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Carillion says 'no change' despite share price jump

Carillion has been unable to explain an increase in the price of its shares yesterday that saw their value rally by more than a quarter.

A trading update from the troubled contractor this morning stressed that a 27 per cent increase in its share value was not down to any “material change” at the firm. 

The update said: “Carillion notes the recent increase in the group’s share price. The group is not aware of any material developments that support this share price increase.”

Carillion is currently under investigation by the Financial Conduct Authority over trading updates posted between December 2016 and July 2017.

On Wednesday Carillion’s management presents a rescue plan to its lenders outlining how it will reduce debt and increase funding for the firm.

A number of reports have suggested that the share jump was driven by hopes that the banks could bail the contractor out.

However, analysts played down the significance of the share increase.

Applied Value analyst Stephen Rawlinson labelled the rise as “something out of nothing”, saying share prices for firms in Carillion’s position were extremely volatile.

Explaining the jump, Mr Rawlinson said: “It’s dead simple: a few people who shorted the stock thought, ‘Look I’ll get out’; a couple of people in recovery stocks thought, ‘I will get in’.

“The other thing is just mathematics – it only [went] up 5p, but base effect tells you that’s a big percentage.”

AJ Bell investment director Russ Mould said that many were waiting to find out details of Carillion’s plan and, crucially, which parts are accepted by the lenders.

He said: “I’d imagine there are some people out there that fear a big debt-for-equity swap or, in a worst-case scenario, Carillion goes bust – there will still be some people thinking along those lines.”

Sky News reported over the weekend that the plan could include Carillion exiting a number of its existing contracts or renegotiating other ones. 

Shares hit a high of 24.52p during trading yesterday, up from the 19.29p at the beginning of the day. Shares had slipped back to 21.20p at the time of writing today.

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