LONDON: The chief executive of Carillion has stepped down as the Middle East construction slowdown hit home for one of Britain’s biggest builders.
The contractor said it would pull out of Saudi Arabia, Egypt and Qatar as the weak oil price slows construction spending across the Middle East. The stock plunged as it warned on full-year profits and took a provision of £845 million ($1.1 billion).
Philip Green, Carillion non-executive chairman, said: “We are undertaking a thorough review of the business and the capital structure, and the options available to optimize value for the benefit of shareholders.”
Carillion said that Chief Executive Richard Howson would step down and Non-Executive Director Keith Cochrane would become interim chief executive.
Carillion is one of the Middle East’s biggest construction and support services companies, having worked on projects such as the Dubai Canal and Oman’s Royal Opera House. But like other international construction groups that have either sold or reduced their regional businesses, it has suffered from a construction spending slowdown that has accompanied two years of falling oil prices.
The contractor did not say how many jobs would be lost following its withdrawal from three major Middle East construction markets. Carillion said on Monday that it would need to take immediate action to accelerate the reduction in average net borrowing while generating significant cashflow in the short term.
As part of that process, it said it had raised £12.8 million from the disposal of half of the economic interest in its Oman unit, Carillion Alawi.
Analysts at investment banking firm Jeffries said they expected the contractor to raise cash later in the year.
Carillion said it would only undertake future construction work on “a highly selective basis” and via lower-risk procurement routes.”
Carillion reported total contract provisions of £845 million at the end of last month — of which £375 million relates to the UK and £470 million to overseas markets, the majority of which relates to exiting markets in the Middle East and Canada.
That led the builder to revise its full-year earnings guidance with revenues expected to be in the range of £4.8 billion to £5 billion and overall performance expected to be below earlier expectations.
Carillion expects to raise a further £125 million over the next 12 months from exiting non-core businesses. It said it would also suspend dividends this year, resulting in cash saving of about £80 million. The company said it would also withdraw from public-private partnerships in the construction sector.
Carillion, along with rival Balfour Beatty was well known for its work in privately financed construction projects. The procurement method, where builders team up with finance partners to fund major construction projects in return for an operating concession was, expected to become popular in the Middle East as an alternative to traditionally procured contractors.
But it has failed to gain traction in most of the region’s major economies, which still rely on traditional contract forms and competitive tenders to award major infrastructure projects.
Carillion shares fell 39 percent to 117 pence on Monday.