FRC to investigate two Carillion directors over financial reporting

The Financial Reporting Council (FRC) has commenced an investigation into the conduct of two former group finance directors at Carillion.

The accounting watchdog said today that the investigation of both Richard Adam and Zafar Khan relates to the preparation and approval of financial statements released by the collapse contractor, namely for the years ended 31 December 2014, 2015 and 2016, and the six months ended 30 June 2017.

The preparation and reporting of other financial information during the period 2014-2017 will also be under scrutiny.

The FRC is already investigating KPMG’s audit of the financial statements of Carillion having launched a separate probe in January.

The Insolvency Service is also investigating the conduct of directors employed at the point at which the outsourcing giant collapsed, but “also of any individuals who were previously directors”, following a request from business secretary Greg Clark.

The FRC said it is liaising with UK’s Official Receiver, the Financial Conduct Authority, the Insolvency Service and The Pensions Regulator to ensure a “joined-up approach” to the investigation of matters arising from the collapse of Carillion.

AWPR workers ‘had to pay £100 to receive wages’, claims Scottish Labour

Workers on the Aberdeen Western Peripheral Route (AWPR) had to pay to £100 receive their wages in the wake of the collapse of Carillion, Scottish Labour has claimed.

Speaking at First Minister’s Questions this week, party leader Richard Leonard told parliament the party has evidence of umbrella companies charging workers to access their wages on the flagship Aberdeen bypass.

According to Mr Leonard, the practice sees money deducted from payslips and described as a ‘company margin’.

He also told how construction companies in Scotland use umbrella companies, including employment agencies, to pay staff working on government contracts, which allows them to dodge tax, cut costs and exploit workers.

In the case of the AWPR, workers employed on constructing the route have been charged to be paid their wages from a number of umbrella firms, including DLP Payroll Solutions, Labour added.

Workers have shared their payslips with Unite the Union, showing the “margin charge”.

Scottish Labour leader Richard Leonard said: “The SNP government is handing over millions of pounds of public money to these companies and they are treating workers shamefully.

“Redacted pay slips from workers on the flagship Aberdeen Western Peripheral Route project show that they were being charged for the privilege of being paid.

“Workers have been blatantly exploited on a contract funded by the SNP government. SNP ministers now must take steps to ensure this never happens again.”

A Transport Scotland spokesman said project bosses were not aware of it happening but had launched an urgent investigation.

87 more Carillion workers made redundant

Another 87 former workers have lost their jobs at collapsed construction giant Carillion, taking the total so far to almost 1,460.

A spokesperson for the Official Receiver, which is the body handling the construction and services firm’s liquidation, said on Monday that a further 150 employees had now been transferred to suppliers that had picked up contracts previously held by Carillion.

That means that 8,216 employees, 45% of the pre-liquidation workforce, have now been given “secure ongoing employment” since the company was placed into liquidation in January.

However the latest round of redundancies means that a total of 1,458 individuals have now lost their jobs as a result of the firm’s failure.

A spokesperson for the Official Receiver said: “A further 150 employees will transfer to new suppliers who have picked up contracts that Carillion had been delivering. Close to half (45%) of the pre-liquidation workforce have now been found secure ongoing employment.

“Regrettably we have been unable to find ongoing employment for a further 87 employees who will leave the business later this week. Jobcentre Plus’ RapidResponse Service will provide them with every support to find new work and they are also entitled to make a claim for statutory redundancy payments.

“Discussions with potential purchasers continue. I am continuing to engage with staff, elected employee representatives and unions to keep them informed as these arrangements are confirmed.”

Former Carillion finance director sold all his shares as soon as he could

Frank Field

MPs have slammed the former finance director of collapsed construction giant Carillion for “dumping” his shares in the troubled company at the “first possible moment”.

Richard Adam was singled out for the cynical move by the Work and Pensions and Business Select Committees, which currently carrying out a joint inquires into Carillion’s demise.

