Last weeks trading statement from this support/construction business proved what a strong position the company is in.

looks to be plenty of growth going forward.......

RNS Number : 8437J
Carillion PLC
10 December 2008



10 DECEMBER 2008




PRE-CLOSE UPDATE ON TRADING IN 2008

UNDERLYING EARNINGS PER SHARE TO GROW BY 15% SUPPORTED BY ROBUST BALANCE SHEET







Leading UK support services company, Carillon plc, is providing this pre-close update on trading in 2008, ahead of announcing its preliminary results on 4 March 2009.




Highlights




Continuing strong performance supported by a reduction in the Group's underlying effective tax rate to around 20% - underlying earnings per share(1) for the 12 months to 31 December 2008 expected to grow by approximately 15%, some 5% ahead of previous expectations.

Alfred McAlpine successfully integrated with integration and re-organisation cost savings increased by 10 million to a run rate of 50 million per annum by the end of 2009.

Balance sheet remains robust - cash flow remains strong with net borrowing expected to be below 275 million at the year end.

Expect strong revenue growth in support services at margins in excess of the 4.1% achieved in 2007.

Public Private Partnership projects creating significant value - 6 investments sold for 59.7 million in 2008.

Middle East business expected to deliver strong growth with an increasing contribution from projects in Abu Dhabi - margins expected to be at least 6%.

Satisfactory performance in construction services (excluding the Middle East) - operating margin expected to be in excess of the 1% achieved in 2007.

Underlying effective tax rate expected to reduce from 25% to around 20% in 2008 and to remain at this level for the foreseeable future.

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Business performance




Our results are expected to reflect the strong progress the Group has made in 2008, enhanced by the acquisition of Alfred McAlpine in February 2008. This acquisition created the UK's largest support services business and further increased the Group's resilience, in line with our strategy for growth.




Support services




Support services continues to be a major driver of earnings growth and continues to account for over half the Group's underlying operating profit (1) . Revenue is expected to increase substantially in 2008, primarily reflecting the acquisition of Alfred McAlpine. The operating margin is also expected to increase, within our target range of four to five per cent, largely due to the effect of integration cost savings.










(1) Continuing operations before intangible amortisation, impairment, restructuring costs and non-operating items.










New order intake has remained strong and we continue to have our largest ever pipeline of opportunities for new contracts.




Public Private Partnership (PPP) projects




Our investments in PPP projects continue to generate substantial value. During the year a further six investments in mature projects were sold, generating total cash proceeds of 59.7 million. As indicated in our 2008 Interim Report, this reflected a net present value for the cash flows from these investments based on an average underlying discount rate of under 5.5 per cent. Carillion has now sold a total of 23 mature investments in PPP projects over the last five years, generating cash proceeds of 179 million and a pre-tax profit of 104 million.




We expect to continue to make good progress in this segment. During 2008, we achieved financial close or preferred bidder positions on four further projects in which we expect to invest 11.2 million of equity. In addition, we have a healthy pipeline of potential new projects, including eight projects for which we are currently shortlisted.




Middle East construction services




In Middle East construction services, we expect to report further strong growth in 2008, driven by increased activity levels in Dubai and Oman, together with contributions from Abu Dhabi and Cairo, where we began operations at the beginning of the year. Going forward, we expect growth to be increasingly driven by Abu Dhabi, where we negotiated substantial new work in 2008 worth over 1 billion and also increased our pipeline of potential opportunities.




We therefore continue to expect long-term sustainable growth in this region and remain confident that we will achieve our objective of broadly doubling revenue in this segment from the 2007 level of 337 million to a run rate of over 600 million by the end of 2009, at an operating margin of some six per cent.




Construction services (excluding the Middle East)




In this segment, we remain focused on project selectivity, in line with our objective of increasing margins rather than revenue, in order to improve the combined operating margin for all our construction activities, including the Middle East, towards three per cent over the next three years. This strategy is supported by our substantial, high-quality order book and probable new orders, which provide sufficient visibility for us to be confident of achieving our expectations for 2009.




Following the acquisition in October 2008 of the Vanbots Group, a well established construction management services group in Canada, the integration of this business is progressing to plan. This acquisition has significantly enhanced our ability to provide fully integrated solutions, especially for PPP projects, further strengthening our market leadership in Canada, particularly in the health sector.




