Should HM Gov' Bail Out Carillion?

thistle_

john80 wrote:

Maybe getting a door fixed on a NHS hospital does not need a project manager, quantity surveyor and a meeting before the guy does it.

+1
Construction has become a management business while the people who actually do things are left at the bottom of the heap.

lostboysaint

Watching this has been an experience. Their problems were first mooted in 2013 and it's a common perception in the industry that if you're overly exposed to low margin, long term contracts then you're going to be in big trouble. However this doesn't sit comfortably with the City and their desire to see big numbers in the turnover box - which can only be acquired by aggressively pricing that very type of work. Guess which one is more attractive to board members and shareholders who are rewarded for "performance"?*

The other thing that needs serious investigation here is public sector procurement, because it's f**king woeful at every level. The failure to understand the difference between cost and value has never been more obvious and yet it's still allowed, even encouraged, in the race to the bottom that it currently provides.

*performance, in this case - as with the banks and plenty of other big businesses, obviously meaning something completely different to profitability and having a sustainable business.

TheBigBean

Mr Goo wrote:

... And that ladies and gentlemen is the whole story of Labours' Building Schools for the Future.

It really is not.

Note how any issues this creates for Carillion's PFI projects are issues for the investors and the banks, and not the government. In contrast, all the contracts the government has privately procurred with Carillion are at risk. Did the government insist on performance bonds?

Jez mon

Surrey Commuter wrote:

Well that answers the first question - now we get to find out if they should have intervened.

It could be a great opportunity to get out of some sh1t contracts but have no faith that the Govt won't be bending over to get farcked on the new contracts.

Given that it's widely accepted that the Govt gets farcked over on the big contracts, you would have thought companies like Carillion would be able to make stacks of money?

So is this just an issue of woeful management all around on the part of all parties involved.

rick_chasey

TheBigBean wrote:

Mr Goo wrote:

... And that ladies and gentlemen is the whole story of Labours' Building Schools for the Future.

It really is not.

Note how any issues this creates for Carillion's PFI projects are issues for the investors and the banks, and not the government. In contrast, all the contracts the government has privately procurred with Carillion are at risk. Did the government insist on performance bonds?

No-one should be surprised by this.

I knew how badly Carillion have been doing and it has nothing to do with me.

No excuses for being caught on the hop.

I mean that it’s a liquidation and not going into administration (to come out eventually as smaller profitable firm) says a lot about the underlying financials.

tangled_metal

Three profit warnings in 6 months wasn't it? I'm sure HMG should have known about problems earlier than 6 months too. Or at least hope they would.

rick_chasey

Tangled Metal wrote:

Three profit warnings in 6 months wasn't it? I'm sure HMG should have known about problems earlier than 6 months too. Or at least hope they would.

Every analyst covering it has been saying more or less that it was a mess.

lostboysaint

Rick Chasey wrote:

Tangled Metal wrote:

Three profit warnings in 6 months wasn't it? I'm sure HMG should have known about problems earlier than 6 months too. Or at least hope they would.

Every analyst covering it has been saying more or less that it was a mess.

Bit of a shame that the same analysts weren't asking the questions when the latest round of defence prime contracts and HS2 were awarded and when half the hedge funds in the city were betting against them (and have been since 2013). Might have opened the eyes of a few people who were downright lazy in their due diligence and made the process a bit more expedient and with less damage.

mamba80

Does go to show that privatisation is not the panacea some believe and why were so many contracts awarded to one company?
A company that managed to pay its former CEO 1.2m in 2015 and then despite its financial issues, raised this to 1.5m in 2016.

Perhaps Lord Adonis was correct when he said that Brexit, both pre and post vote, has paralysed Government.

lostboysaint

I should also mention that they've gone on four months beyond being told by one of the major consultancies that were brought in to advise them on their "rescue" that they were beyond salvation and to call it a day then.

lostboysaint

mamba80 wrote:

Does go to show that privatisation is not the panacea some believe and why were so many contracts awarded to one company?
A company that managed to pay its former CEO 1.2m in 2015 and then despite its financial issues, raised this to 1.5m in 2016.

Perhaps Lord Adonis was correct when he said that Brexit, both pre and post vote, has paralysed Government.

Never mind paying the CEO, it was paying dividends as late as June last year despite knowing this was coming.

surrey_commuter

mamba80 wrote:

Does go to show that privatisation is not the panacea some believe and why were so many contracts awarded to one company?
A company that managed to pay its former CEO 1.2m in 2015 and then despite its financial issues, raised this to 1.5m in 2016.

Perhaps Lord Adonis was correct when he said that Brexit, both pre and post vote, has paralysed Government.

that is a bit tenuous.

Grayling was a tw@t before Brexit. Hopefully more light will be shone on his bailout of the East Coast mainline franchise

TheBigBean

Rick Chasey wrote:

TheBigBean wrote:

Mr Goo wrote:

... And that ladies and gentlemen is the whole story of Labours' Building Schools for the Future.

