Carillion trading stays strong despite pre-election jitters

Emma Haslett
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The company was spurned by Balfour Beatty this time last year (Source: Getty)

Carillion chief executive Richard Howson could be forgiven for sporting a slight smirk. After Balfour Beatty insisted it didn't need a £3bn merger with the construction giant last year, then issued a profit warning last week, it's a different story for its prospective benefactor, which this morning said it expected a significant increase in first-half revenue. It also announced a new £80m contract from BP in Oman.

The figures

In a trading update this morning, construction giant Carillion said it was on track to deliver "healthy full-year revenue growth", with strong first-half operating cashflow.

Net borrowing is expected to increase modestly - to £200m, up from £177.3m in the six months to the end of December. But it added that despite pre-election jitters, it started 2015 with secured and probable orders worth £18.6bn, with revenue visibility of 85 per cent, which is expected to have increased to 96 per cent in the first six months of the year. However, those orders have slipped very slightly, to £17bn.

Meanwhile, Carillion's pipeline has increased to more than £40bn, from £39.2bn at the beginning of the year.

Why it matters

Last year wasn't an easy one for Carillion, which was spurned by Balfour Beatty because of an argument over one of its subsidiaries.

And construction companies have generally warned of uncertainty around the General Election, as various parties threatened a mansion tax. However, things seem to have picked up since the Conservatives won their surprise victory.

Things seem to be particularly strong in Carillion's Middle East construction services division, which said first-half revenues will "increase substantially" compared with the same period in 2014, which reflects the "phasing of new opportunities coming to market".

Presumably those new opportunities also include an £80m contract to build an operational base and accommodation complex for BP's Khazzan gas project in Oman, which it also announced this morning. The contract involves a residential complex for 250 workers and "other infrastructure buildings".

What Carillion said

Having entered 2015 with record revenue visibility, the group continues to be in a strong position to deal with the inevitable effects of the UK General Election on the pace of contract awards, which has slowed, as expected, in the first half of the year. Therefore, with a strong order book, a growing pipeline of contract opportunities and the prospect of market conditions continuing to improve, our expectations for 2015 and for the medium-term remain unchanged.

In short

A much-improved year for Carillion, now it's not bickering with Balfour Beatty. As for many of its rivals, the Middle East is the land of opportunity - in the near term, at least.

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