Balance sheet




The Group continues to deliver strong cash flow and net borrowing at the year end is expected to be below 275 million and below our target of 300 million.




Taxation




Carillion has been successful in agreeing with the tax authorities certain prior year tax issues and a mechanism for the use in 2008 and beyond of certain tax losses acquired with Alfred McAlpine. Consequently, the Group's effective tax rate is expected to reduce from 25 per cent in 2007 to around 20 per cent in 2008. The Group's ability to maintain its effective tax rate at this level for the foreseeable future will be further underpinned by the UK Government's proposal to exempt UK companies from taxation on foreign earnings from April 2009, announced in its 2008 Pre-Budget Report on 24 November 2008.



Acquisition and integration of Alfred McAlpine




The benefits of acquiring and successfully integrating Alfred McAlpine continue to exceed our expectations. Integration and reorganisation cost savings are now expected to reach an annual run rate of 50 million by the end of 2009, an increase of 10 million on the previously announced run rate of 40 million. Additional cost savings have been identified across most areas of our enlarged business as integration has progressed, notably through the adoption of Carillion's shared central services and the outsourcing and off-shoring of back-office processes. All savings have either been delivered, or firmly secured for delivery, with absolute savings expected to be 15 million in 2008, 35 million in 2009 and 50 million in 2010, an increase of 5 million in 2009 and 10 million in 2010. The one-off cost of delivering these savings will increase from the previously announced figure of 40 million to 55 million.










Outlook




The wider economic background will undoubtedly become increasingly difficult and make delivery of our business objectives more challenging. However, Carillion is a well-balanced and resilient business, with strong positions in its chosen market sectors in the UK, the Middle East and Canada. Therefore, with a robust balance sheet, a strong order book and continuing opportunities in our main market sectors, Carillion continues to expect to build on its strong performance in 2008 and deliver materially enhanced earnings in 2009.




Carillion Chief Executive, John McDonough and Group Finance Director, Richard Adam, will host a conference call on this statement for analysts and investors at 9:00am today, Wednesday 10 December. The telephone number to join the conference call is + 44 (0) 207 190 1232.




For further information contact:




Richard Adam, Group Finance Director + 44 (0) 1902 422431

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StockMarketWire.com
Carillion has signed contracts, secured preferred bidder positions and been awarded frameworks, worth some £1.7bn, since 30 June 2015. Within this total are a number of major contract successes. In UK infrastructure services, Carillion and Carillion joint ventures have been selected by Network Rail for a number of frameworks and Early Contractor Involvement contracts from which Carillion expects to generate over £400 million of revenue.

These include the Midland Main Line Electrification project, which was recently "unpaused" by the UK Government, the Northwest Electrification project and the electrification of the Schotts line in Scotland. In UK Construction, Carillion has secured contracts and preferred bidder positions that are expected to be worth £311 million.

These include the recently announced A14 upgrade, which is being delivered by a Carillion joint venture for Highways England and which is expected to be worth some £146 million to Carillion, together with preferred bidder positions for a £90 million contract to build the Great Arundel Court development on London's Embankment and a £75 million schools contract for Peterborough City Council.

Chief executive Richard Howson said: "As we expected, the pace of work winning in the second half of the year has started to pick up. Since the half year, we have secured contracts, preferred bidder positions and framework agreements that are expected to be worth around £1.7 billion. With cash flow remaining healthy and these recent contract successes, we remain confident of achieving this year's targets, including ending the year with strong revenue visibility for 2016."

StockMarketWire.com
Carillion has signed a contract with the Homes and Communities Agency to deliver the regeneration of Tower Works in Holbeck Urban Village on Leeds' South Bank.

The 1.17 hectare site is a former industrial location housing three listed Italianate Towers from which the site derives its name.

Carillion will deliver 90,000 square feet of commercial office space, 24,000 square feet of retail, restaurant and bar spaces alongside a mix of one, two and three bedroom apartments and town houses, transforming the site into a mixed-use, sustainable community with its own distinctive character.

The combined value of the proposed development is approximately £80 million and a site-wide masterplan will be submitted for planning approval shortly, subject to which construction work is expected to begin in Spring 2016.

This contract adds to the £1.7 billion of new business that Carillion has won since the half year, as announced on 12 October 2015.

