LONDON MARKETS: Carillion's Collapse Delivers A Boost For Shares Of Rivals

By FeaturesDow Jones Newswires

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

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.

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One company, Balfour Beatty PLC said it will take a hit of 35 million to 45 million pounds (http://www.marketwatch.com/story/balfour-beatty-sees-35m-45m-hit-from-carillion-2018-01-15)($48 million to $62 million) from Carillion's liquidation. The notification drove Balfour's shares (BBY.LN) lower, losing much as 3.6% on an intraday basis.

Carillion (CLLN.LN) said Monday it will enter liquidation after crisis talks failed over the weekend (http://www.marketwatch.com/story/carillion-to-go-into-liquidation-after-talks-fail-2018-01-15). 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 (https://www.wsj.com/articles/carillion-collapses-forcing-government-to-step-in-1516016678?mod=mktw).

Its shares, listed on the London Stock Exchange, were suspended Monday, at a price of 0.142 pence each. But the potential for its rivals to pick up Carillion's contracts helped lift some of those companies' shares. Construction and services company Interserve PLC (IRV.LN) traded 2.3% higher, outsourcer Serco Group PLC (SRP.LN) bulked up 6.6%, and builder Costain Group PLC (COST.LN) rose 1.3%.

Shares of Kier Group PLC (KIE.LN) tacked on 2.9%. 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 (GFRD.LN) dropped 6.9%. 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 GBP60 million and GBP80 million to the project (http://www.marketwatch.com/story/galliford-try-sees-shortfall-in-carillion-project-2018-01-15), said Galliford Try.

Shares of Banco Santander SA (SAN) were fractionally higher 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 (Santander%e2%80%99s%20U.K.%20branch%20is%20one%20of%20the%20company%e2%80%99s%20principal%20creditor.) and that Santander's total exposure to Carillion could be between GBP50 million and GBP100 million.

(END) Dow Jones Newswires

January 15, 2018 10:30 ET (15:30 GMT)

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