Interim Results

RNS Number : 1612C

Carillion PLC

28 August 2008

 



CARILLION PLC

Interim Results for the six months ended 30 June 2008  

21% growth in underlying earnings per share

Underlying results

·         Total revenue up 27% to £2,411.0m (2007: £1,895.0m)⁽¹⁾

 

·         Underlying profit before taxation up 59% to £53.6m (2007: £33.8m)⁽²⁾

 

·         Underlying earnings per share up 21% to 11.5p (2007: 9.5p)⁽³⁾

 

Reported results

·         Profit before taxation up 42% to £27.0m (2007: £19.0m)⁽²⁾

 

·         Basic earnings per share up 32% to 7.0p (2007: 5.3p)⁽⁴⁾

 

·         Proposed interim dividend up 17% to 4.1p (2007: 3.5p)

 

·         Net borrowing at 30 June 2008 of £264.1m (2007: £139.7m)

 

Strategic highlights

·         Integration of Alfred McAlpine progressing very well with benefits ahead of original expectations - integration savings
 expected to increase by 33% to a run rate of £40m per annum by the end of 2009

 

·         Support services continues to be a major driver of growth – revenue up 43% and bidding activity remains high

 

·         Middle East construction services growing strongly - on track to almost double 2007 revenue by the end of 2009 to over
 £600m at some 6% margins   

 

·         Public Private Partnership projects and construction services (excluding the Middle East) performing well – continuing
strong demand from secondary market funds for equity investments in Public Private Partnership projects

 

·         Support services and total construction margins improving – total group underlying profit from operations margin up to
 2.3% (2007: 1.9%)⁽²⁾

 

·         £20bn order book – plus pipeline of probable orders of £4.1bn

 

·         Expect further strong progress in 2008 and to deliver materially enhanced earnings in 2009

 

⁽¹⁾  Continuing operations

⁽²⁾   Continuing operations after Joint Venture taxation of £4.5m (2007: £4.1m) and before intangible amortisation, impairment of goodwill and other investments, restructuring costs
  and non-operating items (see notes 3 and 4 to interim financial statements)

⁽³⁾  Continuing operations before intangible amortisation, impairment of goodwill and other investments, restructuring costs and non-operating items (see notes 3 and 4 to interim
  financial statements)

⁽⁴⁾  Continuing and discontinued operations

Philip Rogerson, Chairman, commented:

'Carillion has continued to perform strongly and our results for the first half of 2008 are slightly ahead of our expectations, which reflects the Group's strength and increased resilience. With a substantial order book and an overall positive outlook in our principal businesses, the Group remains on track to make strong progress in 2008 and to deliver materially enhanced earnings in 2009'. 

 

A telephone dial in facility ([phone]) will be available from 9:00am for analysts and investors who are unable to attend the presentation. The presentation can be viewed on Carillion's website a www.carillionplc.com/investors/investors_presentations.asp.

For further information contact:

Richard Adam, Group Finance Director                            tel: [phone]

John Denning, Group Corporate Affairs Director                tel: [phone]

28 August 2008 

Notes to Editors:

Carillion is the UK's leading support services company, with a substantial portfolio of Public Private Partnership projects and extensive construction capabilities.  The Group has annual revenue of around £5 billion, employs some 50,000 people and operates across the UK, in the Middle East, Canada and the Caribbean. 

In the UK, Carillion's principal market sectors are 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 also has a substantial portfolio of equity investments in Public Private Partnership projects in the UK and Canada, particularly in the Defence, Education, Health and Transport sectors.

This, and other news releases relating to the Group, 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 [phone].

Key financial figures

		2008	2007	Change
Income statement(1)
Total revenue	£m	2,411.0	1,895.0	+27%
Support services underlying operating profit margin(2)	Percentage	3.3%	3.0%	n/a
Total construction services underlying operating profit margin(2)	Percentage	2.1%	1.9%	n/a
Total group underlying profit from operations margin(3)	Percentage	2.3%	1.9%	n/a
Underlying profit from operations(3)	£m	54.8	35.5	+54%
Underlying profit before taxation(3)	£m	53.6	33.8	+59%
Profit before taxation	£m	27.0	19.0	+42%
Underlying earnings per share	Pence	11.5	9.5	+21%
Basic earnings per share - continuing and discontinued operations	Pence	7.0	5.3	+32%
Dividends
Proposed dividend per share	Pence	4.1	3.5	+17%
Underlying proposed dividend cover(2)	Times	2.8	2.7	n/a
Basic proposed dividend cover - continuing and discontinued operations	Times	1.7	1.5	n/a
Cash flow statement(1)
Cash generated from operations before pension deficit recovery payments and restructuring costs and after dividends received from Joint Ventures	£m	96.9	51.1	+90%
Underlying profit from operations cash conversion	Percentage	176.8	143.9	n/a
Deficit pension contributions	£m	31.6	37.2	-15%
Balance sheet
Net borrowings	£m	264.1	139.7	+89%
Net retirement benefit liability (net of taxation)	£m	74.8	26.6	+181%
Net assets	£m	844.8	476.0	+77%

⁽¹⁾ Continuing operations unless otherwise stated

⁽²⁾ Before intangible amortisation, impairment of goodwill and other investments, restructuring costs and non-operating items (see notes 3 and 4 to interim financial statements)

⁽³⁾ After Joint Ventures taxation of £4.5m (2007: £4.1m) and before intangible amortisation, impairment of goodwill and other investments, restructuring costs and non-operating items (see notes 3 and 4 to interim financial statements).

 

 

Results

Carillion has continued to perform strongly and our results for the first half of 2008 are slightly ahead of our expectations, which reflects the Group's strength and increased resilience. 

Support services continues to be a major driver of earnings growth. In addition, Middle East construction services is growing strongly and Public Private Partnership projects and Construction services in the UK, Canada and Caribbean, have also continued to perform well.

The benefits of acquiring Alfred McAlpine in February 2008 remain significantly ahead of our original expectations, with integration cost savings expected to rise from a run rate of £30 million a year to £40 million a year by the end of 2009.  

Revenue including joint ventures(1) increased by 27 per cent to £2,411.0 million (2007: £1,895.0 million) and underlying profit before tax(2) increased by 59 per cent to £53.6 million (2007: £33.8 million), reflecting both the acquisition of Alfred McAlpine and the Group's strong operating performance. Underlying earnings per share(3) rose by 21 per cent to 11.5 pence per share (2007: 9.5 pence).  

The Group's balance sheet continues to be very robust. Underlying cash flow from operations of £96.9 million (2007: £51.1 million) was again substantially ahead of underlying profit from operations of £54.8 million (2007: £35.5 million). Net borrowing at 30 June 2008 increased to £264.1 million (31 December 2007: £44.9 million). This reflected a number of first-half investments, the largest of which was the acquisition of Alfred McAlpine, partially offset by our strong operating cash flow and proceeds from the sale of equity investments in Public Private Partnership (PPP) projects. At the year end we expect the Group's net borrowing to be below our original target of £300 million.

New order intake has remained very healthy and the Group's forward order book at 30 June 2008 was £20.0 billion (31 December 2007: £16.0 billion), with the increase due both to the acquisition of Alfred McAlpine and organic growth. In addition, the Group had a pipeline of probable new orders of £4.1 billion (31 December 2007: £3.6 billion). 

