In mid-July we asked whether subsidence could worsen. And it did, right though to end-August, from which the chart found support at 40p, albeit with gains and falls of up to 60% on news of contract wins, disposals, bid spec and financial updates.

Today, however, the shares have plunged yet another 60% to fresh record lows after delays to contract wins and disposals forced the company into yet another profits warning. Worse still, with end of year debt covenants dependent on meeting FY profits guidance, these are now set to be breached – a potential credit event unless they can be deferred. The company is in discussions about options to reduce debt and repair/strengthen the balance sheet, however, management is clear that some form of recapitalisation will be required in Q1 2018.

The share price reaction today suggests acceptance that what we foresaw as an inevitable and highly dilutive rights issue to “encourage” shareholders into participation, to keep the restructuring ball in the air. Shorts who stayed the course (most shorted stock on FCA disclosure data), even adding, will be smiling all the way to the bank, having expected already serious corporate and financial troubles to worsen.

The shares are already well off their worst levels, having bounced a whopping 70% on typical bargaining hunting hopes that the gap down from 40p can be filled. However, the overhang remains the same: a steadily increasing debt pile at odds with poor cash flow, uncertain transaction timing (contracts and disposals), transitioning leadership and waning investor confidence.

Mike van Dulken, Head of Research, 17 Nov 2017