The Statement says Carillion is continuing to perform well despite challenging market conditions, with earnings growth in 2011 being driven primarily by the acquisition of Carillion Energy Services and by an improvement in total operating margin.
Cash flow from operations remains strong and the company said it expects to maintain a track record of consistently delivering cash-backed profit. Year-end net debt is expected to be below £125 million, significantly better than the target set following the £298.4 million acquisition of Carillion Energy Services in April 2011 of reducing year-end net debt to below £150 million.
Carillion is continuing to win new contracts, preferred bidder positions and framework agreements - since the company announced its half-year results six weeks ago on 24 August it has notched up a number of wins that are expected to be worth up to some £670 million.
These include local government facilities management, energy services, construction services and rail infrastructure services in the UK, road maintenance services in Canada and construction services in the Middle East.
In support services, which continues to account for around 50 per cent of Carillion’s total underlying operating profit, the company is expecting strong profit growth in 2011, primarily as a result of the acquisition and integration of Carillion Energy Services.
The support services order book plus probable orders continues to provide good revenue visibility and its pipeline of specific contract opportunities remains very strong. Outsourcing by public sector organisations continues to account for a major proportion of Carillion’s current bidding activity and pipeline.
UK construction rescaling remains on track
In construction services (excluding the Middle East), Carillion said it is continuing to benefit from the strategy announced in 2010 of re-scaling the UK construction business to reduce its annual revenue by £600 million to around £1.2 billion by 2013, by largely basing construction activities around the delivery of integrated solutions for PPP projects and support services customers.
The Statement said the strategy anticipated cuts in UK Government spending on construction and is also helping the company to support its margins by avoiding bidding for low margin work in an increasingly competitive UK market.
Carillion expects to deliver strong earnings growth in 2011 in line with market expectations, despite market conditions remaining challenging. The company said it also remains well positioned to achieve the medium-term objectives for growth announced in 2010, namely to deliver substantial growth in support services from 2012 onwards and to double the revenue of its businesses in the Middle East and in Canada, in each case to around £1 billion, over three to five years. Carillion also remains on track to complete the re-scaling of UK construction by 2013.
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