Galliford Try takes £25m hit after Carillion collapse

Construction firm Galliford Try (Stuttgart: 0GF.SG - news) has said it was left tens of millions of pounds out of pocket after rival company Carillion (Frankfurt: 924047 - news) collapsed into liquidation last month.

The two firms were involved in a joint venture to deliver the Aberdeen Western Peripheral Route (AWPR), a major road project that is currently under way in Scotland.

The road, which will be 58km (36 miles) long and is slated to open this summer, is expected to cost £745m overall.

Galliford Try, Carillion and fellow construction firm Balfour Beatty (Other OTC: BAFBF - news) were contracted to build the bypass for £550m but Carillion's demise has left the two other companies facing additional costs.

Many of the contracts held by Carillion when it failed last month, including key infrastructure projects such as parts of the HS2 rail line, were joint ventures with other firms.

This means that, in many cases, the other companies partnered with Carillion will be liable for completing the work and will have to foot the bill themselves.

Galliford Try reported an exceptional charge of £25m as a result of the AWPR project in its half-yearly financial results, which pushed the firm's profits down significantly.

The company said its profit before tax was down 11% in the last six months of 2017 compared to the same period the year before.

If not for the exceptional charge its profit before tax would have gone up by 29%.

Galliford Try's share price dropped by 20% on the news.

The firm has announced it will raise an extra £150m worth of capital in an attempt to offset the "additional financial obligations arising from [the AWPR] contract".

"We enter the second half of the year with a solid foundation to build on and strong fundamentals for the housing market," says Peter Truscott, Galliford Try's chief executive.

"While we remain cautious of the impact of the current political uncertainty and the medium-term outlook for the macro economy, we believe our focused strategy, strong order book and disciplined approach will deliver further growth and shareholder value."