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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Preliminary Results

· Robust financial performance
- Revenue reduced as previously guided, primarily due to the planned rescaling of UK construction
- Underlying profit from operations(2) increased, reflecting an improvement in total operating margin
- Reported profit before taxation and basic earnings per share both increased substantially, due to minimal non-recurring and non-operating items
- Underlying profit before taxation(2) and underlying earnings per share(2) reduced slightly, due to a higher net financial expense, including an increase in the non-cash interest charge relating to pensions

· Strong balance sheet
- Net borrowing of £155.8 million (2011: £50.7 million) reflects the expected outflow of working capital, primarily due to the rescaling of UK construction, and the acquisition of the Bouchier Group in Canada
- Over £1 billion of committed borrowing facilities and private placement funding

· Strong order book and record pipeline of contract opportunities
- £5.2 billion of new and probable orders in 2012
- Total order book plus probable orders of £18.1 billion (2011: £19.1 billion), with the reduction on 2011 due primarily to the sale of equity investments in Public Private Partnership (PPP) projects and the rescaling of UK construction
- 75% revenue visibility(3) for 2013 (2011: 77% for 2012)
- Pipeline of contract opportunities worth some £35.2 billion (2011: £33.1 billion)

· Proposed full year dividend increased by 2% to 17.25p (2011: 16.9p)

(1)
Restated following the change in presentation of profits from the disposal of Public Private Partnership equity investments from non-operating items to operating items (amounting to £13.2 million in 2012 and £11.5 million in 2011).
(2)
The underlying results stated above are based on the definitions included in the key financial figures.
(3)
Based on expected revenue and secure and probable orders, which exclude variable work and re-bids.

Carillion (LSE: CLLN.L - news) : Canaccord Genuity downgrades to hold with a target price of 350p

Investec Hold 306.30 309.20 350.00 305.00 Downgrades

Broker hold at 350 or 305, today's fall to 275 makes these very tempting.

Trading statement due @lunchtime today - I had a dabble 1st thing after the BBY read across induced fall, now not sure whether to hold or not!

AGM Statement

AGM AND INTERIM MANAGEMENT STATEMENT

EXPECTATIONS FOR 2013 UNCHANGED
OVER £1.6 BILLION OF NEW ORDERS AND PROBABLE ORDERS IN THE YEAR TO DATE

At Carillion plc's Annual General Meeting today, Chairman, Philip Rogerson, made the following comments on the Group's performance in 2013.

"The Group's expectations for 2013 that were announced with our 2012 results remain unchanged, despite market conditions remaining challenging.

The Group's healthy work-winning performance in 2012 has continued in 2013 with new orders and probable orders in the year to date of over £1.6 billion. In addition, Carillion has been selected by National Grid as one of six framework contractors to deliver its £1.5 billion sub-station construction programme over the next five years. This follows Carillion's appointment as one of four framework contractors that will support the National Grid's £3.2 billion programme to renew and refurbish high voltage overhead line cables over the next eight years.

As expected, revenue in the first half of 2013 is likely to be lower than in the corresponding period in 2012, primarily because the rescaling of our UK construction activities resulted in the Group having a lower revenue run-rate. However, having achieved this rescaling over the past two years by being selective in terms of the contracts for which we bid, we now have a higher quality UK construction business, which is targeting revenue growth consistent with our selective approach of focusing on national construction projects and long-term customers, in order to achieve our target margins. In 2013, the contribution to Group profit from support services, Middle East construction services and construction services (excluding the Middle East) is expected to be second-half weighted. However, profit from Public Private Partnership projects is expected to be weighted towards the first half of the year, due to the timing of equity sales.

The Group's balance sheet remains strong and we continue to target cash-backed profit in 2013, after adjusting for
the final phase of the working capital outflow arising from rescaling UK construction, in line with previous guidance.

Therefore, with a strong order book and a substantial pipeline of contract opportunities, our expectations for 2013 and medium-term targets for growth, remain unchanged."

