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nsucurrent.com May 21, 2018


Carillion: What is the government doing to help SMEs?

19 January 2018, 02:46 | Ruby West

Construction takes place on the Western Peripheral Route in Aberdeen Scotland Britain

Construction takes place on the Western Peripheral Route in Aberdeen Scotland Britain

Britain's government is under pressure from opposition parties to explain why ministers awarded construction company Carillion 1.3 billion pounds ($1.8 billion) of new contracts after it was known to be in financial difficulty.

Sheila Thomson, director of services at Perennial said: "The collapse of Carillion will affect a large number of small sub-contracted businesses, many of which were pro-actively encouraged by the government to get involved in these public sector contracts".

It is created to support the working capital needs of small businesses within Carillion's supply chain that may now be experiencing financial difficulty.

After Carillion's demise, Interserve is now the cheapest stock in the outsourcing sector, with the shares having fallen 76% in the last two years, and debt of around three times its earnings.

Interserve's shares plunged by more than 14 per cent on Wednesday morning, but recovered to being four per cent down at midday.

Interserve, which employs around 80,000 people worldwide, said it was updating the government on the company's progress with its turnaround plan.




Cabinet Office minister David Lidington defended the government's handling of the company.

United Kingdom construction and services company Carillion, which is involved in six projects in Ireland, collapsed on Monday after banks refused to lend it any more money.

The Cabinet Office has said that support services firm Interserve's position is not "comparable" to Carillion's despite the former's share price drop this week.

Interserve issued a profit warning in September, saying it was set to make huge losses on an energy-from-waste contract in Scotland. This remains the case and we expect our 2018 operating profit to be ahead of current market expectations and we continue to have constructive discussions with lenders over longer-term funding. While the company "clearly" has too much debt, there are businesses to sell and Liberum believes shareholders would support an equity raise.

But Joe Brent, an analyst at investment bank Liberum, said: "We believe Interserve is very different from Carillion".



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