Interim Results
Carillion PLC
19 September 2000
Carillion plc 2000 interim results
Construction to services group Carillion plc today announces its interim
results for the first six months of 2000.
Highlights
* Significant successes in growth segments:
New Private Finance contracts worth over £450 million
New alliance contracts with Railtrack worth over £200 million
£500 million facilities management contract for BT
* Operating profit before exceptional items up 13% to £15.8 million
* Improved margins in construction
* £3.1 million profit on sale of non-core businesses
* Restructuring in Crown House Engineering well under way
Chairman Sir Neville Simms, says, 'Carillion made further significant
progress with its strategy to deliver good quality earnings growth by
developing its activities in private finance, support services and
infrastructure management, while maintaining a selective approach to
traditional construction and implementing prudent financial and risk
management processes.
'The Board is therefore confident that Carillion's performance in the second
half of the year will be in line with our expectations. Furthermore, with the
outlook for the UK economy remaining positive and increasing opportunities in
our chosen markets, we expect to deliver our strategy, creating a portfolio of
contracts with a reducing risk profile that will generate a growing stream of
more visible and predictable earnings.'
For further information
Carillion
Chris Girling Finance Director
John Denning Head of Corporate Affairs and Communications
19 September 2000 until 1200 noon
City Presentation Centre 020 7628 5646
Thereafter from 3.00 pm on 01902 422431
Shandwick
Bobby Leach 020 7905 2537
Juliet Clarke 020 7905 2498
CHAIRMAN'S STATEMENT
In the first six months of 2000, Carillion made further significant progress
with its strategy to deliver good quality earnings growth by developing its
activities in private finance, support services and infrastructure
management, maintaining its selective approach to traditional construction
and implementing prudent financial and risk management processes.
Turnover was some 6% higher at £926 million, primarily as a result of an
almost three-fold increase in our Private Finance activities, partly offset
by a reduction in our traditional contracting activities, consistent with our
strategy to secure better quality work at sensible margins.
Operating profit before exceptional operating items increased by 13% to £15.8
million, compared with the first half of 1999, with operating margins before
exceptional operating items up from 1.6% to 1.7%. These increases were
achieved after restructuring costs of £3.2 million to improve operational
efficiency in our joint venture rail maintenance company, GTRM, and our
building business. Underlying margins, therefore, moved ahead to over 2.0%.
In contrast to the rest of the Group, the performance of our mechanical and
electrical engineering business, Crown House Engineering (CHE), about which a
separate announcement was made on 15 August 2000, has been unacceptable.
However, we are confident that the historical problems, identified as a
result of implementing new risk management processes, have been fully
recognised and that the decisive and prudent action we have taken should
increasingly enable CHE to deliver financial performance commensurate with
its strong market position. This action includes the introduction of a new
senior management team to implement major restructuring, for which there will
be a second half exceptional cost of approximately £9 million, to focus the
business on larger contracts for key customers.
Exceptional first half operating items included the exceptional charge of £25
million taken to cover losses on Crown House Engineering contracts, as
announced on 15 August 2000. As most of these contracts are well advanced, we
do not expect this to have any further significant cash impact. After
exceptional operating items there was a first half operating loss of £10.5
million.
The net cash outflow in the first half was the result of the problems in
Crown House Engineering and the steps being taken to bring our half and full
year cash balances more in line with our average underlying debt position.
Despite the cash outflow, average debt in the period was substantially
reduced, with net interest payable of £1.9 million, compared with £3.6
million in the first half of 1999. Net cash at 30 June 2000 was £49.1 million.
After a profit of £3.1 million on the sale of two non-core businesses,
Stanger Science and Environment and Cimage, the net loss before tax was £9.3
million.
Earnings per share before all exceptional items were 5.3 pence,
compared with 3.4 pence for the same period last year. In view of the Group's
continuing good underlying performance, the Board has declared an interim
dividend of 1.34 pence, a 3% increase on last year's interim dividend. The
dividend will be paid on 22 November 2000.
We were delighted to welcome Roger Dickens to the Board in May. His
experience of our industry and of other businesses in the services sector
will be a considerable asset to the Board.
