Carillion selected for £190m school buildings programme but warns of only marginal overall growth

INFRASTRUCTURE and support services giant Carillion, has been appointed as the selected bidder for a new £190m school building programme.

The Wolverhampton-based group will deliver the Midlands Private Finance Batch under the Priority School Building Programme (PSBP) in conjunction with its joint venture partner, Equitix.

The partnership will finance, design, build and provide hard facilities management for the eight schools that comprise the Midlands Private Finance Batch under the PSPB.  

The programme forms part of the Government’s £750m Priority School Building Programme through which the Education Funding Agency is procuring projects to renew schools in England that have been prioritised for replacement or upgrading.
 
Carillion expects to invest up to approximately £9m of equity into the project from which it expects to generate construction and services revenues of approximately £190m over the life of the 27-year construction and concession contract.  
    
The schools included as part of the programme are:

Alfreton Grange Arts College, Derbyshire

ARK Kings Academy, Birmingham

Greenwood Academy, Birmingham

Plantsbrook School, Birmingham

President Kennedy School, Coventry

The Phoenix Collegiate, Sandwell

The Queen Elizabeth Academy, Warwickshire

Top Valley Academy, Nottingham

Richard Howson, Carillion chief executive, said: “We are delighted that we have been appointed as the Selected Bidder for the Midlands Private Finance Batch under the Priority School Building Programme.  Carillion is a market leader in the education sector having delivered around 180 new schools and academies through a combination of privately and publicly financed projects and we look forward to working closely with the Education Funding Agency and the schools to create excellent facilities for pupils and staff.
 
“This is the second major PPP project in the UK for which we have been selected as the preferred bidder this year, following our success in being selected for the Aberdeen Western Peripheral Route in which we will invest some £20m of equity and from which we expect to generate around £175m of construction revenue.”

The announcement of the deal coincided with a pre-close trading update from the company in which it said it had had a strong year, winning £4.6bn of new work.
The group expects its year-end order book to be worth more than £18.5bn, with a pipeline of contract opportunities of over £39bn.

It said total revenue was expected to be similar to that in 2013, with growth in Middle East construction services and UK construction services offset by a reduction in revenue from Public Private Partnership projects due to the group’s policy of recycling equity investments in mature projects.  

“We expect marginal revenue growth in support services after absorbing foreign exchange headwinds.  Although our markets remain challenging, we continue to see signs of improvement, which indicate that the medium-term outlook remains positive,” said Howson.     

“By remaining very selective in terms of the projects for which we bid, we expect to maintain the group’s operating margin at a broadly similar level to that in 2013, despite the fact that most of the work we are delivering in 2014 was won during the economic downturn.  Our selective approach continues to be supported by rigorous risk management processes, ongoing cost reduction and productivity programmes, shared central services and a centralised operating platform, which creates significant efficiencies and provides visibility for management of the group’s performance.”