Interim Results

Carillion PLC 06 September 2006 6 September 2006 Carillion plc 2006 Interim Results Highlights • Mowlem integration progressing well • Revenue up 71% to £1,726m • Profit before tax and exceptionals* up 23% to £24.7m • Adjusted earnings per share up 11% to 7.9p • Strong operating cash flow - net debt of £118m at 30 June 2006 • Dividend increased by 10% to 3.1 pence • Order book more than doubled to £14.5bn • PPP equity sales announced today - Directors' valuation of PPP equity portfolio increased to £216m Financial Summary 2006 2005 Revenue including joint ventures £1,726m £1,011m Profit before tax • before exceptional items* and tax on joint ventures £29.6m £21.6m • before exceptional items* £24.7m £20.1m • after exceptional items £11.7m £18.4m Earnings per share • adjusted* 7.9p 7.1p • basic 3.5p 6.3p * Exceptional and non-operating items, amortisation of intangible assets and goodwill impairment: a £13m charge in 2006, £1.7m charge in 2005 Commenting, Chairman Philip Rogerson said, 'Carillion made good progress in the first six months of 2006. The integration of Mowlem, acquired in February 2006, has gone well, overall trading has remained positive and we have delivered a strong financial performance. With a large order book and positive outlook in the Group's key markets, the Board expects Carillion to make further progress in the second half of 2006 and slightly exceed our original expectations in the full year. The announcement today of the disposal of some PPP equity holdings is also a clear demonstration of the value being created from Carillion's portfolio of PPP investments.' For further information contact Chris Girling Finance Director 01902 422431 John Denning Director Corporate Affairs 01902 316426 CHAIRMAN'S STATEMENT Carillion made good progress in the first six months of 2006. The integration of Mowlem, acquired in February 2006, has gone well, overall trading has remained positive and we have delivered a strong financial performance. Revenue, including joint ventures, increased by 71 per cent to £1,725.7 million (2005: £1,011.1 million), reflecting the acquisition of Mowlem and substantial organic growth in a number of key market sectors. Profit before tax and exceptional items rose by 23 per cent to £24.7 million (2005: £20.1 million) and earnings per share increased by 11 per cent to 7.9 pence (2005: 7.1 pence), both slightly ahead of our expectations. Operating cash flow continues to be strong and net debt at 30 June 2006 was £118 million. Average debt in 2006 is now expected to be well below £150 million, substantially less than the £200 million anticipated at the time of acquiring Mowlem. The value of the Group's order book has more than doubled to £14.5 billion (31 December 2005: £7 billion), reflecting the acquisition of Mowlem and continuing success in winning substantial new orders in key growth markets. We have also maintained a substantial pipeline of probable new orders worth around £1.9 billion. In view of our progress in the first six months of 2006 and prospects for the second half, the Board has declared an interim dividend of 3.1 pence per share, an increase of 10 per cent on the dividend paid in respect of the corresponding period in 2005. Our finance director, Chris Girling, has decided to retire from Carillion in order to focus on non-executive directorships. The precise timing will depend on the appointment of a successor and will follow a suitable handover period, but is expected to be in the first half of 2007. It had been Chris's intention to leave his executive role a little sooner, but he wished to stay on until the acquisition and integration of Mowlem had been successfully completed. Chris will leave the Group with the Board's grateful thanks for the outstanding contribution he has made over the last seven years to Carillion's success. Don Kenny, the managing director responsible for six Carillion business units, has been appointed as an executive director with immediate effect. Don joined Carillion from Johnson Controls in 2002, having held a number of senior positions in Johnson Controls and prior to that in Mowlem. With extensive experience of our key market sectors, he will make a valuable contribution to Carillion's development and we are delighted to welcome him to the Board. Don will continue to be responsible for our National Building, Health, Integrated Solutions, Facilities Management, Facilities Services and TPS businesses. I am also delighted to announce the appointment of Steve Mogford as a non-executive director. Steve has been a main board director of BAE Systems for over six years and is currently the Chief Operating Officer responsible for Programmes. Steve joined BAE Systems in 1977 and held a number of senior managing director roles before taking up his current position in 2000. Steve brings to the Board considerable experience as a senior business leader who has managed major capital projects in a FTSE 50 company. In line with our policy of maximising the value we generate through investing equity in PPP projects, we have announced today the proposed sale of a number of equity investments to secondary market funds. The sale of these investments, which is expected to generate cash proceeds of £46 million and an exceptional profit of £22 million, is at an implied net present value based on an average discount rate of less than five per cent. The directors' valuation of Carillion's portfolio of PPP equity investments now stands at £216 million, (December 2005: £89 million). This valuation has increased due to the combined effects of acquiring Mowlem's equity portfolio, reaching financial close on two new PPP projects and higher secondary market prices for PPP equity. With a large order book and positive outlook in the Group's key markets, the Board expects Carillion to make further progress in the second half of 2006 and slightly exceed its original expectations for the full year. Philip Rogerson Chairman CHIEF EXECUTIVES'S REVIEW Business performance -------------------- When we acquired Mowlem in February 2006, we said it was an outstanding strategic fit that would deliver a step change in the development of our business. I am pleased to report that we have made good progress with the integration of Carillion and Mowlem and are firmly on track to deliver the benefits expected from this acquisition. Our first-half profit, which was slightly ahead of our expectations, includes