Carillion needs £500m cash injection to survive

Construction and support services giant Carillion needs a £500m injection of cash or it has "no future", according to Sam Cullen, an analyst at investment bank Jefferies.

He told The Guardian: "Realistically, we see no future for Carillion without a rights issue of at least £500m as we believe the group will find it increasingly difficult to win support services work with the balance sheet in its current state."

Other analysts were similarly pessimistic on the company's current parlous state.

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"Analysts at UBS warned in the worst case shares could go into freefall and reach zero", says the Daily Mail.

Royal Bank of Canada added: "In our view, a rights issue and a potential sale of its entire construction operations look to be the most likely outcomes."

This all follows a shock profit warning earlier this week, in which bosses warned of an £845m hole that has been discovered in its balance sheet and cancelled investor dividend payouts to save £80m.

Chief executive Richard Howson immediately stepped down and a new interim boss, Keith Cochrane, has been tasked with conducting a "comprehensive review of the business", which could ultimately see it pull out of major markets.

Investors sold the stock liberally in response, with three days of decline amassing losses of 70 per cent from a share price of £1.92 to a closing price of just 57p yesterday.

The share price has recovered slightly to 64.7p this morning, valuing the company at just £265m - barely half the additional amount experts now think the company needs to survive.

The £845m black hole on the balance sheet was discovered by auditors KPMG. Around £375m is related to large public-private partnership deals and £470m to pulling out of markets in the Middle East and Canada.

Big public-private partnership deals such as hospital building have been a problem for the firm for a while and explain why "the City has long taken a dim view of Carillion", says the Guardian.

Most of its losses relate to hospital projects in Smethwick, near Birmingham, and Liverpool, as well as on a big road project in Aberdeen. It has also faced big problems on a new rail line between Sheffield and Rotherham, which is running behind schedule and over-budget.