Carillion, the support services and construction group, has made a point of saying it will not be hit too hard by the government's cuts in public spending.
Easy to see why, when investors are increasingly concerned about companies involved in public projects being hit by the planned austerity measures.
And in terms of share price reaction, Carillion's calmness seems to have had little effect: it is down 5.8p at 308.1p. Still, the company said only £0.5bn of its expected £19.7bn order book related to probable orders from the public sector "making us resilient to any potential UK government cuts in this area." As for the axing of the Building Schools for the Future programme, Carillion maintained it would not have a material impact on the company.
Overall it said the cuts in the emergency budget "are in line with our plans for reducing the size of our UK construction business and have the potential to create opportunities for our largest business, support services, over the medium term."
As far as the first half is concerned, Carillion said underlying earnings would increase, despite the sale of two non-core business in the form of Enviros and IT services and the disposal of four Public Private Partnership projects which contributed £14m of profit in the first half last year. Revenue for the half would be below last year's figure following the sales and results from projects in the Middle East slipping into the second half.
Analyst Andy Brown at Panmure Gordon kept his buy rating on the shares, saying:
The drive towards greater services exposure remains a key positive behind our investment case. While the shares have had a strong run in recent months, we continue to see upside. We increase our target price to 350p, which assumes the shares trade on a forward PE of 9 times while also generating a 4.5% dividend yield.
