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Carillion eyes Middle East expansion

Carillion expects to double the size of its Middle East and Canadian businesses over the next five years and may move staff to the regions from the UK, according to finance director Richard Adam.

The UK’s second largest contractor by turnover last week posted pre-tax profit of £58.8 million in the six months to 30 June 2010, up from £50.1m in the same period last year. Turnover fell by 11 per cent to £2.5 billion.

The Middle East business reported that revenue, including share of joint venture income, was down by 44 per cent to £180.5m.

But Mr Adam said a new focus on markets such as Oman, Qatar and Abu Dhabi should help revenues increase dramatically over the next few years.

Carillion does not report its Canadian business specifically, but is working on a number of public-private partnership deals in the country.

Mr Adam said: “We are hoping to double the size of our Middle Eastern and Canadian businesses in the next three to five years.

“We have an £8bn bid pipeline in the Middle East, mainly consisting of large-scale infrastructure projects.

“We hope to increase revenue by £1bn in the region, and as we grow this business we can move staff from the UK construction business, which we are reducing in size in line with our strategy there.”

The UK construction business is expected to be scaled down over the next few years, with a target of reducing turnover from £1.8bn in 2009 to £1.2bn in 2012.

Deliberately downsizing the UK construction business last year put Carillion in an ideal place ahead of the public sector spending cuts, Mr Adam said.

It was now able to “pick and choose contracts” that offered attractive returns.

Carillion’s construction turnover, including Canadian income, increased slightly to £1.05bn in the first half of 2010 from £1.03bn in the same period in 2009.

Mr Adam said: “There are a number of PPP contracts we are working on in Ontario and Alberta. The PPP market is very well developed in Canada and we are ideally placed to win more work there.”

Carillion is also keen to exploit what it sees as a potential increase in UK government outsourcing over the next three years.

While no specific plan is identified to deal with the fallout from the forthcoming spending review, the announcement is expected to lead to a number of outsourcing opportunities.

Given this expected growth, Carillion expects to increase its workforce over the next few years.

It secured more than £3bn of new orders during the first six months of the year, with the firm’s overall order book increasing to £18.9bn compared with £17.9bn at the end of December.