Royal Liverpool Hospital

Carillion selected as preferred bidder for £335 million Royal Liverpool Hospital Public Private Partnership project

Carillion has been selected by the Royal Liverpool and Broadgreen University Hospitals Trust to deliver the new Royal Liverpool University Hospital Public Private Partnership (PPP) project, the capital cost of which will be some £335 million.

In addition to carrying out the construction work, Carillion will deliver support services for the new hospital from which it expects to generate approximately £80 million of revenue over the life of the 30-year concession contract. Carillion also expects to invest some £24 million of equity in the project.

Work on site is due to start shortly after the project reaches financial close, which is expected in January 2014, with completion scheduled for 2017. The new hospital will be built next to the existing hospital, which will be demolished once services have been transferred. The new hospital will be the largest in the country with 646 beds, including a 40-bed Critical Care Unit, 18 operating theatres and one of the largest emergency departments in the North West.

Ex-divi 15th May 2013 (11.85p)

Carillion selected as the preferred bidder for £400 million Phase 1 of Battersea Power Station

Carillion has been selected to deliver the £400 million first phase of redevelopment at Battersea Power Station.

The project is a mixed-use development comprising 866 apartments, including 11 penthouses, together with retail facilities, theatre space and business studios, in two blocks built on a podium with two levels of basement parking. The redevelopment project will be located within the area bounded by Battersea Power Station to the East, the main railway serving Victoria Station to the West and the river Thames to the North. The main block will vary in height from 8 storeys at its southern end, rising to 18 storeys and then reducing to 12 storeys at its northern end. The second block will be 8 storeys high. Extensive hard and soft landscaping is included as part of the Phase 1 works.

This project forms part of the overall strategy to create a high-density, mixed-use development around the restored former Grade II* Power Station. Main construction works for Phase 1 will start in the summer of 2013 and are scheduled for completion in 2016. The Battersea Power Station development site is owned by a Malaysian consortium of S P Setia, Sime Darby Property and Employees' Provident Fund. The development is being managed by British firm Battersea Power Station Development Company.

Carillion Chief Executive, Richard Howson, said: "We are delighted to have been selected as the preferred bidder for this prestigious project, which I believe reflects Carillion's reputation for delivering high-quality, value for money projects. We look forward to working in partnership with the Battersea Power Station Development Company to deliver this iconic project that will make a major contribution to the transformation of this historic site.

"This takes the total value of new orders and probable orders for Carillion in 2013 to some £2.6 billion and demonstrates the benefits of our strategy in construction services of focusing on national projects."

Support @240ish.

Carillion Rail in partnership with SPL Powerlines

Infrastructure and support services provider Carillion has today announced a Cooperation Agreement (CA) with Austrian-based SPL Powerlines, one of Europe’s leading specialists in electrically powered transport systems.

6th June 2013
The partnership strengthens Carillion's existing capabilities in the rail sector, particularly around electrification and overhead line (OHL) work.

With one of the lowest percentages of electrified rail lines in Europe there is a need to develop the UK electrification infrastructure. Network Rail is investing £2 billion through its Control Period 5 expenditure between April 2014 and April 2019 on a major rail electrification expansion to address this - and Carillion is among a group of tier 1 suppliers on a framework panel bidding to help deliver the programme.

StockMarketWire.com
Carillion Alawi has been awarded a £130m contract by the Oman Tourism & Development Company to construct exhibition halls, an energy centre and a three-storey car park.

This contract forms part of the Oman Convention and Exhibition Centre Project, which has an estimated construction value in the region of £1bn. The 18-month contract, which is scheduled to begin in July 2013, involves the construction of 13 buildings, including exhibition halls with a gross floor area of 45,000sq m, an energy centre, ancillary buildings for security, taxi services, maintenance, waste management facilities and electrical substations and car parks for 4,200 vehicles.

Carillion Alawi will also deliver mechanical, electrical and plumbing installation, all interior finishes and landscaping. Further contracts for subsequent packages on the Oman Convention and Exhibition Centre Precinct, including auditorium and banquet halls, a 5-star hotel, a 4-star hotel, the Business District, and hotel apartments are expected to come to market between now and the end of 2014.