Super day on Friday. Now at 320p, a critical support / resistance level. If we can break through here and hold on Monday then we could be off to the races.

StockMarketWire.com
JP Morgan Cazenove has upgraded its recommendation on support services group Carillion (LON:CLLN) to overweight from neutral in its note on UK contractors, today.

The broker said: "Carillion's shares have declined by 16% since their last peak in August which we see as unjustified and as they are supported by a 10% FCF yield in FY16E and a 6% dividend yield; we upgrade to Overweight."

Analysts have cut their price target to 347 pence per share from 355 pence.

Looking at today's drop, one wonders if it was upgraded in order for Cazenove's clients to get out

StockMarketWire.com
Carillion's joint venture has signed a £125m contract for Phase 1A5 of Dubai Trade Centre District.

Carillion said Dubai World Trade Centre has awarded Al Futtaim Carillion (AFC) the main contract to deliver the next phase of work on the Dubai Trade Centre District (DTCD), a major development located between the current Dubai International Convention and Exhibition Centre and Emirates Towers in the heart of the city's Central Business District.

This phase comprises a 178,000 square metre development and includes two high-specification office buildings of eight and twelve storeys. The contract, which is worth approximately £125 million has begun and is scheduled for completion in Quarter 3 of 2017.

AFC is nearing completion of the earlier phase, which was awarded in 2014 and this latest award takes the overall value of AFC's work on this site to around £200 million.

The DTCD development is being designed to best-in-class quality standards and this phase will include international Grade A quality offices, which has achieved LEED Gold precertification from the US Green Building Council - the industry benchmark for green building performance covering design, construction, operations and maintenance.

The technology solutions and infrastructure being planned are aligned with the Dubai Government's Smart City strategic agenda, which was launched by Vice-President and Prime Minister of the UAE and Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum.

Carillion chief executive, Richard Howson, welcomed this latest award, citing the UAE as a core market for Carillion: "We are delighted to have been selected for the second phase of this major development in Dubai, where we continue to see more opportunities coming to market for which our capabilities and reputation for delivering to high standards of quality, safety and reliability are important to customers. We look forward to continuing our close relationship with Dubai World Trade Centre to deliver this important development".

StockMarketWire.com
Carillion and its subsidiary business, the Bouchier Group, have won support services contracts for a number of oil sector customers, including Shell and Canadian Natural Resources (CNRL), together with a maintenance and hard facilities management contract for the Department of National Defence in Canada.

Together these contracts are expected to be worth over £100 million over a period of up to five years.

The three-year contract for Shell (extendable to five years), which involves the provision of hard facilities management services to Shell's estate across the Province of Alberta, will start this month.

The contract extensions that have been won for CNRL involve the provision of a range of infrastructure and site support services. The contract for the Defence Construction Canada Forces Housing Agency involves the provision of hard facilities management services for 1,685 military accommodation units at Canadian Forces Base, Petewawa.

Carillion's chief executive, Richard Howson, said: "We are delighted to have secured further support services contracts for long-term customers, notably Shell, Canadian Natural Resources Limited and the Defence Construction Canada Forces Housing Agency, which further enhance the good progress being made by our support services business in Canada.

"We look forward to working with these customers and to building on the strong relationships we have already established through providing value-for-money services that deliver significant operational efficiencies."

uP 4.2%



Carillion on track with new deals of around £1bn

StockMarketWire.com

Carillion is on track to achieve full-year targets and has announced new contracts worth around £1bn.

The group reports strong revenue growth with operating profit in line with expectations.

Operating cash flow has remained strong with cash-backed profit and net debt in line with expectations and secured orders plus probable orders expected to remain strong at around £17bn.

High level of revenue visibility expected for 2016 of around 80 per cent and the pipeline of contract opportunities is expected to increase to over £41bn.

Main revolving debt facility extended by nearly three years to November 2020 at improved pricing.

Carillion says it has been awarded new contracts or is in one-to-one negotiations on support services contracts with an estimated total value of over £350m.

These include new facilities management contracts or contract extensions in the UK for Direct Line Group, Verizon and Virgin Media. In Canada, Outland, the business we acquired in May 2015, is in one-to-one negotiations with customers as their preferred delivery partner for a number of new contracts and contract extensions to provide remote site accommodation and associated services.

Still 18% declared short interest, which I don't understand.

