Carillion awaits Middle East contract flurry
London, October 4, 2012
Support services and construction firm Carillion is in line for potential contracts in the Middle East worth more than GBP3 billion ($4.82 billion) in the next four months as infrastructure projects in the region show signs of life.
Decisions on many Middle Eastern construction contracts have run into planning delays on large scale developments and financing bottlenecks due to the impact of the euro zone crisis on banks. But Carillion said on Thursday it was hopeful of imminent awards.
"It has been a frustrating year in the Middle East, not because the opportunities aren't there, but because decisions have been slow, which is why we are still optimistic about the region," chief executive Richard Howson told Reuters.
"We are well positioned for a number of large contracts, particularly in Qatar and the United Arab Emirates," he said, adding that the construction sector in Oman was also thriving on increased spending on airport and hospitality infrastructure.
Carillion, which maintains some UK railways, roads and military bases, is aiming to double revenue in the Middle East and Canada to around 1 billion pounds each by 2015.
It said so far in the second half of the year it had won 185 million pounds of new and probable orders in the Middle East, a region which generates around 12 per cent of group revenue. This compares with 201 million pounds of work in the first half.
Shares in the FTSE250 firm rose 2.3 percent to 283.4 pence at 1005 GMT.
Investec analyst Andrew Gibb retained a "Buy" rating. "The pipeline of contract opportunities remains strong, and the new orders in the Middle East are particularly encouraging. This should reassure some about the improving outlook in the region," Gibb wrote.
The group is aiming for several private finance school and hospital projects in Canada. In the UK, it is shortlisted with Spanish construction firm FCC for a Royal Liverpool Hospital PFI project and facilities management contract worth a total 800 million pounds, due to be awarded by the end of October.
Carillion will also find out this month if it has won a 600 million pound energy saving contract with Birmingham City Council. The value could rise to more than 1 billion pounds if it is extended across the West Midlands.
Sealing this deal would help it prove the rationale of last year's 306.5 million pound acquisition of energy firm Eaga, which some analysts considered expensive. The firm estimates the size of the UK energy services market at 22 billion pounds.
"This is an emerging sector and I think the important point is Carillion wouldn't have been in the space without the Eaga acquisition. We will see the benefit over the next few years," Howson said.
Carillion, which has reduced its UK construction arm in line with a shrinking market, also said on Thursday that its third quarter performance had been in line with expectations to produce improved full-year operating profit margin.
It is expected to post a full-year pretax profit of 210.22 million pounds, according to a Reuters poll of 14 analysts.
In August, the group posted a 1 per cent rise in underlying first half pretax profit and said it had identified 35.6 billion pounds worth of potential work, including a large portion of public sector opportunities. – Reuters