The Courier & Advertiser (Perth and Perthshire Edition)
Cochrane takes reins at troubled Carillion
REVIEW: Ex-Stagecoach CEO takes charge as support services firm warns on trading
The former chief executive of Stagecoach and Weir Group has been drafted in to lead troubled support services giant Carillion.
Shares in the FTSE 250 firm tanked by more than a third yesterday after it warned on trading prospects and announced that chief executive Richard Howson is leaving to be replaced on an interim basis by Keith Cochrane, one of Scotland’s most experienced and recognisable business figures.
Mr Cochrane was first appointed to Carillion’s board two years ago and has since served as a member of the audit, remuneration, nomination, sustainability and business integrity committees.
In a half-year trading update, Carillion said the board will now embark on a “comprehensive review” of the business after admitting that revenue will fall short of expectations.
The construction and infrastructure giant downgraded its full-year revenue guidance, with sales now expected to be between £4.8 billion and £5bn and its overall performance forecast to be “below management’s previous expectations”.
In addition, following a review carried out by KPMG, the group said it will book an £854 million provision linked to certain UK and overseas contracts.
A total of £375m relates to the UK and £470m to overseas markets in the Middle East and Canada.
Philip Green, Carillion’s non-executive chairman, said action was needed to reduce the firm’s borrowing.
“We must take immediate action to accelerate the reduction in average net borrowing and are announcing a comprehensive programme of measures to address that, aimed at generating significant cashflow in the short-term,” Mr green said.
“In addition, we are also announcing that we are undertaking a thorough review of the business and the capital structure, and the options available to optimise value for the benefit of shareholders.”
The firm reported a 5% fall in pre-tax profits to £146.7m last year and has previously said the pace of new order intakes has slowed since the UK’s Brexit vote.
The group said it had also seen some delays in UK public spending decisions following the referendum, and added that low oil prices had hit customer spending in the Middle East.
Shares in Carillion plummeted by 35% in the immediate aftermath of the announcement yesterday as investors took flight.
Joe Brent, analyst at Liberum, said he expected the firm would have to raise cash to shore up its balance sheet.
He said: “Given the weaker profits, higher debt, need for restructuring, limited proceeds from disposals and working capital unwind in construction, we believe that Carillion will need to raise a significant amount of more money.”
The Wolverhampton-based group has a significant presence in Scotland, with its joint venture training centre in Glasgow welcoming its 1,000th construction apprentice early this month.
Shares closed the session down 75p, or 39.04%, at 117.10p last night.