Carillion 's (CLLN) shift towards its support services business is bearing fruit. The division contributed more than two-thirds of the group's £254m underlying operating profit in 2016 (from £244m in 2015), helping to offset weaker construction markets.
Capitalising on this, chief executive Richard Howson said the group will focus even more resources in the support services segment. The operating margin here expanded by 90 basis points to 6.7 per cent, while margins in construction fell as lower crude prices weighed on contract awards from oil-producing states.
Another management focus will be to reduce net borrowing, which jumped by 29 per cent to £219m, mainly due to adverse changes in foreign-exchange rates. That said, this is still well within the £1.5bn of funding available to the group, and with respect to the dividend, underlying earnings cover remains strong at 1.9 times.
New and probable orders of £4.8bn compared favourably with the £3.7bn secured in 2015, and the pipeline edged higher as a result. Revenue visibility was down 10 percentage points to 74 per cent, but Mr Howson said this had grown to 82 per cent since the year-end.
Analysts at Stifel are forecasting adjusted profit before tax of £181m, giving adjusted EPS of 34.3p in 2017 (from £178m and 35.1p in 2016).
| CARILLION (CLLN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 216.8p | MARKET VALUE: | £933m | |
| TOUCH: | 216.6-216.9p | 12-MONTH HIGH: | 310p | LOW: 196p |
| DIVIDEND YIELD: | 8.5% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 163p* | NET DEBT: | 30% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 4.40 | 165 | 34.6 | 17.25 |
| 2013 | 4.08 | 111 | 23.3 | 17.50 |
| 2014 | 4.07 | 143 | 28.0 | 17.75 |
| 2015 | 4.59 | 155 | 30.9 | 18.25 |
| 2016 | 5.21 | 147 | 28.9 | 18.45 |
| % change | +14 | -5 | -6 | +1 |
Ex-div: 11 May Payment: 9 Jun *Includes intangible assets of £1.67bn, or 388p a share | ||||
