At Carillion plc's Annual General Meeting today, Chairman, Philip Rogerson, made the following comments on trading in the period 1 January to 2 May 2012.
"Carillion has made a solid start to the year, with progress in line with the Board's expectations.
Market conditions remain challenging, but we continue to have a strong order book and a record pipeline of contract opportunities. Encouragingly, we are beginning to see the award of some of the larger, more complex Local Authority support services contracts that are designed to help these Authorities deliver savings, while maintaining good quality, value-for-money services. In April 2012, we were delighted to be selected by Oxfordshire County Council to provide property and facilities management services that are expected to be worth up to £700 million over the initial 10-year contract period, with an option for the contract to be extended for a further 10 years, subject to performance.
In support services, we remain focused on our strategy for growth, which is supported by recent contract wins, such as that for Oxfordshire County Council, and our pipeline of contract opportunities.
Our portfolio of investments in Public Private Partnership projects is performing well and we will continue our policy of selling equity investments in mature projects and reinvesting the proceeds in new projects.
In Middle East construction services, we continue to target revenue growth, but as we indicated at the time of our 2011 Preliminary Results, revenue will be weighted towards the second-half of the year due to the timing of project starts and completions. As previously announced, the operating margin in this segment continues to move back towards six per cent, as negotiated contracts are replaced with contracts that have been competitively tendered.
In construction services (excluding the Middle East), we continue to benefit from the decision we took in 2010 to re-scale our UK business to align it with a shrinking market, by being very selective in terms of the contracts for which we bid. We expect to complete this re-scaling by the end of 2012, with the operating margin remaining strong as a result of our selective approach.
Carillion continues to have a strong balance sheet and we expect to maintain our track record of delivering cash-backed profit, after adjusting for the effect of completing the re-scaling of UK construction, which, as previously indicated, will result in an outflow of working capital in 2012.
Despite challenging market conditions, with a strong order book and record pipeline of contract opportunities, we remain focused on our strategic objectives of growing support services and of doubling revenues in the Middle East and in Canada, in each case to around £1 billion, by 2015".