Carillion has changed its overseas focus, scaling down its general construction activities in Canada while focusing on specific contracts in the Middle East.
In the firm’s full-year results for the 2016 calendar year it stated that trading conditions in construction in the Middle East and Canada continue to be challenging, which called for its change of direction.
Carillion said it is scaling down its general construction activities in Canada to focus on more profitable private public partnerships projects and in the Middle East it is now focused primarily on winning contracts with the support of UK Export Finance, helping to support margins, prompt payment times and good cash flow.
The changes were announced in the latest results, where revenue for the overall group jumped 14% to £5.2bn in 2016, helped by the uplift in UK construction turnover from £1.2bn to £1.5bn.
Support services continues to be the main profit driver, although revenue growth at the division was more modest, up 7% to £2.71bn.
Underlying margins across the business fell from 5.3% to 4.9%, due to decreases for Public Private Partnership projects and its Middle East construction services.
Underlying pretax profit was up 1% at £178m, but reported pretax profit fell 5% to £146.7m.
Explaining its new strategy in the Middle East, the report said: “This reflects our strategy of bidding only for contracts that meet our strict selectivity criteria, which focuses rigorously on identifying and managing risks in order to deliver our target margins and cash flows.”
Elsewhere contractor Costain announced in its latest results that it would be ploughing its resources into technology.
In the firm’s results for the year to 31 December 2016, pretax profits were up to £37.5m from £29.9m as turnover increased to £1.7bn from £1.3bn.
The group’s infrastructure division saw operating profit rise to £56.6m from £50.9m on turnover up to £1.2bn from £996m.
The Natural Resources division made a loss of £12.6m on turnover of £377m following further problems with the Greater Manchester Waste Disposal Authority PFI contract where the company set aside another £15.1m in costs and provisions.
Speaking about its focus on technology for the future, Dr Paul Golby, chairman of Costain, said: “Our major customers are committed to spending billions of pounds to improve people’s lives by enhancing the UK’s energy, water and transportation infrastructures. In order to deliver solutions to their increasingly complex requirements, Costain will continue to provide the broadest range of innovative integrated services and technology-based solutions.
“The group’s continuing success is, therefore, the direct result of its ‘Engineering Tomorrow’ strategy and the deliberate acceleration of growth, both organically and by targeted acquisition.
“Costain is well-positioned to take advantage of the opportunities that lie immediately ahead and this, combined with the good visibility we have over the medium-term, reinforces our confidence for the future.”
