Carillion Shares Rebound After Builder Secures HS2 Contract Win

  • Stock gains 20%, partially recovering last week’s record rout
  • Balfour Beatty, Costain will also lay train line groundwork

Carillion Plc shares made a partial recovery from their worst week in the U.K. builder’s history after the company was co-awarded two major contracts for the country’s new cross-country railway known as HS2.

The work on the planned 190 kilometer (118 miles) high-speed line is valued at almost 1.4 billion pounds ($1.8 billion) and will be shared with French construction company Eiffage SA and U.K. competitor Kier Group Plc, Carillion said in a statement Monday. That may help reassure shareholders after a profit warning a week ago sparked a sell off that wiped 71 percent from the value of the company.

The stock traded 18 percent higher at 66.40 pence as of 11:01 a.m. in London, the highest on an intraday basis since Wednesday. Almost 33 million shares traded, or about 3.8 times the three-month daily average.

Carillion dismayed investors on July 10 by announcing weaker-than-expected profit growth, the departure of its chief executive officer, the suspension of full-year dividends and a write-down related to various projects that analysts said may include work on Royal Liverpool Hospital. Interim head Keith Cochrane said the board hired KPMG to review the company’s portfolio of contracts, and the former Weir Group Plc CEO on Monday added EY to focus on cost reduction and cash collection.

Builder Carillion Turns Restoration Project as Bankers Called In

The U.K. government’s 6.6 billion-pound package of HS2 contracts also includes work for Costain Group Plc, Skanska AB and Balfour Beatty Plc, once a takeover target for Carillion. The deals kick-start a long-term and costly critical infrastructure project, which could be subject to political pressures as the U.K. begins exit talks with the European Union.

Shares in other contract winners rose on the news, albeit more modestly than Carillion. Balfour Beatty increased as much as 3.6 percent, the most in three months, and Costain 2.4 percent. The projects announced are seen supporting 16,000 jobs and 7,000 contracts for the supply chain, with 60 percent seen going to small and medium-sized businesses.

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