marktime1231
19 Feb 2018
CLLN all over again Another committee on CLLN tomorrow, and a last word from me on GFRD.The committee have sought input from CLLNs major investors and shorters. It is interesting that some (LGIM) saw problems as early as 2015, made representation to the board about strategy, governance etc and were sufficiently unhappy so they sold out. Others like me were hanging on to the end believing what they were told, and were only stopped from taking shareholder action against the board because they went bust. The committee's prejudice is that the CEO, CFO and chaira) deliberately manipulated accounts for 2015 and 2016 to hide bad performanceb) anticipated the problems while releasing themselves from clawbackc) kept quiet during early 2017 eg bad contracts, debts, pension deficitd) held a positive AGM, paid the dividend as a calculated deceptionand that they did so under the noses of or with the tacit approval of passive non-execs and too cosy auditors, who must have been complicit or completely bloody useless. The signs were there, buried in the detail but visible to those who looked hard ... but KPMG let us down. As well to blame them as anyone else, they have money.I suspect GFRD were heading to the equivalent of £300M net debt (before the capital raise) by the end of FY18 as predicted by Phil Oakley's analysis. Business set to underperform and more bad contract news to come out. Yes this is at odds with what GFRD say. But look at the numbers harder.My prediction is at least one more profit warning within the next 18 months, the stop gap capital spent up, by when one or two senior execs responsible for these accounts and projections will be history. The share price will end up in 480-660p raw value territory, assets in the housebuilder just about covering construction when the banks force a conclusion.Anyway glad I haven't and determined not to invest, will stop banging on now, make your own minds up and good luck.
FRTEB
19 Feb 2018
Re: IC COMMENT BY JONAS CROSSLAND " Very very annoyed at myself over CLLN because I was fooled by the positive signals and cryptic messages right up to the end. " Marktime, if it's any consolation, so was I. Lesson learned. Fortunately with CLLN's sp heading further and further down what I did do was reduce exposure to construction and sold both Kier and Galliford at a profit. As it turned out that was a good decision but with hindsight I should have also bitten the bullet and sold CLLN at a loss but I thought they would in due course bounce back due to the director's BS... I've also incorporated numberbiter's calculations into my company analysis spreadsheet. Having said that, there is no perfect company to invest in - you just have to run the numbers and take a view, but for me that view no longer takes account of the BS spouted by directors.Onwards and upwards etc.
PIE-EATER
19 Feb 2018
Re: IC COMMENT BY JONAS CROSSLAND DregorNot beating myself up.....just a bit annoyed and it's WELL in perspective. A little pain helps focus on what we would do differently next time.Where I thought there may be light at the end of the uncertainty tunnel this year, it seems more likely it will be a couple of years with bits and pieces falling in to place at various times......that's why i am content to hold and may even nibble again. At the moment it's not a meaningful position.PE
dregor
19 Feb 2018
Re: IC COMMENT BY JONAS CROSSLAND Pie,don't beat yourself up re timing; it is just one of those things and as you say, it was a small amount of dosh. Same here!Lots of doom and gloom over 'GT' and as the old cliche goes, 'we are where we are'.Nevertheless, it wasn't all bad news, and hopefully, (another cliche!) 'lessons have been learned' and the construction side of the business will be run on in such a way as to not do a Carillion.With my investment under water, I am sticking with the stock and am prepared to accept a further cut in the divi. If this along with tighter controls and the cash raising puts Galliford onto a firm footing, then I shall be satisfied. If I thought , this was a no -hoper,then I would take it on the chin and sell up.It is with some comfort that at the time of writing, the SP has recovered somewhat from the welly it took last week.Time will tell if this is the right decision or not!Good luck to all.
Damp Seaweed
19 Feb 2018
Re: IC COMMENT BY JONAS CROSSLAND Thank you for the financial forensics of what is, to my my mind, a very opaque situation.I have taken a much more simplistic, and lazy view. IMHO this company should not need to raise long term capital to fund a short term cash flow issue. The management assertion that the improved capitalisation will enable them to take on bigger projects is a huge worry, when clearly they have fu....ed up these smaller ones. The continuation of a dividend seems like a pathetic attempt at an illusionists trick.They don’t look like a strong management.For the sake of clarity, I sold up my stake at the tail end of last week. I had planned to re enter when the RI was launched. But now, on reflection, think I might just stand aside.
marktime1231
18 Feb 2018
Re: IC COMMENT BY JONAS CROSSLAND Yes and yes. Company accountants produce the figures they are told to by the exec so that they can approve dividends or release share options according to boardroom rules. Playing a game with the truth. The non-execs allow it, and auditors are too passive.But where it gets very disappointing is when "expert" analysts who recommend stock cannot see what is going on and steer amateurs like me to the wrong conclusion. Jonas Crossland is calling us onto the rocks.Very very annoyed at myself over CLLN because I was fooled by the positive signals and cryptic messages right up to the end. I wanted to believe the b8sht. I am determined to be more challenging from now on. GFRDs accounts do not stand up to challenge.
