Carrilion in trouble
Discussion
Dr Jekyll said:
Jut because the company is struggling, this doesn't mean that every individual is doing their job badly.
I'm going to sound like a borderline communist no doubt, but if the company isn't performing well then it shouldn't be paying out bonuses. I get a "discretionary" bonus linked to my performance, but if the company was struggling I have no doubt I wouldn't receive it. Businesses like Carrilion give the Left a justification for their idiotic wishes in my opinion. BrabusMog said:
Dr Jekyll said:
Jut because the company is struggling, this doesn't mean that every individual is doing their job badly.
I'm going to sound like a borderline communist no doubt, but if the company isn't performing well then it shouldn't be paying out bonuses. I get a "discretionary" bonus linked to my performance, but if the company was struggling I have no doubt I wouldn't receive it. Businesses like Carillion give the Left a justification for their idiotic wishes in my opinion. Totally agree with the rest of your post too.
BrabusMog said:
I'm going to sound like a borderline communist no doubt, but if the company isn't performing well then it shouldn't be paying out bonuses. I get a "discretionary" bonus linked to my performance, but if the company was struggling I have no doubt I wouldn't receive it. Businesses like Carrilion give the Left a justification for their idiotic wishes in my opinion.
The whole point of an individual performance related bonus is to improve individual performance, if the company isn't doing well you need individual performance more than ever. Dr Jekyll said:
BrabusMog said:
I'm going to sound like a borderline communist no doubt, but if the company isn't performing well then it shouldn't be paying out bonuses. I get a "discretionary" bonus linked to my performance, but if the company was struggling I have no doubt I wouldn't receive it. Businesses like Carrilion give the Left a justification for their idiotic wishes in my opinion.
The whole point of an individual performance related bonus is to improve individual performance, if the company isn't doing well you need individual performance more than ever. Dr Jekyll said:
BrabusMog said:
I'm going to sound like a borderline communist no doubt, but if the company isn't performing well then it shouldn't be paying out bonuses. I get a "discretionary" bonus linked to my performance, but if the company was struggling I have no doubt I wouldn't receive it. Businesses like Carrilion give the Left a justification for their idiotic wishes in my opinion.
The whole point of an individual performance related bonus is to improve individual performance, if the company isn't doing well you need individual performance more than ever. 
Dr Jekyll said:
BrabusMog said:
I'm going to sound like a borderline communist no doubt, but if the company isn't performing well then it shouldn't be paying out bonuses. I get a "discretionary" bonus linked to my performance, but if the company was struggling I have no doubt I wouldn't receive it. Businesses like Carrilion give the Left a justification for their idiotic wishes in my opinion.
The whole point of an individual performance related bonus is to improve individual performance, if the company isn't doing well you need individual performance more than ever. BrabusMog said:
I'm going to sound like a borderline communist no doubt, but if the company isn't performing well then it shouldn't be paying out bonuses. I get a "discretionary" bonus linked to my performance, but if the company was struggling I have no doubt I wouldn't receive it. Businesses like Carrilion give the Left a justification for their idiotic wishes in my opinion.
you couldn't be any less "communist", its actually a breakdown of proper capitalism that deadweight are rewarded, the left and their equality of outcome are the ones who want to reward/equalise everyone regardless of inputBrabusMog said:
I'm amazed that divi's and bonuses were paid out when the company knew they were failing. Perhaps I'm too moral.
A few facts:- There were no dividends paid in 2017.
- Bonus payments made in 2017 related to previous years; the post tax profit in 2016 was £124 million.
- There will be no further dividend or bonus payments since the company is now being liquidated.
- Dividends between 2012 and 2016 stayed roughly constant at 17 or 18 pence per share.
- Carillion released profit warnings in 2017, not before.
As for SME unsecured creditors - I sympathise. However, if you're concerned about a customer that owes you money, you can insure against default, or use invoice discounting or factoring to cover you in the event of the customer going bust. Or, you can take the risk.
