Carillion plc Preliminary Results 2010

RNS Number : 1096C
Carillion PLC
02 March 2011
 



 

Annual results for the year ended 31 December 2010

 

Carillion, a leading support services company, continues to deliver strong earnings growth.

 

·        Underlying profit before taxation up 7% to £188.1 million (2009(1): £175.5 million)(2)  - with growth more than offsetting the £17 million of underlying profit before taxation contributed by the non-core businesses and investments in Public Private Partnership projects sold in 2009.

 

·        Total operating margin increased to 4.2% (2009(1): 3.8%) - support services margin increased to 5.2% (2009: 4.9%), Middle East construction services margin increased to 9.6% (2009: 8.5%) and construction services (excluding the Middle East) margin increased to 1.9% (2009: 1.4%).

 

·         Reported profit before taxation up 24% to £167.9 million (2009(1): £135.9 million).

 

·         Underlying earnings per share (eps) up 6% to 39.4 pence (2009(1): 37.3 pence)(3) - basic eps up 21% to 36.9 pence (2009(1): 30.5 pence).

 

·         Proposed full year dividend up 6% to 15.5 pence (2009: 14.6 pence).

 

·        Strong cash flow and balance sheet - cash flow from operations of £230.2 million well ahead of profit from operations of £194.9 million (2009: £268.2 million and £190.1 million, respectively) and net cash at 31 December 2010 of £120.2 million (2009: £24.9 million).

 

·        Total revenue reduced by 9% to £5.1 billion (2009(1): £5.6 billion) - reflecting the effects of selling non-core businesses and investments in Public Private Partnership projects in 2009, the planned re-scaling of UK construction and a focus on margins through contract selectivity and financial discipline.

 

·        Forward order book worth some £18.2 billion (2009(1): £17.9 billion) -  maintained a very strong order book despite the sale of a further Public Private Partnership equity investment that removed £0.5 billion from the order book.    

 

(1)

Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12

(2)

After Joint Ventures taxation of £4.7m (2009(1): £3.9m) and before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information)

(3)

Before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information)

 

Carillion Chairman, Philip Rogerson, commented:

 

"I am pleased to report that Carillion performed well in 2010, building on its strong track record to deliver good earnings growth, despite tough market conditions, particularly in the UK.  Looking forward, we expect the global economic environment to continue to make trading conditions difficult, especially in our UK markets.  However, Carillion has a resilient and well-balanced business mix, good revenue visibility and a record pipeline of contract opportunities. Therefore, the Board believes that Carillion is well positioned to make further progress in 2011 and to achieve its objectives for medium-term growth, namely, to double its revenues in Canada and in the Middle East and to deliver substantial growth in UK support services.

 

"In addition, since the year end Carillion has announced a recommended £306.5 million offer for the acquisition of Eaga plc.  The Board believes the acquisition would be immediately earnings enhancing and would build on the Group's previously announced objectives for growth".

 

The presentation will commence at 10.30 am and a telephone dial in facility (+44 (0) 208 515 2302) will be available for analysts and investors who are unable to attend the presentation.  The presentation can be viewed on Carillion's website at www.carillionplc.com/investors/investors_presentations.asp. A replay facility is also available following the call on Toll Free UK: 0800 358 3474 - Access Code: 4410375#  and Toll Free US: 1 800 406 7325 - Access Code: 4410375#

 

 

For further information contact:

Richard Adam, Group Finance Director

tel: +44 (0) 1902 422431

John Denning, Group Corporate Affairs Director

tel: +44 (0) 1902 316426

Finsbury


James Murgatroyd and Gordon Simpson

tel: +44 (0) 20 7251 3801

 

2 March 2011

 

 

Notes to Editors:

 

Carillion is one of the UK's leading support services companies with a substantial portfolio of Public Private Partnership projects and extensive construction capabilities.  The Group has annual revenue of around £5 billion, employs some 46,000 people and operates across the UK, in the Middle East, Canada and the Caribbean.

In the UK, Carillion's principal market sectors are Defence, Education, Health, Facilities Management & Services, Rail, Roads, Building, Civil Engineering and Utilities Services.

 

In the Middle East, Carillion's principal market sectors are Construction and Facilities Management. In Canada and the Caribbean, the Group's main sectors are Health, Roads Maintenance and Construction.

 

Carillion's portfolio of equity investments in Public Private Partnership projects includes projects in the UK and Canada, particularly in the Defence, Education, Health and Transport sectors.

 

This and other Carillion news releases can be found at www.carillionplc.com

 

Photographs:

High resolution photographs are available free of charge to the media at www.newscast.co.uk telephone

+ 44 (0) 208 886 5895.

 

Cautionary statement

This announcement may contain indications of likely future developments and other forward-looking statements that are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries, sectors and business segments in which the Group operates. These and other factors could adversely affect the Group's results, strategy and prospects. Forward-looking statements involve risks, uncertainties and assumptions. They relate to events and/or depend on circumstances in the future which could cause actual results and outcomes to differ materially from those currently anticipated. No obligation is assumed to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

Key financial figures

 


2010

2009(1)

Change

 

Income statement





Total revenue

£m

5,139.0

5,629.3

-9%

Total Group underlying operating margin(2)

Percentage

4.2

3.8

n/a

Support services underlying operating 
margin(2)

 

Percentage

 

5.2

 

4.9

 

n/a

Middle East construction services underlying operating margin(2)

 

Percentage

 

9.6

 

8.5

 

n/a

Construction services (excluding Middle East) underlying operating margin(2)

 

Percentage

 

1.9

 

1.4

 

n/a

Underlying profit from operations(3)

£m

194.9

190.1

+3%

Underlying profit before taxation(4)

£m

188.1

175.5

+7%

Reported profit before taxation

£m

167.9

135.9

+24%

Underlying earnings per share(5)

Pence

39.4

37.3

+6%

Basic earnings per share

Pence

36.9

30.5

+21%

Dividends





Proposed full year dividend per share

Pence

15.5

14.6

+6%

Underlying proposed dividend cover(5)

Times

2.5

2.6

n/a

Basic proposed dividend cover

Times

2.4

2.1

n/a

Cash flow statement





Cash generated from operations(6)

£m

230.2

268.2

-14%

Underlying profit from operations cash conversion

 

Percentage

 

118.1

 

141.1

 

n/a

Deficit pension contributions

£m

35.2

29.0

+21%

Balance sheet





Net cash

£m

120.2

 24.9

383%

Net retirement benefit liability (net of tax)

£m

182.1

211.1

-14%

Net assets

£m

865.2

772.1

+12%

 

(1)

Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12

(2)

Before Joint Ventures net financial expense and taxation, intangible amortisation and non-recurring operating items (see note 3 to the financial information)

(3)

After Joint Ventures net finance expense of £13.9m (2009(1): £21.8m) and taxation of £4.7m (2009(1): £3.9m) and before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information)

(4)

After Joint Ventures taxation of £4.7m (2009(1): £3.9m) and before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information)

(5)

Before intangible amortisation, non-recurring operating items and non-operating items

(6)

Before pension deficit recovery payments and non-recurring operating items and after dividends received from Joint Ventures

 

 

 

Summary results

 

Carillion performed well in 2010, building on its strong track record to deliver good earnings growth, despite tough market conditions, particularly in the UK. 

 

Underlying profit before tax(1) increased by seven per cent to £188.1 million (2009(2): £175.5 million), with the Group's underlying operating margin increasing to 4.2 per cent (2009(2): 3.8 per cent).  Underlying earnings per share(3) increased by six per cent to 39.4 pence (2009(2): 37.3 pence).

 

Profit continues to be cash-backed, with underlying cash flow from operations of £230.2 million (2009: £268.2 million) substantially ahead of underlying profit from operations of £194.9 million (2009(2): £190.1 million).  Consequently, the Group's financial position remains very strong, with net cash at 31 December 2010 of £120.2 million (2009: £24.9 million).

 

As expected, revenue, including joint ventures, reduced by nine per cent to £5.1 billion (2009(2): £5.6 billion), primarily due to the sale of non-core businesses and equity investments in Public Private Partnership (PPP) projects in 2009, the planned reduction in UK construction activity and an ongoing focus on contract selectivity and financial discipline.  

 

The Group continues to have good revenue visibility, which at 31 December 2010 was 82 per cent(4) for 2011.  This reflects a strong work winning performance, which maintained the Group's forward order book at some £18.2 billion (2009(2): £17.9 billion) at 31 December 2010, despite the sale of a further PPP equity investment during 2010 that removed £0.5 billion from the order book.  Probable orders at 31 December 2010 stood at approximately £0.9 billion (2009: £2.0 billion).  In addition, by the year end, the Group had its largest ever pipeline of contract opportunities, notably in markets where we are targeting strong or substantial growth over the medium term, namely Canada, the Middle East and UK support services.

 

The Board is recommending a final ordinary dividend for 2010 of 10.7 pence per share, making the total dividend for 2010 15.5 pence per share (2009: 14.6 pence).  This represents an increase of six per cent on the total paid in respect of 2009, in line with the Group's policy of increasing the dividend in line with earnings growth.

 

(1)

After Joint Ventures taxation of £4.7m (2009(2): £3.9m) and before intangible amortisation, non-recurring operating items and non-operating items.

(2)

Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12.

(3)

Before intangible amortisation, non-recurring operating items and non-operating items.

(4)

Based on expected revenue and secure and probable orders, which exclude variable work and re-bids.

