Carillion on track to improve profit

Carillion, the Wolverhampton-based support services and construction firm, has said it remains on track to deliver improved earnings in 2009, despite difficult market conditions.

The group said that its balance sheet remains strong and that it expects to deliver cash-backed profit and reduce total borrowing to below the half-year level of £146m by the end of the year.

Support services is expected to be the largest driver in earnings growth. However, the group expects that strong partnerships with public sector business are likely to be offset by increased competition in the private sector to reduce costs.

Nevertheless, a pipeline of order opportunities in the second half remains encouraging. So far this year, a Carillion-led joint venture has signed a letter of intent with Openreach, BT's local access network business, for a future contract to deliver complex support and network installation services worth in the region of £1bn.

The group currently has a portfolio of 22 financially closed Public Private Partnership (PPP) projects in which it expects to invest a total of £152.8m of equity. In addition, Carillion is shortlisted for eight projects in which the combined potential equity investment is around £74m.

In the Middle East, the group’s strategy of geographic diversification within the region has improved the resilience of the company. The group expects to increase its share of revenue from the region to around £600m in 2009, compared with £464m in 2008.

The company’s construction services division is forecast to experience an overall revenue increase in 2009, with a reduction in UK revenue being offset by growth in Canada.

In a statement, the company said: ‘Although we expect our markets to remain challenging, the group has a resilient business mix, a strong order book and substantial pipelines of probable new orders and contract opportunities. Consequently, the group expects to achieve its objective of delivering materially enhanced earnings in 2009.’