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Carillion - Funding deal and disposals stabilise balance sheet

Nick Hyett | 24 October 2017 | A A A
Carillion - Funding deal and disposals stabilise balance sheet

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In an unscheduled announcement, Carillion revealed details of a new funding deal, disposals and new contract wins.

The shares rose 14% in early trading.

Financing

The group has secured £140m of new finance facilities, from five of its main lenders. This includes a £40m senior secured facility and a £100m senior unsecured facility.

Carillion has also agreed new committed bonding facilities, with deferral of some pension contributions and delayed repayment of private placement notes due in November 2017 and September 2018.

Collectively, these agreements have the effect of improving the group's financial headroom throughout 2018 by £170m to £190m.

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Disposals

Serco has agreed to purchase a large part of Carillion's UK healthcare facilities management business for £50.1m, subject to final agreement within a few weeks. Contract transfers will take place on a phased basis, with the proceeds expected to be received during the first half of 2018.

The group continues to target non-core disposals worth £300m by the end of 2018, although it is now considering retaining certain parts of its Canadian businesses.

New Contracts

There have been a number of recent contract wins, including:

  • Gigaclear - £200m contract. Joint venture (JV) Carillion telent has signed a contract to build a broadband network in Devon and Somerset between 2018 and 2020
  • Dubai Creek Harbour - £105m contract. Emaar Properties has awarded JV Al Futtaim Carillion the contract to deliver Creek Horizon, a collection of premium residential apartments located in Dubai Creek Harbour. Completion is scheduled for early 2020.
  • Fallowfield - £71m contract. Following Carillion's appointment as preferred bidder in April, Carillion has signed a contract with the University of Manchester to design and build Phase 1 of its Fallowfield Student Residences project. Work is already underway.

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.