 

Financial reporting segments and analysis

Operating profit by financial reporting segment

 




Change from



2010

2009(1)

2009



£m

£m

%

Support services


110.4

117.7

-6

Public Private Partnership projects


23.4

30.7

-24

Middle East construction services


47.5

47.0

+1

Construction services (excluding the Middle East)


41.2

30.9

+33



222.5

226.3

-2

Group eliminations and unallocated items


(9.0)

(10.5)

+14

Profit from operations before Joint Ventures





net financial expense and taxation


213.5

215.8

-1

Share of Joint Ventures net financial expense


(13.9)

(21.8)

+36

Share of Joint Ventures taxation


(4.7)

(3.9)

-21

Underlying profit from operations(2)


194.9

190.1

+3

Intangible amortisation


(27.6)

(30.8)

+10

Non-recurring operating items


(9.4)

(15.2)

+38






Reported profit from operations


157.9

144.1

+10

 

(1)

Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12

(2)

After Joint Ventures net financial expense of £13.9m (2009(1): £21.8m) and taxation of £4.7m (2009(1): £3.9m) and before intangible amortisation and non-recurring operating items

 

 

Support services

 

2010

 £m

 

2009

£m

Change from

2009

%

Revenue

            - Group

            - Share of Joint Ventures

 

1,842.1

266.5

 

2,108.3

281.2

 

 

 

2,108.6

2,389.5

-12

Underlying operating profit(3)

            - Group

            - Share of Joint Ventures

 

92.3

18.1

 

102.9

14.8


110.4

117.7

-6

 

(3)  Before intangible amortisation and non-recurring operating items

 

 

In this segment we report the results of our facilities management, facilities services, rail services, road maintenance, utility services and consultancy businesses.

 

Revenue reduced by 12 per cent to £2,108.6 million, in line with our expectations, and reflected the disposal of non-core businesses in 2009, together with an ongoing focus on contract selectivity and financial discipline in order to support margins.  

 

Consequently, the operating margin in this segment increased to 5.2 per cent (2009: 4.9 per cent) with underlying operating profit reducing by six per cent to £110.4 million.

 

We continue to use our extensive capabilities and nationwide resources to target large, complex contracts for the management and maintenance of property and infrastructure.  The breadth and scale of our capabilities, together with our ability to provide innovative solutions to improve efficiency and reduce costs for our customers, is a key strength that helps to differentiate Carillion from its competitors and support our margins in this segment.

 

Our ability to combine our support services capabilities with our project finance, design and construction capabilities to provide integrated solutions for PPP projects, is also fundamental to our success in winning PPP concession contracts and with them long-term support services contracts.  These contracts contributed approximately 25 per cent of revenue in this segment.

       

Despite challenging market conditions, we have continued to win new work, increasing the total value of our support services order book to £11.7 billion at 31 December 2010 (2009: £11.1 billion).  The value of probable orders at the year end was £0.5 billion (2009: £0.6 billion).  We therefore continue to have good revenue visibility, which at 31 December 2010 was 75 per cent(1) for 2011.

 

Furthermore, we have our largest ever pipeline of contract opportunities in support services that has increased by £2.8 billion to some £8.3 billion (31 December 2009: £5.5 billion), primarily as a result of public sector customers, notably UK Local Authorities, seeking to improve efficiency and reduce costs through outsourcing more services.     We have also noticed that Local Authorities are looking to extend the range of services included in outsourcing contracts, which therefore require more bundled or integrated solutions.

 

This, together with the substantial opportunities we have to win new work in 2011, means that we expect support services to  continue to be resilient, despite our expectation that market conditions will remain difficult in 2011.  Over the medium term, we continue to target substantial growth in UK support services, driven primarily by an increase in public sector outsourcing, notably by UK Local Authorities, as they seek to deliver the substantial reductions in running costs announced in the UK Government's 2010 Spending Review.    Given we are targeting large complex contracts that take considerable time to bid, we continue to expect the benefits of more public sector outsourcing to come through towards the end of 2011, leading to substantial growth in 2012 and beyond.  We will continue to support our operating margin in this segment through applying strict selectivity criteria and by maintaining our financial discipline.

 

(1)

Based on expected revenue and secure and probable orders, which exclude variable work and re-bids

 

Public Private Partnership (PPP) projects

 

2010

£m

 

2009(2)

£m

Change from 2009

%

Revenue

            - Group

            - Share of Joint Ventures

 

1.2

310.7

 

1.1

417.3


311.9

418.4

-25

Underlying operating profit(3)

            - Group

            - Share of Joint Ventures

 

10.7

12.7

 

-

30.7


23.4

30.7

-24

 

(2)

Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12

(3)

Before intangible amortisation and non-recurring operating items

 

 

In this segment we report the results of our investing activities in PPP projects. The results of the support services and construction services we provide as part of delivering PPP projects are reported in our support services and construction services (excluding the Middle East) segments, respectively.

 

Our target internal rate of return is 15 per cent on our equity investments in PPP projects over the life of the concession contracts, which are typically between 25 and 35 years.  Once construction of the asset is complete and the project has moved into the operational phase, with the support services contract firmly established, we have the option of selling our equity investments and reinvesting the proceeds in new projects.

 

The market for equity in mature PPP projects remains strong.  During 2010, we sold the whole of our equity investment in the Queen Alexandra Hospital, Portsmouth, and a further five per cent of our equity in the Allenby Connaught project for the Ministry of Defence that reduced our equity interest in this project to 12.5 per cent.  These equity sales generated proceeds of £45.8 million.      

 

In 2010, we added four new projects to our portfolio of financially closed projects - Southmead Hospital, the Rochdale and Wolverhampton Building Schools for the Future (BSF) programmes and the Forensic Services and Coroners' Complex in Toronto - in which Carillion expects to invest a combined total of £68.1 million of equity. 

 

At 31 December 2010, we had a portfolio of 26 financially closed projects in which we had invested some £71 million of equity, and in which we will invest a further £108 million as projects still in the construction phase are completed.  The Directors' valuation of this portfolio at 31 December 2010 was approximately £135 million (31 December 2009: £115 million), based on a discount rate of nine per cent (2009: nine per cent). 

 

At 31 December 2010, our PPP forward order book was worth £2.7 billion (31 December 2009(1): £2.6 billion).  Probable orders had reduced to zero at the year end (31 December 2009: £0.2 billion) as a result of achieving financial close on the four projects for which we were the preferred bidder at December 2009.

  

We have strong market positions in both the UK and in Canada, and we are currently shortlisted for five projects in which we could invest up to a further £148 million of equity and where we expect continuing opportunities to bid for new projects.  In Canada, Infrastructure Ontario is expected to announce a major expansion to its programme of PPP projects in the first half of 2011, which will significantly increase the scale of Canada's current PPP programme of some £10 billion over the next three years.  As the only company currently able to offer fully integrated solutions for PPP projects in Canada, we believe we are particularly well positioned to benefit from this expected increase in investment.  In the UK, the Government is continuing to use private finance to deliver existing infrastructure programmes and has also announced that private finance will play a key role in delivering the five-year, £200 billion National Infrastructure Plan, announced in October 2010.  As the secondary equity market remains strong, we also expect to continue selling investments in mature projects, namely where construction has been completed and the project has moved successfully into the operational phase with the support services contract fully established.  Therefore, we expect to continue generating significant value for the Group through our ability to win and successfully deliver PPP projects into the operational phase. 

 

 

Middle East construction services

 

2010

£m

 

2009

£m

Change from

 2009

%

Revenue

            - Group

            - Share of Joint Ventures

 

190.9

302.1

 

130.2

423.4


493.0

553.6

-11

Underlying operating profit(1)

            - Group

            - Share of Joint Ventures

 

14.0

33.5

 

6.8

40.2


47.5

47.0

+1

 

(1)

 Before intangible amortisation and non-recurring operating items

 

 

In this segment we report the results of our building and civil engineering activities in the Middle East and North Africa.

 

As expected, revenue grew very strongly in the second half of 2010, which contributed £312.5 million to full-year revenue of £493.0 million, reflecting the timing of new project starts.  Consequently, full-year revenue was only some 11 per cent lower than in 2009, compared with the 44 per cent reduction reported at the half year. 

 

Underlying operating profit remained broadly unchanged at £47.5 million, as the effect of lower revenue was offset by an improved operating margin of 9.6 per cent (2009: 8.5 per cent).  This improvement reflects a strong operating performance, the benefit of a number of negotiated contracts and our ongoing efficiency and cost reduction programmes.  Cashflow remained strong, which supported a nine per cent increase in the dividends received from our Middle East businesses.

 

Our markets continue to be strong in Abu Dhabi and Oman, where we secured a number of significant new contracts during 2010.  Notable successes include two University projects in Abu Dhabi, a £570 million contract for New York University and an £80 million contract for the UAE University, and an £80 million contract for an air traffic control tower and other new facilities at Muscat International Airport.  In Qatar, which also has major investment programmes, the new business we established in the first half of 2010 has submitted its first substantial bids.  In general, activity levels in Dubai have remained relatively low, in line with our expectations.  However, we secured one substantial new project in Dubai during 2010, namely a £124 million contract to build two residential towers in Downtown Dubai for which funding is secure.

 

At 31 December 2010, Carillion's share of the forward order book of our Middle East businesses was worth £1.0 billion (2009: £0.7 billion) and our revenue visibility for 2011 was 78 per cent(1).  By the year end, our pipeline of probable new orders had reduced to near zero (December 2009: £0.2 billion), primarily because all contracts are now competitively tendered, rather than negotiated, using procurement processes that generally do not involve a preferred bidder stage.  However, by the year end, our pipeline of contract opportunities had more than doubled to around £8.8 billion, reflecting the strength of our existing markets. 

 

 

We also continue to explore further geographical expansion of our operations in the medium term, into Saudi Arabia, which also has major investment programmes that could offer substantial opportunities for us to grow our revenue in the region. 

 

Consequently, we continue to believe we are well-positioned to make further progress in 2011 towards our objective of doubling our share of revenue from our Middle East businesses to £1 billion over the next three to five years.  We still expect margins in the Middle East to reduce steadily to around six per cent over the medium term as a result of the return to competitive tendering.  But given our prospects for revenue growth we continue to target substantial earnings growth over the medium term.   

 

(1)

Based on expected revenue and secure and probable orders, which exclude variable work and re-bids

 

Construction services (excluding the Middle East)

 

2010

£m

 

  2009

    £m

Change from

2009

 %

Revenue

            - Group

            - Share of Joint Ventures

 

2,202.3

23.2

 

2,264.6

3.2


2,225.5

2,267.8

-2

Underlying operating profit(2)

            - Group

            - Share of Joint Ventures

 

40.9

0.3

 

  31.7

  (0.8)

 

 

 

41.2

30.9

+33

 

(2)

 Before intangible amortisation and non-recurring operating items

 

In this segment we report the results of our UK building, civil engineering and developments businesses, together with those of our construction activities in Canada and the Caribbean.

