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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RBC comment today:
"New forecasts: In reality, these are largely irrelevant given the high degree of uncertainty on the future strategic direction of the group and ongoing risks. However, these do provide a base to drive our rights issue analysis. At the headline level, we cut FY17E PBT by 20% to £144.7m and EPS by a similar level to 27.5p. For FY18E, we have cut PBT by 16% to £147.2m and EPS by 17% to 27.9p. We have not assumed any resumption in the payment of a dividend over our forecast horizon. Adjusted spot net debt increases by c£290m to £487.8m in FY18E.
In our view, a rights issue is the most obvious course of action. We believe that £600m could be required and assuming a 40% discount to the current share price, would imply an EPS base of 9.2p (67% dilution to new forecasts). This would take average net debt to EBITDA down to 1.2x, a more sensible level of near-term leverage. We would also not rule out the disposal of its Construction operations - given these are the main source of risk and working capital volatility in the group. A focused Support Services business could be more palatable from a turnaround perspective and future valuation.
It is difficult to take a firm stance on valuation, given the high degree of probability in a change to its capital structure. However, on current forecasts, our sum-of-the-parts based valuation indicates a fair value of 100p. If we were to consider c10p as a sensible earnings base post a rights issue, then a 10-12x multiple on this would not be out of kilter with what we have seen at other special situations in the sector."

JP Morgan today:
"We see further risk to the downside, even at the current share price. On reflection, we previously did not adequately appreciate the sharp increase in receivables during 2016 and the high level of receivables vs peers. Our analysis suggests a further provision is possible and that current debt facilities may not be sufficient. We lower our 2017-19 profit forecasts by c.20% and cut our SOTP PT sharply to 64p, from 292p, rolling forward to Dec-18.
While the recent KPMG review of Carillion’s accounting of contracts appears to have been thorough, we note that management used its judgment to determine final provisions. Our analysis (page 2-3) suggests a further (possibly material) provision may be necessary. In addition, we are not convinced Carillion’s current debt facilities will be sufficient to accommodate H2 peak gross debt. We struggle to see an elegant way out for Carillion, with our numbers indicating a possible equity raise of £532m (we consider a rights issue) needed to bring FY18e average ND/EBITDA to 1x. We are also not convinced that Carillion would represent a feasible target for a potential acquirer, given the scale of risk and liabilities.
We overlooked the size of receivables and their rapid growth in H2 2016. We also overlooked the probable drivers behind the rapid growth of the reverse factoring scheme. More generally, we likely should have put more emphasis on the numbers themselves, rather than the circumstances surrounding them.
While we believe further risk is likely to the downside, we are opting for a Neutral in light of material uncertainty on many issues, including future provisions, the decision and ability to raise equity, and the possibility of being acquired."

LedZep4 today:
This is a basket case.
If you have any - SELL
If you don't have any - AVOID

:o)

Bought some @ 57.50p

Appointment of Joint Financial Adviser and Joint Corporate Broker

Carillion plc ("Carillion") announces that HSBC Bank plc ("HSBC") has been appointed Joint Financial Adviser and Joint Corporate Broker, with immediate effect.

StockMarketWire.com
CEK - joint venture partnership consisting of Carillion, Eiffage and Kier - has been successful in its bid for two HS2 contracts worth £1.4bn.

The JV has been awarded lot C2 - North Portal Chiltern Tunnels to Brackley £724m - and lot C3 - Brackley to Long Itchington Wood Green Tunnel South Portal £616m

It said these lots would be awarded in two stages.

It said stage one would be a 16-month period to develop a design, a programme and a target cost for the construction of the works and stage two was the construction of the main works and this was expected to take between four and five years to complete.

Carillion interim chief executive Keith Cochrane said: "We are delighted that our Joint Venture, CEK, has been selected to deliver two of the three Central contracts for HS2 Phase 1, the London to Birmingham section of the route, reflecting the strength of our Joint Venture.

"We look forward to working in close collaboration with HS2 to deliver this iconic project.

"Carillion is a leading supplier of infrastructure services with top two positions in both the UK rail and highways sectors, where we work in partnership with key customers, including Network Rail, Highways England and HS2.

"We expect the UK Government's objective of generating economic growth through investing in infrastructure to continue creating opportunities for us to grow our business in these core markets.

62.75p +6.60 11.71%

this is an important move for the confidence of the city.......

Carillion appoints EY to support its strategic review

Carillion, the integrated support services group, announces that it has appointed the professional services firm, EY, with immediate effect to support its strategic review with a particular focus upon cost reduction and cash collection.

As announced on 10 July, the Carillion Board is undertaking a comprehensive review of the Group's business and capital structure, alongside taking immediate action to generate significant cashflow in the short term and achieve a reduction in average net borrowing.

The Board has identified a number of actions to reduce average net borrowing including further cost efficiencies, an increased focus on managing working capital and on recoveries and cash collection.

Keith Cochrane, Interim Chief Executive, said: "We are moving forward quickly with the actions outlined last week. Alongside our own efforts, EY will provide support across the business and bring an external perspective to our cost reduction and cash collection challenge. My priorities are to reduce the Group's net debt and create a balance sheet that will support Carillion going forward.

"We need to simplify the business and demonstrate that value can again be created for shareholders by focusing the Group on its core markets, including infrastructure and property services, in which it has good strengths and leading positions"

Carillion JV awarded two further HESTIA contracts

Carillion Joint Venture awarded two further HESTIA contracts by Defence Infrastructure Organisation (DIO), with a core value of £158m excluding retail sales



Carillion, the integrated support services company, is pleased to announce that its Joint Venture has been awarded the HESTIA North, and Scotland and Northern Ireland Soft Facilities Management Multi Activity Contracts. These latest contracts follow on from the award of the South East and London contract by DIO to the Joint Venture earlier this year. The two new contracts have a core revenue value of £158 million over the initial contract period of five years, but with the opportunity to double that figure in the same period through catering and retail sales.

