A worker uses a mobile phone outside the gates of a construction site for new apartment blocks built by Carillion Plc in the Canning Town district of London, U.K., on Friday, July 25, 2014. Balfour Beatty, the U.K. construction company whose chief quit in May after predicting a profit drop, is in merger talks with rival Carillion to form the country's biggest builder with a market valuation of about 3 billion pounds ($5 billion). Photographer: Simon Dawson/Bloomberg
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Carillion has built some of Britain’s grandest projects — the Royal Opera House, the Channel tunnel and the Tate Modern gallery. But now the company’s own foundations appear to be crumbling.

The construction and support services group on Monday revealed that soaring debts and an £845m hit on a number of contracts forced it to replace its chief executive, Richard Howson, and issue a profit warning.

Keith Cochrane, a former chief executive of oil and gas engineer, Weir Group, who has taken over as interim boss, said “no option is off the table” as the company looked to prop up its balance sheet by selling off parts of the business and cancelling the dividend.

Carillion, which employs 50,000 staff worldwide, has been grappling with rising debt since its acquisition in 2011 of Eaga, an energy services business that sold solar panels and insulation.

Its troubles were compounded by the construction downturn in the UK. The company has been shifting to less risky support services contracts, such as facilities management, which now accounts for almost two-thirds of revenues. But almost all of the losses have come from its building arm, which was hit by a squeeze on contracts and margins following the financial crisis.

Carillion signalled in March that profits were coming under pressure and it was becoming harder to predict revenues.

But Howard Seymour, an analyst at Numis, says the news “was just much worse than anyone expected”.

Carillon had commissioned a review by accountancy firm KPMG into 58 contracts after it became concerned over late payments. The results of the review, released on Saturday, identified four problem contracts — three in the UK and one in the Middle East, prompting Monday’s announcement.

The statement was the latest in a string of profit warnings to hit the UK support services and construction sector. Carillion’s bigger construction rival, Balfour Beatty, and the outsourcing group, Serco, struggled after running up debt and taking on lossmaking contracts. Both are now being rehabilitated under new management.

Carillon on Monday also warned that it had been hit by delays to contract payments on public-private partnerships in the UK, where prices are agreed ahead of time and vulnerable to design changes, as well as rising materials and labour costs.

Three projects — the Midland Metropolitan Hospital in Smethwick, Merseyside’s Royal Liverpool Hospital, and an Aberdeen road project — are understood to make up the bulk of the £375m writedown that came from the UK business. Carillion is pulling out of public-private partnership deals altogether as a result.

“These problems have been amplified by Brexit,” says Stephen Rawlinson, an analyst at Applied Value, who added that there were “specific issues to Carillion but what’s brought it to a head is industry wide-concerns such as delays to signing contracts”.

The remaining £470m of the writedown came from overseas markets, largely Carillion’s decision to withdraw from its Canadian and Middle Eastern ventures, where the company had sought to offset the slowdown in UK construction.

Carillion said it would pull out of construction projects in Qatar, Saudi Arabia and Egypt after a decline in the oil price caused those countries to stall projects and stretch payments on key contracts. It added that it would only pursue jobs in that region in future “via lower-risk procurement routes”.

The business cut its guidance on revenues this year, while pledging to raise £125m through “non-core” sell-offs over the next 12 months in an attempt to ease the pressure on the balance sheet. Its net debt has soared from £42m in 2010 to £695m in the first half of 2017.

But Joe Brent, analyst at Liberum, says Carillion would need to raise a “significant amount” of money given the weaker profit, higher debt, the need to restructure and the limited proceeds from disposals. “We are not sure that Carillion has the funds to restructure,” he says.

Analysts speculate that Carillion — which three years ago tried and failed to buy Balfour — was now vulnerable to a takeover. Britain’s decision to leave the EU and the depreciation of the pound has already prompted some activity in the sector, including engineering firm WS Atkins’ £2.1bn takeover by Canadian rival SNC-Lavalin.

Suitors for Carillion could include Balfour, which returned to profit in 2016, France’s Sodexo or Spain’s Ferrovial, they say.

“In our view, the group would need to raise a significant amount — £500m plus — to restore stability,” says Andrew Gibb, analyst at RBC. “And in the near term, we would expect others to be running the slide rule over the business.”

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