 

A two per cent reduction in total revenue reflects the first effects of the strategic re-scaling of our UK construction capability, which we announced in May 2010, partially offset by growth in Canada.  The strategic re-scaling of our UK capability, through progressively basing our activities around the delivery of integrated solutions for PPP projects and support services customers, resulted in UK revenue reducing to £1,726.0 million in 2010 (2009: £1,840.6 million).  We expect to continue reducing UK construction revenue over the next three years to around £1.2 billion.  Construction revenue in Canada increased to £499.5 million (2009: £427.2 million), as we make progress towards our target of broadly doubling our revenue in Canada over the next three to five years. 

 

Tightening our already selective approach to UK construction is helping to support margins by enabling us to avoid bidding for lower margin work.  We believe this will become increasingly important, because market conditions are expected to become more competitive as a result of the UK Government's decision to reduce capital investment in real terms by around one third over the next four years.   

 

The benefits of our selective approach together with an ongoing focus on efficiency and cost reduction are evident in our operating margin, which increased to 1.9 per cent (2009: 1.4 per cent), with operating profit rising by 33 per cent to £41.2 million.    

 

We have continued to win new orders consistent with our strict selectivity criteria.  Notable successes in 2010 included the £430 million Southmead Hospital PPP project in Bristol, the £306 million Forensic Services and Coroners' Complex PPP project in Ontario, Canada and UK schools programmes worth approximately £300 million.  Although UK Government curtailed the programme previously known as 'Building Schools for the Future' (BSF), Carillion retained some 68 per cent of its BSF programme schools, compared with an average of around 32 per cent for all contractors, and there was no impact on our order book as no contractually committed schools were cancelled. 

 

At 31 December 2010, we had a forward order book worth £2.8 billion (2009: £3.5 billion) and a pipeline of probable new orders worth approximately £0.4 billion (2009: £1.0 billion), which primarily reflected the highly selective approach we have adopted in order to reduce UK construction revenue.  Our pipeline of potential contract opportunities remained stable at around £7.7 billion (2009: £7.4 billion).

   

In construction services (excluding the Middle East), revenue visibility for 2011 was 89 per cent(1) at 31 December 2010.  This provides a strong platform to continue the strategic re-scaling of our UK business that  we announced in May 2010.  At the same time,  we continue to target strong growth in Canada.  We expect this growth to be driven primarily by the construction of PPP projects, given that the current £10 billion PPP programme in Canada is expected to increase significantly over the next ten years.  Therefore, revenue growth in Canada will largely offset the planned reduction in the UK.  Taking an even more selective approach to UK construction will help to support our operating margin in this segment by enabling us to avoid lower margin work, as we expect the UK construction market to become increasingly competitive, due to the substantial cuts in capital expenditure announced in the UK Government's 2010 Spending Review.     

 

Intangible amortisation

Intangible amortisation of £27.6 million (2009: £30.8 million) relates to the amortisation of intangible assets arising primarily from the acquisition of Mowlem in 2006 and Alfred McAlpine and the Vanbots Group in 2008. 

 

(1)

Based on expected revenue and secure and probable orders, which exclude variable work and re-bids

 

Non-recurring operating items

These costs are summarised in the table below.

   2010

£m

2009

£m

 Rationalisation costs

(9.4)  

(9.9)  

 Office of Fair Trading penalty relating to Mowlem

-  

(5.4)  

 Curtailment gain

-  

0.1  


(9.4)  

(15.2)  

 

 

Rationalisation costs of £9.4 million relate primarily to redundancy and other costs associated with rescaling  the Group's UK construction business to ensure its size reflects the reduction in capital investment indicated in the UK Government's Emergency Budget on 22 June 2010 and confirmed in the Comprehensive  Spending Review in October 2010. 

 

Non-operating items

Non-operating income in 2010 amounted to £16.8 million (2009(2): £6.4 million) and comprised the profit on the sale of two investments in PPP projects.

 

Net financial expense

The Group had a net financial expense of £6.8 million (2009: £14.6 million).  This comprised a net expense of £7.6 million in respect of borrowings (2009: £15.8 million), a net interest charge of £3.6 million (2009: £2.2  million) in respect of retirement benefit schemes and an interest credit of £4.4 million (2009: £3.4 million) in respect of loans to Special Purpose Companies for PPP projects.

 

Taxation

The effective tax rate on underlying profit was 16 per cent (2009: 16 per cent), which is below the UK standard rate of corporation tax, principally reflecting the fact that from July 2009 dividends received from overseas companies are now exempt from UK taxation, together with the utilisation of UK tax losses.  At 31 December 2010 the Group had £306 million (2009: £375 million) of corporate tax losses that are available to reduce future tax payments. 

 

Earnings per share

Underlying earnings per share increased by six per cent to 39.4 pence (2009(2): 37.3 pence). This reflected a strong operating performance in difficult market conditions, notably through improving operating margins through focusing on contract selectivity and financial discipline, supported by our ongoing efficiency and cost reduction programmes. 

 

Dividend

Carillion has a dividend policy of progressively increasing the dividend paid to shareholders broadly in line with earnings growth, after taking account of the investment needs of the business. Consistent with this policy, the Board has recommended a final dividend in respect of 2010 of 10.7 pence, making the full-year dividend 15.5 pence, an increase of six per cent on the total paid in respect of 2009 (14.6 pence). Underlying dividend cover was 2.5 times (2009(1): 2.6 times).

 

(1)Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12.

 

Cash flow

A summary of the Group's cash flow is shown below.

 

 

 

2010

£m

2009

£m

Underlying Group operating profit

148.9

130.9

Depreciation and other non-cash items

32.0

38.8

Working capital

1.2

59.9

Dividends received from Joint Ventures

48.1

38.6

Underlying cash inflow from operations

230.2

268.2

Deficit pension contributions

(35.2)

(29.0)

Rationalisation costs

(15.6)

(17.1)

Interest, tax and dividends

(65.9)

(63.2)

Net capital expenditure

(15.3)

(47.3)

Acquisitions and disposals

2.7

142.7

Other

(5.6)

(2.7)

Change in net cash/(borrowing)

95.3

251.6

Net cash/(borrowing) at 1 January

24.9

(226.7)

Net cash at 31 December

120.2

24.9




Average net borrowing

     (41.8)

(274.4)

 

 

Through a continuing focus on strong cash management we have maintained our strong track record of consistently delivering cash-backed profit.  Underlying cash flow from operations of £230.2 million is once again significantly ahead of underlying profit from operations of £194.9 million, which made a significant contribution to increasing the Group's net cash position at 31 December 2010 to £120.2 million (2009: £24.9 million).

 

The additional cash payments to the Group's pensions schemes of £35.2 million, reflect the agreement reached with the Group's main defined benefit pension scheme's Trustees during the year, covering deficit payments through to the end of 2011. The cash cost of rationalisation of £15.6 million includes costs relating to the integration of the Alfred McAlpine business, which was acquired in 2008, and costs relating to restructuring the Carillion Group, as described under non-recurring operating items.  Net capital expenditure of £15.3 million was lower than in 2009, because expenditure in 2009 was higher than normal due to additional investment in IT infrastructure in order to accommodate the Alfred McAlpine businesses and deliver planned synergy benefits, and in plant and equipment to support the growth of our business in Canada.  The cash inflow in respect of acquisitions and disposals reduced in 2010, primarily due to a reduction in proceeds from the sale of non-core businesses and PPP equity investments - Carillion IT Services, Enviros and four PPP investments were sold in 2009 for £157.9 million, whereas two PPP investments were sold in 2010 for £45.8 million - and an increase in 2010 in the level of investment in new PPP projects and in other trade investments to £38.4 million, compared with £15.2 million in 2009.  

 

Balance sheet

Carillion continues to have a strong balance sheet, which is supported by committed bank facilities of £752.5 million.  A summary of the Group's balance sheet is shown below.

 

 

 

2010

£m

2009(1)

£m

Property, plant and equipment

157.2

168.2

Intangible assets

1,221.2

1,241.3

Investments

176.7

172.0


1,555.1

1,581.5

Inventories, receivables and payables

(613.8)

(608.0)

Net retirement benefit liability (net of tax)

(182.1)

(211.1)

Other

(14.2)

(15.2)

Net operating assets

745.0

747.2

Net cash

120.2

24.9

Net assets

865.2

772.1

 

(1)

Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12

 

Property, plant and equipment reduced due largely to the depreciation charge being £12.5 million higher than capital expenditure.  Intangible assets reduced primarily as a result of amortisation.  Investments increased mostly due to an increase in investments in PPP projects, net of the effect of two PPP equity sales in 2010. 

 

Retirement benefits

The reduction in the deficit in the year largely derives from deficit payments and a reduction in liabilities arising from using an inflation assumption for certain benefits based on the Consumer Price Index (CPI) rather than the Retail Price Index (RPI) as announced by the UK Government in 2010.  These improvements have been partially reduced by higher obligations following a reduction in the discount rate reflecting market bond yields and an increase in life expectancy assumptions in line with those used in the latest actuarial valuations.

 

During 2010, valuations and revised funding arrangements were agreed with the Trustees of six of the principal defined benefit schemes.  The Group has committed funding arrangements across all its defined benefit schemes which amount to around £35 million per annum, in the short term.

 

The Group's ongoing pensions charge against profit in 2010, including defined contribution schemes, was £29.9 million (2009: £28.6 million).  

 

 

Committed bank facilities 

Since the year end, the Group has put in place new committed bank facilities of £752.5 million.  These  comprise a £737.5 million syndicated five-year facility and a £15 million 364-day facility.  The £737.5 million facility is repayable in March 2016, having been arranged in February 2011.

 

Funding and liquidity

In addition to Carillion plc's principal borrowing facilities described above, money market and short-term overdraft facilities are available to Carillion plc and certain subsidiaries. Operating and finance leases are also employed to fund longer-term assets. The quantum of committed borrowing facilities available to the Group is regularly reviewed by the Carillion Board and is designed to satisfy the requirements of the Group's business plan. At 31 December 2010, the Group had undrawn committed facilities amounting to £456.5 million (2009: £518.4 million). This excludes the Group's share of cash balances amounting to £175.1 million (2009: £144.5 million) within jointly controlled operations, which are outside of the Group's facilities. These cash balances are available to the Group to the extent that they are not needed to meet the working capital requirements of the jointly controlled operations.

