Construction giant taken to the brink

Crippled by £800m debts Targeted by hedge funds Abandoned by investors

EMBATTLED Carillion could dump its construction arm amid ballooning financial problems that have wiped £580m off the firm in three days.

Ordinary retail savers have been abandoning the firm after it scrapped its dividend, revealing on Monday a £845m writedown.

Meanwhile hedge funds, which have shorted the firm’s stock, could be sitting on a £145m profit.

Carillion, which is contracted to build a number of hospitals and revamp Liverpool football club’s Anfield stadium (pictured), suffered its third consecutive day of share sell-offs – and is now down 70pc this week.

Bosses are set to quit some construction markets, sell assets and review the business as they warned on borrowing and profits.

It has threatened the very existence of the giant firm, which employs 48,000 and is now thought to be ripe for a takeover.

Analysts RBC warned: ‘In our view, a rights issue and a potential sale of its entire construction operations look to be the most likely outcomes.’

Analysts at UBS warned in the worst case shares could go into freefall and reach zero.

Just under half of the £845m writedown stems from problems on public-private partnership contracts in the UK.

Carillion also has a contract to help run BT’s Openreach service and provides management, oil and gas infrastructure, design and other services.

Its troubles have sparked fears for its global staff, of which around 19,000 are in the UK, and its share price slid a further 26.6pc yesterday after it said it was suspending its dividend to save £80m.

They have now fallen around 70pc since the announcement on Monday, from around 190p to 57.2p yesterday, wiping around £580m off the company’s value. Institutional investors have also been abandoning the company, while the 17 hedge funds betting the shares would fall have made paper profits of around £145m.

The Mail can reveal how former boss Richard Howson, who quit on Monday, earned £5.6m while at the helm of Carillion. Interim chief executive Keith Cochrane, 52, who took over, said: ‘One area of immediate attention is cost reduction by looking at how we simplify the business model and what we can stop doing.’

The problems have been exposed in a review, alongside auditors KPMG, launched by new finance director Zafar Khan. KPMG found £1.6bn was owed to the company, UBS analysts said.

Debt is expected to be up to £905m in the second half of the year and revenue is expected to be between £4.8bn and £5bn. The company also has a pensions’ deficit of £800m.

Carillion chairman Philip Green was unavailable for comment yesterday afternoon.