Interim Management Statement

RNS Number : 9918T

Carillion PLC

07 October 2010

 

 7 OCTOBER 2010                    

CARILLION PLC

2010 THIRD QUARTER INTERIM MANAGEMENT STATEMENT

"ON TRACK TO DELIVER EARNINGS GROWTH IN LINE WITH EXPECTATIONS"

Carillion plc, one of the UK's leading support services companies, announces its interim management statement for the third quarter of 2010.    

Carillion continues to perform well, in line with its strategy for growth and its focus on contract selectivity, financial discipline and cost management to support margins.

Cash flow from operations remains strong and the Group expects to maintain its track record of consistently delivering cash-backed profit and to have positive net cash at the year end.  

New order intake has remained healthy, with a number of major contract wins since the half year. These include contracts for support services customers worth £200 million in the energy sector and £60 million in the financial services sector. In addition we expect our annual revenue under our Openreach support services contract to increase by £30 million, from £115 million to £145 million, reflecting an increase in scope.  In Dubai, we have been awarded a £124 million contract, with committed financing, to build a residential development.           

Support services, which is the Group's largest contributor to underlying operating profit, continues to have good revenue visibility, provided by our large, high-quality order book of long-term contracts, and we remain confident of achieving our full-year target operating margin of around five per cent.  We have our largest ever pipeline of contract opportunities, which has continued to increase due to a growing number of outsourcing opportunities for UK public sector customers, notably local authorities, arising from the pressure they are under to reduce costs substantially.  We remain well positioned for these opportunities, given our proven ability to win large complex contracts for property estates and infrastructure that deliver substantial cost savings for our customers. 

Investments in Public Private Partnership (PPP) projects continue to generate significant value.  The Group has a portfolio of 26 financially closed projects in the UK and Canada.  Some £60 million of equity has already been invested in this portfolio and a further £124 million will be invested as projects currently under construction are completed and move into the operational phase.  We continue to target and achieve a 15 per cent internal rate of return on these investments.  In the UK and Canada, we are shortlisted for six major projects with a combined potential equity investment value for Carillion of up to £180 million and the potential to generate for Carillion support services revenues of up to £1.1 billion, over the lives of the concession contracts, and construction revenues of up to £1 billion.   

In the Middle East, as expected, revenue is growing strongly in the second-half, reflecting the timing of project starts, which we indicated at the half year would be second-half weighted.  We also continue to expect our full-year operating margin and cash flow in this segment to remain strong.  Our markets in Abu Dhabi, Oman and Qatar continue to offer major contract opportunities and the new business we established in Qatar in the first quarter of 2010 has now bid for a number of major contracts, the outcome of which is expected over the next six months.  

Construction services (excluding the Middle East) is performing well and in line with expectations, with our planned reduction in UK construction activity broadly offset by growth in Canada.  The previously announced re-scaling of UK construction, to reduce its annual revenue by one third, from £1.8 billion to £1.2 billion, over the next three years is being achieved through applying strict contract selectivity criteria and will focus our construction capability on delivering integrated solutions for PPP projects and our support services customers.  This is also supporting the operating margin in this segment.

Outlook

With a well-balanced and resilient UK and international business mix, an order book and probable orders that provide excellent revenue visibility and substantial pipelines of contract opportunities in our main market sectors, the Group remains well positioned for both the short and medium term.   

Therefore, we expect to make further progress in the balance of the current year and to deliver earnings growth in 2010 in line with market expectations.

In the medium term, we continue to target strong international growth and substantial growth in UK support services.  In Canada and in the Middle East, we expect to double our annual revenue over the next three to five years, in each case to around £1 billion. In UK support services, we expect substantial opportunities for growth as we move through 2011 and into 2012 and 2013, as pressure on both central and local government to reduce the cost of public services leads to an increase in outsourcing.     

Conference call for analysts and investors

Carillion Group Chief Executive, John McDonough, and Group Finance Director, Richard Adam, will host a conference call for analysts and investors on this statement at 09.00 today.  The telephone number to join this call is + 44 (0) 208 515 2302.  A replay facility is also available following the call on Toll Free UK: 0800 358 3474 - Access Code: 4370744#  and Toll Free US: 1 800 406 7325 - Access Code: 4370744#. 

Pre-close trading update

Carillion will issue a pre-close update on trading in 2010 on 8 December 2010. 

For further information contact

Richard Adam, Group Finance Director                            + 44 (0) 1902 422431

John Denning, Director Group Corporate Affairs                 + 44 (0) 1902 316426

Finsbury

James Murgatroyd or Gordon Simpson                            + 44 (0)  2072513801

7 October 2010

Notes to Editors

Carillion is one of the UK's leading support services companies 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.

 

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