TIDMCLLN
RNS Number : 3015Z
Carillion PLC
10 December 2014
10 December 2014
2014 PRE-CLOSE TRADING UPDATE
EARNINGS IN LINE WITH EXPECTATIONS
-- Strong work winning performance - GBP4.6bn of new work won in the year to date
-- Expect the Group's order book plus probable orders at the year end to be over GBP18.5bn
-- Pipeline of contract opportunities of over GBP39bn
-- Contract selectivity continues to underpin margin performance
-- Net debt before acquisitions reducing as expected
-- 85 per cent revenue visibility for 2015
Group performance
Total revenue is expected to be similar to that in 2013, with
growth in Middle East construction services and UK construction
services offset by a reduction in revenue from Public Private
Partnership projects due to our policy of recycling equity
investments in mature projects. We expect marginal revenue growth
in support services after absorbing foreign exchange headwinds.
Although our markets remain challenging, we continue to see signs
of improvement, which indicate that the medium-term outlook remains
positive.
By remaining very selective in terms of the projects for which
we bid, we expect to maintain the Group's operating margin at a
broadly similar level to that in 2013, despite the fact that most
of the work we are delivering in 2014 was won during the economic
downturn. Our selective approach continues to be supported by
rigorous risk management processes, ongoing cost reduction and
productivity programmes, shared central services and a centralised
operating platform, which creates significant efficiencies and
provides visibility for management of the Group's performance.
We continue to expect profit in 2014 to be cash-backed with
underlying net debt (excluding the effect of business acquisitions)
reducing in line with expectations. The impact of business
acquisitions on net debt in 2014 amounts to some GBP37 million,
which comprises GBP8.6 million for the final instalment of the
consideration for the acquisition of a 49 per cent interest in the
Bouchier Group, which we acquired in December 2012, and GBP28
million in respect of the initial consideration for the acquisition
of a 60 per cent interest in the Rokstad Power Corporation, as
announced on 1 December 2014.
The Group's new order intake has remained strong and in the year
to date we have won contracts worth GBP4.6 billion and we expect
the Group to have an order book plus probable orders at the year
end worth over GBP18.5 billion (31 December 2013: GBP18.0 billion).
Consequently, the Group has strong revenue visibility for 2015 of
85 per cent, based on expected revenue and on secure orders plus
probable orders, which excludes variable work, substantial
potential revenue from framework contracts and potential re-bids.
Furthermore, at the year end we expect the value of the Group's
pipeline of contract opportunities to increase to over GBP39
billion (31 December 2013: GBP37.5 billion).
Business segments
Support services
We expect revenue in support services to be marginally ahead of
that in 2013, which represents underlying growth of around four per
cent, having more than replaced the GBP70 million or so of revenue
that was lost in the first quarter of 2013 due to a number of
energy services contracts coming to an end as a result of changes
in Government policy and legislation. The contribution to revenue
from Canada has also been affected by an adverse movement in the
exchange rate. We expect the operating margin in this segment to
increase, reflecting the benefit of our selective approach to the
contracts for which we bid and cost savings achieved from
restructuring in 2013. Work winning in support services has been
particularly strong in 2014, with major successes in a number of
sectors, notably defence, justice, transport and financial
services. We will continue to focus on the mobilisation of these
contracts in the balance of this year and in 2015, when we expect
these contract wins to contribute to further revenue growth.
Public Private Partnership projects
Our portfolio of investments in financially closed Public
Private Partnership projects continues to perform in line with
expectations. During the year, Carillion Joint Ventures were
appointed as the preferred bidders for two new projects - the
Aberdeen Western Peripheral Route and the Midlands Priority Schools
Programme - in which Carillion expects to invest up to a total of
GBP30 million of equity. The market for buying equity in these
projects remains strong and we expect equity sales to generate cash
proceeds of approximately GBP37 million at an average discount rate
of approximately seven per cent.
Middle East construction services
In Middle East construction services, we continue to expect
strong revenue growth, which reflects our good work winning
performance in the region over the past 18 months. We also expect
the operating margin to improve in this segment in line with
previous guidance. Although trading conditions remain challenging,
the overall outlook in the Middle East continues to improve and
this is reflected in our growing pipeline of contract
opportunities. We are also beginning to see a better balance
between supply and demand, which offers the prospect of further
margin improvement over the medium term.
Construction services (excluding the Middle East)
In construction services (excluding the Middle East), we expect
revenue to be similar to that achieved in 2013, with growth in UK
construction services offset by a reduction in revenue in Canada,
which is partly due to the movement in the exchange rate. We expect
the operating margin in this segment to continue to trend back
towards a normalised level, in line with our long-standing
guidance, as the temporary benefits to margins from the rescaling
of our UK construction business decline. Looking forward, we expect
a steady recovery in contract opportunities, consistent with our
selective approach of focusing on larger projects and long-term
customers. By remaining selective in terms of the contracts for
which we bid, we continue to expect our normalised margin in this
segment to be above the industry average.
Outlook
Although our markets remain challenging, we continue to have a
strong, high quality order book and a substantial pipeline of
contract opportunities, consistent with the selective approach we
take to choosing the contracts for which we bid. We expect the
steady improvement in our markets that began in 2014 to continue in
2015, subject to a sustained macro-economic recovery. Overall, the
Group therefore continues to be well positioned to make further
progress over the medium term.
Conference call
Carillion Group Chief Executive, Richard Howson and Group
Finance Director, Richard Adam, will host a conference call on this
trading update for analysts and investors at 08.00 today. The
telephone number to join this call is +44 1296 480 100 - passcode:
864618. A replay facility is also available following the call on
+44 207 136 9233 - passcode: 49044207.
Carillion will announce its 2014 preliminary results on 4 March
2015.
Notes to Editors
Carillion is a leading integrated support services company with
a substantial portfolio of Public Private Partnership projects and
extensive construction capabilities. The Group had annual revenue
in 2013 of some GBP4.1 billion, employs around 40,000 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
investing activities in PPP projects for Government buildings and
infrastructure, mainly in the Defence, Health, Education, Transport
and Secure accommodation sectors.
Middle East construction services - this includes building and
civil engineering activities in the Middle East.
Construction services (excluding the Middle East) - this
includes building, civil engineering and developments activities in
the UK and construction activities in Canada.
This and other Carillion news releases can be found at
www.carillionplc.com.
For further information contact
Richard Adam, Group Finance Director tel: +44 (0) 1902
316360
John Denning, Group Corporate Affairs Director tel: +44 (0) 1902
316426
Finsbury
James Murgatroyd or Gordon Simpson tel: +44 (0) 2072513801
This information is provided by RNS
The company news service from the London Stock Exchange
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