Brave Fart said:
A few facts:
As for SME unsecured creditors - I sympathise. However, if you're concerned about a customer that owes you money, you can insure against default, or use invoice discounting or factoring to cover you in the event of the customer going bust. Or, you can take the risk.
Fair enough, I've been discussing it from a misinformed position in terms of bonus/divi's but my main point still stands, senior management must have known the writing was on the wall yet still elected to reward themselves. - There were no dividends paid in 2017.
- Bonus payments made in 2017 related to previous years; the post tax profit in 2016 was £124 million.
- There will be no further dividend or bonus payments since the company is now being liquidated.
- Dividends between 2012 and 2016 stayed roughly constant at 17 or 18 pence per share.
- Carillion released profit warnings in 2017, not before.
As for SME unsecured creditors - I sympathise. However, if you're concerned about a customer that owes you money, you can insure against default, or use invoice discounting or factoring to cover you in the event of the customer going bust. Or, you can take the risk.
BrabusMog said:
Brave Fart said:
A few facts:
As for SME unsecured creditors - I sympathise. However, if you're concerned about a customer that owes you money, you can insure against default, or use invoice discounting or factoring to cover you in the event of the customer going bust. Or, you can take the risk.
Fair enough, I've been discussing it from a misinformed position in terms of bonus/divi's but my main point still stands, senior management must have known the writing was on the wall yet still elected to reward themselves. - There were no dividends paid in 2017.
- Bonus payments made in 2017 related to previous years; the post tax profit in 2016 was £124 million.
- There will be no further dividend or bonus payments since the company is now being liquidated.
- Dividends between 2012 and 2016 stayed roughly constant at 17 or 18 pence per share.
- Carillion released profit warnings in 2017, not before.
As for SME unsecured creditors - I sympathise. However, if you're concerned about a customer that owes you money, you can insure against default, or use invoice discounting or factoring to cover you in the event of the customer going bust. Or, you can take the risk.
How can a well performing healthy Company paying dividends and bonuses one year be on the brink of disaster 12 months later? OK as others have pointed out the construction industry is one of very low margins, but this is why Boards are in place to identify the risks and rewards. This Company was clearly so over leveredged that the knife edge was in place for long enough for the Board to take appropriate actions, it clearly failed to do so.
The investigations into exactly were the elements that brought the business down will provide interesting reading. Another case of to big to fail perhaps, but inevitability took hold.
The investigations into exactly were the elements that brought the business down will provide interesting reading. Another case of to big to fail perhaps, but inevitability took hold.
2 sMoKiN bArReLs said:
BrabusMog said:
Brave Fart said:
A few facts:
As for SME unsecured creditors - I sympathise. However, if you're concerned about a customer that owes you money, you can insure against default, or use invoice discounting or factoring to cover you in the event of the customer going bust. Or, you can take the risk.
Fair enough, I've been discussing it from a misinformed position in terms of bonus/divi's but my main point still stands, senior management must have known the writing was on the wall yet still elected to reward themselves. - There were no dividends paid in 2017.
- Bonus payments made in 2017 related to previous years; the post tax profit in 2016 was £124 million.
- There will be no further dividend or bonus payments since the company is now being liquidated.
- Dividends between 2012 and 2016 stayed roughly constant at 17 or 18 pence per share.
- Carillion released profit warnings in 2017, not before.
As for SME unsecured creditors - I sympathise. However, if you're concerned about a customer that owes you money, you can insure against default, or use invoice discounting or factoring to cover you in the event of the customer going bust. Or, you can take the risk.
Brave Fart said:
BrabusMog said:
I'm amazed that divi's and bonuses were paid out when the company knew they were failing. Perhaps I'm too moral.
A few facts:- There were no dividends paid in 2017.
- Bonus payments made in 2017 related to previous years; the post tax profit in 2016 was £124 million.
- There will be no further dividend or bonus payments since the company is now being liquidated.
- Dividends between 2012 and 2016 stayed roughly constant at 17 or 18 pence per share.
- Carillion released profit warnings in 2017, not before.
