July 18, 2017 / 7:01 AM / 2 years ago

Crisis-hit Carillion claws back lost ground after more contract wins

(Reuters) - A Carillion joint venture has won contracts worth 158 million pounds ($207 million) to supply catering and other services for British military sites, bringing further relief to the crisis-hit company on Tuesday.

A Carillion sign can be seen on a van in Manchester, Britain July 13, 2017. REUTERS/Phil Noble

Shares in the construction and support services company jumped 10 percent by 0810 GMT, a second day of gains after news on Monday that a consortium including Carillion had won a 1.4 billion pound contract to help build Britain’s High Speed 2 railway.

The contracts wins follow a torrid week for Carillion which lost two-third of its value after parting ways with chief executive Richard Howson and booking an 845 million pound writedown on problematic construction contracts.

Rail and property services are areas where Carillion has said it wants to focus as it seeks to stabilise its business and rebuild its balance sheet. The shares are now up 50 percent from last week’s lows.

Analysts believe Carillion might have to raise at least 500 million pounds via a share sale or that a debt-for-equity swap could be on the cards to shore up the balance sheet.

Carillion said on Tuesday it would deliver facilities management services, including catering, to about 233 military establishments under the new contracts. Its joint venture partner is U.S. catering company Aramark.

The two contracts, awarded by the Defence Infrastructure Organisation (DIO), are worth 158 million pounds over the initial five-year contract period, Carillion said, adding that there were opportunities to double that figure through catering and retail sales.

The DIO is part of Britain’s defence ministry.

“The DIO is a key support services customer with whom we have built a long-term successful partnership. We are committed to building on... our position as a leading supplier to the DIO by using our core skills and capabilities,” interim CEO Keith Cochrane said.

Liberum analyst Joe Brent wrote the contracts provided evidence that the government remained generally supportive of Carillion, which is a key supplier to the government and employees about 19,000 people in the UK on its own.

“We expect more positive contract news over the summer, including potentially contracts for telecoms infrastructure and government department outsourcing,” Brent wrote in a note.

Carillion was demerged from the Tarmac group in 1999 and went on to buy construction firm Alfred McAlpine. The company has worked on projects ranging from London’s Tate Modern gallery to the Twickenham rugby stadium.

Reporting by Esha Vaish in Bengaluru; Editing by Louise Heavens and Keith Weir

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