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Author Topic: Carillion - railway contractor / public services provider - financial concerns, 2017/18, now in liquidation  (Read 27245 times)
LiskeardRich
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« Reply #60 on: January 19, 2018, 08:58:52 »

Quote
Mrs May said a third of government contracts with Carillion were agreed by the previous Labour administration,

Were they in financial difficulty back before 2010, if not irrelevant Mrs May.
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« Reply #61 on: January 19, 2018, 09:05:23 »

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Mrs May said a third of government contracts with Carillion were agreed by the previous Labour administration,

Were they in financial difficulty back before 2010, if not irrelevant Mrs May.

And of course that means two thirds of them were agreed with the Conservatives or the Con/Lib Coalition. 
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« Reply #62 on: January 19, 2018, 16:10:12 »

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Mrs May said a third of government contracts with Carillion were agreed by the previous Labour administration,

Were they in financial difficulty back before 2010, if not irrelevant Mrs May.

And of course that means two thirds of them were agreed with the Conservatives or the Con/Lib Coalition. 

Look its quite simples really ............................ you have to have faith in Government spin ................. folks a so cynical these days  Grin Grin Grin

Carillion missed out on the original Tory 1992 PFI because it was in the process of being formed out of Tarmac, the Board at the time PFI were causing private companies problems, Carillion even missed out on the PPP Labour initiatives in 2003 the likes of Tubelines causing their rivals all sort of problems.

As time moved on Carillion assimilated Mowlems and McAlpines ......................... I use the word assimilated as I once worked for GTRM (GEC Tarmac Rail Maintenance) we were assimilated as the process was just like being one of the Borg  Grin

Where they took Mowlems and McAlpines order book on-board these companies had PPP and PFI plus they had won some of the contracts in their own right.

In 2014 Carillion put in a hostile £2bn bid for the then failing Balfour Beatty group, indeed they put a second £3bn bid in when the first was declined; this goes to show how a Board can go from an empire builder to a has been in just 4 years
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« Reply #63 on: January 20, 2018, 21:09:58 »

I have cut and pasted the following from a financial bulletin board I subscribe to -;


You ask what can private investors do to avoid investing in the likes of Carillion. As an accountant, I can help you:

If 'cash inflow from operating income' (cash flow statement) is lower than 'net income' (Income Statement) DON'T INVEST and if already invested SELL.

Take out 'Intangible assets' out of the Balance Sheet and if it then goes negative (liabilities exceeds assets) DON'T INVEST and if already invested SELL

Add 'other creditors' to net debt and calculate 'total net debt per share' Deduct this from EPS. If then EPS goes negative, DON'T INVEST and if already invested SELL.

A failure on any one of the above three is a warning not to go near. Carillion failed all three. The writing has been on the wall for years, liquidation was certain; the only question was when.

Finally, don't trust audit reports; sometimes they are not worth the paper they are written on .

Remember also, that IFRS accounting (as compared to UK (United Kingdom) GAAP) made it much easier for directors, if not to falsify, then to bend accounts. For example, under UK GAAP intangible assets had to be amortised over 20 years. Under IFRS amortisation (if at all) is at the discretion of the directors.

I agree with you that the law needs to be changed. Carillion's senior directors and the audit partner signing off the 2016 accounts should be behind bars. Investors who are not financially trained are being taken for a ride.


End of cut and paste.


A few years ago an accountant friend told me the 'warning' about intangible assets and said that any company which failed that test was 'technically insolvent'.
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Chris from Nailsea
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« Reply #64 on: January 20, 2018, 23:21:04 »

Following on, rather neatly, from martyjon's previous post - an update from the BBC» (British Broadcasting Corporation - home page):

Quote
Carillion: The signals that the company was going bust



Carillion's collapse was for many people a bolt from the blue - a large UK (United Kingdom) company that had no obvious problems went bust in a little more than a year.

Even the company's directors seemed to have no idea what was about to happen. In the annual report published in March, they signed off a "viability" statement saying there was no reason to think the company would have financial difficulties in the next three years.

Outside the company, however, there was widespread scepticism.

Investors had begun betting against Carillion shares as long ago as 2013.

Six months ago, at the height of the City scepticism, one quarter of all the company's shares were being used in "short" trades, an unheard of proportion for a large quoted company.

One hedge fund manager complained at the time that the trade had become so popular that it was no longer worth doing - the cost of borrowing Carillion shares, normally the necessary precursor to placing a short trade, had become prohibitive.

What did the short-sellers see that the company's board could not? Here are four of the tell-tale signs that (with hindsight) gave hedge funds and others sufficient confidence to bet that the company's shares would fall.

