Topic: Carillion scrambles to stay afloat

[ShakaHislop]

Carillion, the troubled services and construction group, will reveal a new business plan this week in a bid to avoid collapse.

The company, one of the government's biggest contractors, has issued a series of profit warnings in recent months.

The turmoil has sent its shares tumbling by 90% since July.

The HS2 contractor said it was in discussions about ways of reducing debt and obtaining new funding.

A business plan due to be presented to creditors and other stakeholders on Wednesday will form the basis of a "proposal to restore Carillion's balance sheet", a spokesperson said.

The company employs about 43,000 people worldwide and provides services to half the UK's prisons, as well as hundreds of hospitals and schools.

Analysts estimate Carillion has debts including pensions of about £1.5bn, while its market capitalisation is just £81m.

However, the company's banks, which include Santander UK, HSBC and Barclays, are understood to be reluctant to lend it any more cash.

That could force Carillion to seek some form of government support if its banks do turn off the cash taps.

Given the number of public sector contracts it holds, some analysts think it is "too big to fail" and that ministers may be forced to step in.

Last week the Wolverhampton-based company said it was being investigated by the Financial Conduct Authority over the "timeliness and content" of its stock market announcements from December 2016 to July last year.

The state date for new chief executive Andrew Davies has been brought forward to 22 January.

In September Carillion revealed a huge loss of £1.1bn for the six months to 30 June on revenues that were flat at just under £2.5bn.

http://www.bbc.co.uk/news/business-42595874

This could become quite a big story either way, with it either being allowed to fall and the knock-on effect on HS2 and public services or a government bail-out, bearing in mind the current climate surrounding big business and the criticism the government received for the DUP pay-out.

[Xabi Gerrard]

I used to work in finance for a big construction company. The construction industry really is the most accurate bellweather for the state of the economy - nothing gauges confidence more than how much money people are willing to invest in building projects. I wonder, is this yet another victim of Brexit? I expected construction to be amongst the hardest hit.

The fallout will be huge - Carillion are the/one of the biggest customers to hundreds of smaller building firms.

[12C]

Aren’t they the company building the new Royal. I heard they were facing delays with that project, and had pushed the completion date back. Bad news if they go under

[Nobby Reserve]

They under-tender to win contracts, then fail to deliver on time (because they were unrealistic with their tender) and get fined (if the customer has a tight enough contract and is strong enough to look to enforce it)

With the finances of large construction firms, it's a big case of smoke & mirrors. Throw in the flow of capital around the world for tax-dodging reasons, and sometimes it gets very difficult to keep all the plates spinning.

[puroresu_kid]

The company I work for does loads of work for carillon and I will say they are still settling invoices in a timely manner

[The North Bank]

Had an interview with these lot 7 years ago, showed me all sorts of bar charts about how many billions they make a year, and how they work all over the world and are generally the place to be for job variety and security.
I didnt get the job, been downhill ever since for Carillion.

[Lush is the best medicine...]

Had an interview with these lot 7 years ago, showed me all sorts of bar charts about how many billions they make a year, and how they work all over the world and are generally the place to be for job variety and security.
I didnt get the job, been downhill ever since for Carillion.

do you have a Carillion voodoo doll?

[Spongebob Redpants]

Carillion financial woes have been well  known for a while now . I'm no fan of the company , for many reasons , but if they do fall the implications will be huge . The financial figures are horrendous which do not bode well but there's no such thing as a cpmpany too big to fall .

You also have to question the dilligence / ethics of the public sector when awarding so much work to a company when simple research would reveal the fragility of the company . Fuck me , subcontractors working for Carillion and the like have to jump through hoops to prove the financial viability of the company.

[12C]

Carillion financial woes have been well  known for a while now . I'm no fan of the company , for many reasons , but if they do fall the implications will be huge . The financial figures are horrendous which do not bode well but there's no such thing as a cpmpany too big to fall .

You also have to question the dilligence / ethics of the public sector when awarding so much work to a company when simple research would reveal the fragility of the company . Fuck me , subcontractors working for Carillion and the like have to jump through hoops to prove the financial viability of the company.

