Last checked at 8 Oct 2009 07:00
8 OCTOBER 2009
CARILLION PLC
2009 THIRD QUARTER INTERIM MANAGEMENT STATEMENT
"ON TRACK TO DELIVER STRONG EARNINGS GROWTH"
Leading UK support services company, Carillion plc, announces its interim management statement for the third quarter of 2009.
Business performance
Overall, Carillion continues to perform well and remains on track to deliver materially enhanced earnings in 2009, despite challenging market conditions.
The Group's balance sheet remains robust and the Group continues to expect to deliver cash-backed profit and to reduce net borrowing at the year end to below the half-year level of £146 million.
Support services continues to be the Group's largest business segment and a key driver of earnings growth. We continue to benefit from a strong public sector business together with the Alfred McAlpine integration cost savings. These positive factors are expected to more than offset the effects of increased competition and the pressures from certain existing customers in the private sector to reduce absolute costs by reducing the scope of services already outsourced. Consequently, in the full year we expect to deliver increased operating profit in this segment. We also continue to have our largest ever pipeline of opportunities and the intake of new orders in the second half remains encouraging. Since the half year, a Carillion-led Joint Venture has signed a letter of intent with Openreach, BT's local access network business, for a future contract to deliver complex support and network installation services, asset management, maintenance and other associated works, which is expected to be worth in the region of £1.0 billion.
Investments in Public Private Partnership (PPP) projects continue to generate significant value for the Group, which has leading positions in its chosen market sectors in both the UK and Canada. Since the half year, we have achieved financial close on the Durham Building Schools for the Future (BSF) programme in which Carillion will invest £4.6 million of equity. The Group currently has a portfolio of 22 financially closed projects in which it will invest a total of £152.8 million of equity. We have also continued to make good progress on the £1.6 billion Southmead Hospital project in Bristol, for which a Carillion Joint Venture has been appointed as the proposed preferred bidder, and on the Rochdale BSF programme for which a Carillion Joint Venture is the preferred bidder. Carillion expects to invest combined equity in these two projects of some £42 million. In addition, Carillion is shortlisted for eight projects in which the combined potential equity investment is in the region of £74 million.
In the Middle East we continue to benefit from our strategy of geographic diversification within the region, which has increased the resilience of our business and kept it on track to increase its share of revenue from the region to around £600 million in 2009, compared with £464 million in 2008. As reported at the half year, revenue growth in Abu Dhabi has been particularly strong and we are also making good progress in Oman, which together will more than offset the expected reduction in revenue from Dubai. Operating margins are expected to be in excess of 6 per cent in 2009 and we have maintained a strategic focus on high quality work for reliable long-term customers for whom we have continued to win substantial new contracts. Since the half year, we have secured a £275 million contract for the Majlis, a new Parliament building in Oman. We also continue to have a large pipeline of high-quality contract opportunities in Abu Dhabi, together with good prospects in Oman. In Dubai, activity levels have stabilised and we remain on course to extend operations into Qatar in 2010.
In Construction services (excluding the Middle East), full-year results are expected to be in line with our strategy of applying strict contract selectivity criteria, focused on high quality work for long-term customers, with the aim of improving operating profit. We expect overall revenue to increase in 2009, with a small reduction in UK revenue being offset by growth in Canada, primarily due to the acquisition of the Vanbots Group in October 2008, which strengthened our construction capability and enhanced our leading position in the PPP market. Since the half year, we have continued to win, or secure preferred bidder positions for substantial high quality orders in line with our strategy. These included BSF construction work worth nearly £700 million, a £116 million contract for HM Prison Low Moss in Scotland and three substantial private sector building contracts worth over £120 million.
Outlook
Although we expect our markets to remain challenging, the Group has a resilient business mix, a strong order book and substantial pipelines of probable new orders and contract opportunities. Consequently, the Group expects to achieve its objective of delivering materially enhanced earnings in 2009.
Presentation for analysts and investors
Carillion will be hosting a presentation for analysts and investors on this Interim Management Statement and on the Group's support services activities at 9:30 am today. The presentation will not include any materially new information and will be available on the Carillion plc website at www.carillionplc.com/investors/investors_presentations.asp
Analysts and investors can obtain further details of the presentation by calling + 44 (0) 1902 316426.
A telephone dial in facility (+44 (0) 207 190 1595) will be available from 9:30am until 10:00 am for the IMS section of the presentation for analysts and investors who are unable to attend.
For further information contact
Richard Adam, Group Finance Director + 44 (0) 1902 422431
John Denning, Director Group Corporate Affairs + 44 (0) 1902 316426
8 October 2009
Notes to Editors
Carillion is the UK's leading support services company with a substantial portfolio of Public Private Partnership projects and extensive construction capabilities. The Group has annual revenue of around £5 billion, employs some 50,000 people and operates across the UK, in the Middle East, Canada and the Caribbean. In the UK, Carillion's principal market sectors are Defence, Education, Health, Facilities Management & Services, Rail, Roads, Building, Civil Engineering and Utilities Services.
In the Middle East, Carillion's principal market sectors are Construction and Facilities Management. In Canada and the Caribbean, the Group's main sectors are Health, Roads Maintenance and Construction.
Carillion's portfolio of equity investments in Public Private Partnership projects includes projects in the UK and Canada, particularly in the Defence, Education, Health and Transport sectors.
This and other Carillion news releases can be found at www.carillionplc.com
Photographs:
High resolution photographs are available free of charge to the media at www.newscast.co.uk telephone
+ 44 (0) 207 608 1000.
Cautionary statement
This announcement may contain indications of likely future developments and other forward-looking statements that are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries, sectors and business segments in which the Group operates. These and other factors could adversely affect the Group's results, strategy and prospects. Forward-looking statements involve risks, uncertainties and assumptions. They relate to events and/or depend on circumstances in the future which could cause actual results and outcomes to differ materially from those currently anticipated. No obligation is assumed to update any forward-looking statements, whether as a result of new information, future events or otherwise.