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Recovery drive sees Carillion sell contracts to Serco

25 October 2017

FM industry consolidation was deemed of interest to the national press this week, with The Telegraph reporting on Carillion's latest efforts to reduce debt and return to profitable trading.

In addition to agreeing £140m of debt with two lenders and deferred pension contributions and other debt repayment, it has improved its cash balance by between £170m and £190m.

However, The Telegraph reports that Carillion has lost up to £800m of its market capitalisation in recent weeks, due to "heavy losses and a huge impairment charge linked to trouble contracts".

Cost-cutting measures of £75m had previously been outlined by chief executive Keith Cochrane.

This week has also seen the sale of Carillion FM healthcare contracts to Serco for £50.1m, with the deal predicted to be finalised in the next few weeks.

With Carillion aiming to close its healthcare business, it has stated its intention to sell its remaining contracts in 2018.

The news of its sale and cost-cutting exercises saw a rise in the company's share price of over 24% to 54.5p.

Further consideration is being given to the company's Canadian division, previously earmarked to be sold off.

The company has since announced it is looking at whether it would be better to retain parts of the operation.

Mr Cochrane stated that although progress had been made "on a number of fronts... much remains to be done".

Focus on disposing of its assets and implementing cost savings will continue, combined with ongoing discussions with lenders and stakeholders in an effort to improve its trading position, he said.

The company's position has also been strengthened by recent contract wins.

In addition to its £50m spend on purchasing the Carillion healthcare contracts, Serco has also paid out £15m to purchase US defence engineering firm BTP Systems, according to City AM.

The latter is expected to be finalised toward the end of next year, as Serco looks to extend its presence in the US defence sector.

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