Shares in Carillion were up 2% this morning, following a second quarter trading update ahead of half year results on the 24th August.
The group expects total revenues to increase in the first half, offsetting a slight reduction in underlying operating margin. Performance will be led by revenue and margin growth in the support Services division, which now accounts for almost two thirds of underlying Group operating profit.
Elsewhere in the Group:
- Public Private Partnership (PPP) projects generated proceeds of £49m from the sale of equity investments in three projects, lower than a year previously, with negative consequences for H1 Group margin.
- Middle East construction services saw revenue and margin contract slightly, partly as a result of one off benefits seen a year previously from reorganisation of staff accommodation facilities.
- Construction services (excluding the Middle East) is expected to see revenues increase, despite a further reduction in Canadian construction revenue. First half operating margin is expected to be towards the upper end of the 2.5-3% target range.
Average net borrowing is expected to be in line with the full-year average for 2015, at around £539m, with net borrowing at 30 June 2016 increasing to around £295m. This is reportedly due to a number of temporary factors including the payment of the final dividend in June and impact of movements in the US dollar exchange rate on the Group's US debt. Full year net borrowing is still expected to decline, with full year cash flow and net borrowing expectations remaining unchanged.
Work winning, order book and pipeline of opportunities all remain strong. New first half orders hit £2.5bn while the order book plus probable orders stands at £17.4bn (Dec 2015: £17.4bn). As a result 2016 revenue visibility stands at 97% (December 2015: 84%). Pipeline opportunities at the half year stand at £41.5bn (Dec 2015: £41.4bn).
Full year performance is expected to be driven by revenue and margin growth in support services, with PPP projects, Middle East construction services and construction services excluding the Middle East performing in line with expectations.
The company expects the EU referendum result to create uncertainty across the UK economy, including for its business, but believes it is too early to predict the extent of the business impact. However, the company flags that it has no significant operations in Europe and has robust plans in place to manage the outcome.
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