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magazineCarillion bailed out by HS2
The award of a contract on the HS2 high speed rail project may have raised eyebrows but it is also having a restorative effect on construction services firm Carillion’s (CLLN) share price.
After a major profit warning on 10 July, which saw the departure of chief executive Richard Howson, questions were asked about the decision to award £1.3bn of work to the joint venture in which Carillion is partnered by Eiffage and Kier (KIE). A HS2 spokesman said it had ‘sought reassurance’ and carried out ‘additional due diligence’.
Carillion has also announced the appointment of consultant EY to support a strategic review process.
And while the shares are still down heavily on the 192.1p at which they traded before the profit warning, they are up nearly 30% since the HS2 and EY news to 72.9p.
The market seems to believe these developments will make it easier for Carillion to raise the funds it needs to repair a stretched balance sheet.
Fellow construction play Balfour Beatty (BBY) won two HS2 contracts with a total value of £2.5bn in partnership with French outfit VINCI. Its shares ticked up 1.8% to 270.8p on the news (17 Jul).
Meanwhile, small cap peer Costain (COST) gained nearly 5% to 461.5p on the same day as it revealed HS2 is ‘minded to award’ the company two civil construction packages.
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