In its latest trading update ahead of its interim results on 22 August 2012, integrated support services company, Carillion plc said its pipeline of contract opportunities has grown to £35 billion during the first six months of 2012.
The firm has also secured total first-half new orders and probable orders worth up to £2.2 billion, while its order book has remained steady at £18 billion. However, total revenues will be lower than in the first half of 2011. The update states:
“As expected, total revenue will be lower than in the first half of 2011. This is due primarily to lower UK construction revenue, as we continue the planned re-scaling of our UK construction activities to align them with the shrinking UK market.”
Although first-half revenue in the construction business is expected to reduce, the re-scaling of UK activities according to strict contract selectivity is continuing to support margins and Carillion expects the increase in operating margin in the segment to more than offset the effect of lower revenue, with a consequent improvement in operating profit, at both the half and full year.
Despite challenging market conditions, Carillion said trading in the first six months of 2012 is in line with the Board's expectations, and that the Group continues to benefit from a resilient business mix and from adhering to its strict contract selectivity criteria. Underlying profit and earnings are on track to meet full-year expectations.
Carillion said its portfolio of PPP projects is continuing to perform well and it would continue to sell investments in mature projects and to reinvest the proceeds in new projects.
New project opportunities in the UK currently await the outcome of the Government's review of the current PFI model – expected to play a key role in delivering the UK Government's £250 billion National Infrastructure Plan, as the Government has indicated that up to some 70 per cent of the Plan will be privately financed. However, the size of the UK market continues to reduce, primarily because of the substantial cuts being made by the UK Government to capital investment under its spending plans for the period 2010/2011 to 2014/2015.
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