Just when you think things cannot get worse: Carillion  dived more than 50% on the open after another profits warning that means it now expects to breach debt covenants at the end of the year. CLLN fell as low as 17p at one stage before bouncing back to 26p.

Some investors might think this is the end, but Carillion is probably too big to fail. Government intervention is possible but this is a nightmare for ministers at such a sensitive moment for the economy.

Disposals haven’t gone as quick as forecast, a big Middle East contract is delayed and margin improvements in UK services contracts have been less than expected. None of which is a major surprise to those watching the meltdown from the side lines.

After reporting a £1.15bn loss in September, it said full-year average net debt was expected to be between £825m and £850m.

But given the impact of delays in receipts and disposals, management now expects full year average net borrowing in 2017 to be between £875m and £925m.

That means a debt covenant breach at the end of the year. Management is pinning its hopes on being able to get principal lenders to push the test back to April 30th 2018, by which time it expects to be better capitalised, whilst receipts and disposals should have righted themselves. They better hope for some generous bankers.

It was always a huge ask to get the house in order by the end of the year and it looks like, as we suggested in September ahead of the interims, any turnaround strategy would be too little, too late. Market cap is now £180m and will be even lower by the end of today, which will make the recapitalisation that much harder – an announcement is coming. Disposals aren’t enough, particularly as Carillion is selling things on the cheap. In offloading its healthcare business in the UK it’s also ditched a very high margin business for peanuts.

Carillion has to get net debt to about £350m. Asset sales might fetch about £300m, leaving the best part of another £300m to find. The numbers are increasingly not adding up for Carillion. But it’s probably too big to fail and we will watch for any announcement from the government.

But it’s winning contracts. Its 50:50 joint venture has just won a £240m contract to build a hospital in Oman, with another £120 contract due to be signed soon. Newly announced contracts from Network Rail are worth £192m over the next three years. And it’s won a pair of HS2 contracts worth £1.4bn as part of its CEK joint venture with Eiffage and Kier. But this is little solace for investors.

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