PIE-EATER
18 Feb 2018
Re: IC COMMENT BY JONAS CROSSLAND I believe IC comment was by Jonas Crossland....dedicated property bod.Phil Oakley......Ex Sharescope........a bit like Simon Thomson at IC......either very good or very bad.......I have never been sufficiently convinced by him to follow up on anything - each to their own.The guy I personally would take most notice of is Tony Yarrow, who stated (as per one of my earlier posts before results?)....."At the year-end, the company’s debt of £562m was covered by £765m of cash".Question......don't accountants "manipulate" the figures the world over? I have worked with several who have said they could manipulate the figures to show whatever they wanted, but sooner or later it would come back to bite them.....Tesco springs to mind. While I accept we are both coming at this from very different positions, if you look at their statement it states the £150m is being called on so as not to take cash away from the other 2 more profitable divisions..........and this seems to be the impression most commentators I have seen have looked at it. GLAPE
marktime1231
18 Feb 2018
Re: IC COMMENT BY JONAS CROSSLAND "it has very little debt"Er so why the £150M issue?Net debt £85m (H1s report) or average net debt £203M (H1s report) or net borrowing £301M (Phil Oakley 2018) depending on who you believe - why is it so hard to tell the actual debt position - vs Mkt Cap £723M today.Intangible assets £177M (H1s report) which IC say is equivalent to 213p of the current 873p share price.Trade and receivable current assets £762M plus £287M work in progress = £1,049M vs current payables £1,154M. Wow wow and more wow. The holy mother of all wows.Context is a £511M land bank.My amateur calculation is real net assets of around £400M if GFRD went CLLN tomorrow, if we admit GRFD have real borrowings amounting to "very little debt" of around £200M.Considering the work GFRD are currently doing seems to be losing them 10p in the £, is it a fair conclusion to say the shares are only really worth 480-660p?IC's new conclusion that this is a Hold at 873p ... "we exit our buy recommendation (1,104p, 17 Oct 2013). Last IC View: Buy, 1,389p, 13 Sep 2017". At least they are admitting they were wrong but seem to think it is sentiment rather than reality catching up with GFRD. An assessment like GFRD's own 2019 and 2020 projections which looks rather rosy in the light of a hard look at the figures.Cash at hand etc stated as £1,351M (how and why is GFRD holding this mountain of cash ... er perhaps it isn't ... my eyes started swimming when trying to pick through the lengthy small print notes attached to these figures) except the current bank overdraft is £1,239M so reported net cash just £112M (as at time of H1 reporting, which is clearly NOT the average of the position for the period, same trick as CLLN). Unwinding the manipulation of balance sheet trick has me deducing the average net cash is -£6M ... aha, hence the capital raising.Long term debt is £197M, with -£6M cash gets us to the the net debt of £203M.How Mr Oakley gets to £301M net debt for 2018 is harder to see, maybe that is a projection, but he will have his reasons. Maybe based it on declarations of exceptional charges or write downs which GFRD have indicated on various contract and JV positions etc and maybe explains why GFRD have had to raise fully £150M.I have exceeded my ability - so much for a Summer spent at Harvard Business School - to analyse a balance sheet but I feel pretty confident in saying that GFRD have manipulated the H1 report to fool me (and IC ?) into thinking they have lower net debt than they actually have or will have with everything factored in. They admit it is a sham in their own H1 report.Very little debt? Perhaps we could know who at IC did this analysis?
marktime1231
18 Feb 2018
Re: Article by Phil Oakley on GFRD Thank you Rhigos and Trigger's Broom.I have been tracking GFRD since last Spring when it looked good value hovering under 1200p, but I have held off concerned by the mix of infrastructure type construction projects and housebuilding ... it declared a £100M problem last Summer deepened following CLLN shored up by a rights issue just now. Despite which it is attracting strong interest at 800-850p.Wasn't Phil Oakley the analyst who saw through CLLN cash flow and balance sheet games in 2016 to spot the problems, I believe his evidence has been provided to the parliamentary enquiry. So his view is one to consider.The cut in dividend and the rights issue do not worry, it is the unknowns, the inevitable skeletons, no visibility of one or two big uncontrolled risky projects able to ruin the rest of the business. Govt tight-noose contracts mean risky infrastructure is not very profitable at the best of times, executives selling what can't be delivered then hiding the bad news ... so no thanks.Add that PO thinks the housebuilding cycle is due a turn.