 

Foreign exchange

The average and year-end exchange rates used to translate the Group's overseas operations were as follows

 

£sterling

Average

Year End


2010

2009

2010

2009

Middle East (US Dollar)

1.55

1.56

1.57

1.61

Oman (Rial)

0.60

0.60

0.60

0.62

UAE (Dirhams)

5.69

5.72

5.75

5.93

Canada (Dollar)

1.60

1.78

1.56

1.69

Trinidad (Dollar)

9.84

9.81

10.02

10.23

 

New accounting standards and interpretations

From 1 January 2010, International Financial Reporting Interpretations Committee (IFRIC) 12 'Service concession arrangements' became effective for the Group. IFRIC 12 applies to the accounting for PPP projects in which the Group participates through joint ventures. The overall impact of IFRIC 12 is to change the timing of when revenue and profit are recognised for PPP projects, but it does not affect the total profit recognised or the cash flows generated during the life of PPP projects. The principal change requires revenue and profit to be recognised during the construction period, which was not previously required, and for borrowing costs to be expensed immediately, rather than capitalised during the construction period.  As IFRIC 12 has no effect on cash flows, there is no impact on the Directors' valuation of the Group's PPP portfolio. Following the adoption of IFRIC 12, comparative information for 2009 has been restated accordingly, reducing underlying profit before tax by £6.7 million at 31 December 2009.  Full details of the restatement are given in note 12 to the financial information.

 

Order book

The Group maintained a strong forward order book worth some £18.2 billion at 31 December 2010 (2009(1): £17.9 billion), despite the sale of a further PPP equity investment, which removed £0.5 billion from the order book and the effects of more difficult market conditions.   The value of probable orders at 31 December reduced to £0.9 billion (2009: £2.0 billion), which primarily reflected the timing of achieving financial close on a number of PPP projects.  At 31 December 2010, the Group's revenue visibility for 2011 was 82 per cent(2).  Our pipeline of contract opportunities, namely contracts for which we are either currently bidding or which we expect to bid, increased significantly to a record level of over £25 billion (2009: £17.1 billion).     

(1)

Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12.
(2)

Based on expected revenue and secure and probable orders, which exclude variable work and re-bids.
       

Outlook

 

Although trading conditions are expected to remain difficult, especially in our UK markets, we are well positioned to make further progress in 2011 and to achieve our objectives for medium term growth, namely doubling the revenues of our international businesses, while delivering substantial growth in UK support services.

       

Recommended acquisition of Eaga plc

 

Since the year end, Carillion has announced a recommended offer for the acquisition of Eaga plc, a leading UK provider of energy efficiency solutions.  The offer values each Eaga share at £1.20 and the issued, and to be issued, share capital of Eaga at £306.5 million.  The acquisition would bring together two complementary companies and enhance Carillion's position as one of the UK's leading support services companies.  It is expected to be immediately earnings enhancing and would build on Carillion's previously announced objectives for growth.  The acquisition is expected to complete in April and the Board is confident that it offers the prospect of creating significant value for shareholders of the enlarged group.  

 

 

Consolidated income statement

for the year ended 31 December

 


 

 

 

Note

2010

£m

2009(1)

£m

Total revenue


5,139.0

5,629.3

Less: Share of jointly controlled entities' revenue


(902.5)

(1,125.1)

Group revenue

2

4,236.5

4,504.2

Cost of sales


(3,885.3)

(4,154.4)

Gross profit


351.2

349.8

Administrative expenses


(239.3)

(264.9)

Group operating profit


111.9

84.9

Analysed between:




Group operating profit before intangible amortisation and non-recurring operating items


 

148.9

 

130.9

Intangible amortisation


(27.6)

(30.8)

Non-recurring operating items(2)

3

(9.4)

(15.2)





Share of results of jointly controlled entities

2

46.0

59.2

Analysed between:




Operating profit


64.6

84.9

Net financial expense


(13.9)

(21.8)

Taxation


(4.7)

(3.9)





Profit from operations


157.9

144.1

Analysed between:




Profit from operations before intangible amortisation and non-recurring operating items


 

194.9

 

190.1

Intangible amortisation         


(27.6)

(30.8)

Non-recurring operating items(2)

3

(9.4)

(15.2)





Non-operating items

3

16.8

6.4

Net financial expense

4

(6.8)

(14.6)

Analysed between:




Financial income


123.6

113.4

Financial expense


(130.4)

(128.0)





Profit before taxation


167.9

135.9

Analysed between:




Profit before taxation, intangible amortisation, non-recurring operating items and non-operating items


 

188.1

 

175.5

Intangible amortisation          


(27.6)

(30.8)

Non-recurring operating items(2)

3

(9.4)

(15.2)

Non-operating items

3

16.8

6.4





Taxation

5

(15.1)

(11.5)

Profit for the year


152.8

124.4





Profit attributable to:




Equity holders of the parent


147.2

120.6

Non-controlling interests


5.6

3.8

Profit for the year


152.8

124.4





Earnings per share

6



Basic


36.9p

30.5p

Diluted


36.7p

30.3p

 

 

(1)

Restated on adoption of IFRIC 12 (see note 12)

(2)

This includes rationalisation costs, curtailment gain and the Office of Fair Trading penalty (see note 3)

 

Consolidated statement of comprehensive income

for the year ended 31 December

 




 2010



2009(1)



£m

£m


£m

£m

Profit for the year



152.8



124.4

Net (loss)/gain on hedge of net investment in foreign operations


(3.8)



1.0


Currency translation differences on foreign operations


4.7



(20.0)


Currency translation differences relating to non-controlling interests


-



0.1


Increase in fair value of available for sale financial assets


5.9



-


Actuarial gains/(losses) on defined benefit pension schemes


11.9



(220.0)




18.7



(238.9)


Taxation in respect of the above


(4.7)



61.3


Share of recycled cash flow hedges within jointly controlled entities (net of taxation)


0.2



8.3


Share of change in fair value of effective cash flow hedges within

jointly controlled entities (net of taxation)


(13.4)



(4.2)


Other comprehensive income/(expense) for the year



0.8



(173.5)

 

Total comprehensive income/(expense) for the year



153.6



(49.1)








Attributable to:







Equity holders of the parent



148.0



(53.0)

Non-controlling interests



5.6



3.9




153.6



(49.1)








 

(1)

Restated on adoption of IFRIC 12 (see note 12)

Consolidated statement of changes in equity

for the year ended 31 December 2010

 

 

Share capital

£m

 

Share premium £m

 

Translation reserve

£m

 

Hedging reserve

£m

Fair value reserve £m

 

Merger reserve £m

 

Retained earnings £m

Equity shareholders' funds

£m

Non-controlling interests

£m

 

Total equity £m












At 1 January 2010 as previously reported

 

198.6

 

16.8

 

(20.1)

 

(15.4)

 

-

 

419.4

 

171.6

 

770.9

 

6.3

 

777.2

Impact of adoption of IFRIC 12

 

-

 

-

 

-

 

4.8

 

-

 

-

 

(9.9)

 

(5.1)

 

-

 

(5.1)

At 1 January 2010 as restated

 

198.6

 

16.8

 

(20.1)

 

(10.6)

 

-

 

419.4

 

161.7

 

765.8

 

6.3

 

772.1

Comprehensive income











Profit for the period

-

-

-

-

-

-

147.2

147.2

5.6

152.8

Other comprehensive income/(expense)











Net loss on hedge of net investment in foreign operations

 

 

-

 

 

-

 

 

(3.8)

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(3.8)

 

 

-

 

 

(3.8)

Currency translation differences on foreign operations

 

 

-

 

 

-

 

 

4.7

 

 

-

 

 

-

 

 

-

 

 

-

 

 

4.7

 

 

-

 

 

4.7

Increase in fair value of available for sale assets

 

-

 

-

 

-

 

-

 

5.9

 

-

 

-

 

5.9

 

-

 

5.9

Actuarial gains on defined benefit pension schemes

 

-

 

-

 

-

 

-

 

-

 

-

 

11.9

 

11.9

 

-

 

11.9

Taxation

-

-

1.1

-

-

-

(5.8)

(4.7)

-

(4.7)

Share of recycled cash flow hedges within jointly controlled entities (net of taxation)

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

0.2

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

0.2

 

 

 

-

 

 

 

0.2

Share of change in fair value of effective cash flow hedges within jointly controlled entities (net of taxation)

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(13.4)

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(13.4)

 

 

 

 

-

 

 

 

 

(13.4)

Transfer between reserves

-

-

-

-

-

(26.3)

26.3

-

-

-

 

Total comprehensive income/(expense)

 

 

-

 

 

-

 

 

2.0

 

 

(13.2)

 

 

5.9

 

 

(26.3)

 

 

179.6

 

 

148.0

 

 

5.6

 

 

153.6

Transactions with owners











Contributions by and distributions to owners











New share capital issued

1.2

4.4

-

-

-

-

-

5.6

-

5.6

Acquisition of own shares

-

-

-

-

-

-

(5.6)

(5.6)

-

(5.6)

Share options exercised by employees

 

-

 

-

 

-

 

-

 

-

 

-

 

3.7

 

3.7

 

-

 

3.7

Equity settled transactions (net of deferred tax)

 

-

 

-

 

-

 

-

 

-

 

-

 

(2.8)

 

(2.8)

 

-

 

(2.8)

Dividends paid

-

-

-

-

-

-

(59.1)

(59.1)

(2.3)

(61.4)

 

Total transactions with owners

 

 

1.2

 

 

4.4

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(63.8)

 

 

(58.2)

 

 

(2.3)

 

 

(60.5)












At 31 December 2010

199.8

21.2

(18.1)

(23.8)

5.9

393.1

277.5

855.6

9.6

865.2

 

 

 

Consolidated statement of changes in equity

for the year ended 31 December 2009

 

 

Share capital

£m

 

Share premium £m

 

Translation reserve

£m

 