In view of the Group's performance and prospects for the second half of 2008, the Board has increased the interim dividend by 17 per cent to 4.1 pence per share (2007: 3.5 pence).

With a substantial order book and an overall positive outlook in our principal businesses, the Group remains on track to make strong progress in 2008 and to deliver materially enhanced earnings in 2009. 

⁽¹⁾   Continuing operations

⁽²⁾  Continuing operations after Joint Ventures taxation of £4.5m (2007: £4.1m) and before intangible amortisation, impairment of goodwill and other investments, restructuring costs and non-operating items (see notes 3 and 4 to interim financial statements)

⁽³⁾   Continuing operations before intangible amortisation, impairment of goodwill and other investments, restructuring costs and non-operating items (see notes 3 and 4 to interim financial statements).

Strategy 

Carillion has become an increasingly resilient business, well positioned in a wide range of markets offering continuing opportunities for growth, through implementing our consistent and successful strategy.

The strong progress we have made in the first six months of the year against the key performance indicators we set for 2008 is summarised in the table below:

Continue to attract, develop and retain excellent people by being an employer of choice	Employee satisfaction levels indicate the continuing success of our leadership, personal development and employee engagement programmes
Be a recognised leader in the delivery of safety and sustainability	Carillion and Alfred McAlpine topped their respective sectors in Business in the Community's 2007 Corporate Responsibility Index. In the Sunday Times 2007 'Best Green Companies' awards Carillion received the top award for large and medium companies with high environmental impact. Our Accident Frequency Rate in the first half of 2008 of 0.16 (2007: 0.15) ranks with the best in our sector
Deliver revenue growth of a minimum of 5 per cent	Our first half performance puts us on track to achieve this target
Successfully integrate Alfred McAlpine and deliver integration cost savings at a run rate of £30 million per annum by the end of 2009	Integration is progressing very well, with integration cost savings up 33% from £30 million per annum to £40 million per annum by the end of 2009
Achieve underlying earnings per share growth  that puts the Group on track to deliver materially enhanced earnings per share in 2009 following the Alfred McAlpine acquisition	21% growth in underlying earnings per share(1) in the first half of 2008 puts us firmly on track to achieve  this objective
Generate cash-backed profit from operations	Underlying cash flow represented 177% of underlying profit from operations at the half year
Achieve year end net borrowing in the region of £300 million	Net borrowing of £264.1 million at the half year puts us on track to reduce net borrowing to below our year end target

 

⁽¹⁾ Continuing operations before intangible amortisation, impairment, restructuring costs and non-operating items.

In line with our strategy for growth, around two thirds of underlying operating profit continues to come from support services and investments in Public Private Partnership projects.  This strategic transformation of our business mix resulted in the FTSE and Dow Jones Indices changing Carillion's Industry Classification Benchmark from Heavy Construction to Business Support Services on 20 June 2008.

The Group's strategy continues to be underpinned by our commitment to living our values in everything we do. Carillion has consistently demonstrated that adopting the highest standards of corporate responsibility not only has positive impacts on the environment and on the communities in which we operate, but also helps us to deliver our business objectives.  For the second year

running, Carillion received a Gold performance ranking and came top of the Construction and Materials sector of Business in the Community's 2007 Corporate Responsibility Index, announced in May 2008, and Alfred McAlpine topped the Support Services sector of the 2007 Index.

The acquisition of Alfred McAlpine was completed on 12 February 2008 for a total consideration of £554.5 million, satisfied by the issue of 112.9 million new Carillion plc shares, £171.7 million in cash and £1.3 million of loan notes. The attributable costs of the transaction were £10.4 million.  

This acquisition was a further significant step in the Group's strategic development. It created the UK's largest support services business with the capabilities required to provide customers with fully integrated solutions for buildings and infrastructure, including project finance, design, construction and life-time facilities and asset management services. 

The integration of Carillion and Alfred McAlpine is progressing very well and the overall benefits of the acquisition are exceeding our expectations.  

The structure of the enlarged group is firmly established and operating in accordance with Carillion's risk management policies and processes.  

As previously announced, integration cost savings will reach a run rate of £40 million a year by the end of 2009, an increase of 33 per cent on our original expectation of £30 million a year. Absolute cost savings in 2008 will be £15 million, rising to £30 million in 2009 and £40 million in 2010. The cumulative one-off cost of delivering these savings will be £40 million.

A rigorous assessment of the fair value of assets acquired with Alfred McAlpine has been undertaken in accordance with International Financial Reporting Standards. As previously announced the overall adjustments made to fair value are in line with our expectations at the time of the acquisition and will have no impact on net assets, profits or cash flow. We do not expect to make any significant further adjustments in relation to this acquisition.

However, in the event that adjustments are required they will be made transparent in accordance with the relevant accounting standards and will have no impact on underlying profit or earnings. Based on this assessment of fair value, we continue to expect goodwill arising from this acquisition to be £615 million. 

Following the acquisition of Alfred McAlpine we are now the UK's largest support services company, which we believe provides the Group with a solid platform for future growth.

Business performance

Total revenue from continuing operations in the first half of 2008 increased by 27 per cent to £2,411.0 million (2007: £1,895.0 million) including revenue from joint ventures of £326.4 million (2007: £317.7 million).

Total underlying profit from operations increased by 54 per cent to £54.8 million (2007: £35.5 million), including profit from joint ventures of £18.8 million (2007: £17.5 million). After a net financing expense of £1.2 million (2007: £1.7 million), underlying profit before taxation was £53.6 million, an increase of 59 per cent (2007: £33.8 million). Underlying earnings per share on the same measure increased by 21 per cent to 11.5 pence (2007: 9.5 pence).

Intangible amortisation and impairment amounted to £28.8 million (2007: £9.8 million), restructuring costs £19.9 million (2007: £5.5 million) and non-operating income £22.1 million (2007: £0.5 million), leaving profit before taxation of £27.0 million (2007: £19.0 million). Group taxation income of £0.1 million (2007: £1.8 million charge) when combined with joint venture taxation of £4.5 million (2007: £4.1 million), represented an underlying effective tax rate of 25 per cent. Profit after tax was £27.1 million (2007: £17.2 million). After minority interests of £1.4 million (2007: £1.1 million), profit attributable to Carillion shareholders was £25.7 million (2007: £15.1 million) and basic earnings per share from continuing and discontinued operations were 7.0 pence (2007: 5.3 pence).  

The first half underlying profit from operations margin, including joint ventures, increased to 2.3 per cent (2007: 1.9 per cent) as a result of our continuing focus on cost reduction, contract selectivity and greater efficiency.  

Net borrowing at 30 June 2008 was £264.1 million (31 December 2007: £44.9 million), despite a number of substantial cash investments and costs in the first half of 2008, including the acquisition of Alfred McAlpine, which increased net borrowing by £279.8 million. Other significant cash outflows included a £31.6 million payment to Group pension funds, in line with our pension deficit recovery plan (2007: £37.2 million), integration restructuring costs of £13.5 million (2007: £0.3 million), net capital expenditure of £4.4 million (2007: £5.4 million) and interest, tax and dividend costs of £39.1 million (2007: £15.1 million). These outflows were partially offset by net proceeds received from the sale of equity investments in Public Private Partnership projects amounting to £61.6 million, of which £25.9 million related to sales announced by Alfred McAlpine prior to its acquisition by Carillion. Cash inflow from operations for the full year of 2008 is expected to remain strong and net borrowing at the year end is now expected to be below our original objective of £300 million.

