Collapsed UK contractor Carillion "aggressively managed" its reported debt and working capital to make its accounts look better, according to a suppressed business review Carillion’s board itself commissioned to show lenders, but didn’t in the end because it was deemed "too harsh".
The review, carried out by FTI Consulting in September 2017, has now been published by a committee of MPs, whose chairman, Frank Field, said it showed "gross failings".
Carillion, the UK’s second-largest construction company, collapsed under a debt pile of £1.5bn on 15 January.
MPs have now released FTI’s draft review, which was originally intended to be presented to would-be lenders.
The review said that income had been brought forward and payments postponed in order to make the company’s accounts seem better last year.
To help with cash flow, Carillion quadrupled the time subcontractors had to wait for payment, from 30 days to four months, the review noted. Some of those subcontractors are nore struggling to survive.
The review revealed that Carillion kept taking on debt to compensate for its failure to turn reported profits into cash.
"Rather than addressing the underlying challenges facing the group in respect of problem contracts and the strength of the balance sheet, transactions were entered into, and accounting treatments and assumptions made, to enhance the reported profitability and net debt position of the group," the review said.
Not surprisingly, perhaps, FTI’s review was never used, as Carillion directors deemed its findings "too harsh".
Labour MP and committee co-chair Frank Field said the review showed the "gross failings of corporate governance and accounting" at Carillion.
Last week, MPs kept up their attack on Carillion’s management, calling directors "fantasists" for blaming heavy losses on the company’s sole Qatar project.
The work and pensions and business, energy and industrial strategy committees said new evidence submitted to their joint inquiry into the spectacular demise of the firm revealed "pervasive institutional failings".
Meanwhile, today the Official Receiver handling Carillion’s liquidation said a further 150 Carillion ex-employees will transfer to new suppliers who have picked up contracts that Carillion had been delivering.
Close to half (45%) of the pre-liquidation workforce have now been found secure ongoing employment, but also today another 87 employees were made redundant.
In total, to date 8,216 jobs have been saved and 1,458 jobs have been made redundant through the liquidation.
Image: Carillion, the UK’s second-largest construction company, collapsed under a debt pile of £1.5bn on 15 January 2018 (Carillion)