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Mon May 20 2024

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Carillion downsizing improves profitability

4 Jul 12 Carillion’s plan to scale back its UK construction activities is expected to result in improved operating margins, the company has revealed.

In a pre-close trading update this morning, Carillion’s board said that first-half trading was in line with expectations and revenues would be lower than in the first half of 2011.

Cash flow and balance sheet remain strong with net debt expected to be around £125m.

Total first-half new orders and probable orders are worth up to £2.2bn.

“As expected, total revenue will be lower than in the first half of 2011,” the board said. “This is due primarily to lower UK construction revenue, as we continue the planned re-scaling of our UK construction activities to align them with the shrinking UK market and, as also previously announced, to Middle East construction revenue being second-half weighted, which reflects the timing of project starts.”

It added: “The group's total first-half operating margin is expected to increase, reflecting the benefit to margins of re-scaling our UK construction business, together with our group-wide focus on contract selectivity.” 

Net borrowing at the half year is expected to be approximately £125m. The value of the order book and probable orders is expected to remain strong at around £18.0bn and the pipeline of contract opportunities is expected to have increased to £35bn.       

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