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.

.

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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Ah you mean freebe Alf.

Another bit of help!



Carillion wins £90m contract in Cyprus

StockMarketWire.com

The Defence Infrastructure Organisation has awarded Carillion a contract to design and build a new communications facility in Cyprus, which will be a single storey building, approximately 10,000 square metres in area, with temperature and humidity controlled environments.

Carillion said construction would start in April and was scheduled to be completed by the end of January 2019.

Chief Executive Richard Howson said: "We are delighted to have been selected by the Defence Infrastructure Organisation to design and build this project and we look forward to building on the strong relationship we have with the DIO as we work closely together to deliver this important new facility."


Story provided by StockMarketWire.com.


One to watch with stop loss of approx 205.

Projected yield of 8.5+%.

Jefferies International today downgrades its investment rating on Carillion PLC (LON:CLLN) to hold (from buy) and cut its price target to 230p (from 360p).

clln, x-Div 11/5/17

12.65p per share!

Bookies target prices share price 200-300p!

How far will this go , and when will the shorters decide to depart , and is it a buy .

Strangely the shorters never seem to give up. Must be the most heavily and consistently shorted stock. Currently just over 21% declared short interest.

Not a lot, but a starter.

But look at the forecasts, not the charts.



Director Deals - Carillion PLC (CLLN)

BFN

Richard Howson, Executive Director, bought 8,719 shares in the company on the 9th June 2017 at a price of 197.49p. The Director now holds 160,384 shares.

Story provided by StockMarketWire.com
Director deals data provided by www.directorsholdings.com

I'm watching .

an ugly chart and even uglier if you look at the 5-year

Doesn't look too good here now until they maybe complete their review , see where the shorters take it .

Down 37% .

Peel Hunt Reduce 123.75 200.00 200.00 Reiterates

Liberum Capital Under Review 123.75 - - Under Review

Provision £0.85 billion on a £4.5 billion turnover company.

Provision about the same as total of last 5 years profits.

Pension deficit and debt no look a problem to me as confidence lost.

Thought about getting into this one a couple of months ago for the divi but decided it looked too good to be true, the shorters have certainly been vindicated, sorry for holders though.

UBS comment:
"We have long argued that Carillion is running excessive risk with total net debt incl pension of £1.4bn before considering around £0.5bn reverse factoring. While dividend cut and asset sales are the first step, we struggle to see how they will be sufficient in reducing net debt. We therefore believe the immediate reaction to the share price will likely be dramatic, possibly down more than 50%, though we recognise the volatility will be high and with c30% shares on loan some short closing may support."

Carillion 2017 first-half trading update
Strategic review and management changes

H1 revenue expected to be similar to that in 2016 at approximately £2.5bn.
· H1 operating profit lower than expectations primarily due to phasing of Public Private Partnerships (PPP) equity disposals, which are now expected to be in H2.

· Strong work-winning performance, with £2.6bn of new work secured in H1 - £2.1bn in support services.

· Progress made against strategic objectives set at full year results, with cost reduction underway and disposal of 50 per cent of the economic interest in the Group's business in Oman, Carillion Alawi, for an immediate cash consideration of £12.8m.

· Deterioration in cash flows on a select number of construction contracts led the Board to undertake an enhanced review of all of the Group's material contracts, with the support of KPMG and its contracts specialists, as part of the new Group Finance Director's wider balance sheet review.

· This review has resulted in an expected contract provision of £845m at 30 June 2017, of which £375m relates to the UK (majority three PPP projects) and £470m to overseas markets, the majority of which relates to exiting markets in the Middle East and Canada. The associated future net cash outflows in respect of these contracts is £100m-£150m (primarily in 2017 and 2018).

· As a result of the enhanced contracts review and the strategic actions below, reflecting difficult markets and exits from certain territories, Carillion is issuing revised full-year guidance, with revenue now expected to be between £4.8bn and £5.0bn and overall performance expected to be below management's previous expectations.

Actions to reduce net borrowing
· Deterioration in cash flows on construction contracts, combined with a working capital outflow due to a higher than normal number of construction contracts completing and not being replaced by new contract starts, means H1 average net borrowing is now expected to be £695m (Full year: 2016: £586.5m).
· The actions the Board put in place in March 2017 to reduce net borrowing have been accelerated and further actions are being taken to reduce net borrowing including:
· Disposals to exit non-core markets and geographies to raise up to a further £125m1 in the next 12 months.
· Further annual cost savings to be quantified as part of the strategic and operational review.
· Maximising the recovery of receivables.
· 2017 dividends suspended resulting in a cash saving of approximately £80m.

Strategic and operational review
· The Board announces today that it is undertaking a comprehensive review of the business and the capital structure, with all options to optimise value for the benefit of shareholders under consideration. An update on the Board's review of the business and capital structure will be provided at the Group's interim results, in September.

· Significant actions already taken to reposition the business.

· Exit from construction PPP projects.

· Exit from construction markets in Qatar, the Kingdom of Saudi Arabia and Egypt.

· Only undertaking future construction work on a highly selective basis and via lower-risk procurement routes.

[1] Includes £12.8m immediate cash consideration from the sale of Carillion Alawi

Philip Green, Non-Executive Chairman said,
"Despite making progress against the strategic priorities we set out in our 2016 results announcement in March, average net borrowing has increased above the level we expected, which means that we will no longer be able to meet our target of reducing leverage for the full year.

