24th Apr 2006 16:37
Carillion PLC24 April 2006 Carillion plc Mowlem acquisition Support services and construction company Carillion plc is providing today anupdate on the assessment of fair value adjustments to the net assets of Mowlemplc, which it acquired on 23 February 2006, and on the cost synergies expectedas a result of integrating the Carillion and Mowlem businesses. The provisional assessment of fair value and other adjustments to net assets setout in the announcement of the offer for Mowlem on 14 December has been revisedin association with the completion of Mowlem's 2005 audited accounts. As aresult, goodwill has been increased by £80 million to a total of £474 million.This has no material impact on expected earnings nor on the Group's net debtforecasts, also set out in that announcement. Earnings will increase as a resultof increased cost synergy savings. Fair value adjustments Since completing the acquisition of Mowlem, it has become clear that prior toacquisition the position on a small number of large contracts had deterioratedfurther, particularly the Dublin Port Tunnel and Exeter Schools projects. As aresult, the provisional fair value adjustment of £45 million relating tocontract write-downs is now expected to increase by a further £90 million. Thisreflects a firm view of the expected outturn for these contracts. In the eventthat actual write-downs are different from expectations, full visibility will beprovided of the amounts involved. In addition, there will be a non-cash adjustment of £30 million to cover costsassociated with businesses closed by Mowlem in the second half of 2005 and in2006 prior to acquisition. These increases in goodwill are expected to be reduced by £40 million in respectof a surplus of proceeds over net assets on the disposal of a number of Mowlembusinesses. Synergy cost savings Since acquisition, further cost synergies have been identified. Savings by theend of 2006 are now expected to reach a running rate of £15 million per annum,£5 million more than previously announced. By the end of 2007, savings are nowexpected to reach a running rate of £23 million per annum, £8 million more thanpreviously announced. Therefore, after a modest additional cost associated withdelivering these additional savings, there will be a further increase inearnings in addition to the material enhancement in 2007 already expected fromthe acquisition. Cash Carillion estimated that average net debt in 2006 would be £200 million and peaknet £250 million and that net debt by the end of 2007 would be below £100million. The cash effect of the fair value adjustments described above will have nomaterial impact on these net debt forecasts. Expected proceeds from businessdisposals will largely offset the cash effect of the increased contract losses. For further information contactJohn Denning, Director Group Corporate Affairs, Carillion plc 01902 316426 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Carillion Plc