Revealed: Funds Hit by the Carillion Collapse

Construction company Carillion went into liquidation yesterday, leaving thousands without jobs and shareholders - professional and private alike - with no cash

Emma Wall 16 January, 2018 | 2:40AM

Carillion

Construction giant Carillion (CLLN) went into liquidation yesterday, as plans to restructure the company’s debt failed to come to fruition. The firm had been in talks with key stakeholders – including the UK Government, since Thursday.

“Despite considerable efforts, discussions have not been successful, and the board of Carillion has therefore concluded that it had no choice but to take steps to enter into compulsory liquidation with immediate effect,” the statement released yesterday read.

Carillion had applied to the Government for a £20 million loan to avoid liquidation, but ministers were unwilling to offer financial support. The collapse puts 20,000 jobs at risk, and the pensions of employees and investors are in the balance.

Investors range from the corporate – according to reports 30,000 firms risk losing out on £1 billion, including Balfour Beatty – to creditors – including Santander, Lloyds, HSBC and Barclays – and private and professional shareholders.

Major shareholders are listed as Standard Life Investments with 4.96% and hedge fund firm Kiltearn Partners has 4.94%. The company is held in thousands of tracker funds and ETFs which invest in the FTSE All Share or UK smaller companies indices.

3 Actively Managed Funds Which Own Carillion

Value and Income Trust (VIN) owns 1 million Carillion shares. This is a mixed asset closed-end fund, investing in UK equities, UK commercial property and cash. It currently delivers a dividend yield of 4.02% and is trading at a 17.7% discount to net asset value. The trust has a four star performance rating and is up 15% over the past year.

Lowland Trust (LWI) owns two million Carillion shares, as part of a portfolio of UK-listed stocks. This trust has a Silver Analyst Rating. The approach is not simply to focus upon the income component of the portfolio but to aggressively grow the capital, as a larger capital base should allow for significant dividend growth. The opportunity set is to look diligently across the full range of the market capitalisation to seek out contrarian investment opportunities.

Morningstar analyst David Holder is particularly positive on the trust’s management: “James Henderson has demonstrated his ability to manage this multi-cap equity income investment company with notable success over the 27 years of his tenure.

“For the past four years he has been assisted by Laura Foll, who in recognition of her input was appointed co-fund manager in November 2016. Whilst this appointment has an element of long-term succession planning, we think that the partnership has merit for shareholders, marrying as it does differing and complementary skills.”

Janus Henderson UK Equity Income and Growth has 1.9 million shares. This fund aims to provide dividend income with prospects for both income and capital growth over the medium to long term by investing primarily in UK companies. It has a two star performance rating, reflecting lacklustre performance against peers in recent years. 

An earlier version of this article stated that the Schroder UK Dynamic Smaller Companies fund owned Carillion. However, the manager sold his position last year.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Carillion PLC14.20 GBX-28.95
Janus Henderson UK Eq Inc&Gr I Acc1,301.02 GBP-0.38
Lowland Ord1,305.00 GBX0.38
Value And Income Ord265.50 GBX0.00

About Author

Emma Wall  is former Senior International Editor for Morningstar

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