Crisis-hit infrastructure firm Carillion has been awarded two Ministry of Defence contracts worth £158m just days after the company’s shares plummeted following a shock profit warning.
The wins mark a partial turnaround for Carillion after it last week announced that it had booked a £845m write down on some of is problematic construction contracts. That announcement wiped £600m off the company’s market value, prompting UBS analysts to suggest shares might slump to zero.
On Monday Carillion was named as one of the winners of £6.6bn-worth of contracts to build the controversial HS2 train line.
Under the new MoD contracts, Carillion will provide catering, retail and leisure services, as well as hotel and mess services at more than 230 military sites across the north of England, Scotland and Northern Ireland.
The company said it could double the £158m it will be paid by the MoD through catering and retail sales.
Shares in Carillion rose as much as 12.5 per cent in morning trading on Tuesday, following Monday's 17.5 per cent boost which was spurred by news of the HS2 contract as well as an announcement of plans to appoint accountancy giant EY to review its business.
Despite the gains, Carillion shares are trading at just one third of the price they were just over a week ago, prior to the profit warning. Chief executive Richard Howson stepped down with immediate effect last week after the group said it was struggling to stay within its borrowing limits and warned of tough trading conditions.
The North contract will employ around 1500 people, covering 130 military establishments and will go live at the beginning of January 2018, Carillion said in a statement. The contract for the Scotland and Northern Ireland region will go live at the beginning of November this year. That will covers a further 103 military establishments and will employ around 1,030 people.
Interim boss Keith Cochrane said: “These contracts play a critical role in supporting our armed forces and they have a number of unique aspects that require a specific, regional focus."
