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Fresh woe for Carillion as shares hit new low

Carillion’s shares fell to fresh lows on Tuesday after a number of banks and brokerages cut their share price targets for the contractor.

Shares in Carillion fell by more than 6 per cent to hover at just over 50p a share at 53.25p at the close of trading on Tuesday, after analysts said the firm could be forced to raise fresh funds to stave off a takeover or shore up its balance sheet.

At one point the firm’s shares hit a low of 52.36p before recovering slightly in late afternoon trading.

UBS bank repeated its ‘sell’ rating on the shares, saying in a statement: “We believe either equity raise, debt for equity or asset disposals are all on the cards, or a combination of the three.

“However, for shareholders and creditors, the question is now mainly: what is the value of the support services business and is it above the current debt like liabilities of £1.6bn (second half estimate)?”

According to the bank, Carillion’s low market capitalisation, which currently stands at around £230m, would mean it could prove difficult to restructure without seeing a dilution in shareholder value.

The contractor’s chief executive Richard Howson stepped down in July with immediate effect after the firm said it would be “undertaking a comprehensive review of the business” following a profit warning.

Carillion said it expected to make a contract provision of £845m at 30 June 2017, of which £375m relates to the UK (primarily three PPP projects) and £470m to overseas markets, the majority to exiting markets in the Middle East and Canada.

Mr Howson, who had been the group’s boss since 2012, was replaced by non-executive director Keith Cochrane on an interim basis.

Carillion has also brought in HSBC and EY to offer financial advice and support the firm’s review.

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