Shares in outsourcing group Carillion tumbled on Friday after the company issued its second profit warning of the year, adding that it expected to breach its loan covenants.
The company, a major UK government infrastructure contractor, said it expected full-year profits to be "materially lower" than current market expectations.
This was Carillion's second profit warning this year after it said in July that rising debt and writedowns on the value of several contracts would see earnings come in light of forecasts.
July's warning resulted in the departure of chief executive Richard Howson and the suspension of dividend payments. The company is temporarily headed by interim CEO Keith Cochrane (left) until Andrew Davies, currently of Wates Group, takes the helm.
In its latest warning, Carillion blamed a combination of delays to key disposals, a slippage in the commencement date of a "significant" Middle East project and lower than expected margin improvements across a number of UK support services contracts.
Based on these forecasts, the company said it now expected to be in breach of its loan covenants at of 31 December and that it would seek discussions with lenders to amend the relevant agreements to defer test dates by four months to 30 April.
This, the company hopes, will give it time to implement a recapitalisation plan, possibly involving a restructuring of the balance sheet.
Cochrane commented: "Whilst we continue to target cash collections, reduce costs, execute disposals and focus on delivering for our customers, it is clear that significant challenges remain and more needs to be done to reduce net debt.
"Constructive dialogue is continuing with our financial stakeholders to rebuild the Group’s balance sheet, and I am grateful for their support."
The shares tumbled 30.7% to 29.25p in early trade in London. Before July's profit warning, the shares had traded close to 200p.
Picture courtesy of Carillion website