Carillion hit by £200m of additional contract write-downs forcing government statement of support

by

Carillion said in July it would delay its half-year results until September (Source: Carillion)

Carillion today announced £200m of additional contract write-downs as beleaguered contractor grapples to resize its balance sheet.

Ministers leapt to the support of the firm, saying the government is "supportive" of the firm.

Shares fell as much as 20 per cent in opening trades.

Revenue was downgraded to between £4.6bn and £4.8bn from £4.8bn to £5.0bn and the firm estimated further costs to restructure the business could top £100m.

The firm revealed a £1.15bn loss for the half-year.

Today's write-downs relate to Carillion's support services business, seen by many as more secure than its construction arm. It was the latter which bore the brunt of its painful £845m write-down in July.

Interim chief exec Keith Cochrane said:

No one is in any doubt of the challenge that lies ahead.

A Cabinet Office spokesperson said: "Carillion is a major supplier to the government with a number of long-term contracts. The company has kept us informed of the steps it is taking to restructure the business. We remain supportive of their ongoing discussions with their stakeholders and await future updates on their progress."

Revealed: Carillion suitor sets sights on prized London listing

Carillion said it will write down the value of its UK and Canadian construction businesses by £134m. The firm said it has entered into discussions to sell its Canadian arm and its healthcare business in the UK.

But there was some hope of the firm. Carillion said it had agreed a £140m of further bank funding and reduce its £650m pension deficit by £80m, with the potential for a further reduction of the shortfall of £120m.

Cochrane said: "This is a disappointing set of results which reflects the issues we flagged in July and the additional £200m provision for our Support Services business that we have announced today. We now expect results for the full year to be lower than current market expectations.

Our objective is to be a lower risk, lower cost, higher quality business generating sustainable cash backed earnings. In the immediate short term, our focus is to complete the disposal programme, accelerate our action to take cost out of the business and get our balance sheet back to a place where it can support Carillion going forward.

He continued: "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."

Read more: Another day, another jump: Carillion shares rocket up a further fifth