Carillion may issue shares to plug debt hole as warns on results

REUTERS - Carillion is exploring options including a share issue to shore up the balance sheet, the British construction and support services group said on Friday, as it warned that full-year results would be lower than market expectations.

The company, whose shares have lost two-thirds of their value since it announced a writedown on July 10, booked a further 200 million pound provision relating to services contracts, following a review of its entire business.

"While self-help measures will lead to a material reduction in our average net debt, these along will not be enough to achieve our target," the group said in a statement.

"The board is therefore considering other available options, including raising equity to repair and strengthen the balance sheet in due course," it added.

Carillion booked an 845 million pound ($1.13 billion)writedown on problematic construction contracts in July, prompting the departure of is chief executive.

Analysts have said they expect Carillion to have to raise new funds to shore up its balance sheet, although uncertainty over its contracts, its debt position and its pensions obligations have raised questions over the value of the company.

"We believe that the business could have an enterprise value of 1.6 billion pounds," Liberum analysts wrote in a client note.

Shares in Carillion rose this week after a newspaper reported that a Middle Eastern buyer was considering a bid.

Carillion said on Friday that its 2017 revenue was expected to be between 4.6 billion and 4.8 billion pounds, down from a previous expectation of 4.8 billion to 5 billion pounds.

Full-year average net debt was expected to be between 825 million pounds and 850 million pounds, it said, as it announced measures to boost its balance sheet including raising 300 million pounds from asset disposals and an 80 million pound reduction in its pension deficit.

Carillion said on Sept 11. that its chief financial officer Zafar Khan was leaving and would be replaced by Emma Mercer, the finance head of its UK construction business.

($1 = 0.7458 pounds)

(Reporting by Esha Vaish in Bengaluru; Editing by Alexander Smith)