The Carillion saga continues. Now one reads that profits were being misstated over a prolonged period and operational management was extremely poor; perhaps not a startling revelation after what has been reported so far. Hindsight is, as they say, a wonderful thing.
One of the many lessons to come from Carillion's collapse will be the depth of due diligence required when entering into long term agreements. It is not simply enough to read what is published; one needs to go behind the balance sheet and find out what lies beneath the gloss. Due diligence is a time consuming and costly exercise and will probably get even more time consuming and costly post Carillion. But thorough due diligence is vital.
If, for example, the PFI/PPP model (or its successor) is to continue we need to remember that just like a puppy, 'PFI/PPP is for life, not just for Christmas'.
Murdo Murchison, chairman of Kiltearn, told the joint business and pensions select committee that is investigating the outsourcer’s collapse that he was “surprised” and “very, very disappointed” when Carillion announced an £845m writedown in July last year. He said that although Kiltearn knew about weaknesses in Carillion's balance sheet and cash flow, it had not been made aware of the breadth of the problems. Since the company’s collapse in January, he had become aware of “evidence of misstatement of profits over a prolonged period of time, evidence of aggressive accounting and actually evidence of extremely poor operational management” that were “completely at odds with the way the business was presented”.