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Carillion trading update: support services boost turnover and profit

Carillion’s support services arm will contribute two-thirds of the group’s total operating profit this year.

In a trading update on 2016 ahead of its preliminary results, the firm said that overall revenue and profit growth had been led by its support services arm, which it said had contributed 57 per cent of its total operating profit last year.

However, overall operating margin across the business is expected to be slightly lower, with reduced contributions to profit from the group’s Middle East construction arm, where margins fell year on year.

Its UK and Canada construction business is on target to achieve similar figures to last year, with margins remaining between the group’s target of 2.5 and 3 per cent.

The group added that it expected these levels of revenue, profit and margin to be maintained throughout 2017, with the firm boasting a £2.6bn construction order book and a £10.9bn pipeline of contract opportunities.

Construction contract wins in the past six months include a £160m regeneration scheme in Durham and a 506-home two-tower development for Select Property Group in Manchester.

The contractor was also given the green light for the £96m Lincoln Eastern Bypass last month, but missed out on HS2’s enabling works contracts altogether, alongside joint venture partners Eiffage and Kier.

In support services, Carillion expected an increase in operating profit, revenue and operating margin this year after benefiting from full-year contributions of contracts started in 2015, alongside new contracts won in 2016.

The firm expected its support services division to have an order book of around £12bn at the end of 2016, after posting an order book of £12.7bn in 2015.

Major contract wins for support services this year include a seven-year £350m FM deal with Nationwide Building Society.

However, the support services arm has not been without its problems this year, after news emerged last month that Nottingham University Hospitals Trust is looking to terminate a five-year £200m estates and facilities contract with Carillion amid concerns over standards.

In PPP (public-private partnership) projects, Carillion said it expected a steady flow of pipeline opportunities in the UK, particularly in health and transport.

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