Wolverhampton-based Carillion's half-year losses soar past £1 billion

Carillion, which has around 43,000 staff worldwide and 400 at its headquarters in Wolverhampton, has been thrown into crisis since a hefty profit warning in July, which sent its shares tumbling by more than 70% in one week.

On Friday, the firm said that pre-tax losses for the six months to June 30 came in at a staggering £1.15 billion as it was dragged down by series of restructuring charges.

This included an £845 million write down relating to construction contracts and a goodwill impairment charge of £134 million linked to construction activities in the UK and Canada.

It has also made a fresh £200 million provision for support services contracts.

As a result, Carillion said that full-year results will be lower than current market expectations with total revenue expected to come in between £4.6 billion and £4.8 billion, down from £4.8 billion to £5 billion.

On an underlying basis, pre-tax profit plunged 40% to £50 million.

Interim boss Keith Cochrane described the results as "disappointing".

He said: "This is a disappointing set of results which reflects the issues we flagged in July. We now expect results for the full year to be lower than current market expectations.

"No one is in any doubt of the challenge that lies ahead."

In a briefing later, Mr Cochrane said a review carried out since July had revealed Carillion was "too complex" and had been hit by "a perfect storm", with half the £845m construction black hole centred on just four "challenging" contracts.

He said 'self-help' measures would included halving the number of layers of management, with the top executive team reduced from nine to six and the next layer cut from 52 to 35. The company is getting out of PPP contract work and is becoming more choosy in the work it takes on. This has seen it slash £10bn from its pipeline of contracts it was considering bidding for.

But Mr Cochrane warned that the turnaround of the business "won't be a quick fix", predicting it could take three to five years.

Carillion is a major supplier to the Government with a number of long-term contracts and was named among the firms awarded deals for the building of phase one of the HS2 rail line.

A Government spokesman said: "The company has kept us informed of the steps it is taking to restructure the business. We remain supportive of their ongoing discussions with their stakeholders and await future updates on their progress."

Carillion was formed when it split off from parent company Tarmac in 1999 but has always retained its headquarters in Wolverhampton, moving into what is now Carillion House on the Ring Road St Marks in 2008.

July's profit shock saw chief executive Richard Howson step down as the group said it would need to bolster its balance sheet and was struggling to stay within its borrowing limits.

Full-year net debt is forecast to come in at between £825 million and £850 million.

Since July, it has also parted company with its finance chief and announced a raft of senior management changes.

The group has previously blamed poor orders on some delays in UK public spending decisions following the EU referendum, while low oil prices had hit customer spending in the Middle East.

The group's battered share price was given a reprieve earlier this week when reports surfaced a Middle East investor is planning a takeover bid for the group.

An unnamed Middle East construction firm is understood to be lining up a potential offer for Carillion in the wake of its recent dramatic share price falls.

The rumoured bid plans come after recent reports the company was looking to sell its Middle East operations, with a raft of local firms said to have been interested.

Friday's interim results included an update on its group-wide review as it battles for survival.

Mr Cochrane added: "The strategic review that we launched in July has enabled us to get a firm handle on the group's problems and we have implemented a clear plan to address them.

"Our objective is to be a lower risk, lower cost, higher quality business generating sustainable cash backed earnings. In the immediate short term, our focus is to complete the disposal programme, accelerate our action to take cost out of the business and get our balance sheet back to a place where it can support Carillion going forward."

To this end, Carillon said that discussions are ongoing regarding sales of its business in Canada and the UK healthcare arm.