In this case they just might lose a bit.
In this case they just might lose a bit.
'Against stupidity, the gods themselves struggle in vain' - Schiller.
One day i'll learn how a company can go from dishing out record bonuses and dividends with assets nearing a billion, to being £1.5 billion in debt and without any assets of note.
I like how we're getting the 'jobs at risk' thing as well just now, how exactly are jobs going to be at risk in the long run when carillion was based on building and maintaining, not exactly things that can disappear out of the UK or not be needed anymore!
To answer Eddie's question about a lack of assets, while Carillion doesn't have much in the way of tangible assets, they do have a large number of high-value Government backed contracts, so were able to borrow against future income from these.
The Carillion Group is vast, and complex, so it's going to be very difficult to ascertain exactly where the value lies, and whether there are (almost certainly) inter-company loans within the Group, which, together with cross-guarantees, will muddy the waters and make it almost impossible to unravel the Group and find anything that's actually worth anything. Which is why the only way forward is for the Government contracts to revert to the other contractors involved, as many will be joint ventures, and placing Carillion into liquidation is probably the means to trigger contract clauses which require the other parties to such contracts to step in and take over the contracts, with the Government taking ultimate responsibility and (hopefully) control.
Other aspects of the Group's activities may be sold off, but smaller unsecured creditors are likely to lose out. I suspect that the only people involved who won't lose money are the former Directors of Carillion.
Although no trees were harmed during the creation of this post, a large number of electrons were greatly inconvenienced.
Although no trees were harmed during the creation of this post, a large number of electrons were greatly inconvenienced.
Tesco (and others) were not known for taking too much notice of such guidelines, but they may have had a change of senior management at around that time. Historically, unless you were the type of person who would have failed an SS or Khmer Rouge assessment on the grounds of excessive brutality you wouldn't have got a job as a Tesco buyer.
Although no trees were harmed during the creation of this post, a large number of electrons were greatly inconvenienced.
I wonder if this has anything to do with Tesco inflating their profits by including all of the deductions they had in the pipeline for their suppliers before they had actually "earned" them? Anyway, as far as the suppliers are concerned, it has to be a huge improvement, and it's good to see.
Anyway. Thread drift alert. Let's get back to the matter in hand, and Carillion. It's certainly given the BBC something to talk about. It's even relegated Brexit to "in other news" status.
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They do have a fair few from memory Portsmouth hospital is one which had some major issues with the electrical infrastructure from the opening day the incompetence was astounding. as is the new royal Liverpool which isn’t complete yet over a year late. There’s a fair few schools I know of too there will be all kinds of scams gone on over the past few months I have no doubt.
The bosses have looked after themselves.
“The former chief executive stepped down from Carillion's board last July and left in November after the firm made its first profit warning, sending share prices tumbling.
Yet a document tucked away on Carillion's website shows Mr Howson was entitled to another full year of his £660,000 base salary up until October 2018”
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This is pretty much the crux of it.
I am currently in the process of re tendering a large outsourced facilities management contract - circa £40m.
The fact of the matter is, government departments involved here have irresponsibility let contracts to Carillon on two counts, the first is the due diligence around the financial stability of the company and the second is the due diligence as to the company’s ability to deliver the said services at the price point they have promised.
I don’t necessarily agree that it’s difficult to manage these contracts in the longer term - I’ve been doing it for many years and I ain’t clever - as others have pointed out, these so called “outsourcing experts” are nothing more than a labour resource with minimal assets.
The problem comes when a contract is sold on an output spec where the contractor has not a snowball in hells chance of delivering the services at the price promised.
On a basic level if you sell a contract to clean a hospital based upon needing 50 cleaners at a certain mark up the salesman gets his bonus, and the company report a growth in turnover at a certain profit good news all round.
Standards slip, and 6-12 months later it actually turns out you require 70 cleaners. The contractor then must either employ more cleaners at the contractors cost of course - he has signed up to maintain a certain standard, not supply X number of cleaners which then means he loses a vast sum of money for the duration of the contract due to his payroll or pays penalties for a failure to deliver the services to a sufficient standard (normally which ever is the cheapest).
