The Lemon Fool

Gengulphus wrote: as though they had admitted to trying to report lower debt positions at reporting dates in the past.

They did however own up to an "accounting error" in their balance sheet statement of debt earlier this year.

viewtopic.php?f=15&t=16694&p=207017&hilit=kier+group#p206927

As observed at the time, the "error" was of a size about the same as the cost of the dividend.

Gengulphus may split hairs if he wishes, but I take the statement in the RNS at face value. They are looking for a sustained reduction in debt rather than targeting lower debt positions at reporting dates. That would suggest that they did not mind what the debt position was at other times but wanted to put the best face on it at reporting dates. In other words mislead as to the true, or at least average, debt position.

They are unlikely to spell that out in full but it seems to me and I suspect any reader that that is the implication. Understandable, and probably a quite widespread practice which I guess most FDs and CEOs have undertaken at one time or another either with debt or simply putting as many expenses for instance through in a 'good' year so as to remove them from the next year's accounts.

In a public company that is misleading though.

Dod

Dod101 wrote:Gengulphus may split hairs if he wishes, but I take the statement in the RNS at face value. ...

That is exactly what you are not doing: the statement in the RNS that you gave was "Going forward, Kier will focus on managing its retained businesses to deliver long-term profits and a sustained reduction in the Group's underlying debt levels rather than targeting lower debt positions at reporting dates." and its face value is about a change in their management targets.

There really is no point in discussing this further with someone who doesn't understand that the face value of a statement is what it actually says, not what it suggests to them, so this is the last I will say on the subject.

Gengulphus

There is an article in the FT that talks about the 'reverse factoring' that Kier used.

Google "Hidden leverage makes ‘dividend traps’ harder to spot" if you need to get behind the paywall.

The article also refers to a report by Henderson’s International Income Trust that came out a week back which says one in five listed stocks is a potential dividend trap with stretched balance sheets as a classic tell-tale sign.

torata

Gengulphus wrote:There really is no point in discussing this further with someone who doesn't understand that the face value of a statement is what it actually says, not what it suggests to them, so this is the last I will say on the subject.

I am glad about that since it was you who sought to extend the discussion, not me.

Dod

Dod101 wrote:Supply chain financing is the same as invoice factoring except looking at it from the other side. I do not think that the manipulation of debt statements had much to do with the cash position of Kier; it was much more to give the impression that debt was under control and reducing. Alaric seems to have a fixation with cash flow but that is simply one part of the picture.

The fact is though that Kier is in a spot of bother with way too much debt and no real way of reducing it except by a fire sale. Not a comfortable position to be in and as JoyofBrex has said it may end up in a disaster. I would say get out whilst you can to any holders.
Dod

Acknowledging torato's earlier post ultimately providing this link
Hidden leverage can make ‘dividend traps’ harder to spot - https://www.ft.com/content/3ec20f5a-90e ... e35ef678d2
Investors should beware ruses such as reverse factoring, which flatters a balance sheet
He flagged several ways the group was putting a gloss on its financial statements, such as its use of reverse factoring, which is a form of borrowing against supplier payments that accountants do not class as debt ...
One risk they cited lurking on Casino’s balance sheet will be familiar to those burnt by Kier, Carillion and Vodafone: heavy use of reverse factoring.

It clearly allows manipulation of the balance sheet debt position. I use the term "manipulation" by choice. Others may insert their own terminology.

AiY

AsleepInYorkshire wrote:

Dod101 wrote:Supply chain financing is the same as invoice factoring except looking at it from the other side. I do not think that the manipulation of debt statements had much to do with the cash position of Kier; it was much more to give the impression that debt was under control and reducing. Alaric seems to have a fixation with cash flow but that is simply one part of the picture.

The fact is though that Kier is in a spot of bother with way too much debt and no real way of reducing it except by a fire sale. Not a comfortable position to be in and as JoyofBrex has said it may end up in a disaster. I would say get out whilst you can to any holders.
Dod

Acknowledging torato's earlier post ultimately providing this link
Hidden leverage can make ‘dividend traps’ harder to spot - https://www.ft.com/content/3ec20f5a-90e ... e35ef678d2
Investors should beware ruses such as reverse factoring, which flatters a balance sheet
He flagged several ways the group was putting a gloss on its financial statements, such as its use of reverse factoring, which is a form of borrowing against supplier payments that accountants do not class as debt ...
One risk they cited lurking on Casino’s balance sheet will be familiar to those burnt by Kier, Carillion and Vodafone: heavy use of reverse factoring.

It clearly allows manipulation of the balance sheet debt position. I use the term "manipulation" by choice. Others may insert their own terminology.

AiY

Slightly off topic but I humbly suggest of interest.

Industry rejects Fitch’s call to reclassify supply chain finance as debt - https://www.gtreview.com/news/global/in ... e-as-debt/
The ratings agency says that reverse factoring was a key contributor to the largest construction bankruptcy in UK corporate history, as it “allowed the outsourcer to show an estimated £400-£500mn of debt to financial institutions as ‘other payables’ compared to reported net debt of £219mn”.
Calling this an “accounting loophole”,

AiY

gtreview (AsleepInYorkshire) wrote:The ratings agency says that reverse factoring was a key contributor to the largest construction bankruptcy in UK corporate history, as it “allowed the outsourcer to show an estimated £400-£500mn of debt to financial institutions as ‘other payables’ compared to reported net debt of £219mn”.

and also in the report

“As seen in the case of Carillion, reverse factoring could have a potentially large impact on vulnerability to default for specific issuers,”