Fears for UK construction giant

Mar 4 2010 by Iain Laing, The Journal

SUPPORT services firm Carillion says it believes its UK construction revenues will shrink further this year as the firm looks to other markets for growth.

The Wolverhampton-based firm, which posted a better than expected rise in pre-tax profits of 16% to £182.2m for 2009, expects lower demand from the UK while it will also be more selective over contracts.

Carillion is benefiting from its shift towards support services, where it now has its biggest-ever order book due to pressure on both the public and private sector to make savings.

The company added construction revenues from markets such as the Middle East and Canada will grow this year, but “expects the contribution to revenue from the UK to continue to decline in 2010.“

Despite the tough UK markets, the firm did scoop major domestic deals last year – including a £209m deal to upgrade the A1 trunk road in Yorkshire, and a £116m contract to build the new Low Moss prison in East Dunbartonshire, Scotland.

Carillion – spun off from aggregates giant Tarmac more than ten years ago – has boosted its position with the acquisition of rivals such as Alfred McAlpine, which bolstered its support services business.

The company, which grew revenues 4% to £5.4bn in “challenging“ market conditions – boasts an order book of £17.7bn, although this was down on 2008 due to the sales of non-core operations and stakes in public private partnership projects.

Chairman Philip Rogerson said trading conditions were likely to remain tough this year but added the group’s “resilient business mix“ and strong international presence left it well-placed for 2010.

Despite the debt woes of Dubai, Carillion’s Middle East business is mainly centred on Abu Dhabi and Oman, with a £4bn contract pipeline in the region.

Its Middle East operations contributed more than a fifth of the group’s underlying profits, at much higher margins than its other construction activities.