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Carillion issues profit warning amid debt woes Carillion shares plunge after profit warning
(35 minutes later)
Construction firm Carillion has warned on profits again and says it expects to breach its financial covenants. Carillion shares have sunk 30% after the construction firm issued another profit warning and said it expected to breach financial covenants.
It said slower than expected asset sales and delays to a project in the Middle East meant annual profits would be "materially lower" than forecasts. The firm said slower asset sales and delays to a Middle East project meant profits would be below expectations.
Carillion said it was in talks with stakeholders to repair its finances, which would include "some form of recapitalisation". Carillion, which is in a consortium building part of the £56bn H2 high-speed rail link, said it was in talks on a potential recapitalisation.
This is the company's third profit warning over the past 12 months. The news follows separate profit warnings issued in July and September.
"Whilst we continue to target cash collections, reduce costs, execute disposals and focus on delivering for our customers, it is clear that significant challenges remain and more needs to be done to reduce net debt and rebuild the balance sheet," interim chief executive Keith Cochrane said. In its latest update, interim chief executive Keith Cochrane said: "Whilst we continue to target cash collections, reduce costs, execute disposals and focus on delivering for our customers, it is clear that significant challenges remain and more needs to be done to reduce net debt and rebuild the balance sheet."
Carillion said it now expected average net borrowing in 2017 to be between £875m and £925m. Carillion said profits for this year would be "materially lower than current market expectations", and it now expected average net borrowing in 2017 to be between £875m and £925m.
"Based on its latest forecasts... the board now expects a covenant breach as at 31 December 2017," it said."Based on its latest forecasts... the board now expects a covenant breach as at 31 December 2017," it said.
In July this year, shares in Carillion plunged after it had to write off £845m and its chief executive, Richard Howson, stepped down. In July this year, shares in Carillion plunged after it had to set aside £845m in provisions and its chief executive, Richard Howson, stepped down.
Despite this, the company was included in a joint venture that was awarded a contract to design and build part of the £56bn HS2 high speed rail link. Following the latest warning, the company's shares have now fallen by about 90% this year.
"Some investors might think this is the end, but Carillion is too big to fail", said Neil Wilson, an analyst at ETX Capital.
"Government intervention is possible but this is a nightmare for ministers at such a sensitive moment for the economy".