They have published responses from Mr Adam, firm’s former financial director, and his successor Zafar Khan.

The MP’s findings show that Mr Adam retired at the end of December 2016 and, on March 1 last year, sold his existing shareholding for £534,000, including performance awards of £277,000 for 2013 to 2015, which vested on his retirement.

He then sold his longterm incentive plan awards for 2014 on May 8, 2017, the day they vested, for £242,000.

In total, in March and May 2017, he sold shares worth £776,000, the committees found.

Mr Khan had his contract terminated last September after eight months in the job.

Frank Field, chairman of the Work and Pensions Select Committee, said: “Mr Adam presided over Carillion’s finances for a decade. He, more than anyone else, ought to know the merits of Carillion shares as a long-term investment in the light of his lengthy and lucrative tenure.

“His assessment? Dumping the last of his shares at the first possible moment because he is – with his own money at least – ‘risk averse’. What conclusions are we to draw from that?”

CITB hosts new careers page for former Carillion workers

The Construction Industry Training Board (CITB) is calling on construction employers to offer opportunities to the hundreds of Carillion workers who lost their jobs following the company’s collapse.

A new careers page has been set up on the CITB website, collating job opportunities in each nation and region, to help Carillion staff find new employment.

Currently there are over 100 employers across England, Scotland and Wales offering job opportunities in a wide range of roles. However, with more than 1,000 former Carillion workers having lost their jobs, many more are needed to keep these skilled people in the industry.

Employers to have offered roles in Scotland to date are Realm Construction Ltd, Hatrick-Bruce Ltd, D&A Tiling Ltd, Wates Group and GAP Group.

In the wake of Carillion’s closure, CITB CEO Sarah Beale has joined a UK government taskforce which aims to mitigate the effects of Carillion’s liquidations on the construction industry and the people involved.

CITB has worked with employers and training providers to help the 1400 former Carillion apprentices and, one month on, nearly 200 apprentices have been found college places and a further 725 have been placed with new firms.

Mark Noonan, industry relations director at CITB, said: “News that Carillion had ceased trading was a huge blow for all those involved and we’ve been working hard to minimise the impact. Now, hundreds of workers are looking for a new employer and with our forecast showing a need of 158,000 extra workers over the next five years, it’s vital we retain these highly skilled staff.

“The support shown by employers to date has been outstanding but there’s more to be done and I encourage employers to hire these talented people to help meet your demand.

“If you are a former Carillion worker who is no longer in employment, please go to the CITB website – there are hundreds of job opportunities being displayed each day and one might just be the perfect role for you.”

Carillion job losses top 1,000 as another 152 posts go

The number of workers who have lost their jobs as a result of the collapse of the construction giant Carillion has topped 1,000 amid another wave of cuts.

The Official Receiver has announced that a further 152 former employees are being made redundant this week, taking the total to 1,141 since the company went into liquidation last month.

Ongoing employment has been agreed for another 942 workers as a result of new agreements, taking the total number of jobs saved to date to 7,610.

A statement by the Official Receiver said: “Most employees who have transferred so far have done so on existing or similar terms.

“Those who have lost their jobs will be able to find support through Jobcentre Plus’ Rapid Response Service and are also entitled to make a claim for statutory redundancy payments.

“Discussions with potential purchasers continue and I expect that the number of jobs safeguarded through the liquidation will continue to rise.

“I am continuing to engage with staff, elected employee representatives and unions to keep them informed as these arrangements are confirmed.”

Minister meets former Carillion AWPR workers as more subsidiaries liquidated

Economy, jobs and fair work secretary, Keith Brown, has assured former Carillion employees working on the Aberdeen Bypass project that they are being supported by the Scottish Government.

A joint venture between Balfour Beatty, Galliford Try and Carillion (Aberdeen Roads Limited) was awarded the contract to build the £745 million Aberdeen Western Peripheral Route/Balmedie to Tipperty (AWPR/B-T) project in December 2014.

