Shaky Carillion now attracts scrutiny of financial regulator
Comment Martin Flanagan
The bottom may not have yet fallen out of construction group Carillion, but the seams are stretched to burst. As if its serial profits warnings, monumental debts, stretched financial covenants, demolished share price and management upheaval were not enough, now the UK’S financial regulator is on the group’s case. Carillion has revealed that the Financial Conduct Authority (FCA) is probing the “timeliness and content” of announcements made between December 2016 and July 2017. Unsurprisingly, the bombed out shares took another hit on the latest news, shedding a further 5 per cent.
Last July the beleagured business jolted the market by writing off £845 million in revenue it had expected from several large contracts and admitted that its already big borrowings were rising. It led to the departure of chief executive Richard Howson, only for yet another profit warning to follow in November.
It is premature to say we are looking at another Tesco-type situation with the FCA of a few years back. But Carillion’s rivets are more loose than ever. Next back in fashion Santa Simon Wolfson has come down the chimney with a present for the retail sector. Next, the clothing chain where he is chief executive, has kicked off the festive reporting season in style, with full-price sales from 1 November to 24 December up 1.5 per cent, an improvement on the prior guidance for a 0.3 per cent fall.
Next has upgraded its profit forecasts, sparking a near-7 per cent jump in the share price. Even more positive is Wolfson’s more optimistic outlook for 2018 when he believes one of two of the headwinds facing the sector should ease. This is significant as the long-serving boss’s standing is high in the City and he has been bearish over the past two years.
Unsurprisingly, the trading update had a positive effect. Primark-owning ABF was up 2 per cent during the day, Supergroup, owner of the Superdry brand, was ahead 5 per cent, Marks & Spencer up 1.4 per cent and Debenhams 1.2 per cent.
Next’s online sales jumped 13 per cent, mitigating a 6 per cent fall in bricks-andmortar revenues. Expect this to be mirrored elsewhere (even if there is evidence online purchases are sending returns of goods soaring).