a contribution from equity returns on PPP investments acquired with Mowlem, but no profit on the revenue contributions to our Support Services and Construction Services segments from business acquired with Mowlem. However, we expect these businesses to make a significant contribution to profit in the second half of the year and the Group's full-year performance to be slightly ahead of our original expectations. As announced in April 2006, integration cost savings are substantially ahead of our original forecasts and we are confident that we will deliver savings at a running rate of £15 million per annum by the end of 2006 and £23 million per annum by the end of 2007. The contracts for which we announced revised fair value adjustments on 24 April 2006 are progressing in line with expectations. While there have been a number of movements in the carrying values of assets acquired with Mowlem, the revised total fair value of assets acquired is unchanged. In line with our strategy, we have disposed of a number of non-core businesses acquired with Mowlem. Disposals in the first half of 2006 included Charter, a US construction management business, Edgar Allen, a UK rail products manufacturer, MESG, an environmental services business, and Barclay Mowlem, a construction business in Australia, with the cash proceeds for the latter received in July 2006. Mowlem's complementary skills and market strengths in private finance, support services and construction have significantly enhanced our ability to provide customers with high quality, integrated solutions in our key market sectors. This has been evident in a number of significant new contract wins in the first six months of 2006 and helped us to more than double the value of our order book to £14.5 billion (December 2005: £7 billion). Our consistent and successful strategy for growth remains unchanged. We will therefore continue to grow support services and PPP investment activities alongside a strong and selective construction capability and seek opportunities to provide customers with integrated solutions by using our wide range of skills and extensive resources. In addition to revenue growth, we are also firmly focused on improving margins, particularly in the businesses acquired with Mowlem, to bring them, over time, into line with those of Carillion. We are continuing to implement our strategy through market-focused business units: the 14 business units established immediately after acquisition are now well established and operating in accordance with Carillion's rigorous risk management procedures. The cultural fit between Carillion and Mowlem is also an important factor in the successful integration of the two businesses. The focus we have on living our values in everything we do has been welcomed by those who joined us from Mowlem and we have made substantial progress in this area. Private Finance The acquisition of Mowlem substantially increased our portfolio of equity investments in Public Private Partnership (PPP) projects and strengthened our pipeline of projects for which we were either the preferred bidder or shortlisted. Having achieved financial close in April 2006 on the £12 billion Allenby Connaught project for the Ministry of Defence, at 30 June 2006 we had a portfolio of 31 financially closed projects in which we had invested, or commitments to invest, some £173 million of equity. Since the half-year, we have achieved financial close on the £880 million Joint Permanent Headquarters, Northwood project, also for the Ministry of Defence, in which we are committed to invest a further £10 million of equity. We have announced today the proposed sale of eight equity investments in PPP projects with a total book value of £24 million. The sale is expected to generate cash proceeds of £46 million and an exceptional profit of £22 million. The proceeds we expect from this sale reflect an average discount rate of under 5 per cent. This confirms our view that the Directors' valuation should now be based on discounting the cash flows from our portfolio of investments at an average discount rate of 8 per cent rather than the 10 per cent we have used previously. On that basis, the Directors' valuation of our current portfolio, net of the equity sales announced today, is £216 million. At 31 December 2005 the Directors' valuation was £89 million, based on a 10 per cent discount rate. Financial reporting segments Investments In this segment we report the equity returns on our investments in Public Private Partnership (PPP) projects £m H1 2006 H1 2005 Revenue Group 7.2 0.3 JVs 72.3 28.2 ------- ------- 79.5 28.5 ------- ------- Operating profit* 13.2 3.4 JV Interest & tax (3.7) 0.1 ------- ------- Profit from operations* 9.5 3.5 ------- ------- * Before goodwill impairment of £0.1m in both years. The substantial increase in profit from operations in this segment reflects growing returns from Carillion's investment portfolio as well as contributions from the investments acquired with Mowlem. The Allenby Connaught project for the Ministry of Defence, on which we achieved financial close in April 2006, also made a significant contribution to first half profit. Increasing profitability in this segment, together with the £22 million exceptional profit we expect to achieve following today's announcement of the sale of a number of PPP equity investments, demonstrates the value being generated for the Group through these investments. We expect to continue to create substantial value through investing in PPP projects. In the UK, we have a good pipeline of PPP projects for which we are the preferred bidder or shortlisted and expect to add further projects to this pipeline as the Government remains committed to major PPP programmes in our key sectors. In Canada, where we are providing two of the first PPP hospitals, the PPP market continues to grow as the Government is increasingly using PPPs for the provision of new hospitals and roads. Support Services In this segment we report the results of our rail infrastructure, road maintenance, facilities management, facilities services and consultancy businesses. £m H1 2006 H1 2005 Revenue Group 638.9 460.1 JVs 48.5 3.5 ------- ------- 687.4 463.6 ------- ------- Operating profit* 15.2 19.8 JV Interest & tax (0.6) (0.1) ------- ------- Profit from operations 14.6 19.7 ------- ------- * Before amortisation of intangible assets of £1.2 m (2005: £1.0 m) Revenue in