Revenue growth at FTSE 250 construction and support services group Carillion beat forecasts in 2016, but difficulties across a number of its businesses weighed on margins, dragging profits down.
Total revenues climbed 14 per cent to £4.2bn, but pre-tax profit slipped 5 per cent compared to 2015, to £147m.
The company’s underlying operating margin reduced to 4.9 per cent from 5.3 per cent in 2015, as a reduction in margins from its public private partnerships in Canada and construction services in the Middle East more than offset gains in its support services business.
Carillion had previously warned that “reassessed” spending priorities in Whitehall had brought a slowdown in new orders in the UK in the second half of the year.
The group said it has lower revenue visibility for the year ahead than at the same point last year, but said it has “a good platform from which to develop the business”.
In an effort to improve margins, Carillion said it has already pulled out of construction operations in the Caribbean and the general construction market in Canada, and 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”.
Carillion chairman Philip Green (not that one), said:
In 2016, Carillion’s performance was led by revenue growth and an increased margin in support services, together with good cash flow. 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.