Defence support contractor Carillion fighting to stay afloat
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Defence support contractor Carillion fighting to stay afloat
The news isn’t looking particularly rosy for Carillion’s future, with potential serious implications for the MOD who have in recent years awarded the company billions in contracts for support services and estate management functions including accommodation & Messing.
https://uk.reuters.com/article/uk-ca...-idUKKBN1EV0IK
There are already enough problems in Defence support without a key service provider failing with all the uncertainty of how bases and infrastructure will be maintained. It also highlights some of the issues with the thinking that it’s cheaper and better to contract out.
So where do we go from here? Plough much needed funding into Carillion to keep it afloat (is this why the MOD awarded further contracts after Carillion announced profits warnings last year?) Find a replacement supplier (at what premium as we will be over a barrel) and lose already sunk costs? Or accept that contracting out of key strategic functions isn’t always the best plan, but at risk of increasing pressure on an already creaking budget.
Not a good start to 2018, especially on sites heavily reliant on patching and ongoing maintenance.
https://uk.reuters.com/article/uk-ca...-idUKKBN1EV0IK
There are already enough problems in Defence support without a key service provider failing with all the uncertainty of how bases and infrastructure will be maintained. It also highlights some of the issues with the thinking that it’s cheaper and better to contract out.
So where do we go from here? Plough much needed funding into Carillion to keep it afloat (is this why the MOD awarded further contracts after Carillion announced profits warnings last year?) Find a replacement supplier (at what premium as we will be over a barrel) and lose already sunk costs? Or accept that contracting out of key strategic functions isn’t always the best plan, but at risk of increasing pressure on an already creaking budget.
Not a good start to 2018, especially on sites heavily reliant on patching and ongoing maintenance.
Are they too cheap
I am not sure what happens at the MOD, but down here the company had contracts based on lowest quotes;but in the end the 'claims' made it well over budget. Me-thinks things are too cozy in the contract/quotes/job/final claims dept that runs all across civil engineering, and also MOD contracts. Look at the nonsense with the ATC Glider fleet. The MOD paid for a 'service' that failed, and ended up paying again for the rectification, which is still not finished or providing the product that has already been paid for TWICE. When its PUBLIC MONEY 'watch out' no one seems to have their eye on the ball, or watertight contracts that can reclaim the waste/overspend.
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"Analysts have estimated the company has debt including provisions, pensions and accounts payable of about 1.5 billion pounds ($2.04 billion) compared with its market capitalisation of about 70 million pounds, according to Thomson Reuters data."
Also under investigation about the timing of announcements........
Not a good bet IMHO
Also under investigation about the timing of announcements........
Not a good bet IMHO
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They provide facilities support across 360+ sites and maintain 50,000 married quarters, along with being a key provider in the Army Rebasing Programme. Not a good bet is looking like an under-statement.
But given the multi-billion size of the MOD contracts awarded in recent years you have to wonder what’s gone wrong to give such a relatively low market capitalisation.
But given the multi-billion size of the MOD contracts awarded in recent years you have to wonder what’s gone wrong to give such a relatively low market capitalisation.
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"
Howson and the board managed to safely navigate an annual general meeting in May. But on 10 July the charade was over, after a partial review by auditors KPMG identified £845m of contract write-downs.
Analysts worried further hits could be on the cards once the review was completed. They estimated shareholders would be asked for £500m. Howson was shown the door and hopes were pinned on the experienced Cochrane to steady the ship.
“The balance sheet is a mess,” wrote Liberum analyst Joe Brent. Peel Hunt’s Andrew Nussey advised Carillion’s “shares are best avoided until management provides further insight”.
The Carillion insider says the reaction from within the firm was one of shock. “There was disbelief from the staff generally. Nobody on my management team could believe the scale of the issues at hand.”
“We all knew the accounts were questionable; it was the most shorted stock in Europe,” a leading City analyst told City A.M. “But the extent of the problems were gobsmacking.”"
Howson and the board managed to safely navigate an annual general meeting in May. But on 10 July the charade was over, after a partial review by auditors KPMG identified £845m of contract write-downs.
Analysts worried further hits could be on the cards once the review was completed. They estimated shareholders would be asked for £500m. Howson was shown the door and hopes were pinned on the experienced Cochrane to steady the ship.
“The balance sheet is a mess,” wrote Liberum analyst Joe Brent. Peel Hunt’s Andrew Nussey advised Carillion’s “shares are best avoided until management provides further insight”.
The Carillion insider says the reaction from within the firm was one of shock. “There was disbelief from the staff generally. Nobody on my management team could believe the scale of the issues at hand.”
“We all knew the accounts were questionable; it was the most shorted stock in Europe,” a leading City analyst told City A.M. “But the extent of the problems were gobsmacking.”"
This has been going on for months. I hate to say it, but some Hedge Funds will have made decent profits from it.
Good, I thought PriDE were bad until this lot came in. Cold in quarters and now cold at work. Pretty much every station I go to the heating is busted with no one fixing it. Sadly, no chance of taking them to the cleaners to get our money back though...
To be fair, that's the point of hedge funds, if they didn't exist a lot of people's pensions would be worth a lot less. They're there to minimise losses when things go wrong which has always struck me as pretty sensible.
What were the Accountants/Auditors doing !!!!
And what were all the accountants doing whilst this was going on !!!!
Amazing how we have massive pension 'black holes' and suchlike plus all this (paid for but not delivered) services and the gravy train rolls on.
