The turnaround plan Carillion pitched to banks and the government shortly before its collapse showed the company expected to lose over a billion pounds on problem construction contracts.
The document, released as part of MPs’ inquiry into Carillion, revealed the firm was anticipating even higher losses than had been previously stated.
Carillion highlighted nine major contracts on which it expected to lose £325m between the end of 2017 and 2020.
In addition, the company said it had increased the provision for problem construction jobs revealed in July last year from £845m to £890m, which meant the firm stood to lose a total of £1.25bn on its construction jobs by 2020.
Out of the nine major contracts, the Midland Metropolitan Hospital was expected to be the biggest drain, incurring a £119m hit between Q4 2017 and 2020.
Carillion had said the job was 47 per cent complete and would be finished in June 2019, but would produce losses of £58m in 2018, £57m in 2019 and £6m in 2020.
The company also told its banks and the government that it had £33m of claims against other parties on the job, including a £10m claim against Aecom, which designed the M&E systems on the project.
Carillion’s work on the Msheireb development in Qatar, connected with the 2022 World Cup, was expected to incur the second-biggest loss, with a £67m cash outflow by 2020. The company said it had also lodged £97m of claims on the job.
The Royal Liverpool Hospital PFI was forecast to take a £44m hit this year, but then see income of £20m in 2019. This produced a net cash position of -£24m by 2020, but with £43m of claims on the job.
The Aberdeen Western Peripheral Route was forecast to contribute £2m of positive cashflow this year, following a £26m loss in the final quarter of 2017.
However, it was then expected to cost another £2m in 2019, leading to a net cash position of -£26m by 2020.
Carillion said it had £40m of claims outstanding on the job, with £25m against Transport Scotland.
A Transport Scotland spokesman said: “We do not recognise these figures.
”The agreed cost of the contract is fixed and as such there has been no change to the overall project budget of £745m which was announced in December 2014.”
Across rest of the major contracts listed in the document, Carillion revealed it had forecast losses of £89m by 2020, with £49m of claims outstanding.
Carillions: 9 major problem contracts
- Midland Metropolitan Hospital: £119m outflow by 2020 | £33m of claims outstanding
- Msheireb, Qatar: £67m outflow | £97m claims
- Royal Liverpool Hospital: £24m outflow | £43m claims
- Abderdeen Bypass: £26m outflow | £40m claims
- Battersea Power Station: £29m outflow | £16m claims
- PF2 Schools: £23m outflow | £5m claims
- Ontario Roads: £22m outflow | No claims
- AIdara hospital, Saudi Arabia: £21m outflow | No claims
- Toronto Transit Commission (Stations): £6m inflow | £28m claims
TOTAL: £325m cash outflow by 2020 | £262m outstanding claims
The proposed rescue plan also outlined how management aimed to turn Carillion into a “lower cost, higher gross margin” business.
It reveals a strategy to dispose of a number of operations in 2018, including Rokstad and Bouchier in Canada and FM operations in Ireland.
Carillion anticipated this would reduce turnover for the year by 25 per cent to £3.54bn.
It also planned to spend £54m to cut costs by £100m by the end of 2018, which would lead to lower overheads in future years.
In addition, it laid out its hopes for future turnover growth and contracts wins.
Carillion planned to win an extra £200m of infrastructure work in the UK on HS2 and other transport schemes, which would have a gross margin of 8 per cent.
The company also aimed to secure £110m of new work in its Canadian services operations, with a margin of approximately 11 per cent.
It also hoped to replace expiring contracts with Aspire Defence and central government with new deals to the tune of £450m per annum.
The combination of the disposals, reduced overheads and new work were expected to rebuild turnover to £3.95bn by 2022, with the Carillion achieving a 4.5 per cent operating margin by 2019, which it then planned to broadly maintain.
However, these plans did not include any contributions to the pension funds, which had a £587m deficit when the company collapsed.
Carillion also said its dividends policy “has not yet been determined” and so was not included in the cashflow projections.