Hedging reserve

£m

Fair value reserve £m

 

Merger reserve £m

 

Retained earnings £m

Equity shareholders' funds

£m

Non-controlling interests

£m

 

Total equity

£m












At 1 January 2009 as previously reported

 

197.8

 

12.9

 

(0.9)

 

(17.0)

 

-

 

449.1

 

222.3

 

864.2

 

3.4

 

867.6

Impact of adoption of IFRIC 12

 

-

 

-

 

-

 

2.3

 

-

 

-

 

1.9

 

4.2

 

-

 

4.2

At 1 January 2009 as restated

 

197.8

 

12.9

 

(0.9)

 

(14.7)

 

-

 

449.1

 

224.2

 

868.4

 

3.4

 

871.8

Comprehensive income(1)











Profit for the period

-

-

-

-

-

-

120.6

120.6

3.8

124.4

Other comprehensive income/(expense)











Net gain on hedge of net investment in foreign operations

 

 

-

 

 

-

 

 

1.0

 

 

-

 

 

-

 

 

-

 

 

-

 

 

1.0

 

 

-

 

 

1.0

Currency translation differences on foreign operations

 

 

-

 

 

-

 

 

(20.0)

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(20.0)

 

 

-

 

 

(20.0)

Currency translation differences relating to non-controlling interests

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

0.1

 

 

0.1

Actuarial losses on defined benefit pension schemes

 

-

 

-

 

-

 

-

 

-

 

-

 

(220.0)

 

(220.0)

 

-

 

(220.0)

Taxation

-

-

(0.2)

-

-

-

61.5

61.3

-

61.3

Share of recycled cash flow hedges within jointly controlled entities (net of taxation)

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8.3

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8.3

 

 

 

-

 

 

 

8.3

Share of change in fair value of effective cash flow hedges within jointly controlled entities (net of taxation)

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(4.2)

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(4.2)

 

 

 

 

-

 

 

 

 

(4.2)

Transfer between reserves

-

-

-

-

-

(29.7)

29.7

-

-

-

 

Total comprehensive income/(expense)

 

 

-

 

 

-

 

 

(19.2)

 

 

4.1

 

 

-

 

 

(29.7)

 

 

(8.2)

 

 

(53.0)

 

 

3.9

 

 

(49.1)

Transactions with owners











Contributions by and distributions to owners











New share capital issued

0.8

3.9

-

-

-

-

-

4.7

-

4.7

Acquisition of own shares

-

-

-

-

-

-

(4.2)

(4.2)

-

(4.2)

Share options exercised by employees

 

-

 

-

 

-

 

-

 

-

 

-

 

0.5

 

0.5

 

-

 

0.5

Equity settled transactions (net of deferred tax)

 

-

 

-

 

-

 

-

 

-

 

-

 

2.8

 

2.8

 

-

 

2.8

Dividends paid

-

-

-

-

-

-

(53.4)

(53.4)

(1.0)

(54.4)

 

Total transactions with owners

 

 

0.8

 

 

3.9

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(54.3)

 

 

(49.6)

 

 

(1.0)

 

 

(50.6)












At 31 December 2009

198.6

16.8

(20.1)

(10.6)

-

419.4

161.7

765.8

6.3

772.1

 

(1)  Restated on adoption of IFRIC 12 (see note 12)

Consolidated balance sheet

as at 31 December

 

Note

2010

£m

2009(1)

£m

At 1 January

2009(1)

£m

Non-current assets





Property, plant and equipment


157.2

168.2

167.2

Intangible assets


1,221.2

1,241.3

1,276.9

Retirement benefit assets


0.9

2.6

37.1

Investments in jointly controlled entities


134.8

125.8

242.8

Other investments


41.9

46.2

-

Deferred tax assets


101.7

132.5

103.5






Total non-current assets


1,657.7

1,716.6

1,827.5






Current assets





Inventories


40.6

37.2

44.6

Trade and other receivables


1,052.4

1,038.4

1,186.8

Cash and cash equivalents

9

396.7

267.2

257.3

Income tax receivable


3.9

4.6

0.6

Derivative financial instruments


-

1.0

1.1






Total current assets


1,493.6

1,348.4

1,490.4






Total assets


3,151.3

3,065.0

3,317.9






Current liabilities





Borrowing


(52.0)

(54.0)

(58.0)

Derivative financial instruments


(0.2)

-

-

Trade and other payables


(1,706.8)

(1,683.6)

(1,721.8)

Provisions


(13.5)

(12.5)

(23.4)

Income tax payable


(5.1)

(11.3)

(3.1)






Total current liabilities


(1,777.6)

(1,761.4)

(1,806.3)






Non-current liabilities





Borrowing


(224.5)

(188.3)

(426.0)

Retirement benefit liabilities


(250.3)

(296.4)

(146.2)

Deferred tax liabilities


(28.0)

(37.3)

(59.6)

Provisions


(5.7)

(9.5)

(8.0)






Total non-current liabilities


(508.5)

(531.5)

(639.8)






Total liabilities


(2,286.1)

(2,292.9)

(2,446.1)






Net assets

2

865.2

772.1

871.8






Equity





Share capital

13

199.8

198.6

197.8

Share premium


21.2

16.8

12.9

Translation reserve


(18.1)

(20.1)

(0.9)

Hedging reserve


(23.8)

(10.6)

(14.7)

Fair value reserve


5.9

-

-

Merger reserve


393.1

419.4

449.1

Retained earnings


277.5

161.7

224.2






Equity attributable to shareholders of the parent


855.6

765.8

868.4

Non-controlling interests


9.6

6.3

3.4

 

Total equity


 

865.2

 

772.1

 

871.8

 

(1)  Restated on adoption of IFRIC 12 (see note 12)

 

Consolidated cash flow statement

for the year ended 31 December

 


 



2010

£m

2009

£m

Cash flows from operating activities




Group operating profit


111.9

84.9

Depreciation and amortisation


63.4

67.7

(Profit)/loss on disposal of property, plant and equipment


(1.3)

2.5

Share-based payment (income)/expense


(3.9)

3.9

Other non-cash movements


1.4

(4.5)

Non-recurring operating items


9.4

15.2





Operating profit before changes in working capital


180.9

169.7

(Increase)/decrease in inventories


(3.4)

4.1

(Increase)/decrease in trade and other receivables


(8.3)

107.3

Increase/(decrease) in trade and other payables


12.9

(51.5)





Cash generated from operations before pension deficit recovery

payments and rationalisation costs


 

182.1

 

229.6

Deficit recovery payments to pension schemes


(35.2)

(29.0)

Rationalisation costs


(15.6)

(17.1)





Cash generated from operations


131.3

183.5

Financial income received


11.7

11.6

Financial expense paid


(13.5)

(23.3)

Taxation


(2.7)

2.9





Net cash flows from operating activities


126.8

174.7





Cash flows from investing activities




Disposal of property, plant and equipment


5.5

5.5

Disposal of jointly controlled entity and other investments


45.8

100.7

Dividends received from jointly controlled entities


48.1

38.6

Disposal of businesses, net of cash disposed of


(4.7)

57.2

Acquisition of intangible assets


(7.5)

(4.3)

Acquisition of property, plant and equipment


(17.1)

(48.5)

Acquisition of equity in and loan advances to jointly controlled entities


(34.5)

(15.2)

Acquisition of other non-current asset investments


(3.9)

-





Net cash flows from investing activities


31.7

134.0





Cash flows from financing activities




Proceeds from issue of share capital


-

1.0

Proceeds from exercise of employee share options


2.3

-

Draw down/(repayment) of bank and other loans


50.2

(233.6)

Proceeds from finance leaseback


3.8

-

Payment of finance lease liabilities


(17.3)

(16.8)

Dividends paid to equity holders of the parent


(59.1)

(53.4)

Dividends paid to non-controlling interests


(2.3)

(1.0)





Net cash flows from financing activities


(22.4)

(303.8)





Increase in net cash and cash equivalents         

136.1

4.9

Net cash and cash equivalents at 1 January


252.4

              250.0

Effect of exchange rate fluctuations on net cash and cash equivalents


2.6

(2.5)





Net cash and cash equivalents at 31 December

9 

391.1

252.4

 

 

 

1

Basis of preparation

Carillion plc (the 'Company') is a company domiciled and incorporated in the United Kingdom (UK). The consolidated financial statements of the Company for the year ended 31 December 2010 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interest in jointly controlled entities.

 

The Group's  financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the European Union.  The following new accounting standards and interpretations have been adopted in 2010 as they are mandatory for the year ended 31 December 2010:

 

·      International Accounting Standard (IAS) 27 'Consolidated and separate financial statements (revised 2008)'

·      International Financial Reporting Standard (IFRS) 3 'Business combinations (revised 2008)'

·      International Financial Reporting Interpretations Committee (IFRIC) 12 'Service concession arrangements'

·      International Financial Reporting Interpretations Committee (IFRIC) 15 'Agreements for the construction of real estate'

·      International Financial Reporting Interpretations Committee (IFRIC) 16 'Hedges of a net investment in a foreign operation'

 

IAS 27 'Consolidated and separate financial statements (revised 2008)' and IFRS 3 'Business combinations (revised 2008)' include revisions relating to the accounting for acquisitions.  The principal change in accounting policy is that attributable transaction costs relating to business acquisitions which complete on or after 1 January 2010 are expensed in the income statement in the period incurred.  Previously such costs would have been capitalised as part of goodwill relating to the acquisition.  In addition, the term 'non-controlling interest' has been introduced to replace the term 'minority interest'. The revisions to IAS 27 and IFRS 3 have had no impact on profit, earnings per share or net assets in the year ended 31 December 2010.

 

IFRIC 12 'Service concession arrangements' applies to the accounting for Public Private Partnership (PPP) projects in which the Group participates through jointly controlled entities.  Principally, the impact of IFRIC 12 on the Group's PPP projects is to:

·      Recognise revenue and profit during the construction period which was not previously required

·      Expense borrowing costs in relation to financial asset projects which previously were capitalised on the balance sheet

·      Re-assess the obligation in relation to life cycle maintenance of the asset constructed

The overall impact of IFRIC 12 is to change the timing of when profits are recognised in PPP projects but it does not impact the total profit recognised or cash flows during the life of the PPP project.  Comparative information has been restated for the effect of the retrospective application of IFRIC 12 as disclosed in note 12.

