Carillion post-mortem

[GeoffF100]

So why would management need to feel any pressure to run it in a commercially effective (efficient) manner.

You could say the same about a private company. Management appear to walk away with obscene amounts of money however badly they mess up. They ought to face criminal prosecution when they submit misleading accounts, but they do not. Their reputation does suffer, however, as it should, in a transparently run state organisation.

The problem is that state organisations are usually badly run in practice. Perhaps that might not be the case if we elected really capable and sensible politicians, but we do not.

[tieresias]

Practical question: Since it seems that our Carillion holdings are now worth nothing, at what point, and on what date, do we record the capital loss for CGT purposes? And will brokers provide some sort of evidence, of a similar function to a contract note, of the date and zero value?

I held to the end because I didn't particulary want to crystallise the loss in this fiscal year, but it looks like I may have to.

TIA

[Regdragon]

Practical question: Since it seems that our Carillion holdings are now worth nothing, at what point, and on what date, do we record the capital loss for CGT purposes? And will brokers provide some sort of evidence, of a similar function to a contract note, of the date and zero value?

I held to the end because I didn't particulary want to crystallise the loss in this fiscal year, but it looks like I may have to.

TIA

Does this help Tieresias?

https://www.gov.uk/government/publicati ... ment-he--2

I stand to be corrected but I believe the process is you simply claim a CGT loss by advising HMRC, usually through your tax return, but the loss doesn’t necessarily have to be taken in the tax year when it was incurred. It can be used, in part or whole, to offset gains for up to 4 years from when you claim it but it’s “timed out” after that. I’ve just used a 2013 loss to reduce my tax liability for 2017.

Regards

RD

[grimer]

Commiserations to those that have lost money.

A bit of light relief.

https://postimg.org/image/gquivmebn/

[idpickering]

John Laing Infra Fd Update regarding liquidation of Carillion plc

John Laing Infrastructure Fund Limited ('JLIF' or the 'Company'), the listed infrastructure investment company, notes the recent announcement by Carillion plc ('Carillion') regarding its compulsory liquidation.

Full item here;

https://www.investegate.co.uk/john-lain ... 00039444B/

[Arborbridge]

Moderator Message:
edited as related posts removed. Please no personal attacks and would urge posters to "report" posts rather than reply as it takes work by mods to go through and delete/edit related posts. Thanks for your understanding. Raptor.

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On the subject of CLLN, it seems that many cleverer people than me or Dod got this wrong: including the auditors who according to the R4 business news comments this morning, in their stated opinion foresaw no problems with the company or its contracts for the next three years.
If so many bright people with detailed knowledge could be so wrong, I do not think it reasonable to believe that ordinary investors - myself and Dod included - could be indulging in much more than guesswork. It's just that some are better (or lucky) with reading the tea leaves than others. It may not be rocket science, as I believe Dod once said, but nearer to groping in the dark with a lighted match.

How many mixed metaphors does a fellow need?
Arb.

[Arborbridge]

44 pages, 343 posts and over 12000 views.

Perhaps we should have had this much discussion before the event

[Wizard]

On the subject of CLLN, it seems that many cleverer people than me or Dod got this wrong: including the auditors who according to the R4 business news comments this morning, in their stated opinion foresaw no problems with the company or its contracts for the next three years.
If so many bright people with detailed knowledge could be so wrong, I do not think it reasonable to believe that ordinary investors - myself and Dod included - could be indulging in much more than guesswork. It's just that some are better (or lucky) with reading the tea leaves than others. It may not be rocket science, as I believe Dod once said, but nearer to groping in the dark with a lighted match.

I think we need to wait for the FCA* investigation (and maybe others as yet to commence) to conclude as to whether any information was withheld or manipulated. But if the FCA concludes that there was no wrong doing it does seem we will struggle to understand the true state of a company from the published numbers. I think the chances of anyone who is responsible being held to account has increased significantly now that the collapse has dragged the govt. in to this and the politicians will not be happy about that.

Whether it will ever be considered or not by the powers that be, I would be interested in what the presumably even cleverer people in the hedge funds that shorted Carillion based their conclusions on. If they reached their conclusions based on published financial information it would be very instructive for us to know what they saw.

One concrete point I have taken from this is to take less acount of end of year debt or gearing numbers, as they are at a point in time they have the potential to be manipulated. Better to look at interest cover which at least takes account of the whole of the previous twelve months. Other than that the only other concrete point is to avoid being away on holiday without access to my share accounts when a holding issues a profit warning .

