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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Liberum Capital today reaffirms its sell investment rating on Carillion PLC (LON:CLLN) and set its price target at 5p.

my comment on #329 was clearly not so dumb

It's done for imho. They need to get the debt for equity swap done as every day this drags on the supply chain will be trying to claw in money owed to them and minimise any credit given.

and still possible to short, though that's always a bit scary .... perhaps to do with a guaranteed stop

Apparently not cynic. I've been watching it all day and it's beginning to look really weak into the last hour and there's a 25k sell bot running at 26.25 plus there were some 250k sells went through a little higher about half an hour ago, plus someone has loaded a 500k buy at 25.0 which I reckon is fake.

Tried to short it with intention of closing today regardless of success or failure and my broker has disabled all shorting on it even at 100% margin.

edit: and the sell bot has already moved down a quarter of a point to 26. It's getting multiple fills. Reckon it's shifted a million already.

it looks that i can short with IG CFD's with 25% margin

looks that i missed the boat anyway ..... dithered with the thought this morning when sp wasrecovering to about 28, then went to the gym and when i came back, our whole IT system was down for about 2 hours .... never mind

===============

just noted that i managed to sell 750 at 24.75 ...... that'll never buy me a yacht :-)
filled balance at about 23.25 ..... it's not an aggressive position, but it may rake in a few shekels

looks to have been an ok move, and position already in the money
sod's law says that on monday morning it'll open at 30 ...... no i don't believe that either :-)

StockMarketWire.com
Carillion has been awarded two lots on the Education & Skills Funding Agency's school building framework.

Carillion said the new framework was for a period of four years and replaced the existing ESFA Contractors Framework, on which it was also a provider.

Carillion said it had been appointed on both lots it bid, covering the north and south of England, for high value projects.

It said these were anticipated to be worth c£2.64bn in total over the period to 2021, with the group one of nine contractors selected on these lots.

so it's been allowed to bid for a portion which it may or my not get .... and how much profit might accrue?

glug glug glug ..... what a shame :-)

Unfortunate for most holders, but that yield (10% ish) back along was a warning sign.

it's been on the cards for several months so holders should not be surprised

The government has come under fire after Carillion continued to win new contracts, despite Whitehall rules designed to limit taxpayer exposure to "financially distressed" companies. Cabinet Office policy states that departments and agencies should reduce "where possible" the additional work given to "strategic suppliers" designated "high-risk" under existing contracts to "contain the risk to the taxpayer".

Stan, thanks for the background info - AFIK the work that CLLN workers provide is OK... I don't recognise "several botched jobs" - so there is "probably" no reason to exclude CLLN from any BID-process.... Esp. if they are traditionally a low-bid provider. Where Management has failed is to know how low they can go, while still making the Client happy ( as well as shareholders).
I'm really not sure about this one....but suspect my 68p purchases a while-back was foolhardy . . . it's easy to look at recent highs and believe they are the "right-price" - clearly they weren't and maybe the yield was false, if the Co. as racking up debts.
Just how low can this go depends on the timescale and profits within New projects working through.
Just because they are included in a Construction scheme, may not mean they'll get the business . . . rather they are allowed to bid to lower the "Bid-average" -yet someone will win the business and if CLLN can do a good job.... why not?

because CLLN do not seem to recognise the difference between profit and turnover
also see #311

I don't know if it's still the case but in the past co's would win the business and then subcontract some of the work to other firms for less than they received for the business in the first place, the subcontractors would then do the same, but ultimate responsibility remained with the original 'winners' of the business.

Can't argue with that...it's pretty common in the construction business. If you have a house extension, the Builder may not have their own plant, so they contract-out the foundations and steelwork. Some smaller works may mean the local builder has to employ a plasterer for a day and electrician also.... I'm just not sure how this affects CLLN and their sp. The big issue is whether they can become profitable before the creditors agree to lose their money, by closing the show. Since [CLLN] hasn't been involved (DYOR) in any scandal like their building falling down, one might suspect the issue is Management having their eyes on Bonus, rather than LT profits.
Almost anyone can get a job if it's "under-priced" - since the Client is getting the work for free.... Some contracts are won on the assumption there will be "Changes" - the contract can be "Upped" - as the specification is altered. Rather like buying the base-model of a car...Dealer weeps....Buy his accessories like mats and wipers (Eh?) and he laughs as these are Marked-up £ots . . . seems no Buyer knows they can go to Halfords.
Ho-Hum.
EDIT-23Nov2017)- Sold out...Can't stand more!
EDIT-13Dec2017)- sp=16p, up today = selling HealthCare division for £40m.

still slowly sinking into the quicksand :-)