Looking forward, our strategic progress is also reflected in the growing
quality of our order book, which by 30 June 2000 was £2.45 billion, some £500
million higher than in June 1999. This increase was due to major new orders
in our growth segments that more than offset a further reduction in orders
for traditional contracting. Our rail businesses were awarded new contracts
worth over £200 million and financial close was achieved on two major PFI
projects, GCHQ and Nottingham Express Transit, which involve construction,
maintenance and facilities management contracts for Carillion worth over £450
million. These PFI contracts have also increased the turnover we expect to
generate from our equity investments in PFI concession companies to around
£1.70 billion, which is in addition to our order book figure of £2.45
billion.
Another major success was the selection by BT plc of the Carillion led
consortium as its partner to supply integrated facilities management and
maintenance services to its 8,500 properties. The contract will initially be
for a period of five years and be worth over £500 million, making it the
largest private sector facilities management contract to be let in the UK.
The Board is therefore confident that Carillion is continuing to make
satisfactory progress and that its performance in the second half of the year
will be in line with our expectations. Furthermore, with the outlook for the
UK economy remaining positive and increasing opportunities in our chosen
markets, we expect to deliver our strategy, which is creating a portfolio of
contracts with a reducing risk profile that will generate a growing stream of
more visible and predictable earnings.
OPERATING REVIEW
Services
Turnover in our Services segment was £132 million, some 16% lower than in the
first half of 1999 as a result of reduced turnover in Crown House Engineering
(CHE). Before the £25 million exceptional operating charge for CHE, operating
profit improved by 10% to £4.5 million with margins up from 2.6% to 3.4 %
reflecting a further improvement in operating performance by the other
businesses in this segment. After the exceptional operating charge there was
an operating loss in this segment of £20.5 million. However, as the strategic
changes being made in CHE take effect and with our other services businesses
continuing to perform well, the outlook for this segment is positive.
Infrastructure Management
Turnover in Infrastructure Management grew by 25% as a result of increased
activity both in rail and road maintenance and renewal. However, operating
profit and margins were lower at £1.6 million and 1.1% respectively, compared
with £5.2 million and 4.4% in the first half of 1999. This was mainly due to
restructuring costs of £2.2 million in GTRM, our joint venture rail
maintenance business, a more prudent view of settlements on old track renewal
contracts and competitive market conditions. Operating performance is
expected to improve as the benefits of restructuring and of newer contracts
under which we are working in alliance with Railtrack, increasingly come
through. In the longer term, we also expect our road and rail businesses to
benefit significantly from the £180 billion transport investment programme,
recently announced by the Government.
Private Finance
Turnover in Carillion Private Finance almost trebled to £126 million compared
with the first half of 1999, as more projects moved forward into the
construction phase. Operating profit more than trebled to £3.4 million, with
margins up from 2.3% to 2.7%. Carillion confirmed its position as the market
leader in PFI construction by achieving financial close on GCHQ and
Nottingham Express Transit, bringing the total number of financially closed
projects to fourteen. With six of these projects now in the operational
phase, PFI is demonstrating that it does offer predictable long term cash
flows from equity investments and facilities management and maintenance
contracts, as well as construction contracts with premium margins. The
growing experience and confidence in PFI is leading to an increasing number
of opportunities for companies with specialist PFI knowledge and skills.
Carillion is currently the preferred bidder for the £30 million Manchester
Magistrates Court project and shortlisted on a further seventeen projects.
Capital Projects
Turnover in Capital Projects was again reduced, by around 3%, primarily
reflecting our continuing withdrawal from higher risk power and process
projects. Operating profit more than doubled from £1.1 million to £2.5
million, with margins up from 0.5% to 1.1%. Maintaining our selective
approach that concentrates on the quality rather than the quantity of the
work we undertake, is continuing to reduce our UK civil engineering
activities. However, this is being offset by increasing levels of activity in
our overseas regions. Looking further ahead, we expect benefit from the
increased spending recently announced by the UK Government on new transport
infrastructure and maintenance.
