A deeper dive into Carillion’s collapse

Daryl Smith, CFA, Head of Research (London)

Post feature

Using data sourced from a Neudata-listed alternative data provider, we highlight key findings from the group’s analysis on the UK construction giant’s failures, establishing the early warning signals that could have helped investors anticipate the group’s failure.

Key points

In short, three early warning signs have been identified that could have highlighted trouble at the firm:

1. Carillion’s public sector book of business was highly concentrated in a small number of high risk, high value contracts

2. These contracts were dominated by lumpy construction projects, providing a less recurring source of revenue than peers such as IT/Business Services provider Capita

3. 2017 saw a shift in Carillion’s activity: it won a lower overall award value than previous years and doubled down on the construction sector

Used with other sources of insight, this alternative dataset could have prompted questions about Carillion’s risky public sector strategy and given an early warning of shifts in its activity.

Carillion & Capita comparison

Carillion’s public sector revenue was always concentrated in a small number of large contracts – a very different contract profile to peers such as Capita. Between January 2015 and January 2018, the average award won by Carillion was 34x the size of the average won by Capita.

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