High short interest is hedging or arbitrage.

I'm not entirely clear on the full details as I haven't researched. CLLN have some convertible debt. i.e. those who have lent, have locked in the profit on the conversion of the loans by pre-selling (shorting) the shares they will get on conversion.

In other words when the debt converts the lender will hold an equal amount of shares to match those they've pre-sold (shorted). Effectively closing the short will not require them to purchase shares in the market.

Thanks CC, that makes sense, but nevertheless that still means there is a large chunk of stock out there on loan, which dents investor confidence in the stock slightly.

Great update today. Everything a shareholder would wish to hear, and yet we can't hold on to a modest rise and then end the day down. Unbelievable.

It seems to me than virtually every share cannot hold onto modest gains at the moment. Well that's how it feels to me. Symptoms of a uncertain and bearish market.

If it's of any comfort I think we are getting close to the point of max pain. By close I'm thinking 3 months rather than next week. Eventually company results will overcome this sentiment

StockMarketWire.com
A Carillion joint venture, The Hospital Company (Sandwell) Limited, has achieved financial close on the Midland Metropolitan Hospital public private partnership project in Birmingham.

This follows an announcement on 11 August that the JV had been selected by the Sandwell and West Birmingham Hospitals NHS Trust as the preferred bidder to deliver this project.

The new state-of-the-art hospital, which will have around 683 beds and 13 operating theatre suites, has been designed to meet the best international standards to make it truly patient focussed and to support the efficient delivery of high-quality clinical services and also the highest standards of sustainability.

The hospital will also have a number of innovative design features, including a fully enclosed Winter Garden, car parking within the hospital building on the ground and first floors to create secure environment for patients and staff, and full separation of clinical activities and journeys from the public and non-clinical services.

Carillion will invest £13 million of equity in the project, which Carillion will build at a capital cost of £297 million. Construction will start in early 2016 and completion is scheduled for mid-2018, with the hospital opening in late 2018.

Carillion will also deliver hard facilities management and life cycle maintenance that is expected to generate approximately £140 million of revenue over the 30-year life of the concession contract.

As a leading provider of apprenticeships and training, Carillion will use this project as a further opportunity to provide training and apprenticeship opportunities for local people as well as maximising the use of local suppliers.

StockMarketWire.com
Carillion reports a full year performance for the year to the end of December in line with expectations.

Revenues rose by 13% to GBP4,586.9m with underlying profit from operations up 8% at £234.4m. Net borrowing reduced was to £169.8 million at 31 December (2014: £177.3 million).

New orders and probable orders totalled £3.7 billion (2014: £5.1 billion), reflecting the expected impact in the first half of the UK General Election, with £2.7 billion secured in the second half of the year.

Proposed full-year dividend increased by 3% to 18.25p (2014: 17.75p).

Chairman Philip Green commented: "Our performance in 2015 reflects the benefits of our consistent and successful strategy, which enabled us to rescale and reposition our business during the economic downturn in order to take advantage of opportunities for growth as market conditions improve. Growth in revenue, underlying profit before taxation and earnings per share was primarily organic, following the successful mobilisation of a number of major new contracts, supplemented by two bolt-on acquisitions, the Rokstad Corporation and the Outland Group, which have significantly enhanced our support services business in Canada. With a strong, high-quality order book, a large and growing pipeline of contract opportunities and the financial strength to support our strategy for growth, the Group is well positioned to make further progress in 2016."

JP Morgan Cazenove today downgrades its investment rating on Carillion PLC (LON:CLLN) to neutral (from overweight) and cut its price target to 309p (from 347p).

StockMarketWire.com
Carillion has clinched new contracts worth £600m and says it remains on track to make further progress in 2016.

In a trading update Carillion says it continue to expect its first-half performance to be led by revenue and margin growth in support services, with this segment of its business moving towards two thirds of the group's total underlying operating profit.

It adds: "The Group's total first-half revenue is expected to increase and offset the effect on first-half profit of a slight reduction in underlying operating margin, because, as previously indicated, the quantum of equity sales in Public Private Partnership projects was lower than in the first half of 2015 and the one-off contribution to profit from the reorganisation of our Middle East labour facilities in the first half of 2015 was not repeated in 2016.

