'With minimal assets on its balance sheet it [Carillion] has said it can raise about £300m. This not enough. If Carillion wants to reduce debt to 1 times forecast earnings before standard deductions for 2017, it would need to raise at least another £300 million. With a market worth of £64m it would be difficult to raise enough via a rights issue. A deal with creditors to reduce or restructure is the only answer. Shareholders would be wiped out.
Carillion suffered a sudden cash outflow when four contracts went wrong at once. It is reasonable for investors to ask why downfall came so swiftly after former boss Richard Howson had claimed trading conditions were largely unchanged, A financial watchdog investigation should provide answers. But nobody active in the UK's risky construction and support services industries will be surprised. The difficulties of valuing long-tern contracts are as old as the indusries itself.'
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