Support Services increased due to the acquisition of Mowlem, which contributed £155 million in the first half, and organic growth in Carillion. As explained earlier in this statement, there is no contribution to profit in this segment from the businesses acquired with Mowlem. The reduction in profit from operations was due to lower revenues and margins in rail infrastructure, on which we have commented previously. We have taken action to reduce overheads and improve margins in our rail business through restructuring and refocusing it on sustainable areas of the UK market, the benefits of which will begin to come through in the second half of 2006. As a result of this action and the significant contributions to profit expected in the second half from the businesses acquired with Mowlem, in which we are also targeting margin improvements, we expect full-year profit margins in this segment to be significantly ahead of the half year. New order intake has remained strong in our support services markets, with the exception of UK rail infrastructure, where activity levels have continued to decline as expected. In the UK, we had significant first half successes in the defence, health and private sector facilities management sectors and also in the roads maintenance market in Canada. These included the £12 billion Allenby Connaught PPP project for the Ministry of Defence, which will generate around £3 billion of support services revenue for Carillion, a £330 million facilities management contract for Barts and The London Hospital (as part of the PPP project to redevelop the hospital) and a £137 million highways maintenance contract in Alberta, Canada. In the first half we also mobilised the Housing Prime and Regional Prime Central contracts for the Ministry of Defence, together worth some £60 million per annum. Since the half-year, we have also achieved financial close on an £880 million PPP project for the Ministry of Defence to redevelop, manage and operate the Northwood Headquarters, home of the Chief of Joint Operations. This is expected to generate around £440 million of support services for Carillion. The outlook in this segment continues to be positive. Overall, the UK support services market is forecast to continue growing at around 5 per cent per annum. In a number of our key market sectors we expect significant opportunities for further growth particularly in defence, education, health and private sector facilities management. We remain cautious on the outlook for the UK rail market, which we expect to continue declining, albeit it at a more modest rate. In Canada, the outsourcing of roads maintenance remains a growth market and our facilities management activities will increase as service delivery in our two PPP hospitals comes on stream in the second half of 2006. We also expect to be bidding for two further PPP hospitals and our first PPP road project in Canada, in the second half. Our joint venture facilities management business in the Middle East is also expected to grow strongly. Construction Services In this segment, we report the results of our UK building, civil engineering and developments businesses and the construction activities of International Regional businesses. £m H1 2006 H1 2005 Revenue Group 843.0 478.4 JVs 115.8 40.6 ------- ------- 958.8 519.0 ------- ------- Operating profit 7.8 2.3 JV Interest & tax (2.2) (1.2) ------- ------- Profit from operations* 5.6 1.1 ------- ------- * Before a JV exceptional charge of £0.6 m in 2005 Revenue and profit from operations increased substantially in this segment, due largely to growth in our Middle East joint venture business, supplemented by substantial organic growth in our UK markets, particularly in our National and Regional Building businesses. As explained earlier in this statement, there is no contribution to profit in this segment from businesses acquired with Mowlem. However, these businesses are expected to make a significant contribution to profit in the second half. Consequently, we expect full-year profit margins in this segment to be ahead of those for 2005. Beyond that, we shall continue to target opportunities for margin growth, particularly in the businesses acquired with Mowlem. New order intake has also been strong in most of our construction markets, in particular UK building, UK roads civil engineering and the Middle East. The regional civil engineering business acquired with Mowlem is going through a period of consolidation in line with our strategy and risk management criteria, but is expected to begin growing from its new base in 2007. In addition to the Allenby Connaught project for the Ministry of Defence, which will generate £600 million of building revenue for Carillion, we continued to make good progress in the retail, offices and mixed-use developments sectors of the commercial building market and in education, health and prisons, where we have framework contracts in both England and Scotland. In the first half, we also signed the £122 million Early Contractor Involvement contract to upgrade the A74 between Carlisle and Guardsmill to motorway standard. Since the half-year, we have achieved financial close on the Northwood Headquarters PPP project for the Ministry of Defence, adding a further £150 million to our construction order book. The outlook in this segment is for continuing growth. Overall, the UK construction market is forecast to grow in line with GDP or better over the next three years. Against this background, we expect particular opportunities for growth in a number of our key market sectors, most notably defence, education and health. In the Middle East, we expect further growth, driven by the Festival City project in Dubai and emerging opportunities in other countries, particularly Abu Dhabi. We also have good opportunities for growth in the medium to longer term in Canada, where we are well positioned to bid for further PPP projects. John McDonough Chief Executive Consolidated income statement for the 6 months to 30 June 2006 Note Half year to Half year to Year to 30 June 2006 30 June 2005 31 December (unaudited) (unaudited) 2005 (audited) £m £m £m Total revenue 1,725.7 1,011.1 2,284.2 Less: Share of jointly controlled entities revenue (236.6) (72.3) (258.7) --------- -------- --------- Revenue 1,489.1 938.8 2,025.5 Cost of sales (1,403.4) (869.1) (1,888.6) --------- -------- --------- Gross profit 85.7 69.7 136.9 Administrative expenses (87.7) (56.2) (104.6) --------- -------- --------- Group operating (loss)/ profit before exceptional reorganisation costs 2 (2.0) 13.5 32.3 Exceptional reorganisation costs 4 (5.7) - - --------- -------- --------- Group operating (loss)/ profit (7.7) 13.5 32.3 -------------------------------------------------------------------------------- Jointly controlled entities 2,3 Operating profit 21.1 5.4 20.3 Net financing income/ (expenses) (1.6) 0.3 1.1 Exceptional items 4 - (0.8) (0.8) Income tax (4.9) (1.3) (5.0) -------------------------------------------------------------------------------- Share of results of jointly controlled entities 14.6 3.6 15.6 --------- -------- --------- Profit from operations 2 6.9 17.1 47.9 --------------------------------------------- Financial income 5 51.4 27.7 54.4 Financial expenses 5 (46.6) (26.4) (50.4) --------------------------------------------- --------- -------- --------- Net financing income 5 4.8 1.3 4.0 --------- -------- --------- Profit before tax 11.7 18.4 51.9 Income tax expense 6 (1.6) (4.3) (11.1) --------- -------- --------- Profit for the period 10.1 14.1 40.8 ========= ======== ========= Attributable to: Equity holders of the parent 9.0 13.3 39.3 Minority interests 1.1 0.8 1.5 --------- -------- --------- Profit for the period 10.1 14.1 40.8 ========= ======== ========= Earnings per share 7 Basic 3.5p 6.3p 18.7p Diluted 3.5p 6.2p 18.4p ========= ======== ========= Total dividend declared for the period 8 3.1p 2.8p 8.0p ========= ======== ========= Consolidated statement of recognised income and expense for the 6 months to 30 June 2006 Half year to Half year to Year to 30 June 2006 30 June 2005 31 December (unaudited) (unaudited) 2005 (audited) £m £m £m Foreign exchange translation adjustments 0.3 1.5 1.6 Actuarial gains and losses on defined benefit pension schemes (5.8) (12.1) 6.7 Group share of change in fair value of cash flow hedges within jointly controlled entities (net of tax) 5.4 (2.2) (1.3) --------- -------- --------- (0.1) (12.8) 7.0 Tax in respect of above 1.7 3.7 (1.5) --------- -------- --------- Income and expense recognised directly in equity 1.6 (9.1) 5.5 Profit for the period 10.1 14.1 40.8 --------- -------- --------- Total recognised income and expense for the period 11.7 5.0 46.3 ========= ======== ========= Attributable to: Equity holders of the parent 10.6 4.2 44.8 Minority interests 1.1 0.8 1.5 --------- -------- --------- Total recognised income and expense for the period 11.7 5.0 46.3 ========= ======== ========= Consolidated balance sheet at 30 June 2006 Notes At 30 June 2006 At 30 June 2005 At 31 December (unaudited) (unaudited) 2005 (audited) £m £m £m Assets Non-current assets Property, plant and equipment 134.4 79.7 100.9 Intangible assets 9 569.0 62.6 62.3 Retirement benefit assets 5.4 5.3 6.4 Investments in jointly controlled entities 162.4 52.7 62.7 Other investments 19.6 4.7 4.7 Deferred tax assets 88.2 40.3 35.2 -------- -------- --------- Total non-current assets 979.0 245.3 272.2 -------- -------- --------- Current assets Inventories 25.9 18.9 21.2 Income tax receivable 0.5 1.4 0.2 Trade and other receivables 997.2 493.2 459.7 Cash and cash equivalents 214.1 147.0 180.9 Assets classified as held for sale 4.5 - - -------- -------- --------- Total current assets 1,242.2 660.5 662.0 -------- -------- --------- Total assets 2,221.2 905.8 934.2 -------- -------- --------- Liabilities Current liabilities Borrowings (31.1) (23.3) (17.0) Derivative financial instruments (0.1) (0.5) (0.3) Trade and other payables (1,313.2) (571.4) (600.4) Provisions - (1.5) - Income tax payable (15.3) (17.7) (13.3) Liabilities classified as held for sale (9.5) - - -------- -------- --------- Total current liabilities (1,369.2) (614.4) (631.0) -------- -------- --------- Non current liabilities Borrowings (301.4) (62.7) (73.1) Retirement benefit liabilities (170.1) (103.5) (74.3) Deferred tax liabilities (7.0) (11.3) (6.0) Provisions (1.7) (0.4) - -------- -------- --------- Non current liabilities (480.2) (177.9) (153.4) -------- -------- --------- Total liabilities (1,849.4) (792.3) (784.4) -------- -------- --------- Net assets 371.8 113.5 149.8 ======== ======== ========= Equity Issued share capital 140.4 107.3 107.4 Share premium 8.5 7.3 8.2 Merger reserve 192.4 8.2 8.2 Other reserves (6.2) (16.8) (9.2) Retained earnings 35.7 6.3 34.1 -------- -------- --------- Equity attributable to equity holders of the parent 370.8 112.3 148.7 Minority interests 1.0 1.2 1.1 -------- -------- --------- Total equity 371.8 113.5 149.8 ======== ======== ========= Consolidated statement of cash flows for the six months to 30 June 2006 Note At 30 June 2006 At 30 June 2005 At 31 December (unaudited) (unaudited) 2005 (audited) £m £m £m Cash flows from operating activities Cash generated from operations - continuing 11 49.3 5.0 73.8 Financial expenses paid (7.2) (2.1) (4.6) Income taxes paid (1.2) (10.4) (19.5) -------- -------- --------- Net cash flows from operating activities 40.9 (7.5) 49.7 -------- -------- --------- Cash flows from investing activities Disposal of property, plant and equipment 0.8 5.5 7.3 Disposal of investments in jointly controlled entities - 0.1 0.6 Disposal of other non-current investments - 3.4 3.4 Financial income received 6.2 4.1 7.4 Dividends received from jointly controlled entities 7.4 3.3 8.4 Disposal of businesses, net of cash disposed of 10 26.7 - - Acquisition of subsidiary, net of cash acquired 10 (122.1) (43.6) (37.1) Acquisition of property, plant and equipment (22.1) (15.1) (34.2) Acquisition of intangible assets (0.3) (2.2) (4.3) Acquisition of investments in jointly controlled entities (2.5) - (2.3) Acquisition of other non-current investment (1.4) - - -------- -------- --------- Net cash flows from investing activities (107.3) (44.5) (50.8) -------- -------- --------- Cash flows from financing activities Proceeds from the issue of share capital 0.4 0.7 1.7 Draw down of borrowings 107.1 2.2 3.4 Repayment of borrowings - - (2.8) Payment of finance lease liabilities (2.5) (1.8) (3.7) Dividends paid to equity holders of the parent (14.5) (10.2) (16.1) Dividends paid to minority interests (1.2) (1.7) (2.5) -------- -------- --------- Net cash flows from financing activities 89.3 (10.8) (20.0) -------- -------- --------- Net increase/(decrease) in cash and cash equivalents 22.9 (62.8) (21.1) Cash and cash equivalents at beginning of period 169.7 189.6 189.6 Effect of