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Sun September 27 2020

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Carillion reduces exposure to UK construction

7 Jul 11 Carillion is reducing its UK construction activity by a third in a strategy designed to improve group operating margins.

Opting out of cut-throat bidding at home, Carillion is focusing on doubling its overseas construction business, while focusing increasingly on support services at home.

In a trading update, Carillion said that UK construction revenues were being cut from £1.8bn in 2009 to £1.2bn by the end of 2012.

It said: “This further tightening of our selective approach to UK construction is helping us to improve operating margins, as we avoid bidding for low margin work in a market that is becoming increasingly competitive as the UK Government progressively implements substantial cuts in capital spending on construction over the next four years.”

UK construction capability is being progressively focussed on delivering integrated solutions for long-term customers, notably for PPP projects and for support services customers.

In the Middle East and Canada, however, Carillion is aiming to double annual revenues over three to five years, to around £1b in each region.

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First-half revenue in construction is expected to reduce operating profit will be up on last year’s first half.

The support services operations are benefitting from the integration of Eaga, acquired in February and now called Carillion Energy Services. The synergy cost savings from the acquisition are now expected to increase from the previously announced cumulative total of £9m a year by 2013 to £15m a year.

The pipeline of support services contract opportunities continues to increase and Carillion expects to benefit from an increase in public sector outsourcing.

“Despite the fact that market conditions remain challenging, we expect the group to build on its strong first-half performance to deliver earnings growth in the full year.  Our ability to perform well continues to reflect the strength and resilience of our well balanced UK support services and international business mix, good revenue visibility and record pipeline of contract opportunities,” the board said.

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