Carillion wins latest multi-million government deal

Blue chip construction firm Carillion has notched up another major government contract win after sealing a deal to build eight new hospitals for the Department for Education.

The Times reports the agreements, "the largest contract in the Department for Education’s £700m priority school building programme", will see the FTSE-250 firm start work on the secondary schools in the Midlands and maintain them in an outsourcing arrangement that will last 25 years.

A consortium of investors including the European Investment Bank and Aviva, the insurer, will fund £138m in construction costs, while the maintenance deal is worth an additional £49m. Carillion, along with infrastructure investor Equifax, will put £11m in equity into the project with a further £2m coming from the Treasury’s Infrastructure UK arm, which will hold a 15 per cent stake.

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The deal comes hot on the heels of Carillion being named as one of three firms that will provide services to various government departments and non-departmental public bodies in a "facilities management services agreement", which will run until 2019. City AM says the outsourcing contract that could be worth up to £4.1bn.

The company was also recently selected as preferred bidder for a £430m contract to build a new hospital for the West Birmingham Hospitals NHS Trust, the Birmingham Post reports. Again, the contract will involve a long-running maintenance agreement that the company expects to yield £130m in revenue over 30 years.

Carillion shares were up slightly in trading on Tuesday to 354p. As a result of its strong pipeline of deals it is currently labelled as a buy by the Investors Chronicle as well as seven equity ratings analysts.