exchange rate fluctuations on cash held (1.1) 1.4 1.2 -------- -------- --------- Cash and cash equivalents at end of period 191.5 128.2 169.7 -------- -------- --------- Cash and cash equivalents comprise: Cash and cash equivalents 214.1 147.0 180.9 Bank overdrafts (22.6) (18.8) (11.2) -------- -------- --------- 191.5 128.2 169.7 ======== ======== ========= Notes 1 Basis of preparation This interim financial information has been prepared applying the accounting policies and presentation which were applied in the preparation of the company's published consolidated financial statements for the year ended 31 December 2005. No new accounting policies have been adopted in the six months to 30 June 2006. Carillion plc (the 'Company') is a company domiciled in the United Kingdom (UK). The consolidated interim financial statements of the Company for the six months to 30 June 2006 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interest in jointly controlled entities. The comparative financial information for the year ended 31 December 2005 does not constitute the company's statutory accounts for that financial year. The statutory accounts for the year ended 31 December 2005 have been reported on by the company's auditors and delivered to the registrar of companies. 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 237 (2) or (3) of the Companies Act 1985. 2 Segment reporting Segment information is presented in the consolidated interim financial statements in respect of the Group's business segments, which are the primary basis of segment reporting. The business segment reporting format reflects the Group's management and internal reporting structure. 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. Business segments The Group is comprised of the following main business segments: • Construction Services: UK building, development and civil engineering activities and international regional construction activities. • Support Services: Rail infrastructure, roads maintenance, facilities management and other support services. • Investments: Equity returns on investments in Public Private Partnership (PPP) projects. Notes (continued) 2 Segment reporting (continued) Half year to Construction Support Investments Eliminations Consolidated 30 June 2006 Services Services and unallocated head office £m £m £m £m £m Revenue from external customers 843.0 638.9 7.2 - 1,489.1 Inter-segment revenue - 14.8 - (14.8) - ----- ------ ---- ------ ------- Segment revenue 843.0 653.7 7.2 (14.8) 1,489.1 ----- ------ ---- ------ ------- Segment trading result (2.3) 12.8 4.6 - 15.1 Amortisation/ impair-ment of intangible assets - (1.2) (0.1) (6.0) (7.3) Unallocated expenses - - - (9.8) (9.8) ----- ------ ---- ------ ------- Group operating profit before exceptional re-organisation costs (2.3) 11.6 4.5 (15.8) (2.0) Exceptional reorganisation costs - - - (5.7) (5.7) Share of profit of associates and jointly controlled entities 7.9 1.8 4.9 - 14.6 ----- ------ ---- ------ ------- Profit from operations 5.6 13.4 9.4 (21.5) 6.9 ----- ------ ---- ------ Net financing income 4.8 Income tax expense (1.6) ------ Profit for the period 10.1 ====== Notes (continued) 2 Segment reporting (continued) Half year to Construction Support Investments Eliminations Consolidated 30 June 2005 Services Services and unallocated head office £m £m £m £m £m Revenue from external customers 478.4 460.1 0.3 - 938.8 Inter-segment revenue - 10.9 - (10.9) - ----- ------ ---- ------ ------- Segment revenue 478.4 471.0 0.3 (10.9) 938.8 ----- ------ ---- ------ ------- Segment trading result 0.1 19.6 0.4 - 20.1 Amortisation/ impair-ment of intangible assets - (1.0) (0.1) - (1.1) Unallocated expenses - - - (5.5) (5.5) ----- ------ ---- ------ ------- Group operating profit before exceptional re-organisation costs 0.1 18.6 0.3 (5.5) 13.5 Exceptional reorganisation costs - - - - - Share of profit of associates and jointly controlled entities 0.4 0.1 3.1 - 3.6 ----- ------ ---- ------ ------- Profit from operations 0.5 18.7 3.4 (5.5) 17.1 ----- ------ ---- ------ Net financing income 1.3 Income tax expense (4.3) ----- ------ ---- ------ ------- Profit for the period 14.1 ======= Notes (continued) 2 Segment reporting (continued) Year to 31 Construction Support Investments Eliminations Consolidated December Services Services and unallocated 2005 head office £m £m £m £m £m Revenue from external customers 1,050.1 974.6 0.8 - 2,025.5 Inter-segment revenue 0.3 28.6 - (28.9) - ----- ------ ---- ------ ------- Segment revenue 1,050.4 1,003.2 0.8 (28.9) 2,025.5 ----- ------ ---- ------ ------- Segment trading result 4.8 39.9 0.8 - 45.5 Amortisation/ impair-ment of intangible assets - (2.5) (0.3) - (2.8) Unallocated expenses - - - (10.4) (10.4) ----- ------ ---- ------ ------- Group operating profit before exceptional re-organisation costs 4.8 37.4 0.5 (10.4) 32.3 Exceptional reorganisation costs - - - - - Share of profit of associates and jointly controlled entities 8.2 0.5 6.9 - 15.6 ----- ------ ---- ------ ------- Profit from operations 13.0 37.9 7.4 (10.4) 47.9 ----- ------ ---- ------ Net financing income 4.0 Income tax expense (11.1) ----- ------ ---- ------ ------- Profit for the period 40.8 ======= 2 Segment reporting (continued) Half year Construction Support Investments Eliminations Consolidated to Services Services and unallocated 30 June head office 2006 £m £m £m £m £m Segment assets 705.9 448.2 7.2 - 1,161.3 Investments in jointly controlled entities 35.4 4.6 122.4 - 162.4 Unallocated assets - - - 897.5 897.5 ------- ----------- ----------- ----------- ----------- Total assets 741.3 452.8 129.6 897.5 2,221.2 ------- ----------- ----------- ----------- ----------- Segment liabilities (890.0) (333.3) (18.0) - (1,241.3) Unallocated liabilities - - - (608.1) (608.1) ------- ----------- ----------- ----------- ----------- Total liabilities (890.0) (333.3) (18.0) (608.1) (1,849.4) ------- ----------- ----------- ----------- ----------- Net assets/ liabilities) (148.7) 119.5 111.6 289.4 371.8 ======= ========= ========= ========= ========= Capital expenditure 2.3 7.9 - 10.8 21.0 Depreciation and amortisation 1.9 7.2 - 7.9 17.0 Impairment losses - - 0.1 - 0.1 ======= ========= ========= ========= ========= 2 Segment reporting (continued) Half year Construction Support Investments Eliminations Consolidated to Services Services and unallocated 30 June head office 2005 £m £m £m £m £m Segment assets 371.4 286.0 6.8 - 