Carillion post-mortem

[Dod101]

I do not know Carillion well enough to be able to comment except to condemn the entire sector. By the time I really got to know much about Carillion short sellers were abundant and that, the sector and the high dividend put me off in a big way at the time when plenty were either buying or topping up. None of that is rocket science nor does it need an accounting degree. Apart from culture it is reading the signs that were before us.
That, and as always, there is no strength in the number of others who may be investing, I am sure we have all been there though.

Dod

[Bouleversee]

I remember a time when brokers were always on about the quality of earnings at M&S. Seems to have disappeared along with the quality of the products.

Plenty of people were shorting PFC but that hasn't stopped the sp from going much higher recently. Of course, the fat lady hasn't sung yet but she's been practising her scales, getting ever higher, and I'm hoping for a triumphant aria ending on a high note when she has finished warming up. Of course, she could lose her voice completely before the end of the performance and I defy anyone to be 100% certain which way it will end up. I just hope her vocal chords have been checked regularly and her temperature taken from time to time. Ain't hindsight a wonderful thing?

[Arborbridge]

I do not know Carillion well enough to be able to comment except to condemn the entire sector. By the time I really got to know much about Carillion short sellers were abundant and that, the sector and the high dividend put me off in a big way at the time when plenty were either buying or topping up. None of that is rocket science nor does it need an accounting degree. Apart from culture it is reading the signs that were before us.
That, and as always, there is no strength in the number of others who may be investing, I am sure we have all been there though.

Dod

Thinking about this, what you are saying in a nutshell, is virtually what any chartist would say. You do not need to look at the financial numbers, because all you need to know is in the charts - even if we look not at the price chart but the yield curve. (And shorting curve?) But what is an unreasonable yield? And at what point should one sell? having bought when the company and its yield looked sound? Maybe we're back to something like Luni's danger zones, after all.

Although you reject stop-losses on the grounds that the market itself can slump, in my experience this isn't a problem. The usual problem is a precipitous fall of a share price when bad news swirls around - often in continual decline before it is widely known. That is why buying into a constantly falling share price is the amateur's worst error - and I have to admit falling for it in this case. Pretty shameful thing to admit for an ex-chartist! Unfortunately, it is a tendency which comes with the HYP mentality of buying the highest yield available - which as I wrote the other day, can make HYPing risky.
That risk is built in to the HYPer's DNA and HYP ideology.

Arb.

[monabri]

These directors or the ones that caused the problem? (Howson and Adam).

On the positive side a French company (Eiffage) should benefit from an increased workshare on HS2 and the UK taxpayer can pick up the pieces.

From the Telegraph article previously referred to:

"Talks are expected to continue through the weekend but unless a deal can be struck soon, the company could be put into administration as soon as Monday, triggering massive losses for lenders, shareholders, suppliers and pension scheme members."

Sarcasm mode ; off.

[OLTB]

Just watched Sky news and, although only conjecture at the moment, it seems there is little appetite for government guarantees. Decision will be made today apparently and if the outcome isn’t positive for Carillion then administration decision either today, but more likely tomorrow.

Cheers, OLTB.

[ReformedCharacter]

if there is one thing the French do well it is railways.

Well, sometimes

http://www.bbc.co.uk/news/world-europe-27497727

'The French train operator SNCF has discovered that 2,000 new trains it ordered at a cost of 15bn euros ($20.5bn; £12.1bn) are too wide for many regional platforms. '

RC

[jackdaww]

the french did design the best steam locomotives .

[grimer]

Just watched Sky news and, although only conjecture at the moment, it seems there is little appetite for government guarantees. Decision will be made today apparently and if the outcome isn’t positive for Carillion then administration decision either today, but more likely tomorrow.

Cheers, OLTB.

Decision today with announcement tomorrow morning. The Board will want time to empty the office and hop on a flight.

[staffordian]

the french did design the best steam locomotives .

Ooh, controversial!

Certainly the most complicated

[vrdiver]

the french did design the best steam locomotives .

Surely you mean "America"? http://www.steamlocomotive.com/misc/best.php

As for Carillion, perhaps the directors will have more time to play with their train sets from now on?

[monabri]

The in post directors are not the ones that caused the problems...they "departed" armed with their bonuses.
The directors that need to answer the FCA investigation being Howson and Adam (Finance Director Khan wasn't in the job that long and Mercer was recently appointed)

[funduffer]

Well here we are 5 months after I launched this thread, and Carillion is in its death throws, so maybe post-mortem was not a bad title after all!

A year ago CLLN was 3% of my HYP and providing over 4.5% of my HYP income. Today the dividend is gone and the capital value is less than 0.2% of the HYP.

What are the lessons learnt?

Re-reading John Kingham's article that I linked to in the OP, I think the combination of pension liability, debt level and the large number of acquisitions seem to be at the root of CLLN's demise.

