Carillion eyes outsourcing opportunity as profits surge

Aaron Morby 12 years ago

Carillion’s management focus on margins has delivered a 17% increase in pre-tax profits to £58.8m in the first half of 2010.

Across the group underlying profit margins improved to 2.8%, helped by strong rises in profitability within support services and the Middle East.

Construction services margins were stable at just 1.1%, although Carillion expects to raise margins at this division to 1.4% by the end of the year as it is more selective about the work it bids for.

The firm said it was on course to cut revenues at the UK construction services arm by a third to £1.2bn in three years.

This has seen a round of jobs cuts in an ongoing shake-up which cost £9.4m in the first half.

Disposals of two small business and PPP assets flattered profits, although the underlying Carillion performance was up 7% to £65.7m.

Disposals contributed to the group wide revenue fall of 11% to 2.5bn in the first six months.

    Carillion trading by division

  • Construction services Turnover £1.05bn (+2%); Profit £12.1m (+11%) Margin 1.1%
  • Support services Turnover £1.12bn (-13%); Profit £43.2m (+1%) Margin 3.9%
  • Public Private Partnership Turnover £155m (-19%); Profit £14.7m (-6%)
  • Middle East construction services Turnover £180m (-44%); Profit £15.4m (-38%) Margin 8.5%

Carillion said the outlook in the medium term remained positive despite Government spending cuts.

“In the UK, our support services business is well positioned to benefit from the expected increase in Government outsourcing of non-core services, particularly as we move through 2011 into 2012 and 2013,” said the contractor.

“In the Middle East, we believe we have the opportunity to double Carillion’s revenue in this region to around £1bn over the next three to five years.”

Carillion also believes it can double revenue in Canada over the next 3-5 years.

“In Canada, we also have strong markets, particularly Public Private Partnership projects, which we believe will not only enable us to achieve healthy growth in Canada in 2010, but will also provide the opportunity to double our revenue.”

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