Carillion's orderbook jumps to record £20bn

Housebuilders might be screaming and tearing their hair out, but Carillion is as happy as Larry. This morning the construction group reported a record forward orderbook worth £20bn, a rise of £4bn since the start of the year.

In addition, Carillion has a pipeline of probable new orders worth a further £4.1bn (figure six months ago: £3.6bn).

Carillion has published its latest interim results covering the six months to 30 June 2008.

John McDonough, chief executive, said: “Carillion has continued to perform strongly. Results are slightly ahead of our expectation, which reflects the group’s increased resilience.

“New order intake has remained healthy. With a substantial orderbook and an overall positive outlook in our businesses, the group remains on track to make strong progress in 2008 and deliver enhanced earnings in 2009.”

Carillion’s latest interim pre-tax profit of £27m is 42% higher than the comparable figure last year, which was a figure of £19m.

Turnover was also higher at £2.4bn (comparable figure in previous year: £1.9bn).

Despite McDonough’s enthusiasm, the results show Carillion to be achieving a profit margin of just 1.1% which is below the industry average. However the latest figure is marginally higher than the group’s previous margin of 1.0%.

Carillion completed the acquisition of Alfred McAlpine on 12 February this year. It paid £555m, the sum being raised in the form of:

• 113m new Carillion shares
• £172m in cash
• £1m of loan notes.

McDonough said today: “The integration of Carillion and McAlpine is progressing well. The overall benefits are exceeding our expectations.”

Integration cost savings will reach a run-rate of £40m a year by the end of 2009, an increase on the original expectation of a figure of £30m.

Absolute cost savings will be:

• £15m in 2008
• £30m in 2009
• £40m in 2010

The total one-off cost of delivering these savings has been put at £40m.

Goodwill arising from the McAlpine acquisition has been put at £615m.

Carillion’s net borrowing at the end of the latest six-month period was £260m which is £210m higher than at the start of the six-month period. The McAlpine deal added £280m to borrowings.

Other cash outflows included the £32m needed to tackle some of the on-going shortfall in the group’s pension fund. The previous payment was £37m.

McDonough said that net borrowing at the year-end is expected to be below the original objective of £300m.

Segmental analysis shows operating profit contributions, before allocation of £11m of central costs, of:

• £39m – support services (from turnover of £1.2bn)
• £24m – construction services (from turnover of £970m)
• £13m – from PPP partnerships (from turnover of £81m)