Carillion's first full year results since its demerger from Tarmac plc last July show operating profit (after exceptional items) up 11.3% to £41.3 million producing pre-tax profit of £35.1 million on turnover 3.4% lower at £1.8bn.
Carillion says it will continue to pursue the strategy that has seen the proportion of turnover that comes from Private Finance, Infrastructure Management and Services operations more than double to 36%, over the last five years.
Chairman Sir Neville Simms commented: "Our order book has nearly trebled over the last five years to £2.2 billion, but more importantly orders in our growth sectors of Private Finance, Infrastructure Management and Services have increased tenfold to £1.4 billion, some 64% of total orders.
"I am therefore confident that, against a strengthening economic background, we have created in the UK and our overseas regions an excellent platform from which to benefit from the growing trend in outsourcing by both the public and private sectors."
Turnover in the Services operation increased by 12% to £323 million, with operating profit up 54% to £8.6m and margins up from 1.9 % to 2.7%, as a result of an improved operating performance.
Carillion says its services order book reduced from £338 million at the end of 1998 to £277 million as a result of a more selective approach in M&E contracting and the fact that the major facilities management orders won during the year were in its PFI segment.
The company's position as a leading supplier of non-clinical support services to the NHS was reinforced by the award of three new contracts under the PFI schemes for South Glasgow University Hospital NHS Trust, North Staffordshire Combined Healthcare NHS Trust and Swindon and Marlborough NHS Trust - adding to the five district general hospitals where it already provides integrated facilities management services.
The first outsourcing contract in the Constabulary sector for property management services was awarded to Carillion Services by the Metropolitan Police. The award of three further contracts by the Ministry of Defence for property management services for its housing estate has consolidated Carillion's position as one of the MOD's leading suppliers in this market.
Carillion Services also developed framework agreements with Bass Leisure Retail, Whitbread, Somerfield and Accor Group, for the provision of consultancy services.
Carillion claims to be the UK leader in Private Finance construction with a large and growing portfolio of contracts that offer "premium construction margins and predictable long term cash flows from equity investments, facilities management and maintenance."
Turnover and operating profit for the PFI division remained broadly unchanged at £95 million and £5.0 million but Carillion says this does not yet reflect the growing momentum in its private finance activities. "As more projects reach financial close and move forward into the construction phase, turnover and, more importantly, profit, are expected to increase sharply."
The company says it will use its PFI base to broaden its activities during this year to include opportunities in the defence, education and social housing sectors. Carillion also intends to pursue selected PFI opportunities in its international regions.
Carillion's share price remained depressed following the results, unchanged at 83p yesterday. The FT commented, "Despite the emphasis it places on its move to higher-margin activities, analysts remain cautious. The City has yet to work out how to factor long-term PFI projects into its valuations."
Along with Amec, Carillion is in the running for BT's major property services outsourcing initiative Project Jaguar. A decision on this is expected some time next month.
To read an interview with Carillion Services MD Gordon Bryden Click here
For background on Carillion visit www.carillionplc.com
Richard Byatt
