SUPPORT services and construction group Carillion buoyed the markets with a promise of increased profits yesterday – but warned that 1,500 staff are likely to lose their jobs.
The company, which acquired former Newcastle plc Eaga earlier this year, said it expected demand for energy services and outsourcing to play a key role in driving growth in 2012.
Shares in the business rose after Carillion said that integration of the former Eaga business – now known as Carillion Energy Services (CES) – was “well ahead of expectations”.
It added: “We continue to target strong returns from this acquisition.”
It said that it planned to “extend the restructuring of CES to deliver a substantial further improvement in overall operational efficiency”.
Carillion said last week that some 4,500 staff – including around 800 in the North East – had been warned their jobs were at risk due to Government plans to halve state subsidies for solar panel schemes.
After yesterday’s trading update to the market, the business told employee representatives that it is likely 1,500 jobs will go. It said it did not know how many of those were likely to be in the North East.
In its trading statement, the firm said: “We now propose to downsize our solar photo voltaic operations, following the Government’s proposed changes to Feed-in-Tariffs, and to extend the restructuring of CES to deliver a substantial further improvement in overall operational efficiency.
“Total cost savings are expected to increase from £15m per annum to £25m per annum by the end of 2013 and the one-off cost of delivering these savings is expected to increase to £40m, which includes a provision of up to £10m in respect of downsizing our solar photovoltaic operations.”
The company said it welcomed the measures announced by the Government in its ‘Green Deal’ which aims to reduce Britain’s carbon emissions by improving the energy efficiency of properties. It said the measures should “kickstart at least £14bn of investment over the next ten years”.
The statement added: “The group’s ability to perform well and deliver strong profit and earnings growth, despite the current challenging market conditions, continues to reflect the success of our strategy in creating a resilient and well-balanced UK support services and international business mix.”
Carillion added the CES division was expected to benefit from increased outsourcing by central and local government. “We have a very strong long-term order book in the UK. Local authority outsourcing pipeline is now filling very well and through 2012 and 2013 we will see that work coming to fruition,” said chief executive John McDonough.
A Thomson Reuters I/B/E/S poll of 17 analysts suggested the group is expected to post a full-year pretax profit of between £164.65m and £213.9m, with a consensus of £205.86m.
Investec analyst Andrew Gibb said: “The group has delivered on what it set out to achieve in 2011 and is in a strong position for 2012. Its focus on margins and cash remains the right strategy.”
Shares in the FTSE 250 firm closed up more than 4% at 319.40 pence.
