Carillion content with cash flow as analysts keep Balfour on back burner

Construction and facilities management group Carillion said earnings and cash generation both remained in line with expectations for the full year after a robust third quarter.

After returning to positive net cash generation during the first half, the FTSE 250 company's trading and cash flow performance continued to be encouraging.

The mobilisation of new contracts, particularly in support services, will continue to be a major focus during the balance of 2014 and early 2015, having won orders and probable orders worth approximately £3.2bn in the first half.

“Importantly, in winning new work we have maintained our highly selective approach to the contracts for which we bid and therefore the group continues to target revenue growth in 2014 at an operating margin in line with expectations,” the company said in its statement.

The balance sheet remained robust with strong cash flow and net borrowing reducing in line with expectations.

“With trading in line with expectations, a strong order book and a substantial pipeline of contract opportunities, management expectations for 2014 and the group's prospects for growth over the medium term, remain unchanged.”

Carillion, which abandoned its attempted merger with Balfour Beatty in August, will issue a pre-close update on the full year's trading on 10 December with final results on 4 March 2015.

Broker Liberum said that while Balfour is off the table for now, it “would not rule out an accretive merger at some point” as the touted £1.5bn of synergies between the two companies “seems too large to ignore”.

“Even without that Carillion has an attractive go-it-alone strategy. Support Services orders are strong and the Middle East pipeline is growing.”

Shares in the company were up 1.6% to 309.21p by 09:10 on Thursday.