Financial reporting segments 

We report the financial results of our activities in four segments, in which activities of a similar type and risk profile are reported together to make it easier to value the Group's earnings on a consistent basis.  

Operating profit by financial reporting segment

			Change from
	2008	2007	2007
	£m	£m	%
Support services	39.1	24.4	60
Public Private Partnership projects	13.1	12.1	8
Middle East construction services	13.1	9.3	41
Construction services  (excluding the Middle East)	10.8	9.2	17
	76.1	55.0	38
Group eliminations and unallocated items	(10.6)	(9.8)	(8)
Profit from operations before Joint Venture net financial expense and taxation	65.5	45.2	45
Share of Joint Venture net
financial expense	(6.2)	(5.6)	(11)
Share of Joint Venture taxation	(4.5)	(4.1)	(10)
Underlying profit from operations(1)	54.8	35.5	54
Intangible amortisation and impairment  of goodwill and other investments	(28.8)	(9.8)	(194)
Restructuring costs	(19.9)	(5.5)	(262)
Reported profit from operations(2)	6.1	20.2	(70)

⁽¹⁾ Continuing operations before intangible amortisation, impairment, restructuring costs and non-operating items
⁽²⁾ Continuing operations.

Support services

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

	2008 £m	2007 £m	Change from 2007 %
Revenue(1)     - Group     - Joint Ventures	1,060.1 119.3	715.4 109.6
	1,179.4	825.0	43
Underlying operating profit(2) (3)     - Group     - Joint Ventures	32.1 7.0	18.2 6.2
	39.1	24.4	60

⁽¹⁾ Continuing operations
⁽²⁾ Continuing operations before intangible amortisation, impairment, restructuring costs and non-operating items
⁽³⁾ Before Group eliminations, unallocated items and joint venture net financial expense and taxation.

Revenue increased by 43 per cent, due primarily to the acquisition of Alfred McAlpine plus organic growth. Underlying operating profit increased by 60 per cent, reflecting increases in revenue and operating margin, which rose from 3.0 per cent to 3.3 per cent, despite a higher than normal level of bid and contract mobilisation costs. Full-year margins are expected to be between four and five per cent, in line with our objective for this segment. 

Overall, new order intake in support services has remained strong, with a number of notable contract wins in the first half of the year that reflected the Group's ability to provide customers with fully integrated solutions for large complex property estates. These included a £500 million contract for BT, a £350 million contract for Philips and a £40 million contract for AXA.

Our forward order book at 30 June 2008 was worth £11.5 billion (31 December 2007: £8.4 billion), with this substantial increase due to the acquisition of Alfred McAlpine and organic growth. In addition, we had a pipeline of probable new orders worth £0.5 billion (31 December 2007: £0.6 billion).

The outlook in this segment continues to be positive with bidding activity remaining at a high level. We therefore expect continuing opportunities for growth, driven by public and private sector outsourcing, particularly in facilities management, utility services and road maintenance. 

We also expect opportunities for further growth in our international regions. In Canada, roads maintenance and facilities management, particularly for Public Private Partnership hospitals, are expected to remain growth markets and facilities management in the Middle East is expected to grow steadily. 

Public Private Partnership (PPP) 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.

	2008 £m	2007 £m	Change from 2007 %
Revenue(1)     - Group     - Joint Ventures	0.5 80.5	0.4 83.2
	81.0	83.6	(3)
Underlying operating profit(2) (3)     - Group     - Joint Ventures	0.3 12.8	0.4 11.7
	13.1	12.1	8

⁽¹⁾   Continuing operations

⁽²⁾   Continuing operations before intangible amortisation, impairment, restructuring costs and non-operating items

⁽³⁾   Before Group eliminations, unallocated items and joint venture net financial expense and taxation.

 

Carillion's ability to win and successfully deliver PPP projects by integrating our skills in project finance, design, construction, maintenance and lifetime facilities and asset management, continues to generate substantial value for the Group.  

Underlying operating profit increased despite the effect of selling three further equity investments in December 2007, because their contribution to underlying operating profit was more than offset by growing returns from our remaining portfolio of investments, as this continues to mature.  

In May and June 2008, we sold equity investments in a further four projects - Lewisham Hospital, James Cook Hospital, Barnsley Schools and Redcar and Cleveland Schools - generating total proceeds of £35.9 million and a non operating profit of £22.1 million. Since the half year we have sold equity investments in two further projects - John Radcliffe Hospital, Oxford, and Nottingham Express Transit (NET) - generating total proceeds of £23.8 million. Excluding NET, the proceeds from these sales reflected a net present value for the cash flows from these investments based on an average discount rate of under 5.5 per cent. The discount rate in respect of NET was higher than that achieved for the other sales due to the special circumstances relating to the planned extension of the NET system, which involves subsuming the current project into a larger PPP project.  

In the first half of 2008, we continued to add PPP projects to our portfolio. A Carillion joint venture achieved financial close on the Nottingham Building Schools for the Future (BSF) project, in which we expect to invest around £1.4 million of equity, and a second joint venture was selected as the preferred bidder for the Tameside BSF project in which we expect to invest some £3.3 million of equity. 

At 30 June 2008, we had a portfolio of 22 investments in financially closed PPP projects in which we had already invested, or had commitments to invest, some £176 million. The Directors' valuation of our portfolio at 30 June 2008 was £235 million (31 December 2007: £266 million), based on discounting the cash flows from these investments and commitments at an average of eight per cent.  

In addition, we are the preferred bidder for three projects, Tameside BSF, as indicated above, and two Independent Sector Treatment Centres in which we expect to invest some £6.5 million of equity. We are also shortlisted for a further seven projects in the UK and Canada in which Carillion could potentially invest up to £50 million.  

At 30 June 2008, our forward order book stood at £4.9 billion (31 December 2007: £5.1 billion) and we had a pipeline of probable new orders worth approximately £0.2 billion (31 December 2007: £0.2 billion). Overall, the outlook in our chosen sectors of the PPP market remains positive, both in the UK and Canada, and we expect to continue adding new projects to our portfolio of investments.

Middle East construction services

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

	2008 £m	2007 £m	Change from 2007 %
Revenue(1)     - Group     - Joint Ventures	55.7 125.3	41.0 123.5
	181.0	164.5	10
Underlying operating profit(2) (3)     - Group     - Joint Ventures	3.5 9.6	2.0 7.3
	13.1	9.3	41

 

⁽¹⁾ Continuing operations

⁽²⁾ Continuing operations before intangible amortisation, impairment, restructuring costs and non-operating items

⁽³⁾ Before Group eliminations, unallocated items and joint venture net financial expense and taxation.

Revenue increased by 10 per cent due primarily to growth in our activities in Oman and Abu Dhabi. Underlying operating profit increased by 41 per cent, with operating margins increasing from 5.7 per cent to 7.2 per cent. 

Our markets in the Middle East remain very strong and we continue to negotiate all new orders, rather than bid for work competitively. Our joint venture business, Al Futtaim Carillion negotiated a number of new orders in Dubai and Abu Dhabi in the first half of the year worth approximately £1.1 billion, of which Carillion's share of revenue is expected to be some £550 million. In Dubai, these orders include a partnering agreement for construction of the TimeZone Business Park for the Dubai Multi Commodities Centre and infrastructure works for the Motor City Development of Union Properties and for the Burj development of Emaar Properties. In Abu Dhabi, we have been awarded construction contracts for the Race Track Hotel and for infrastructure works for new smelter facilities for Emirates Aluminium. 

