from the construction contractor's collapse

The committees will question how a company that auditor KPMG said was a going concern less than a year ago could crash.

At the same session, they will probe the trustees of the company’s retirement scheme, which is expected to leave the Pension Protection Fund with £900mln of liabilities.

MPs will then move onto the directors at another session on 6 February.  

“Another day, another company goes bust hot on the heels of a clean bill of health from a ‘big four’ financial services firm,” said Work and Pensions Select Committee chair, Frank Field.

“The particularly nasty twist in this now grimly familiar tale is the mountain of debt and giant pension deficit this public services contractor leaves in the wreckage of its collapse – with an accompanying massive hit to the public purse.

“It must also be time now for the auditors who cosily signed off this disaster-in-the-making as a ‘going concern’ less than a year ago to begin to account for themselves.”

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Wed, 24 Jan 2018 15:24:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/190567/carillion-directors-to-be-questioned-by-mps-over-contractor-s-collapse-190567.html
<![CDATA[News - Carillion pleaded with government for short-term £150mln loan to avoid collapse ]]> http://www.proactiveinvestors.co.uk/companies/news/190286/carillion-pleaded-with-government-for-short-term-150mln-loan-to-avoid-collapse-190286.html Carillion PLC (LON:CLLN) had reportedly pleaded with the government for a £150mln three-month loan to avoid collapse.

In the days leading up to its demise, the construction company had asked for the short-term loan to support its turnaround efforts and raise new commercial loans that would be used to repay the state, the Financial Times reported.

READ: Carillion debacle: Six lessons investors can draw from the construction contractor's collapse

A letter, drafted by the group’s legal advisers Slaughter and May, was sent on January 1 to request the funding. It argued the government loan would allow Carillion to reassure lenders and secure the support of new investors for £100mln of extra longer-term funding.

Carillion confirmed its collapse on Monday after the failure of rescue deal talks with its key financial and other stakeholders, including the government and lenders, over the weekend.

It has made an application to the High Court for a compulsory liquidation.

Carillion had issued a string of profit warnings after losing money on contracts and racking up large debts before admitting defeat.

Carillion investors mull legal action

Shareholders are now considering legal action against Carillion on claims the company failed to inform them of the extent of their financial struggles, The Telegraph reported.

A leading litigation fund told the newspaper it had fielded calls from shareholders demanding an investigation into the company.

However, given the low value of Carillion’s assets, shareholders could instead explore taking against its auditors, KPMG.

The Financial Reporting Council has signalled that it was looking to investigate KPMG after the auditor received criticism over its signing off of Carillon’s books 10 months ago.

KPMG said it would ­co-operate fully with any inquiries that were made into its actions but believes it conducted its work with Carillion “appropriately and responsibly”.

Banks offer support to small firms hit by Carillion collapse

On Thursday, Royal Bank of Scotland Group PLC (LON:RBS), Lloyds Banking Group PLC (LON:LLOY) and HBSC Holdings (LON:HSBA) said they would provide funds to support small businesses affected by Carillion’s failure.

Lloyds is setting up a £50mln fund, RBS is offering £75mln and HSBC will provide £100mln.

Nationwide building society also said it will take in-house jobs, which were performed by Carillion, and wanted to provide "reassurances" at an "unsettling" time.

                            

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Fri, 19 Jan 2018 08:13:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/190286/carillion-pleaded-with-government-for-short-term-150mln-loan-to-avoid-collapse-190286.html
<![CDATA[News - Lloyds and Nationwide lend support to small firms hit by Carillion collapse ]]> http://www.proactiveinvestors.co.uk/companies/news/190260/lloyds-and-nationwide-lend-support-to-small-firms-hit-by-carillion-collapse-190260.html Lloyds Banking Group (LON:LLOY) and Nationwide have set up a separate support measures for small business customers hit by the collapse of Carillion PLC (LON:CLLN).]

Construction and services firm Carillion said on Monday that it had made an application to the High Court for a compulsory liquidation after failing to secure a rescue deal in talks with lenders and the government.

READ: Carillion collapse confirmed as firm takes steps to enter compulsory liquidation

Lloyds, which was among the banks to stop backing Carillion, said it would provide a £50mln fund for small businesses within the contractor’s supply chain that "may now be experiencing financial difficulty".

The “most severely impacted" customers could receive capital repayment holidays on loans for six months to start with to help with cash flow problems.

"Small businesses don't normally have the cash reserves that larger businesses do, so any interruption to their cashflow can have a significant impact on their ability to survive,” said Jo Harris, Lloyds managing director of business banking.

"By supporting our small business customers during this difficult time, we hope we can help as many businesses as possible to get back on an even keel as quickly as possible."

Lloyds told the BBC it withdrew funding from Carillion because of "viability". "There are reasons the Carillion situation happened,” a spokesman said.

Nationwide said it will take in-house jobs that were performed by Carillion and wants to provide “reassurances" at an "unsettling" time.

The news comes after Business Secretary Greg Clark on Wednesday met with representatives of some of the banks to seek assurances that they would support small businesses affected by Carillion's demise.

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Thu, 18 Jan 2018 15:50:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/190260/lloyds-and-nationwide-lend-support-to-small-firms-hit-by-carillion-collapse-190260.html
<![CDATA[News - Carillion debacle: Six lessons investors can draw from the construction contractor's collapse ]]> http://www.proactiveinvestors.co.uk/companies/news/190043/carillion-debacle-six-lessons-investors-can-draw-from-the-construction-contractor-s-collapse-190043.html Russ Mould, investment director at AJ Bell thinks that while the recriminations are only just beginning, six lessons can immediately be drawn from the Carillion PLC (LON:CLLN) debacle which investors will be able to apply to stocks from all geographies and sectors:

1. Beware complexity – keep it simple

“It is hard to find what operational synergy or overlap in expertise can be found between providing school meals, maintaining prisons, building hospitals or arranging project finance, yet Carillion did them all and it did so in several geographies, not just one.

“The very best long-term investments develop a competitive edge – via a technological lead, a brand or market share, for example – and then deepen their core competence. Carillion was juggling complex, long-term contracts across a range of disciplines and geographies, a feat which ultimately proved beyond it, especially once a small number of big projects went wrong.”

2. Be wary of companies whose history is littered with acquisitions

“Merger and acquisition (M&A) activity brings complexity too, as deals must be integrated staff kept motivated and customer service maintained. M&A tends to work best when small, bolt-on deals are used to supplement existing momentum (as is the case at Halma and Bunzl) not create it.

“Carillion acquired Mowlem in 2006, Alfred McAlpine in 2008, Eaga in 2011 and John Laing’s facilities management business in 2014 before a failed lunge for Balfour Beatty in 2014. These deals expanded the company’s range of services and geographical reach – to bring complexity into the company and take some cash out of it.”

3. Debt can be deadly if profit margins are thin

“Debt in its own right is not inherently bad as it can be a cheap and ready source of funding. However, the company’s business model must be suitable – and that means demand must be fairly predictable and margins consistent (and preferably fairly high) so that the interest can be paid without difficulty and interest cover is good. Utilities and tobacco stocks can take on a lot of debt pretty comfortably.

“Tech stocks tend to avoid it, as they need to keep investing in research so their fixed costs are high, and construction firms tend to avoid debt, too, to ensure they have a nice cash buffer in case a big project goes wrong and they are hit by cost over-runs. Carillion did not take this precaution and it was further hobbled by a huge pension deficit with disastrous consequences.

“In 2016, it generated a stated operating profit of £146 million on sales of £4.4 billion for a margin of just 3.3% - and that operating profit had to fund £60 million of interest and pension payments, tax and £79.8 million in dividends so there was little margin for error.”

4. Always look at how management is incentivised to behave

“As Charlie Munger, vice-chairman of Berkshire Hathaway once said, “Show me the incentive and I will show you the outcome” and questions can be asked about how bonuses and options were triggered for senior executive directors at Carillion.