 

IFRIC 15 'Agreements for the construction of real estate' clarifies the situations when a contract for the construction of property should be accounted for in accordance with IAS 11 'Construction contracts' or IAS 18 'Revenue'.  Where a contract comprises separately identifiable components, the fair value of the total consideration is required to be allocated to each component and revenue is then recognised depending upon whether the component relates to the construction of an asset (in accordance with IAS 11) or the rendering of services or delivery of goods (in accordance with IAS 18) based upon a risks and rewards approach.  The adoption of IFRIC 15 has had no impact on profit, earnings per share or net assets in the year ended 31 December 2010.

 

IFRIC 16 'Hedges of a net investment in a foreign operation' clarifies the accounting treatment of hedges in a foreign operation, specifically, the nature of the item to be hedged and the amount for which a hedging relationship can be designated, where in the Group the hedging item can be held and the treatment on disposal of a foreign operation.  The adoption of IFRIC 16 has had no impact on profit, earnings per share or net assets in the year ended 31 December 2010.

  

The financial information set out herein (which was approved by the Board on 2 March 2011) does not constitute the Company's statutory accounts for the years ended 31 December 2010 and 2009 but is derived from the 2010 statutory accounts.

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement itself does not contain sufficient information to comply with IFRS.  The Company will make available the full financial statements that comply with IFRS by 31 March 2011.

 

The statutory accounts for the year ended 31 December 2009 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2010 will be delivered to the Registrar of Companies following the Company Annual General Meeting.  The auditors have reported on those accounts; their report was unqualified, did not include references to any matter which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

 

The Group's business activities, together with the factors likely to affect its future development, performance and position are described earlier in this announcement.  The Group has considerable financial resources, including a £737.5m committed syndicated facility expiring in March 2016.  The Group has long-term contracts with a number of customers across different geographic areas and industries.  As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.  The Directors confirm that, after making enquiries, they have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.  For this reason, they continue to adopt the going concern basis in preparing the condensed interim financial statements.

 

 

2

Segmental reporting

 

Segment information is presented in respect of the Group's strategic operating segments.  The operating segment reporting format reflects the differing economic characteristics and nature of the services provided by the Group and is the basis on which strategic operating decisions are made by the Group Chief Executive, who is the Group's chief operating decision maker.

 

Inter-segment pricing is determined on an arm's length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis, except finance items and income tax.

 

Operating segments

The Group is comprised of the following main operating segments:

 

Support services

In this segment we report the results of our facilities management, facilities services, road maintenance, rail services, utility services and consultancy businesses.

 

Public Private Partnership projects

In this segment we report the equity returns on our investments in Public Private Partnership projects in our chosen sectors of Defence, Health, Education, Transport, Secure and other Government accommodation.

 

Middle East construction services

In this segment we report the results of our building and civil engineering activities in the Middle East and North Africa.

 

Construction services (excluding the Middle East)

In this segment we report the results of our UK building, civil engineering and developments businesses and our construction activities in Canada and the Caribbean.

 

Segmental revenue and profit

 

 

2010


 2009(1)


Revenue

Operating profit before intangible amortisation and non-recurring operating items


              Revenue

Operating profit before intangible amortisation and non-recurring operating items


£m

£m


£m

£m

Support services






Group

1,842.1

92.3


2,108.3

102.9

Share of jointly controlled entities

266.5

18.1


281.2

14.8


2,108.6

110.4


2,389.5

117.7

Inter-segment

107.3

-


117.7

-







Total

2,215.9

110.4


2,507.2

117.7







Public Private Partnership projects






Group

1.2

10.7


1.1

-

Share of jointly controlled entities

310.7

12.7


417.3

30.7


311.9

23.4


418.4

30.7

Inter-segment

-

-


-

-







Total

311.9

23.4


418.4

30.7







Middle East construction services






Group

190.9

14.0


130.2

6.8

Share of jointly controlled entities

302.1

33.5


423.4

40.2


493.0

47.5


553.6

47.0

Inter-segment

-

-


-

-







Total

493.0

47.5


553.6

47.0







Construction services (excluding the Middle East)






Group

2,202.3

40.9


2,264.6

31.7

Share of jointly controlled entities

23.2

0.3


3.2

(0.8)


2,225.5

41.2


2,267.8

30.9

Inter-segment

4.2

-


57.7

-







Total

2,229.7

41.2


2,325.5

30.9







 

Group eliminations and unallocated items

 

(111.5)

 

(9.0)


 

(175.4)

 

(10.5)







Consolidated






Group

4,236.5

148.9


4,504.2

130.9

Share of jointly controlled entities

902.5

64.6


1,125.1

84.9







Total

5,139.0

213.5


5,629.3

215.8

 

(1)  Restated on adoption of IFRIC 12 (see note 12)

 

Reconciliation of operating segment results to reported results

 

                 2010

                    £m

 

2009(1)

£m

Group and share of jointly controlled entities' operating



profit before intangible amortisation and non-recurring operating items

213.5

215.8

Net financial expense



- Group

(6.8)

(14.6)

- Share of jointly controlled entities

(13.9)

(21.8)

Share of jointly controlled entities' taxation

(4.7)

(3.9)

Underlying profit before taxation

188.1

175.5

Intangible amortisation(2)

(27.6)

(30.8)

Non-recurring operating items(2)

(9.4)

(15.2)

Non-operating items(2)

16.8

6.4

Profit before taxation

167.9

135.9

Taxation

(15.1)

(11.5)

 

Profit for the year

 

152.8

 

124.4

 

(1)  Restated on adoption of IFRIC 12 (see note 12)

(2)  Intangible amortisation, non-recurring operating items and non-operating items arise in the following segments:

 


2010

 


2009(1)

 


Intangible

amortisation

£m

Non-recurring

operating

items

£m

Non-operating

items

£m


 

 

Intangible

amortisation

£m

Non-recurring

operating

items

£m

 

Non-operating

items

 £m





Support services

(19.8)

(0.4)

-


(22.5)

(4.6)

10.3

Public Private Partnership projects

-

-

16.8


-

-

(3.9)

Construction services (excluding the Middle East)

(7.8)

(6.1)

-


(8.3)

(9.7)

-

Unallocated Group items

-

(2.9)

-


-

(0.9)

-









Total

(27.6)

(9.4)

16.8


(15.2)

6.4

 

 

Depreciation and amortisation and capital expenditure arise in the following segments:

 

2010


2009


Depreciation

and

amortisation

£m

 

Capital

expenditure

£m


Depreciation

and

amortisation

£m

 

Capital

                               expenditure

£m

Support services

(37.0)

(10.8)


(42.5)

(30.3)

Middle East construction services

(2.1)

(2.1)


(2.0)

(1.9)

Construction services (excluding the Middle East)

(11.2)

(1.9)


(11.1)

(4.3)

Unallocated Group items

(13.1)

(14.5)


(12.1)

(16.6)







Total

(63.4)

(29.3)


(67.7)

(53.1)

 

 

Segmental net assets

 

2010

 



2009(1)

 


 

 

Operating

assets

£m

 

 

Operating

liabilities

£m

Net

operating

assets/
(liabilities)

£m



    

 

Operating

assets

£m

 

 

Operating

liabilities

£m

Net

operating

assets/
(liabilities)

 £m

Support services









Intangible assets (2)

936.5

-

936.5



           956.5

-

956.5

Operating assets

486.4

-

486.4



434.4 

-

434.4

Investments

9.6

-

9.6



11.3 

-

11.3

Total operating assets

1,432.5

-

1,432.5



1,402.2 

-

1,402.2

Total operating liabilities

-

(475.7)

(475.7)



- 

(528.9)

(528.9)

 

Net operating assets/(liabilities)

 

1,432.5

 

(475.7)

 

956.8



 

1,402.2 

 

(528.9)

 

873.3

 

Public Private Partnership projects









Operating assets

5.5

-

5.5



5.5 

-

5.5

Investments

74.5

-

74.5



65.8 

-

65.8

Total operating assets

80.0

-

80.0



71.3 

-

71.3

Total operating liabilities

-

(11.6)

(11.6)



- 

(15.4)

(15.4)

 

Net operating assets/(liabilities)

 

80.0

 

(11.6)

 

68.4



 

71.3 

 

(15.4)

 

55.9

 

Middle East construction services









Operating assets

172.2

-

172.2



101.6 

-

101.6

Investments

48.9

-

48.9



45.4 

-

45.4

Total operating assets

221.1

-

221.1



147.0 

-

147.0

Total operating liabilities

-

(192.4)

(192.4)



- 

(127.0)

(127.0)

 

Net operating assets/(liabilities)

 

221.1

 

(192.4)

 

28.7



 

147.0 

 

(127.0)

 

20.0

 

Construction services (excluding the Middle East)









Intangible assets (2)

269.4

-

269.4



276.0 

-

276.0

Operating assets

548.2

-

548.2



583.4 

-

583.4

Investments

43.7

-

43.7


49.5 

-

49.5

Total operating assets

861.3

-

861.3



908.9 

-

908.9

Total operating liabilities

-

(1,022.7)

(1,022.7)



- 

(939.6)

(939.6)

 

Net operating assets/(liabilities)

 

861.3

 

(1,022.7)

 

(161.4)



 

908.9 

 

(939.6)

 

(30.7)

 

Consolidated before Group items









Intangible assets (2)

1,205.9

-

1,205.9



1,232.5 

-

1,232.5

Operating assets

1,212.3

-

1,212.3



1,124.9 

-

1,124.9

Investments

176.7

-

176.7


172.0 

-

172.0

Total operating assets

2,594.9

-

2,594.9



2,529.4 

-

2,529.4

Total operating liabilities

-

(1,702.4)

(1,702.4)


- 

(1,610.9)

(1,610.9)

Net operating assets/(liabilities) before Group items

2,594.9

(1,702.4)

892.5



2,529.4 

(1,610.9)

918.5










Group items









Deferred tax

101.7

(28.0)

73.7



132.5 

(37.3)