It’s like when the new schools were built in Liverpool under PFI. Jarvis got the contracts to build and council staff were transferred to Jarvis to maintain them once built. When they were then pulled up for their slipshod rail work, the whole house of cards came down, and people who had been employed by the council, and then transferred to Jarvis, were left wondering about their future.

[Stubbins]

The company I work for does loads of work for carillon and I will say they are still settling invoices in a timely manner

Settling invoices in a timely manner?! Never thought I'd hear that about one of our multi national Contractors. Is it still ninety day payment terms for subcontractors working for Carillion?

[12C]

Was in the Royal this morning and was told by one of the volunteers that the New Royal completion date is a worry. Apparently the completion date has been pushed back so far that no one seems to be able to say when it will happen. Noticed all the landscaping/trees etc was going ahead though.

[Rob K]

Not surprised, they are shite. They have the maintenance contract here at Brize and trying to get anything fixed in a timely manner is a complete shitshow.

[ShakaHislop]

Key UK contractor Carillion denies rescue plan in doubt

Troubled construction firm Carillion has denied reports lenders rejected a proposed rescue plan for the business.

The firm, which is a key government contractor for projects including schools and prisons, said crunch talks with stakeholders were still ongoing.

The firm is struggling under £1.5bn of debt, including a pension shortfall of £587m, raising fears about its future.

Ministers are drawing up plans to take over prisons contracts worth £200m from Carillion, the BBC understands.

The government confirmed ministers met yesterday to discuss Carillion's future and were "monitoring the situation closely".

The Financial Times reported that David Lidington, who was moved to the Cabinet Office as part of Prime Minister Theresa May's reshuffle this week, convened the meeting with Business Secretary Greg Clark, new Justice Minister Rory Stewart, new Transport Minister Jo Johnson and Liz Truss, Chief Secretary to the Treasury.

http://www.bbc.co.uk/news/business-42656879

[BarryCrocker]

The company I work for does loads of work for carillon and I will say they are still settling invoices in a timely manner

That's easy to do when you're not putting £580m into the pension funds of your 28,000 employees.

[SP]

As I posted in the Labour topic. £60M Market Cap. Worth more than that in PFI liabilities....

[stevensr123]

Settling invoices in a timely manner?! Never thought I'd hear that about one of our multi national Contractors. Is it still ninety day payment terms for subcontractors working for Carillion?

90 days is pretty decent I have found in the construction industry/pretty much the norm.

In fact I have worked with some of the biggest developers in the world and they have been a longer wait. I'm in the engineering buisness though so might be different

[Spongebob Redpants]

90 days is pretty decent I have found in the construction industry/pretty much the norm.

In fact I have worked with some of the biggest developers in the world and they have been a longer wait. I'm in the engineering buisness though so might be different

Work in construction and we wouldn't accept any payment terms longer than 45 days . Some do though .

[redalways]

Settling invoices in a timely manner?! Never thought I'd hear that about one of our multi national Contractors. Is it still ninety day payment terms for subcontractors working for Carillion?

Thank god they finished our new stand

[Musketeer Gripweed]

I have no sympathy for Carillion to be honest. We used to do a lot of work for them, but something happened about 7 or 8 years ago when they seemed to get too greedy with their sub-contractors. They demanded retro discounts on projects where they had already negotiated their discount, like they always do. Took us for over £80K, and we are not a big company.

Then they started doing online auctions for work packages. We won two, valued at over £1M, but for some reason they decided to award them to someone else. We started going legal but were advised against it, because "they always get away it."

I only hope their current suppliers get paid. That's my fear if Carillion go down, the poor guys they will take with them that have done nothing wrong.

[sminp]

Work in construction and we wouldn't accept any payment terms longer than 45 days . Some do though .

I’ve only ever come across 90 day payment terms in my 5 years, never anything more or less.

[Spongebob Redpants]

I’ve only ever come across 90 day payment terms in my 5 years, never anything more or less.

Surprised by that . You'd have to be a pretty solid company with good credit terms to be able to trade on those terms. I work for a financially solid company and could survive on 90 day payments, , but it wouldn't take much to go wrong to put the company in a serious position.

