Building firm posts pre-tax profit of £188m for year

Carillion’s profit increased by 7% in 2010, as a focus on margins across its businesses delivered strong results.

In the financial year to 31 December the company made a pre-tax profit of £188.1m, up from £175.5m during 2009. Its sales fell by 9%, ending the year at £5.1bn, down 9% from £5.6bn a year earlier.

In a positive results announcement, Carillion said its cash holdings more than quadrupled to £120.2m, while its order book increased to £18.2bn from £17.9bn, despite the sales of PPP investments reducing it by £500m.

Revenue from Carillion’s UK construction business was £1.7bn during 2010, down from £1.8bn in 2009 - a reduction of 7%.

This is in line with its target to reduce UK construction revenues to £1.2bn over the next few years as it focuses on higher-margin work, as well as construction in the growing Canadian market.

Overall, profits in its construction business increased by 33%, rising from £30.9m in 2009 to £41.2m last year.

Pointing to an increasingly competitive UK construction market, Carillion chairman Philip Rogerson said: “Tightening our already selective approach to UK construction is helping to support margins by enabling us to avoid bidding for lower-margin work.

“We believe this will become increasingly important, because market conditions are expected to become more competitive as a result of the UK government’s decision to reduce capital investment in real terms by around one third over four years.”

Carillion’s rival, Kier, released its results last week and said it increased its profits in the second half of last year. Work already in its order book has secured all of its target revenue for 2011, while it also has 65% of revenue for 2012 in the bag.

In a strong set of figures for the first half of its financial year, for the six months to 31 December, Kier said its revenue was £1.1bn, compared with £1bn in 2009.

It made an underlying pre-tax profit of £31.3m in the last six months of 2010, compared with £24.8m in 2009, up 26% - although this excludes a profit in that year of £7.1m from a sale of land held by its Partnerships Homes division.

Paul Sheffield, chief executive of Kier, said a focus on “keeping on top of the cost base” has helped with margins, while “work has kept flowing in and a focus on efficiency has helped convert this work to profit”.

Kier’s order book for construction and support services was steady at over £4bn, the company said. Sheffield added: “Revenues grew in the support services division and we have had a good period [in terms of contract wins] but the market has got more competitive over the last few months.”