Carillion chief executive Richard Howson has been replaced ‘with immediate effect’ as the outsourcing giant reported worsening cash flows, increasing debt and a £845m writedown.
Around £375m of this writedown relates to UK Public Private Partnerships (PPP), the company revealed in a 2017 first-half trading update.
It announced that its operating profit would be lower than expectations, ‘primarily due to phasing of Public Private Partnerships (PPP) equity disposals, which are now expected to be in [the second half of the year]’.
Although Carillion declined to comment, the three PPP contracts in question are reported to be the Royal Liverpool Hospital PFI, a section of the Aberdeen Western Peripheral Route (AWPR) project and the Midland Metropolitan Hospital PF2.
The Royal Liverpool Hospital project and the section of AWPR that Carillion is involved with have both been subject to significant delays.
The firm said it had also suffered from ‘a higher than normal number of construction contracts completing and not being replaced by new contract starts’.
It said a deterioration in cash flows on a number of construction contracts had led its board to undertake ‘an enhanced review of all of the group’s material contracts’, as part of a wider balance sheet review.
This ‘resulted in an expected contract provision of £845m at 30 June 2017, of which £375m relates to the UK (majority three PPP projects) and £470m to overseas markets, the majority of which relates to exiting markets in the Middle East and Canada’.
Non-executive chairman Philip Green said increased debt had led the board to conclude that it ‘must take immediate action’.
‘Richard Howson has stepped down as group chief executive and from the board with immediate effect and Keith Cochrane, previously our senior independent non-executive director, will take over as interim group chief executive, while a search is underway for a new group chief executive,’ he said.
He added that Mr Cochrane had ‘considerable plc CEO experience’ and that Mr Howson would stay with the group ‘for up to one year to support the transition’.
In May the RMT union claimed that Carillion was planning job cuts and redundancies as a result of spending cuts from Network Rail.