I suppose it depends on what sector of the industry you're in and profit margins .We're on 30 to 45 day credit terms with most of our suppliers, and working on 90 day payments would require a hefty cash at bank balance.

As far as Carillion and the other big contractors are concerned , the reason for their position is the ridiculously low profit margins worked to . Most aim for 5% , but not many achieve that , with most probably comfortable at a 2% margin. Factor in the contractors buying in work on occasion and the risk to the big boys is always there . These margins are nothing new , and makes you wonder why people invest in an industry with such a low return.

[GBF]

They will surely be purchased by the chinese. Too good for them to let this opportunity go

[CraigDS]

Into liquidation it goes.

[Trada]

I wonder if there will be a urgent question in the HOC's today? seeing that they were still given government contracts after 3 profit warning in the last year and they started to protect bosses bonus's last year.

[Spongebob Redpants]

I wonder if there will be a urgent question in the HOC's today? seeing that they were still given government contracts after 3 profit warning in the last year and they started to protect bosses bonus's last year.

Have to be questions - Goes way beyond just incompetence .

[nayia2002]

it have a massive effect on  a lot of subcontractors 

 

[Trada]

So the Tories are saying some of Carillions contracts will be passed onto other companies & others will be brought in house to the government guaranteed the profit making ones will be passed on and the taxpayer will pay for the loss making ones as always.

[Nobby Reserve]

As far as Carillion and the other big contractors are concerned , the reason for their position is the ridiculously low profit margins worked to . Most aim for 5% , but not many achieve that , with most probably comfortable at a 2% margin. Factor in the contractors buying in work on occasion and the risk to the big boys is always there . These margins are nothing new , and makes you wonder why people invest in an industry with such a low return.

A key problem for them (and others - Interserve and Mitie are also struggling) is the practice of short-term bolstering of balance sheets with won contracts. It gives the illusion that the company is doing well - with accompanying bonuses for directors & executives. But to win the contracts, the companies are bidding unrealistically, especially concerning time deadlines. They don't allocate enough resources (to do so would immediately condemn the contract into loss-making territory) and take the penalty hit at a later date, with the aim of having more contracts in place by then to pay the penalties.

Worth noting that the CEO who oversaw Carillion's slide into trouble was paid £1.5m in 2016 and, although he stepped down, was paid his £700k basic alary for a further 12 months. And other executive bonuses were ring-fenced in 2017 despite the emerging shitstorm.

I'm naively hoping that the shysterism of this company is fully laid bare in an inquiry, but I'd imagine a whitewash, especially with this bunch of corporate arsekissers in power.

I want to know, off the top of my head:

* whether the leaks are true that the UK government was spending taxpayer cash to [illegally] prop-up the company for the past 6 months or so.

* the level of beneficial ownership arrangements that are/were in place.

* how much of its cashflow & profits were syphoned off into tax havens

What's obvious is that the UK taxpayer will be picking up the tab and ordinary workers will lose out, whilst directors/executives skulk back to their country retreats and tax havens to count their dirty cash (before stepping back onto the executive merry-go-round to pick up a new top-management job with a 6- or 7-figure 'package')

[BarryCrocker]

A key problem for them (and others - Interserve and Mitie are also struggling) is the practice of short-term bolstering of balance sheets with won contracts. It gives the illusion that the company is doing well - with accompanying bonuses for directors & executives. But to win the contracts, the companies are bidding unrealistically, especially concerning time deadlines. They don't allocate enough resources (to do so would immediately condemn the contract into loss-making territory) and take the penalty hit at a later date, with the aim of having more contracts in place by then to pay the penalties.

Worth noting that the CEO who oversaw Carillion's slide into trouble was paid £1.5m in 2016 and, although he stepped down, was paid his £700k basic alary for a further 12 months. And other executive bonuses were ring-fenced in 2017 despite the emerging shitstorm.

I'm naively hoping that the shysterism of this company is fully laid bare in an inquiry, but I'd imagine a whitewash, especially with this bunch of corporate arsekissers in power.