At 30 June 2008, our forward order book stood at £0.5 billion (31 December 2007: £0.7 billion) and we had a pipeline of probable new orders worth approximately £1.9 billion (31 December 2007: £1.0 billion). 

The outlook is for sustainable long-term growth in this region. With a number of major new projects in Dubai and Abu Dhabi contributing to growth in the second half of 2008 and beyond, we remain confident of increasing our share of the revenues from our businesses in the Middle East to over £600 million by the end of 2009, at margins of some six per cent. 

Construction services (excluding 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.

	2008 £m	2007 £m	Change from 2007 %
Revenue(1)     - Group     - Joint Ventures	968.3 1.3	820.5 1.4
	969.6	821.9	18
Underlying operating profit(2) (3)     - Group     - Joint Ventures	10.7 0.1	7.2 2.0
	10.8	9.2	17

⁽¹⁾ Continuing operations

⁽²⁾ Continuing operations before intangible amortisation, impairment, restructuring costs and non-operating items 

⁽³⁾   Before Group eliminations, unallocated items and joint venture net financial expense and taxation.

 

 

Overall trading in our chosen sectors of the UK non-housing construction market continues to be satisfactory and supports our focus on growing margins. Revenue increased by 18 per cent due to the acquisition of Alfred McAlpine and underlying operating profit increased by 17 per cent. 

We have continued to win new orders in our principal market sectors, including education, airport developments, retail, leisure, mixed used developments, prisons and urban regeneration, in line with our strict selectivity criteria. New orders secured in the first half of 2008 included the Media Centre for the 2012 Olympic Games, worth £300 million, and a £330 million construction contract for the Terminal 5 satellite at Heathrow for BAA, following Carillion's selection as a framework contractor for BAA's £6.1 billion five-year airport investment programme.

Our principal market sectors in Canada and the Caribbean also remain healthy. We are making good progress with construction of the Sault Area Hospital, Ontario, our third major Public Private Partnership (PPP) hospital in Canada, and we are also shortlisted for a further PPP hospital in Ontario. 

At 30 June 2008, our forward order book for construction services (excluding the Middle East) was worth £3.1 billion (31 December 2007: £1.8 billion), with the increase due to the acquisition of Alfred McAlpine and organic growth. In addition, we had a pipeline of probable new orders worth approximately £1.5 billion (31 December 2007: £0.9 billion). 

Given our strong order book and continuing opportunities in our chosen market sectors, our performance in this segment remains in line with our expectations for the full year.

Outlook and prospects 

We have continued to win significant new orders in our principal market sectors and our forward order book at 30 June 2008 was worth £20.0 billion (31 December 2007: £16.0 billion), of which over 80 per cent relates to support services and investments in Public Private Partnership projects. In addition, we have a pipeline of probable new orders worth £4.1 billion, where we believe we have a better than 90 per cent chance of securing these orders. Beyond that, overall bidding activity remains high across our principal businesses. In the Middle East, we continue to negotiate all new orders rather than bid competitively. We therefore expect to make strong progress in 2008 and to deliver materially enhanced earnings in 2009.

Unaudited consolidated income statement for the six months ended 30 June
Continuing operations	Note	2008   £m	2007 (1)   £m	Year ended    31 December      2007          £m
Total revenue		2,411.0	1,895.0	3,951.7
Less: Share of jointly controlled entities' revenue		(326.4)	(317.7)	(621.0)
Group revenue	2	2,084.6	1,577.3	3,330.7
Cost of sales		(1,925.5)	(1,475.2)	(3,092.0)
Gross profit		159.1	102.1	238.7
Administrative expenses		(180.1)	(102.7)	(219.5)
Other operating income		8.3	3.3	9.5
Group operating (loss)/profit	2	(12.7)	2.7	28.7
Analysed between:
Group operating profit before intangible amortisation, impairment
of goodwill and other investments and restructuring costs		36.0	18.0	64.4
Intangible amortisation and impairment of goodwill and other investments	3	(28.8)	(9.8)	(21.5)
Restructuring costs	4	(19.9)	(5.5)	(14.2)
Share of results of jointly controlled entities	2	18.8	17.5	36.8
Analysed between:
Operating profit		29.5	27.2	55.7
Net financial expense		(6.2)	(5.6)	(9.9)
Taxation		(4.5)	(4.1)	(9.0)
Profit from operations	2	6.1	20.2	65.5
Analysed between:
Profit from operations before intangible amortisation,  impairment of goodwill and other investments and restructuring costs		54.8	35.5	101.2
Intangible amortisation and impairment of goodwill and other investments	3	(28.8)	(9.8)	(21.5)
Restructuring costs	4	(19.9)	(5.5)	(14.2)
Non-operating items	4	22.1	0.5	28.3
Net financial (expense)/income	5	(1.2)	(1.7)	0.6
Analysed between:
Financial income		71.2	47.7	99.8
Financial expense		(72.4)	(49.4)	(99.2)
Profit before taxation		27.0	19.0	94.4
Analysed between:
Profit before taxation before intangible amortisation, impairment of goodwill and other investments, restructuring costs and non-operating items		53.6	33.8	101.8
Intangible amortisation and impairment of goodwill and other investments	3	(28.8)	(9.8)	(21.5)
Restructuring costs	4	(19.9)	(5.5)	(14.2)
Non-operating items	4	22.1	0.5	28.3
Taxation	6	0.1	(1.8)	(8.3)
Profit for the period from continuing operations		27.1	17.2	86.1
Discontinued operations	7	-	(1.0)	(7.6)
Analysed between:
Trading loss from discontinued operations		-	(1.0)	(1.4)
Loss on disposal of discontinued operations		-	-	(6.2)
Profit for the period		27.1	16.2	78.5
Profit attributable to:
Equity holders of the parent		25.7	15.1	76.0
Minority interests		1.4	1.1	2.5
Profit for the period		27.1	16.2	78.5
Earnings per share	8
From continuing operations
Basic		7.0p	5.7p	29.8p
Diluted		6.9p	5.7p	29.5p
From continuing and discontinued operations
Basic		7.0p	5.3p	27.1p
Diluted		6.9p	5.3p	26.8p
Total dividend declared for the period	9	4.1p	3.5p	11.0p

⁽¹⁾Restated in respect of discontinued operations (see note 7). 

