Carillion posted a pre-tax loss of £1.15bn and announced another £200m of write downs in the first six months of the year.
The further write downs compounded what Laith Khalaf, senior analyst at Hargreaves Lansdown, called the firm’s “£845m black hole identified earlier in the summer”, referring to provisions set aside for exiting underperforming contracts.
Markets were decidedly unimpressed with the long-anticipated update from the firm, which had been delayed following a dismal trading update in July.
Shares in the firm opened 14% lower, falling from £0.64p to £0.54p.
This year alone, the British construction company’s shares have fallen close to 80%.
During the period, the group reported that pre-tax profit was down 40% to £50m and that total revenue was flat at £2.5bn.
Meanwhile, the firm’s debt pile has continued to grow, nearly doubling year-on-year from £291m to £571m.
“They say misery loves company and a second profit warning from Carillion in the space of few months suggests there is some truth in that adage,” said Khalaf.
“The company’s latest missive to the stock market doesn’t make for pretty reading, but then no turnaround ever got initiated from a position of strength.”
The firm’s interim chief executive Keith Cochrane also admitted “no one is in any doubt of the challenge that lies ahead”, while adding the group has got a handle on its major problems since its strategic review in July.
The firm has set its sights on an initial cost reduction target of £75m by mid-2019 and is increasing its sale of assets from £125m to £300m in an attempt to get its balance sheet back on track.
It is also working towards cutting its pension deficit by £80m by pulling discretionary increases in pension payments, which is bad news for Carillion employees, according to Khalaf.
“It looks like Carillion employees, past and present, are going to take some of the strain of the current crisis enveloping the company, which is planning to water down their pension benefits to rise at a lower rate of inflation, subject to trustee approval.
“This would bring members into line with the public sector and some other private sector schemes, though such changes are never welcome, particularly when they are prompted by disappointing business performance.”