664.2 Investments in jointly controlled entities 24.2 0.8 27.7 - 52.7 Unallocated assets - - 188.9 188.9 ------- ----------- ----------- ----------- ------------ Total assets 395.6 286.8 34.5 188.9 905.8 ------- ----------- ----------- ----------- ------------ Segment liabilities (348.1) (240.7) (5.2) - (594.0) Unallocated liabilities - - - (198.3) (198.3) ------- ----------- ----------- ----------- ------------ Total liabilities (348.1) (240.7) (5.2) (198.3) (792.3) ------- ----------- ----------- ----------- ------------ Net assets/ liabilities) 47.5 46.1 29.3 (9.4) 113.5 ======= ========= ========= ========= ========= Capital expenditure 5.8 6.0 - 9.3 21.1 Depreciation and amortisation 1.6 5.1 - 2.0 8.7 Impairment losses - - 0.1 - 0.1 ======= ========= ========= ========= ========= 2 Segment reporting (continued) Year to 31 Construction Support Investments Eliminations Consolidated December Services Services and unallocated 2005 head office £m £m £m £m £m Segment assets 306.3 323.0 5.3 - 634.6 Investments in jointly controlled entities 33.6 1.2 28.3 (0.4) 62.7 Unallocated assets - - - 236.9 236.9 ------- ----------- ----------- ----------- ------------ Total assets 339.9 324.2 33.6 236.5 934.2 ------- ----------- ----------- ----------- ------------ Segment liabilities (340.7) (229.0) (4.3) - (574.0) Unallocated liabilities - - - (210.4) (210.4) ------- ----------- ----------- ----------- ------------ Total liabilities (340.7) (229.0) (4.3) (210.4) (784.4) ------- ----------- ----------- ----------- ------------ Net assets/ liabilities) (0.8) 95.2 29.3 26.1 149.8 ======= ========= ========= ========= ========= Capital expenditure 4.0 29.9 - 20.1 54.0 Depreciation and amortisation 2.4 12.7 - 4.1 19.2 Impairment losses - 1.0 0.3 - 1.3 ======= ========= ========= ========= ========= Geographic segments Half year to United Kingdom Europe Rest of World Consolidated 30 June 2006 £m £m £m £m Revenue from external customers 1,354.8 45.0 89.3 1,489.1 ========= ========= ========= ========= Segment assets 2,033.5 65.6 122.1 2,221.2 ========= ========= ========= ========= Capital expenditure 17.2 0.1 3.7 21.0 ========= ========= ========= ========= Geographic segments Half year to United Kingdom Europe Rest of World Consolidated 30 June 2005 £m £m £m £m Revenue from external customers 841.3 15.5 82.0 938.8 ========= ========= ========= ========= Segment assets 763.6 18.3 123.9 905.8 ========= ========= ========= ========= Capital expenditure 15.2 0.4 5.5 21.1 ========= ========= ========= ========= Geographic segments Year to 31 United Kingdom Europe Rest of World Consolidated December 2005 £m £m £m £m Revenue from external customers 1,796.7 40.2 188.6 2,025.5 ========= ========= ========= ========= Segment assets 780.4 15.1 138.7 934.2 ========= ========= ========= ========= Capital expenditure 32.7 0.6 20.7 54.0 ========= ========= ========= ========= Notes (continued) 3 Share of results of jointly controlled entities The group's share of the results of jointly controlled entities is analysed below: Half year to Half year to Year to 30 June 2006 30 June 2005 31 December (unaudited) (unaudited) 2005 (audited) £m £m £m Revenue 236.6 72.3 258.7 ----- --- --- Operating profit 21.1 5.4 20.3 Net finance (expense)/income (1.6) 0.3 1.1 ----- --- --- Profit before tax and non-operating items 19.5 5.7 21.4 Exceptional items (see note 4) - (0.8) (0.8) ----- --- --- Profit before tax 19.5 4.9 20.6 Income tax (4.9) (1.3) (5.0) ----- --- --- Profit after tax 14.6 3.6 15.6 ===== === === The Group's share of the operating profit of jointly controlled entities arises in the following business segments: Half year to Half year to Year to 30 June 2006 30 June 2005 31 December (unaudited) (unaudited) 2005 (audited) £m £m £m Construction Services 10.1 2.2 12.1 Support Services 2.4 0.2 0.7 Investments 8.6 3.0 7.5 --- --- --- 21.1 5.4 20.3 === === === Notes (continued) 4 Exceptional items Reorganisation costs of £5.7m primarily include redundancy and associated costs following a review of the Group's structure on the acquisition of Mowlem plc on 23 February 2006. The exceptional item in jointly controlled entities of £0.8m in 2005 relates to the sale of a small non-core plant hire business. 5 Financial income and expenses Half year to Half year to Year ended 30 June 2006 30 June 2005 31 December (unaudited) (unaudited) 2005 (audited) £m £m £m Financial income Bank interest receivable 3.9 1.9 4.3 Other interest receivable 5.3 2.0 3.1 Expected return on retirement plan assets 42.2 23.8 47.0 --- --- --- 51.4 27.7 54.4 --- --- --- Financial expenses Interest payable on bank loans and overdrafts (5.7) (0.9) (1.7) Other interest payable and similar charges (1.5) (1.2) (2.9) Interest cost on retirement plan obligations (39.4) (24.3) (45.8) --- --- --- (46.6) (26.4) (50.4) === === === Net financing income 4.8 1.3 4.0 === === === 6 Income taxes Reconciliation of effective tax rate The current tax expense (including the Group's share of joint ventures tax) for the six months to 30 June 2006 is calculated based on the estimated average annual effective income tax rate of 27% (six months to 30 June 2005: 27%), as compared to the tax rates expected to be enacted or substantively enacted at the annual balance sheet date of 30% (six months to 30 June 2005: 30% ). Differences between the estimated average annual effective income tax rate and statutory rate include but are not limited to the effect of tax rates in foreign jurisdictions, non-deductible expenses, tax incentives not recognised in profit or loss, the effect of tax losses utilised and under/over provisions in previous years. Notes (continued) 7 Earnings per share (a) Basic The calculation of basic earnings per share for the six months to 30 June 2006 is based on the profit for the period of £9.0 million (six months to 30 June 2005: £13.3 million; year to 31 December 2005: £39.3 million) and a weighted average number of ordinary shares outstanding during the six months to 30 June 2006 of 257.7 million (six months to 30 June 2005: 210.4 million; year to 31 December 2005: 210.5 million). The weighted average number of shares excludes shares held by the Employee Share Ownership Plan and the QUEST, which together amount to 3.8 million shares in total (six months to 30 June 2005: 4.1 million; year to 31 December 2005: 4.1 million). (b) Underlying performance A reconciliation of profit before tax and basic earnings per share, as reported