Carillion Share Discussion Threads

[rcturner2] 21/2/2017 07:59

FTSE 250 member Carillion (LSE: CLLN) is three times the size of Interserve. But the group’s mix of construction and outsourcing businesses is similar.

Carillion’s share price has fallen by 24% over the last six months, even though earnings forecasts for the firm have remained fairly stable. The firm’s shares now trade on a forecast P/E of 6.4, with a whopping prospective yield of 8.6%.

The problem is that Carillion appears to be suffering from a change in the profile of its activities. Profits from overseas construction work are falling. The group is becoming more dependent on low-margin outsourcing work. This means sales are rising much faster than profits, reducing Carillion’s profit margins.

A second concern is that the firm’s revenue visibility for 2017 was just 70% in December. A year ago, the equivalent figure was 84%.

A hidden risk?
Carillion expects year-end net debt to be below the £290m reported in its interim results. However, the group admits that average net borrowing across 2016 is expected to be above the £540m reported in 2015.

Carillion isn’t the only company that manages its financial activities to minimise the net debt reported in its accounts. Many companies do this. But the difference between £290m and £540m is very great. In my view, this adds a considerable amount of risk to the stock.

My view
If business conditions improve in the construction and outsourcing sectors, companies such as Carillion and Interserve could become contrarian buys.

But I’m discouraged by their high levels of debt and uncertain outlook. In my view, now isn’t the right time to invest in either company.

[lab305] 20/2/2017 22:09

......And from 5 days earlier ...







The problem with Carillion is that it is tarred with the same brush.

[fizzypop] 20/2/2017 14:37

Good GFRD results tomorrow may read across to CLLN for an early rise in share price

[kcsham] 20/2/2017 10:33

The problem now is, we may have less well undervalued shares to pick soon.

[jaf1948] 20/2/2017 10:21

They could, of course, not short at all.....

[kcsham] 20/2/2017 09:14

Looking the rapid rising trend on the stock markets all over the world, I believe the shorters have not had a lot of choice.......

[edmundshaw] 20/2/2017 09:13

Interserve has fallen because they lost two and a half years' operating profits on one part of their business (waste-to-energy), or at least that is the loss they are providing for. That is a disastrous handful of contracts they entered into, and it has been the cause of most of the fall. So, with respect, that is not really proof of anything as far as shorting is concerned, as Carillion has had no such disaster.

[kiwihope] 20/2/2017 09:06

Interserve has fallen by more than CLLN over the last couple of years but it was not shorted to any extent. This is just more proof to me that the shorters are not the main reason for CLLN's fall. If they were then CLLN would have fallen more than IRV.

[kfp] 20/2/2017 09:03

on td waterhouse "Daily trade idea's"


hxxps://www.tddirectinvesting.co.uk/share-dealing/daily-trading-ideas?utm_source=trader&utm_medium=email&utm_content=weekly_trading_ideas_briefings&utm_campaign=weekly_trading_ideas

[kfp] 20/2/2017 09:01

on td waterhouse "Daily trade idea's"

[kcsham] 20/2/2017 08:56

Isn't shorters always win?

[wskill] 20/2/2017 08:23

IRV will have very little cash flow left to compete on contracts with CLLN all good news for shareholders here.

[w1ndjammer] 20/2/2017 08:12

Interserve took a hit this morning, looks like the shorters got that one wrong

they were only short 1.6% even i managed to avoid buying IRV

WJ.

[candid investor] 19/2/2017 13:08

Hi Kiwihope. Yes when I read their objectives I was minded of my own new year resolutions...I resolved to cutting down my alcohol intake, eating less junk food and exercising more...they are my objectives...haven't set out a detailed strategy with KPI'S because if I am still alive next year I will conclude that I am succeeding. !! The debts are manageable on a day to day basis as evidenced by the ongoing support and pension deficits fluctuate up and down so less of a worry...the real issue is their ability to reinvest in the business because they are already heavily indebted..what external observers see is stagnant growth with high debt. At some point this will have to be addressed...managed for several years already though so my gamble is they will continue to do so at least until I exit when share price gets to £3 which am hoping it will within next 12 months.

[shroder] 19/2/2017 11:39

Link removed as data out of date, apologies.

[113mike] 19/2/2017 09:37

CLLN looks robust to me ..imho...i'm in long term for the div anyway but share price going north would be a bonus...will get more if share price dips to around £2

[spoole5] 19/2/2017 08:34

Not sure you can compare the fickle world of retail with the steady income streams at carillion. Will carillion announce a profit warning on March 1st and halve the dividend? I doubt it.

[rcturner2] 19/2/2017 08:29

Laura Ashley is a good example of a similar debate, and it hasn't ended happily there.

[fizzypop] 18/2/2017 21:45

Looks to me that most of the bad news is now reflected in the share price Much of the concern about pensions/debt/shorting is mere BB noise. Risk/reward now favours the brave and I think the share price will build during the next three weeks as we head towards the next results. I believe the upside has tremendous potential and the 8.4% yield will sweeten the wait. A few months down the line and I think it likely that this will be seen in its true perpective as a great opportunity to bag a bargain comparable to the discount available on housebuilders immediately after the Brexit vote.

[kcsham] 17/2/2017 20:15

shawzie - good findings and thanks!

[rcturner2] 17/2/2017 18:09

They loan them out as they are the clients' shares and the institutions keep the loan fee from the shorters.

[redartbmud] 17/2/2017 17:30

Some big boys loaning out their shares to the shorters then?

[m4rtinu] 17/2/2017 17:28

Shawzie - thanks for info. On the geographical side, would some (much of?) of the UK %age be subsidiaries of N America?

[shawzie] 17/2/2017 16:41

Some statistics provided by Carillion which, seeing that the vast majority of shares
are held by Institutional Investors, I find rather reassuring.
I do not see such investors as nervous, dumping their holdings.
Investors by type - Institutional 84% and Private 16%.
Investors by geography - UK 72% Europe 7% North America 16% and Rest of World 5%.
Investor concentration - Percentage of issued share capital held by :-
Top 10 investors 50%, Top 30 investors 74%, Top 100 investors 93% and others 7%