Mixed bag for Carillion as challenging markets impact results

The challenging nature of its markets has been thrown into sharp focus in a mixed set of full year results for construction and support services group, Carillion.

Despite a 14% increase in total revenue, the group still saw pre-tax profits dip 5%.

The Wolverhampton-based company has said the performance is in line with expectations but has vowed to step up its cost reduction programme to put the business back on track.

It has also said its strong order book continues to give rise to optimism.

Carillion chairman, Philip Green, said: “In 2016, Carillion’s performance was led by revenue growth and an increased margin in support services, together with good cash flow. Given the size and quality of our order book and pipeline of contract opportunities, our customer-focused culture and integrated business model, we have a good platform from which to develop the business in 2017.  

“We will accelerate the rebalancing of our business into markets and sectors where we can win high-quality contracts and achieve our targets for margin and cash flows, while actively managing the positions we have in challenging markets.  We will also begin reducing average net borrowing by stepping up our ongoing cost reduction programmes and our focus on managing working capital.”

The results show revenue reaching £5,214m (2015: £4,586m), while pre-tax profit came in at £146.7m (2015: £155.1m). Basic earnings per share declined 6% to 28.9p (2015: 30.9p). Nevertheless, it has proposed a full year dividend of 18.45p per share (2015: 18.25p), an increase of 1%.

The revenue rise was led by growth in the group’s support services operation, which contributed over two thirds of the total operating profit and more than offset expected reductions in profit from Public Private Partnership projects and Middle East construction services.

Underlying operating margin was expected to be lower and so it proved, coming in at 4.9% (2015: 5.3%).

Net borrowing reached £218.9m at December 31, 2016 (2015: £169.8m) and average net borrowing for 2016 were £586.5m (2015: £538.9m), with the increases mainly reflecting adverse movements in foreign exchange rates.

The group said it maintained a high-quality order book and a strong pipeline of contract opportunities, with £4.8bn of new orders and probable orders in 2016 (2015: £3.7bn).

It also expects more than £1.5bn of revenue from framework agreements not yet included in the orders.

The substantial pipeline of contract opportunities is roughly the same as the previous year at £41.6bn (2015: £41.4bn).

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