Galliford raising £158m to cover Carillion project costs
Construction group Galliford Try is raising £158 million in a share sale to cover the costs to the company from the collapse of Carillion.
Most of the money is to cover the cost of delays and picking up Carillion's share of work on the Aberdeen bypass project – a joint venture between the two builders and Balfour Beatty.
The 28-mile bypass has a price tag of £745m and is due for completion in late autumn – around a year later than originally hoped.
Galliford Try is aiming to raise £157.6 million with a rights issue, selling new shares. Although it is trading well, it revealed in May last year it revealed £98m of costs from some construction contracts, most of it due to the Aberdeen bypass.
When Wolverhampton-based Carillion went into compulsory liquidation in January, Galliford Try said it expected it would add £30m-£40m to its costs.
Under joint venture rules partners have to complete the contract if one member fails, and fund any shortfall in finance.
Galliford Try says the over-run costs on the bypass, compounded by Carillion's compulsory liquidation, are expected in total to absorb more than £150m of the group's cash.
Although the company says it has the financial resources to cope with this, it would mean diverting funds from its Linden Homes and Partnerships & Regeneration businesses, reducing their ability to capitalise on current growth opportunities, particularly in the housebuilding market.
The company also says it has moved away from high-risk construction work and fixed-price contracts.
Chief executive Peter Truscott said: "Following the group's strong financial and operational performance in the first half, with revenue growth across all three of our businesses and excellent progress against our 2021 strategy, we are pleased today to announce the terms of the group's fully underwritten rights Issue.
"We see excellent opportunities and demand for both our private and affordable homes businesses and our construction business continues to benefit from the current and planned investment in the nation's infrastructure.
"The rights Issue proceeds will strengthen the group's balance sheet and ensure that the group's businesses are in a position, with the appropriate capital, to deliver on their respective growth opportunities in line with the group's stated 2021 strategy."
