14th Jul 2015 10:30
LONDON (Alliance News) - FTSE 250-listed construction and facilities management company Carillion PLC on Tuesday said it performed in line with its expectations in the first half of 2015 and said its forecasts for the full year remain unchanged.
The company said the steady improvements seen in market conditions in 2014 have continued into this year and said it has made good progress on mobilising a number of major contracts it secured in 2014, particularly in its support services business. Carillion added its Public Private Partnership investments are performing in line with its expectations.
Group first-half revenue has increased "significantly", Carillion said, and it remains on track to deliver robust revenue growth for the full year. Margins have been maintained through the group being selective on which contracts it takes on, along with cost controls put in place.
The company said the pace of new order intake in the first half slowed, as expected, due to the impact of the UK General Election on the awarding of new public sector contracts. The company expects to have revenue visibility of 96% for the second half, up from 85% at the start of the year, with the value of its secured and probable orders at around GBP17 billion, slightly down from the GBP18.6 billion in place at the start of 2015.
In terms of contract opportunities, Carillion said its pipeline remains strong and is expected to have increased to GBP40 billion by the half year, up from GBP39.2 billion at the end of December.
Support services revenue is expected to rise in the first half, with its operating margin to be broadly flat despite the costs associated with the mobilisation of several contracts secured in 2014. Over the course of 2015, the company will start work on a number of major support services contracts, including a facilities management deal with the UK Ministry of Defence and a prisons deal with the Ministry of Justice.
Notwithstanding the election-related slowdown in the UK, Carillion said the outlook for support services looks strong, with continued outsourcing of public sector services in the UK and a growing pipeline of potential deals in Canada and the Middle East.
The group said its Public Private Partnerships portfolio is performing in line with its expectations. It sold equity investments in two projects in the first half, for around GBP44 million, and said its pipeline looks strong, having been named preferred bidder for the Midlands Priority Schools Programme and having been shortlisted for seven other projects.
In its construction services business, excluding the Middle East, revenue is expected to rise significantly year-on-year in the first half. Its strong construction order book and pipeline and the outlook for increasing investment in infrastructure, particularly in the transport, defence, health and education sectors in the UK, should drive revenue growth in the UK which will offset a further reduction in revenue from its Canadian business. The Canadian revenue decline is being driven by the company being more selective on the projects its takes on.
In its Middle East construction services arm, revenue is expected to rise significantly in the first half too, boosted by the phasing of new contracts coming to market in the sectors where Carillion focuses. The pipeline of opportunities in the region is encouraging, the company said, in particularly the plans in Dubai to build a second airport, new hotels and more commercial, retail and leisure facilities, mostly to back its role as the host of Expo 2020.
The pipelines in Oman and Qatar also are strong, Carillion said, and this was back up by another statement released by Carillion on Tuesday in which it said it has won a GBP80 million contract with FTSE 100 oil company BP PLC to build the operational base and accommodation complex for the Khazzan gas project in Oman.
Carillion Alawi, the company's local unit, will construct the accommodation facilities, with work due to start in September 2015 and set to complete in mid-2017.
Carillion shares were up 1.3% to 356.27 pence midday Tuesday, one of the best performers in the FTSE 250.
By Sam Unsted; [email protected]; @SamUAtAlliance
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