In a half-year trading update, the construction and infrastructure giant downgraded its full-year revenue guidance, with sales now expected to be between £4.8 billion and £5 billion and its overall performance forecast to be “below management’s previous expectations”.
In addition, following a review carried out by KPMG, the group said it will book an £854 million provision linked to certain UK and overseas contracts.
A total of £375 million relates to the UK and £470 million to overseas markets in the Middle East and Canada.
To compound matters, chief executive Richard Howson is to step down and be replaced by Keith Cochrane on an interim basis while a search is undertaken for a permanent boss.
Philip Green, Carillion’s non-executive chairman, said that the action is needed to reduce the firm’s borrowing.
“We must take immediate action to accelerate the reduction in average net borrowing and are announcing a comprehensive programme of measures to address that, aimed at generating significant cashflow in the short-term.
“In addition, we are also announcing that we are undertaking a thorough review of the business and the capital structure, and the options available to optimise value for the benefit of shareholders,” he said.
The firm reported a 5% fall in pre-tax profits to £146.7 million last year and has previously said the pace of new order intakes has slowed since the Brexit vote.
The group said it had also seen some delays in UK public spending decisions following the referendum, and added that low oil prices had hit customer spending in the Middle East.
Shares in Carillion tanked over 35% in morning trading to 122.1p.
Joe Brent, analyst at Liberum, said: “Given the weaker profits, higher debt, need for restructuring, limited proceeds from disposals and working capital unwind in construction, we believe that Carillion will need to raise a significant amount of more money.”