More than 12 months ago, Carillion opted to rescale construction activities to put more effort in expanding support services.
In 2010, construction looked more like the star turn delivering greater sales outside the middle east region as well as outperforming support services in terms of profit growth.
The strategic decision lifted construction margins from a mediocre 1.4% to 1.9%, with little impact on turnover, which remained largely flat at £2.2bn in the year to December.
Carillion said it had high hopes for support services in future. Its pipeline of contract opportunities increased by £2.8bn to £8.3bn as local authorities bundle outsourcing work.
Richard Adam, group finance director, said: “Given we are targeting large complex contracts that take considerable time to bid, we continue to expect the benefits of more public sector outsourcing to come through towards the end of 2011, leading to substantial growth in 2012 and beyond.
Overall, Carillion underlying profits were up 7% to £188m while revenue fell 9% last year to £5.1bn reflecting fall across all divisions.
Carillion results by division
- Construction services (excluding the Middle East): Profit £41.2m (+33%); turnover £2.2bn (-2%); margin 1.9%
- Support services: Profit £110.4m (-6%); turnover £2.1bn (-12); margin 5.2%
- Public Private Partnership projects: Profit £23.4m (-24%); turnover £312m (-25%)
- Middle East construction services: Profit £47.5 (+1%); turnover £493m (-11%); margin 9.6%
Carillion said it was still on target to reduce UK construction turnover to £1.2bn over the next three years, which fell to £110m to £1.73bn last year.
The firm did better than many other contractors during the round of big education capital spending cuts.
It retained some 68% of its BSF programme schools, compared with an average of around 32% for all contractors, and there was no impact on our order book as no contractually committed schools were cancelled.
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