Amazing how we have massive pension 'black holes' and suchlike plus all this (paid for but not delivered) services and the gravy train rolls on.
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Apparently they have serious cash flow problems due to late payments by QATAR for the World Cup work....
With the spat ongoing with the UAE & Saudi a lot of Qatar money is staying close to home and they are deferring payments on all sorts of deals -
"
One of the biggest problem projects was a $650m development preparing Qatar for the 2022 FIFA World Cup.
The client, Qatar Foundation-backed Msheireb, had not handed over any cash for a year. Carillion believed it was owed £200m.
The Qataris, concerned at the prospect of Carillion not being able to complete the works, thought they were owed money – and withheld payment.
Attendees of cash conference calls, which were now happening three times a week instead of the normal two times a month, heard first-hand of the trouble involved in extracting cash from Middle East clients, saying simply that it appeared “impossible”."
With the spat ongoing with the UAE & Saudi a lot of Qatar money is staying close to home and they are deferring payments on all sorts of deals -
"
One of the biggest problem projects was a $650m development preparing Qatar for the 2022 FIFA World Cup.
The client, Qatar Foundation-backed Msheireb, had not handed over any cash for a year. Carillion believed it was owed £200m.
The Qataris, concerned at the prospect of Carillion not being able to complete the works, thought they were owed money – and withheld payment.
Attendees of cash conference calls, which were now happening three times a week instead of the normal two times a month, heard first-hand of the trouble involved in extracting cash from Middle East clients, saying simply that it appeared “impossible”."
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Not MOD but I am employed by Carillion.
Site I work at has a £25k non availability clause, this has been invoked 3 times in 2 months due to lack of investment in infrastructure. Boilers/pumps/Air con all non-operational.
Private contractors all owed money so trying to get anyone in to fix stuff is very difficult as most are now pricing jobs ridiculously high.
They do appear to have a habit of pitching too low on contracts to get customer base but are now suffering and are rumoured to be selling on contracts to improve cash flow.
Site I work at has a £25k non availability clause, this has been invoked 3 times in 2 months due to lack of investment in infrastructure. Boilers/pumps/Air con all non-operational.
Private contractors all owed money so trying to get anyone in to fix stuff is very difficult as most are now pricing jobs ridiculously high.
They do appear to have a habit of pitching too low on contracts to get customer base but are now suffering and are rumoured to be selling on contracts to improve cash flow.
Not a rumour. This is from their own web-site.
Update on proposed disposal of UK healthcare facilities management business
So will hedge funds have another rough year in 2017? It’s possible that select funds will do well, though the industry as a whole has underperformed the market every year since 2008. The rising frustration among investors over high fund fees and inconsistent returns? That’s not likely to go away any time soon........2017 was not a good year for most of the hedge community. Most HNW individuals now look at Private Equity.
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like most Financial deals - they are invented, a few people make a zillion, a load of copycats pile in and the market them to the average well off and - SURPRISE - the returns drop to average (or worse)
Reversion to mean ..................
Reversion to mean ..................
What percentage of the liability is pension?
I think pension liabilities will become a huge concern for both private and public institutions.
What percentage of your council tax is dedicated to employee pensions?
I think pension liabilities will become a huge concern for both private and public institutions.
What percentage of your council tax is dedicated to employee pensions?
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Torygraph in November
19 November 2017 • 7:45pm
Around 28,000 pensioners who used to work at Carillion could end up owning a stake in the construction company under plans to keep it afloat.
The outsourcer, which is now worth just a tenth of what it was a year ago, warned last week that it expects to breach covenants by the end of this year following delays to asset sales and cost-cutting efforts.
Carillion’s shares tanked by as much as 64pc on Friday as investors reeled at a third profit warning in just four months.
Analysts now expect a recapitalisation of the business, which is working on the HS2 rail link, is inevitable with a highly dilutive debt for equity swap considered to be the most likely option.
Carillion has said that “some form of recapitalisation” which could include a restructuring of the balance sheet, will take place during the first quarter of next year.
The company’s debt pile is forecast to swell to £925m, compared to its shrunken market value of just £107m.
Meanwhile, its pension deficit is also estimated to grow to £800m from its £587m in June.
Earlier this year Carillion’s pension trustees were understood to favour a rights issue as a way of shoring up the retirement scheme. But the stricken company’s share price fall has now made that unlikely.
19 November 2017 • 7:45pm
Around 28,000 pensioners who used to work at Carillion could end up owning a stake in the construction company under plans to keep it afloat.
The outsourcer, which is now worth just a tenth of what it was a year ago, warned last week that it expects to breach covenants by the end of this year following delays to asset sales and cost-cutting efforts.
Carillion’s shares tanked by as much as 64pc on Friday as investors reeled at a third profit warning in just four months.
Analysts now expect a recapitalisation of the business, which is working on the HS2 rail link, is inevitable with a highly dilutive debt for equity swap considered to be the most likely option.
Carillion has said that “some form of recapitalisation” which could include a restructuring of the balance sheet, will take place during the first quarter of next year.
The company’s debt pile is forecast to swell to £925m, compared to its shrunken market value of just £107m.
Meanwhile, its pension deficit is also estimated to grow to £800m from its £587m in June.
Earlier this year Carillion’s pension trustees were understood to favour a rights issue as a way of shoring up the retirement scheme. But the stricken company’s share price fall has now made that unlikely.