However, following the collapse of Carillion last month, both Galliford Try and Balfour Beatty have been left to shoulder the remaining costs on the scheme.

Last week Galliford Try said it has booked a £25m exceptional charge for the six months to December 31 as a result and announced plans to raise £150 million of new equity capital to help cover its additional financial obligations on the contract.

Speaking after a visit to project site on Friday, Mr Brown said he has been in regular discussions with trade unions, the UK government and other key partners regarding Carillion.

“I have endeavoured to keep Parliament informed via statements to the chamber, press statements and committee appearances, as well as correspondence,” he said.

“It was important to visit the project today and give site representatives some assurances about the next few months, as it has been a worrying time.

“It is just as important for my officials and Aberdeen Roads Limited to take the time to calculate the implications of this situation and consider what action should be taken to mitigate any knock-on consequences.”

During his visit, Mr Brown met with workers and a representative from Aberdeen Roads Limited, as well as inspecting the 270-metre long River Dee Crossing.

He also reiterated that Balfour Beatty and Galliford Try have made offers of employment to former Carillion workers on the project where there is a position available. To date, around 90% of former Carillion employees have transferred over to the two firms, who have also committed towards fulfilling their obligations on the project.

The minister said: “This is an exciting phase of the project. There is clearly much still to do, and weather will play a part in the final opening date, but it feels like the beginning of the home run towards completion.

“More details of the various milestones and key dates will be revealed in the weeks ahead, but I’m sure the community and workforce will play a pivotal role in the opening celebrations – and both groups are at the forefront of our thinking and initial planning.”

Meanwhile, ten more Carillion subsidiaries have joined the raft of firms to have been put into liquidation following the contractor’s demise.

On February 16 Carillion Property Services, Carillion Professional Services, Dudley Bower Group and Schal International among others were placed in the hands of the Official Receiver and its special managers from PwC.

To date, 6,668 Carillion jobs have been saved and 989 jobs have been made redundant through the liquidation.

Blog: Insolvency in a post-Carillion world

Keith Kilburn

Keith Kilburn outlines 10 issues for employers, professionals and the supply chain to consider in the event of the insolvency of a main contractor.

It is fair to say that the insolvency of Carillion has sent shockwaves through the construction industry. While this may be the catalyst for change, insolvency has unfortunately been a risk which has been realised all too often.

Looking at the current position, we set out the top ten issues that employers, professionals and the supply chain should consider in the event of main contractor insolvency.

  1. Payment cycle – check where in the payment cycle you are. Are there interim payments due? There are limited saving provisions under the Construction Act in the event of insolvency;
  2. Security – check the terms of any bonds or guarantees which have been granted. Are they valid? Do they respond to insolvency? Insolvency may not be treated as a default depending on how the bond or guarantee is drafted. What is the process for making a valid call?
  3. Termination provisions – check what the contract says about termination. What is the process? Do notices require to be issued? What is to happen to materials and equipment on site?
  4. Status of the works – accurately record and document the status of the works on the date of insolvency. This will be relevant to calculating what works remain to be carried out and what the entitlement to payment due to or by the main contractor is;
  5. Completing the works – how are the works to be completed? What form will the completion contract or contacts take?
  6. Defects – accurately record and document any defects which are discovered and the costs incurred for making good;
  7. Final account – check what the contract says about preparing a final account. When should this be carried out and what is the process?
  8. Step-in rights – check if the contract makes provision for step-in rights, where a party may have the right under a contract to take the place of the main contractor.
  9. Making a claim in the insolvency – is a claim to be made and what is the process and timing for that?
  10. Insurance – check any insurances which are in place and if they will respond to insolvency.

Insolvency and its consequences can be complicated in any construction project and our specialist team of construction lawyers would be happy to assist you if this is an issue you face.

  • Keith Kilburn is a managing associate at Brodies

This blog originally appeared on the Brodies website.