“In 2016, former chief executive Richard Howson received a £245,000 bonus and £346,000 in long-term performance incentives which helped to take his total package to £1.5 million.

“In principle, the structure of the bonus mechanism seems sensible enough, as it was 30% based on earnings per share, 20% on cash conversion, 25% on operational performance indicators and 25% on internal leadership and staff engagement ratings. Yet the 2016 bonus contained telling clues for investors – the zero score for earnings per share, cash, and ratings from customers – while the use of a specific earnings per share figure (36.1p) was simply wrong, as this can lead to temptation and corner-cutting, even in this case the threshold was not reached.

“The LEAP (Leadership Equity Award Plan) was similarly flawed. A three-year time horizon (2014 to 2016) was too short and all LEAP plans should only vest three to five years after the executives leaves the firm, to combat short-termism and ensure proper strategic and succession planning. In addition, 50% of salary was based on earnings per share, 50% on cash conversion and another 50% of salary could be accrued on the basis of other performance targets, based on cost-efficiencies, staff engagement and (less sensibly) order intake and the book-to-bill ratio.”

5. Why cash flow is more important than profit

“Too many investors look at the profit and loss account and nothing else, forgetting the old market maxim that ‘Profit is a matter of opinion, cash is a fact.’

Profits may drive short-term sentiment but it is cash that pays the bills such as salaries, interest and tax, so investors must always look at the balance sheet first, the cash flow statement second and the profit and loss account third. The first will explain how safe (or otherwise) the firm is. The second can show if there are any problems, accounting issues or issues of earnings quality to address. And the third will provide a short-term snapshot of trading.

“One quick test is to compare and contrast growth in sales, stated profit and cash flow. While they may grow at different rates, owing to operational gearing and investment, they should generally all show the same direction of travel. If they do not, investors may need to delve deeper into the company’s accounting, to ensure it is not aggressively recognising revenue or relying on asset sales and capital gains to “make the numbers”, as the failure of cash flow growth to tally to profit and sales growth can be a ‘red flag’.

6. Dividend yields that look too good to be true usually are

“At last year’s share price high of 238p Carillion was offering a dividend yield of 7.7%, assuming even an unchanged annual pay-out of 18.45p. That no doubt drew a lot of income-seekers to their doom, as the dividend was cut to zero as the profit warnings rained in and the shares collapsed.

“This reinforces the importance of looking at the net debt position (including any pension and lease liabilities) and cash flow as well as earnings cover when assessing whether a dividend is safe.

“Investors should also consider how much risk they are taking if a company is offering such a yield. Such optically fat pay-outs can be the market’s polite way of saying it does not believe the earnings forecast or the dividend forecast (or both).”

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Tue, 16 Jan 2018 07:30:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/190043/carillion-debacle-six-lessons-investors-can-draw-from-the-construction-contractor-s-collapse-190043.html
<![CDATA[Media files - Investors left in the lurch as Carillion goes into liquidation ]]> http://www.proactiveinvestors.co.uk/companies/stocktube/8616/investors-left-in-the-lurch-as-carillion-goes-into-liquidation-8616.html Mon, 15 Jan 2018 12:07:00 +0000 http://www.proactiveinvestors.co.uk/companies/stocktube/8616/investors-left-in-the-lurch-as-carillion-goes-into-liquidation-8616.html <![CDATA[News - Carillion collapse puts contracts at risk but presents opportunities for sector peers ]]> http://www.proactiveinvestors.co.uk/companies/news/190030/carillion-collapse-puts-contracts-at-risk-but-presents-opportunities-for-sector-peers-190030.html Carillion PLC (LON:CLLN) has finally admitted defeat.

Following a string of profit warnings over the past year and the failure of talks with its lenders and the government, the construction and services firm confirmed its collapse on Monday.

The company said despite considerable efforts, discussions to secure funding have not been successful and has therefore decided to make an application to the High Court for a compulsory liquidation of the business.  

Its struggles have stemmed from losing money on big contracts and running up large debts.

Carillion’s collapse will mean the government will have to provide funding to maintain the public services run by the contractor.

The group is a major supplier to the government with projects including the HS2 high speed rail line, schools and prisons.

Contracts, joint venture partners and lenders are now hanging in the balance as a result of Carillion's demise.

BT contract 

Carillion has a contract with Openreach, the network division of BT Group plc (LON:BT.A), to provide maintenance, extension and repair work for the UK’s telephone and broadband infrastructure. In February of last year Carillion signed a three-year extension to its agreement with Openreach until the end of 2021.

Transport deals

The company is the second largest supplier to Network Rail. In November it was awarded two maintenance contracts on Network Rail’s Midland Mainline upgrade programme.

Just days after a shock profit warning in July, Carillion bagged a £1.34bn contract for building works on the new HS2 railway, which will link London with the north of England from 2026.

Kier Group PLC (LON:KIE), which works on HS2 and the Highways England smart motorways programme with Carillion, assured investors that won’t be adversely affected because it had put in place contingency plans for each of the shared projects as the collapse had been on the horizon for some time.

Prison and defence 

The company maintains about half of the UK's prisons along with about 50,000 homes for the Ministry of Defence.

Balfour Beatty and Speedy Hire

Carillion has three joint ventures with Balfour Beatty plc (LON:BBY), including major road projects in Aberdeenshire, Cambridgeshire and north-west England.

In a statement today, Balfour said it would take a hit of up to £45mln from the collapse of Carillion.

However, Speedy Hire Plc (LON:SDY) - one of Carillion’s largest suppliers - is expected to be worse off with shares in the equipment rental company falling 6.3% to 56p in morning trading.

Lenders to lose millions of pounds

Carillion’s lenders will also take a hit from the company’s liquidation.

Liberum analysts estimate Carillion owes about £1.5bn to Royal Bank of Scotland Group PLC (LON:RBS), Barclays PLC (LON:BARC), HSBC Holdings PLC (LON:HSBA), Lloyds Banking Group PLC (LON:LLOY) and Santander.

“Crudely, the banks rank ahead of the trade creditors and employees in a liquidation,” Liberum said.

“However, we would expect the banks to lose hundreds of millions of pounds. This will inevitably reduce their appetite for lending.”

Collapse presents silver lining for sector peers

Carillion’s demise inevitably provides contract opportunities for sector peers, according to Liberum.

In December, Carillion agreed to sell a large part of its UK healthcare facilities management business to Serco Group PLC (LON:SRP).

Liberum thinks there may now be an opportunity for Serco to acquire the remaining healthcare assets, or even other assets.

Babcock International Group PLC (LON:BAB) also stands to benefit by picking up Carillion’s MoD contracts.

Meanwhile, Balfour and Costain PLC (LON:COST) could win more rail work with Network Rail with Carillion out of the picture.

Costain and Kier could also potentially win more road works in England.

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Mon, 15 Jan 2018 12:04:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/190030/carillion-collapse-puts-contracts-at-risk-but-presents-opportunities-for-sector-peers-190030.html
<![CDATA[RNS press release - Compulsory liquidation of Carillion ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180115070002_13495528/ Mon, 15 Jan 2018 07:00:02 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180115070002_13495528/ <![CDATA[News - Carillion collapse confirmed as firm takes steps to enter compulsory liquidation ]]> http://www.proactiveinvestors.co.uk/companies/news/189973/carillion-collapse-confirmed-as-firm-takes-steps-to-enter-compulsory-liquidation-189973.html Carillion PLC (LON:CLLN) has confirmed its collapse after the failure of talks with its key financial and other stakeholders, including the UK government over the course of the weekend and has taken steps to enter into compulsory liquidation with immediate effect, with its shares temporarily suspended as a result, from 7.45am today.

