Carillion shares rocket for second day running as markets prepare for day of reckoning

 
Oliver Gill
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Carillion is to deliver its delayed half-year figures on Friday (Source: Getty)

Carillion shares made a second day of bumper gains, soaring 18 per cent as investors prepared for an update on the beleaguered firm's half-year figures tomorrow.

Morning trading was relatively muted after the stock advanced over 20 per cent on Wednesday on overnight revelations by City A.M. that a Middle Eastern investor was lining up a takeover bid.

But shares rocketed from just before lunchtime, and are currently trading at 66.50p per share. They closed at 46.5p on Tuesday evening prior to takeover reports.

Carillion is to reveal its delayed half-year figures on Friday. Investors both backing and betting against the firm's fortunes will pay close attention to the results of a contract review by Carillion's auditors KPMG and any findings shared from an independent business review conducted by EY.

Investec analyst Chris Moore told Bloomberg today that "additional provisioning [is] unlikely at this stage but may still pose a risk over a 12-month horizon".

Read more: Carillion shares leap 20 per cent on takeover reports

Lenders

The firm's lenders, which are supported by advisers from FTI, are understood to be supportive of Carillion.

Moore said he did not expect Carillion's banking covenants to be breached.

Fears persist, however, that the firm's fortunes could take a swift turn for the worst if tomorrow's news fails to provide the banking syndicate with enough comfort.

Of particular importance are the surety lines provided by Carillion's lenders. These are held off-balance sheet but in the event of troubles can crystallise as an on balance sheet liability, adding to the firm's burgeoning debt pile.

Furthermore, if surety lines are withdrawn, Carillion may not be able to bid for future contracts. This because construction customers which make large payments upfront require insurance from financial institutions in the event of failure.

Read more: Carillion suitor sets sights on prized London listing

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