 

Unaudited consolidated balance sheet as at 30 June
	Note	2008 £m	2007 £m	At 31 December 2007 £m
Assets
Non-current assets
Property, plant and equipment		150.2	146.6	131.5
Intangible assets		1,276.8	586.7	555.8
Retirement benefit assets		15.1	24.7	17.3
Investments in jointly controlled entities		216.5	200.2	185.9
Other investments		–	15.9	14.5
Deferred tax assets		70.3	30.6	9.3
Total non-current assets		1,728.9	1,004.7	914.3
Current assets
Inventories		38.0	25.1	30.5
Trade and other receivables		1,132.2	787.5	858.7
Cash and cash equivalents		215.9	141.0	327.5
Income tax receivable		9.2	0.5	2.2
Assets classified as held for sale	7	5.6	11.1	–
Total current assets		1,400.9	965.2	1,218.9
Total assets		3,129.8	1,969.9	2,133.2
Liabilities
Current liabilities
Borrowing		(41.8)	(11.5)	(13.9)
Derivative financial instruments		(0.2)	(1.1)	(0.7)
Trade and other payables		(1,595.9)	(1,082.1)	(1,175.7)
Provisions		(16.7)	(7.7)	(6.9)
Liabilities classified as held for sale	7	–	(10.6)	–
Income tax payable		(4.6)	(13.2)	(2.3)
Total current liabilities		(1,659.2)	(1,126.2)	(1,199.5)
Non-current liabilities
Borrowing		(438.2)	(269.2)	(358.5)
Retirement benefit liabilities		(123.7)	(62.7)	(41.6)
Deferred tax liabilities		(56.1)	(32.3)	(24.0)
Provisions		(7.8)	(3.5)	(6.7)
Total non-current liabilities		(625.8)	(367.7)	(430.8)
Total liabilities		(2,285.0)	(1,493.9)	(1,630.3)
Net assets	2	844.8	476.0	502.9
Equity
Issued share capital	12	197.7	140.6	140.6
Share premium	12	12.6	8.6	8.6
Other reserves Retained earnings	12 12	462.5 170.3	181.7 144.1	150.0 202.4
Equity attributable to shareholders of the parent		843.1	475.0	501.6
Minority interests	12	1.7	1.0	1.3
Total equity		844.8	476.0	502.9

 

Unaudited consolidated cash flow statement for the six months ended 30 June
	Note	2008   £m		2007 (1) £m		Year ended    31 December         2007    £m
Continuing operations
Cash flows from operating activities
Group operating (loss)/profit		(12.7)		2.7		28.7
Depreciation, amortisation and impairment		47.3		21.2		46.8
Profit on disposal of property, plant and equipment		(8.3)		(3.3)		(9.5)
Share based payment expense		1.4		1.5		2.8
Other non-cash movements		(1.3)		2.1		(2.7)
Restructuring costs		19.9		5.5		14.2
Operating profit before changes in working capital		46.3		29.7		80.3
Decrease in inventories		3.5		13.6		7.2
(Increase)/decrease in trade and other receivables		(95.0)		92.0		(2.9)
Increase/(decrease) in trade and other payables		124.6		(97.1)		27.4
Cash generated from operations before pension deficit recovery  payments and restructuring costs		79.4		38.2		112.0
Deficit recovery payments to pension schemes		(31.6)		(37.2)		(46.3)
Restructuring costs		(13.5)		(0.3)		(6.5)
Cash generated from operations		34.3		0.7		59.2
Financial income received		12.6		5.8		13.7
Financial expense paid		(19.7)		(10.5)		(19.9)
Taxation		(1.4)		7.3		4.4
Net cash flows from operating activities		25.8		3.3		57.4
Cash flows from investing activities
Disposal of property, plant and equipment		14.9		6.7		29.5
Disposal of investments in jointly controlled entities		61.6		0.5		22.0
Dividends received from jointly controlled entities		17.5		12.9		23.7
Disposal of businesses, net of cash disposed of		-		-		8.2
Acquisition of subsidiary, net of cash acquired	13	(135.3)		-		-
Acquisition of intangible assets		(0.3)		(0.7)		(1.6)
Acquisition of property, plant and equipment		(19.0)		(11.4)		(23.5)
Acquisition of equity in and loan advances to jointly controlled entities		(18.8)		(12.4)		(19.6)
Acquisition of other non-current asset investments		-		(0.9)		(1.0)
Net cash flows from investing activities		(79.4)		(5.3)		37.7
Cash flows from financing activities
Draw down of bank and other loans		-		27.7		309.8
Repayment of bank loans		(32.9)		-		(193.3)
Payment of finance lease liabilities		(7.9)		(3.0)		(10.9)
Dividends paid to equity holders of the parent		(29.6)		(16.6)		(26.4)
Dividends paid to minority interests		(1.0)		(1.1)		(2.2)
Net cash flows from financing activities		(71.4)		7.0		77.0
Net (decrease)/increase in cash and cash equivalents from  continuing operations		(125.0)		5.0		172.1
(Decrease)/increase in cash and cash equivalents from discontinued operations		-		(9.0)		12.4
Net (decrease)/increase in cash and cash equivalents for the period		(125.0)		(4.0)		184.5
Cash and cash equivalents at 1 January		323.8		141.4		141.4
Cash and cash equivalents included in liabilities held for sale		-		1.2		-
Effect of exchange rate fluctuations on cash held		0.4		0.4		(2.1)
Cash and cash equivalents at period end	10	199.2		139.0		323.8

⁽¹⁾ Restated in respect of discontinued operations (see note 7).

Unaudited reconciliation of net cash flow to movement in net borrowing for the six months ended 30 June
	Note	2008 £m	2007 (1) £m	Year ended  31 December 2007  £m
(Decrease)/increase in cash and cash equivalents for the period		(125.0)	(4.0)	184.5
Draw down of bank and other loans		-	(27.7)	(309.8)
Repayment of bank loans		32.9	-	193.3
Payment of finance lease liabilities		7.9	3.0	10.9
(Increase)/decrease in net borrowing resulting from cash flows		(84.2)	(28.7)	78.9
Net borrowing in subsidiaries acquired	13	(143.2)	-	-
Loan notes issued on acquisition of Alfred McAlpine plc	13	(1.3)	-	-
Cash and cash equivalents included in liabilities held for sale		-	1.2	-
Finance lease additions		-	(1.2)	(5.5)
Finance lease disposals		7.3	-	-
Currency translation differences		2.2	(3.0)	(10.3)
Change in net borrowing during the period		(219.2)	(31.7)	63.1
Net borrowing at 1 January		(44.9)	(108.0)	(108.0)
Net borrowing at period end		(264.1)	(139.7)	(44.9)

⁽¹⁾ Restated in respect of discontinued operations (see note 7).

Unaudited statement of recognised income and expense for the six months ended 30 June
	Note	2008   £m	2007   £m	Year ended  31 December 2007 £m
Net gain/(loss) on hedge of net investment in foreign operations	12	0.6	-	(2.7)
Currency translation differences for foreign operations	12	(5.3)	0.4	2.6
Increase in fair value of available for sale assets		1.1	-	-
Actuarial (losses)/gains on defined benefit schemes		(61.2)	33.7	30.2
		(64.8)	34.1	30.1
Taxation in respect of the above		16.6	(10.4)	(8.3)
Share of recycled cash flow hedges within jointly controlled entities  (net of taxation)	12	2.1	-	-
Share of change in fair value of effective cash flow hedges within jointly controlled entities (net of taxation)	12	8.2	18.3	(5.3)
Income and expense recognised directly in equity		(37.9)	42.0	16.5
Profit for the period		27.1	16.2	78.5
Total recognised income and expense for the period		(10.8)	58.2	95.0
Attributable to:
Equity holders of the parent		(12.2)	57.1	92.5
Minority interests		1.4	1.1	2.5
		(10.8)	58.2	95.0

Notes to the interim financial statements

1    Basis of preparation

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 ended 30 June 2008 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interest in jointly controlled entities.

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 2007 which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union. No new accounting policies have been adopted in the six months ended 30 June 2008.  

The consolidated interim financial statements for the six months ended 30 June 2008 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.

