Carillion Share Discussion Threads

[nomdeplume] 13/6/2017 15:59

This blog is full of regurgitated comments about Carilion's debt etc. Usually, these comments appear at a time when there is a downward pressure on the share price I note that after last year's July trading statement, the share price rose over 50p in the following month. In other words, the steady fall is based on innuendo and rumour, facts have produced a rise. I'm looking forward to this year's July statement. At least we will then be able to make judgements on something factual.

[edmundshaw] 13/6/2017 14:02

RCT with repect, I doubt the market is suggesting a cut. If the dividend were cut the share price could well rise on the basis that debt would reduce and the dividend was a bit of a millstone. The market might, on balance, be worried about the debt and the pension deficit and the ongoing business, or it might just be shorting htat put the price where it is.

I notice Mitie cut their dividend and the share price bounced up strongly

[wallywoo] 13/6/2017 13:12

Personally think that the share price action is key here. IF the 2 year down trend breaks on high volume, it is worth taking the risk. Otherwise too risky

[rcturner2] 13/6/2017 12:19

kcsham, companies cut their dividend all the time, usually because they can no longer afford to pay the amount out of their earnings. Whether that will happen here is another question, the market is suggesting that a cut is possible, the market is not always right.

[kcsham] 13/6/2017 10:54

I don't see any reason for Carillion to change its dividend policy. Carillion managed to pay ever increasing dividends for donkey years and there is no sign of stopping. I agree with GARYCOOK's comments and let us wait and see. I believe the shorters will continue their gamble on the share price of Carillion for a while but the end will soon come.

[garycook] 13/6/2017 01:51

WW,We will wait,and see then !

[redartbmud] 12/6/2017 12:32

Mite +25p?? :-(

[8w] 12/6/2017 12:06

Interesting share price reaction to Mitie's bad news.

Wonder if the same could happen here?

[snowtime] 12/6/2017 11:35

Some positive movement today probably everyone reinvesting their shares divis, pension & debt looks worst % wise because of the lower than normal share price, due to shorting. Lot more buy trades than sells, support the company

[wallywoo] 12/6/2017 10:58

gary have to disagree with you. CLLN does not have to be anything. It currently has a mkt cap of £850M. If they decide to suspend the dividend because of pension and debt issues, I could easily see this drop by 50%. Look what happened to IRV when they suspended their divi. (current mkt cap of £325M - with only slightly less t/o than clln).

There was a lot of believers for IRV too, if I remember but the share price kept dropping and then they suspended the divi and it crashed (March 17)

[garycook] 10/6/2017 03:14

After reading all recent posts.I just think what the CLLN share price will finally be when the Shorts sell out,for whatever reason.CLLN has to be a very good long term hold,even if management halved the dividend.I have increased my holding.

[death by donut] 09/6/2017 15:18

Any help?

Would seem 60% of suppliers are being paid quicker/on time rather than later?



"Carillion negotiates terms with its suppliers and these have ranged from payments in advance to 130 days from month end. Since late 2012, Carillion has been offering an EPF for suppliers as part of a package of measures" (see below for details).

DbD

[jaf1948] 09/6/2017 14:58

Unfortunately, your logic is faulty.(Elephants are grey, battleships are grey therefore elephants are battleships). It only makes it untrue for Berkeley - it doesn't necessarily make it untrue for Carillion. No two situations are identical.

[rcturner2] 09/6/2017 14:52

JAF that is clearly not true since the very large scale shorting of Berkeley has coincided with a massive increase in the share price of Berkeley.

[m4rtinu] 09/6/2017 14:47

Thanks, Ed.

[jaf1948] 09/6/2017 14:47

Wallywoo,We've had this discussion on here many times before. I still content that the shorters know no more than the rest of us and the reason for the fall in the share price is the shorting itself, not some serious malaise with the company.But each to their own belief.

[wallywoo] 09/6/2017 14:42

2.5 years ago approx 7% of shares were short. Today over 23%. There is no evidence of shorters closing out, in fact quite the opposite. They are all adding to their positions. Be very careful here IMO.

