Euro crisis puts brakes on MidEast projects - Carillion
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Uncertainty caused by the euro-zone crisis has put the brakes on some infrastructure projects in the Middle East and Britain, support services and construction firm Carillion Plc said on Wednesday.
Carillion, which maintains some of Britain's railways and military bases and has a strong construction presence in Canada and the Middle East, said market conditions in the first six months of 2012 had been challenging, although its pipeline of potential work had grown to 35 billion pounds ($54.9 billion).
"The uncertainty this year is probably a result of the euro crisis, certainly in the UK and a little bit in the Middle East," Carillion Chief Executive Richard Howson told Reuters.
Investec analyst Andrew Gibb kept his "buy" rating on the stock but dropped his pretax profit forecast to 227.5 million pounds from 231 million.
"There remains a lot to do in terms of convincing the market as to the longer-term growth prospects of the business, but the balance sheet and broad geographic spread do provide some reassurance," Gibb wrote in a research note.
The Middle East represents around 20 percent of group profit for Carillion, which is aiming to benefit from huge infrastructure spending in the region driven by events like the Qatar 2022 Football World Cup and a rising need for social infrastructure in places like Oman and Saudi Arabia.
While many projects remain in prospect and bidding is intense, timing of work is unclear. Carillion, which is well established in Abu Dhabi, Oman and Dubai, has had some bids lodged for up to 15 months without resolution.
"There's plenty of opportunity (but) ... decisions aren't being made as quickly as they usually are," Howson said.
A retreat from project financing by many of Europe's banks, which fund large amounts of Middle Eastern work, has spread quickly this year, with a strict hold on funding requests likely to remain in the absence of a clear resolution for the euro zone sovereign debt crisis.
Carillion, as expected, said its first-half revenue would be lower than the 2.4 billion pounds it posted a year ago, due to a decision to shrink its UK construction unit in line with poor market conditions.
It remains in line to meet full-year targets.
British construction activity fell at its fastest pace in 2-1/2 years in June, according to a survey, as an uncertain economic outlook and bad weather took their toll.
Carillion said it expected new opportunities to come from Britain's 250 billion pound, five-year National Infrastructure Plan, much of which is likely to be privately financed, although progress around the government's PFI review had been hampered by euro-zone distractions.
The group also pointed to Canada's growing number of private finance hospital and school projects, driven by a C$35 billion programme in Ontario, and a "steady stream" of large bundled service contracts coming to market from cash-strapped UK councils as reasons for optimism in the medium term.
It said it remained on track to increase revenue to around 1 billion pounds in both Canada and the Middle East by 2015.