95.2

Net cash/(borrowing)

396.7

(276.5)

120.2



267.2 

(242.3)

24.9

Retirement benefit (gross of taxation)

0.9

(250.3)

(249.4)



2.6 

(296.4)

(293.8)

Income tax

3.9

(5.1)

(1.2)



4.6 

(11.3)

(6.7)

Other

53.2

(23.8)

29.4



128.7 

(94.7)

34.0










Net assets/(liabilities)

3,151.3

(2,286.1)

865.2



3,065.0 

(2,292.9)

772.1

 

(1)  Restated on adoption of IFRIC 12 (see note 12)

(2)  Arising from business combinations

 

Geographic information - by origin

 

  2010

£m

2009(1)

£m

United Kingdom



Total revenue from external customers

3,848.6

4,411.1

Less: share of jointly controlled entities' revenue

(469.6)

(607.7)

 

Group revenue from external customers

 

3,379.0

 

3,803.4




Non-current assets

1,317.1

1,363.6




Middle East



Total revenue from external customers

504.2

564.4

Less: share of jointly controlled entities' revenue

(313.3)

(434.2)

 

Group revenue from external customers

 

190.9

 

130.2




Non-current assets

56.3

53.7




Canada and the Caribbean



Total revenue from external customers

709.8

574.1

Less: share of jointly controlled entities' revenue

(70.5)

(36.5)

 

Group revenue from external customers

 

639.3

 

537.6




Non-current assets

137.9

114.6




Rest of the World



Total revenue from external customers

76.4

79.7

Less: share of jointly controlled entities' revenue

(49.1)

(46.7)

 

Group revenue from external customers

 

27.3

 

33.0




Non-current assets

1.9

3.4




Consolidated



Total revenue from external customers

5,139.0

5,629.3

Less: share of jointly controlled entities' revenue

(902.5)

(1,125.1)

 

Group revenue from external customers

 

4,236.5

 

4,504.2




Non-current assets






Total of geographic analysis above

1,513.2

1,535.3

Retirement benefit assets

0.9

2.6

Other investments

41.9

46.2

Deferred tax assets

101.7

132.5

Total non-current assets

1,657.7

1,716.6

 

(1)  Restated on adoption of IFRIC 12 (see note 12)

 

 

Revenue from the Group's major customer, the UK Government, is shown below:

 

 

 

Support services

£m

Public Private Partnership projects

£m

Construction services (excluding the Middle East)

£m

 

 

Total

£m

Year ended 31 December 2010

782.5

222.7

1,263.0

2,268.2

Year ended 31 December 2009

823.8

175.3

1,065.6

2,064.7

                                               

3     Non-recurring operating items and non-operating items

 

 

Non-recurring operating items

2010

£m

2009

£m

Rationalisation costs

(9.4)

(9.9)

Office of Fair Trading penalty

-

(5.4)

Curtailment gain

-

0.1


 

(9.4)

 

(15.2)

 

Rationalisation costs of £9.4m in 2010 relate to non-recurring redundancy and other associated costs incurred to ensure that the Group's cost base reflects the expected reduction in our UK construction market as indicated in the UK Government's Emergency Budget on 22 June 2010 and confirmed in the Comprehensive Spending Review in October 2010.

 

Rationalisation costs in 2009 of £9.9m relate to non-recurring redundancy and other associated costs incurred in rationalising the Group's structure, including ensuring that the size of the Group's UK construction capability reflects the expected decline in our general construction markets, while maintaining the capability to support the delivery of Public Private Partnership projects and meet the needs of the support services business.

 

The Office of Fair Trading (OFT) penalty of £5.4m was imposed on Carillion JM Limited (CJM) (formerly Mowlem) in 2009 following the conclusion of the OFT's investigation of cover pricing in the construction industry (under the Competition Act 1998).  The penalty relates to CJM's construction business and relates entirely to the period prior to CJM's acquisition by Carillion.  No other member of the Group was subject to the investigation.

 

In the year ended 31 December 2009, as part of the Group's strategy for managing defined benefit pension scheme risk, the benefits for members of the Alfred McAlpine Pension Plan were no longer linked to final salary resulting in a curtailment gain of £0.1m (net of expenses of £3.2m).

 

An income tax credit of £1.6m (2009: £2.8m) relating to the above has been included within taxation in the income statement.

 

Non-operating items

 

2010

£m

2009(1)

£m

Profit/(loss) on disposal of jointly controlled entity and other investments

16.8

(3.9)

Profit on disposal of businesses

-

10.3


 

16.8

 

6.4

 

(1)  Restated on adoption of IFRIC 12 (see note 12)

 

During 2010, the Group disposed of two Public Private Partnership equity investments.  The disposals generated cash consideration of £45.8m and a non-operating profit of £16.8m. 

 

During 2009, the Group disposed of two non-core businesses, Carillion IT Services Limited and Enviros Group Limited, generating a profit on disposal of £10.3m.  

 

There is no income tax associated with any of the non-operating items in either 2010 or 2009.

 

4     Financial income and expense

   


2010

£m

2009

£m

Financial income



Bank interest receivable

1.1

1.1

Other interest receivable

10.6

10.5

Expected return on retirement plan assets

111.9

101.8

 

 

 

123.6

 

113.4

Financial expense



Interest payable on bank loans and overdrafts

(3.3)

(10.5)

Other interest payable and similar charges

(11.6)

(13.5)

Interest cost on retirement plan obligations

(115.5)

(104.0)


(130.4)

(128.0)

 

Net financial expense

 

 

(6.8)

 

(14.6)

 

No borrowing costs have been capitalised in either 2010 or 2009 as they are not material.

 

5     Income tax

 

The Group's income tax expense (including the Group's share of jointly controlled entities' income tax) for the year ended 31 December 2010 is calculated based an underlying income tax rate of 16% (2009: 16%).  This effective rate differs to the UK standard corporation tax rate of 28% (2009: 28%) due to items such as the effect of tax rates in foreign jurisdictions, the agreement of certain issues with the tax authorities and the recognition of deferred tax on trading losses. 

 

6    Earnings per share

 

(a)   Basic earnings per share

The calculation of earnings per share for the year ended 31 December  2010 is based on the profit attributable to equity holders of the parent of £147.2m (2009(1): £120.6m) and a weighted average number of ordinary shares in issue of 399.0m (2009: 396.0m), calculated as follows:

 

In millions of shares

2010

2009

Issued ordinary shares at beginning of period

397.3

395.7

Effect of shares issued in the period

1.9 

0.7

Effect of own shares held by Employee Share Ownership Plan and Qualifying Employee Share Ownership Trust

 

(0.2)

 

(0.4)




Weighted average number of ordinary shares at 31 December

399.0

396.0

 

(1)  Restated on adoption IFRIC 12 (see note 12)

  

(b)  Underlying performance

A reconciliation of profit before taxation and basic earnings per share, as reported in the income statement, to underlying profit before taxation and earnings per share is set out below. The adjustments made in arriving at the underlying performance measures are made to illustrate the impact of non-trading and non-recurring items.

 

 

 

2010


2009(1)


Profit

before tax

£m

 

Tax

£m


Profit

before tax

£m

 

Tax

£m

Profit before taxation






Profit before taxation as reported in the income statement

167.9

15.1


135.9

11.5

Amortisation of intangible assets arising from business combinations

27.6

8.7


30.8

8.6

Curtailment gain

-

-


(0.1)

-

Rationalisation costs

9.4

1.6


9.9

2.8

Office of Fair Trading penalty

-

-


5.4

-

Profit on disposal of investments and businesses

(16.8)

-


(6.4)

-

Underlying profit before taxation

188.1

25.4


175.5

22.9

Underlying taxation

(25.4)



(22.9)


Underlying profit attributable to non-controlling interests (2)

(5.6)



(5.0)

 


Underlying profit attributable to

shareholders

 

157.1



 

147.6


 

(1)    Restated on adoption of IFRIC 12 (see note 12)

(2)    A reconciliation of non-controlling interests as reported in the income statement to underlying profit attributable to non-controlling interests  shown above is set out below:                                 

 

 

 
                             2010
      £m
                        2009
                  £m
Profit attributable to non-controlling interests as reported in the income statement
5.6           
3.8  
Rationalisation costs (net of tax)
-           
1.2  
Underlying profit attributable to non-controlling interests
5.6           
5.0   
 

 

2010

Pence per

share

 

2009(1)

Pence per

share

Earnings per share



Basic earnings per share

36.9

30.5

Amortisation of intangible assets arising  from business combinations

4.7

5.6

Rationalisation costs         - Group

2.0

1.8

                                                - attributable to non-controlling interests

-

(0.3)

Office of Fair Trading penalty

-

1.4

Profit on disposal of investments and businesses

(4.2)

(1.7)

 

Underlying basic earnings per share

 

 

39.4

 

37.3

 

Underlying diluted earnings per share (post-tax basis)

 

 

39.2

 

37.1

 

(1)  Restated on adoption of IFRIC 12 (see note 12)

  

(c)   Diluted earnings per share

The calculation of diluted earnings per share is based on profit as shown in note 6 (a) and (b) and a weighted average number of ordinary shares outstanding calculated as follows:

 

In millions of shares

 

2010

2009

Weighted average number of ordinary shares

399.0

396.0

Effect of share options in issue

1.7

2.2




Weighted average number of ordinary shares (diluted) at 31 December

400.7

398.2

 

7    Dividends

 

The following dividends were paid by the Company:

 


2010



 

2009


£m

Pence per

share


£m

Pence per

share

Previous year final dividend

39.9

10.0


35.2

8.9

Current year interim dividend

19.2

4.8


18.2

4.6







Total

59.1

14.8


53.4

13.5

 

The following dividends were proposed by the Company:

 


 

2010



2009


£m

Pence per

share


£m

Pence per

share

Interim

19.2

4.8


18.2

4.6

Final

42.8

10.7

39.7

10.0







Total

62.0

15.5


57.9

14.6

 

The final dividend for 2010 of 10.7 pence per share was approved by the Board on 2 March 2011 and, subject to approval by shareholders at the Annual General Meeting, will be paid on 17 June 2011 to shareholders on the register on 17 May 2011.  The record date and the payment date for the final dividend are subject to change due to the timing of the effective completion of the proposed acquisition of Eaga plc.  Any change to the aforementioned dates will be notified to shareholders via a regulatory announcement.