The comparative financial information for the year ended 31 December 2007 does not constitute the Company's statutory accounts for that financial year. The statutory accounts for the year ended 31 December 2007 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.

Following the disposal of Pall Mall Holdings Limited and Sovereign Soft Services Limited in September 2007, these businesses were classified as discontinued operations in the Annual Report for the year ended 31 December 2007. Consequently, the income statement and cash flow statement for the six months ended 30 June 2007 have been restated accordingly.

2    Segmental reporting

Segment information is presented 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:

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 results on our investments in Public Private Partnership projects in our chosen sectors of Defence, Health, Education, Transport, Secure and other Government accommodation.

Construction Services:

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

2    Segmental reporting (continued)

Period ended 30 June 2008
			Revenue				Operating profit before intangible amortisation, impairment and restructuring costs
Continuing operations	UK, Canada and the Caribbean (1) £m	Middle East £m	Total £m		UK, Canada and the Caribbean (1) £m	Middle East £m	Total £m
Support services
Group	1,060.1	-	1,060.1		32.1	-	32.1
Share of jointly controlled entities	115.4	3.9	119.3		6.7	0.3	7.0
	1,175.5	3.9	1,179.4		38.8	0.3	39.1
Inter-segment	56.9	-	56.9		-	-	-
Total	1,232.4	3.9	1,236.3		38.8	0.3	39.1
Public private partnership projects
Group	0.5	-	0.5		0.3	-	0.3
Share of jointly controlled entities	80.5	-	80.5		12.8	-	12.8
	81.0	-	81.0		13.1	-	13.1
Inter-segment	-	-	-		-	-	-
Total	81.0	-	81.0		13.1	-	13.1
Construction services
Group	968.3	55.7	1,024.0		10.7	3.5	14.2
Share of jointly controlled entities	1.3	125.3	126.6		0.1	9.6	9.7
	969.6	181.0	1,150.6		10.8	13.1	23.9
Inter-segment	14.3	-	14.3		-	-	-
Total	983.9	181.0	1,164.9		10.8	13.1	23.9
Group eliminations and unallocated items	(71.2)	-	(71.2)		(10.6)	-	(10.6)
Consolidated
Group	2,028.9	55.7	2,084.6		32.5	3.5	36.0
Share of jointly controlled entities	197.2	129.2	326.4		19.6	9.9	29.5
Total	2,226.1	184.9	2,411.0		52.1	13.4	65.5

⁽¹⁾ Includes Rest of the World.

2    Segmental reporting (continued)

Period ended 30 June 2007
			Revenue				Operating profit before intangible amortisation, impairment and restructuring costs (2)
Continuing operations	UK, Canada and the Caribbean (1) £m	Middle East £m	Total £m		UK, Canada and the Caribbean (1) £m	Middle East £m	Total £m
Support services
Group	715.4	-	715.4		18.2	-	18.2
Share of jointly controlled entities	107.2	2.4	109.6		6.0	0.2	6.2
	822.6	2.4	825.0		24.2	0.2	24.4
Inter-segment	28.0	-	28.0		-	-	-
Total	850.6	2.4	853.0		24.2	0.2	24.4
Public private partnership projects
Group	0.4	-	0.4		0.4	-	0.4
Share of jointly controlled entities	83.2	-	83.2		11.7	-	11.7
	83.6	-	83.6		12.1	-	12.1
Inter-segment	-	-	-		-	-	-
Total	83.6	-	83.6		12.1	-	12.1
Construction services
Group	820.5	41.0	861.5		7.2	2.0	9.2
Share of jointly controlled entities	1.4	123.5	124.9		2.0	7.3	9.3
	821.9	164.5	986.4		9.2	9.3	18.5
Inter-segment	4.8	-	4.8		-	-	-
Total	826.7	164.5	991.2		9.2	9.3	18.5
Group eliminations and unallocated items	(32.8)	-	(32.8)		(9.8)	-	(9.8)
Consolidated
Group	1,536.3	41.0	1,577.3		16.0	2.0	18.0
Share of jointly controlled entities	191.8	125.9	317.7		19.7	7.5	27.2
Total	1,728.1	166.9	1,895.0		35.7	9.5	45.2

⁽¹⁾ Includes Rest of the World
⁽²⁾ Restated in respect of discontinued operations (see note 7).

2    Segmental reporting (continued)

Year ended 31 December 2007
			Revenue				Operating profit before intangible amortisation, impairment and restructuring costs
Continuing operations	UK, Canada and the Caribbean (1) £m	Middle East £m	Total £m		UK, Canada and the Caribbean (1) £m	Middle East £m	Total £m
Support services
Group	1,569.4	-	1,569.4		62.4	-	62.4
Share of jointly controlled entities	218.8	5.4	224.2		11.0	0.5	11.5
	1,788.2	5.4	1,793.6		73.4	0.5	73.9
Inter-segment	64.7	-	64.7		-	-	-
Total	1,852.9	5.4	1,858.3		73.4	0.5	73.9
Public private partnership projects
Group	0.9	-	0.9		0.7	-	0.7
Share of jointly controlled entities	153.2	-	153.2		24.7	-	24.7
	154.1	-	154.1		25.4	-	25.4
Inter-segment	-	-	-		-	-	-
Total	154.1	-	154.1		25.4	-	25.4
Construction services
Group	1,660.4	100.0	1,760.4		12.3	9.6	21.9
Share of jointly controlled entities	6.6	237.0	243.6		3.7	15.8	19.5
	1,667.0	337.0	2,004.0		16.0	25.4	41.4
Inter-segment	32.0	-	32.0		-	-	-
Total	1,699.0	337.0	2,036.0		16.0	25.4	41.4
Group eliminations and unallocated items	(96.7)	-	(96.7)		(20.6)	-	(20.6)
Consolidated
Group	3,230.7	100.0	3,330.7		54.8	9.6	64.4
Share of jointly controlled entities	378.6	242.4	621.0		39.4	16.3	55.7
Total	3,609.3	342.4	3,951.7		94.2	25.9	120.1

⁽¹⁾ Includes Rest of the World.

2    Segmental reporting (continued)

	2008 £m	2007 £m	Year ended 31 December 2007 £m
Group and share of jointly controlled entities' operating
profit before intangible amortisation, impairment
of goodwill and other investments and restructuring costs	65.5	45.2	120.1
Net financial (expense)/income
- Group	(1.2)	(1.7)	0.6
- Share of jointly controlled entities	(6.2)	(5.6)	(9.9)
Share of jointly controlled entities' taxation	(4.5)	(4.1)	(9.0)
Underlying profit before taxation from continuing operations	53.6	33.8	101.8
Intangible amortisation and impairment of goodwill and other investments (1)	(28.8)	(9.8)	(21.5)
Restructuring costs (1)	(19.9)	(5.5)	(14.2)
Non-operating items (1)	22.1	0.5	28.3
Profit before taxation from continuing operations	27.0	19.0	94.4
Taxation	0.1	(1.8)	(8.3)
Profit for the period from continuing operations	27.1	17.2	86.1
Discontinued operations	-	(1.0)	(7.6)
Analysed between:
Trading loss from discontinued operations	-	(1.0)	(1.4)
Loss on disposal of discontinued operations	-	-	(6.2)
Profit for the period	27.1	16.2	78.5

⁽¹⁾ Intangible amortisation and impairment, restructuring costs and non-operating items arise in the segments as set out on the following page:

