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Jan. 15, 2018, 11:50 a.m. EST

Carillion’s collapse delivers a boost for shares of rivals

But Balfour Beatty warns of hit from failure of U.K. construction and services giant

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By Carla Mozee, MarketWatch


Reuters
A worker on Monday walks into Carillion's Midland Metropolitan Hospital construction site in Smethwick, Britain, after the company went into liquidation.

The collapse of British construction and outsourcing giant Carillion PLC was swinging focus on shares of rival companies as ripple effects from the failure started to emerge on Monday.

One company, Balfour Beatty PLC, said it will take a hit of 35 million pounds to 45 million pounds ($48 million to $62 million) from Carillion’s liquidation. The notification drove down Balfour’s shares /zigman2/quotes/202863772/delayed UK:BBY +0.69%  , leaving them to close 3% lower.

Carillion /zigman2/quotes/208402800/delayed UK:CLLN -28.95%  said Monday it will enter liquidation after crisis talks failed over the weekend. The construction company had been in discussions with the U.K. government and its creditors to save itself, but a deal couldn’t be worked out.

“The knock-on effect on the broader economy could be large, given that the potential number of job losses are in the thousands,” said City Index in a note Monday, pointing out that Carillion employs around 43,000 people worldwide, including 20,000 in the U.K.

In addition to its construction business, Carillion delivers a range of public services as one of the government’s biggest contractors, and subcontracts a slice of that work out to smaller companies.

Carillion is carrying a large pension deficit, and in November, it put out its third profit warning in under six months after some of its contracts failed to bring in the earnings expected .

Its shares, listed on the London Stock Exchange, were suspended Monday, at a price of 0.142 pence each. But the potential for Carillion’s rivals to pick up its contracts helped lift some of those companies’ shares. Construction and services company Interserve PLC   rose 2%, outsourcer Serco Group PLC /zigman2/quotes/202143031/delayed UK:SRP +0.97% surged 7.4%, and builder Costain Group PLC /zigman2/quotes/204252535/delayed UK:COST -7.94% gained 1.1%.

Shares of Kier Group PLC /zigman2/quotes/209470443/delayed UK:KIE -1.28% tacked on 3.5%. The construction company had been working with Carillion on the U.K.’s HS2 high-speed rail line and the Highways England smart motorways program.

“Following today’s announcement and after a short period of transition for these contracts, we do not expect there to be an adverse financial impact on the Group arising from these joint venture contracts,” Kier said in a statement.

But shares of Galliford Try PLC /zigman2/quotes/209256748/delayed UK:GFRD -1.53%  dropped 7.3%. The facilities management and construction services provider has been working with Carillion on the Aberdeen Western Peripheral Route road project in Scotland, and Carillion has an outstanding cash contribution between £60 million and £80 million to the project, said Galliford Try.

Shares of Banco Santander SA /zigman2/quotes/205677933/delayed ES:SAN +2.09%  ended down 0.3% on Monday. The move followed a report by business daily Expansion that the Spanish lender’s U.K. arm is one of Carillion’s principal creditors and that Santander’s total exposure to Carillion could be between £50 million and £100 million.

/zigman2/quotes/202863772/delayed
UK : U.K.: London
261.00 p
+1.80 +0.69%
Volume: 829,930
July 10, 2020 4:35p
P/E Ratio
13.83
Dividend Yield
0.80%
Market Cap
£1.80 billion
Rev. per Employee
N/A
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/zigman2/quotes/208402800/delayed
UK : U.K.: London
14.20 p
-5.79 -28.95%
Volume: 46.31M
Jan. 12, 2018 12:00a
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
N/A
Rev. per Employee
N/A
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/zigman2/quotes/202143031/delayed
UK : U.K.: London
156.00 p
+1.50 +0.97%
Volume: 1.68M
July 10, 2020 4:35p
P/E Ratio
37.86
Dividend Yield
N/A
Market Cap
£1.92 billion
Rev. per Employee
N/A
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/zigman2/quotes/204252535/delayed
UK : U.K.: London
58.00 p
-5.00 -7.94%
Volume: 2.42M
July 10, 2020 4:35p
P/E Ratio
N/A
Dividend Yield
6.55%
Market Cap
£159.47 million
Rev. per Employee
N/A
loading...
/zigman2/quotes/209470443/delayed
UK : U.K.: London
73.55 p
-0.95 -1.28%
Volume: 566,736
July 10, 2020 4:35p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
£117.54 million
Rev. per Employee
N/A
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/zigman2/quotes/209256748/delayed
UK : U.K.: London
102.66 p
-1.60 -1.53%
Volume: 423,580
July 10, 2020 4:35p
P/E Ratio
1.10
Dividend Yield
34.09%
Market Cap
£113.72 million
Rev. per Employee
N/A
loading...
/zigman2/quotes/205677933/delayed
ES : Spain: Madrid
2.22
+0.05 +2.09%
Volume: 43.50M
July 10, 2020 5:38p
P/E Ratio
8.00
Dividend Yield
3.65%
Market Cap
€36.87 billion
Rev. per Employee
€374,762
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Carla Mozée is a reporter for MarketWatch, based in London. Follow her on Twitter @MWMozee.

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