Building
Turnover in our Building segment was reduced by nearly 8 % to £327 million as
a result of continuing project selectivity. Operating profit increased by 22%
to £6.0 million, with margins up from 1.4% to 1.8%. This improvement has been
achieved after restructuring costs in our building business of £1.0 million.
The focus in this segment has continued to be on larger contracts for
long-term key customers, securing more negotiated work, better supply chain
management and improving efficiency. With continuing selective opportunities
in our retail, leisure and commercial building markets and the recent
Government announcement of increased spending on social housing, the outlook
in this segment for the second half of 2000 and beyond remains positive.
Sir Neville Simms
Chairman
Unaudited Consolidated Profit and Loss Account
For the half year ended 30 June 2000
Before Exceptional Half year Proforma Year to
Exceptional Operating to 30 June Half Year 31
Operating Items 2000 to 30 June December
Items 1999 1999
£m £m £m £m £m
Total turnover 926.1 - 926.1 873.5 1,802.3
Deduct turnover of (100.3) - (100.3) (88.8) (193.8)
joint ventures
----- ----- ------ ------ -------
Group turnover 825.8 - 825.8 784.7 1,608.5
===== ===== ====== ====== =======
Group operating 10.9 - 10.9 9.2 31.5
profit before
exceptional
operating items
Exceptional - (26.3) (26.3) - (1.5)
Operating Items
---- ------ ------ --- -----
Group operating 10.9 (26.3) (15.4) 9.2 30.0
profit/(loss)
Group share of 4.9 - 4.9 4.8 11.3
operating profit of
joint ventures ----- ------ ------ ------ -----
Total operating 15.8 (26.3) (10.5) 14.0 41.3
profit/(loss)
Profit on sale of ----- ------ 3.1 - -
businesses
Net interest
payable: Group (1.3) (1.9) (3.7)
Joint Ventures (0.6) (1.7) (2.5)
(1.9) (3.6) (6.2)
----- ----- -----
(Loss)/profit on (9.3) 10.4 35.1
ordinary activities
before taxation
Taxation on 4.6 (3.5) (11.6)
(loss)/profit on
ordinary activities ----- ----- ------
(Loss)/profit on (4.7) 6.9 23.5
ordinary activities
after taxation
Equity minority - - 0.1
interests ----- ----- ------
(Loss)/profit for (4.7) 6.9 23.6
the financial period
Equity dividends (2.8) (2.7) (8.2)
----- ----- ------
Retained (loss)/profit (7.5) 4.2 15.4
for Group and its share
of joint ventures ===== ===== ======
Basic(loss)/earnings per
ordinary share
- Basic (2.3p) 3.4p 11.5p
====== ===== =====
- Before all exceptional 5.3p 3.4p 12.0p
items
====== ===== =====
Diluted (loss)/earnings
per ordinary share
- Basic (2.3p) n/a 11.5p
====== ===== =====
- Before all exceptional 5.2p n/a 12.0p
items
====== ===== =====
Dividends per 1.34p 1.3p 4.0p
ordinary share
====== ===== =====
Unaudited Consolidated Balance Sheet
At At
30 June 31 December
2000 1999
£m £m
Fixed assets
Intangible assets 1.6 1.7
Tangible assets 49.3 54.0
Investments in joint
ventures: Share of gross assets 449.3 297.4
Share of gross (402.4) (266.7)
liabilities
46.9 30.7
Other investments: Own shares held 2.2 -
----- ----
100.0 86.4
----- ----
Current assets
Stocks 49.1 60.2
Debtors 547.8 510.5
Investments 6.8 5.4
Cash at bank and in hand 137.4 147.3
----- -----
741.1 723.4
----- -----
Creditors: amounts falling due within
one year
Bank loans and overdrafts (71.1) (5.0)
Other creditors (625.9) (658.7)
------- -------
(697.0) (663.7)
------- -------
Net current assets
Due within one year 23.0 35.3
Debtors due after more than one year 21.1 24.4
44.1 59.7
----- -----
Total assets less current liabilities 144.1 146.1
Creditors: amount falling due after
more than one year
Bank loans (17.2) (10.8)
Other creditors (6.3) (7.2)
------ ------
(23.5) (18.0)
Provisions for liabilities and charges (3.9) (3.9)
------ ------
Net assets 116.7 124.2
