Carillion Share Discussion Threads

[careful] 15/7/2017 10:22

the shorts must know that any announcement about funding or any other corporate news could catch them out.
I admire their nerve for holding over the weekend.

This company will probably have a significant rights issue, possibly requiring an investment of double the value of your present holding.
but with pension deficits, possibly temporary, high debt levels and contract problems they are not in a good place right now.

but I am tempted to invest here, take up my rights when they arrive, and hold for the medium term.
The management and workforce will now be focussed on financial discipline.
There is an added bonus that ex. rights this could be a tempting target.

[tevita] 15/7/2017 10:12

what is YOUR STUPID RAMP HERE 70p Monday
Monday your STUPIDITY witless PUMP will be shown to be WHAT IT is no doubt

[tevita] 15/7/2017 10:10

LIAR and DECEITFUL RAMPER

[tevita] 15/7/2017 10:09

GLENKAZ
YOU LIED about buying GWMO at 0.6p
You tried a STUPID RAMP to 39p
WHAT DOES THAT SAY ABOUT YOU

[glenkaz] 15/7/2017 09:31

Why would I have 2 alias I am Glenkaz only! Are you saying I have split personality disorder🤔 Don't be silly! Gla here! And the Ukog ship is sailing check out late Friday rns! Shorts caught with pants down! 😃

[robizm] 15/7/2017 09:21

Glenkaz and tevita are the same person with the other alias tenmujen as well so please stop filling the board with stupid posts

[investment dave] 15/7/2017 09:08

More positive article from times

[r ball] 15/7/2017 08:15

Carillion missed a payment earlier this month. Will they make the PAYE payment?

[winston270] 14/7/2017 23:33

delato - What last post?? ;-) Thanks for pointing that out.

Sorry, when I said pre-recession, it was actually referring to pre-downturn of the Construction sector that I'm in.

I'm both invested and currently working on a large Carillion Construction project (indirectly).

[deltalo] 14/7/2017 23:18

Winston,be very careful what you post as that last post could be liable. And I must correct you as pree recession was before 2008. Only time will tell how this company turn's out and not anyone here knows any more than anyone else. It's just guess work and small talk. There are many different options obvious to all and options not obvious so it's best to wait and see how it plays. If your not invested then really it's not your problem and you should just go talk on a board you are interested in. But maybe you have no investment's and your just drifter's from one bad news to another.

[winston270] 14/7/2017 23:01

pjt105 - The contents of that article aren't really anything new, neither are the comments re: payment reputation.

[spob] 14/7/2017 21:19

Carillion fights for survival after share price crash


Troubles faced by UK construction group risk spreading to thousands of subcontractors


by: Gill Plimmer

Financial Times

13 July, 2017


One of the UK government’s biggest contractors and an employer of 50,000 people worldwide, Carillion is fighting for survival after a calamitous fall in its share price wiped nearly three-quarters off the company’s value in three days.

A damaging profit warning, revelations of a sharp increase in debt and larger than expected writedowns on four projects this week confirmed what many short sellers in the market had bet on for years — that Carillion’s finances were far shakier than appeared.

Carillion is the biggest manager of military bases for Britain’s Ministry of Defence and its other activities range from maintaining tracks for Network Rail and building roads for the Highways Agency, to hospitals in Canada and Oman’s parliament.


" [Carillion’s woes] will raise questions on how the industry is built on balance sheets that don’t have any foundations; they don’t have any assets "

Rudi Klein, Specialist Engineers Contracting Group


Fears are now growing that the shockwaves triggered by this week’s announcement will spread to thousands of sub-contractors used by the group.

On Thursday, Oxfordshire County Council said it would end in September a 10-year deal with Carillion to build schools and supply property management services, which had been signed in 2012 and was due to run until 2022 and be worth £500m.

Bankers at Lazard are scrambling to find a solution after Carillion on Monday announced a “corporate and strategic review” — and its share price has plunged by 70 per cent to 59p since, although it recovered 3 per cent on Thursday.

Already the group has written off £845m of operating profit from construction contracts, replaced its chief executive, Richard Howson, and suspended its dividend.

Its more dramatic options to stave off bankruptcy include a rescue takeover, a debt-for-equity swap or a heavily dilutive equity raising from shareholders.

