Carillion has issued a fresh profit warning and confirmed that it expects to breach its financial covenants at the end of next month.
In an unscheduled trading update, the embattled contractor revealed that profit for the year to 31 December 2017 would be “materially” below expectations and the group will be require “some form of recapitalisation, which could involve a restructuring of the balance sheet”.
The contractor blamed the fresh profit warning on delays to a number of PPP disposals, delays to the start of a major project in the Middle East, and “lower-than-expected margin improvements” among several UK support services contracts.
The company’s share price plummeted to as low as 17p this morning before edging up to 26p as per 08:30, having closed yesterday at 41.5p.
The news marks the latest blow to Carillion’s fortunes, after the UK’s second largest contractor revealed a £1.15bn loss for the six months to 30 June and set aside an extra £200m provision for problem support services contracts.
The company also issued a major profit warning amid an £845m writedown in July, in a move that also saw Richard Howson step down as chief executive.
This morning’s update revealed that Carillion faced a challenge to meet its net-debt-to-EBITDA ratio targets, leading the board to explore recapitalisation options.
It expects to begin implementing its chosen option in Q1 2018, stating that a further announcement on this will be made in due course.
Carillion shocked the industry last month with the appointment of Wates boss Andrew Davies as its new chief executive.
Commenting on the latest update, interim chief executive Keith Cochrane said: “While we continue to target cash collections, reduce costs, execute disposals and focus on delivering for our customers, it is clear that significant challenges remain and more needs to be done to reduce net debt and rebuild the balance sheet.
“Constructive dialogue is continuing with our financial stakeholders, and I am grateful for their support. I remain focused on addressing this issue before my successor, Andrew Davies, takes up the role on 2 April 2018.”