Carillion said it was on track to complete its £306m acquisition of Eaga, the home insulation installer hit by UK government spending cuts, as the construction and infrastructure services group posted full-year profits at the top end of brokers’ forecasts.
The company, which has sought to transform itself into a supplier of diverse support services, said opportunities overseas and further outsourcing from public sector bodies should shield it from the worst of capital spending cuts.
Although pre-tax profits rose from £135.9m to £167.9m in the year to the end of December, shares in the FTSE 250 company fell as much as 5.6 per cent.
Sales fell from £5.63bn to £5.14bn following the sale of non-core businesses and equity investments in public-private partnership projects.
Carillion plans to reduce its exposure to UK construction by a third over the next three years to focus more on support services, which range from providing accommodation for British soldiers to maintaining IT infrastructure for BT Group.
Shares closed down 16.26p at 357.74p. Some analysts cited concerns that margins at the company’s Middle East construction business, where sales fell 11 per cent, could be squeezed by greater competition.
A proposed final dividend of 10.7p gives a total for the year of 15.5p (14.6p), payable from diluted earnings per share of 36.7p (30.3p).
In spite of the spending cuts, John McDonough, chief executive, said public sector bodies would continue to pursue “large, complex” projects such as infrastructure maintenance. For example, he said, Carillion – along with Capita – is competing with Mitie for a big outsourcing contract from Edinburgh City Council.
Carillion’s proposed takeover of Eaga has been controversial as the takeover target’s biggest shareholder is an employee trust that has agreed to take Carillion shares rather than cash.
Employees have complained that they could have received about £40,000 cash each. The Eaga Partnership Trust met Eaga’s employee council on Wednesday afternoon.
The council organised an independent anonymous survey to gauge the views of its 4,000 employees – termed partners. Survey results were to be presented at the meeting and will be considered by the trust at a meeting on Thursday.
The trust argues that its assets, including a 36.6 per cent stake in Eaga and about £60m in reserves, are for all beneficiaries – including potential ones – and do not belong to them.
But some disgruntled Eaga employees argue that they were not consulted on a decision that has big financial implications for them.
Drew Johnson, Eaga’s chief executive, said on Wednesday: “The objective was to create a trust to look after the long-term interests of the employees. It wasn’t envisaged that the trust would be wound up and people paid out.”
He added: “I’m disappointed it has come to this. I feel the long-term interests of the beneficiaries can be served by the trust going forward but, equally, the trust has to listen to the views of the beneficiaries.”
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