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UPDATE 1-Carillion sees return to revenue growth, after strong first half
July 14, 2015 / 11:14 AM / in 3 years

UPDATE 1-Carillion sees return to revenue growth, after strong first half

(Adds CEO comments, detail)

By Li-mei Hoang

LONDON, July 14 (Reuters) - British support services company Carillion expects to see a return to growth in annual revenue for the first time in five years, after reporting a significant rise in first-half turnover, putting it on track to meet market expectations for 2015.

The company, which maintains railways, roads and military bases, said in a trading update it expected healthy revenue growth for the full year and a steady improvement in market conditions for the rest of the year.

“We are talking about strong double digit revenue growth in the first half of the year ... it is significant,” CEO Richard Howson told Reuters.

The company’s optimism contrasts with rival Balfour Beatty , which last week issued a profit warning putting it on course for another annual loss of up to 150 million pounds. Carillion had abandoned a 3 billion pound merger with Balfour nearly a year ago.

Carillion’s shares rose as much as 3 percent and were one of the top gainers in the FTSE mid-cap index. They have risen 7.2 percent since the beginning of the year, while the FTSE mid-cap index is up 11.2 percent.

Analysts at Jefferies said: “Performance in-line with expectations and no changes to full year outlook. No profit warning, unlike its main peer.”

“We are therefore not changing our estimates. New orders did slow into the election, as expected,” they said in a note.

The company said uncertainty over Britain’s national election in May had delayed public-sector contract awards. But at the half year, it expected the value of its secured and probable orders to have remained strong at about 17 billion pounds ($26.3 billion). Its pipeline of contract opportunities, which was 39.2 billion pounds at the end of 2014, is expected to have risen to more than 40 billion at the half year, it said.

Howson said he expected work in Britain’s public sector, which accounts for around 60 percent of its UK revenue, would pick up in later in the year.

“I think procurement will return to a more normal level but until the (government) departments are clear on where they are going to invest, what they spend, what their budgets are, that procurement is bound to be a little slower.”

Analysts on average expect Carillion to report full-year pretax profit of 178.2 million pounds, according to a Thomson Reuters poll of 10. Pretax profit was was 142.6 million pounds in 2014. Its half-year results are due on August 26.

$1 = 0.6470 pounds Reporting by Li-mei Hoang and Paul Sandle; editing by Kate Holton and Jane Merriman

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