Building services firm Carillion's share price is tumbling after it revealed profit fell in 2016

Courtney Goldsmith
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Carillion's profit fell in 2016, but it has a strong pipeline of projects for the year ahead
Carillion's profit fell in 2016, but it has a strong pipeline of projects for the year ahead

Carillion's shares are tumbling after the building support services firm revealed a drop in profit for 2016.

The figures

Pre-tax profit fell five per cent to £146.7m in the year to the end of December while total revenue grew 14 per cent to £5.21bn.

In 2016, £4.8bn was made from new and probable orders. The firm said it has a high-quality order book with probable orders worth £16bn, providing it a strong platform for 2017. Its pipeline of contract opportunities is worth £41.6bn, Carillion said.

Carillion's proposed full-year dividend per share increased one per cent to 18.45p.

Shares in the FTSE 250-listed firm dropped more than five per cent in morning trading.

Why it's interesting

Carillion, which maintains British railways, roads and military bases, said its profit was down but in line with expectations because of delays in government spending since the Brexit vote as well as slower business in the Middle East due to low oil prices.

Its performance was led by growth in support services, which contributed more than two thirds of total operating profit, more than offsetting reductions from its public private partnership projects and Middle East construction services.

In January, the firm's joint venture bagged a £160m contract to build a real estate development in the heart of Dubai's central business district.

What Carillion said

Chairman Philip Green said:

In 2016, Carillion's performance was led by revenue growth and an increased margin in support services, together with good cash flow. Given the size and quality of our order book and pipeline of contract opportunities, our customer-focused culture and integrated business model, we have a good platform from which to develop the business in 2017.

We will accelerate the rebalancing of our business into markets and sectors where we can win high-quality contracts and achieve our targets for margin and cash flows, while actively managing the positions we have in challenging markets. We will also begin reducing average net borrowing by stepping up our ongoing cost reduction programmes and our focus on managing working capital.

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