Shares in construction firm Galliford Try slump after £25m Carillion hit

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The company says it will have to raise more capital to cover the costs of a joint venture project after Carillion’s demise.

Workers on a road construction

Shares in construction firm Galliford Try have slumped by a fifth after it revealed a £25m hit from the collapse of Carillion.

It also revealed that it needed to raise £150m from investors in coming weeks to help meet its cash commitments on a joint venture it had been engaged on with the failed company.

The two firms were involved in a project to deliver the Aberdeen Western Peripheral Route (AWPR), a major road project that is currently under way in Scotland.

The road, which will be 58km (36 miles) long and is slated to open this summer, is expected to cost £745m overall.

Galliford Try, Carillion and fellow construction firm Balfour Beatty were contracted to build the bypass for £550m but Carillion’s demise has left the two other companies facing additional costs.

Many of the contracts held by Carillion when it went into liquidation last month, including key infrastructure projects such as parts of the HS2 rail line, were joint ventures with other firms.

This means that, in many cases, the other companies partnered with Carillion will be liable for completing the work and will have to foot the bill themselves.

Carillion sign
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Carillion collapsed into liquidation in January under a £1.3bn debt mountain

Galliford Try reported an exceptional charge of £25m as a result of the AWPR project in its half-yearly financial results, which pushed the firm’s profits down significantly.

The company said its profit before tax was down 11% in the last six months of 2017 compared to the same period the year before.

If not for the exceptional charge its profit before tax would have gone up by 29%.

The firm has announced it will raise an extra £150m worth of capital in an attempt to offset the “additional financial obligations arising from [the AWPR]contract”.

Galliford Try chief executive Peter Truscott said it had a “solid foundation to build on” amid “strong fundamentals for the housing market” though acknowledging political uncertainty.

Shares fell 19%.

Elsewhere, the fall-out from Carillion’s collapse saw outsourcing giant Serco secure an £18m discount on a deal agreed in December to buy a raft of healthcare contracts from the company.

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It said it would now pay £29.7m instead of £47.7m, reflecting the facts that the contracts had no working capital and came with none of the usual warranties in place as a result of Carillion’s failure.

However the potential revenues and profitability of the projects remained “substantially unchanged”, Serco said.

Carillion sign

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