Carillion, which generates much of its revenue from government contracts and Public Private Partnership (PPP) projects, said margins were improving and that it was benefiting from integration cost savings following last year's acquisition of Alfred McAlpine.

It expects to save 35 million pounds annually in 2009 and 50 million pounds in 2010.

The company, which manages much of Britain's rail and motorway networks, said net borrowing at the half- year would fall to around 150 million pounds from 226.7 million at the end of 2008.

Carillion said its Middle East construction services business would increase 2009 revenues to around 600 million pounds from 464 million pounds in 2008 at margins of around 6 percent due to its strong order book in the region.

Shares in Carillion, which have fallen by 17 percent in the last year, closed at 249 pence on Tuesday, valuing the group at around 990 million pounds.

(Reporting by Rhys Jones; editing by Matt Scuffham)