“Carillion horror show continues”, is how Nicholas Hyett, equity analyst at Hargreaves Lansdown, describes the latest developments at the construction firm.
Some sort of recapitalisation was inevitable, but a possible debt for equity swap, with debt even higher than the group had anticipated, is probably as bad as anyone would have guessed.
The group has made some progress on asset sales, and it sounds like some cost savings are being made. It’s not what the group expected though, and it’s clearly not enough. It’s also probably irrelevant given the state of the balance sheet, with net debt already many multiples of the group’s market capitalisation.
Carillion shares plunge after third profit warning
Carillion shares plunged as much as 60% in early trading after the construction group involved in HS2 and Battersea Power Station issued its third profit warning of the year:
The group now expects that a combination of delays to certain PPP disposals, a slippage in the commencement date of a significant project in the Middle East and lower than expected margin improvements across a small number of UK Support Services contracts, partially offset by cost savings initiatives realised in the fourth quarter, will lead to profits for the year to 31 December 2017 being materially lower than current market expectations.
Shares are now down 37% at 26p.
The company, which is struggling to cope with a large debt pile and badly-performing contracts, said the board expects a covenant breach at the end of December and will need to implement a recapitalisation plan.
Keith Cochrane, interim chief executive, 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 and rebuild the balance sheet.
Constructive dialogue is continuing with our financial stakeholders, and I am grateful for their support. I remain focused on addressing this issue before my successor, Andrew Davies, takes up the role on 2 April 2018.
Love it or hate it, Black Friday is almost upon us.
In recent years Britain has embraced the American tradition where retailers slash prices the day after Thanksgiving.
British shoppers are expected to spend £10.1bn in the week of Black Friday, which falls on 24 November this year.
Just in case you’re interested, here is a piece we’ve done on some of the best deals going this year:
News of Greggs controversial decision to replace the baby Jesus with a sausage roll in an advent calendar has rippled across the Atlantic:
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Draghi concludes by returning to one of his favourite themes, saying eurozone governments should do their bit to secure future economic stability by getting their “fiscal houses in order”.
The ECB will do our bit, you do yours, is the message:
ECB’s mandate is framed in terms of price stability, as this is the best contribution that we can make to the welfare of citizens. Ensuring price stability is a precondition for the economy to be able to grow along a balanced path that can be sustained in the long run. This is the guiding principle of all our monetary policy decisions.
With the recovery ongoing, now is the right moment for the euro area to address further challenges to stability. This means actively putting our fiscal houses in order and building up buffers for the future – not just waiting for growth to gradually reduce debt.
It means implementing structural reforms that will allow our economies to converge and grow at higher speeds over the long term. And it means addressing the remaining gaps in the institutional architecture of our monetary union.