Bloomberg News

Carillion Says Full-Year Earnings in Line With Consensus

October 04, 2011

(Updates with closing share price in seventh paragraph.)

Oct. 4 (Bloomberg) -- Carillion Plc, a U.K. construction and services provider, said it expects full-year earnings to meet management forecasts, with underlying growth of 10 percent.

Revenue will increase on the acquisition of Carillion Energy Services and international business, the Wolverhampton, England-based company said in a statement today. Net debt will be less than 125 million pounds ($193 million), compared with its 150 million-pound year-end debt target after the energy services acquisition, according to the statement.

“We’re on track to deliver strong earnings growth in line with market expectations, which is around underlying growth of about 10 percent,” Chief Executive Officer John McDonough said in a phone interview. The board will increase dividends to shareholders in line with earnings growth if it meets consensus, he said.

Carillion is looking to boost international sales and scale back its U.K. construction business from around 1.8 billion pounds in 2009 to 1.2 billion pounds by the end of 2012, anticipating reduced government spending. Full-year operating profit in construction services is expected to increase, with public private partnerships in Canada a key growth driver.

The company’s interim statement “confirms trading in line with a strong cash performance,” Andrew Nussey, a London-based analyst at Peel Hunt, wrote in an e-mailed note to clients today, re-iterating his “buy” rating on the stock. “We maintain estimates.”

Carillion has a strong balance sheet, and will be “opportunistic” about acquisitions in U.K. and Canada support services, particularly in energy, technical and local government services, McDonough said.

Shares Fall

Carillion fell 4.6 pence, or 1.4 percent, to 323.7 pence at the 4.30 p.m. close in London trading, giving the company a market value of 1.39 billion pounds.

Operating margin in the Middle East will decline from more than 9 percent to around 6 percent in the next two to three years, although operating profit will increase this year, the company said. Revenue from the Middle East will be more than 500 million pounds this year, McDonough said. Canada has seen “modest growth” over the 700 million pounds reported last year, he said.

Carillion is “well-positioned” to double revenue in the Middle East and Canada to about 1 billion pounds in each market over three to five years, as per its 2010 plan, the company said.

Support services, which account for 50 percent of underlying operating profit, will see “substantial growth” from 2012 onwards, the company said. Carillion seeks to benefit as the U.K. government plans to cut public services costs by outsourcing. Chancellor of the Exchequer George Osborne said yesterday he will stick to his deficit-reduction plan, which hinges on the deepest public spending cuts since World War II.

David Maloney, chairman of the company’s audit committee and a non-executive director, has stepped down and will be succeeded by Andrew Dougal, according to the statement. McDonough will quit at the end of the year, to be succeeded by Chief Operating Officer Richard Howson, the company said in August.

--Editors: Chris Peterson, Peter Branton

To contact the reporter for this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

To contact the editor responsible for this story: Colin Keatinge in London at Ckeatinge@bloomberg.net


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