It's too good to be true

Carillion reported average margins of about 4%, twice the normal going rate for construction companies.

While some of this could be explained by the company's mix of business, with potentially lucrative service contracts and high-margin work in the Middle East, it seemed suspiciously high to some investors.

And high-margin work is good, as long as you actually receive payment. Industry insiders say Carillion was owed about £400m from Middle East contracts when it went under.

Longer payment terms

Construction industry veterans know that when main contractors come under pressure, their first port of call is making subcontractors wait for their money.

Late payment is endemic in construction, but Carillion was making its suppliers wait 120 days.

There was other evidence too; stories in the trade press about the woes of angry subcontractors, which enough to give keen-eyed hedge funds reason to think that cash was tight at Carillion.

Debts may have been larger than most thought

Carillion had plenty of debt - about £850m at the time of its last annual report - although this had grown much larger by the time of its demise.

But that figure did not give a full picture. To help speed payment to its subcontractors, Carillion, in common with other large contractors, used a system called the Early Payment Facility.

Its suppliers could take their invoice to one of Carillion's lenders and be paid. The bank took a fee, and Carillion no longer owed the subcontractor, but the bank.

This sum was not included in the published debt figure, but was in the accounts under a different heading - if you knew where to look.

A new regime coming

All companies that have long-term contracts have to wrestle with the tricky question of when the profits should be recognised in the accounts.

If they abide by the actual flow of cash from the deals, then the results would be very lumpy, with big losses early on followed, hopefully, by profits in the final years.

Accounting rules allow companies to smooth the profits out, but it is a matter of judgement. If the judgement is too optimistic, profits can be booked too early.

The accounting rules are changing, with a new standard (IFRS 15) coming into force this year. It will force companies to be tougher, matching reported profits much more closely to actual cash flows.

It is not an unreasonable assumption for a hedge fund that the new accounting standard would be likely to hit Carillion's reported profitability.

It is worth remembering that the investors were betting only that the share price would fall.

Most probably expected that - as had happened with Carillion's big rival Balfour Beatty a few years earlier - there would be a string of profits warnings, a share price plunge, painful write-offs and a slow crawl back to normality.

It turned out to be much worse than that. As the interim chief executive Keith Cochrane set out in his witness statement to the court that approved the liquidation, the company had nearly no cash left at all.

The court requires a deposit to be paid to secure the liquidator's services; Carillion did not have it, relying instead on the government to come up with the sum.

The Financial Conduct Authority keeps a record of short positions in companies listed on the London Stock Exchange. Bear in mind that while the short sellers turned out to be right about Carillion, they have been wrong many other times.

And a short position may be just one part of a wider trading strategy - the table does not tell you anything about the reasons for the trades, or the wider context.


« Last Edit: January 20, 2018, 23:35:42 by Chris from Nailsea » Logged

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martyjon
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« Reply #65 on: January 25, 2018, 21:15:46 »

I reported a while back that workers for Carillion had set up a works compound near my home to staballise an embankment. I have noticed since last week that some of the plant and containers which were on this site have gone. I read in my local gazette today, Yate and Sodbury Gazette, that they reported residents had seen low loaders leaving the site with plant and equipment on board and yes the site does look devoid of some large plant although there is still some plant on the site bearing the legend Flannery Plant Hire which seems to be parked up. Perhaps officials from the liquidators have visited the site and placed prohibitation notices on the plant that its not to be used and Mr Flannerys low loaders haven't been able to visit the site yet to recover his hired out plant yet but the site was very quiet today when I passed and I only saw 5 members of the orange army there today when normally there were at least 15 - 20.
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« Reply #66 on: January 26, 2018, 06:47:56 »

I reported a while back that workers for Carillion had set up a works compound near my home to staballise an embankment. I have noticed since last week that some of the plant and containers which were on this site have gone. ....

Really stupid question - how's the work been going?  Could the phase that needed the heavy plant have been completed?
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martyjon
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« Reply #67 on: January 26, 2018, 08:00:30 »

I reported a while back that workers for Carillion had set up a works compound near my home to staballise an embankment. I have noticed since last week that some of the plant and containers which were on this site have gone. ....

Really stupid question - how's the work been going?  Could the phase that needed the heavy plant have been completed?

When the compound was sent up talking to operatives, the work was scheduled to run until April. The plant 'parked up' was used to lift the 'L' shaped pre-cast concrete fabrications off the lorries that delivered them to the site. The work which has taken place is all 'hidden' behind houses and can't be seen from the highway but the work remaining which can be seen from the highway involves shoring up an increasingly higher embankment which rises to where the railway crosses a road which dips down under the railway line and nearly always floods in heavy rain.

