A focus on profit margins at the expense of growing revenues has lead to a 17 per cent rise in pre-tax profit for the six months to 30 June at Carillion, the firm said today.
Pre-tax profits for the six months to 30 June increased to £58.8 million, compared to £50.1m at the same stage last year.
Unveiling its results for the first six months of the year, Carillion said revenue had fallen by 11 per cent to £2.5 billion - compared to £2.8bn in 2009.
The fall in turnover is not a concern, according to the firm, as it chose to target profitability rather than chase higher sales. The turnover fall also reflects the sale of a number of PPP equity investments and non-core businesses.
Carillion chairman Philip Rogerson said: “Carillion has continued to perform well in the first half of 2010, despite challenging market conditions in the UK.
“With a well-balanced and resilient UK and international business mix, strong revenue visibility and good positions in market sectors where we have substantial pipelines of contract opportunities, we expect to make further progress in the second half of 2010 in line with market expectations.”
The firm has what it described as “very good revenue visibility” and at 30 June had secured 98 per cent of its forecast revenue for 2010 and 75 per cent for 2011 - based on expected 2010 revenue and secured and probable orders.
It secured over £3bn of new orders during the first six months of the year and the order book has subsequently increased to £18.9bn at 30 June, compared to £17.9bn at the end of December.
The increase in the order book is despite the sale of a PPP equity investment, which removed £0.5 billion from the order book.
In a sign that opportunities are still available, it has a pipeline of probable new orders at the half year stage worth £1bn - down from £2bn last year, as well as what it describes as its largest ever pipeline of contract opportunities.
Revenue in its construction services division was relatively stable at £1.05bn, while profits in the division were up 11 per cent at £12m.
Carillion is still on target to reduce revenue in this division from £1.8bn in 2009, to £1.2bn over the next three years as it positions itself as a support services company, rather than a tradional construction firm.
Support services revenue, including its share of joint venture revenue, fell during the first six months to £1.1bn - down from £1.3bn a year earlier.
Despite the revenue fall, profits actually increased very slightly to £43.2m.
Releasing details of the order book within the support services division, the firm said: “Despite this focus on margins rather than revenue, the intake of new orders in the first half remained healthy and the value of our forward order book for support services at 30 June had increased to £11.3bn (31 December 2009: £11.1bn).”
“The value of probable new orders at the half year was £0.5bn (31 December 2009: £0.6bn), but our pipeline of potential contract opportunities had substantially increased to over £8bn (31 December 2009: £5.5bn).
It expects further opportunities to come in this division from planned reductions in government spending, adding: “As we move through 2011 into 2012 and 2013, we continue to expect outsourcing by central and local government to increase, in order to reduce public expenditure, while continuing to deliver value-for-money public services.”
Revenue in the Middle East fell by nearly half, from £321.6m in 2009, to just £180.5m in the first six months of this year.
Profit in the division fell by 38 per cent, to £15.4m.
The pipeline of future bidding opportunities in the Middle East is strong, currently sitting at £6bn.