It really is not.

Note how any issues this creates for Carillion's PFI projects are issues for the investors and the banks, and not the government. In contrast, all the contracts the government has privately procurred with Carillion are at risk. Did the government insist on performance bonds?

No-one should be surprised by this.

I knew how badly Carillion have been doing and it has nothing to do with me.

No excuses for being caught on the hop.

I mean that it’s a liquidation and not going into administration (to come out eventually as smaller profitable firm) says a lot about the underlying financials.

That would all be priced into the performance bond. Key question is whether the government required them. All PFI developers would.

mr_goo

lostboysaint wrote:

Rick Chasey wrote:

Tangled Metal wrote:

Three profit warnings in 6 months wasn't it? I'm sure HMG should have known about problems earlier than 6 months too. Or at least hope they would.

Every analyst covering it has been saying more or less that it was a mess.

Bit of a shame that the same analysts weren't asking the questions when the latest round of defence prime contracts and HS2 were awarded and when half the hedge funds in the city were betting against them (and have been since 2013). Might have opened the eyes of a few people who were downright lazy in their due diligence and made the process a bit more expedient and with less damage.

According to a risk analyst on the radio this morning, last year Carillion issued a profits warning. This sent the shares tumbling, as one would expect. The very next day Chris Grayling's Dept of Transport award them a multi million pound contract......And the shares go up.

I think the financial regulators need to investigate.

rick_chasey

Chris Grayling corrupt?


No. F@cking. Way.

surrey_commuter

Rick Chasey wrote:

Chris Grayling corrupt?


No. F@cking. Way.

and as nobody (not even a thread on here) gave a sh1t about the £2bn bung to Virgin/Stagecoach why would they bat an eyelid about this?

I see him more as a prize idiot than corrupt

mamba80

lostboysaint wrote:

mamba80 wrote:

Does go to show that privatisation is not the panacea some believe and why were so many contracts awarded to one company?
A company that managed to pay its former CEO 1.2m in 2015 and then despite its financial issues, raised this to 1.5m in 2016.

Perhaps Lord Adonis was correct when he said that Brexit, both pre and post vote, has paralysed Government.

Never mind paying the CEO, it was paying dividends as late as June last year despite knowing this was coming.

yes paying dividends/awarding themselves pay rises and the Government via the Pensions regulator, despite having the powers to question this in-balance did nothing at all, now the tax payer and those yet to collect their pensions will foot this bill.
No wonder people associate the tories with corporate greed and corruption.

SC its not really that tenuous, its from the former insider Adonis and Ministers dont award contracts, they act on advice from civil servants/advisors, who are snowed under with brexit related cr@p, we dont live in a parallel universe, so will never know.

Stevo_666

Mr Goo wrote:

lostboysaint wrote:

Rick Chasey wrote:

Tangled Metal wrote:

Three profit warnings in 6 months wasn't it? I'm sure HMG should have known about problems earlier than 6 months too. Or at least hope they would.

Every analyst covering it has been saying more or less that it was a mess.

Bit of a shame that the same analysts weren't asking the questions when the latest round of defence prime contracts and HS2 were awarded and when half the hedge funds in the city were betting against them (and have been since 2013). Might have opened the eyes of a few people who were downright lazy in their due diligence and made the process a bit more expedient and with less damage.

According to a risk analyst on the radio this morning, last year Carillion issued a profits warning. This sent the shares tumbling, as one would expect. The very next day Chris Grayling's Dept of Transport award them a multi million pound contract......And the shares go up.

I think the financial regulators need to investigate.

There would have been a fair lead time negotiating such a deal. Are you suggesting that a major contract was negotiated and awarded within 24 hours to help the company?

Also the government is in a bit of a catch 22 as if you pull all your future business from a company issuing a profit warning, you are hastening its demise - or maybe even causing the demise of a company that might have survived otherwise. Profit warnings are not necessarily 'fatal'. Although out of interest I may put my accountants hat on and look at their last set of published financials just to see what they looked like and what warning signs were there.

rick_chasey

Surrey Commuter wrote:

Rick Chasey wrote:

Chris Grayling corrupt?


No. F@cking. Way.

and as nobody (not even a thread on here) gave a sh1t about the £2bn bung to Virgin/Stagecoach why would they bat an eyelid about this?

I see him more as a prize idiot than corrupt

Oh that bugs me a lot. I use that line a lot.

Just nothing to discuss really. It's just sh!t.

letap73

Stevo 666 wrote:

Mr Goo wrote:

lostboysaint wrote:

Rick Chasey wrote:

Tangled Metal wrote:

Three profit warnings in 6 months wasn't it? I'm sure HMG should have known about problems earlier than 6 months too. Or at least hope they would.

Every analyst covering it has been saying more or less that it was a mess.

Bit of a shame that the same analysts weren't asking the questions when the latest round of defence prime contracts and HS2 were awarded and when half the hedge funds in the city were betting against them (and have been since 2013). Might have opened the eyes of a few people who were downright lazy in their due diligence and made the process a bit more expedient and with less damage.

