Shares in troubled support services group Carillion fell 13.6% following the release of what interim CEO Keith Cochrane described as 'disappointing' interim results.
Underlying revenue was flat at £2.5bn, however restructuring and other exceptional costs (including Â£845m of pre-announced provisions against the construction services business) led the group to report a £1.2bn pre-tax loss.
On an underlying basis, pre-tax profits fell 40% to £50m as margins dipped from 4.9% to 3.5%. Carillion says this is due to the phasing of Public Private Partnership (PPP) disposals and trading contracts that have been provisioned against at zero margin.
New H1 orders plus probable orders were £2.6bn, with total orders plus probables stable at £16bn.
Also this half, the pension deficit fell by £76m to £587m, however average net debt rose by £108m to £694m and is expected to rise again, to between £825m and £850m, by year-end.
Looking ahead, Carillion expects results for the full year to be lower than current market expectations.
After undertaking a review of its contracts, there is no change to the previously announced provisions of £845m against construction contracts, however a further £200m has been written down against support services contracts.
The group is now aiming to raise £300m from asset sales, raised from the previous target of £125m. Discussions regarding the sales of Carillion's Canadian and UK Healthcare businesses are ongoing.
There are also plans afoot to become 'a lower risk, lower cost, higher quality business generating sustainable cash backed earnings'. This will mean improving cash flows and the balance sheet, as well as reducing costs. The group's initial cost reduction target is £75m per annum by mid-2019.
Carillion expects to incur further restructuring costs of between £75m and £100m in the second half.
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