====== ======
Financed by:
Capital and Reserves
Called up share capital 103.3 102.5
Reserves 13.4 21.7
----- -----
Equity shareholders' funds 116.7 124.2
===== =====
Unaudited Consolidated Statement of Total Recognised Gains and Losses
Half year to Proforma Year to
30 June Half year to 31 December
2000 30 June 1999
1999
£m £m £m
(Loss)/profit for the financial (4.7) 6.9 23.6
period
Exchange movements - (0.4) 0.5
----- ----- ----
Total recognised gains and (4.7) 6.5 24.1
losses for the period ===== ===== ====
Unaudited Reconciliation of Movements in Consolidated Equity Shareholders'
Funds
Half year to Proforma Year to
30 June Half year to 31 December
2000 30 June 1999
1999
£m £m £m
(Loss)/profit for the financial (4.7) 6.9 23.6
period
Dividends (2.8) (2.7) (8.2)
----- ----- -----
(7.5) 4.2 15.4
New share capital subscribed by Quest 1.8 - -
Other new share capital subscribed - - 0.5
Exchange movements - (0.4) 0.5
Transfer arising on issue of (1.8) - -
shares to Quest
Other movements - 0.8 0.9
----- ----- ----
Net (reduction in)/addition to (7.5) 4.6 17.3
equity shareholders' funds
Opening equity shareholders' 124.2 106.9 106.9
funds
----- ----- -----
Closing equity shareholders' 116.7 111.5 124.2
funds ===== ===== =====
Summarised Consolidated Cash Flow Statement and Reconciliation of Net Funds
Half year to Proforma Year to
30 June Half year to 31 December
2000 30 June 1999
1999
£m £m £m
Net cash outflow from operating (71.1) (84.8) (10.7)
activities
Debenture advance to a joint - (9.2) (6.1)
venture
Net cash (outflow)/inflow from (0.4) 18.1 16.9
returns on investments and
servicing of finance
Corporate taxation paid (0.4) (0.8) (1.7)
Net cash outflow from capital (6.3) (6.2) (10.1)
expenditure and financial
investments
Net cash outflow from (3.7) (0.3) (0.2)
acquisitions and disposals
Equity dividends paid - - (2.2)
----- ----- -----
Net cash outflow before (81.9) (83.2) (14.1)
management of liquid resources
and financing
Net cash inflow from management 7.7 - 2.4
of liquid resources
Financing - drawdown/(repayment) 5.9 (0.1) 22.0
of debt
------ ------ -----
(Decrease)/increase in cash in (68.3) (83.3) 10.3
the period ====== ====== =====
Reconciliation of Net Cash Flow to Movement in Net Funds
Half year to Proforma Year to
30 June Half year to 31 December
2000 30 June 1999
1999
£m £m £m
(Decrease)/increase in cash (68.3) (83.3) 10.3
Cash inflow from management of (7.7) - (2.4)
liquid resources
Net (drawdown)/repayment of (6.4) 0.1 (10.6)
debt
Effect of foreign exchange rate - - (0.4)
changes
------ ------ -----
Movement in net funds in the (82.4) (83.2) (3.1)
period
Net funds at start of period 131.5 134.6 134.6
----- ----- -----
Net funds at end of period 49.1 51.4 131.5
===== ===== =====
Reconciliation of Operating Profit to Operating Cash Flows
Half year to Proforma Year to
30 June Half year to 31 December
2000 30 June 1999
1999
£m £m £m
Group operating profit before 15.8 14.0 42.8
exceptional operating items
Share of operating profits of (4.9) (4.8) (11.3)
joint ventures
Depreciation 6.3 6.4 13.1
Loss/(profit) on disposal of 0.1 (0.3) (0.4)
fixed assets
Amortisation of goodwill 0.1 - -
Decrease/(increase) in stocks 10.5 (4.3) (5.2)
Increase in debtors (73.3) (25.4) (3.0)
Decrease in creditors due (25.0) (68.3) (44.5)
within one year
Decrease in creditors due after (0.4) (2.0) (0.7)
more than one year
Decrease in bills of exchange (0.3) (0.1) (1.5)
------ ------ ------
Net cash outflow from operating (71.1) (84.8) (10.7)
activities ====== ====== ======
Notes
1 Basis of preparation
The interim accounts which are unaudited have been prepared using the
accounting policies set out in the 1999 Annual Report.