Terry.

* Based on what I have seen in other matters they have looked at I have to say that I do not have a particularly positive view on the FCA's investigative skills.

[Arborbridge]

One concrete point I have taken from this is to take less acount of end of year debt or gearing numbers, as they are at a point in time they have the potential to be manipulated. Better to look at interest cover which at least takes account of the whole of the previous twelve months.
Terry.

"Better to look at interest cover" - but the interest cover was a healthy 4.5x. While we're at it, net gearing was a modest 31%. The other safety check - total borrowings - had increased by only £50m and were actually down well over £100m on a few years previous.

A quick glance through the ratios or balance sheet and is there anything that stands out as flashing red warnings - that is any worse than others companies? It looks fairly benign, but no doubt a trained eye could go straight to the problem on a deeper perusal.

As regards shorters, for most of the time one has to say with shorting at, let's say, 15%, the majority of shareholders were happy to hold and only a small number of shorters therefore had contrary opinions.

Arb.

[melonfool]

I think we need to wait for the FCA* investigation (and maybe others as yet to commence) to conclude as to whether any information was withheld or manipulated. But if the FCA concludes that there was no wrong doing it does seem we will struggle to understand the true state of a company from the published numbers. I think the chances of anyone who is responsible being held to account has increased significantly now that the collapse has dragged the govt. in to this and the politicians will not be happy about that.

Terry.

* Based on what I have seen in other matters they have looked at I have to say that I do not have a particularly positive view on the FCA's investigative skills.

Why would the FCA investigate?

Mel

[Wizard]

Why would the FCA investigate?

Mel

...the timeliness and content of announcements made by Carillion between 7 December 2016 and 10 July 2017...

http://www.londonstockexchange.com/exch ... 83085.html

Terry

[UncleEbenezer]

"Better to look at interest cover" - but the interest cover was a healthy 4.5x. While we're at it, net gearing was a modest 31%. The other safety check - total borrowings - had increased by only £50m and were actually down well over £100m on a few years previous.

A quick glance through the ratios or balance sheet and is there anything that stands out as flashing red warnings - that is any worse than others companies? It looks fairly benign, but no doubt a trained eye could go straight to the problem on a deeper perusal.

Indeed. Compare that 31% to the 40% that Gordon Brown was happy with for the nation even before the Big Bust blew that away. I suspect what killed them from there was over-sensitivity: with tiny margins, a small change to revenues has a disproportionate effect on the bottom line. If you have 15% margins, a 1% hit is just a year without the bonus. But a 1% hit on 1.5% margins (the conclusion of a competitive race to the bottom) turns that debt into a huge millstone.

And then there was the dodgy accounting. How does that compare to government moving its spending off the balance sheet with PFI?

(the above is probably hopelessly naïve: I understand numbers but not accounts).

[vrdiver]

Why would the FCA investigate?

Mel

...the timeliness and content of announcements made by Carillion between 7 December 2016 and 10 July 2017...

http://www.londonstockexchange.com/exch ... 83085.html

Terry

Which takes us back to "how can I avoid companies like this?"

Tesco was a similar story, albeit not quite such a disaster.

Without having every director's bio and track record on tap, it seems our HYP filters are as good as it gets. I note from Morningstar (http://investors.morningstar.com/owners ... tml?t=CLLN) that we are in good company!*

VRD

*Yes, some will have held because that's the index they track etc.

[OLTB]

I was listening to the radio on the way in to work this morning and understand that the Financial Reporting Council (FRC) are preparing to look over the books of Carillion to see if KPMG were irresponsible in signing off the accounts during their audit. Whether the FRC has any teeth or not is a different matter (I'm not in that world so I don't know) but I also heard that in most cases during company AGMs, auditors are re-elected year after year by 90%+ of shareholders without questioning if they are doing a good job or not. How we, as shareholders, are able to assess whether they are doing a good job or not is another question as it's only in cases like these when you realise how ineffective they possibly can be.

Also, a consultant was saying that the route the Govt has gone down in respect of Carillion is the most expensive and that any companies taking over the works that Carillion were involved with will ensure that they fully cost the completion of outstanding work as they don't want to get into the same position that Carillion found themselves in. The Govt wouldn't want that either so will pay whatever is needed - work to start at least after six months as a full assessment will need to be completed on the building sites on what's required to finish the job.

