CARILLION PLC (Reuters) - British construction and infrastructure support services company Carillion (>> Carillion plc) posted a 5 percent fall in profits on Wednesday and said it had seen a slower pace of new order intakes in some markets and lower contributions from public partnership contracts in the UK and Canada.
The company, which helps maintain British railways, roads and military bases, said its pretax profit fell to 146.7 million pounds last year from 155.1 million pounds in 2015, due to some weakness in the construction business.
The company generates three quarters of its revenue in the UK but said it had seen slower business wins in the Middle East, as spending in the region adapts to lower oil prices, and had also experiences some delays in UK public spending decisions since Britain voted to leave the European Union.
"In the UK there was some inertia in residential and commercial buildings and infrastructure ... more around phasing rather than cancellation of projects ... It might have slightly adversely affected our work winning and sales," Chief Executive Richard Howson told Reuters.
Carillion's order visibility for 2017 revenue stood at about 74 percent, lower than the 84 percent visibility it had reported a year ago for 2016 revenues.
"Outlook is reasonably cautious," Peel Hunt's Andrew Nussey wrote in a note, reducing his 2017 pretax profit forecast to 178 million pounds from 191 million pounds and cutting his target price to 200 pence from 225 pence.
Shares in Carillion, which has been increasing its exposure to support services work, were down 5.4 percent at 207 pence at 1016 GMT, making it the third top loser on London's FTSE 250 mid-cap index <.FTMC>.
Most construction and support services companies have weathered the affects of the Brexit vote on customer spending decisions better than many feared thanks in part to strong pipelines of existing work.
However, the uncertainty has caused public and private clients to delay awarding new contracts, causing some outsourcing firms such as Capita (>> Capita PLC) and Mitie (>> Mitie Group PLC) to issue profit warnings and Interserve (>> Interserve plc) to report a slowdown in its UK business.
Nevertheless for Carillion there was still much work to be won in the UK, Howson said, while the Middle East construction market was expected to remain challenging.
"We will choose to focus our resources on the UK construction market and de-emphasize construction in the Middle East ... I think Brexit is a short-term impact and we have to look through that at the broader picture," he said.
Eventually more UK work would come up for grabs as the government makes good on its promise to spend billions on housing and infrastructure, he said, noting that Carillion has bid for two phases of the High Speed 2 railway project.
($1 = 0.8087 pounds)
(Reporting by Esha Vaish in Bengaluru; Editing by David Goodman, Greg Mahlich)
By Esha Vaish