I will be looking at these aspects before purchasing any new HYP share in the future.

I think the shorters also knew something, and I for one, will look at the shorting table before any top-up or new share purchase from now on. Anything over 5% will probably rule them out for me, and over 10% certainly. Interestingly, if I use this rule, it would rule out Sainsburys which is at just over 10% currently, which I hold but I am not a seller for now. I see other HYP favourites M&S and Morrisons are also over 10% and Greene King is about 7%, although I don't hold these.

Shorting table is here: https://shorttracker.co.uk/companies/?sort=2&d=desc by the way.

Note I would apply these rules for buying, as I subscribe to the LTBH mantra and am very averse to selling. Well done to those who escaped CLLN in time, but I am with tjh that usually the time to get rid is sometime after the bad news. In the case of CLLN, it looks like this is an exception to that guidance.

FD

[cshfool]

It's a pity that John Kinghams article came out after the first CLLN profit warning & dividend cancellation rather than before it, as such his hindsight perspective is less convincing than it might have been. Perhaps he's also tipping Red Rum to win the National.

Revisiting the various summary data I had on this one the advertised debt levels were actually not that bad, coverage was ok, however as noted the profits did not seem to be generating much cash and the advertised tax rate seemed to be averaging less than 9% over 5 years. If the Inland revenue could not find the profits to tax, maybe they were more imaginary than real? (Graham, - four extremely instructive case histories chapter, The Intelligent Investor)

There seems little or no increase in book value over 5 years from 2011- reflecting the lack of increase in basic intrinsic value (Buffet),due to retained (no) profits.

We also had, to invert Jim Slaters notes "a group of directors not buying in a cluster", in fact director buying pre crash was zero, why was that ? If the men who should want it don't want it, perhaps they have good reason (Livermore).

The widespread short interest in this one was also a most worrying further line supporting the crucifix on which CLLN was nailed, as I am prepared to believe that hedge funds may have access to information that I don't have, and I had expected (hoped) for some short covering near the xd date - which we didn't see.

Also as the share price slowly submerged, the forward yield creaked into the "definitely can't be believed" zone which starts about 10% in my book, into which I had previously seen BHP Billiton steadily sliding, only to cut later. It was that unreal forward yield made me finally sell CLLN (which I had bed & Isa'd) pre-warning despite expert buy recommendations elsewhere. I shared concerns here in an effort to help other lemons before the first implosion, rather than after it, as this board is really useful, thanks to all for your notes and comments.

CSH

[BreakoutBoy1]

Latest FT & Guardian coverage is pretty sombre.

[Breelander]

Looks terminal. This from Sky News in the last half hour....

Directors of Carillion were making a final rescue appeal to its lending banks on Sunday night after the Government refused to rescue the ailing construction group, taking it to the brink of collapse...

...Government sources said that emergency talks on Sunday concluded with John Manzoni, the permanent secretary at the Cabinet Office, announcing that Carillion would not receive any special support from taxpayers...

https://news.sky.com/story/carillion-ap ... s-11208333

[Bouleversee]

"Carillion - Making tomorrow a better place". Yeah, right!

What an unholy mess! Brandon Lewis's comments on the Andrew Marr show (see below) were really prescient and helpful though, don't you think?

" Earlier, new Conservative Party chairman Brandon Lewis told the BBC's Andrew Marr Show: "It is a growing concern.
"It's a very commercially sensitive situation so I wouldn't comment further than to say it is a growing concern.
"I would hope to see that the working capital they need will be there, working with their partners.
"But of course ministers and my colleague the Secretary of State at Business (Greg Clark) is keeping a very close eye on it."


We should be thankful and reassured that with such genius and insight in the government, the problems will be quickly solved.

Methinks dry January may be followed by a very wet February despite the govt's decree that we must not drink more than one unit of alcohol (half a glass of wine) per day.

[vrdiver]

Methinks dry January may be followed by a very wet February despite the govt's decree that we must not drink more than one unit of alcohol (half a glass of wine) per day.

Dry January being funded by the Carillion dividend, yes?

[idpickering]

Carillion to Take Steps to Enter Into Compulsory Liquidation

U.K. government contractor Carillion Plc is to take steps to enter into compulsory liquidation, Bloomberg News reports

https://www.bloomberg.com/news/articles ... iquidation

[idpickering]

Carillion to Take Steps to Enter Into Compulsory Liquidation

U.K. government contractor Carillion Plc is to take steps to enter into compulsory liquidation, Bloomberg News reports

https://www.bloomberg.com/news/articles ... iquidation

And from Sky News;

LIVE: Ailing construction giant Carillion enters into liquidation

The construction group's board says it has began steps to enter compulsory liquidation after its final rescue appeal fails.

https://news.sky.com/story/live-ailing- ... n-11208600

[grimer]

BBC are reporting the company has entered receivership.