in the income statement, to adjusted profit before tax and basic earnings per share, is set out below: Profit before Half year to 30 June Half year to 30 June Year to 31 December tax 2006 2005 2005 £m £m £m Profit before tax as reported in the income statement 11.7 18.4 51.9 Amortisation of intangible assets arising from business combinations 7.2 1.0 2.5 Impairment of goodwill 0.1 0.1 0.3 Loss on disposal of business - 0.6 0.8 Reorganisation costs 5.7 - - --- --- --- Adjusted profit before tax 24.7 20.1 55.5 === === === Half year to 30 June 2006 Half year to 30 June 2005 Year to 31 December 2005 £m Pence per share £m Pence per share £m Pence per share Profit attributable to equity holders of the parent 9.0 3.5 13.3 6.3 39.3 18.7 Reorganisation costs 5.7 2.2 - - - - Group share of joint ventures non-operating items (net of tax) - - 0.6 0.3 0.8 0.4 Less taxation in respect of above (1.5) (0.6) - - - - --- --- --- --- --- --- Profit before exceptional items 13.2 5.1 13.9 6.6 40.1 19.1 Amortisation/ impairment of intangible assets 7.3 2.8 1.1 0.5 2.8 1.3 --- --- --- --- --- --- Profit before exceptional items and amortisation/ impairment of intangible assets 20.5 7.9 15.0 7.1 42.9 20.4 ==== ==== ==== === ==== ==== Diluted adjusted earnings per share 7.9 7.0 20.1 Notes (continued) 7 Earnings per share (continued) (c) Diluted earnings per share Diluted earnings per 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: Half year to Half year to Year to 30 June 2006 30 June 2005 31 December (unaudited) (unaudited) 2005 (audited) Million Million Million Number of ordinary shares per basic earnings per share calculations 257.7 210.4 210.5 Effect of shares under option 2.8 3.1 3.1 --- --- --- 260.5 213.5 213.6 === === === 8 Dividends The following dividends were paid by the company: Half year to 30 June 2006 Half year to 30 June 2005 Year to 31 December 2005 £m Pence per £m Pence per £m Pence per share share share Previous period final dividend 14.5 5.2 10.2 4.825 10.1 4.825 Current period interim dividend - - - - 6.0 2.8 ------------- ------------- ------------- ------------- ------------- ------------- 14.5 5.2 10.2 4.825 16.1 7.625 ============= ============= ============= ============= ============= ============= The following dividends were declared by the company in respect of each accounting period presented: Half year to 30 June 2006 Half year to 30 June 2005 Year to 31 December 2005 £m Pence per £m Pence per £m Pence per share share share Interim dividend 8.7 3.1 6.0 2.8 6.0 2.8 Final dividend - - - - 14.6 5.2 ------------- ------------- ------------- ------------- ------------- ------------- 8.7 3.1 6.0 2.8 20.6 8.0 ============= ============= ============= ============= ============= ============= The interim dividend for 2006 of 3.1 pence per share was approved by the Board on 6 September 2006 and has not been included as a liability as at 30 June 2006. This interim dividend will be paid on 10 November 2006 to shareholders on the register at the close of business on 15 September 2006. Notes (continued) 9 Intangible assets Goodwill Customer Total arising Computer Total contracts and from business software and lists combinations licences £m £m £m £m £m Cost At 1 January 2006 53.6 6.2 59.8 8.7 68.5 Acquisitions (see note 10) 396.1 100.0 496.1 - 496.1 Goodwill acquired (see note 10) 18.0 - 18.0 - 18.0 Additions - - - 0.3 0.3 Reclassification - - - 0.2 0.2 --------------- --------------- --------------- --------------- --------------- At 30 June 2006 467.7 106.2 573.9 9.2 583.1 =============== =============== =============== =============== =============== Amortisation and impairment losses At 1 January 2006 - 2.5 2.5 3.7 6.2 Amortisation - 7.2 7.2 0.5 7.7 Reclassification - - - 0.2 0.2 --------------- --------------- --------------- --------------- --------------- At 30 June 2006 - 9.7 9.7 4.4 14.1 =============== =============== =============== =============== =============== Net book value At 31 December 2005 53.6 3.7 57.3 5.0 62.3 =============== =============== =============== =============== =============== At 30 June 2006 467.7 96.5 564.2 4.8 569.0 =============== =============== =============== =============== =============== 10 Acquisitions and disposals Acquisitions On 23 February 2006, the Group acquired the entire share capital of Mowlem plc for total consideration of £348.7 million. The company and its subsidiaries operate in a number of sectors and industries, particularly construction, facilities management and Public Private Partnerships. In the period from acquisition to 30 June 2006 Mowlem plc contributed profit before tax of £2.7 million to the consolidated profit for the interim period. If the acquisition had occurred on 1 January 2006, Group revenue would have been £1,738.5 million and profit before tax would have been £4.0 million for the six months to 30 June 2006. Effect of acquisitions The acquisition had the following effect on the Group's assets and liabilities. Notes (continued) 10 Acquisitions and disposals (continued) Net assets at the acquisition date Carrying Provisional Accounting Provisional amounts fair value policy recognised adjustments adjustment values £m £m £m £m Property, plant and equipment 25.9 (2.4) - 23.5 Intangible assets 18.0 - - 18.0 Investments in jointly controlled entities 24.5 72.7 (8.8) 88.4 Other investments 15.0 - - 15.0 Deferred tax assets 30.9 15.3 6.3 52.5 Inventories 17.9 (4.2) - 13.7 Trade and other receivables 457.1 (20.0) - 437.1 Assets held for sale 76.3 56.9 - 133.2 Cash and cash equivalents 11.6 (8.1) - 3.5 Borrowings (126.4) 0.4 - (126.0) Trades and other payables (560.2) 32.4 2.9 (524.9) Income tax (4.2) 1.3 - (2.9) Retirement benefit liabilities (95.5) - (21.0) (116.5) Liabilities held for sale (125.9) (34.4) - (160.3) Provisions (1.7) - - (1.7) --- --- --- --- Net identifiable assets and liabilities (236.7) 109.9 (20.6) (147.4) --- --- --- --- Provisional goodwill and intangible assets recognised on acquisition 496.1 --- Consideration 348.7 === Of the provisional goodwill of £496.1m, £100.0m has provisionally been identified as relating to customer contracts and relationships that require classification as intangible assets. This review of intangible assets acquired is still ongoing and will be completed by the year end. A charge of £6.0m has been included the income statement in relation to the amortisation of these intangible assets. Provisional goodwill of £396.1m has arisen on