sparks1962
17 Feb 2018
Legacy Contracts Tracing back the history of the AWPR to June 2014 when first announced that it had won the project as part of the consortium between Carillion and Kier. The Construction pmi and CPA were predicting great things for the industry going forward. Brokers were predicting GT profits to grow by 15-23% over the period 14/15. Greg Fitzgerald was reported as saying" Construction is working hard to protect margins on projects won during more challenging times""The division is winning work with appropriate margins and inflation protection with a continual focus on risk management"It begs the following questions:1. Are GT using the legacy contract excuse too much?2. Why did the AWPR and others go so badly wrong?3. Can you trust what is being said surrounding risk management and bidding strategies or is it lets price pretty much anything and see how we get on?
PIE-EATER
16 Feb 2018
IC COMMENT BY JONAS CROSSLAND In the wake of the Carillion (CLLN) collapse, investors were in no mood to take prisoners. So, when Galliford Try (GFRD), already smarting over previous fixed-price contracts that went wrong, announced a further £25m provision to cover its involvement with Carillion and the Aberdeen road project, the share price was marked down by nearly a fifth.GFRD:LSEGalliford Try PLC1mthToday change1.86% Price (GBP)876.00Sentiment was further undermined by news that £150m is to be raised through a fully underwritten capital placing. At the same time, it has brought forward plans to restore a two times dividend cover on pre-exceptional earnings, which means that the half-year dividend has been cut by 13 per cent to 28p a share.Taking on fixed-price contracts works well until rising costs lead to eroding margins, and Galliford has already booked an exceptional charge of £98.3m to cover these contracts taken out in 2014 and earlier, with the last due for completion in mid-2018.On a brighter note, Linden Homes, which accounts for just under a third of group revenue, benefited from further strong demand for new-build houses, and its operating profits were lifted by 9 per cent to £80.9m, with margins up by 18.5 per cent and completions up by 6 per cent. And average selling prices, which include affordable housing, rose from £287,000 to £309,000.Galliford also increased its exposure to the affordable, private rented and mixed tenure side, increasing the order book by 41 per cent to £1.3bn. Work secured included a new joint venture with Trafford Housing Trust to deliver a £100m, 600-home regeneration scheme in Manchester.In the construction division, pre-exceptional operating margins grew from a wafer thin 0.4 per cent to 0.9 per cent, but uncertainty remains over the amount that will be recovered relating to final settlement of legacy contracts. However, the order book edged up to £3.5bn, and 99 per cent of projected revenue for the year to June has already been secured and 61 per cent for the following financial year.GALLIFORD TRY (GFRD) ORD PRICE: 808p MARKET VALUE: £672mTOUCH: 808-811p 12-MONTH HIGH: 1,592p LOW: 772pDIVIDEND YIELD: 11.4% PE RATIO: 15NET ASSET VALUE: 681p* NET DEBT: 15% Half-year to 31 Dec Turnover (£bn) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)2016 1.24 63.0 61.9 322017 1.40 56.3 56.3 28% change +14 -11 -9 -13Ex-div: 15 Mar Payment: 6 Apr *Includes intangible assets of £177m, or 213p a shareIC ViewGalliford Try is very different to Carillion. It has a vibrant housebuilding arm, and unlike Carillion it has very little debt. Even with a rise in dividend cover, the yield is forecast to be over 10 per cent for the full year to June 2018. However, the shares have fallen more than a third since the start of the year, and now trade on just 1.3 times net tangible assets. But, while we would be happy to ride out the current storm, sentiment is stacked against the shares, and we exit our buy recommendation (1,104p, 17 Oct 2013). HoldLast IC View: Buy, 1,389p, 13 Sep 2017
Rhigos
16 Feb 2018
Re: Article by Phil Oakley on GFRD Well done Triggers broom, much nicer and worked. I had realised the link was overly long which is why I put direct pdf link in my post. I simply opened link from a ShareScope email and copied and pasted resulting URL from my browser.I approve Phil's comments about beware of construction companies and would extend it to a lot of service companies like BAB and MCRO which I regret having shares in. Investors should beware of the allure of high yields which come with high risk to capital.
Triggers broom
16 Feb 2018
Re: Article by Phil Oakley on GFRD I'll try the removing the s and see if this links directly. Here goes.[link] to see SP heading back to normality after the St Valentines Day massacre.
Rhigos
16 Feb 2018
Article by Phil Oakley on GFRD Article by well respected analyst Phil Oakley, now working for Ionic, is worth reading.[link] to pdf:[link]
kapita
15 Feb 2018
Re: placing or rights issue Thanks for clarity.Kapita