StockMarketWire.com
Carillion's joint venture business in the United Arab Emirates, Al Futtaim Carillion, has been awarded a £130m contract by Mubadala to design and build a luxury Hotel on Al Maryah Island in Abu Dhabi's new central business district.

Construction of this five-star hotel, which will be 144 metres high and have a floor area of 100,000 square metres, will start in June 2013 and is scheduled for completion by the end of 2015.

Trading Statement

Highlights

· First-half performance in line with expectations and full-year targets unchanged
· As expected, the planned re-scaling of UK construction has led to lower first-half revenue
· First-half underlying operating profit(1) expected to increase
· New order intake strong with first-half orders and probable orders of £2.9bn
· Net debt at the half year is expected to be around £270m

StockMarketWire.com
Carillion has been awarded two contracts by Network Rail - Crossrail West Inner Track Improvements and Crossrail Old Oak Common and Paddington Approaches and Intercity Express Programme - which together are worth £122m.

These contracts will enable the new Crossrail service to be integrated into Network Rail's existing infrastructure from Stockley Junction in the West through to Old Oak Common on the approaches to Paddington.

The contracts involve a wide range of services including design, track work, switches and crossings, overhead line and cable management, together with minor civil engineering works.

Carillion chief executive Richard Howson said: "As one of Network Rail's largest suppliers, we are delighted to have been selected for these important contracts. We look forward to continuing our strong relationship with Network Rail through working together to delivering the upgrades required to enable Crossrail to connect to the existing network between Stockley Junction and Old Oak Common."

The contracts, which are being procured and managed by Network Rail with some funding coming from Crossrail, are due from completion by summer 2017.

UBS Sell 269.60p 230.00p 210.00p Reiteration

Long article in the IC today. They are confident of further growth, increased divi and growing order book. They recommend BUY.
I will post the column when I can.

I guess UBS has more followers than IC judging by the price reaction. What a caning.

IC article from last week:
"Shares in Carillion have fallen by more than 20% since the start of this year, mainly because of the weak UK construction sector. But this is puzzling because UK construction accounts for less than 10% of Carillion's impressive order book, which reached £18bn at the end of december. Moreover, there are signs that the UK picture is starting to improve.
A rescaling of the UK business meant that the group was more selective about which contracts it took on. So while turnover from UK operations last year fell by 31% operating profit actually rose by 25%. Since then, Carillion has been selected to deliver the first £400m redevelopment phase of the Battersea power station site and, more recently, the group has been chosen as one of the preferred bidders to provide construction services for Manchester airport, worth a potential £500m.
A further £130m of work has also been secured in the group's Middle East construction division, in Oman. Probable new orders in the Middle East so far this year have reached more than £340m. That's more than the total for the whole of the previous year."

Berenberg Bank comment:
"Even after a £115m working capital outflow this year, driven by UK construction rescaling, we expect Carillion to maintain a strong balance sheet, with gearing of around 19% and a net debt to cash profits multiple of 0.7 times, We also expect to see significant expansion in the Middle East operation and if Carillion can achieve it's 1/3 win to bid ration target, there could be even further 15% upside to our current 2014 estimates. Expect 2013 pre-tax profit of £211m & EPS of 41.25p, with a dividend of 18.5p, rising to EPS of 44.88p in 2014. Based on 2014's estimate, the shares trade at a discount to construction peers of around 40%. Our price target is 370p. BUY."

Panmure Gordon comment:
"The transformation from a pure construction company into a multinational construction and support services group certainly isn't reflected in Carillion's valuation. Metrics such as PE ratio and enterprise value both stand at discounts to those of it's most immediate peer, Interserve. As well as a growing Middle East division, the group is also well placed in Canada, where there is a healthy private finance initiative sector. We believe our forecasts are on the conservative side at £199m of pre-tax profit for 2013, giving EPS of 40p. The prospective dividend yield is 7% and our price target is 400p. BUY."