the acquisition of Mowlem plc because of a large number of other customer contracts and relationships that do not meet the criteria for recognition as an intangible asset at the date of acquisition. The fair value adjustments made at acquisition relate to: - market value adjustments to the carrying value of investments in PPP jointly controlled entities - the reclassification of Edgar Allen Limited and Charter as available for sale assets and liabilities and the subsequent adjustment to their net realisable value following the decision to dispose of the businesses post acquisition - the recognition of a deferred tax asset on a proportion of corporation tax trading losses The accounting policy adjustments made relate to : - the reversal of the fair value uplift to finance debtors within PPP jointly controlled entities - the recognition of the full defined benefit pension scheme deficits on balance sheet following the reversal of the corridor approach to the recognition of actuarial gains and losses - a re-alignment of the treatment of investment related bid cost recoveries at financial close on PPP projects Consideration for the acquisition comprises the following: £m Cash 117.3 Equity shares issued 223.1 Attributable costs 8.3 ---------------- 348.7 ================ The value of equity shares issued is based on the quoted mid-market price of Carillion plc shares at the close of business on the day preceding the effective date of acquisition of £3.39 and the total number of equity shares issued of 65.8 million. Attributable costs include direct advisor costs incurred in relation to the acquisition contracts and due diligence procedures. Cash flows associated with the acquisition are included in the cash flow statement as follows: £m Cash paid (117.3) Attributable costs paid (8.3) -------------- (125.6) Cash and cash equivalents acquired 3.5 -------------- Net cash outflow on acquisition (122.1) ============== Disposals During the acquisition of Mowlem plc, certain businesses were identified as being non-core operations for disposal. In addition, there were a number of businesses which had not been identified as available for sale by Mowlem plc prior to acquisition. In the post acquisition period the Group disposed of the following Mowlem plc businesses; Edgar Allen Limited Charter Mowlem Environmental Sciences Group Barclay Mowlem Limited These businesses were included in the acquisition balance sheet of Mowlem Plc as assets and liabilities held for sale and are therefore carried at fair value, which represents proceeds on disposal less costs to sell. These fair values were realised on subsequent disposal and consequently no profit or loss has arisen. The cash effect has been reflected in the Group cash flow statement as follows: £m Consideration received (net of disposal costs paid) 49.8 Cash in businesses disposed of (23.1) ---------------- Cash inflow from disposal of businesses 26.7 ================ Notes (continued) 11 Reconciliation of profit for the period to cash generated from operations Half year to Half year to Year to 30 June 2006 30 June 2005 31 December (unaudited) (unaudited) 2005 (audited) £m £m £m Cash flows from operating activities Profit for the period 10.1 14.1 40.8 Depreciation, amortisation and impairment 17.1 8.8 20.5 (Profit)/loss on sale of property, plant and equipment 0.5 (0.5) (0.9) Share based payment expense 0.6 0.5 1.2 Other non-cash movements 2.2 0.9 (3.2) Share of results of jointly controlled entities (14.6) (3.6) (15.6) Net financing income (4.8) (1.3) (4.0) Income tax expense 1.6 4.3 11.1 Exceptional reorganisation costs 5.7 - - --- --- --- Operating profit before changes in working capital and provisions 18.4 23.2 49.9 Increase in inventories 8.8 (0.5) (2.6) (Increase)/decrease in trade and other receivables (147.0) (60.3) (26.4) Increase/(decrease) in trade and other payables 196.4 53.0 65.1 Decrease in provisions - (0.4) (2.2) --- --- --- Cash generated from operations before pension scheme contributions and exceptional costs 76.6 15.0 83.8 Pension scheme contributions (23.0) (10.0) (10.0) Exceptional reorganisation costs (4.3) - - --- --- --- Cash generated from operations 49.3 5.0 73.8 === === === Pension scheme contributions of £23.0m in the half year to 30 June 2006 relate to lump sum contributions agreed with the trustees of the Carillion, Staff, 'B' and Public Sector schemes in order to reduce the deficits in those schemes. The pension scheme contribution of £10.0 million in 2005 relates to a one-off payment into the pension scheme of PMG following the acquisition of the company in March 2005. 12 Reconciliation of Equity Shareholders' Funds Half year to Half year to Year to 30 June 2006 30 June 2005 31 December (unaudited) (unaudited) 2005 (audited) £m £m £m Recognised income and expense for the period 10.6 4.2 44.8 Equity settled transactions (net of tax) 0.4 0.5 0.9 Share options exercised by employees 2.1 0.4 0.7 New share capital subscribed 223.5 0.7 1.7 Dividends paid to equity holders of the parent (14.5) (10.2) (16.1) --- --- --- Net movement in equity shareholders' funds 222.1 (4.4) 32.0 Opening equity shareholders' funds 148.7 116.7 116.7 --- --- --- Closing equity shareholders' funds 370.8 112.3 148.7 === === === Independent review report to Carillion plc Introduction We have been instructed by the Company to review the financial information, for the six months ended 30 June 2006 which comprises consolidated income statement, consolidated statement of recognised income and expense, consolidated balance sheet, consolidated statement of cash flows and the related notes. 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. This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of The Listing Rules of the Financial Services Authority. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority, which 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 any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries 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 excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Statements on Auditing (UK and Ireland) 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 2006. KPMG Audit Plc Chartered Accountants 2 Cornwall Street Birmingham B3 2DL 6th September 2006 This information is provided by RNS The company news service from the London Stock Exchange CBUPQUUQ

Companies

Carillion (CLLN)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today