[jaf1948] 09/6/2017 14:37

People will always think a post is good if it fundamentally agrees with their own take on the subject. Although Ed's post is well argued, it falls into the usual trap with shorters: he says 'I think the short sellers are onto Carillion's balance sheet weakness'. The only problem with that statement is that the serious shorting started nearly 2 1/2 years ago which invalidates many of the conclusions in the post.

[ny boy] 09/6/2017 14:33

Received a nice fat divi payment this morning..added a few more this morning too GL long termers.

[ed 123] 09/6/2017 09:32

Yes, trade payables went up by 22%, whereas revenue went up about 11%. It suggests Carillion might be slower to pay their subcontractors (ie. hanging onto their cash a bit longer) than in the previous year - but I'm not an insider, so can't know for sure.

To cross check I've looked in the annual report for a statement of the average time taken by Carillion to pay invoices. I didn't find it. (Has anyone else found it?)

[m4rtinu] 09/6/2017 09:02

Agree, good post.

I am not very expert at company accounts but didn't trade payables go up quite a bit in last accounts too.

[rcturner2] 09/6/2017 08:08

Very good post ed.

[ed 123] 08/6/2017 20:20

FWIW, my take on this debate ...

I would set aside consideration of reported profit (which is opinion) and focus on cash and balance sheet.

I think the short sellers are onto Carillion's balance sheet weakness.

Retirement benefit liability has gone from about 400 million to about 800 million (2015 to 2016). That's equal to about 11 years operating cash flow.

Again comparing Carillion's full year 2016 with 2015, revenue went up about 11%, whereas trade receivables went up about 31%. Why would that happen? Are customers that much slower at paying this year, or has Carillion recognised some revenue early? I don't know.

If trade receivables had gone up in line with revenue, in the 2015 accounts ratio, net assets would have been about 250 million less. Total equity would then be only about 480 million, compared to 1,016 million the year before. Also, intangible assets in 2016 were recorded as 1,669 million - so there's a large negative figure for net tangible assets.

Cash flow? Net cash flow from operating activities was exactly the same in 2015 and 2016, 73.3 million. Dividend payments amounted to about 80 million in both years. Sustainable?

My view, fwiw, is that Carillion should cut its dividend and start making inroads into its debt. If not, and confidence cracks, its cost of borrowing goes up and things get even more difficult.

[pjt105] 08/6/2017 19:54

Getting nearer to shorts closing ipo.
from the FT article dated 6 April 2017 that Sux quotes above:
'So how much could the short sellers make?

Carillion’s shares are worth £930m, so with net debt of £219m the enterprise value of the group is £1.15bn, or around 4 times estimates for earnings this year, before interest costs, taxes, depreciation and amortisation charges.

However, the net debt total is what Carillion reported for the end of 2016, whereas the average figure during the year was much higher. Analysts at UBS argue a more complete total using the average number and other liabilities, such as the pension deficit, is net debt of £1.4bn.

Valuing the group on a similar multiple of ebitda as peers, incorporating the more conservative debt figure, implies a share price a fifth or more lower than today’s 218p.

UBS suggests a “downside scenario, in which profit margins come under pressure in all divisions” of 60p per share.

What are the risks?

Even the most brazenly confident short seller must be aware that many things can go wrong.

Crowding is one risk: if many short sellers rush to buy stock to close their bets a shareprice can be squeezed rapidly higher. Aryzta shares jumped 11 per cent after the group announced executive departures in February, for instance. Carillion shares have periodically rebounded.

Another is a simple improvement in the construction and service industries. If valuations for the whole sector improve, Carillion’s shares could rise regardless of any problems the short sellers believe the company may have'.

Still could go either way, but I reckon we're much closer to the bottom price now. UBS worst case scenario would mean a share price of 60p - I think there would be a takeover long before that happened.

[sux_2bu] 08/6/2017 19:34

The hedge funds want it down. They smell blood. Read the link, some interesting detail in it.