24th Aug 2016 10:20
LONDON (Alliance News) - Construction and support services company Carillion PLC on Wednesday said a strong performance in its support services business drove a 24% rise in pretax profit in its first half, as it announced the appointment of a new finance director.
Shares in Carillion were up 0.2% at 296.81 pence on Wednesday morning, 6.5% ahead of the level they were trading at prior to the referendum result. Shares have recovered in the construction and support services company over August, after dropping 21% in the week following the Brexit vote.
The mid-cap firm said pretax profit in the half to the end of June was GBP83.9 million, up from the GBP67.5 million reported a year earlier, a rise led by revenue and margin growth within its support services division.
Carillion generates more than half its revenue from its support services division and for the recently ended first half, revenue from the division was GBP1.34 billion, up 8.0% from the GBP1.24 billion a year earlier. Carillion also saw revenue rises in both its public private partnership division and construction services division, excluding the Middle East region where revenue from construction services fell.
On a group level, revenue grew to GBP2.49 billion from GBP2.26 billion, with a good organic growth performance, but on an underlying basis, both profit from operations and pretax profit remained unchanged from a year earlier at GBP112.5 million and GBP84.5 million respectively. Carillion said this was due to an increase in both joint ventures net financial expenses and the group's net financial expenses.
Underlying operating margin also dipped to 4.9% from 5.1% a year earlier, though rose to 5.7% from 4.7% in support services. Carillion said the margin a year earlier had benefited from the organisation of its labour facilities in Oman and the recently-ended period also saw a lower level of profit coming from equity sales within its public private partnership projects.
Carillion said its average net borrowing was similar to the 2015 full-year average of GBP538.9 million and came in in line with expectations. However, net borrowing at the end of the first half was GBP290.6 million, up from GBP199.6 million a year earlier and GBP169.8 million at the end of December.
The company said this rise was expected, though was slightly higher than anticipated, due to the phasing of a number of cash flow items and an adverse movement in the US dollar exchange rate resulting from the UK referendum outcome.
The majority of Carillion's private placement borrowing is denominated in US dollars. Apart from the potential impact of the US dollar exchange rate on its private placement borrowing, Carillion said it expects net borrowing at the year-end to reduce.
The company said its balance sheet remains robust with more than GBP1.40 billion of committed funding available to the group.
The group secured GBP2.5 billion of new orders and probable orders in the first half and said its revenue visibility for 2016 is 98%. Its total order book is at GBP17.4 billion, flat against the end of December, with its pipeline also flat at GBP41.5 billion.
Carillion said work winning in its support services division remained strong, with GBP1.60 billion work secured during the period compared to the GBP600.0 million a year earlier. Its work winning a year earlier, however, was particularly low due to the usual slowdown in contract awards by the UK government that accompanies an election.
Total value of orders and probable orders in its Middle East construction division fell to GBP600.0 million from GBP800.0 million. Carillion said it continued to focus on winning contracts in the region to mitigate the impact of the prolonged low oil price on the pace of customer investment plans.
Carillion said it is on track to make progress in 2016, leaving its expectations for the full year unchanged.
Carillion raised its interim dividend by 2.0% to 5.80 pence from 5.70p, "in view of the group's first-half performance and [its] expectations for the full year".
"I am pleased to report that the group's first-half results are in line with our expectations, led by a strong performance in our support services business, which accounted for nearly two thirds of the group's underlying operating profit," said Chairman Philip Green.
"New order intake in the first half of the year has been strong and continues to reflect the success of our strategy and strength of our business model. Overall, we remain on track to make further progress in 2016," he added.
Carillion, in a separate statement, also said it has appointed Zafar Khan as its group finance director. He will replace Richard Adam, who will retire in December. Khan has been the company's group financial controller since 2013.
By Hannah Boland; [email protected]; @Hannaheboland
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