It is the job of the person letting the contract to check that the services can be delivered for the price promised. In large organisations this is normally the job of the procurement officers, who often have limited sector knowledge, and will be under a great deal of pressure to achieve the lowest price possible. This is very beneficial when buying commodities, but it rarely works well when buying services.
These government departments (and the private sector ones for that matter) are equally to blame for the collapse and should take some responsibility.
Obviously there’s a lot more to it than this (I have no idea how the pension liabilities work) but I have real sympathy for the hundreds, if not thousands of small subcontractors employed by Carillon on their construction and small works contracts. This is where it is going to really hurt. These guys now face not getting paid for works they have completed already, and the job of re filling their order book.
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When I was local authority we had "Procurement Officers" earning more than what a Chartered Surveyor and they were trying to tell the Surveyor what they should be doing. They had no idea about the construction industry nor the contracts it was a complete and utter farce. They were trying to lump the same procurement rules/method on buying bulk stationary for schools to multi million housing and school projects..
Political leverage ( no pun) PFI's were VERy poular with Blair and Brun. It got the debt off the treasury balance sheet
Capitalisation - remember the capitalisation of mortgage debt into derivative securities in the 2008 crash.
The debtors in the middle east 500 mil according to the city chat rooms
BP is very similarly structured in that they bankroll the jobs and the subcontractors do the work
......and Look what Bransons lot have done to the east coast line and the hospital trust in the midlands or south or somewhere.............the list goes on and on.
I don't have a problem with the principle of PFI........ it is down to how it is managed.
Other contractors will step in and replace the darling Carillon - however my thoughts are with the subbies in the private sector and the pensioners at head office
Last edited by Brian; 16th January 2018 at 13:12.
Diane Abbot on Carillion:
"How many is a Carillion?"
Cheers..
Jase
Working for a subcontracting company I have worked on numerous Carillion rail contracts over the years, they loved to subbi bash, never paid what you were entitled to and would beat you with a big stick whenever they felt like, multiple times the left hand didn't know what the right hand was doing and their health and safety was a joke at times. These guys were paid top dollar to deliver these projects, they couldn't deliver a pizza and hope the fat cats within the organisation get held to task
The government state that the bosses and directors will not be getting any bonuses or severance pay, well that's a comfort, but i bet they've all set up a nice little nest egg before it all went pete tong, same with the banks, nothing will be done and we'll just write off the £1.5 billion or more as usual.
That's privatisation for you and frankly I see many schools/"academies" going the same way in a few years time.
They were the worst payers I've ever had. It took over a year to get paid and I thankfully ended the contacts when they were finally up to date.
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Aggressive accounting (link)?
Then there’s Carillion’s “aggressive accounting”.
The aptly titled practice is when you declare revenue and profit before you’ve made the money, based on optimistic forecasts.
This approach works while expectations and reality are aligned, and you bring forward the benefits of your big wins.
But say a PFI hospital job that you’re anticipating will make you £200m over 30 years, is delayed twice in the construction process, well, that expected profit becomes real-life losses.
Remember that £845m “contract provision” Carillion made at its 2016 results?
That was the contractor admitting that there was nearly a billion pounds worth of difference between what it thought it’d make and what it actually was making.
Isn't that fraud? If not...why not, please?
Isn't this what several senior Tesco executives were prosecuted for a few years ago, when they were forward-counting anticipated rebates from suppliers into profits?
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Heart attack (link):
Chris Bush, Tesco's former UK boss, John Scouler, Tesco's former commercial food director and Carl Rogberg, its former UK finance boss have been on trial for more than four months.
It emerged on Tuesday that Mr Rogberg had a heart attack last Thursday.
The Serious Fraud Office will decide in early March whether to pursue a re-trial. The men deny the charges.
Analysis:
It's an outcome no one could've predicted - or would have wanted. It had already taken up more than a quarter of a year and had been beset by delays. There was the hope it would end before Christmas, then the judge became ill and it's been stop, start, stop ever since.
Having already discharged one juror for health reasons, there was a further delay when a juror went on holiday.
And then there's the cost. This has been a complex, multi-million pound, trial. The SFO, which brought the case, will now decide whether or not a retrial is appropriate.