"We expect average net borrowing to be in line with the full-year average in 2015 of some £539 million. As previously indicated, net borrowing at 30 June 2016 will increase and is expected to be in the region of £295 million, which reflects a number of temporary factors, including the effect of paying the final dividend for 2015 in June 2016, coupled with the effect of the recent adverse movement in the US$ exchange rate on the Group's US private placement borrowing. However, we expect net borrowing to reduce by the year end and our full-year expectations for cash flow and net borrowing remain unchanged."

Looking ahead, the group says it continues to expect its full-year performance to be led by revenue and margin growth in support services, with Public Private Partnership projects, Middle East construction services and construction services excluding the Middle East also performing in line with expectations. And it says with revenue visibility for the full year of 97 per cent and a strong pipeline of further contract opportunities, the group remains on track to make further progress in 2016.

It says the referendum vote in favour of the UK leaving the European Union has obviously created uncertainty for the UK economy as a whole and therefore for businesses generally, including Carillion, and it is clearly too early to predict the extent to which businesses will be affected by this result. Carillion says it has no significant operations in Mainland Europe and prior to the referendum it undertook extensive work to assess the possible impact on its business of a vote to leave and it has put in place robust plans to manage this outcome.

The group separately announced that its market leading business in Oman, Carillion Alawi, has signed a 4.5-year contract extension for Petroleum Development Oman to continue the provision of integrated facilities management services at 12 locations across Oman, worth £240 million.

Carillion has also been awarded two contracts by the Northern Ireland Housing Executive to deliver maintenance services for its housing stock, worth up to £366 million over a period of up to 10 years, of which some £60 million was included in the Group's order book at 30 June. We expect the balance of the £366 million to be added to the order book during the life of these contracts.

These latest contracts take the total value of new orders and probable orders won by Carillion in the first six months of 2016 to approximately £2.5 billion.

StockMarketWire.com
Carillion reports a first half performance in line with expectations led by strong growth in support services.

Revenues were up 10% at £2,487.1m with underlying profit from operations flat at £112.7m (H1 2015: £112.5m). Underlying profit before taxation was also flat at £84.5m.

Underlying earnings per share rose by 1% to 16.0p and pre-tax profits were up 24% at £83.9m.

Basic earnings per share rose buy 24% to 15.8p and the interim dividend is up 2% at 5.8p per share.

Chairman Philip Green said: "I am pleased to report that the Group's first-half results are in line with our expectations, led by a strong performance in our support services business, which accounted for nearly two thirds of the Group's underlying operating profit. New order intake in the first half of the year has been strong and continues to reflect the success of our strategy and strength of our business model. Overall, we remain on track to make further progress in 2016."

StockMarketWire.com
Carillion has been selected by Centrica as preferred partner to deliver facilities management and project services for an initial period of five years, which can be extended to seven years.

The contract has an estimated value to Carillion of some £90 million over five years with service delivery scheduled to start in December 2016.

Carillion has worked in close partnership with Centrica for over a decade as managing agent, helping to deliver significant value to Centrica's British Gas business. The new contract builds on this successful relationship with an extension of scope to a Total Facilities Management service.

Under the new contract Carillion will provide a wide range of hard and soft facilities management services, including asset surveys and planning, planned and reactive maintenance, cleaning, security and catering for Centrica's 115 locations in the UK and Republic of Ireland, together with the delivery of certain construction projects for Centrica.

Carillion chief executive, Richard Howson, said: "We have worked closely with Centrica since 2005 and built a strong partnership. We are delighted to be extending this relationship, which is based on a one-team approach in which Carillion and Centrica work together to deliver award-winning standards of facilities management and customer service across all Centrica and British Gas sites."

Carillion Joint Ventures awarded construction and support services contract by UK Ministry of Defence worth over £1.1 billion

Joint Ventures between Carillion and KBR (50:50) have been awarded construction and facilities management support services contracts to support the Army Basing Programme (a series of unit moves and re-roles within the UK, and the return and resettlement of troops from Germany by 2019) - with delivery across Salisbury Plain Training Area and at Aldershot - in total worth over £1.1 billion.

The Aspire Defence Capital Works Joint Venture will design and construct 130 new buildings, together with extensions and alterations to existing buildings and associated infrastructure. The construction works have an estimated value of £680 million, of which Carillion's share will be 50 per cent or some £340 million. Work is expected to start immediately with completion scheduled for 2020.