Changes signalled to avoid Carillion derail
IT COULD take five years to rebuild the creaking construction business Carillion after it plunged £1.15billion into the red, its boss warned yesterday.
Interim chief executive Keith Cochrane, who took over from Richard Howson after a profit warning two months ago, wants a “radical change in culture” to transform the firm rocked by huge losses on construction deals.
Staff redundancies and less generous pensions are looming as the company seeks to shore up its finances.
It is looking to generate £300million by selling off non-core operations, but may also have to tap investors for cash.
Carillion is part of a consortium which recently won £1.34billion of contracts on the HS2 rail scheme and whose projects have included the expansion of Liverpool Football Club’s Anfield stadium.
It fell to a £1.15billion half-year pre-tax loss from an £84million profit last time as it wrote off £200million more on underperforming support services contracts, having already taken an £845million hit on problem construction deals.
Carillion has called on banks for extra credit of £140million and its debt is expected to climb to £850million this year.
It is aiming to reduce its £587million pension deficit by £120million, through scrapping discretionary payment increases and basing future increases on the lower consumer prices index rather than the retail prices index measure of inflation. Shares, which had risen sharply this week on takeover speculation, plunged 13p to 51¼p as Carillion warned its annual results would fall short of expectations. Cochrane said: “No one is in any doubt about the challenge that lies ahead. At the heart of this company there is a strong core. Supported by an operating model that manages risk much more effectively and led by a fresh management team with a mandate to drive cultural change, I am confident that a strong business can emerge.”
Carillion is targeting cost savings of £75million by 2020 including “removal of layers and duplication of management” and “increased professionalism”.
IN THE REDS: Anfield and HS2 have not saved Carillion, says Cochrane, below