Richard Howson (the Chief Exec who left after the first profit warning) still being paid £600k p.a. - what a kick in the teeth to all those who are having to lay off staff who won't be paid as they sub-contracted out to Carillion.

Cheers, OLTB (now off high horse).

[Dod101]

Richard Howson (the Chief Exec who left after the first profit warning) still being paid £600k p.a. - what a kick in the teeth to all those who are having to lay off staff who won't be paid as they sub-contracted out to Carillion.

Cheers, OLTB (now off high horse).

I assume Howson will miss out on whatever is outstanding since there is no money

Dod

[Alaric]

I assume Howson will miss out on whatever is outstanding since there is no money

Outstanding wages and salaries come in high on the priority list. Shareholders are last.

[GoSeigen]

I think the media and others are getting very excited over what is actually a pretty small and insignificant company failure. CLLN balance sheet was just £4bn. By comparison, the bank balance sheets in the banking crisis were more than one thousand times larger, and many Fools were advocating they be allowed to go bust! I think it's good riddance for Carillion; hopefully some other better run companies (like my favourite, COST) will pick up some good projects.

Just a flesh wound? More like a scratch....


GS

[moorfield]

I think the media and others are getting very excited over what is actually a pretty small and insignificant company failure. CLLN balance sheet was just £4bn. By comparison, the bank balance sheets in the banking crisis were more than one thousand times larger, and many Fools were advocating they be allowed to go bust! I think it's good riddance for Carillion; hopefully some other better run companies (like my favourite, COST) will pick up some good projects.

Just a flesh wound? More like a scratch....


GS

That's a rather short-sighted opinion GS - there are plenty of significant implications for sure.

http://www.bbc.co.uk/news/business-42695661

"Asset sales won't even raise enough to cover the debts of senior bank creditors, so many small firms won't see a bean," he said.

Trade body Build UK estimates that between 25,000 and 30,000 businesses are owed money by Carillion.

Edit: Shouldn't be too difficult for Jezza to scoop up a lot of those votes now, so Utilities next ...

[Bouleversee]

Practical question: Since it seems that our Carillion holdings are now worth nothing, at what point, and on what date, do we record the capital loss for CGT purposes? And will brokers provide some sort of evidence, of a similar function to a contract note, of the date and zero value?

I held to the end because I didn't particulary want to crystallise the loss in this fiscal year, but it looks like I may have to.

TIA

Does this help Tieresias?

https://www.gov.uk/government/publicati ... ment-he--2

I stand to be corrected but I believe the process is you simply claim a CGT loss by advising HMRC, usually through your tax return, but the loss doesn’t necessarily have to be taken in the tax year when it was incurred. It can be used, in part or whole, to offset gains for up to 4 years from when you claim it but it’s “timed out” after that. I’ve just used a 2013 loss to reduce my tax liability for 2017.

Regards

RD

I'm not sure you are right about that; at least I hope you are not. My understanding is that there is a time limit for claiming a loss (I'd need to check what that is; you may be right about 4 years) , that if you have a gain in the year you claim it must be set against that (even if the gain would not otherwise be taxable) but if you have no gains or if the loss exceeds the gains you can carry it forward indefinitely and need only be used if gains exceed c/f losses in future years. However, it's possible the law may have changed while I have been asleep. I have quite a large chunk of c/f losses which I was planning to use this year as I dispose of non-ISA holdings, so I will not be a happy bunny if you are right. Maybe things are different if it is a case of negligible value rather than a loss through takeover or sale but I wasn't aware of that distinction. I am no expert; it's just what has happened to me in past years but I may be out of date. However, this is really one for the tax board.

PS I think HMRC determines when a company can be considered of negligible value and keeps a list of such. I think you will be able to choose whether to claim it this year or wait till next year to claim if that suits your finances better. Claiming against one's income tax is a new one on me unless it's for a business one has been running oneself. I must check that out.

[funduffer]

As regards shorters, for most of the time one has to say with shorting at, let's say, 15%, the majority of shareholders were happy to hold and only a small number of shorters therefore had contrary opinions.

Arb.

I think the shorters table will play an important part in my HYP buy selections from now on.

Anything over 10% - do'nt touch with a bargepole

Anything over 5% - think twice before acting!

If the accounts can be fiddled or 'made to look optimistic' let's say, then they are worthless to the average investor (and I am probably below average!). The shorters must have some 'inside knowledge', although I realise this is illegal in the true sense of the phrase.

FD