KEITH Cochrane, former chief executive of Weir Group and Stagecoach, has taken charge of Carillion after the company revealed it has suffered a raft of problems in its construction division, which has faced challenges in Scotland.
Carillion said Mr Cochrane had been appointed interim chief executive after Richard Howson stepped down with immediate effect yesterday.
A spokesperson for Carillion said Mr Cochrane does not want to take on the job permanently. He has enjoyed pursuing a range of interests since leaving Weir in September.
But the temporary role will mean Mr Cochrane could play a key part in the development of a group which has been one of the biggest players in the PPP market for public sector construction projects in the UK.
News of his appointment came in an update which made clear the board had concluded a dramatic shake up was required at Carillion, and which sent shares in the firm plunging 40 per cent.
Carillion, whose activities range from building roads in the UK to developing oil and gas facilities overseas, has launched a comprehensive review. All options will be on the table.
The company revealed it has provided around £850m against the value of contracts on which profits are likely to be much lower than expected.
It said the financial position on three significant UK contracts worsened significantly in the first half without giving details.
One is thought to be the £745 million Aberdeen bypass which Carillion is building with Galliford Try and Balfour Beatty under the PPP programme. In December it emerged construction on a section of the scheme had fallen almost a year behind schedule.
Carillion said a review by KPMG had found common issues on some problematic PPP contracts.
It said: “These include accepting tenders with a high degree of uncertainty around key assumptions, undertaking contracts where success has been contingent on the performance of others not under our control and agreeing design changes without agreeing incremental costs and value.”
The board has decided the group will exit the business of delivering construction for PPP projects.
Wolverhampton-based Carillion has suspended dividend payments after missing its debt reduction targets.
The company warned performance in 2017 is now likely to be below the board’s expectations.
Highlighting more challenging market conditions, Carillion cited the slower pace of new contract awards in the UK, due to political uncertainty as a result of Brexit and the UK General Election, and ongoing difficult market conditions in the Middle East.
Its chairman Philip Green said Mr Cochrane will be interim group chief executive while a search is underway for a new boss. He noted Mr Cochrane has considerable experience of running listed companies.
Mr Howson will stay for up to a year to support the transition but will not be on the board.
Mr Cochrane joined Carillion’s board in July 2015, becoming senior independent director two months later.
The Glasgow university graduate has become one of Scotland’s best known executives since qualifying as a chartered accountant with Arthur Andersen.
Mr Cochrane spent seven years running a global engineering business at Glasgow-based Weir.
His last three years in charge were blighted by the downturn in the oil and gas industry, which Weir has acquired a big exposure to. Announcing plans to stand down last July, Mr Cochrane said the sector had a positive outlook and his successor, Jon Stanton, had a great platform to build on.
Mr Cochrane was chief executive of Stagecoach from 2000 to 2002. He faced challenges in his attempt to turn round its Coach USA subsidiary.
Before joining Weir, Mr Cochrane served as group finance director of Scottish Power.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "Carillion looks like it's trying to bail out a supertanker with a soup spoon. Despite the group's best efforts, debt is continuing to climb, and at an increasing rate, while the construction business seems to be hitting one hurdle after another.
"Judging by this announcement, the board are prepared to do everything it takes in order to save the ship.”
Carillion shares closed down 75p at 117.1p.
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