Carillion looks to restore lost confidence after shares slide 40%

For a company famed for its construction prowess, ironically it is now Carillion that is looking to rebuild itself.

After a devastating day on the markets its reputation is in tatters, with investors shunning it like the plague.

If it was hoping the new day would herald improved fortunes then it was wrong, as shares slid more than 10% in early trading.

The Wolverhampton-based group ended a turbulent day yesterday with shares down almost 40% as institutional investors looked to better prospects elsewhere.

The day began badly when it announced that chief executive Richard Howson was leaving his post, leaving stand-in Keith Cochrane to try and fend off the flack.

The true scale of the problems emerged when a trading update revealed that the company was set to take a £845m hit as a result of over-optimistic contracts.

Of these, £375m related to three PPP projects in the UK and £470m to overseas markets, the majority of which related to exiting markets in the Middle East and Canada.

The devastation was underlined in one paragraph, which stated: “As a result of the enhanced contracts review and (various) strategic actions, reflecting difficult markets and exits from certain territories, Carillion is issuing revised full-year guidance, with revenue now expected to be between £4.8bn and £5.0bn and overall performance expected to be below management’s previous expectations.”

Panic ensued.

Steps taken towards damage limitation include an exit from construction PPP projects and an exit from construction markets in Qatar, Saudi Arabia and Egypt.

In future, it said it would only be undertaking construction work on a highly selective basis and via lower-risk procurement routes.

However, this was not enough to satisfy those who had previously pledged their support for the business.

It will now be left to Mr Cochrane to implement short term measures while a full-time successor to Mr Howson is found.

Mr Cochrane was appointed to the Carillion board in July 2015 and has served as the Senior Independent Non-Executive Director since September 2015. He has also served as a member of the Audit, Remuneration, Nomination, Sustainability and Business Integrity Committees.

Aged 52, he is the former chief executive of The Weir Group. He joined Weir as Finance Director in July 2006 and was appointed chief executive in November 2009, standing down in 2016.  Following a number of years at Arthur Andersen, he joined Stagecoach Group plc in 1993, where he became the group’s Finance Director in 1996 and chief executive in 2000. He joined Scottish Power in 2003 and served as Director of Group Finance.

In 2015, he was appointed as the UK Government’s Lead Non-Executive Director for the Scotland Office and Office of the Advocate General. He is a Chartered Accountant and a member of the Institute of Chartered Accountants of Scotland. He was elected a Fellow of the Royal Society of Edinburgh and appointed CBE in 2016.

A man for a crisis perhaps.

He will be assisted by Tony Blair’s former political secretary and Women’s Minister, Baroness Sally Morgan, who will need every ounce of her experience in the bear-pit of UK politics to help steer the company to calmer waters.

Only appointed as a new Non-Executive Director at the beginning of this month, in what constitutes a true baptism of fire, she has now been appointed as the Senior Non-Executive with immediate effect.

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