In a statement this morning, the embattled construction firm said, despite considerable efforts, its discussions have not been successful, and the board of Carillion has therefore concluded that it had no choice but to make an application was made to the High Court for a compulsory liquidation of Carillion before opening of business today.

READ: Carillion plunges on reports lenders have rejected its debt restructuring plan

It added that an order has been granted to appoint the Official Receiver as the liquidator of Carillion, with the group anticipating that an application will be made to the High Court for PricewaterhouseCoopers to be appointed as Special Managers of the business.

Philip Green, Carillion’s chairman, said: "This is a very sad day for Carillion.”

He added: “In recent days however we have been unable to secure the funding to support our business plan and it is therefore with the deepest regret that we have arrived at this decision.  We understand that HM Government will be providing the necessary funding required by the Official Receiver to maintain the public services carried on by Carillion staff, subcontractors and suppliers."

The FTSE small cap firm saw its shares drop nearly 30% in value on Friday after a week of speculation about its future which started positively on hopes that a new business plan put forward by the firm could be agreed or a government rescue organised, but ended badly amid rumours that its lenders had rejected the group’s proposals.

Refuted talk plan rejected on Friday

In a statement released after the London market close on Friday, Carillion confirmed that it met with representatives of its creditor groups to present its business plan on 10 January 2018 but had refuted the suggestions that its plans had been rejected.

The group said then: “Further to this presentation, Carillion continues to engage in constructive discussions with a range of financial and other stakeholders regarding options to reduce debt and strengthen the Group's balance sheet. Suggestions that Carillion's business plan has been rejected by stakeholders are incorrect.”

READ: Carillion issues brief, dismissive response to share price leap on chatter it's close to a rescue deal

It continued: “It is too early to predict the outcome of these discussions but Carillion expects that any such agreement is likely to involve the raising of new capital and the conversion of existing financial indebtedness to equity which would result in significant dilution to existing shareholders.” 

The firm added: “As part of its engagement with stakeholders, Carillion is in constructive dialogue in relation to additional short term financing while the longer term discussions are continuing.”

Carillion - which issued three profit warnings in less than six months last year and has seen its market value collapse by more than 90% - is a major supplier to the government with contracts across education, the NHS and the rail industry, including HS2.

 -- Adds temporary share suspension-

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Sun, 14 Jan 2018 15:00:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/189973/carillion-collapse-confirmed-as-firm-takes-steps-to-enter-compulsory-liquidation-189973.html
<![CDATA[RNS press release - Update on discussions with creditors ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180112180821_13495422/ Fri, 12 Jan 2018 18:08:21 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180112180821_13495422/ <![CDATA[RNS press release - Holding(s) in Company ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180112170811_13495336/ Fri, 12 Jan 2018 17:08:11 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180112170811_13495336/ <![CDATA[News - Carillion plunges on reports lenders have rejected its debt restructuring plan ]]> http://www.proactiveinvestors.co.uk/companies/news/189949/carillion-plunges-on-reports-lenders-have-rejected-its-debt-restructuring-plan-189949.html Carillion PLC (LON:CLLN) shares dropped by nearly 30% in late afternoon trading on reports that its lenders have rejected the embattled construction firm’s business plan, and that it has lined up an accountancy firm as a standby administrator.

According to the Press Association, Carillion's lenders – which include Barclays, HSBC and Santander - rejected the plan because it did not present enough of a restructuring plan for the business.

READ: Carillion to present revised business plan as it fights for survival

Sky News also reported that the company has put accountancy firm EY on standby to oversee an administration if it is unable to secure a rescue deal.

By 4.00pm, Carillion shares were down 29.4%, or 5.88p to 14.11p, having hit a low of 12.5p after the reports emerged, after being more modestly lower this morning.

Adding to the pressure on the small cap firm – which issued three profit warnings in less than six months last year and has seen its market value collapse by 90% - was a recommendation from broker Peel Hunt to sell the stock ahead of forthcoming newsflow.

Having had its rating for Carillion ‘under review’ previously, the City broker has resumed coverage with a ‘sell’ saying it currently sees no equity value in the stock.

In a note to clients, Peel Hunt’s analysts said: “We suspect that given its mounting liabilities, recent press comment, growing customer worries and supply chain hesitancy that Carillion will be forced (by the banks) to accelerate its financial restructuring.”

They added: “Based on our current trading assumptions (Dec’ 18 EBITDA £188m with material downside risk) and our estimates of the mounting debt (>£1.1bn), likely additional supply chain funding/working capital unwind (>£300m) and pension liabilities (£600m), we currently see no equity value. “

Further press reports earlier today said the government is being urged to bring Carillion into public control amid fears the construction company could collapse.

The group – which was demerged for Tarmac in the late 1990s -  is a major supplier to the government with contracts across education, the NHS and the rail industry, including HS2.

READ: Carillion: Where it all went wrong for the mega-cap turned micro-cap UK contractor

The Guardian’s website reported shadow business secretary, Rebecca Long-Bailey, as saying: “The collapse of Carillion could provoke a serious crisis. It would have major implications for the outsourced government contracts the company holds, as well as the firm’s thousands of workers, those in the supply chain and those who rely on Carillion’s pension fund.”

It reported Long-Bailey as adding that: “The government, who, despite warnings carried on with its programme of outsourcing public services to this company, must stand ready to bring these contracts back into public control, stabilise the situation and safeguard our public services.”

 -- Updates share price --

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Fri, 12 Jan 2018 11:04:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/189949/carillion-plunges-on-reports-lenders-have-rejected-its-debt-restructuring-plan-189949.html
<![CDATA[News - Carillion shares drop as investors await any news out of Wednesday’s crucial lenders ]]> http://www.proactiveinvestors.co.uk/companies/news/189887/carillion-shares-drop-as-investors-await-any-news-out-of-wednesdays-crucial-lenders-189887.html Embattled construction contractor Carillion PLC (LON:CLLN) saw its shares drop back over 13% today, having soared at the start of the week as investors awaited any news out of Wednesday’s crucial meeting with its lenders.

Press reports last weekend said the stricken FTSE small cap company would present a plan to shareholders and lenders on Wednesday that would form the basis of a proposal to restore the group’s balance sheet.

READ: Carillion to present revised business plan as it fights for survival

Carillion has already said it is in talks about ways to reduce its mounting debt pile and securing new funding.

The company’s lenders, including Santander UK, Barclays and HSBC, are understood to be reluctant to provide it  with further loans, which could force Carillion to seek government support.

Carillion is a major supplier to the government with a number of contracts, including construction of the UK’s HS2 rail project and school building programmes.

Newspaper reports yesterday said the government has made contingency plans for the collapse of the UK’s second largest construction company.

The firm ran into financial difficulties last year after issuing three profit warnings in five months and writing down more than £1bn from the value of contracts.

It has debts of about £1bn and a £600mln pension deficit, but a stock market value of just £100mln after its shares collapsed by 90% after last year’s warnings.

READ: Carillion issues brief, dismissive response to share price leap on chatter it's close to a rescue deal

In a brief statement on Tuesday, noting the previous session’s share price jump, Carillion simply stated: “The Group is not aware of any material developments that support this share price increase. Further updates on discussions with the Group's financial stakeholders will be provided as appropriate.”

Last week Carillion shares fell after it revealed it is being investigated by the Financial Conduct Authority over the “timeliness and content of announcements” made by the company between 7 December 2016 and 10 July 2017.

In early afternoon trading today, Carillion shares were down 13.7%, or 3.1p at 19.5p.

