Carillion wangles earlier start for new CEO

Embattled Carillion has negotiated an earlier start date for new chief executive, Andrew Davies, who will now begin work more than two months before he was expected.

The construction and outsourcing company, which last month released its third profit warning this year, had anticipated the former BAE Systems executive would start work on 2 April when his appointment was announced in late October.

But Davies, who since 2014 has been boss of construction group Wates, will now take up the role at Carillion on 22 January after some sweet-talking by chairman Philip Green.

Keith Cochrane, who was appointed as interim CEO after former boss Richard Howson resigned in the summer alongside a massive profit warning, will step down from his role but will stay on in an advisory capacity for a while to help smooth the transition.

Looking to reassure investors after seeing its shares fall more than 90% since July, Carillion highlighted that Davies "brings executive, strategic, turn around and leadership skills to the company as well as experience of complex public sector contracting in projects, support services and construction".

Chairman Green, who is an adviser to the Prime Minister on corporate responsibility, added: "We are very grateful to the board of Wates Group Ltd, and to James Wates CBE, their chairman, for their facilitation of Andrew's earlier appointment. It is a demonstration of how the sector is willing to cooperate and collaborate to ensure the long term sustainability of UK industry."

Last month's profit warning also revealed that the company expects to breach its debt covenants.

A combination of delays to certain public private partnership disposals, a slippage in the start date of a significant Middle East project and lower-than-expected margin improvements across a number of UK support services contracts have hit profits for the calendar year. While management have been focused on reducing costs, collecting cash, carrying out disposals and implementing the new operating model, average net debt is coming down slowly but not sufficiently to reach the target net debt to EBITDA ratio of between 1.0 to 1.5 times by the end of next year.

As a result, the board and lenders have agreed that "some form of recapitalisation" is needed, possibly involving a restructuring of the balance sheet. Discussions with lenders have led to amendments to the relevant agreements to defer the test date for both the company's financial covenants from 31 December 2017 to 30 April 2018, by which time the new recapitalisation plan should be in place.