Carillion issues profit warning amid debt woes

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Carillion is part of a joint venture that is building parts of the HS2 rail link

Construction firm Carillion has warned on profits again and says it expects to breach its financial covenants.

It said slower than expected asset sales and delays to a project in the Middle East meant annual profits would be “materially lower” than forecasts.

Carillion said it was in talks with stakeholders to repair its finances, which would include “some form of recapitalisation”.

This is the company’s third profit warning over the past 12 months.

“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,” interim chief executive Keith Cochrane said.

Carillion said it now expected average net borrowing in 2017 to be between £875m and £925m.

“Based on its latest forecasts… the board now expects a covenant breach as at 31 December 2017,” it said.

In July this year, shares in Carillion plunged after it had to write off £845m and its chief executive, Richard Howson, stepped down.

Despite this, the company was included in a joint venture that was awarded a contract to design and build part of the £56bn HS2 high speed rail link.

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