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Thu, 11 Jan 2018 13:21:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/189887/carillion-shares-drop-as-investors-await-any-news-out-of-wednesdays-crucial-lenders-189887.html
<![CDATA[RNS press release - Holding(s) in Company ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180110174854_13492202/ Wed, 10 Jan 2018 17:48:54 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180110174854_13492202/ <![CDATA[News - Carillion issues brief, dismissive response to share price leap on chatter it's close to a rescue deal ]]> http://www.proactiveinvestors.co.uk/companies/news/189702/carillion-issues-brief-dismissive-response-to-share-price-leap-on-chatter-it-s-close-to-a-rescue-deal-189702.html Carillion PLC (LONL:CLLN) saw its shares slip today after it issued a brief, dismissive response to Monday’s over 25% leap in its share price on chatter that the embattled construction contractor could be close to a rescue deal, and even a potential government bail-out.

In early trading Carillion shares were down 3% at 23.15p.

In a statement, the small cap firm - which issued three profit warnings in the second half of last year – simply said: “The Group is not aware of any material developments that support this share price increase. Further updates on discussions with the Group's financial stakeholders will be provided as appropriate.”

READ: Carillion to present revised business plan as it fights for survival

Yesterday’s share price surge came after weekend press reports said the stricken company will present a plan to shareholders and lenders on Wednesday that will form the basis of a proposal to restore Carillion’s balance sheet.

The group has already said it is in talks about ways to reduce its mounting debt pile and securing new funding. Carillion has debts, including pensions of about £1.5bn, according to analysts’ estimates.

The company’s lenders, including Santander UK, Barclays and HSBC, are understood to be reluctant to provide it further loans, which could force Carillion to seek government support.

READ: Carillion - Where it all went wrong for the mega-cap turned micro-cap UK contractor

Carillion is a major supplier to the government with a number of contracts, including construction of the UK’s HS2 rail project and school building programmes.

Last week the company said it was being investigated by the Financial Conduct Authority over the timeliness and content of its stock market announcements from July 10 to December 7 last year.

Carillion’s share price plunged by 90% last July after announcing its first profit warning, a dividend suspension and the departure of its chief executive.

 -- Adds share price --

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Tue, 09 Jan 2018 07:26:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/189702/carillion-issues-brief-dismissive-response-to-share-price-leap-on-chatter-it-s-close-to-a-rescue-deal-189702.html
<![CDATA[RNS press release - Response to share price movement ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180109070358_13489308/ Tue, 09 Jan 2018 07:03:58 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180109070358_13489308/ <![CDATA[News - Carillion to present revised business plan as it fights for survival ]]> http://www.proactiveinvestors.co.uk/companies/news/189629/carillion-to-present-revised-business-plan-as-it-fights-for-survival-189629.html Stricken contractor Carillion PLC (LON:CLLN) is to reveal a revised business plan this week to avoid collapse following a string of profit warnings.

The services and construction company will present the plan to shareholders and lenders on Wednesday. It will form the basis of a proposal to restore Carillion’s balance sheet. The group said it was in talks about ways to reduce its mounting debt pile and securing new funding.

READ: Carillion: Where it all went wrong for the mega-cap turned micro-cap UK contractor

Carillion has debts, including pensions of about £1.5bn, according to analysts’ estimates.

The company’s lenders, including Santander UK, Barclays and HSBC, are understood to be reluctant to provide it further loans, which could force Carillion to seek government support.

Carillion is a major supplier to the government with a number of contracts, including construction of the UK’s HS2 rail project and school building programmes.

READ: FCA launches investigation into Carillion for company announcements

Last week the company said it was being investigated by the Financial Conduct Authority over the timeliness and content of its stock market announcements from July 10 to December 7 last year.

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Mon, 08 Jan 2018 07:29:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/189629/carillion-to-present-revised-business-plan-as-it-fights-for-survival-189629.html
<![CDATA[RNS press release - Holding(s) in Company ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180103164435_13484356/ Wed, 03 Jan 2018 16:44:35 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180103164435_13484356/ <![CDATA[News - Carillion: Where it all went wrong for the mega-cap turned micro-cap UK contractor ]]> http://www.proactiveinvestors.co.uk/companies/news/189461/carillion-where-it-all-went-wrong-for-the-mega-cap-turned-micro-cap-uk-contractor-189461.html Carillion PLC (LON:CLLN) can’t seem to get a break.

Following a string of profit warnings over the past year, the Financial Conduct Authority has now launched an investigation into the construction contractor’s announcements between 7 December 2016 and 10 July 2017.

READ: FCA launches investigation into Carillion for company announcements

During the period the company’s shares plunged 70%, leading to its demotion from the FTSE 250 index to the small cap index in September.

Where Carillion’s troubles began...

Carillion’s struggles first emerged in a trading update on 7 December 2016 when it cautioned that the pace of new orders had slowed in the second half of the fiscal year due to spending delays by the government following the Brexit vote.

The outsourcing firm also said there had been slowdown in contract awards from the Middle East, particularly in Oman, as the region grappled with lower oil prices.

On 1 March 2017, the company reported a 5% drop in pre-tax profit for the year to 31 December 2016 to £146.7mln, reflecting a decline in profit from public private partnership projects and Middle East construction services.

First 2017 profit warning...

In July, the group lost 39% of its market value after warning that annual results would be "below management's previous expectations" and announcing that Richard Howson would step down as chief executive with immediate effect.

At the time it said it would write down £845mln following deterioration in cash flows on some construction contracts. Some of the high profile problems on major contracts included an Aberdeen road project and two NHS hospitals in public-private partnerships.

Carillion also suspended its 2017 dividend and warned debt in the first half had ballooned to £695mln from £586.5mln in 2016.

The shock profit warning led to Carillion's relegation from the FTSE 250 in September after its market capitalisation crashed from almost £1bn in early July to less than £250mln in August during a quarterly review of London's top indices.

Carillion’s management shakeup...

In September the group revealed that finance director Zafar Khan was to step down with immediate effect along with a slew of other departures at the top.

Managing director of the construction services arm, Adam Green, also left along with managing director of Carillion Services, Nigel Taylor, and group strategy director, Shaun Carter.

Another profit warning...

Later that same month, the company issued its second profit warning for the year after reporting an eye-watering first half loss. In a statement, interim chief executive Keith Cochrane said the “disappointing set of results” reflected the issues flagged in July.

The group booked a further £200mln charge for support services contracts in addition to an £845mln writedown on problematic construction contracts announced in July.

It said it would explore options including a share issue to shore up its battered balance sheet.

Carillion offloads UK healthcare arm...

In October it was handed a lifeline after agreeing new credit facilities and deferrals on some debt repayments and signing a heads of terms agreement to sell a large part of its UK healthcare business to fellow outsourcer Serco Group PLC (LON:SRP) for £50.1mln.

The firm said it intended to dispose of the remaining contracts in its UK healthcare facilities management portfolio in 2018 to help reduce its mounting debt pile.

In another statement later in October, Carillion named Andrew Davies, boss of construction firm Wates Group, as its new chief executive to start on 2 April 2018.

Third profit warning for 2017 as debt mounts...

In November, the company warned that it would breach its banking covenants as it downgraded its annual profit guidance for a third time in 2017 following ongoing struggles with badly-performing contracts.

It added that full year average net debt was expected to rise to between £875mln and £925mln.

A month later it inked a definitive sale agreement with Serco for the disposal of a large part of its UK healthcare facilities management business.

New CEO starts earlier than planned...

Carillion in December said Davies would start as chief executive in January, instead of April, to help aid the group’s turnaround.

In its last trading update for 2017, it said it was still in discussions with stakeholders regarding its options to reduce debt and avoid a breach of debt covenants and expects to take action in the first quarter of 2018.

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Wed, 03 Jan 2018 12:54:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/189461/carillion-where-it-all-went-wrong-for-the-mega-cap-turned-micro-cap-uk-contractor-189461.html
<![CDATA[News - FCA launches investigation into Carillion for company announcements ]]> http://www.proactiveinvestors.co.uk/companies/news/189437/fca-launches-investigation-into-carillion-for-company-announcements-189437.html Carillion PLC (LON:CLLN) is being investigated by the financial watchdog for the timeliness of announcements made in the lead up to a string of profit warnings for 2017.