The debacle puts thousands of the company’s contractors and subcontractors at risk and highlights the frailty of UK construction companies, which have almost no assets and outsource nearly all of their work. The sector is vulnerable to slow payment practices — for years Carillion has had a reputation for late payments to suppliers.

Questions are also being asked by analysts over accounting practices in the industry, including how early companies record profits on long-term contracts, which can affect how much they can borrow.

“Everyone will be watching the Carillion process with a lot of anxiety,” said Rudi Klein, chief executive of the Specialist Engineers Contracting Group. “There’s thousands of contractors and sub-contractors tied up in the company and the way things are going they will be incredibly concerned. Now the subcontractors are wondering if they will get paid in three months and if they are paid late they may suspend work.”

Mr Klein added that Carillion’s woes “will raise questions on how the industry is built on balance sheets that don’t have any foundations; they don’t have any assets”.

Carillion has been shifting from construction to less risky support services contracts, such as facilities management, which now accounts for almost two-thirds of revenues. Almost all of the losses have come from its building arm, which was hit by a squeeze on contracts and margins after the financial crisis.

The company has faced delays to payments on public-private partnership contracts in the UK — an area it is withdrawing from — as well as rising materials and labour costs. It has also suffered, along with industry rivals, from a slowdown in signing contracts since the Brexit vote.

This week Carillion highlighted some key projects — including Merseyside’s Royal Liverpool Hospital and an Aberdeen road project — on which it has taken large writedowns. This sparked concerns that the company’s problems could run deeper, with profits potentially set for a sharp decline.

The company announced savings from axing its £80m dividend and withdrawing from business in Qatar, Saudi Arabia and Egypt. But these are unlikely to make a significant dent in its debt mountain — its net debt has risen from £42m in 2010 to £695m in the first half of 2017 and is expected to reach £800m in the second half.

Carillion’s market value on Thursday morning was about £250m, dwarfed by its £663m pension deficit, meaning any rescue deal would need to be negotiated with trustees.

Some analysts are forecasting a diluted rights issue of about £500m — double the company’s current stock market value.

“The most likely course of action will be a rights issue, but we would not rule out a more dramatic restructuring (an exit from construction?), or potentially a combination of both,” analysts at RBC Capital Markets said in a note.

But Stephen Rawlinson, analyst at Applied Value, said he viewed a rights issue as “extremely unlikely”.

“Why would any investor put money into Carillion when the trustees would have first call on it? There needs to be an agreement with pension trustees and they don’t tend to act quickly.”

Sources close to the company said that an emergency rights issue would take time to engineer given the instability in the share price and the churn in the share register. The company is exploring a range of other options, including a debt-for-equity swap, the source said.

The option of a purchase of part or all of the business has been downplayed, as rival British contractors including Balfour Beatty — the subject of an aggressive takeover attempt by Carillion in 2013 — appeared to rule out bids.

However, industry watchers speculated that a Chinese company could make a play for the group given Beijing’s ambitions to move into the British construction market.

“I can’t see any British firm bidding for it,” said one industry source. “Why would you invest? How many businesses do you know that have only had [just] one profit warning? They have hardly any assets they could sell and the pension trustees would have first access to the proceeds anyway.”

Carillion insisted it had substantial liquidity and was in no danger of breaching banking covenants, which do not mature before 2019 and 2020. It said that with £4.8bn new orders last year and £2.6bn so far this year it was still winning work and going about its business as usual.

But there are concerns that the situation could quickly deteriorate, particularly if the group started struggling to pay suppliers.

“If you’re a contractor working for Carillion you’ll be worried about progress payments over next three months because they may slow down payment to the supply chain by even more than 120 days,” said Mr Klein, who added that he was advising subcontractors to assess the risks and chase outstanding payments.

Mr Rawlinson did, however, point to rivals of Carillion that have survived similar problems.

“The sector has been prone to over optimistic views of costs and revenues for a long time,” he said. But although some such as Jarvis, the rail contractor, have gone into administration, others such as Serco, Mouchel and Balfour Beatty have faced spectacular blow-ups and survived.





Supplier payments attract attention

Carillion’s slow payments to suppliers have come under the spotlight as analysts and hedge funds said the practice was a sign of the company’s parlous financial state, write Emma Dunkley and Gill Plimmer.

The UK construction company warned this week that it needed to shore up its balance sheet as its debt spiralled and it made £845m of contract writedowns. Some analysts and investors said invoice payment methods and use of supply chain finance had exacerbated its debt problems.

