Carillion cut fuels PFI worries
PRIVATE Finance Initiative accounting scares spooked the market again as Carillion revealed it will have to reduce profits by £12m over the next two years. The PFI stock bubble - inflated by hopes for a range of construction and maintenance companies winning increasing work from the Government's public-private partnerships - has burst in recent weeks after Amey revealed a £70m accounting black hole.
Carillion, the former Tarmac, admitted, like Amey, that it has been booking profits earlier than it should have on PPP contracts. In addition to a prior-year adjustment, it said reported operating profits would be £6m lower in the current year to 31 December and down by another £6m in 2003. The news sent Carillion shares down 9 1/2p to 159 1/2p.
Amey this week warned that delays in the London Underground PPP will affect cashflows. Its shares, down another 4 1/2p at 84p, have fallen by 78% since the spring, wiping more than £800m off the company's value.
Other PFI heavy contractors have recorded heavy falls. Jarvis, the maintenance contractor, has seen its shares halve, and £1.4bn has been wiped off outsourcer Capita.
