Shares in Carillion (CLLN) fell more than 4 per cent after the support services group warned that total orders in the second half of the 2016 calendar year would be down from the £2.5bn secured in the first half. However, at £4.5bn expected new orders for the whole year will still be up from £3.7bn in 2015.
The second-half slowdown was blamed on a slower pace of contract awards in the Middle East as a result of weak oil prices, while UK government departments were busy reassessing their spending priorities following the EU referendum. The total order book remained significant at around £16bn, although this was down from £17.4bn a year earlier, while revenue visibility for 2017 was lower at 70 per cent compared with 84 per cent for 2016 a year earlier.
However, the support services side of the business is expected to deliver an increase in underlying profits, boosted by major contracts mobilised in 2015 and new contracts secured this year. Around £20m of profit is expected to be realised this year through additional use of the outsourced platform used to operate its back-office arrangements. Even without this, operating margins are expected to be similar to those in 2015, and support services are expected to generate around two-thirds of group underlying operating profits.