The construction contractor said in a statement that the Financial Conduct Authority is looking into statements released by Carillion between 7 December  2016 and 10 July 2017, during which time its shares tumbled 70%. 

READ: Carillion says still in discussion with stakeholders regarding debt reduction options, expects to take action in the first quarter 2018

“Carillion is co-operating fully with the FCA,” it said.

Shares fell 3.9% to 17.2p in morning trading.

On July 10,  the group issued its first profit warning for fiscal year 2017 and announced that Richard Howard would step down as chief executive.

The annoucement came four months after it reported a 5% decline in pre-tax profit to £146.7mln in the year to 31 December 2016, reflecting a weak performance in public private partnership projects and Middle East construction services.

Ahead of the 2016 results, on December 7, the company said it had seen a slowdown in orders due to changes in government spending plans since the Brexit vote. 

Since July, its share price has plunged more than 90% after issuing two more profit warnings and saying it would breach its banking covenants as full year net debt balloons. 

In its last trading update in December, it said it was still in discussions with stakeholders regarding its options to reduce debt and avoid a breach of debt covenants and expects to take action in the first quarter of 2018.

READ: Carillion's new boss to start earlier to lead turnaround of troubled contractor

New chief executive Andrew Davies will begin on January 22,  almost three months earlier than previously planned, to help lead the group's turnaround. 

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Wed, 03 Jan 2018 07:33:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/189437/fca-launches-investigation-into-carillion-for-company-announcements-189437.html
<![CDATA[RNS press release - Regulatory investigation ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180103070002_13483085/ Wed, 03 Jan 2018 07:00:02 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20180103070002_13483085/ <![CDATA[News - Year past and year ahead: Carillion, Lloyds, RBS and BT Group in focus ]]> http://www.proactiveinvestors.co.uk/companies/news/189175/year-past-and-year-ahead-carillion-lloyds-rbs-and-bt-group-in-focus-189175.html Brexit uncertainty and a slowdown in the British economy weighed on businesses in 2017, resulting in a wave of profit warnings.

Carillion PLC (LON:CLLN), Provident Financial PLC (LON:PFG), Dixons Carphone Plc (LON:DC.), Interserve PLC (LON:IRV), Centrica PLC (LON:CNA) and GKN PLC (LON:GKN) were among the slew of London-listed firms to issue profit warnings in 2017 as consumer confidence weakened following the UK’s vote to leave the European Union.

Carillion issues three profit warnings

In November Carillion issued its third profit warning for the year due to its failure to improve profit margins across UK support service contracts, delays to asset disposals and to the start of a significant project in the Middle East. 

The group also said it would breach its banking covenants and that full year net debt is expected to rise to between £875mln and £925mln.

Provident Financial hit by troubles at doorstep lending arm

Sub-prime lender Provident Financial had a string of bad news this year, including two profit warnings, the resignation of chief executive Peter Crook and the sudden and untimely death of executive chairman Manjit Wolstenholme.

A botched plan to take its sales force in-house and troubles at its doorstep lending division have resulted in expected losses for the year and the decision to scrap its dividend. 

UK mobile competition hurts Dixons Carphone

Dixons Carphone in December cut its full year profit forecasts following a slump in first half profits due to challenges in its UK mobile business. That marked its second profit warning in four months.

In response, the company plans to overhaul the mobile division, which has come under pressure as consumers hold onto their handsets for longer rather than updating to the latest releases due to the Brexit-driven slump in the pound driving prices higher.

Interserve trading slows

In October, Interserve said it could breach its banking covenants as it slashed its estimates for second half operating profit.

Trading slowed in the third quarter with its UK support services business affected by higher costs and challenging market conditions.

Centrica loses customer accounts

Centrica, the owner of British Gas, in November said full year earnings will be lower than market forecasts after losing customer accounts due to tough competition.

The group also said it would be scrapping a higher standard variable tariff (SVT) for new UK customers and introducing a new fixed-term default tariff in response to the UK government’s planned energy price caps.

GKN’s US aerospace business under pressure

GKN PLC (LON:GKN) gave incoming chief executive Kevin Cummings the boot in November as it announced a further write-off at the struggling US aerospace business following a profit warning a month earlier.

Cummings left just weeks before he was due to take up the top job, leaving the company without a successor to Nigel Stein, who was to retire at the end of December.

Banks recover in 2017

On the reserve side, the UK’s major lenders showed recovery on the back of turnaround efforts after the 2008-09 financial crisis.

Lloyds Banking Group (PLC:LLOY) was the star performer this year as it reported robust profit growth, announced healthy dividends and returned to private hands in May following its taxpayer bailout during the financial crash.

In its most recent trading statement, the bank reported a surge in third quarter profit on the back of its acquisition of credit card business MBNA and the absence of further provisions for its payment protection insurance mis-selling scandal.

Royal Bank of Scotland Group PLC (LON:RBS) posted its third consecutive quarter of profit in the third quarter as restructuring and misconduct costs fell.

The bank, which is still more than 70% owned by the taxpayer, expects to return to a full year profit in 2018 but is still awaiting a hefty fine by the US Department of Justice (DoJ) for its role in selling subprime mortgages in the lead up to the financial crash.

The government has announced plans to sell its stake in RBS following its bailout during the financial crash, though at an expected loss to taxpayers.

Barclays PLC’s (LON:BARC) turnaround progress was mainly thanks to its decision to offload non-core assets, including its Africa division.

All the UK’s major lenders passed the Bank of England’s stress tests this year. The BoE found that none of Britain’s major lenders needed to raise extra capital for the first time since starting the tests and could handle a Brexit-driven recession without a government bailout.

However, the Bank said the combination of a disorderly Brexit, a severe global recession and misconduct costs could result in more severe conditions than in the stress test.

Brexit the focus of 2018               

Negotiations between the UK and the EU for a new trade deal will be the prime focus in 2018 given its potential impact on the economy.

EU’s chief Brexit negotiator Michel Barnier has warned that securing a full trade deal by autumn would be a “furious race against time”.

Banks and financial services firms have already put contingency plans in place in the event the government is unable to secure a new trade deal.

HSBC, JP Morgan, UBS and Goldman Sachs, have signalled they would move jobs and operations to the EU to ensure they can continue to trade freely across the bloc after Brexit.

Lloyds plans to set up a Berlin office as its post-Brexit European hub, while RBS has chosen Amsterdam, and Barclays is expanding its Dublin operations.

Prime Minister Theresa May is trying to negotiate a two-year transition deal to ease the burden for businesses following the UK’s withdrawal from the EU but the worry is that the government is running out of time.

Bank of England Governor Mark Carney has warned that without a transitional deal banks would need to start moving staff and setting up offices in the EU from as early as the first three months of next year.

BT facing regulatory headwinds

Upcoming regulatory changes in telecoms, gaming and energy will also be eyed in 2018.

BT is among the companies facing regulatory headwinds with Ofcom proposing the group should cut the wholesale prices its network sUBSidiary Openreach charges telecoms operators.

Such a move could disrupt BT’s plans to invest in broadband network upgrades to deliver ultrafast speeds to 12mln premises by the end of 2020.

Investors have also raised concerns BT could cut its dividend amid rising costs of securing broadcasting sports rights and investing in customer service improvements.

BT has long competed with Sky PLC (LON:SKY) for the broadcasting rights to Premier League and Champions League football.

But BT has agreed a deal to market and sell Sky’s video streaming service Now TV, which includes Sky Sports, to its customers on its set top box ahead of the next bidding round for the football rights in February.

Review of fixed-odds betting terminals

In gaming, the government has proposed a crackdown on fixed-odds betting terminals (FOBTs) after MPs raised concerns the machines were too addictive and fuelled problem gambling.

