UK-based support services provider Carillion Plc (CLLN.L) Thursday said it is on track to make further progress and deliver earnings growth in the full-year 2011, despite challenging market conditions. The company also backed its medium-term organic growth outlook.
Providing a trading update for the six-month period ahead of its interim results announcement on August 24, Carillion said it continues to perform well with strong growth in underlying earnings. Group operating margin remains high, and margins in support services and construction services excluding the Middle East are expected to increase.
The company also forecasts the first-half order book to remain strong, with a record pipeline of contract opportunities.
Among Carillion's business segments, support services still performs well, and its operating profit is projected to rise in the first half, contributing over half of the group's total operating profit.
The company attributed the support service's operating profit performance to the expected post-acquisition contribution from Carillion Energy Services, along with healthy segmental operating margin, which is anticipated to be broadly in line with the prior-year period.
Synergy cost savings from the Carillion Energy acquisition are now expected to increase to 15 million pounds per year by 2013 from 9 million pounds per annum previously estimated, with one-off costs of 20 million pounds, Carillion noted.
The company also anticipates that full-year revenue of support services will be higher and operating margin will remain strong. The positive outlook in support services remains unchanged, it said.
Further, the company said it is looking for strong first-half revenue from the construction services in the Middle East where the business continues to perform well. The segment's operating margin, however, will be lower than the prior-year period, as anticipated earlier. Regardless of this fact, Middle East's operating profit is projected to grow in the six-month period, driven by higher revenue.
In the full-year, we expect to see an improvement in our operating margin and to deliver growth in operating profit.
The company's construction services excluding the Middle East is estimated to deliver operating profit growth in the first half, despite lower revenue, supported by a continuing improvement in operating margin. Carillion also foresees full-year operating profit to be higher with improving operating margin.
Moving ahead, Carillion confirmed its medium-term organic growth objectives, namely substantial growth in support services from 2012 onwards and the doubling of annual revenues in the Middle East and in Canada over three to five years, around 1 billion pounds in each business.
CLLN.L is trading at 385.10 pence on the LSE, up 1.20 pence or 0.31 percent, on a volume of 4.18 million shares.
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