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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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 :-)

StockMarketWire.com
Carillion has appointed Justin Read as a non-executive director.

He has also been appointed as chairman designate of the audit committee and he will assume that post following the preliminary announcement of the group's 2017 results.

He will takeover the role from Andrew Dougal who will retire from the board having served as a non-executive director since October 2011. Read will also serve as a member on the remuneration, nomination, business integrity and health, safety and sustainability committees.

He was was group finance director of Segro from August 2011 to December 2016. Between 2008 and 2011 he was group finance director at Speedy Hire.

Carillion chairman Philip Green said: 'Andrew Dougal has made a substantial contribution to the group and leaves the board with our grateful thanks and best wishes for the future.

'We are very pleased that Justin Read has joined the board.

'He has substantial operational experience across the finance function of significant and international businesses, having served as a group finance director for over eight years and a proven track record of driving business growth.'

StockMarketWire.com
Carillion has concluded a deal for the sale of its UK healthcare facilities management arm after a entering into a business purchase agreement with Serco.

Carillion said that subject to shareholder approval a portfolio of UK healthcare facilities management contracts and associated ancillary contracts and assets which relate to 15 sites would be transferred to Serco on a phased basis.

Carillion said an agreed proportion of the total consideration of approximately £47.7m would be payable in instalments on the transfer of each FM arrangement to Serco, with the aim of receiving the bulk of the proceeds in the second and third quarters of 2018.

Carillion said that after taking account of fees, costs and taxes, the net disposal proceeds were expected to be £41.4m and, when received, would be applied in prepayment and cancellation of an equivalent amount of the group's £140m committed credit facilities announced on 24 Oct.

The disposal forms part of the group's £300 million non-core disposals target announced as part of its strategic review in order to reduce net debt and refocus the Group on its core strengths and markets Interim chief executive Keith Cochrane said: 'I am pleased we have been able to successfully conclude this transaction which will contribute to our efforts to reduce net debt.'

Chief Executive Appointment





On 27 October 2017, Carillion plc ("Carillion") announced the appointment of Andrew Davies as Chief Executive Officer with effect from 2 April 2018. The Board of Carillion is now pleased to announce that it has been agreed that Mr Davies will assume his appointment at an earlier date, and will become Chief Executive Officer with effect from 22 January 2018, at which point he will also join the Board. Keith Cochrane will step down from his role as Interim Chief Executive Officer, and from the Board, on that date but will remain with Carillion in an advisory capacity for a period thereafter in order to ensure an orderly transition.

Andrew Davies was appointed to the role of Chief Executive of Wates Group Ltd in 2014. Prior to that he held a series of senior roles with BAE Systems plc over a 28 year period. He is currently a Non-Executive Director of Chemring Group PLC and brings executive, strategic, turn around and leadership skills to the Company as well as experience of complex public sector contracting in projects, support services and construction.

Philip Green, Chairman of Carillion, said, "We are very grateful to the Board of Wates Group Ltd, and to James Wates CBE, their Chairman, for their facilitation of Andrew's earlier appointment. It is a demonstration of how the sector is willing to cooperate and collaborate to ensure the long term sustainability of UK industry.

"As I said when we announced his appointment, Andrew has the ideal combination of commerciality, operational expertise and relevant sector experience to build on the conclusions of the strategic review and to lead the on-going transformation of the business, and I look forward to his bringing that experience and expertise to Carillion in the New Year."

There are no disclosures in respect of paragraph 9.6.13 (1) to (6) of the FCA's Listing Rules.

StockMarketWire.com
Carillion is under investigation by the Financial Conduct Authority over the timeliness and content of announcements made between 7 Dec 2016 and 10 Jul 2017.

Carillion said it was cooperating fully with the FCA.

LONDON (Reuters) - Senior British ministers held crisis talks this week to discuss the fate of key infrastructure partner Carillion (CLLN.L), as fears grow at the highest levels of government that the debt-laden group could collapse.

A spokesman for Prime Minister Theresa May said the government was monitoring the situation closely and making contingency plans after the construction and services group asked creditors for more time to tackle its debts.

The 200-year-old group is fighting to survive after costly contract delays and a downturn in new business prompted a string of profit warnings and a first-half loss of more than 1 billion pounds.

Carillion builds hospitals, roads and rail lines and provides services to government departments including justice, health and education. It has debt and liabilities including provisions, pensions and accounts payable of as much as 1.5 billion pounds, according to analysts.

i'm not quite brave enough to go short here - did ok from so doing several months back - but surely debt/equity swap must be a racing certainty

why the hell CLLN was even permitted to quote for most of these projects is totally incomprehensible

Sky reports CLLN got 2 quotes from administrators.

I tried to short this afternoon but left it a bit late only to discover my broker still won't allow shorting. Not confident to try and cover CMC's spread so left it now.

Think it's completely in the knackers yard now. Watching it on L2 for entertainment value

Best time to short is when mentor says buy .... sure fire winner.

Newspaper reports suggest CLLN asked for £300m to keep going. Bankers feel they are too optimistic and it's far more.

I sincerely hope the government do not underwrite this loan and let the company go bust.

Regrettably I live near Wolverhampton where CLLN's head office is and although only 450 people are based there, Wolverhampton has one of the highest unemployment rates in the country, so it will hurt locally.

Nationally the work will still have to be done by someone and Kier or Galliford etc. will do it better..

I used to work in mechanical and electrical contracting and 30 years ago. The company I worked for had a unofficial policy of not working for CLLN because it took forever to get paid and you never got paid a fair amount by the time the quantity surveyor had done their stuff. I still keep in touch and today it's the same.

Occasionally someone would take on some work for CLLN before the directors knew about it. I had the pleasure of trying to extract the money. CLLN were simply the most unreasonable off all the builders by some considerable margin. They were so brazen about it. "Yes, we agree the QS has certified it, yes we agree it's 60 days overdue, but we aren't going to pay it yet and we can't tell you when we will pay it".

I also had the discomfort of meeting two members of the senior finance team socially every week. They didn't know who I worked for but I knew who they were. Not nice people. Not nice at all.

The country is better off without this sort of company who have spent the last 30 years screwing everyone they trade with.

It is interesting to note that Wolverhampton was identified as the fifth worst city on the planet. One wonders how much of that is down to it's biggest employer.

https://www.expressandstar.com/news/2017/04/19/not-again-wolverhampton-named-as-one-of-uks-most-miserable-cities/

Shame as it may be but CLLN has become just one of many 'Zombie' co's that QE and low interest rates supported for far too long.

the gov't - aka us the taxpayer - will not bail out CLLN though it may find a way to fudge round that issue

it is typical of all gov'ts that they have evaded the question as to how and why CLLN was allowed to quote at all on major projects when it was already known to be in deep financial trouble
guideline or stronger said this was forbidden

Where did it all go wrong?