Carillion's shares are sinking yet again as investors flee the crisis-struck construction firm

Courtney Goldsmith
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Carillion's shares dropped 30 per cent yesterday (Source: Getty)

Embattled construction giant Carillion's shares booked a steep drop for the third day in a row today.

The firm's stock closed 26.57 per cent lower at 57.2p today. Less than a week ago on Friday, the company's shares closed at 192.1p.

The fresh losses stem from a slew of bad news which sent the company's shares down nearly 40 per cent on Monday and a further 30 per cent yesterday.

The FTSE 250 firm's chief executive Richard Howson stepped down with immediate effect on Monday 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.

Carillion's steadily increasing debt pile, poor cash flow and a lack of leadership may cause "even the most daring of bulls" to think again, said Mike van Dulken, head of research at Accendo Markets.

Andrew Gibb, analyst at RBC Capital Markets, said:

The actions announced to reduce net borrowing alongside the strategic and operational review look sensible, but it does not feel these will be adequate to remove all concerns. In our view, a rights issue and a potential sale of its entire construction operations look to be the most likely outcome.

"Carillion has some specific balance sheet issues, and that’s what’s driving the share price movement at the moment since it’s behind the dividend cut and worries about a rights issue. However, this is itself are a product of the industry wide problem with wafer thin margins to some extent, particularly in construction," Nicholas Hyett, equity analyst at Hargreaves Lansdown, said after yesterday's share price crash.

Russ Mould, AJ Bell investment director, said: "This is also a warning (yet another one) about how highly acquisitive companies often come unstuck, either because the deals do not deliver the promised cost or sales benefits or they leave the buyer saddled with debt. Investors in RPC Group, a serial acquirer over the last 2-3 years, will doubtless be feeling a little more nervous."

A number of hedge funds celebrated after the stock's initial collapse when they bagged tens of millions of pounds. Carillion has been one of the most shorted stocks recently, and on Monday 18 hedge funds scooped up nearly £80m as the company's stock tanked, according to analysts at IHS Markit.

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

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