We don’t support this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

Carillion - Recapitalisation and profit downgrade

Nicholas Hyett | 17 November 2017 | A A A
Carillion - Recapitalisation and profit downgrade

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Carillion plc Ordinary 50p

Sell: 14.27 | Buy: 14.27 | Change 0.00 (0.00%)
Chart View factsheet

Market closed | Prices delayed by at least 15 minutes | Switch to live prices

In a brief trading update Carillion announced a recapitalisation, downgraded profit expectations, revealed higher than anticipated net debt and said it expected to be in breach of covenants by the end of the year. The group is in discussions to defer its covenant test date by fourth months.

The shares fell 35% in early trading.

Recapitalisation - Carillion no longer expects to be able to achieve its net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) target of 1-1.5 times by the end of 2018. As a result, some form of recapitalisation will be required. This could involve a restructuring of the balance sheet, and is expected to take place during the first quarter of 2018.

Profit downgrade - The group now expects profits for the year to be materially lower than current market expectations. That follows delays to the sale of some PPP contracts, slippage in the start of a significant project in the Middle East and lower than expected margin improvements in UK Support Services. This has been partially offset by cost savings realised in the fourth quarter.

Net debt - Full year average net debt is now expected to be between £875m and £925m.

Breach of Covenants - As a result of the above, Carillion now expects to be in breach of covenants at the end of the year and is seeking to defer its testing date to the end of April 2018.

Interim CEO 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 and rebuild the balance sheet. Constructive dialogue is continuing with our financial stakeholders, and I am grateful for their support."

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.