Carillion took the decision a few years ago to extend payment terms to its suppliers to 120 days, nearly doubling its previous payment timeframe.

The move was part of a new government-backed payment system it had adopted, called the Early Payment Facility. Under this scheme, partnering banks would offer to pay a supplier earlier than 120 days for a charge. Carillion would then pay the bank back at the end of the term.

This process, sometimes known as “reverse factoring”, is designed to ensure suppliers have fast access to cash.

One analyst said the move to extend payment terms allowed Carillion to keep cash for longer, at a time when its cash reserves were low, and move debt off its balance sheet.

But the controversial practice, an initiative of former UK prime minister David Cameron, has concerned some investors.

One hedge fund manager told the FT he had been shorting the stock for a couple of years because Carillion had failed to agree invoices or pay them quickly. “When we see payment terms lengthening it’s a red flag and that’s why we shorted it,” he said.

Carillion was one of the biggest users of reverse factoring.

One of the risks is if banks become nervous about Carillion’s ability to pay, they could limit or withdraw the facility. According to Carillion’s website, partner banks include Lloyds Banking Group, Royal Bank of Scotland and Santander.

One industry expert said: “The banks will probably have put in place credit insurance so if Carillion falls into insolvency they might have insurance that will pay out.”

Another issue is that if suppliers become worried, more of them will ask for earlier payments, putting pressure on the funding facility to deliver this.






COMMENTS (3)

Upaswellasdown
6 hours ago

Gill – well done on getting the competitors to rule out bids.Was that on the record?

A few other comments

- Chart showing net debt and order book – a bit misleading – the 2nd y-axis gives the initial impression that orders have fallen to zero.In any event, an order book of £16bn vs net debt of £200m looks ok but what matters is how this order book turns into FCF.Pre-tax profit margins of 2.8% imply post-tax margins of 2.2% and suggest the order book could be worth £363m.But how much of that profit will become cash?E.g. will it become large contract debtors?Should also bring this chart up to H1 as ND vs orders is probably much more alarming then

- I wasn’t aware that a trigger for involvement by pension trustees is the relative size of the deficit vs market capitalisation. Is that right?Obviously there are probably other possible triggers.But I can’t see that they will get in the way of any recapitalisation that improves their credit position compared to the precarious position it is in now.

- A debt for equity swap could only take place if the current shareholders are almost totally wiped out.It’s a possibility but probably worse for them than a very dilutive right issue - e.g. see Mouchel where equity got 1p / share

- Maybe have confused banking covenants with debt maturities – the facilities / bonds which mature in 2019 and 2020 will have maintenance covenants that need to be complied with at each half year testing period.So the debts are a problem long before they need refinancing (though that is when the rubber really hits the road)

- You should probably also include Laing and Mowlem in the list of failed contractors
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@MusapuriR
11 hours ago

How and why is this mismanagement allowed especially with such a large £663m pension deficit ? The people responsible should prosecuted.
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Thisisnotworkingout
1 day ago

663m pension deficit? Bye bye.

[glenkaz] 14/7/2017 21:15

So you think they will short to zero lol!

[pjt105] 14/7/2017 20:37

Interesting comment in today's FT about why one of the hedgies shorted CLLN -
'Carillion, which has had a reputation for late payments to suppliers, took the decision a few years ago to extend payment terms to 120 days, nearly doubling its previous timeframe. Hedge funds have been shorting the stock for two years as a result. One hedge fund manager told the FT: “When we see payment terms lengthening it’s a red flag and that’s why we shorted it.”

[glenkaz] 14/7/2017 20:03

Hi t/sser! Another troll!

[nakedsteve] 14/7/2017 19:33

glenkaz up to his old tricks, yet again!!

[tevita] 14/7/2017 18:25

GLENKAZ is GWMO still worth 39p ??????

[tevita] 14/7/2017 18:24

you might be alright on UKOG this time GLENKAZ
but what price will you have to pay Monday

[tevita] 14/7/2017 18:22

GLENKAZ one day you will learn what being
HONEST and TRUTHFUL means
you might

[tevita] 14/7/2017 18:12

GLENKAZ one day you will learn what being
HONEST and TRUTHFUL means
you might

[tevita] 14/7/2017 18:11

I bet if it goes down on Monday you will claim you sold