Carillion builds profits despite declining sales

Construction and infrastructure group Carillion saw revenues fall by over a tenth in the first half but profits were ahead of last year on the back of a continuing improvement in the operating margin.

Revenue slipped 12% from £2,453.5m to £2,156.8m in the six months to June 30th, primarily due to the continued re-scaling of UK construction and the timing of project awards in the Middle East, the firm said on Wednesday.

Revenues in Middle East construction services dropped by 21% to £201.6m during the first half, though the group did assure that full-year sales in this division would by second-half weighted. "This is due to the timing of project awards, which can have a significant effect on revenue movements between financial reporting periods, given our strategy in the Middle East is to focus on large projects for a small number of financially robust customers, for whom quality and reliability are paramount."

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Group underlying operating profit increased 8% from £74.4m to £80.7m, as the underlying operating margin rose from 3.3% to 4.1% "in line with our focus on cost management and selective approach to the contracts for which we bid." The company said it expects an improvement in the total full-year operating margin.

Carillion said that the operational integration of Carillion Energy Services is largely complete and it remains on track to deliver integration cost savings of £25m per annum by the end of 2013.

Underlying pre-tax profit improved by 1% year-on-year from £72.5m to £73.1m while underlying earnings per share rose at the same rate from 14.3p to 14.4p.

The group raised its interim dividend per share by 2% from 5.3p to 5.4p.

Chairman Philip Rogerson said: "Carillion delivered a robust first-half performance, in line with the Board's expectations, despite market conditions remaining challenging.

"Given the strength of our business model, order book and pipeline of contract opportunities, we remain on track to deliver full-year results in line with expectations and to achieve our medium-term targets, namely to deliver growth in support services and to double our annual revenues in the Middle East and in Canada in the five-year period to 2015, in each case to around £1 billion."

Net borrowing totalled £115.2m in the period, up from £50.7m the year before, though still better than the group expected.