"We have therefore concluded that we must take immediate action to accelerate the reduction in average net borrowing and are announcing a comprehensive programme of measures to address that, aimed at generating significant cashflow in the short-term.

"In addition, we are also announcing that we are undertaking a thorough review of the business and the capital structure, and the options available to optimise value for the benefit of shareholders. We will update the market on the progress of the review at our interim results in September.

"Richard Howson has stepped down as Group Chief Executive and from the Board with immediate effect and Keith Cochrane, previously our Senior Independent Non-Executive Director, will take over as interim Group Chief Executive, while a search is underway for a new Group Chief Executive. We are fortunate to have had Keith as a Non-Executive member of our Board as he has considerable plc CEO experience. Richard will stay with the Group for up to one year to support the transition."

Carillion's chief executive has resigned as the construction support services company suspended its 2017 dividend and promised to carry out a strategic review as it warned profits would be lower and debt higher than expected.

Due to cash flows dwindling as construction contracts dry up, first-half average net borrowing at the FTSE 250 company is now expected to be more than £100m higher than last year at £695m, with the board now forced to accelerate the restructuring of the business to slash costs and preserve cash.

Suspending the dividend will save around £80m, with around a further £125m will raised by selling off businesses in non-core markets and geographies over the next 12 months, while further cost savings will be sought as part of the strategic and operational review.

As full year guidance for revenue was cut to £4.8-£5bn and overall performance now expected to be below management's previous expectations, CEO Richard Howson has stepped down with immediate effect and the role filled on an interim basis by non-executive director Keith Cochrane, ex boss of Weir, amid the hunt for a permanent replacement. The managing director of the UK building unit has also walks, along with finance chiefs of three other business units.

In March when the company announced its annual results, chairman Philip Green had said Carillion was accelerating the rebalancing of the business "into markets and sectors where we can win high-quality contracts and achieve our targets for margin and cash flows, while actively managing the positions we have in challenging markets" and would "begin reducing average net borrowing by stepping up our ongoing cost reduction programmes and our focus on managing working capital".

On Monday he said that despite making progress against the priorities set out in March, average net borrowing had increased above the level expected, meaning it will not be able to reduce leverage for the full year.

"We have therefore concluded that we must take immediate action to accelerate the reduction in average net borrowing and are announcing a comprehensive programme of measures to address that, aimed at generating significant cashflow in the short-term," Green said. "In addition, we are also announcing that we are undertaking a thorough review of the business and the capital structure, and the options available to optimise value for the benefit of shareholders. We will update the market on the progress of the review at our interim results in September."

The origin of the profit warning was blamed on the phasing of public private partnership (PPP) equity disposals, which are now expected to be in the second half, as the board pointed to strong contract wins elsewhere, with £2.6bn of new work secured in the half.

Although Green's initial review mentioned in March had seen cost cutting begin with the disposal of 50% interest in business in Oman for £12.8m cash, the deterioration in cash flows on several construction contracts called for an 'enhanced review' of all material contracts by new finance director Zafar Khan that has led the board to decide to exit UK construction PPP projects and exit from construction markets in Qatar, Saudi Arabia and Egypt and only undertake future construction work "on a highly selective basis and via lower-risk procurement".

Khan's review threw up a huge £845m contract provision as of 30 June 2017, of which £375m relates mostly to three UK PPP projects and £470m to overseas markets, the majority of which relates to exiting markets in the Middle East and Canada.

Having previously expected a cash receipt of £730m from these contracts, now a future net cash outflows of £100-150m is predicted, primarily in 2017 and 2018.
Shares in Carillion fell around 38% initially on Monday to below 120p - a level last seen almost 13 years ago.

Broker N+1Singer's Jamie Constable, who pointed out that the company also has a £587m pension deficit, said: "In conclusion it’s hard to see how they can get away without a rescue rights to rebuild the balance sheet. The problems appear to be endemic in the business so culture needs to change too.

"Keith Cochrane was only appointed interim CEO yesterday so could there be more to come out in due course? I have yet to find a number for the gross debt either. At 133p the equity market cap is £575m illustrating the depth of the hole they are in."

Analyst Nicholas Hyett at Hargreaves Lansdown said Carillion "looks like it’s trying to bail out a supertanker with a soup spoon" as debt continues to climb at an increasing rate, while the construction business seems to be hitting one hurdle after another.
"Judging by this announcement, the board are prepared to do everything it takes in order to save the ship. But talk of a review of capital structure, and the ongoing debt problem, will leave investors worried that a significant rights issue could be on the horizon."

Took a punt @100.70p

why?
At this prices and considering the order book is £5 Billions is worth a punt market cap is 1/10 at £530M, high debt and problems ahead short term.
A very low PE 3.9 with fcast of 25.6p for 2017. Bids for the company at this prices is a real possibility. The stock is well shorted so on closing will bounce strongly

Beaufort Securities today downgrades its investment rating on Carillion PLC (LON:CLLN) to hold (from buy).

Peel Hunt today reaffirms its reduce investment rating on Carillion PLC (LON:CLLN) and cut its price target to 100p (from 200p).

Morgan Stanley today reaffirms its equal weight investment rating on Carillion PLC (LON:CLLN) and set its price target at 260p.

Worth a punt at these 99p prices.