  2 Segmental reporting (continued)

	2008				2007				Year ended 31 December 2007
	Intangible amortisation and impairment £m	Restructuring costs £m	Non-operating items £m		Intangible amortisation and impairment £m	Restructuring costs £m	Non-operating items £m		Intangible amortisation and impairment £m	Restructuring costs £m	Non-operating items £m
Support services	(13.9)	(6.0)	-		(6.7)	-	-		(13.9)	(0.5)	-
Public private partnership projects	-	-	22.1		-	-	0.5		(1.9)	-	24.1
Construction services	(14.1)	(2.3)	-		(2.3)	-	-		(4.2)	-	4.2
Unallocated group items	(0.8)	(11.6)	-		(0.8)	(5.5)	-		(1.5)	(13.7)	-
Total	(28.8)	(19.9)	22.1		(9.8)	(5.5)	0.5		(21.5)	(14.2)	28.3

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

	2008			2007			Year ended 31 December 2007
	Depreciation, amortisation and impairment (2) £m	Capital expenditure £m		Depreciation, amortisation and impairment (2) £m	Capital expenditure £m		Depreciation, amortisation and impairment  £m	Capital expenditure £m
Support services	26.1	9.1		13.4	7.2		28.3	15.0
Public private partnership projects	-	-		-	-		1.9	-
Construction services	15.8	2.2		3.9	1.8		7.5	4.2
Unallocated group items	5.4	8.0		3.9	4.3		9.1	11.2
Total	47.3	19.3		21.2	13.3		46.8	30.4

⁽²⁾ Includes impairment of other investments within construction services of £9.9m (six months ended 30 June 2007 £nil; year ended 31 December 2007 £nil).

The share of results of jointly controlled entities arises in the following segments:

	2008 £m	2007 £m	Year ended 31 December  2007 £m
Support services	5.1	4.4	8.5
Public private partnership projects	5.3	4.0	9.4
Construction services	8.4	9.1	18.9
	18.8	17.5	36.8

  2 Segmental reporting (continued)

Segmental net assets

		2008						2007		Year ended 31 December 2007
		Operating assets £m	Operating liabilities £m	Net operating assets/ (liabilities) £m		Operating assets £m	Operating liabilities £m	Net operating assets/ (liabilities) £m		Operating assets £m	Operating liabilities £m	Net operating assets/ (liabilities) £m
Support services
Operating assets		971.1	-	971.1		716.0	-	716.0		716.3	-	716.3
Investments in jointly  controlled entities		11.0	-	11.0		4.4	-	4.4		4.4	-	4.4
Total operating assets		982.1	-	982.1		720.4	-	720.4		720.7	-	720.7
Total operating liabilities		-	(574.5)	(574.5)		-	(375.5)	(375.5)		-	(392.4)	(392.4)
Net operating assets/(liabilities)		982.1	(574.5)	407.6		720.4	(375.5)	344.9		720.7	(392.4)	328.3
Public Private Partnership projects
Operating assets		2.7	-	2.7		7.1	-	7.1		7.8	-	7.8
Investments in jointly  controlled entities		140.2	-	140.2		164.3	-	164.3		134.9	-	134.9
Total operating assets		142.9	-	142.9		171.4	-	171.4		142.7	-	142.7
Total operating liabilities		-	(10.4)	(10.4)		-	(20.2)	(20.2)		-	(10.0)	(10.0)
Net operating assets/(liabilities)		142.9	(10.4)	132.5		171.4	(20.2)	151.2		142.7	(10.0)	132.7
Construction services
Operating assets		931.4	-	931.4		731.0	-	731.0		750.4	-	750.4
Investments in jointly  controlled entities		65.3	-	65.3		31.5	-	31.5		46.6	-	46.6
Total operating assets		996.7	-	996.7		762.5	-	762.5		797.0	-	797.0
Total operating liabilities		-	(879.6)	(879.6)		-	(639.3)	(639.3)		-	(678.2)	(678.2)
Net operating assets/(liabilities)		996.7	(879.6)	117.1		762.5	(639.3)	123.2		797.0	(678.2)	118.8
Consolidated
Operating assets		1,905.2	-	1,905.2		1,454.1	-	1,454.1		1,474.5	-	1,474.5
Investments in jointly  controlled entities		216.5	-	216.5		200.2	-	200.2		185.9	-	185.9
Total operating assets		2,121.7	-	2,121.7		1,654.3	-	1,654.3		1,660.4	-	1,660.4
Total operating liabilities		-	(1,464.5)	(1,464.5)		-	(1,035.0)	(1,035.0)		-	(1,080.6)	(1,080.6)
Net operating assets/(liabilities) before Group items		2,121.7	(1,464.5)	657.2		1,654.3	(1,035.0)	619.3		1,660.4	(1,080.6)	579.8
Group items
Intangible assets		615.0	-	615.0		-	-	-		-	-	-
Assets/(liabilities) classified as held for sale		5.6	-	5.6		11.1	(10.6)	0.5		-	-	-
Deferred tax  assets/(liabilities)		70.3	(56.1)	14.2		30.6	(32.3)	(1.7)		9.3	(24.0)	(14.7)
Net borrowing		215.9	(480.0)	(264.1)		141.0	(280.7)	(139.7)		327.5	(372.4)	(44.9)
Retirement benefit  assets/(liabilities)  (gross of taxation)		15.1	(123.7)	(108.6)		24.7	(62.7)	(38.0)		17.3	(41.6)	(24.3)
Income tax  receivable/(payable)		9.2	(4.6)	4.6		0.5	(13.2)	(12.7)		2.2	(2.3)	(0.1)
Other net assets/(liabilities)		77.0	(156.1)	(79.1)		107.7	(59.4)	48.3		116.5	(109.4)	7.1
Net assets/(liabilities)		3,129.8	(2,285.0)	844.8		1,969.9	(1,493.9)	476.0		2,133.2	(1,630.3)	502.9

  2    Segmental reporting (continued)

Geographic segments

	2008 £m	2007(1) £m	Year ended 31 December 2007 £m
United Kingdom
Total revenue from external customers	2,090.4	1,635.1	3,385.4
Less: share of jointly controlled entities' revenue	(175.2)	(174.7)	(334.7)
Revenue from external customers	1,915.2	1,460.4	3,050.7
Total operating assets	1,858.7	1,427.6	1,361.9
Capital expenditure	16.9	9.9	22.1
Middle East
Total revenue from external customers	184.9	166.9	342.4
Less: share of jointly controlled entities' revenue	(129.2)	(125.9)	(242.4)
Revenue from external customers	55.7	41.0	100.0
Total operating assets	62.0	33.4	75.6
Capital expenditure	0.7	0.9	2.2
Canada and the Caribbean
Total revenue from external customers	110.4	77.4	186.0
Less: share of jointly controlled entities' revenue	(2.7)	(1.5)	(7.5)
Revenue from external customers	107.7	75.9	178.5
Total operating assets	125.0	125.5	146.9
Capital expenditure	1.6	2.4	5.9
Rest of the world
Total revenue from external customers	25.3	15.6	37.9
Less: share of jointly controlled entities' revenue	(19.3)	(15.6)	(36.4)
Revenue from external customers	6.0	-	1.5
Total operating assets	76.0	67.8	76.0
Capital expenditure	0.1	0.1	0.2
Consolidated
Total revenue from external customers	2,411.0	1,895.0	3,951.7
Less: share of jointly controlled entities' revenue	(326.4)	(317.7)	(621.0)
Revenue from external customers	2,084.6	1,577.3	3,330.7
Total operating assets	2,121.7	1,654.3	1,660.4
Capital expenditure	19.3	13.3	30.4

⁽¹⁾ Restated in respect of discontinued operations.

