There was more bad news for UK construction giant Carillion this morning when it issued its third profits warning in five months and said it would breach its debt covenants.
Shares in the company tumbled 44% in early trading to 23.5p on the news. They have already fallen more than 90% in the past year.
The contracting and services firm said full-year profits would be materially lower than current market expectations after delays to public private partnership disposals, a later start date for a large Middle East project, and lower margin improvements across some UK outsourcing contracts.
The board said that with a rise in net debts to between £875m and £925m it expected to breach its financial covenants by the end of the year.
Interim chief executive Keith Cochrane said: "Whilst we continue to target cash collections, reduce costs, execute disposals and focus on delivering for our customers, it is clear that significant challenges remain and more needs to be done to reduce net debt.
"Constructive dialogue is continuing with our financial stakeholders to rebuild the Group’s balance sheet, and I am grateful for their support."
The unwelcome revelation today means the new chief executive, Andrew Davies, who is joining from rival contractor Wates, faces an even bigger challenge when he takes up his role on 2 April 2018.
There was some good news for Carillion this week when it announced a major contract win in Oman: a £240m hospital project in Salalah awarded to a 50:50 joint venture awarded to Carillion Alawi.
But elsewhere in the Middle East Carillion has had difficulties. It is reported to be chasing £200m in payments for a major development in Doha, Qatar, and it wants to exit Qatar altogether, as well as Saudi Arabia and Egypt.
Today the company said it was considering further options to cut debt and get control of its balance sheet. "This will require some form of recapitalisation, which could involve a restructuring of the balance sheet," it said.
The firm’s travails came to light in July when it issued a shock profits warning and said it needed to keep £895m in reserve to cover project liabilities.
The news worsened in September when the company reported a £1.15 billion pre-tax loss, warned that full-year results would be lower than market expectations and said that it expected net debt to be between £825m and £850m.
Image: "Significant challenges remain," said interim chief executive Keth Cochrane (Carillion)