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Carillion construction profits nudge 3% margin

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Carillion’s construction margins are close to 3% thanks to its strategy of withdrawing from overly competitive bidding in the past few years.

In an upbeat trading statement, Carillion said that its 2015 results, when announced in March, would show strong growth.

Carillion scaled back its UK construction operations in 2011 to protect its profitability.  The benefit of that move has been confirmed with profits likely to be stronger than most if its peers.

For its construction business (excluding Middle East), Carillion expects its profit margin for 2015 “to be around the top end of the 2.5 per cent to 3.0 per cent range within which we expect it to stabilise, in line with our long-standing guidance, and at a level above the industry average”.

For the business as a whole, the board said that new order intake had picked up following a hiatus caused by the UK general election. “Although trading conditions in some of our markets are still recovering, we continue to see signs of improvement, especially in the UK. The group's order book and pipeline of contract opportunities both remain strong, as does operating cash flow, which continues to enable the group to invest to support our strategy for growth.  Therefore, we believe the overall outlook remains positive and the group continues to be well positioned to make further progress in 2016.”

In a separate announcement, the company also reported that it has picked up £1bn of new orders, including £550m worth of construction orders and more than £350m in support services.

Construction awards include further projects for the Defence Infrastructure Organisation, together with projects at Paradise Circus in Birmingham and Kings Cross in London, on both of which Argent is the development manager.

Carillion chief executive, Richard Howson said: ''I am pleased to say that the pace of work winning in the second half of the year has continued to pick up, as we expected. Much of the £1 billion of new work announced today reflects our continuing success in winning repeat work for long-term customers, consistent with our selective approach to contracts and margins.  We also continue to see some improvements in market conditions, especially in the UK, and following the UK government's spending review, we expect to see further opportunities for outsourcing and capital projects over the medium term".

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