The government started a 12-week consultation in October to consider cutting the maximum stake allowed on FOBTs to between £50 and £2 from £100 currently.

The outcome of the so-called triennial review will determine how much GVC Holdings (LON:GVC) pays in its planned takeover of Ladbrokes Coral Group PLC (LON:LCL). GVC has offered to buy Ladbrokes Coral for up to £4bn but the final price could be as low as £3.2bn depending on the review.

Energy price cap

The government plans to put a cap on standard energy prices, which could hurt profits of the big six suppliers including Centrica, SSE plc (LON:SSE), EDF Energy, E.ON, npower and Scottish Power.

Regulator Ofgem said standard variable tariffs (SVTs) offered by the big six in August were on average almost £320 per year more expensive than their cheapest deals.

Rising competition from new market entrants has already put pressure on the big six so investors will be keen to see how they deal with the proposed changes.

Centrica has recommended a phase-out the SVT and all so-called ‘evergreen’ contracts that automatically renew an agreement after the expiry date.

Ahead of the planned price cap, SSE plc (LON:SSE) has proposed a merger with npower in an effort to cut costs and strengthen its position. 

But the deal still needs approval by the Competition and Markets Authority and MPs have raised concerns that a merger could hurt consumers by reducing choice.

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Sun, 31 Dec 2017 12:00:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/189175/year-past-and-year-ahead-carillion-lloyds-rbs-and-bt-group-in-focus-189175.html
<![CDATA[News - Carillion says still in discussion with stakeholders regarding debt reduction options, expects to take action in the first quarter 2018 ]]> http://www.proactiveinvestors.co.uk/companies/news/189225/carillion-says-still-in-discussion-with-stakeholders-regarding-debt-reduction-options-expects-to-take-action-in-the-first-quarter-2018-189225.html Carillion PLC (LON:CLLN) has said it is still in discussion with stakeholders regarding its options to reduce debt and avoid a breach of debt covenants and expects to take action in the first quarter of 2018.

In a statement, the troubled construction contractor which has seen its market value plunge by 90% after three profit warnings this year, said:  “As previously indicated, Carillion is in continuing constructive discussions with stakeholders regarding its options to reduce net debt and recapitalise and/or restructure the Group's balance sheet.”

READ: Carillion's new boss to start earlier to lead turnaround of troubled contractor

It added: “These discussions are progressing well, and the Board still expects to determine the approach and to commence steps to implement the chosen option during the first quarter of 2018.”

Carillion also said it has now received all necessary consents and the deferral of its financial covenants has become effective.

Keith Cochrane, Carillion's interim chief executive, said: "We believe that our lenders' decision to defer the test date demonstrates their continuing support.  We remain focused on actively progressing a constructive dialogue with our financial stakeholders on the Group's recapitalisation plans."

Earlier this week, Carillion shares got a boost from news its new chief executive will take the helm three months earlier than previously agreed to aid the turnaround of the troubled UK contractor.

READ: Carillion inks definitive sale agreement for disposal of bulk of its UK healthcare facilities business

Andrew Davies will step down as chief executive of UK construction property services firm Wates Group to join Carillion as its new boss on 22 January, instead of April 2 as announced in October.

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Fri, 22 Dec 2017 08:03:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/189225/carillion-says-still-in-discussion-with-stakeholders-regarding-debt-reduction-options-expects-to-take-action-in-the-first-quarter-2018-189225.html
<![CDATA[RNS press release - Update on financial covenant deferral ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171222070004_13475241/ Fri, 22 Dec 2017 07:00:04 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171222070004_13475241/ <![CDATA[RNS press release - Block listing Interim Review ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171220101645_13472425/ Wed, 20 Dec 2017 10:16:45 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171220101645_13472425/ <![CDATA[News - Carillion's new boss to start earlier to lead turnaround of troubled contractor ]]> http://www.proactiveinvestors.co.uk/companies/news/189067/carillion-s-new-boss-to-start-earlier-to-lead-turnaround-of-troubled-contractor-189067.html Carillion PLC (LON:CLLN) said its new chief executive will take the helm three months earlier than previously agreed to aid the turnaround of the troubled UK contractor.

Andrew Davies will step down as chief executive of UK construction property services firm Wates Group to join Carillion as its new boss on 22 January, instead of 2 April as announced in October.

Shares rose 1.5% to 16.50p in morning trading.

READ: Carillion inks definitive sale agreement for disposal of bulk of its UK healthcare facilities business

Keith Cochrane will step down as interim chief executive but will remain at Carillion in an advisory capacity to ensure an orderly handover, the company said in a statement on Wednesday.

Davies has been chief executive of Wates Group since 2014 and is also a non-executive director of defence company Chemring Group PLC (LON:CHG).

Carillion chairman Philip Green said: "We are very grateful to the board of Wates Group and to James Wates CBE, their chairman, for their facilitation of Andrew's earlier appointment. It is a demonstration of how the sector is willing to cooperate and collaborate to ensure the long term sustainability of UK industry."

His appointment comes about five months after Richard Howson stepped down as chief executive as the company issued a profit warning.

READ: Carillion shares up as stock overhang cleared after biggest shareholder, Kiltearn halves stake

The company has issued three profit warnings this year due to its failure to improve profit margins across UK support service contracts, delays to asset disposals and to the start of a significant project in the Middle East.  

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Wed, 20 Dec 2017 07:32:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/189067/carillion-s-new-boss-to-start-earlier-to-lead-turnaround-of-troubled-contractor-189067.html
<![CDATA[RNS press release - Chief Executive Appointment ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171220070004_13471800/ Wed, 20 Dec 2017 07:00:04 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171220070004_13471800/ <![CDATA[News - Carillion inks definitive sale agreement for disposal of bulk of its UK healthcare facilities business ]]> http://www.proactiveinvestors.co.uk/companies/news/188705/carillion-inks-definitive-sale-agreement-for-disposal-of-bulk-of-its-uk-healthcare-facilities-business-188705.html Carillion PLC (LON:CLLN) has now entered into a definitive sale agreement with Serco PLC (LON:SRP) for the disposal of a large part of its UK healthcare facilities management business.

Further to its announcement on October 24, the struggling construction contractor said today that a portfolio of UK healthcare facilities management contracts and associated ancillary contracts and assets which relate to fifteen sites will be transferred to Serco on a phased basis.

READ: Carillion shares up as stock overhang cleared after biggest shareholder, Kiltearn halves stake

The firm said an agreed proportion of the total consideration of approximately £47.7mln will be payable in instalments on the transfer of each facilities management arrangement to Serco, with the aim of receiving the bulk of the proceeds in the second and third quarters of 2018

After taking account of fees, costs and taxes, it added, the net disposal proceeds are expected to be £41.4mln which will used to reduce the firm’s debt.

Keith Cochrane, Carillion's Interim chief executive, said: “I am pleased we have been able to successfully conclude this transaction which will contribute to our efforts to reduce net debt."

Carillion issued its third profit warning in five months in November and said it was heading towards a breach of debt covenants and would need fresh capital.

READ: Carillion fighting for survival after third profit warning

The group's shares have slumped by over 90% since it first issued a profit warning and its CEO quit in July but have been rallying this week helped by the clearance of a stock overhang after Scottish investment firm Kiltearn Partners, the firm’s largest shareholder was revealed to have halved its stake in the company.

Kiltearn cut its stake in Carillion to 4.94% on December 7, down from 9.85% previously, a notification of major holdings statement revealed.

In late morning trading, Carillion shares held steady at 17.5p.

