The extent of the mind-boggling problems facing Carillion were laid bare today and it is not a pretty picture.
On top of the £845m of writedowns it revealed in July, the group has announced an extra £200m of writedowns for problem support services contracts.
All in all, it has resulted in an eye-watering half-year loss of £1.15bn.
The man currently charged with fixing the issues, interim boss Keith Cochrane, used some pretty straightforward language to admit what had caused the problems.
“People were too focused on the short term,” he told analysts. The company is “too broad and too complex”, he said.
And on its approach to contracts, he added: “We were building a Rolls-Royce, but only getting paid to build a Mini.”
Mr Cochrane appeared to understand that investors needed to hear some straight talking to appease what is a car crash situation. Let’s not forget, Carillion’s share price has tumbled more than 70 per cent since July’s update, wiping around £600m off its market cap.
Unfortunately, investors appear unimpressed so far, as Carillion’s share price has slumped around 11 per cent today.
In essence, Carillion is a company that got too big without enough checks and balances in place to retain a grip.
As part of the cost-cutting measures, the firm is cutting its management team from 52 to 35, branded a “delayering” process.
But the screamingly obvious question is ‘how did it get this bad’? Yes, construction is a high-risk and complex business, but the phrase ‘asleep at the wheel’ springs to mind with regard to previous management.
Carillion is still without a permanent chief executive and today all we got from chairman Philip Green is “good progress” is being made in the search. Clearly, finding a turnaround expert of the type Carillion requires will take some time.
Ultimately, the firm’s problems, like Balfour Beatty’s three years ago, are a salient reminder of the risks involved in construction.
Hopefully other firms can learn from Carillion’s woes to avoid a similar situation, but that is not guaranteed after other worrying updates this year.
Rivals may be looking at the business and saying ‘there but by the grace of God go us’.