Sale of group's IT businesses has also helped reduce debt, says contractor in trading update

Carillion has announced that the strength of its Middle East operations and the sale of its IT services businesses have left it with a strong cash flow, despite the challenging market conditions.

The group made the announcement as part of an update on trading in the first six months of the year, ahead of its interim results on 27 August.

The group said the sale of its IT business, coupled with dividends from its Middle East division and sale of two investments in PPP projects was expected to result in a substantial reduction in net borrowing at the half year, to around £150m, compared with £226.7m in December 2008.

Net borrowing at the half year has fallen to around £150m, from £226.7m in December 2008

The group said growth in Abu Dhabi had been particularly strong, offsetting the anticipated reduction in revenue from Dubai. This was emphasised by the £550m contract secured by Al Futtaim Carillion for Aldar in February to build the Al Muneera development.

Despite a lack of opportunities for new projects in Dubai, Carillion said it was on track to increase its Middle East revenue from £464m in 2008 to around £600m by the end of 2009. It also said it hoped to extend its operations into Qatar in early 2010.

In the UK, the group said it had maintained a strong order book, with new contracts for the NHS worth over £260m, road and rail infrastructure maintenance contracts worth £250m and contracts for private sector customers of £175m.

Carillion also said that its Canadian and Caribbean markets remained positive.