As for SME unsecured creditors - I sympathise. However, if you're concerned about a customer that owes you money, you can insure against default, or use invoice discounting or factoring to cover you in the event of the customer going bust. Or, you can take the risk.
1 in terms of profit the 2016 profit was not relevant in terms of the overall business structure as you cannot and do not accrue up to 2.5 billion in pension deficits in 12 months.Likewise the £125 million will not be balanced against the companies overdraft facilities so they could have made a profit of £125 million but still be £250 million overdrawn.
Making a small profit does not cover the reality of a companies debts nor is it an indicator that bonuses should be paid.
As to SME's I agree. As i have said before the company I work for falls into SME category and we have strict controls to limit loss liability from customers. As an SME if you worked for carillion and herd they were in trouble as a company you should have put in place controls to limit your exposure to them falling over. Limit the amount of credit you are willing to extend or if needs be demand payment up front.
If carrilion were your only customer then you made a serious business mistake in putting all your eggs in one basket.
crankedup said:
How can a well performing healthy Company paying dividends and bonuses one year be on the brink of disaster 12 months later? OK as others have pointed out the construction industry is one of very low margins, but this is why Boards are in place to identify the risks and rewards. This Company was clearly so over leveredged that the knife edge was in place for long enough for the Board to take appropriate actions, it clearly failed to do so.
The investigations into exactly were the elements that brought the business down will provide interesting reading. Another case of to big to fail perhaps, but inevitability took hold.
That post shows that you don't understand the nature of a contracting business.The investigations into exactly were the elements that brought the business down will provide interesting reading. Another case of to big to fail perhaps, but inevitability took hold.
Any large contractor will be on a conveyor belt of tendering, winning and delivering major contracts. It only takes an error on risk allocation/pricing on a few of those to adversely impact the whole business. Fifteen or so years ago, for example, Laing - one of the biggest and best regarded contracting businesses in the U.K., failed because of losses on the millennium stadium in Cardiff.
Contracting margins have become so slim (because everyone wants 'cheap') that contractors simply don't have the balance sheet strength to withstand even one toxic project, much less the two or three that Carillion had.
I suspect that, in a few years, there will be about half a dozen 'large' building and civil engineering contractors globally. These will have the balance sheet strength to take on major projects through diversified trading activity in other, higher margin sectors. Many of the current national players will either go to the wall, be subsumed into the global players or diversify into housebuilding/commercial development/investment portfolio management etc
crankedup said:
How can a well performing healthy Company paying dividends and bonuses one year be on the brink of disaster 12 months later?
You've obviously never worked in the construction industry. You estimate profits on long term contacts as you go along. The truth though is that you don't know the real score until you get towards the end.Get your forecasts wrong and a catastrophe can appear virtually overnight.
2 sMoKiN bArReLs said:
You've obviously never worked in the construction industry. You estimate profits on long term contacts as you go along. The truth though is that you don't know the real score until you get towards the end.
Get your forecasts wrong and a catastrophe can appear virtually overnight.
Thank fGet your forecasts wrong and a catastrophe can appear virtually overnight.
k I don't work in such a volatile industry 
BrabusMog said:
2 sMoKiN bArReLs said:
You've obviously never worked in the construction industry. You estimate profits on long term contacts as you go along. The truth though is that you don't know the real score until you get towards the end.
Get your forecasts wrong and a catastrophe can appear virtually overnight.
Thank fGet your forecasts wrong and a catastrophe can appear virtually overnight.
k I don't work in such a volatile industry 
When it's your living it's scary s
t!ClaphamGT3 said:
crankedup said:
How can a well performing healthy Company paying dividends and bonuses one year be on the brink of disaster 12 months later? OK as others have pointed out the construction industry is one of very low margins, but this is why Boards are in place to identify the risks and rewards. This Company was clearly so over leveredged that the knife edge was in place for long enough for the Board to take appropriate actions, it clearly failed to do so.
The investigations into exactly were the elements that brought the business down will provide interesting reading. Another case of to big to fail perhaps, but inevitability took hold.
