Read analysis on the Carillion collapse and PwC’s appointment as special managers.
EY have been hired by the FTSE 250 company to assist with a review of its finances, effective immediately.
The announcement of this strategic review comes a week after the troubled construction group revealed it was battling with rising debt, deteriorating cash flows and writedowns of £845m, which caused its share price to drop by over 70% in just three days.
EY have been tasked with advising the group on cost reduction and cash collection. The group’s board has meanwhile identified immediate actions to reduce borrowing, generate cash flow and improve management of its working capital in the short term.
Earlier this year Carillion asked its auditor, KPMG, to look into 58 contracts following late payment concerns. KPMG discovered four problematic contracts, which led to the large writedown – three in the UK, costing £375m, and one in the Middle East, costing £470m.
Amidst this crisis, the group’s chief executive Richard Howson resigned and was replaced by Keith Cochrane for the interim.
The construction giant has also hired HSBC as joint adviser and broker as part of its efforts to overhaul operations.
Although in the midst of a rocky period, Carillion’s fortunes are looking up already as just last week it announced it had jointly won two government contracts alongside Eiffage and Kier to build tunnels for the multi-billion project the HS2 high speed railway to Birmingham. In response to this news, its share price rose by about 21%.
Last week EY announced the appointment of 63 new partners.