The chief executive of Galliford Try’s construction arm has questioned why Carillion continued to pay dividends as its debts and pension liabilities mounted.

Bill Hocking was speaking as Galliford Try said it was cutting its interim dividend from 32p a share to 28p and planned to raise £150m in new equity after problems on its scheme to build a bypass around Aberdeen increased “the group’s total cash commitments on the project by in excess of £150m”.

Carillion was carrying out work on the 58km long road for Transport Scotland in joint venture with Galliford Try and Balfour Beatty when it went bust.

Hocking (pictured) said its former partner’s collapse last month “was a real shock” and admitted: “I met with some of the Carillion guys in Glasgow a few days before [it went bust] and there was absolutely no sign whatsoever. They thought they were going to be OK as well. The Carillion guys [on the Aberdeen project] are honourable, good people.”

But he had more critical words for the firm’s senior management and the decisions they took. “When you look at it in the cold light of day, debt and pension deficit was rising, they were taking on risky jobs and they were still paying out dividends – it’s a toxic mix.”

In its 2016 annual report, Carillion’s former finance director Zafar Khan boasted how “the board has increased the dividend in each of the 16 years since the formation of the company in 1999”. In total, Carillion paid out more than £770m in dividends to shareholders.

Earlier this month at a parliamentary hearing into Carillion’s collapse, held jointly by the business and work and pensions select committees, MPs berated former executives for continuing to pay out dividends while the pension deficit increased.

Rachel Reeves, business select committee chair, told interim chief executive Keith Cochrane: “The fact that you were paying more out in dividends than you were paying into a pension fund that had a deficit at the end of probably £900 million shows that the priority was dividends.”

Hocking said clients expecting his business to take over Carillion contracts without running the rule over them needed to think again. “We will tread very, very carefully here. If [Galliford Try taking over is] needed to keep the job going, we will only do it on a cost-plus basis. We are not going to buy risk.”

The firm has taken on a Carillion job to build a bypass around Lincoln and was looking at a handful of other schemes that were in their infancy.

But he said he was giving Carillion’s jobs building new PFI hospitals in Liverpool and Smethwick a wide berth. “We are not going anywhere near those,” he added.

According to a business recovery plan published days before it went bust, Carillion said it was expecting to rack up a further £143m in losses on the two jobs by 2020.