Carillion cuts full-year revenue guidance after ‘disappointing’ first half
Construction and outsourcing group Carillion on Friday reduced its full-year revenue outlook after posting what it referred to as a “disappointing” slate of first-half results.
Carillion now expects revenues this year to be £4.6bn – £4.8bn, down from £4.8bn – £5bn. Analysts had been forecasting revenues of £4.83bn, according to a FactSet survey. The group will also take a further £200m provision for support services contracts, which it reckons will have a “minimal” impact on cash.
Weak cash flow and failure to replace completed contracts have caused the company’s debt pile to rise, climbing from £42m at the start of the decade to an average of £694m in the first half of this year. Full-year average net debt is forecast by the company at £825m – £850m.
Its shares plunged in July in the wake of a large profits warning, and this set of results was delayed so auditors could more thoroughly assess its business.
Total revenues in the first half were little changed from the same period in 2016 at £2.5bn, close to analyst estimates. It swung to a pre-tax loss of £1.15bn, from a profit of £84m in the previous period.
“This is a disappointing set of results which reflects the issues we flagged in July,” said Keith Cochrane, interim chief executive.
The company – which is one of the UK government’s largest contractors – previously said it would consider “all options to optimise value for the benefit of shareholders”.
Carillion has already held discussions to sell a chunk of its overseas business in an effort to cut costs and reduce its debt. Shares in the company also jumped earlier this week on speculation that one company was close to making a bid for the whole group, though any takeover is likely to be complicated by Carillion’s vast pensions deficit.
A swath of senior figures at Carillion, including its chief executive, finance director and a number of managing directors, have announced their departure since July’s profit warning. The company has brought in ex-Weir chief executive Mr Cochrane as temporary chief, while Lee Watson has joined as “chief transformation” on secondment from EY. The professional services firm was brought in to aid with Carillion’s review and rescue plans in July.
Despite their recent bounce, shares in Carillion – which remains the most shorted stock on the London market, are still down more than 70 per cent for the year to date.