According to a risk analyst on the radio this morning, last year Carillion issued a profits warning. This sent the shares tumbling, as one would expect. The very next day Chris Grayling's Dept of Transport award them a multi million pound contract......And the shares go up.

I think the financial regulators need to investigate.

There would have been a fair lead time negotiating such a deal. Are you suggesting that a major contract was negotiated and awarded within 24 hours to help the company?

Also the government is in a bit of a catch 22 as if you pull all your future business from a company issuing a profit warning, you are hastening its demise - or maybe even causing the demise of a company that might have survived otherwise. Profit warnings are not necessarily 'fatal'. Although out of interest I may put my accountants hat on and look at their last set of published financials just to see what they looked like and what warning signs were there.

Although I don't agree with Goo - you would have been a moron to invest in Carillion as a stock holder over the last three years ( the share price had dropped significantly preceding the profit warning in a bull market) - it had a poor Altman Z2 score before the profit warning which indicated a high bankrupcy risk.
The whole sector of PFI constuction /service is awash with some pretty poor companies - Interserve for example.

Frank the tank

With any luck a lot of workers will be coming back into the public sector.

rick_chasey

PFI if done properly works for everyone.

It was just a badly run company.

Stevo_666

Frank the tank wrote:

With any luck a lot of workers will be coming back into the public sector.

Who is it lucky for?

slowmart

£83,000,000.00 was paid in dividends which was an increase on the previous year.

The company execs are incentivised in creating value within the business which is shown with a climbing share price rather than a measured and incentivised with a well capitalised pension fund. The funding of the pension scheme is the responsibility of the pension trustees.

Carillion sown auditors are now under investigation and this has been ongoing now for a while.

In part defence of the company pension deficit bond yields are low due to the quantitative easing.

All the checks and balances seem to have been asleep, certainly the banks and board seem to have woken up after the party started.

mamba80

Slowmart wrote:

£83,000,000.00 was paid in dividends which was an increase on the previous year.

The company execs are incentivised in creating value within the business which is shown with a climbing share price rather than a measured and incentivised with a well capitalised pension fund. The funding of the pension scheme is the responsibility of the pension trustees.

Carillion sown auditors are now under investigation and this has been ongoing now for a while.

In part defence of the company pension deficit bond yields are low due to the quantitative easing.

All the checks and balances seem to have been asleep, certainly the banks and board seem to have woken up after the party started.

Yep but isnt the pensions regulator supposed to keep a check on this and check the balance between Div's and pension, negotiating a settlement if the balance is wrong.

the board changed the rules on bonus claw backs last summer, making it far harder to do so in the event of corp failure, so i d suggest the board were well awake....

Stevo_666

mamba80 wrote:

Slowmart wrote:

£83,000,000.00 was paid in dividends which was an increase on the previous year.

The company execs are incentivised in creating value within the business which is shown with a climbing share price rather than a measured and incentivised with a well capitalised pension fund. The funding of the pension scheme is the responsibility of the pension trustees.

Carillion sown auditors are now under investigation and this has been ongoing now for a while.

In part defence of the company pension deficit bond yields are low due to the quantitative easing.

All the checks and balances seem to have been asleep, certainly the banks and board seem to have woken up after the party started.

Yep but isnt the pensions regulator supposed to keep a check on this and check the balance between Div's and pension, negotiating a settlement if the balance is wrong.

the board changed the rules on bonus claw backs last summer, making it far harder to do so in the event of corp failure, so i d suggest the board were well awake....

Looking at the 2016 published accounts, the pension deficit had jumped considerably, but they were putting in around £46m a year by way of a deficit recovery scheme. Typically the deficit recovery is spread over a long period.

http://annualreport2016.carillionplc.com/downloads/Carillion_Financial_statements.pdf

Some warning signs were there in the 2016 accounts such as the jump in already high trade creditors, but most of the damage seems to have been done in 2017 when they wrote off nearly £900m on some large contracts - mostly Middle Eastern IIRC.

rick_chasey

Since 2014 a fifth of their stocks were out on loan.

Has been going on for years.

slowmart

Surely the emphasis and weighting for balancing pension fund deficits should be over a shorter period?

It seems fundamentally wrong when shareholders take a dividend when the pension fund is in deficit. As Stevo says as long as there’s a plan to remedy the deficit over a number of years the regulator is content not to disturb the arrangement.

This is compounded when shareholders know that HMG will backstop any shortfall if the worst happens.

Where’s the incentive on shareholders and execs to do the right thing in terms of securing the livelihoods of their ex colleagues?

Frank the tank

Rick Chasey wrote:

PFI if done properly works for everyone.

It was just a badly run company.

Society.

Or is there no such thing?

pblakeney

Frank the tank wrote:

Rick Chasey wrote:

PFI if done properly works for everyone.

It was just a badly run company.

Society.

Or is there no such thing?

Died. Circa 1986.
R.I.P.