Carillion squashes talk of £400m write-down

Carillion has scotched a story that appeared in the Sunday Telegraph which suggested that a £400m write-down to net assets is in the pipeline.

“Not true,” said a spokesman. “We issued a statement on the Stock Exchange this morning to say that there is no change to anything. It was a non-story.”

Everything in Carillion’s announcement to the city has been aired before, he pointed out. The clarification highlighted that:

• Restructuring costs as a result of the Alfred McAlpine acquisition will run to £30m
• Progress is being made towards delivering the £30m-a-year cost saving it expects to achieve from the McAlpine acquisition
• 60% of the above have now been identified
• the group is on track to meet its objective of bringing net debt down to £300m by the year-end.

When Carillion bought Mowlem it took a guess at what it thought the balance sheet adjustment would be, and aired this figure.

Once Mowlem was actually owned, it became an obligation of Carillion’s directors to accept or alter what it subsequently found within the acquired business. Such changes could be made within one year of the date of acquisition without impact on the profit-and-loss account.

When the recommended offer for Mowlem went in, Carillion thought at that time that Mowlem’s figures would need adjusting by £120m.

But once acquired, and time having moved on by four months, some of the finances on Mowlem’s big projects had “gone south big-time”. The result was that Carillion made a further adjustment of £80m.

Carillion points out the McAlpine acquisition was different from Mowlem in two ways:

• McAlpine had no big contracts, such as Mowlem’s £400m Dublin port tunnel
• there have been no financial surprises and what was found during due diligence has not needed subsequent adjustment.

The Sunday Telegraph’s £400m tally of hits that Carillion faced were said to include:

• £100m reduction in the contract “settlements” anticipated from some of McAlpine’s historic jobs
• £30m write-off against one of the two groups’ IT systems
• £183m goodwill adjustment
• £30m restructuring costs
• £50m to make up McAlpine’s pension fund deficit.