Profit warning stops Carillion cold

Carillion said on Thursday last week that delays in completing a PFI tram project in Nottingham were likely to cost it £10m. The share price had opened the day on a 12-month high of 176.5p, but by close of business had slumped to 159p.

The fall continued, with the price closing at 156.5p on Monday this week. Carillion had slowly built up investor confidence after hitting a low of 107p in December, a period when investors were taking a bleak view of all companies involved in the PFI market.

Steven Rawlinson, an analyst with Old Mutual, said that Carillion was likely to recover from the setback. He added: "Those tram deals are quite awkward. It looks like the deal was done before the present management was installed."

Carillion chief executive John McDonough said the share-price fall merely looked dramatic, as it had just gained about 15p on the back of the Department for Transport's announcement of its road expansion plans.

Over the course of the week the price only fell a few pence. Now it will stabilise

John McDonough, Carillion

McDonough said: "Over the course of the week it only fell a couple of pence. Hopefully, now it will stabilise."

He added that the company was no longer interested in light rail or tram projects. He said: "With any luck, the market will recognise that this is an old project."

The Nottingham Express Transit scheme is likely to be delayed by up to two months beyond its original completion date of 11 November. Carillion is drafting in extra workers to accelerate the project.