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TOPIC: Carillion
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Re:Carillion 6 Years, 2 Months ago
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Because it doesn't
Greed, taking on far too many projects
Born from mergers/demergers
Exactly like the banks...
Not good enough in the big picture
And too much external influences...
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Re:Carillion 6 Years, 2 Months ago
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Accounting practices are another issue - and it's significant that KPMG will be part of the forthcoming government enquiry.
For example - at the financial year end - if, say, a football stadium is half completed, a company can be quick to take half the profit into its accounts.
Even though thecproject is not finished - with many risky final factors to be overcome. Wembley was built at a loss to the Australian builder.
And if a lucrative contract to build/operate a prison is signed - it would be imprudent to take the paper profit into figures, as the early years are problematical.
Directors are not keen to wait though - because of share prices and bonuses.
Carillion will, I think, be found to have flawed accounting principles - and a propensity to taken on too many finely costed projects.
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Re:Carillion 6 Years, 2 Months ago
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Yes, CEOs should be rewarded if successful.
But Carillion has had major problems with projects in the Middle East.
As well as at hospital sites in the Midlands and Liverpool. The Aberdeen bypass is also in serious difficulty.
Back to accounting practices - Work in Progress (WIP) is very difficult to assess. How much is a half completed hospital worth - and how much should be included in profit and/or forecasts?
Nothing - because the asset is useless. Or 50% of the completed value - or something else?
The investigation will look into WIP, and other matters - and will wonder why Carillion's previous CEO is still on the payroll, after receiving a £1.6m severance package.
I suspect overvalued WIP will have played a part - and also on the historical share price, and the government's very generous support of the company...
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Re:Carillion 6 Years, 2 Months ago
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Spee wrote:
the government's very generous support of the company...
Notwithstanding the dire profit warnings, the government recently awarded 7 large public sector contracts to Carillion!!
This is akin to getting a painter - who had just filed for bankruptcy - to paint your house.
Beggars belief springs to mind...
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Re:Carillion 6 Years, 2 Months ago
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Spee wrote:
Although, as subsequent events have clearly shown - the awarding of the contracts to Carillion was foolhardy as they are/were incapable of completing them
Foolhardy is now proven to be a major understatement!
Extremely important/major government contracts were recently given to an insolvent company - by our government.
Carillion has net liabilities of £5 billion - it is reported today...
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Re:Carillion 6 Years, 2 Months ago
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Now - it's confirmed that Carillion owes 30,000 subcontractors.
And was making them wait the maximum term of 120 days for payment.
This payment strategy is not unusual though, for large organisations.
Nothing your supermarket sells you today is owned by them - the suppliers will be paid in 90/120 days time.
In the meantime, the supermarket has the use of the customers' money - for free.
Enhancing substantial profit margins even further.
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Re:Carillion 6 Years, 1 Month ago
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Now, the top 4 accountancy firms will be investigated.
Including their methodology in valuing a partly completed project - say, a half completed hospital which is valueless (because it's useless) or worth half the end valuation!
Carillion had a Goodwill asset of £1.6 billion in its Balance Sheet. But what is the real relevance of this intangible asset - in a breakup situation?
Answer - not a lot; but it does a great job in propping up a listing Balance Sheet...
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