Underlying earnings to increase at Carillion

SUPPORT services company Carillion expects underlying earnings to increase ahead of its interim results next month, it said today.

The Wolverhampton-based company says its “balance sheet remains robust” and it has more than offset the effects of disposing of non-core businesses Enviros and IT services and selling investments in four Public Private Partnerships.

In a trading update, Carillion said it expected to maintain a positive net cash position at the half year – it stood at £24.9 million in December 2009.

Support services, which contribute more than half of the group’s underlying operating profit, continue to perform in line with expectations, it said, with margins improving and on track to achieve full-year margin target of around 5%.

The firm continues to invest in Public Private Partnership projects with four new projects commenced in the first half of this year, totalling £69m.

It also sold one project, the Queen Alexandra Hospital in Portsmouth, which generated proceeds of £31.3m.

The statement added: “First-half revenue in 2010 will be lower than in the corresponding period in 2009, primarily as a result of the business disposals and equity sales made in 2009, the timing of project starts and completions in the Middle East and the effect of focusing on margins rather than revenue.

“Underlying cash flow from operations continues to be strong and is again expected to exceed underlying profit from operations.

“The value of our order book and probable orders at the half year is expected to be similar to that at December 31, 2009 (£19.7 billion), despite the sale of our equity investment in the Queen Alexandra Hospital Public Private Partnership project, which reduced the value of our order book by some £0.5bn.

“In addition only £0.5bn of the £19.7bn is expected to relate to probable orders from the public sector, making us resilient to any potential UK Government cuts in this area.”