Meanwhile the defendants, who denied the charges, have almost another month to wait to find out what happens next.
Wonder how much the Tesco fiasco has cost the tax payer so far for no result?
Where's the public accountability for that?
I’m afraid I haven’t really followed this as closely as I ought (nasty chest infection floored me since xmas) given I currently work for a large M&E maintenance company on a big government contract, but the tidbits I have picked up smack of a certain artistic flair in revenue recognition that reminds me somewhat of Enron?
I did a lot of PM training at the previous firm I worked for (large American company) who were keen to the point of disciplinary action on ensuring that no books were cooked or bags sanded that didn’t reflect laws in the US around revenue recognition; is there no such legislation in the UK? Or am I over simplifying the failure mode?
I work in this sector, Carillion were famous for not payment, they required 120 days payment terms and if the invoice was in the slightest bit wrong (even a spelling mistake) they would use it as excuse for you to resubmit a new correct invoice as close to the 120 day payment as possible and the new invoice would again be on 120days!!! Luckily I work for a manufacturer who supplies through a wholesaler so not an issue for us but one of my wholesalers has been taken for 750k.
Yes the knocked one of my invoices back because it was dated 12-12-14 instead of 12/12/14 over 8 months to actually get paid for that one at the time they where my biggest contract so very hard to kick up a fuss. As I said earlier my hope is that those who worked in the accounts dept get absolutely shafted in their pay and pension due to this collapse for all the stress and issues they caused me.
On a happier note one of my current clients was taken for £120k because of their collapse but was in the process of being sued for £2.4m by them so he’s happy to take the hit if it means the litigation has gone away
[QUOTE=bootneck;4658570]Yes they knocked one of my invoices back because it was dated 12-12-14 instead of 12/12/14 over 8 months to actually get paid
That's what I was talking about earlier, outrageous that they could get away with it, feel sorry for the suppliers and the employees who were at the sharp end but the accountants and bosses are a bunch of sh*ts
Unfortunately Carillion our not alone in their practices. A lot of the large main contractors notoriously hang there subcontractors out to dry and use them to finance the projects whilst stripping out client, payments on account, to large wage bills and expenses.
I’ve been at the receiving end of this several times in the past and nearly lost my business through these companies.
Hopefully the ethics of this kind of business will be addressed and something good will come out of this but I’m not holding my breath.
Laughable to see them all on TV yesterday, taking a telling off for being not very good
All get to keep their bonuses of course, while the pension fund goes short
Disgusting
It's been going on for years, back in 1991 they knocked back one of my monthly valuation payments of £1.25 million due to a 'round up/down error' of 1p.
Carillion "aggressively managed" its balance sheet to make accounts look better, Report:
The report was intended to be presented to would-be lenders but never used.
However, it has now been published by a committee of MPs, whose chairman, Frank Field, said it showed "gross failings".
To nobody's surprise, a report has surfaced which purports to show that Carillion's directors "aggressively managed" their accounts to make the Company's financial situation appear better than was actually the case:
http://www.bbc.co.uk/news/business-43275605
Which may be bad news for the Carillion directors.
Comparisons with Tesco are inevitable, and several Tesco directors were to stand trial accused of massaging the accounts in a similar manner to Carillion - income due but not actually received taken into profits, unilaterally extending credit terms for suppliers, etc. I can't remember if the Tesco directors have actually appeared before the beak yet, as the trial was postponed because one of them had a convenient heart attack.
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Beaten to it!
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A multi-billion corporation that handled tens of billions of taxpayers' money went down in rather suspicious circumstances and it all but disappeared from the MSM coverage. Strange isn't it.
Fas est ab hoste doceri
Capita going a similar way according to the media.
I don't know much about it myself but Capita own Gas Safe of which I am a member.
I wonder how much PWC fees have made so far out of the liquidation of carillion, and how much has been raised to pay off creditors, always amazes me how so much money is made after a collapse by administrators and so on, but very little left to pay actual creditors who have suffered real losses.
Well, there's a strict order in which any available funds are paid out, and the Liquidator or Administrator is always at, or very near the top, with unsecured Creditors at the bottom.
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