 -- Adds share price --

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Wed, 13 Dec 2017 07:33:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/188705/carillion-inks-definitive-sale-agreement-for-disposal-of-bulk-of-its-uk-healthcare-facilities-business-188705.html
<![CDATA[RNS press release - Update on UK healthcare facilities business ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171213070004_13463255/ Wed, 13 Dec 2017 07:00:04 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171213070004_13463255/ <![CDATA[News - Carillion shares up as stock overhang cleared after biggest shareholder, Kiltearn halves stake ]]> http://www.proactiveinvestors.co.uk/companies/news/188586/carillion-shares-up-as-stock-overhang-cleared-after-biggest-shareholder-kiltearn-halves-stake-188586.html Carillion PLC (LON:CLLN) saw its shares jump nearly 8% higher today, with the troubled contractor getting a lift as a stock overhang was cleared from the market.

The rise came as Scottish investment firm Kiltearn Partners, the firm’s largest shareholder was revealed to have halved its stake in the construction company, according to a regulatory filing on Monday.

WATCH: Carillion fighting for survival after third profit warning

Kiltearn cut its stake in Carillion to 4.94% on December 7, down from 9.85% previously, a notification of major holdings statement revealed.

Carillion disclosed on August 11 that Kiltearn had doubled its stake to 10% at the start of February when its shares were trading at around 225p each, becoming the company's biggest shareholder.

The company's shares have slumped by over 90% since it issued a profit warning and its CEO quit in July, and in lunchtime trading today, they were changing hands at 17p each, albeit up 1.25p on Friday’s close.

Carillion issued its third profit warning in five months in November and said it was heading towards a breach of debt covenants and would need fresh capital.

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Mon, 11 Dec 2017 12:43:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/188586/carillion-shares-up-as-stock-overhang-cleared-after-biggest-shareholder-kiltearn-halves-stake-188586.html
<![CDATA[RNS press release - Holding(s) in Company ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171211075844_13460382/ Mon, 11 Dec 2017 07:58:44 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171211075844_13460382/ <![CDATA[RNS press release - Directorate Change ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171201070008_13450329/ Fri, 01 Dec 2017 07:00:08 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171201070008_13450329/ <![CDATA[RNS press release - Holding(s) in Company ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171123120824_13442114/ Thu, 23 Nov 2017 12:08:24 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171123120824_13442114/ <![CDATA[RNS press release - Holding(s) in Company ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171122122927_13440630/ Wed, 22 Nov 2017 12:29:27 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171122122927_13440630/ <![CDATA[RNS press release - Holding(s) in Company ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171121161101_13439445/ Tue, 21 Nov 2017 16:11:01 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171121161101_13439445/ <![CDATA[News - Carillion selected in school building framework despite fresh profit warning ]]> http://www.proactiveinvestors.co.uk/companies/news/187488/carillion-selected-in-school-building-framework-despite-fresh-profit-warning-187488.html Carillion PLC (LON:CLLN) has been selected as a preferred contractor for two UK school building programmes worth £2.64bn in the wake of another profit warning.

The contractor said it has been awarded two lots on the Education & Skills Funding Agency’s (ESFA) school building framework. 

WATCH: Carillion fighting for survival after third profit warning

Carillion was one of nine contractors selected for the lots, which cover the north and south of England, paving the way for the company to bid for school-building contracts worth more than £12mln each. The contracts are estimated to be worth around £2.64bn in total between now and 2021.

“We are pleased to have re-secured our position on this framework, demonstrating that we continue to retain the confidence of key customers despite the Group's current challenges,” said interim chief executive Keith Cochrane.

Shares edged up in morning trading but fell bacdk 0.31% to 21.43p in the afternoon.

On Friday, the company issued a fresh profit downgrade for the year due to the failure to improve profit margins across UK support service contracts, delays to the disposal of certain public private partnerships and to the start of a significant project in the Middle East.  

It also said it would breach its banking convenants and that full year net debt is expected to rise to between £875mln and £925mln.

The news sent the shares spiralling lower and prompted the government to release a statement reaffirming its support for the contractor.

The government said Carillion is a "major supplier" with a number of long-term contracts, fuelling speculation of possible intervention. 

READ: Carillion says it will breach banking covenants as it warns on profits and debt

Over the weekend it emerged that Carillion is fighting to recoup a multi-million pound fee from a recently aborted £500mln contract with the Oxfordshire County Council. The council terminated the strategic asset management contract in July.

City AM reported that one source said the council owes Carillion £15mln while another source said the figure was nearer the single-digit millions.

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Mon, 20 Nov 2017 08:15:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/187488/carillion-selected-in-school-building-framework-despite-fresh-profit-warning-187488.html
<![CDATA[RNS press release - Framework Award ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171120070005_13436557/ Mon, 20 Nov 2017 07:00:05 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171120070005_13436557/ <![CDATA[Media files - Carillion fighting for survival after third profit warning ]]> http://www.proactiveinvestors.co.uk/companies/stocktube/8386/carillion-fighting-for-survival-after-third-profit-warning-8386.html Fri, 17 Nov 2017 15:09:00 +0000 http://www.proactiveinvestors.co.uk/companies/stocktube/8386/carillion-fighting-for-survival-after-third-profit-warning-8386.html <![CDATA[News - Analysts think Carillion's most likely route to survival is through a debt for equity swap ]]> http://www.proactiveinvestors.co.uk/companies/news/187450/analysts-think-carillion-s-most-likely-route-to-survival-is-through-a-debt-for-equity-swap-187450.html Carillion PLC (LON:CLLN) is in bad shape and analysts see a debt for equity swap as the mostly likely route to survival.

The construction company on Friday said it will be in breach of its loan conditions, which could lead to possible collapse into administration.

The contractor also warned that profits for the year would be “materially lower than market expectations” and that its debt pile would increase. It marked the third profit warning for the year and comes on the back on falling revenues, rising costs and project delays in the Middle East.

READ: Carillion says it will breach banking covenants as it warns on profits and debt

“We now think one of the most likely routes towards a recapitalisation is a debt for equity swap,” UBS analysts said.

“Given the current level of debt (H2 implied now c£1.1bn plus pension and reverse factoring), if fresh external equity can be raised, it may be highly dilutive for existing shareholders.”

Under a debt for equity swap, shareholders are given the right to exchange their stock for a predetermined amount of debt. The value of the swap normally set at current market rates. It is one way of financial restructuring to avoid an emergency takeover or bankruptcy.

Asset disposals will make no difference, says UBS

UBS added that potential asset disposals are unlikely to "materially change the picture" unless these businesses can be sold materially above the implied leverage ratio, which is approaching 10 times ‘all-in’ net debt dividend by earnings before interest, tax and depreciation. “Our valuation was already in slight negative equity value today and with higher debt and lower earnings this would widen.”

Liberum also continues to expect a debt for equity swap. It noted that the financial liabilities are more than £500mln higher than the enterprise value and thinks there is “limited value on the equity”.

In an effort to cut debts, Carillion in October said it had signed a head-of-terms agreement to sell a large part of its UK healthcare business to outsourcing company Serco Group PLC (LON:SRP) for £50.1mln. It expects to dispose of the remaining contracts in its UK healthcare facilities management portfolio during 2018.

“The group has made some progress on asset sales, and it sounds like some cost savings are being made,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

"It’s not what the group expected though, and it’s clearly not enough. It’s also probably irrelevant given the state of the balance sheet, with net debt already many multiples of the group’s market capitalisation.”

Carillion still winning contracts but is there hope?

On the upside, Carillion is still winning contracts, including a £240mln contract to build a hospital in Oman and another £120mln deal to be signed soon. On top of that it has contracts with Network Rail worth £192mln over the next three years and a £1.4bn contract to support the HS2 project.

“However, the overhang remains the same: a steadily increasing debt pile at odds with poor cash flow, uncertain transaction timing (contracts and disposals), transitioning leadership and waning investor confidence,” said Mike van Dulken, head of research at Accendo Market.

“The share price reaction today suggests acceptance that what we foresaw as an inevitable and highly dilutive rights issue to 'encourage' shareholders into participation, to keep the restructuring ball in the air.

