Carillion's shares sink to lowest level since 2000 after warning on profits

 
Courtney Goldsmith
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Carillion's share price dropped nearly 40 per cent yesterday
Carillion's share price dropped nearly 40 per cent yesterday (Source: Carillion)

Construction giant Carillion's stock has slumped to its lowest level since 2000 today after a disastrous day of trading yesterday.

The firm issued a severe warning over profits yesterday, which sent shares tumbling nearly 40 per cent, wiping almost £350m off its market cap.

Carillion's chief executive Richard Howson stepped down with immediate effect after the company said it would take a £845m provision due to problems with a string of contracts and was forced to admit it was struggling to stay within its borrowing limits.

The FTSE 250 firm's share price fell a further 31.3 per cent to 80.45p in late afternoon trading after closing at 117.1p yesterday, which valued the company at around £350m.

Mike van Dulken, head of research at Accendo Markets, said it is still early days in terms of Carillion's announced capital structure review. "This could easily comprise a highly dilutive rights issue to reduce debt and shore up the balance sheet. Hedge funds have already done well by shorting the stock in anticipation of corporate troubles. However, they may decide to stay the course seeing these financial woes (financial stress, profits warning, dividend suspension, CEO departure) having legs, and expecting the above-mentioned remedial work to take the shares even lower."

Eighteen hedge funds bagged around £80m yesterday as Carillion’s stock tanked, according to analysts at IHS Markit.

"The shares are flirting with 100p again, however, this may simply be psychological. A near 50 per cent discount may be attractive but the overhang of a steadily increasing debt pile at odds with poor cash flow and a lack of leadership may prove too much to ignore for even the most daring of bulls," van Dulken said.

Read more: From soup spoons to monsters: City analysts react to Carillion debacle

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