Carillion PLC Trading Statement (5229K)

TIDMCLLN

RNS Number : 5229K

Carillion PLC

10 July 2017

10(th) July 2017

2017 first-half trading update

Strategic review and management changes

H1 revenue expected to be similar to that in 2016 at approximately GBP2.5bn.

-- H1 operating profit lower than expectations primarily due to phasing of Public Private Partnerships (PPP) equity disposals, which are now expected to be in H2.

-- Strong work-winning performance, with GBP2.6bn of new work secured in H1 - GBP2.1bn in support services.

-- Progress made against strategic objectives set at full year results, with cost reduction underway and disposal of 50 per cent of the economic interest in the Group's business in Oman, Carillion Alawi, for an immediate cash consideration of GBP12.8m.

-- Deterioration in cash flows on a select number of construction contracts led the Board to undertake an enhanced review of all of the Group's material contracts, with the support of KPMG and its contracts specialists, as part of the new Group Finance Director's wider balance sheet review.

-- This review has resulted in an expected contract provision of GBP845m at 30 June 2017, of which GBP375m relates to the UK (majority three PPP projects) and GBP470m to overseas markets, the majority of which relates to exiting markets in the Middle East and Canada. The associated future net cash outflows in respect of these contracts is GBP100m-GBP150m (primarily in 2017 and 2018).

-- s a result of the enhanced contracts review and the strategic actions below, reflecting difficult markets and exits from certain territories, Carillion is issuing revised full-year guidance, with revenue now expected to be between GBP4.8bn and GBP5.0bn and overall performance expected to be below management's previous expectations.

Actions to reduce net borrowing

-- Deterioration in cash flows on construction contracts, combined with a working capital outflow due to a higher than normal number of construction contracts completing and not being replaced by new contract starts, means H1 average net borrowing is now expected to be GBP695m (Full year: 2016: GBP586.5m).

-- The actions the Board put in place in March 2017 to reduce net borrowing have been accelerated and further actions are being taken to reduce net borrowing including:

-- Disposals to exit non-core markets and geographies to raise up to a further GBP125m(1) in the next 12 months.

-- Further annual cost savings to be quantified as part of the strategic and operational review.

   --        Maximising the recovery of receivables. 
   --        2017 dividends suspended resulting in a cash saving of approximately GBP80m. 

Strategic and operational review

-- The Board announces today that it is undertaking a comprehensive review of the business and the capital structure, with all options to optimise value for the benefit of shareholders under consideration. An update on the Board's review of the business and capital structure will be provided at the Group's interim results, in September.

   --       Significant actions already taken to reposition the business. 
   --       Exit from construction PPP projects. 
   --       Exit from construction markets in Qatar, the Kingdom of Saudi Arabia and Egypt. 

-- Only undertaking future construction work on a highly selective basis and via lower-risk procurement routes.

[1] Includes GBP12.8m immediate cash consideration from the sale of Carillion Alawi

Philip Green, Non-Executive Chairman said,

"Despite making progress against the strategic priorities we set out in our 2016 results announcement in March, average net borrowing has increased above the level we expected, which means that we will no longer be able to meet our target of reducing leverage for the full year.

"We have therefore concluded that we must take immediate action to accelerate the reduction in average net borrowing and are announcing a comprehensive programme of measures to address that, aimed at generating significant cashflow in the short-term.

"In addition, we are also announcing that we are undertaking a thorough review of the business and the capital structure, and the options available to optimise value for the benefit of shareholders. We will update the market on the progress of the review at our interim results in September.

"Richard Howson has stepped down as Group Chief Executive and from the Board with immediate effect and Keith Cochrane, previously our Senior Independent Non-Executive Director, will take over as interim Group Chief Executive, while a search is underway for a new Group Chief Executive. We are fortunate to have had Keith as a Non-Executive member of our Board as he has considerable plc CEO experience. Richard will stay with the Group for up to one year to support the transition."

A presentation for institutional investors and analysts will be held today at etc.venues St Paul's, 200 Aldersgate, London EC1A 4HD starting at 08:30 today. The presentation will be webcast live on www.carillionplc.com and subsequently available on demand. A dial-in facility is also available on 0808 109 0700 (UK Toll Free) or [phone] (Standard International Access) with a participant pin code of 110717. A replay facility will be available for 7 days on [phone] with an access code of 9946232

The announcement contains inside information. The person responsible for the release of this announcement on behalf of Carillion plc is Zafar Khan, Group Finance Director.

For further information contact:

 
 Institutional Investors and Analysts 
  John Denning, Group Corporate Affairs         tel: [phone] 
  Director                                      tel: [phone] 
  Kellie McAvoy, Head of Investor Relations 
 
  Media                                         M: [phone] 
  Liz Morley - Bell Pottinger                   M: [phone] 
  Sam Cartwright - Bell Pottinger 
 

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July 10, 2017 02:00 ET (06:00 GMT)