 

8     Pension commitments

 

The on-going charge to operating profit in respect of pension commitments amounted to £29.9 million (2009: £28.6 million), including £22.8 million (2009: £20.5 million) in respect of defined contribution schemes.  The net charge to other financial income and expense as disclosed in note 4, amounted to £3.6 million (2009: £2.2 million).

 

 

The valuation of the Group's main defined benefit pension schemes were reviewed by the scheme's actuary at 31 December 2010.

 

A summary of defined benefit obligations and scheme assets is given below:

 

2010

£m

2009

£m

Present value of defined benefit obligation

(2,128.6)

(2,028.5)

Fair value of scheme assets

1,888.6

1,741.4

Minimum funding requirement

(9.4)

(6.7)




Net pension liability

(249.4)

(293.8)

Deferred tax on the above

67.3 

82.7

 

Net pension liability after tax

 

(182.1)

 

(211.1)

 

The principal assumptions used by the independent qualified actuaries in providing the International Accounting Standard (IAS) 19 position were:

 

 

2010

%

2009

%

Rate of increase in salaries

4.4

4.4

Rate of increase in pensions

3.4

3.4

Inflation rate - Retail Price Index

3.4

3.4

Inflation rate - Consumer Price Index

2.8

N/A

Discount rate

5.4

5.8

 

 

9     Cash and cash equivalents and net cash

 

Cash and cash equivalents and net cash comprise:

 

 2010

£m

 2009

 £m

Cash and cash equivalents

396.7

267.2

Bank overdrafts

(5.6)

(14.8)

Net cash and cash equivalents

391.1

252.4

Bank loans

(201.4)

(141.4)

Finance lease obligations

(53.8)

(64.6)

Other loans

(15.7)

(21.5)




Net cash

120.2

24.9

 

Reconciliation of cash flow to movement in net cash:

 

 

 

2010

£m

2009

£m

Increase in net cash and cash equivalents


136.1

4.9

(Draw down)/repayment of bank and other loans


(50.2)

233.6

Proceeds from finance leaseback


(3.8)

-

Payment of finance lease liabilities


17.3

16.8

Change in net cash resulting from cash flows


99.4

255.3

Finance lease additions


(0.4)

(0.4)

Currency translation differences


(3.7)

(3.3)

Change in net cash


95.3

251.6

Net cash/(borrowing) at 1 January


24.9

(226.7)





Net cash at 31 December


120.2

24.9

 

10   Related party transactions

 

The Group has made sales to the Group's jointly controlled entities, which are in the normal course of business and on commercial terms, amounting to £1,043.7m in the year ended 31 December 2010 (2009: £690.8m).  Amounts receivable from jointly controlled entities amounted to £108.5m (2009: £85.6m) and amounts payable to jointly controlled entities amounted to £25.5m (2009: £40.8m).

 

11    Disposals

 

During 2010, the Group disposed of two Public Private Partnership equity investments. The disposals generated  cash consideration of £45.8m and a non-operating profit of £16.8m.

 

 

12    New accounting standards and interpretations

 

As described in note 1, IFRIC 12 clarifies the accounting for Public Private Partnership (PPP) projects which the Group participates in through jointly controlled entities.  The overall impact of IFRIC 12 is to change the timing of when profits are recognised in PPP projects but it does not impact the total profit recognised or cash flows during the life of the PPP project.  This has resulted in a restatement of the Group's share of the results of jointly controlled entities and the non-operating profit arising from the disposal of investments in jointly controlled entities.

 

The adoption of IFRIC 12 has had an impact on the Group's share of movements in the fair value of interest rate swaps within PPP jointly controlled entities.  For a number of jointly controlled entities, the impact of IFRIC 12 on its carrying value in the Group's balance sheet requires the Group's share of fair value movements in interest rate swaps to be restricted to avoid the carrying value of the jointly controlled entities concerned from becoming negative.  This adjustment has been reflected in the statement of comprehensive income.

 

Upon the adoption of IFRIC 12 on 1 January 2010 the Group has restated prior period information, which has had the following impact on reported profit, earnings per share and net assets:

 


Year ended

 31 December 2009



£m

£m

Income statement




Total revenue as previously reported

5,426.5

Impact of adoption of IFRIC 12



202.8





Total revenue as restated



5,629.3





Share of jointly controlled entities' revenue as previously reported



922.3

Impact of adoption of IFRIC 12



202.8





Share of jointly controlled entities' revenue as restated



1,125.1





Profit before tax as previously reported



147.7

Impact of adoption of IFRIC 12 on share of jointly controlled entities




    - operating profit


(1.5)


    - net financial expense


(7.8)


-    - taxation


2.6


Impact of adoption of IFRIC 12 on underlying(1) profit before tax



(6.7)

Impact of adoption of IFRIC 12 on non-operating items

(5.1)





Profit before tax as restated



135.9

 

(1)  As defined in note 6b

  

£m unless otherwise stated


   Year ended

31 December 2009





Earnings per share as previously reported (pence)



33.4

Impact of IFRIC 12 as noted above (pence)



(2.9)





Earnings per share as restated (pence)



30.5





Diluted earnings per share as previously reported (pence)



33.2

Impact of IFRIC 12 as noted above (pence)



(2.9)





Diluted earnings per share as restated (pence)



30.3

Statement of comprehensive income




 

Share of recycled cash flow hedges within jointly controlled entities as previously reported



 

9.9

Impact of adoption of IFRIC 12



(1.6)





 

Share of recycled cash flow hedges within jointly controlled entities as restated



 

8.3





Share of change in fair value of effective cash flow hedges within jointly controlled entities as previously reported



 

(8.3)

Impact of adoption of  IFRIC 12



4.1





Share of change in fair value of effective cash flow hedges within jointly controlled entities as restated



 

(4.2)





 

 

 

31 December 2009

 £m


 

1 January 2009

£m

Balance sheet




Net assets as previously reported

777.2


867.6

Impact of adoption of IFRIC 12 on investments in jointly controlled entities

(7.5)

4.2

Impact of adoption of IFRIC 12 on other investments

2.4


-





Net assets as restated

772.1


871.8

 

The adoption of IFRIC 12 reduced underlying(1) profit before tax from £182.2m to £175.5m and underlying(1) earnings per share from 39.0 pence to 37.3 pence at 31 December 2009.

 

In the year ended 31 December 2010, the adoption of IFRIC 12 reduced the Group's share of results of jointly controlled entities and therefore underlying(1) profit before tax from £192.3m to £188.1m and consequently underlying(1) earnings per share reduced from 40.4 pence to 39.4 pence. 

 

The adoption of IFRIC 12 also increased non-operating profit in the year ended 31 December 2010 by £6.1m, therefore reported profit before tax increased from £161.8m to £167.9m and consequently basic earnings per share increased from 36.4 pence to 36.9 pence and diluted earnings per share increased from 36.2 pence to 36.7 pence.  In the statement of comprehensive income, IFRIC 12 reduced the loss recognised on the Group's share of the change in fair value of effective cash flow hedges within jointly controlled entities by £5.3m.  The adoption of IFRIC 12 increased net assets in the year ended 31 December 2010 by £7.2m.

 

(1)   As defined in note 6b

 

 

13     Share capital

 

During the year ended 31 December 2010, 2,310,106 shares were issued to the Group's Employee Ownership Plan in order to satisfy the exercise of employee share options.  The issued and fully paid share capital at 31 December 2010 was 399.7m shares (2009: 397.3m).

 

14    Guarantees and contingent liabilities

 

The Group has entered into guarantees, primarily in respect of letters of credit issued by banks in relation to deferred equity payments and performance contracts in Public Private Partnership (PPP) jointly controlled entities.  These guarantees in total amount to £144.7m (31 December 2009: £82.4m) with the increase since December 2009 reflecting commitments in respect of PPP projects that reached financial close in 2010.  There has been no material change to the contingent liabilities of the Group in the year ended 31 December 2010.

 

 

15    Post balance sheet events

 

In February 2011, the Group extended it's banking facilities by securing a syndicated facility of £737.5m which is repayable in March 2016 together with a 364 day £15.0m facility.

 

On 11 February 2011, Carillion plc reached agreement on the terms of a recommended acquisition of the entire issued, and to be issued, share capital of Eaga plc, a leading provider of energy efficiency solutions in the UK, for a total consideration of £306.5m.  The acquisition is subject to approval by the shareholders of Eaga plc, change of control approval from the Financial Services Authority and confirmation by the Court, and it is expected to become effective in April 2011.

 

 

16    Company information

 

This preliminary announcement was approved by the Board of Directors on 2 March 2011. The 2010 Annual Report will be posted to all shareholders by 31 March 2011 and both this statement and the 2010 Annual Report will be available on the internet at www.carillionplc.com or on request from the Company Secretary, Carillion plc, Birch Street, Wolverhampton, WV1 4HY.

 

 

Directors' responsibilities

 

This preliminary announcement complies with the Disclosure and Transparency Rules (DTR) of the United Kingdom's Financial Services Authority.  The preliminary announcement is the responsibility of, and has been approved by, the Directors of Carillion plc.

 

The responsibility statement below has been prepared in connection with the Company's full Annual Report for the year ending 31 December 2010.  Certain parts thereof are not included in this announcement.

 

The Directors of Carillion plc confirm that to the best of their knowledge

 

·      the financial statements, prepared in accordance with IFRS as adopted by the European Union give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole and

·      the Operating and Financial Review includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

 

 

On behalf of the Board

 

 

 

 

 

 

 

 

 

Richard Adam

Group Finance Director

2 March 2011

 

 

Forward-looking statements

This report may contain certain statements about the future outlook for Carillion plc.  Although we believe our expectations are based on reasonable assumptions, any statements about future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.

 

Governing law

This report of Carillion plc for the year ended 31 December 2010 has been drawn up and presented for the purposes of complying with English law.  Any liability arising out of or in connection with the report for the year ended 31 December 2010 will be determined in accordance with English law.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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