“Shorts who stayed the course (most shorted stock on FCA disclosure data), even adding, will be grinning smiling all the way to the bank, having expected already serious corporate and financial troubles to worsen.”

Shares fell 34.21% to 27.30p in afternoon trading. 

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Fri, 17 Nov 2017 14:53:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/187450/analysts-think-carillion-s-most-likely-route-to-survival-is-through-a-debt-for-equity-swap-187450.html
<![CDATA[News - Government fuels speculation of intervention into Carillion as it responds to profit warning ]]> http://www.proactiveinvestors.co.uk/companies/news/187443/government-fuels-speculation-of-intervention-into-carillion-as-it-responds-to-profit-warning-187443.html The government has fuelled speculation of possible intervention into Carillion PLC (LON:CLLN) after saying it would keep an eye on the struggling contractor following another profit warning.

The construction company, which holds contracts with the government, on Friday warned it would breach its banking covenants and that its debt pile would grow. It said profits for the year would be “materially lower” than current market forecasts. 

READ:Carillion says it will breach banking covenants as it warns on profits and debt

In a statement, the government said: "Carillion is a major supplier to the government with a number of long-term contracts. The company has kept us informed of the steps it is taking to restructure the business.”

It added: “We remain supportive of their ongoing discussions with their stakeholders and await future updates on their progress."

Some analysts suggested that government intervention could be on the cards given its close ties to the company. Carillion’s contracts with the government include building parts of the UK's high-speed railway (HS2) and managing nearly 900 schools.

“Some investors might think this is the end, but Carillion is too big to fail,” said Neil Wilson, senior market analyst at ETX Capital. “Government intervention is possible but this is a nightmare for ministers at such a sensitive moment for the economy.”

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Fri, 17 Nov 2017 13:49:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/187443/government-fuels-speculation-of-intervention-into-carillion-as-it-responds-to-profit-warning-187443.html
<![CDATA[News - Carillion says it will breach banking covenants as it warns on profits and debt ]]> http://www.proactiveinvestors.co.uk/companies/news/187414/carillion-says-it-will-breach-banking-covenants-as-it-warns-on-profits-and-debt-187414.html Carillion PLC (LON:CLLN) said it will breach its banking covenants as the troubled construction and services contractor downgraded profits again and warned of a mounting debt pile.

Profits will be “materially lower” than market estimates for the year to 31 December 2017 due to the failure to improve profit margins across UK support service contracts, delays to the disposal of certain public private partnerships and to the start of a significant project in the Middle East.  

Third profit warning of the year

The news marks the third profit warning from the company this year as it struggles with badly-performing contracts.

Full year average net debt is expected to rise to between £875mln and £925mln.

Shares plunged 59.04% to 17p in early trading before clawing back some gains to 27.25p. 

The company said it no longer expects to be in compliance with its banking terms, as advised in September, and that it would be in breach of its earnings-to-net-debt target ratio.

 "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," said interim chief executive Keith Cochrane.

READ: Carillion unveils £13.8mln disposal of holdings in property development companies

“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 2 April 2018."

Government intervention possible

The government responded to the announcement by saying that Carillion is a "major supplier to the government with a number of long-term contracts" and that it would await further updates from the company. The announcement sparked speculation of possible government intervention.

"Some investors might think this is the end, but Carillion is too big to fail. Government intervention is possible but this is a nightmare for ministers at such a sensitive moment for the economy," said Neil Wilson, senior market analyst at ETX Capital.

-57% Carillion is getting utterly destroyed

— Neil Wilson (@neilwilson_etx) 17 November 2017 Carillion horror show continues

“The Carillion horror show continues," said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

"Some sort of recapitalisation was inevitable, but a possible debt for equity swap, with debt even higher than the group had anticipated, is probably as bad as anyone would have guessed.
The group has made some progress on asset sales, and it sounds like some cost savings are being made.

"It’s not what the group expected though, and it’s clearly not enough. It’s also probably irrelevant given the state of the balance sheet, with net debt already many multiples of the group’s market capitalisation.”

Analysts at Liberum reiterated a 'sell' rating and target price of 5p, saying Carillion's latest statement confirms its view that there is limited value in the equity.

It noted that the financial liabilities are more than £500mln higher than the enterprise value and continues to expect a debt for equity swap.

UBS also believes one of the most likely routes towards a recapitalisation is a debt for equity swap.

Leaving its rating at 'sell' and target price at 1p, UBS said: "Given the current level of debt (H2 implied now c£1.1bn plus pension and reverse factoring), if fresh external equity can be raised, it may be highly dilutive for existing shareholders." 

It added: "We do not think potential asset disposals would materially change the picture, unless businesses can be sold materially above the implied leverage ratio which on our calculations is now approaching 10x "all in" net debt/ EBITDA. Our valuation was already in slight negative equity value today and with higher debt and lower earnings this would widen."

A series of profit warnings

In September, Carillion said it expects full year results to be lower than market forecasts as it reported an eye-watering first-half loss after booking an additional provision of £200mln for support services contracts on top of the previously announced £845mln charge for construction contracts.

READ: Carillion warns on full-year results, as it posts massive first-half loss after booking further contract provisions

A month later, the group revealed that it had signed a head-of-terms agreement to sell a large part of its UK healthcare business to outsourcing company Serco Group PLC (LON:SRP) for £50.1mln.

The firm – which announced plans to exit its UK Healthcare business in September - intends to dispose of the remaining contracts in its UK healthcare facilities management portfolio during 2018.

Carillion in July launched a strategic review to turnaround the business as former chief executive Richard Howson stepped down and the company announced the suspension of its dividend and warned that full year revenue would be lower than expected. Since starting the review, the company has also lost its finance chief Zafar Khan.

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Fri, 17 Nov 2017 07:37:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/187414/carillion-says-it-will-breach-banking-covenants-as-it-warns-on-profits-and-debt-187414.html
<![CDATA[RNS press release - Update ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171117070231_13434997/ Fri, 17 Nov 2017 07:02:31 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171117070231_13434997/ <![CDATA[RNS press release - Oman - letter of award for contract ]]> http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171115070006_13431737/ Wed, 15 Nov 2017 07:00:06 +0000 http://www.proactiveinvestors.co.uk/companies/rns/3082/LSE20171115070006_13431737/ <![CDATA[News - Carillion gets boost as Network Rail awards embattled contractor two jobs ]]> http://www.proactiveinvestors.co.uk/companies/news/186779/carillion-gets-boost-as-network-rail-awards-embattled-contractor-two-jobs-186779.html Struggling contractor Carillion PLC (LON:CLLN) has been awarded two track maintenance contracts on Network Rail's Midland Mainline upgrade programme.

Carillion will upgrade the existing track and infrastructure on the route from London to Corby, a contract expected generate revenues of £62m over the next two-and-a-half years. 

READ: Carillion unveils £13.8mln disposal of holdings in property development companies

The company’s joint venture with Powerlines, meanwhile, will complete the electrification of that route, a contract worth about £260mln for the joint venture over the next three years.

Keith Cochrane, Carilion’s interim chief executive, said the awards demonstrated it still has the support of key customers and can win new contracts. 

Carillion has been through turmoil this year after two profit warnings, the departure of chief executive Richard Howson and suspension of its dividend.

READ: Carillion names Andrew Davies, boss of privately-owned construction firm Wates, as its new CEO

Andrew Davies was recently appointed as new chief executive, but he does not join until April.

The contractor received a major boost in October when it agreed new credit facilities and rolled over some debt repayments.

“The group faces significant challenges, but we remain focused on executing our disposals programme, taking cost out and strengthening our balance sheet,” Cochrane said today.

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Mon, 06 Nov 2017 07:56:00 +0000 http://www.proactiveinvestors.co.uk/companies/news/186779/carillion-gets-boost-as-network-rail-awards-embattled-contractor-two-jobs-186779.html