The financial information included in this report does not constitute
statutory accounts for the purpose of Section 240 of the Companies Act 1985.
The financial information for the year ended 31 December 1999 has been
extracted from the statutory accounts for that financial year. These accounts
have been reported on by the company's auditors and have been delivered to the
Registrar of Companies. The auditor's report was unqualified and did not contain
a statement under Section 237(2) or (3) of the Companies Act 1985.
2. Segmental Analysis
Half Year Proforma Year Ended
Ended Half year Ended 31 December
30 June 2000 30 June 1999 1999
Turnover
£m £m £m
Class of business:
Building 327.0 353.7 711.1
Capital Projects 232.0 238.7 490.4
Services 132.2 157.1 322.7
Infrastructure Management 145.9 117.1 233.6
Private Finance 126.1 44.0 95.1
Internal trading (37.1) (37.1) (50.6)
----- ----- -------
926.1 873.5 1,802.3
===== ===== =======
Half Year Proforma Year Ended
Ended Half Year Ended 31 December 1999
30 June 2000 30 June 1999
£m £m £m
Geographical origin:
UK 776.8 728.5 1,494.2
Europe 79.1 80.7 148.9
Other 70.2 64.3 159.2
----- ----- -------
926.1 873.5 1,802.3
===== ===== =======
Operating Profit
Half Year Ended Proforma Year Ended
30 June 2000 Half Year 31 December 1999
Ended 30
June 1999
Before Exceptional Before and Before Exceptional
Exceptional Operating after Exceptional Operating
Operating items Exceptional Operating Items
items Items Items
Class of £m £m £m £m £m £m £m
business:
Building 6.3 (0.3) 6.0 4.9 17.0 (0.3) 16.7
Capital 2.6 (0.1) 2.5 1.1 4.4 (0.2) 4.2
Projects
Services 4.6 (25.1) (20.5) 4.1 8.7 (0.1) 8.6
Infrastructure 1.7 (0.1) 1.6 5.2 13.3 (0.2) 13.1
Management
Private 3.5 (0.1) 3.4 1.0 5.1 (0.1) 5.0
Finance
Corporate (2.9) (0.6) (3.5) - (3.4) (0.6) (4.0)
Centre
Tarmac - - - (2.3) (2.3) - (2.3)
management
charge
---- ------ ------ ---- ----- ----- ----
15.8 (26.3) (10.5) 14.0 42.8 (1.5) 41.3
==== ====== ====== ==== ===== ===== ====
Geographical £m £m £m £m £m £m £m
origin:
UK 12.6 (26.3) (13.7) 9.1 38.9 (1.5) 37.4
Europe 0.2 - 0.2 0.3 (0.1) - (0.1)
Other 3.0 - 3.0 4.6 4.0 - 4.0
---- ------ ------ ---- ---- ----- -----
15.8 (26.3) (10.5) 14.0 42.8 (1.5) 41.3
==== ====== ====== ==== ==== ===== =====
Share of joint ventures
The segmental analysis of the Group's share of joint ventures is set out
below:
Half Year Ended Proforma Year Ended
30 June 2000 Half Year Ended 31 December 1999
30 June 1999
Turnover Operating Turnover Operating Turnover Operating
profit profit profit
Class of £m £m £m £m £m £m
business:
Building 3.8 0.1 - 1.4 13.2 2.9
Capital 26.2 1.0 34.9 (2.8) 65.9 (5.1)
Projects
Services - - - - - -
Infrastructure 63.8 1.7 52.2 4.1 104.3 9.2
Management
Private Finance 9.7 2.1 7.9 2.1 16.8 4.3
Internal trading (3.2) - (6.2) - (6.4) -
----- --- ---- --- ----- ----
100.3 4.9 88.8 4.8 193.8 11.3
===== === ==== === ===== ====
3. Exceptional operating items
Half Year Proforma Year Ended
Ended Half Year 31
30 June 2000 Ended December
30 June 1999 1999
£m £m £m
Founders' Equity 1.3 - 1.5
Plan
Provision against
contract losses in 25.0 - -
Crown House
Engineering
---- ---- ----
26.3 - 1.5
==== ==== ====
4. Taxation
Based on profit projections for the year to 31 December 2000 the forecast
full year tax charge is estimated to be 49.5%. The tax credit in respect of
the loss arising in the six month period to 30 June 2000 has been calculated
by reference to the expected full year tax rate. The forecast full year tax
rate is higher than the standard rate of UK tax due to tax relief being
available on only an element of the exceptional operating loss.
