5th Mar 2014 09:00
LONDON (Alliance News) - Carillion PLC Wednesday reported a fall in profit and revenue for the recent full year, after it shrunk its UK construction activities by being more selective about the contracts it took during the economic downturn.
The construction services company was hit hard by the financial crisis and ensuing downturn as its construction markets slowed dramatically. In response, it decided to focus on winning public-private partnership contracts, where the financing risk is shared with government, and on winning support services clients. Like peers, it also decided to focus on protecting its margins and paying down debt.
Carillion posted pretax profit of GBP110.6 million in 2013, down from GBP164.8 million, as total revenue fell 6.8% to GBP4.1 billion, from GBP4.4 billion a year earlier.
Group revenue fell to GBP3.32 billion from GBP3.67 billion, while revenue from the company's share from joint ventures rose to GBP748.3 million from GBP736.6 million in 2012.
As expected, geographically the UK - which makes up 71% of group revenue - was the only market where the firm saw a drop in revenue, to GBP2.88 billion, from GBP3.26 billion, while revenue in Canada and the Middle East and North Africa increased off the back of a number of contract wins.
Commenting on the restructure of the UK construction arm the firm said: "Rescaling has created a strong, high-quality construction business in the UK, which is capable of achieving growth, while continuing to be selective in terms of the contracts for which it bids in order to maintain its operating margin above the industry average."
Overall underlying operating margin, which is before joint ventures' net financial expense and taxation, intangible amortisation and non-recurring operating items, was maintained at 5.6%.
Net borrowing rose to GBP215.2 million from GBP155.8 million.
Despite, its woes the firm said its order book remained strong with GBP4.9 million of orders and probable orders in the year. It also expects further growth in Canada and the Middle East, where it recently won a GBP100 million contract from Aabar Properties to build a five-star Hard Rock Hotel in Abu Dhabi.
"Overall, we expect market conditions to remain challenging in 2014, but with a strong order book, good revenue visibility and substantial pipeline of contract opportunities the group is now well positioned for the future," Chairman Philip Rogerson said in a statement.
Carillion also said Wednesday it has won two contracts worth a combined GBP520 million.
The first is a contract worth GBP150 million to build the Avenue Phase 2 City Walk development in Dubai. The work will be carried out by its joint venture business in the United Arab Emirates, Al Futtaim Carillion.
Carillion also has been selected as the preferred bidder for support services contracts by Canada Natural Resources Limited and Royal Bank of Scotland Group PLC, and has been awarded a support services contract by Arqiva Ltd, a communications infrastructure and media services group, that together are expected to be worth in excess of GBP370 million over five years.
Carillion proposed a final dividend of 12.00 pence per share, up from 11.85 pence, making a full year dividend of 17.50 pence, up from 17.25 pence in 2012.
The stock was trading at 385.50 pence Wednesday morning, up 2.0%, making it a top-ten gainer in the FTSE 250.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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