TIDMCLLN
RNS Number : 9251J
Carillion PLC
07 July 2011
7 JULY 2011
CARILLION PLC TRADING UPDATE
STRONG FIRST- HALF PERFORMANCE
Carillion, one of the UK's leading support services companies,
is providing this update on trading in the first six months of 2011
ahead of announcing its interim results on 24 August 2011.
Group highlights
-- Group continues to perform well - underlying(1) earnings
growing strongly
-- Group operating margin continues to increase - expect
improved margins in support services and construction services
(excluding the Middle East)
-- Strong cash flow and balance sheet - net debt expected to be
below GBP125 million at 30 June 2011, following the GBP298.4
million acquisition of Carillion Energy Services (formerly Eaga
plc) in April 2011 (December 2010: GBP120.2 million of net
cash)
-- Order book at the half year expected to remain strong, plus
record pipeline of contract opportunities
-- Integration of Carillion Energy Services progressing well -
synergy cost savings now expected to increase from a total of GBP9m
per annum to GBP15m per annum by 2013, at a one-off cost of
GBP20m
-- On track to make further progress in the full-year, despite
challenging market conditions
(1) Before intangible amortisation, restructuring costs and
non-operating items.
Financial reporting segments
Support services
Support services continues to perform well and we expect
operating profit to increase in the first half and to contribute
over half of the Group's total operating profit. This growth is due
to the expected post-acquisition contribution from Carillion Energy
Services, together with an increase in our support services
operating margin. The latter reflects our focus on margins rather
than revenue, which is expected to be broadly similar to that in
the corresponding period in 2010.
The integration and rebranding of Eaga as Carillion Energy
Services has gone well and we remain confident that the acquisition
will immediately enhance Carillion's short and medium term
prospects for growth. The synergy cost savings from the acquisition
are now expected to increase from the previously announced
cumulative total of GBP9 million per annum by 2013 to GBP15 million
per annum, with savings of GBP5 million in 2011, GBP10 million in
2012 and the full GBP15 million per annum by 2013, at a one-off
cost of GBP20 million.
We continue to benefit from a strong order book of high-quality,
long-term contracts that provide good revenue visibility and we
expect to make further progress in the second half of the year. We
remain confident that full-year revenue( ) in this segment will
increase and that our operating margin will remain strong. Our
pipeline of contract opportunities also continues to increase and
includes substantial opportunities arising from public sector
organisations looking to reduce operating costs through outsourcing
more non-core services. Therefore, the positive outlook in support
services remains unchanged and we continue to expect to benefit
from an increase in public sector outsourcing as we move into
2012.
Public Private Partnership (PPP) projects
During the first half, we added one new project to our portfolio
of financially closed projects - the Solar Photo-Voltaic project to
install solar panels on the roofs of over 30,000 houses - on which
Carillion Energy Services achieved financial close in March 2011
and in which we expect to invest some GBP15 million of equity. We
also sold equity investments in two projects - South Ayrshire
Schools and Three Shires Hospitals - generating cash proceeds of
GBP14.8 million, which represents a 7 per cent discount rate.
Consequently, at 30 June 2011, we had a portfolio of 25 financially
closed projects in which we had invested some GBP81 million of
equity. The Directors' valuation of this portfolio, based on
discounting the cash flows from our investments at nine per cent,
is expected to increase from the GBP135 million reported for 31
December 2010, despite selling two investments in the first
half.
At 30 June we also had commitments to invest a further GBP106
million in financially closed projects still in the construction
phase. We were also the preferred bidder for our sixth PPP hospital
in Canada - the Oakville Hospital for Halton Healthcare Services -
in which we expect to invest some GBP28 million of equity and from
which we expect to generate up to GBP390 million of support
services and construction revenues for Carillion. In addition, we
were shortlisted for four projects in which Carillion could
potentially invest up to a further GBP117 million. Beyond this we
have a good pipeline of further opportunities, particularly in
Canada, where Infrastructure Ontario has recently announced a new
10-year PPP programme, which commences with $35 billion of
investment over the next three years. In the UK, we expect to
benefit over the medium term from the role that private finance is
expected to play in delivering the Government's GBP200 billion,
five-year National Infrastructure Plan announced in October 2010.
We therefore expect to continue generating value for the Group by
using our ability to provide fully integrated solutions to win and
successfully deliver projects and by selling our equity investments
in projects after they have moved successfully from construction
into the operational phase, as the secondary market for these
assets remains strong.
Middle East construction services
In the Middle East, our businesses continue to perform well and
we expect to deliver strong first-half revenue growth. The
operating margin in this segment will be lower than in the first
half of 2010, in line with the expectation we announced in 2010
that margins will ease back over a three-year period to around six
per cent, as customers in the Middle East have moved from
negotiating contracts to competitive tendering. However, we expect
first-half operating profit to increase, compared with the
corresponding period in 2010, as the effect of a lower margin will
be more than offset by revenue growth.
