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Carillion share price slumps again with more writedowns feared

Carillion’s share price has slumped for the third day in a row with the group’s stock down 26 per cent today. 

The construction and support services giant has been reeling since Monday when it issued a profit warning, suspended its dividend and parted company with chief executive Richard Howson.

The FTSE-250 firm’s share price fell a total of nearly 60 per cent on Monday and Tuesday after it revealed it had booked a provision of £845m over problem construction contracts. Analysts have warned more writedowns are “possible”. 

Carillion’s share price fell 26 per cent to 57.2p today from 69.9p yesterday. On Friday, the group’s share price closed at 192p. 

Monday’s news was not entirely unexpected as Carillion’s shares have been the FTSE 250’s most shorted stock. However, the scale of the provision has left most observers surprised. 

Carillion’s share price slide has prompted speculation that it could become a takeover target. RBC analyst Andrew Gibb said he expects Carillion’s rivals to be “running the slide rule over the business”.

However Liberum analyst Joe Brent said he still believed a takeover bid is ”unlikely”, adding: ”I think a debt for equity swap is most likely.” 

Meanwhile UBS analysts warned that Carillion’s shares could yet fall to zero if trading in its support services division declined.

Carillion interim chief executive Keith Cochrane, the former boss of engineering group Weir, is leading a root-and-branch review of the business and has said “no option is off the table”.

The results of the review are due to be published in September alongside its half-year results, which have been put back from August.

Morgan Stanley analysts added: “While the provisions de-risk the specific contracts to some extent, a continuing contract review and a new CEO suggest that further writedowns are possible.” 

 

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