Carillion revenue increases as it aims to reduce net borrowing

Facilities manager Carillion’s revenue in 2016 increased led by growth in support services, while the company aims to reduce its net borrowing in the medium-term.

Total revenue rose 14% in 2016 to £5.21m, compared to the previous year and group revenue increased 11% to £4.39m.

This was led by growth in the support services division, which contributed over two-thirds of total operating profit and offset expected reductions in profit from public private partnership projects for government buildings and infrastructure mainly in the defence, health, education, transport and secure accommodation sectors in the UK and Canada, and construction and civil engineering activities in the Middle East.

The underlying operating margin was lower as the company expected at 4.9% from 5.3% and underlying profit from operations fully cash-backed had a 117% cash conversion.

There was a 1% rise in both underlying pre-tax profit of £178m and underlying earnings per share of 35.3p.

However, pre-tax profit fell 5% to £146.7m and basic earnings per share was down 6% to 28.9p.

The FTSE 250 company proposed a full year dividend of 18.45p, up 1%.

Carillion is starting to lay the foundations to cut its average net borrowing in the medium-term by ongoing cost reduction programmes and a focus on managing working capital.

At the end of December, net borrowing widened to £218.9m from £169.8m, while average net borrowing for 2016 increased to £586.5m from £538.9m, and the company sid the increases mainly reflected adverse movements in foreign exchange rates.

Carillion has an order book and strong pipeline of contract opportunities as it gained £4.8bn of new orders and probable orders in 2016 and high-quality order book, including potential orders, worth £16bn.

Looking ahead, the company has revenue visibility of 74 per cent for 2017 and expects over £1.5bn of revenue from framework agreements not yet included in orders, probable orders or revenue visibility, as well as a pipeline of contract opportunities worth £41.6bn.

Chairman Philip Green said: "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."