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No slowdown for the major players

FINANCE - City Site

THE FINANCIAL results from the major contractors to date suggest the impact of any economic slowdown among the quoted groups seems to have been confined to the house builders and builders merchants.

Figures over the past week from Balfour Beatty, Carillion and Interserve were all in line with or better than expectations, with all three sporting strong order books and healthy cash positions and reporting good progress with their PFI interests.

The stock market was impressed both with the £289 million valuation Balfour put on its UK PFI assets and the group's strategy to look at spending some of its £315 million cash on acquisitions, possibly in the US or Germany. Having missed out on Mowlem, Balfour may feel almost dutybound to do some form of deal soon.

Yet amid all the corporate manoeuvring, it is clear the major groups are doing pretty well out of the larger end of UK construction at the moment, particularly in defence, health and education.

The star performer at Carillion was its construction services arm, where operating profits rose by 35 per cent and growth in UK building and developments helped increase its turnover by over a fifth. The City will also have been pleased to see lower bid costs and overheads on PublicPrivate Partnership projects, helping profits at its investment arm. With 80 per cent of its UK building order book secure for this year, Carillion is taking full advantage of a strong market.

Indeed a survey from Savills last week pointed to the strongest rise in commercial activity for a year in February. Private sector office activity saw the sharpest improvement, although public sector activity was also rising and, the agents suggest, the outlook for industrial and warehouse activity is pretty bright.

Although some markets remain tough ? Carillion's transport order book dipped 8 per cent and it expects UK rail to remain challenging ? the majors seem nicely set up for another good year.