Carillion, a very large construction company has gone into liquidation. It would seem they have been struggling for a long time as their share price plummeted from over 200p to 14p in the past year. The trouble started after Carillion lost money on large contracts and in turn ran up vast debts.
All the public services run by Carillion will be funded by the government so some of the employees will continue working. Government minister, David Lidington said; “All employees should keep coming to work, you will continue to get paid. Staff that are engaged on public sector contracts still have important work to do.”
Carillion is a public British multinational facilities management and construction services company whose HQ is based in Wolverhampton. They are involved in major projects including the HS2 (high-speed rail line), maintaining schools, prisons and Ministry of Defence housing. Carillion has a long history: it was founded in July 1999 after a demerger from Tarmac, which was founded in 1903.
On 10 July 2017, Carillion issued a trading update that referred to a £845 million impairment charge in its construction services division. This in turn caused their share price to drop from 192p to 45p by the end of August. In real terms, its £1 billion market cap was reduced to £250 million. At the end of September, their 6 months financial statement ending 30-June-2017 displayed losses of £1.15 billion. At the same time, Carillion’s debts grew to just under £1 billion. All this equated to a serious financial struggle, with the only saviour likely to be a takeover. That unfortunately never materialised.
Many suppliers to the UK’s second largest construction company will be sweating as to whether they will be paid. Others will be waiting for their credit insurers to pay claims to cover these losses they will ultimately suffer.
Regarding the construction sector, many of Carillion’s competitors will now be looking to pick up the jobs Carillion will not be able to continue. This should help the winners gain new sources of income and increase their productivity and hopefully, even more importantly, their profitability. They will, however, be wary of falling into the trap that has brought Carillion to its knees.
Credit insurers will be paying claims against the losses to those companies that have had the foresight to take out credit insurance policies. Once again, this high-profile collapse shows the importance of credit insurance. In these uncertain times, no company is risk free. As we’ve said before, the bigger they are the harder they fall.
For more information about credit insurance and how it can protect your business and its profits, please do not hesitate to contact our friendly, professional team. We can provide you with a no-obligation credit insurance quote and provide a managed service to make your business life less stressful.