The Carillion Joint Venture will deliver soft facilities management services, including catering, retail and leisure, together with hotel and mess services. The North contract will employ around 1500 people, covering 130 military establishments and will go live at the beginning of January 2018. The Scotland and Northern Ireland Region contract will go live at the beginning of November 2017 and covers a further 103 military establishments and will employ around 1030 people.

Carillion Interim Chief Executive, Keith Cochrane, said: "We are delighted to be awarded these contracts. The DIO is a key support services customer with whom we have built a long-term successful partnership. We are committed to building on this relationship and on our position as a leading supplier to the DIO by using our core skills and capabilities to deliver high-quality services.

"These contracts play a critical role in supporting our armed forces and they have a number of unique aspects that require a specific, regional focus. They will enable us to create further training and employment opportunities for ex-services personnel in support of our commitment to the Armed Forces Corporate Covenant".

74.15p +7.25 (+10.84%)

Another day another bounce, as good RNS are reported, Some Institutions were loading at those low prices..............

17-Jul-17 15:52 RNS Holding(s) in Company.........from 6.50% to 7.09%

Citigroup Global Markets Limited
Resulting situation on the date on which threshold was crossed or reached
7.0979% - 430,254,629 shares

Position of previous notification 6.5078%

Yeah the same silly buggers who bought 13 times more at probably quadruple the price.

Yeah, yeah, yeah

note:
The same old sheep standing on 3 legs now

You the fund manager ?

Retracement Levels - high/low - 75.68 / 49.90p

50.0%
62.79

61.8%
59.75p

78.2%
55.41p

I wonder if this is a re-run of Marconi...? However, in that instance the ( Memory serves?), they had made bad judgement for several years and their Market was in collapse ( Telco-Dot-Com ), so the World was getting out, whatever companies said.
Here CLLN is different...sure the same bad processes by Management.... but their Market is buoyant, with new Contracts and the ability of UK-Government to spend money like they have a "Money-Tree" for infrastructure.
Of course, I don't know if CLLN is close to UK-Gov but one might suspect that most large employers can exert pressure . . . so, what CLLN needs is at least one contract where they can make money . . . and I suspect the current bunch of Execs need to be ditched; bring in "Builders that know".
The Institutions could do worse than asking Peachey ( from Berkley Homes) - in an hour ...he'd tell 'em how it is...
I'll admit I hold from marginally higher and fear Debt-for-Equity . . . Now seeing further falls....
I'm reading the latest Annual Report and everything appears perfectly OK..... Most ODD that.

I imagine the vultures are circling.

I haven't seen Freda on here since he was bragging about the divi and potential of this company , bet he says he sold beforehand .

I don't think Fred would do that VIC, whilst his views are different I believe him to be honest.

Vicky darling,

Are you attempting to crow again.

In spite of Clln, it hasn't been a bad week.

Thought that might weed him out of his silence , George .

Canaccord comment today:
"Pursuant to Carillion's parlous H1 trading update (£845m contract receivables provision, elevated net debt, dividend suspension, CEO exit, strategic review), we downgrade estimates and reiterate our SELL stance with a revised target price of 20p (from 200p). Notwithstanding a flurry of recent contract awards, which speak loudly to the pedigree and various world-class capabilities and technical competencies which exist within the company, we continue to see material downside in the equity value of the group.
The company is facing a major liquidity crisis which will, in our view, require significant capital restructuring. Successful delivery of the current balance sheet repair initiatives (including augmented recovery of receivables, exit from certain construction markets) may itself be compromised by the perceived funding gap.
An equity based funding solution is likely to prove challenging:
Interests of other stakeholders including banks and pension trustees (net deficit £587m, double the market cap) may impose conditionality.
Lack of permanent CEO turnaround specialist (may not be in situ soon).
Scope for further provisions/write-downs pursuant to EY strategic review (i.e. forecasts not secure and thus scale of funding requirement unclear). A formal update is not scheduled before the interims in (now "late") September.
Given the 80% price destruction over the last two years, current holders may not wish to exercise their pre-emption in which instance the strike price for new shares will be dictated by sub-underwriters and potentially very dilutive. Using a base assumption of a £500m rights issue (2.4x EBITDA, reducing net debt/EBITDA to 1.1x) we model for a spectrum of scenarios from a 7 for 6 at 100p down to a 12 for 1 at 10p, which constitute potential dilution to existing shareholders of between 55% and 93%.
This remains a very binary situation with the equity value highly geared to the quantum of net debt. Should the company over-deliver on the receivables recovery plan within the existing provision alongside its other balance sheet repair measures (by say £100m versus our forecast) then the shares could move back above 100p quite quickly (albeit we are unlikely to gain clarity on progress made before September). Any deterioration versus our admittedly cautious forecast leaves the existing equity value in peril. We expect the next few weeks will see continued price volatility and the net performance outcome could be extreme. Our SELL recommendation and 20p target price (equivalent to a further £200m balance sheet deterioration OR 6 for 1 rights to raise £500m) reflects the balance of risks, as we see them, for equity holders."

I think Canaccord is wrong this time. Carillion is oversold now and with winning 2 out of 3 HS2 contracts and also HESTIA contracts, this is moving up now.