Julia Irvine 3 Jan 2018 11:40am

Troubled Carillion faces regulatory investigation

City regulator the Financial Conduct Authority (FCA) is investigating troubled UK construction and integrated services group Carillion

In a statement released to the London Stock Exchange this morning, the former FTSE 250 company – which saw its share price crash by 93% during 2017 following a series of profit warnings – disclosed the investigation which it said was “in connection with the timeliness and content of announcements” it had made between 7 December 2016 and 10 July 2017.

Carillion added that it was co-operating fully with the FCA.

In July, the company announced that, following a review of its material contracts with the support of auditors KPMG, it had written off £845m at 30 June. Of this £375m related to the UK and £470m to Carillion’s markets in Canada and the Middle East.

As a result, it warned it was issuing a revised full-year forecast, with revenue likely to be down to between £4.8bn and £5bn and overall performance below management’s previous expectations.

The crisis led to the resignation of Carillion’s chief executive Richard Howson, to be replaced by Sccottish chartered accountant Keith Cochrane as interim group CEO.

Two months later Carillion announced that group finance director Zafar Khan had left the company with immediate effect and brought in Emma Mercer, the then finance director of Carillion’s UK construction business in his place.

It appointed Big Four firm EY to advise on its strategic review, focusing on cost reduction and cash collection, and also brought in EY partner and restructuring expert Lee Watson on secondment as chief transformation officer.

In November, the group was forced to issue another profit warning and disclose that it expected to be in breach of its financial covenants by 31 December.

Since then, its financial stakeholders have agreed to defer testing the financial covenants until the end of April 2018 and the group is now discussing with them its options to reduce net debt and recapitalise and restructure its balance sheet.

The board also received a boost with the news that, thanks to the board of Wates Group, its new chief executive, Andrew Davies, will arrive in post on 22 January rather than at the beginning of April. He has been CEO of Wates for the last three years.

Before joining Wates, Davies spent 28 years at BAE Systems in a number of senior roles. He brings with him executive, strategic, turn around and leadership skills, along with experience of complex public sector contracting in projects, support services and construction.

Cochrane will step down from the board but will remain with Carillion in an advisory capacity to ensure a smooth changeover.