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Carillion focus on services and integration

Carillion has reported strong progress as it continues to focus on increasing operating margins and re-scaling its UK construction business, the company said today.

In a trading update to the Stock Exchange, the construction and support services giant said it is pushing on with its “strategic re-scaling”, and expects UK construction revenue to drop from £1.8 billion in 2009 to £1.2bn by the end of 2012.

Its focus will be on delivering integrated solutions for long-term customers, notably for public private partnership (PPP) projects and for support services customers.

The firm said it is on track to make further progress in the full-year, despite challenging market conditions. It reported “substantial opportunities” arising from public sector organisations looking to reduce operating costs through outsourcing more non-core services.

The update said: “This further tightening of our selective approach to UK construction is helping us to improve operating margins, as we avoid bidding for low margin work in a market that is becoming increasingly competitive as the UK Government progressively implements substantial cuts in capital spending on construction over the next four years.”

Carillion also said it expects to benefit over the medium term from the role that private finance is expected to play in delivering the Government’s £200bn, five-year National Infrastructure Plan announced in October 2010.

It reported a record pipeline of contract opportunities. Net debt is expected to be below £125 million as of 30 June 2011, following the £298.4m acquisition of Carillion Energy Services (formerly Eaga plc) in April 2011.

It also reported revenue growth in the Middle East, although it expects operating margins to drop compared with 2010. In Canada, it said markets remain strong, particularly in PPP, as the company continues with its planned reduction of revenue.

Looking ahead, the company said: “Our medium term objectives for organic growth remain unchanged, namely to deliver substantial growth in support services from 2012 onwards and to double our annual revenues in the Middle East and in Canada over three to five years, in each case to around £1bn.”