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Carillion's acquisition strategy and tight control of costs is paying off

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The support services firm Carillion (LON:CLLN) gave an upbeat assessment of its prospects this morning, as it said it is on target to meet City profit forecasts.

Earnings growth is being driven by the recent acquisition of energy saving specialist Eaga, a firm control of its cost base and a switch to higher margin business.

“Outsourcing by public sector organisations continues to account for a major proportion of our current bidding activity and pipeline, consistent with our expectations that substantial growth as a result of increased public sector outsourcing would only come through during 2012 and beyond,” the company revealed in a trading update this morning.

It also revealed cashflow remains strong, which means its net debt will fall to around £125 million by the year-end – down from £298.4 million last year, and below the company’s targeted £150 million ceiling.   

Carillion said it continues benefit from the strategy of reducing the size of its UK construction business, with annual revenues expected to fall by around one-third to £1.2 billion in 2013.

“This strategy anticipated cuts in government spending on construction and is also helping us to support margins as we avoid bidding for low margin work in the increasingly competitive UK market,” the company revealed.  

Quick facts: Carillion

Price: 14.2 GBX

LSE:CLLN
Market: LSE
Market Cap: -
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