Carillion Energy Services boosts owner's profits

THE company formerly known as Eaga, which is now part of support services giant Carillion, is driving growth for its new owner.

Cavity wall and loft insulation by Eaga

THE company formerly known as Eaga, which is now part of support services giant Carillion, is driving growth for its new owner.

Carillion paid £298.4m for the Newcastle-based Warm Front supplier in April and has rebranded it Carillion Energy Services.

The business, which remains based on Tyneside, was highlighted as boosting sales at the group, which also operates in the construction sector.

“Earnings growth in 2011 is being driven primarily by the acquisition of Carillion Energy Services and by an improvement in our total operating margin, which reflects our ongoing focus on applying strict contract selectivity, financial discipline and cost management,” Carillion said yesterday.

The Wolverhampton-based group, which maintains everything from railways to telephone lines and operates across Europe, Canada and the Middle East, is also expecting to benefit from an increase in public sector outsourcing for this division.

Carillion’s support services, into which Eaga was integrated, is responsible for around half of the group’s underlying profits.

The group said: “The value of our support services order book plus probable orders continues to provide good revenue visibility and our pipeline of specific contract opportunities remains very strong.

“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.”

Since the company’s half-year results, it has won work worth around £670m and is chasing further contracts in the Middle East and Canada.

It expects to reduce its debts at the end of the year to below £125m – better than the £150m target it set itself after the Eaga takeover.

Carillion said: “In 2011, we expect to deliver strong earnings growth in line with market expectations, despite market conditions remaining challenging.”

Analysts now expect Carillion’s full year pre-tax profits to be in the region of £206.26m when its results are published at the end of February.

It targeted Eaga for takeover after the Newcastle business was forced to reassess its future when the Government radically cut the Warm Front budget. The scheme, which provides funding to help insulate the homes of elderly people, is expected to come to a complete end in 2013.

In August, Carillion said the purchase of Eaga had dragged down its bottom line but expected to save £15m a year by the end of 2013 from cost savings at Carillion Energy Services, which includes the loss of 700 jobs from its 1,400-strong workforce providing the Warm Front home insulation scheme.

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