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FTSE rises but Carillion plummets on profit warning

Shares in infrastructure and construction firm plunge on profit warning, leaving mid cap index trailing blue-chip FTSE 100.

FTSE rises but Carillion plummets on profit warning

The FTSE 100 has edged higher, rising 27 points to 7,378 and leaving the FTSE 250 index of 'mid cap' stocks trailing.

The FTSE 250 fell 21 points to 19,373, weighed down by a plunge in the shares of Carillion (CLLN) after the infrastructure and construction firm issued a profit warning.

The company said its results would be 'below management's previous expectations' and that chief executive Richard Howson would step down ahead of a 'comprehensive review' of the business. The board has also suspended this year's dividend. The shares slumped 33% to 129.4p on the news.

'Carillion looks like it's trying to bail out a supertanker with a soup spoon,' said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

'Despite the group's best efforts debt is continuing to climb, and at an increasing rate, while the construction business seems to be hitting one hurdle after another.

'Judging by this announcement, the board are prepared to do everything it takes in order to save the ship. But talk of a review of capital structure, and the ongoing debt problem, will leave investors worried that a significant rights issue could be on the horizon.'

4 comments so far. Why not have your say?

William Phillips

Jul 10, 2017 at 11:09

What a dismal affair the amorphous 'support services' sector has turned into over the past five years. Many types of service to many sorts of industry, but uniformly bad outcomes.

Not one company seems to have a decent set of contract estimators.They are like defence suppliers: forever getting their margin projections and timings wrong where one miscalculation can blow a hole in profits and reputations. Given the wafer-thin margins they run on, you would think they would be more careful.

Unlike defence contractors, there is no 'national interest' fallback for bad managements in support services- less hope that HMG will shelter them from the consequences of their faux pas.

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Law Man

Jul 10, 2017 at 18:40

I bought Carillion about 10 years ago for the dividend - until today over 7%. Hands up - a bad choice.

Within the last year Investors' Chronicle published an article saying the bad free cash flow of Carillion made it a 'sell'; and yet IC's view was 'buy'. Moral - look at the detail and do not trust tips.

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richard tomkin

Jul 10, 2017 at 22:56

This was the old Tarmac company,as I recall - always a bit accident prone,even in much earlier days.How some things never change.

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Jul 11, 2017 at 17:36

Heavily shorted apparently, they are okay. I reckon they're heading for zero, get out while there's some value.

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