Good morning!

Alongside today's updates, I'm also planning to add a few comments on Dart (LON:DTG), to continue the conversation in Friday's comments thread.



Carillion (LON:CLLN)

  • Share price: 59.65p (+6%)
  • No. of shares: 430.3 million
  • Market Cap: £257 million

Carillion appoints EY to support Strategic Review

This was at 117p when I covered it a week ago, and near 200p the week before that, so today's 6% bounce is likely to be of little comfort to shareholders.

This building support services group is, as we've discussed, the UK's most shorted stock. 21% of shares outstanding are currently reported short: that's a reduction compared to the last time I checked, implying there has been a decent amount of short covering over the past week.

A large amount of short interest can be a helpful bonus when you go long of a stock, because it means there is a lot of pent-up demand from the shorters who have no choice but to eventually buy it back. In extreme cases, you can get a gigantic short squeeze as what happened with Volkswagen shares in 2008!

Long-term success still depends on being right about the company fundamentals, of course, and in particular on the company in question not going bust or diluting shareholders to oblivion while you are in it.

In the case of Carillion, an equity raise looks like it could be on the cards, although who knows how big it might be?

With unpopular decisions on the cards and on interim CEO in the hot seat, some awkward tasks are being outsourced:

Carillion, the integrated support services group, announces that it has appointed the professional services firm, EY, with immediate effect to support its strategic review with a particular focus upon cost reduction and cash collection.

Working capital and recoveries are also mentioned  in a later paragraph as strategies to assist in reducing net borrowing.

CEO comment:

We are moving forward quickly with the actions outlined last week. Alongside our own efforts, EY will provide support across the business and bring an external perspective to our cost reduction and cash collection challenge. My priorities are to reduce the Group's net debt and create a balance sheet that will support Carillion going forward.

My opinion: I completely agree with using…

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