5. Dividends
The interim ordinary dividend of 1.34p per share (1999: 1.3p) will be paid on
22 November 2000, to shareholders on the register at the close of business on
29 September 2000.
6. (Loss)/earnings per ordinary share
(a) Basic
(Loss)/earnings per ordinary share is calculated by dividing the loss
for the financial period, amounting to £4.7m (six months ended 30 June 1999:
£6.9m profit; year ended 31 December 1999: £23.6m profit) by 203,285,592 (six
months ended 30 June 1999:204,674,861; year ended 31 December
1999:204,705,786) ordinary shares being the weighted average number of shares
in issue during the period.
(b) Adjusted
A reconciliation of the basic (loss)/earnings per ordinary share to the
adjusted amounts shown on the face of the profit and loss account to
illustrate the impact of exceptional items is set out below:
Half Year Ended Proforma Year Ended
30 June 2000 Half Year Ended 31 December 1999
30 June 1999
£m Pence £m Pence £m Pence
per per per
share share share
(Loss)/profit
attributable (4.7) (2.3) 6.9 3.4 23.6 11.5
to shareholders
Exceptional
items:
Operating 26.3 12.9 - - 1.5 0.7
items
Less profit on (3.1) (1.5) - - - -
sale of business
Less taxation (7.8) (3.8) - - (0.5) (0.2)
in respect of
the above
---- --- --- --- ---- ----
Earnings 10.7 5.3 6.9 3.4 24.6 12.0
before all ==== === === === ==== ====
exceptional
items
(c) Diluted
Diluted (loss)/earnings per ordinary share have been calculated using
the same numerators as set out in (a) and (b) above and by reference to the
following number of shares:
Number of ordinary shares
30 June 2000 31 December 1999
m m
Number of ordinary shares per
basic (loss)/earnings per
share calculations 203.3 204.7
Adjustments to reflect dilutive shares
under options 1.7 0.1
Number of ordinary shares diluted (loss)/ ----- -----
earnings per share calculations 205.0 204.8
===== =====
A comparative figure for the half year ended 30 June 1999 has not been provided,
as the dilutive shares under option were not issued until after the demerger
from Tarmac.
7. Approval of interim statement
The interim statement was approved by the Board of Directors on 19 September
2000.
Independent review report by KPMG Audit Plc to Carillion plc
Introduction
We have been instructed by the company to review the financial information set
out on pages 5 to 11 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where they are to be
changed in the next annual accounts in which case any changes, and the reasons
for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4: Review of interim financial information issued by the Auditing
Practices Board. A review consists principally of making enquires of group
management and applying analytical procedures to the financial information
and underlying financial data and, based thereon, assessing whether the
accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review is substantially less in scope than an audit
performed in accordance with Auditing Standards and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an
audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications
that should be made to the financial information as presented for the six
months ended 30 June 2000.
KPMG Audit Plc
Chartered Accountants, Birmingham
Latest directors dealings
- 13 minutes ago Banco Santander S.A.
- 14 minutes ago Merit Group
- 20 minutes ago 3i Group
- 1 hour ago British American Tobacco
- 1 hour ago British American Tobacco