Crunch time for Carillion this week as investors brace for the worst ahead of first-half results

 
Lucy White
A man's umbrella turns inside-out as he
Investors have already sat through an onslaught as millions was wiped from Carillions market cap over the summer (Source: Getty)

Ailing construction services company Carillion is in talks to offload some of its Middle East operations, as the business embarks on a radical reshaping plan and attempts to pull back from the brink of collapse.

Carillion's share price took a huge hit in July, after the firm issued a significant profit warning, slashed its dividend to zero and chief executive Richard Howson quit.

Read more: Construction giant Carillion's shares sink for third consecutive day

Under the guidance of stand-in boss Keith Cochrane, Carillion has launched a strategic review with the help of consultants EY.

Philip Green, Carillion’s chairman, hinted in July that further news on the outcome of that review would come in this week's interim results – which were postponed to give the firm more time to pull a recovery plan together.

Some analysts are predicting that a rights issue could be announced – where a cash-strapped company can offer shares to existing shareholders at a discount, to steady its finances.

This is due to Carillion's potentially massive net debt. It ended last year at £219m, but averaged £587m over the year with a £663m pension liability on top. Some estimates think this could reach £850m to £900m in this week's interims.

Read more: Carillion has revealed a shake-up of its senior team after its finance director stepped down

Investors will also keenly be watching for any changes to revenue guidance, after Carillion steered analysts down from the £5.2bn of sales chalked up last year to full-year sales of between £4.8bn and £5bn.

Despite the troubles Carillion has faced in recent times, the company has continued to win contracts. Government departments in particular have been keen to award work to the contractor – a crash the size of Carillion during the tricky period of Brexit negotiations would be undesirable.

It has nabbed a £300m Manchester property development contract, one of its joint ventures secured £158m of government contracts to take care of defence infrastructure, and a HS2 spokesperson said they were confident the firm would be able to deliver after it was awarded contracts to design and build part of the rail link.

Read more: Carillion shares tumble to new lows as short sellers fight to bet against the firm's fortunes

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