Are the vultures circling for Carillion?

The future of Wolverhampton-based construction group Carillion was looking increasing uncertain this morning as doubts continue about its viability.

The group has seen its share price plummet over the past two days and its market value scaled back dramatically.

The group, listed on the FTSE 250, has had close to 60% of its market value wiped out since Monday’s profit warning. The figure is equivalent to almost £500m.

Its shares closed down a further 33.5% yesterday, leaving the stock at an all time low of 77.60p. This contrasts with the figure in August last year when it was close on 300p.

The dramatic fall in the share price leaves the company, which employs around 49,000 people, with a market value of around £335m.

Such a situation may make it vulnerable – how ironic when just three years ago it was itself bidding to take over rival Balfour Beatty after it found itself in similar difficulties.

Balfour Beatty held firm in the situation and Carillion eventually abandoned the attempt.

What the future might hold for Carillion now is difficult to predict. Many suitors may be playing a waiting game to see where the group’s shares eventually bottom out.

However, most are likely to be wary of launching any rescue bid because of concerns over the state of the company’s contracts and the possibility of further problems.

One of these could be the size of the group’s pension deficit, which was last year approaching £400m.

Given the group’s toxicity, large institutional investors are unlikely to commit to the business in the short term, preferring to hedge their bets elsewhere.

Any attempt at a fundraising is also mired in problems, not least because the main question is, is the group worth investing in.

The group’s crisis was triggered on Monday when it announced that chief executive Richard Howson was leaving his post, leaving stand-in Keith Cochrane to handle the fall-out.

The true scale of the problems emerged when a trading update revealed that the company was set to take a £845m hit as a result of over-optimistic contracts.

Of these, £375m related to three PPP projects in the UK and £470m to overseas markets, the majority of which related to exiting markets in the Middle East and Canada.

Steps taken towards damage limitation include an exit from construction PPP projects and an exit from construction markets in Qatar, Saudi Arabia and Egypt.

In future, it said it would only be undertaking construction work on a highly selective basis and via lower-risk procurement routes.