Carillion collapse: CEO ‘wishes’ he’d acted sooner while finance chief denies being ‘asleep at the wheel’

CFO Zafer Khan will continue to receive his £425,000 salary for a year after being sacked in September 2017, months before construction giant's liquidation

Zafar Khan, Carillion’s former chief financial officer, said he was ‘surprised at the outcome that eventually came to pass’

Carillion’s former chief executive admitted failings in the run-up to the construction firm’s collapse last month as he and other top bosses faced a volley of questions from MPs on Tuesday.

“Clearly the business did have issues – undoubtedly,” Keith Cochrane told a joint business and pensions select committee. “And clearly, do I wish we had done something about it sooner? Absolutely. I recognise that.”

Carillion’s former chief financial officer, Zafar Khan, who also appeared before the committee, denied that he had been “asleep at the wheel”.

“As soon as I came into the role, we were looking to tackle the issues and the key focus of my time in the role was to bring net debt down.”

He initially appeared to claim that he had reduced the company’s debt but, when pushed, he conceded that it had increased during his nine-month tenure.

MPs heard that Carillion will continue to pay Mr Khan’s £425,000 for the year after he was sacked in September. He left the company just four months before it collapsed, leaving hundreds of workers redundant and public-sector contracts in turmoil.

He added that he did not expect the company to collapse. “I was surprised at the outcome that eventually came to pass,” Mr Khan said.

Emma Mercer, who took over from Mr Khan as CFO in September 2017, said the company had adopted a “more aggressive” approach to accounting in the years running up to its collapse, under Mr Khan and his predecessors.

“We were taking judgments on more contracts and the size of those judgments had increased,” she said.

That meant that when the prospects of being paid for those contracts quickly deteriorated, “it was very difficult to withstand those deteriorations”, she said.

Carillion was put into liquidation in January after racking up debts of around £900m and a pension deficit thought to be at least £587m.

Mr Cochrane, who replaced Richard Howson as chief executive last July, on Tuesday said he was “truly sorry” about the company’s collapse.

“It was the worst possible outcome. This was a business worth fighting for. That’s what I sought to do during my time as chief executive,” he said.

Mr Cochrane said he had been aware of concerns raised by accounting watchdog, the Financial Reporting Council, in 2015 when he was a non-executive director on Carillion’s board, but said he believed the company had dealt with all of those concerns.

Carillion shocked the stock market with an £845m write-down of the value of its contracts in July last year.

Asked how the company’s finances could deteriorate so rapidly from March of that year when accounts were signed off by auditor KPMG, Mr Cochrane said he was only made aware of the scale of the problems at the end of June, a week before he took on Carillion’s top job.

“When I became chief executive, the business had a number of challenges.

“Let’s be clear, the business got itself into this position,” Mr Cochrane said.

Labour committee member Frank Field responded: “No, the directors did.”

“You were in charge, you were taking money, the company had no personality of its own to do this.”