Disposal
Carillion PLC
28 June 2004
Carillion sells further PPP equity and
announces additional dividend
In line with its policy of recycling its equity investments in Public Private
Partnership (PPP) projects through a programme of phased disposals, business and
construction services company, Carillion, has sold its 50 per cent equity
interest in the M40 road project to John Laing plc. Carillion has also sold 50
per cent of the 100 per cent equity interest it held in the A249 road project to
Barclays European Infrastructure Limited (BEIL).
These sales generated an exceptional profit of some £7 million. The Board has
again decided to return one third of this to shareholders by way of an
additional dividend of one penny per share, which will be paid with the Group's
2004 interim dividend.
Commenting, Carillion Chief Executive, John McDonough, said, 'Our PPP equity
sales continue to meet the objectives we set when we announced our intention to
recycle our investments. They clearly demonstrate the value we have created for
shareholders and generate funds that will be reinvested in new PPP projects to
provide further returns for shareholders.
'As expected, there is a growing market for PPP equity and we intend to continue
our phased programme of equity disposals. At the same time we already expect to
invest around a further £25 million over the next few years in new projects that
we have already financially closed or for which we are the preferred bidder.'
M40
Carillion has sold its equity interest in this project for a cash consideration
of £19.65 million, of which £0.5 million will be held in escrow and will be
receivable by Carillion subject to the financial performance of the concession.
The consideration may also be adjusted up or down by a further £0.75 million,
subject to financial performance.
The proceeds generated by the sale are entirely in line with the Director's
valuation of Carillion's equity portfolio of around £100 million, published with
the Group's preliminary results in March 2004.
Carillion will continue to maintain the 123 km of the M40 between Junction 1A,
the intersection with the M25, and Junction 15 at Warwick.
Carillion's original equity investment in the M40 Special Purpose Vehicle
company (SPV) was £2.2 million, made in 1998. Carillion also purchased
additional equity from its M40 SPV partners in 2000 and 2001.
At the point of sale, Carillion's equity interest in the M40 SPV stood at £13.1
million. The sale will generate an immediate net exceptional profit of £6.0
million, excluding the future potential increase in the consideration.
Carillion's original equity investment of £2.2 million generated proceeds of
some £7.65 million, approximately 3.5 times book value. The remaining equity
generated proceeds that were approximately equal to its original cost.
Net of dividends and interest on loan stock, the cash cost to Carillion of its
investments in the M40 SPV up to the point of sale, was £6.3 million.
In 2003, the profit attributable to Carillion's equity interest in M40 was some
£1.0 million.
The accounting treatment for profit and cash relating to the Group's equity
interest in the M40 project from 1998 to the point of sale is included in the
notes below.
A249
Carillion was the sole investor in this project at financial close in February
2004 with 100 per cent of the share capital of £50,000. Carillion also assumed
an obligation to increase its equity interest in due course through a
subordinate loan note of approximately £6 million.
Carillion has sold 50 per cent of its share capital to Barclays European
Infrastructure Limited (BEIL). This will generate an exceptional profit of £1.0
million.
BEIL has also assumed responsibility for 50 per cent (£3 million) of the
subordinate loan note.
This sale has no effect on Carillion's subcontracts for routine maintenance of
17 kilometres of the existing road prior to completion of the new road, for the
design and construction of the new £130 million road and for its subsequent
maintenance. The new road is due to be completed in Summer 2006.
Notes
Following the disposal of its equity interest in the M40 project, Carillion has
a portfolio of 14 financially closed PPP projects in which it has invested
equity of some £29 million and in which it has commitments to invest around a
further £11 million.
Carillion is also the preferred bidder for five PPP projects in which its total
equity investment is expected to be in the region of £14 million.
The construction, maintenance and facilities management value of the five
projects for which Carillion is preferred bidder, is in the region of £1.8
million.
The following tables summarise Carillion's share of profit and cashflow on the
M40 concession.
-------------------------- ----------- ----------
Profit £000's Received Paid
-------------------------- ----------- ----------
Sales Proceeds 19,150
Equity Interest
Equity 7,547
Loan Stock 5,524
Profit consolidated to date of sale 79
Total 19,150 13,150
Exceptional Profit 6,000
--------------------------- ----------- -----------
Cash £000's Received Paid
--------------------------- ----------- -----------
Equity Interest
Equity 7,547
Loan Stock 5,524
Sale Proceeds 19,150
Dividends 3,275
Loan Stock Interest 3,473
Total 25,898 13,071
Net Cash generated 12,827
For further information contact John Denning Director Group Corporate Affairs
01902 316426
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