Shareholders of the failed outsourcer Carillion had concerns about the business’ strength as early as 2015, according to a select committee inquiry into its collapse, raising questions about the transparency of the group’s financial reporting.
One manager, Edinburgh-based Kiltearn Partners, said it would even have considered legal action against the company if it had not gone into liquidation, and called for an investigation into whether management were aware of financial weaknesses earlier than stated.
Kiltearn began selling its 10 per cent share in Carillion in August last year, saying that the £845m provision “effectively destroyed Carillion’s capital base” and that the company “had become impossible to value as it was not clear what future cash flows would be as there was no concrete information on critical factors”.
It said the company’s annual reports could “no longer be considered reliable and consequently no effective assessment of its finances could be made”.
Standard Life Aberdeen began selling Carillion shares as early as December 2015, citing concerns about the company’s “financial management, strategy and corporate governance”.
BlackRock, the world’s largest asset management company, said its net outflows from the company may have been influenced by rebalancing of passive trackers, and that there was no conflict of interest arising from its management, via a different part of the business, of Carillion's defined contribution pensions.
Frank Field, chair of the Work and Pensions Committee, said: “There is a disconnect here. On one hand, the Carillion directors told us all was sunny until a bolt of Qatari lightning hit them out of the blue. Their stewardship had, they proudly told us, been adjudged ‘best in class’ by their friends at KPMG.”
“On the other hand, investors were fleeing for the hills, and it appears those who looked closest ran fastest,” he added.
The ‘big four’ professional services firms, including Carillion auditors KPMG, will give evidence on their involvement to the Work and Pensions Committee and Business, Energy and Industrial Strategy Committee on Thursday. The Pensions Regulator will also appear before MPs.