I want to know, off the top of my head:

* whether the leaks are true that the UK government was spending taxpayer cash to [illegally] prop-up the company for the past 6 months or so.

* the level of beneficial ownership arrangements that are/were in place.

* how much of its cashflow & profits were syphoned off into tax havens

What's obvious is that the UK taxpayer will be picking up the tab and ordinary workers will lose out, whilst directors/executives skulk back to their country retreats and tax havens to count their dirty cash (before stepping back onto the executive merry-go-round to pick up a new top-management job with a 6- or 7-figure 'package')

Add to that list:

Why is the UK government hiring a business with a £580m hole in the staff pension fund? That's taxpayers money not getting to taxpayer pockets.

[Lush is the best medicine...]

Add to that list:

Why is the UK government hiring a business with a £580m hole in the staff pension fund? That's taxpayers money not getting to taxpayer pockets.

not massively defending that but what are the other companies who have govt contracts pension fund gaps?

[gazzam1963]

Isn't the pension blackhole sometimes linked to the share price of the company , possibly the pension fund invests in it's own business share wise and a slump creates a blackhole

[GBF]

Add to that list:

Why is the UK government hiring a business with a £580m hole in the staff pension fund? That's taxpayers money not getting to taxpayer pockets.

and you would think lessons were learnt during the last recessions

[A-Bomb]

I wonder if there will be a urgent question in the HOC's today? seeing that they were still given government contracts after 3 profit warning in the last year and they started to protect bosses bonus's last year.

I suspect it was somewhat more innocent than that - knowing the fallout of a such a large company going up shit streak I imagine the contracts were awarded in an attempt to try and help the company.

[Spongebob Redpants]

I suspect it was somewhat more innocent than that - knowing the fallout of a such a large company going up shit streak I imagine the contracts were awarded in an attempt to try and help the company.

You mean like throwing good money after bad money ?

[A-Bomb]

You mean like throwing good money after bad money ?

Or bad money after bad money.....but yup, the government procurement would have been fully aware of their situation when awarding those contracts, which indicates it was deliberate - as a result that in turn suggests it was to try and save some bacon.

[ShakaHislop]

Government to hold COBRA crisis meeting over Carillion

https://www.theguardian.com/business/live/2018/jan/15/carillion-crisis-liquidation-last-ditch-talks-fail-business-live?page=with:block-5a5cbdb2e4b0fe5e06bfa715#block-5a5cbdb2e4b0fe5e06bfa715

[classycarra]

Government to hold COBRA crisis meeting over Carillion

https://www.theguardian.com/business/live/2018/jan/15/carillion-crisis-liquidation-last-ditch-talks-fail-business-live?page=with:block-5a5cbdb2e4b0fe5e06bfa715#block-5a5cbdb2e4b0fe5e06bfa715

Perhaps they could have done this a few weeks ago? Hardly a shock today

[Spongebob Redpants]

I work in construction and we have to jump through hoops to provide financial information to contractors to prove our financial stability .

I'd expect the public sector to require similarly stringent checks on main contractors being awarded public sector contracts . No idea why this hasn't seemingly happened , but no responsible body (whether private or public sector ) should award contracts to a company with a suspect financial footing . I'd expect these questions to be answered in the enquiry that will follow .

[Nobby Reserve]

I'd expect these questions to be answered in the enquiry that will follow .

Don't bet your trousers on it.


(I wonder what the total value of donations to the Tory Party made by Carillion, its shareholders and/or executives has been...)

[Musketeer Gripweed]

I work in construction and we have to jump through hoops to provide financial information to contractors to prove our financial stability .

I'd expect the public sector to require similarly stringent checks on main contractors being awarded public sector contracts . No idea why this hasn't seemingly happened , but no responsible body (whether private or public sector ) should award contracts to a company with a suspect financial footing . I'd expect these questions to be answered in the enquiry that will follow .

Six to eight months ago we couldn't get a credit rating on Carillion. Our insurance firm advised us we wouldn't be covered if we took on any work with them.

The alarm bells were surely going at a far higher level than I operate at!