That post shows that you don't understand the nature of a contracting business.The investigations into exactly were the elements that brought the business down will provide interesting reading. Another case of to big to fail perhaps, but inevitability took hold.
Any large contractor will be on a conveyor belt of tendering, winning and delivering major contracts. It only takes an error on risk allocation/pricing on a few of those to adversely impact the whole business. Fifteen or so years ago, for example, Laing - one of the biggest and best regarded contracting businesses in the U.K., failed because of losses on the millennium stadium in Cardiff.
Contracting margins have become so slim (because everyone wants 'cheap') that contractors simply don't have the balance sheet strength to withstand even one toxic project, much less the two or three that Carillion had.
I suspect that, in a few years, there will be about half a dozen 'large' building and civil engineering contractors globally. These will have the balance sheet strength to take on major projects through diversified trading activity in other, higher margin sectors. Many of the current national players will either go to the wall, be subsumed into the global players or diversify into housebuilding/commercial development/investment portfolio management etc
What I do not understand, and you do not elude to and it is the critical question in this mess, what were the company directors thinking and doing taking on huge contracts when the business clearly could not service its existing debts? Small margins do not create a 2 billion debt book overnight, not a 2 billion hole in the pensions fund. the directors low balling appears to be simply gambling that work would come good. Why did the directors shaft the SME businesses by extending thier own terms of payment.
Not familiar with the Laing failure, did they fail in with such a massive debt pile, did that have such an e tended time frame to put the company back on track, failure due to one contract suggests not.
I understand the tendering processes and the result of errors in the tender price, however it is clear that this is not the situation which brought down carillion. Too much debt without decent asset value is a classic shell company failure.
2 sMoKiN bArReLs said:
crankedup said:
How can a well performing healthy Company paying dividends and bonuses one year be on the brink of disaster 12 months later?
You've obviously never worked in the construction industry. You estimate profits on long term contacts as you go along. The truth though is that you don't know the real score until you get towards the end.Get your forecasts wrong and a catastrophe can appear virtually overnight.
crankedup said:
It’s true that tender contracting large scale is not / was not my professional area. Your saying that the margins are so slim, I did elude to that, that the balance sheet is not strong enough to withstand a bad contract, easy enough to understand and one that is recognised by just about all of us.
What I do not understand, and you do not elude to and it is the critical question in this mess, what were the company directors thinking and doing taking on huge contracts when the business clearly could not service its existing debts? Small margins do not create a 2 billion debt book overnight, not a 2 billion hole in the pensions fund. the directors low balling appears to be simply gambling that work would come good. Why did the directors shaft the SME businesses by extending thier own terms of payment.
Not familiar with the Laing failure, did they fail in with such a massive debt pile, did that have such an e tended time frame to put the company back on track, failure due to one contract suggests not.
I understand the tendering processes and the result of errors in the tender price, however it is clear that this is not the situation which brought down carillion. Too much debt without decent asset value is a classic shell company failure.
At a share price of £3.50/£4 per share, Carillion wasn't massively over-geared by the standards of the industry. What I do not understand, and you do not elude to and it is the critical question in this mess, what were the company directors thinking and doing taking on huge contracts when the business clearly could not service its existing debts? Small margins do not create a 2 billion debt book overnight, not a 2 billion hole in the pensions fund. the directors low balling appears to be simply gambling that work would come good. Why did the directors shaft the SME businesses by extending thier own terms of payment.
Not familiar with the Laing failure, did they fail in with such a massive debt pile, did that have such an e tended time frame to put the company back on track, failure due to one contract suggests not.
I understand the tendering processes and the result of errors in the tender price, however it is clear that this is not the situation which brought down carillion. Too much debt without decent asset value is a classic shell company failure.
The directors weren't 'low balling' they were pricing at the levels necessary to win contracts. They didn't 'shaft' SMEs any more than other tier 1 contractors; cash flow management is critical in contracting - it may not be nice or moral but it is the way it is.
What does appear to be inept on the part of the Carillion board was to handle the announcement of performance issues in a very cack-handed way, which in turn caused the share price collapse that decimated their market cap and breached their banking covenants
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