Carillion (CLLN)

Carillion (CLLN)

INTRO
[BOB THE BUILDER MODEL ON TABLE]

[ALISON ENTERS STAGE LEFT WEARING HARD HAT AND VISIBILITY JACKET. SHE ANGRILY THROWS THE TOY OFF THE TABLE]
Stop dancing there’s a recession on you plastic fool.
Banks aren’t lending.
The government’s slashing spending.
We’re building diddly squat.
So stow your upbeat jingly optimism and get real!
We’re going need more than a fictional moulded midget to fix this!
[GIVES TOY ANOTHER BLOW OF THE HAMMER]

DESK PIECE

The Government is tackling the monumental budget deficit by cutting spending wherever it can, whilst hoping that the private sector will grow us out of recession.
The slight snag with this strategy is that the private sector relies quite heavily on the public sector for much of its work.
Particularly when it comes to construction.
Catch 22.
So recent news that the number of building contracts has fallen by 40% over the last 12 months will plunge construction companies like Carillion further into the depths of despond, especially since its share price had nearly doubled since the really dark days of 2008.
[ALISON IS DISTRACTED BY A TINY SPEEDED UP VOICE COMING FROM SOMEWHERE. SHE LOOKS AROUND, THEN UNDER THE DESK AND FINDS ANOTHER BOB THE BUILDER TOY AND PICKS HIM UP]
Not you again!
What do you want Bob?
[SHE LIFTS HIM UP TO HER EAR]
Yes, I know the government cancelled the Building Schools for the Future initiative.
Yes, it is bad news for the construction sector isn’t it?
You wanted to resign in protest but they wouldn’t let you?
I didn’t have you down as a leftie, Bob!
Now if you don’t mind…
[PUTS BOB BACK DOWN ON THE DESK IN FRONT OF HER]
Carillion, like many other international construction services companies is being forced to chase lower-value, shorter term contracts and to diversify into support services.
It recently bought home insulation company Eaga for £306 million - it maintains IT infrastructure for BT, manages accommodation for British soldiers and has its dibs on road, rail, and utilities contracts.
Anything, it seems, to get away from the moribund British construction market.
And boss John McDonough says this trend is likely to continue.
In fact, construction now accounts for only a tenth of group revenue.
So we shouldn’t be lumping Carillion in with other construction companies at all.
Viewed as an internationally diversified services group, Carillion seems much more alluring.
And the analysts agree, marking this one up as an ‘outperform’.

STATS PACK
With sales of over £5 billion…pre-tax profits of £168 million…but a PE of just over 10…the £1.62 billion Carillion looks good value…especially with a healthy earnings per share of nearly 37 pence.