Carillion's plan to shrink its UK construction business will see the firm focus on contracts for PPP projects and its support services clients.
The contractor, which plans to reduce its annual UK construction revenue by one third over the next three years, from £1.8bn to £1.2bn, said it will achieve this “through applying strict contract selectivity criteria” and concentrating on “delivering integrated solutions for PPP projects and our support services customers”.
In an interim management statement for the third quarter of 2010, Carillion said it “continues to perform well, in line with its strategy for growth".
New orders in the last quarter have included contracts for support services customers worth £200m in the energy sector, and £60m in the financial services sector. Carillion expects annual revenue from its Openreach support services contract to increase from £115m to £145m, reflecting an increase in scope.
In Dubai, the construction arm has been awarded a £124m deal to build a residential development.
Carillion said its support services business, the group's largest contributor to operating profit, continues to perform well, boosted by “outsourcing opportunities for UK public sector customers, notably local authorities, arising from the pressure they are under to reduce costs substantially”.
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Its PPP business continues to grow, and in the UK and Canada the firm is shortlisted for six major projects with a combined potential equity investment value of up to £180m.
In the Middle East, as expected, Carillion said revenue is growing “strongly”, while growth in Canada will offset the reduction in the UK construciton business.
Summarising the firm's outlook and strategy, the statement concluded: “In the medium term, we continue to target strong international growth and substantial growth in UK support services. In Canada and in the Middle East, we expect to double our annual revenue over the next three to five years, in each case to around £1bn.
“In UK support services, we expect substantial opportunities for growth as we move through 2011 and into 2012 and 2013, as pressure on both central and local government to reduce the cost of public services leads to an increase in outsourcing.”
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