Galliford Try to raise £150m to negate loss on AWPR after Carillion demise

Galliford Try is planning to raise £150 million of new equity capital to help cover its additional financial obligations on the Aberdeen Western Peripheral Route (AWPR) contract following the collapse of Carillion.

The two firms formed two-thirds of the Aberdeen Roads Ltd (ARL) consortium leading the £745 million AWPR work alongside Balfour Beatty.

The demise of Carillion, which entered liquidation on January 15, has increased Galliford Try’s total cash commitments on the project by in excess of £150m.

While it has “sufficient financial resources” to meet its obligations, Galliford Try said this would involve diverting capital away from the Linden Homes and Partnerships & Regeneration businesses, “thereby reducing their ability to capitalise on the material growth opportunities these businesses would otherwise be well positioned to exploit”.

The firm has now booked a £25m exceptional charge for the six months to December 31 and announced plans to raise £150m from investors, fully underwritten by Peel Hunt and HSBC.

It added: “Galliford Try therefore intends to raise £150m of new equity capital in the coming weeks to strengthen further the group’s balance sheet and ensure that the group’s businesses can continue to pursue their respective growth opportunities.”

Galliford Try said it continues to make good progress in resolving both AWPR, the construction of which is expected to complete during summer 2018, and other legacy contracts.

The firm has also committed to no longer undertaking fixed price, all risk major projects of this nature, and has improved its tendering and project selection processes, it added.

Announcing its interim results today, Galliford Try revealed “strong” financial and operational performance across all three businesses with good progress being made against the group’s growth plan to 2021.

While the group pre-tax profit figure was down 11% on last year, net debt was also substantially reduced from £113.8m to £84.9m.

Chief executive Peter Truscott said: “We have delivered a strong financial and operational performance in the first half, with revenue growth across all three businesses and excellent progress against our 2021 strategy.

“Linden Homes had a very strong first half, with both volume growth and improving margins. Our strategy of focusing on standardisation is proving to be effective and we continue to benefit from further operating efficiencies. The market continues to be positive, underpinned by good mortgage availability, the government’s ongoing commitment to Help-to-Buy, and the recent stamp duty cut for first-time buyers.

“Within Partnerships & Regeneration, we have delivered an excellent first half performance and continue to be very encouraged by the opportunities in the market, which give us confidence that this growing business will continue to deliver sustained returns over the strategy period and beyond. Our underlying Construction business is performing well with the margin drag of legacy contracts reducing.

“We have reviewed the impact on our business from the compulsory liquidation of Carillion, which has resulted in a further reassessment of the likely out-turn from our participation in the AWPR joint venture, leading to an exceptional charge of £25m. Reflecting the additional financial obligations arising from this contract, we have today announced our plans for a capital raise of £150m. We have also brought forward our plans to increase dividend cover to 2.0x pre-exceptional earnings, with the result that we are today declaring an interim dividend of 28.0p.

“We continue to maintain strict control over net debt, which is consequently better than our guided level. We enter the second half of the year with a solid foundation to build on and strong fundamentals for the housing market. While we remain cautious of the impact of the current political uncertainty and the medium-term outlook for the macro economy, we believe our focused strategy, strong order book and disciplined approach will deliver further growth and shareholder value.”

Serco negotiates £20m reduction on Carillion health FM deal

Serco has agreed a revised deal to buy a large part of Carillion’s UK healthcare facilities management business, saving £20 million in the process.

Stricken contractor Carillion agreed a £47.7m sale to Serco in December as part of efforts to reduce its debt.

Since then, Carillion filed for liquidation allowing Serco to negotiate a revised business purchase agreement with liquidators and special managers at PwC and will now be paying £29.7m for the business.

Serco said: “The agreement covers substantially all of the assets that were the subject of the previous agreement.

“The change in consideration reflects Serco’s re-evaluation of potential liabilities, indemnities, warranties and the additional working capital investment required as a result of Carillion’s liquidation.”