Our strong progress in the region continues to be driven by our
brand reputation for quality and delivery. With a good order book
and a growing pipeline of contract opportunities, which reflect the
strength of our markets in Abu Dhabi, Oman and Qatar, we continue
to target growth in full-year revenue and operating profit and
expect to make progress towards the objective we announced in
August 2010 of doubling our revenue in the Middle East over three
to five years.
Construction services (excluding the Middle East)
In construction services (excluding the Middle East), we are
making good progress with the previously announced strategic
re-scaling of our UK construction capability, through progressively
basing our activities around delivering integrated solutions for
long-term customers, notably for PPP projects and for support
services customers. We continue to expect this re-scaling to reduce
UK revenue from GBP1.8 billion in 2009 to around GBP1.2 billion by
the end of 2012. This further tightening of our selective approach
to UK construction is helping us to improve operating margins, as
we avoid bidding for low margin work in a market that is becoming
increasingly competitive as the UK Government progressively
implements substantial cuts in capital spending on construction
over the next four years.
In Canada, our markets remain strong, notably the PPP market,
which we believe will continue to be the key driver of our growth
towards the target we announced in August 2010, of doubling our
revenue in Canada to around GBP1 billion over three to five
years.
Overall, first-half revenue in this segment is expected to
reduce, as planned. Nonetheless, we expect first-half operating
profit to increase, compared with the corresponding period in 2010,
as a result of a continuing improvement in operating margin. In the
full-year, we expect to see an improvement in our operating margin
and to deliver growth in operating profit.
Outlook
Despite the fact that market conditions remain challenging, we
expect the Group to build on its strong first-half performance to
deliver earnings growth in the full year. Our ability to perform
well continues to reflect the strength and resilience of our well
balanced UK support services and international business mix, good
revenue visibility and record pipeline of contract
opportunities.
Our medium term objectives for organic growth remain unchanged,
namely to deliver substantial growth in support services from 2012
onwards and to double our annual revenues in the Middle East and in
Canada over three to five years, in each case to around GBP1
billion.
Presentation and conference call
Carillion will be hosting a presentation for analysts and
investors today on this trading update and on the Group's support
service activities, focusing in particular on Carillion Energy
Services, previously Eaga plc, which Carillion acquired on 21 April
2011. The presentation will not include any material new
information and will be available on the Carillion plc website at
www.carillionplc.com/investors/investors_presentations.asp
A telephone dial in facility will be available for the trading
update section of the presentation, including the ability to ask
questions, on (+44 (0) 208 515 2302) from 09.00. A playback
facility will also be available following the call on Toll Free UK:
0800 358 3474 - Access Code: 4410375# and Toll Free US: 1 800 406
7325 - Access Code: 4410375#
For further information contact
Richard Adam, Group Finance Director tel: +44 (0) 1902
422431
John Denning, Group Corporate Affairs Director tel: +44 (0) 1902
316426
Finsbury
James Murgatroyd or Gordon Simpson tel: +44 (0) 2072513801
________________________________________________________________________
______________________
Notes to Editors
Carillion is a leading support services company with a
substantial portfolio of Public Private Partnership projects and
extensive construction capabilities. The Group had annual revenue
in 2010 of GBP5.1 billion, employs around 50,000 people and
operates across the UK, in the Middle East and Canada.
The Group has four business segments.
Support services - this includes facilities management,
facilities services, energy services, utility services, road
maintenance, rail services and consultancy services.
Public Private Partnership (PPP) projects - this includes our
investing activities in PPP projects in our chosen sectors of
Defence, Health, Education, Transport, Secure and other Government
accommodation.
Middle East construction services - this includes our building
and civil engineering activities in the Middle East.
Construction services (excluding the Middle East) - this
includes our building, civil engineering and developments
activities in the UK and our construction activities in Canada.
On 21 April, Carillion acquired Eaga plc, which has been
rebranded Carillion Energy Services (CES). CES is a leading
independent energy services provider and one of the largest
installers of renewable technologies in the UK. CES employs around
4,500 people and operates across three main markets: carbon
services where CES is a market leader in the provision of carbon
savings to energy generators and utilities to assist them in
meeting their regulatory obligations; Heating and Renewables
Services where CES is one of the largest installers of domestic
heating and renewable technologies; and Managed Services where CES
provides outsourced solutions to a range of customers.
This and other Carillion news releases can be found at
www.carillionplc.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
TSTRFMPTMBJMBFB
Carillion (LSE:CLLN)
Historical Stock Chart
From Jun 2024 to Jul 2024
Carillion (LSE:CLLN)
Historical Stock Chart
From Jul 2023 to Jul 2024