Going out later today and will report how the general electrification work is going in the area but quite frankly I'm disappointed at the progress, or rather the lack of it  really since the August/September blocks on the Badminton line, Westerleigh Junction - Wotton Bassett line and then the Bristol Parkway - Westerleigh Junction section too. 
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« Reply #68 on: January 27, 2018, 08:50:29 »

I reported a while back that workers for Carillion had set up a works compound near my home to staballise an embankment. I have noticed since last week that some of the plant and containers which were on this site have gone. ....

Really stupid question - how's the work been going?  Could the phase that needed the heavy plant have been completed?

When the compound was sent up talking to operatives, the work was scheduled to run until April. The plant 'parked up' was used to lift the 'L' shaped pre-cast concrete fabrications off the lorries that delivered them to the site. The work which has taken place is all 'hidden' behind houses and can't be seen from the highway but the work remaining which can be seen from the highway involves shoring up an increasingly higher embankment which rises to where the railway crosses a road which dips down under the railway line and nearly always floods in heavy rain.

Going out later today and will report how the general electrification work is going in the area but quite frankly I'm disappointed at the progress, or rather the lack of it  really since the August/September blocks on the Badminton line, Westerleigh Junction - Wotton Bassett line and then the Bristol Parkway - Westerleigh Junction section too. 

If its a Network rail project it should be continuing; NR» (Network Rail - home page) has agreed with the Liquidators to pay suppliers backdated to a certain date (cannot recall the date) and to continue to pay certainly up until April, the agreement with the Liquidators also include Carillion employees.  It might have taken a few days to sort out some of the details before work restarted.
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ellendune
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« Reply #69 on: January 27, 2018, 10:42:13 »

If its a Network rail project it should be continuing; NR» (Network Rail - home page) has agreed with the Liquidators to pay suppliers backdated to a certain date (cannot recall the date) and to continue to pay certainly up until April, the agreement with the Liquidators also include Carillion employees.  It might have taken a few days to sort out some of the details before work restarted.

This article from RailNews explains the offer, which only applies to smaller suppliers for invoices between Christmas and 15th January (later ones are already covered). 

Quote
.......However, although payments will be made directly by Network Rail to about 300 smaller suppliers, these will not help larger sub-contractors. Network Rail said ways of helping them will 'continue to be explored'.

The payments of arrears are the result of an agreement between Network Rail and accountancy firm PwC, which has been instructed to manage Carillion’s affairs by the Official Receiver. The payments will cover the period between Christmas and 15 January, when Carillion went into liquidation.
......
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grahame
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« Reply #70 on: January 31, 2018, 18:49:42 »

http://www.bbc.co.uk/news/business-42885211

Quote
Capita shares have plunged almost 50% after the outsourcing firm warned on profits and announced a major shake-up.

New chief executive Jonathan Lewis said the company had become "too complex" and "driven by a short-term focus" and needed to change its approach.

Capita, which issued a series of profit warnings last year, has again cut its profit forecast and revealed plans to raise £700m by issuing new shares.

The move comes after outsourcing rival Carillion collapsed earlier this month.

[etc]

My bolding.  Industry sector problem?
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ellendune
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« Reply #71 on: January 31, 2018, 18:52:44 »

http://www.bbc.co.uk/news/business-42885211

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Capita shares have plunged almost 50% after the outsourcing firm warned on profits and announced a major shake-up.

New chief executive Jonathan Lewis said the company had become "too complex" and "driven by a short-term focus" and needed to change its approach.

Capita, which issued a series of profit warnings last year, has again cut its profit forecast and revealed plans to raise £700m by issuing new shares.

The move comes after outsourcing rival Carillion collapsed earlier this month.

[etc]

My bolding.  Industry sector problem?

Not just a Sector problem. It is a problem with most of British Industry
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broadgage
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« Reply #72 on: January 31, 2018, 19:36:41 »

Capita is often spelt with an "r" inserted between the first two letters, there are numerous reasons for this.

I for one will laugh if they bust, serves them right. I would of course feel sorry for staff, suppliers and sub contractors, who faced loss or worry, but for capita as a company "just desserts"

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« Reply #73 on: January 31, 2018, 20:13:50 »

We should all remember we have been told time and time again ..........

The competitive tendering of out sourcing the out sourcing is the most efficient and cost effective way to do business ......................................

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« Reply #74 on: January 31, 2018, 20:38:17 »

I’m sure GWR (Great Western Railway) and any other TOCs (Train Operating Company) that took the decision to outsource to Capita will be keeping a close eye on this one.
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