3    Intangible amortisation and impairment of goodwill and other investments

Amortisation and impairment costs	2008 £m	2007 £m	Year ended 31 December 2007 £m
Amortisation of intangible assets arising from business combinations	18.9	9.8	19.6
Impairment of goodwill and other investments	9.9	-	1.9
	28.8	9.8	21.5

Amortisation for the six months ended 30 June 2008 includes £10.0m relating to the acquisition of Alfred McAlpine plc. Following a reassessment of fair value by Directors, an impairment charge of £9.9m has been recognised in the period in relation to the Alice Springs to Darwin railway investment which is classified as part of other investments in the balance sheet.

4    Restructuring costs and non-operating items

Restructuring costs	2008 £m	2007 £m	Year ended 31 December 2007 £m
McAlpine integration costs	19.9	-	-
Mowlem integration costs	-	5.5	9.5
Operational structure review costs Rail activities review costs	-    -	- -	4.5 0.2
	19.9	5.5	14.2

Alfred McAlpine integration costs relate primarily to redundancy and property exit costs arising from a review of the Group's requirements following the acquisition of Alfred McAlpine plc on 12 February 2008. A tax credit relating to restructuring costs of £4.9m (six months ended 30 June 2007: £1.7m; year ended 31 December 2007: £2.7m) has been included within income tax in the income statement.

Non-operating items	2008 £m	2007 £m	Year ended 31 December 2007 £m
Profit on disposal of investments in jointly controlled entities	22.1	0.5	24.5
Profit on disposal of businesses	-	-	3.7
Other	-	-	0.1
	22.1	0.5	28.3

In May and June 2008, the Group disposed of equity investments in four Public Private Partnership jointly controlled entities. The disposal generated cash consideration of £35.9m and a non-operating profit of £22.1m. There is no income tax associated with any of the non-operating items in any of the above periods.

5    Financial income and expense

	2008 £m	2007 £m	Year ended 31 December 2007 £m
Financial income
Bank interest receivable	6.6	1.7	5.1
Other interest receivable	6.5	4.1	8.6
Expected return on retirement plan assets	58.1	41.9	86.1
	71.2	47.7	99.8
Financial expense
Interest payable on bank loans and overdrafts	(15.1)	(7.2)	(15.4)
Other interest payable and similar charges	(5.1)	(3.3)	(4.5)
Interest cost on retirement plan obligations	(52.2)	(38.9)	(79.3)
	(72.4)	(49.4)	(99.2)
Net financial (expense)/income	(1.2)	(1.7)	0.6

6  Income tax

The Group's income tax expense (including the Group's share of jointly controlled entities' income tax) for the six months ended 30 June 2008 is calculated based on the estimated average annual effective underlying income tax rate of 25% (six months ended 30 June 2007: 27%). This effective rate differs to the UK standard corporation tax rate of 28% (six months ended 30 June 2007: 30%) due to items such as the effect of tax rates in foreign jurisdictions, non-deductible expenses, the effect of tax losses utilised and under/over provisions in previous years.

7        Discontinued operations and assets held for sale

In the six months ended 30 June 2008, the Group made the decision to dispose of it's 50% equity holding in The Hospital Company (Oxford John Radcliffe) Holdings Limited (OJR) and it's 12.5% equity holding in Arrow Light Rail Holdings Limited (Arrow). The disposal of Arrow completed on 18 July 2008 and the disposal of OJR completed on 21 August 2008. On this basis, the investments in Arrow and OJR have been classified as assets held for sale.

The Group disposed of non-core rail activities in Sweden and Denmark in July 2007 and Pall Mall Holdings Limited and Sovereign Soft Services Limited in September 2007. These operations, which were previously reported in the Support Services segment, were classified as discontinued operations in 2007 and their results were as follows:

	2008 £m	2007 £m	Year ended 31 December 2007 £m
Revenue	-	48.4	64.9
Cost of sales	-	(44.6)	(59.5)
Gross profit	-	3.8	5.4
Administrative expenses	-	(4.8)	(6.6)
Operating profit	-	(1.0)	(1.2)
Net financial income	-	0.1	-
Loss before tax	-	(0.9)	(1.2)
Taxation	-	(0.1)	(0.2)
Loss for the period	-	(1.0)	(1.4)
Loss on disposal	-	-	(6.2)
Loss for the period from discontinued operations	-	(1.0)	(7.6)

8    Earnings per share

(a)    Basic

The calculation of earnings per share for the six months ended 30 June 2008 is based on the profit attributable to equity holders of the parent of £25.7m (six months ended 30 June 2007: £15.1m; year ended 31 December 2007: £76.0m) and a weighted average number of ordinary shares in issue of 368.2m (six months ended 30 June 2007: 280.2m; year ended 31 December 2007: 280.6m), calculated as follows:

In millions of shares	2008	2007	Year ended 31 December 2007
Issued ordinary shares at beginning of period	281.2	281.2	281.2
Effect of own shares held by ESOP and QUEST	(0.4)	(1.0)	(0.6)
Effect of shares issued in the period	87.4	-	-
Weighted average number of ordinary shares	368.2	280.2	280.6

  8      Earnings per share (continued)

(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.

	2008			2007			Year ended 31 December 2007
	Profit before tax £m	Tax £m		Profit before tax £m	Tax £m		Profit before tax £m	Tax £m
Profit before taxation -  continuing operations
Profit before taxation as reported in the  income statement	27.0	(0.1)		19.0	1.8		94.4	8.3
Restructuring costs	19.9	4.9		5.5	1.7		14.2	2.7
Amortisation of intangible assets arising  from business combinations	18.9	5.3		9.8	2.8		19.6	7.3
Impairment of other investments	9.9	-		-	-		1.9	-
Profit on disposal of investments  and businesses	(22.1)	-		(0.5)	-		(28.3)	-
Underlying profit before taxation -  continuing operations	53.6	10.1		33.8	6.3		101.8	18.3
Underlying taxation	(10.1)			(6.3)			(18.3)
Minority interests	(1.4)			(1.1)			(2.5)
Underlying profit attributable to  shareholders - continuing operations	42.1			26.4			81.0
Underlying loss attributable to  shareholders - discontinued operations	-			(1.0)			(7.6)
Underlying profit attributable to  shareholders - continuing and discontinued operations	42.1			25.4			73.4

8    Earnings per share (continued)

		2008 Pence per share		2007 Pence per share		Year ended 31 December 2007 Pence per share
Earnings per share
Basic earnings per share -  continuing and discontinued operations		7.0		5.3		27.1
Restructuring costs		4.1		1.3		4.1
Amortisation of intangible assets arising  from business combinations		3.7		2.5		4.4
Impairment of other investments		2.7		-		0.7
Profit on disposal of investments  and businesses		(6.0)		-		(10.1)
Underlying basic earnings per share -
continuing and discontinued operations		11.5		9.1		26.2
Discontinued operations		-		0.4		2.7
Underlying basic earnings per share -  continuing operations		11.5		9.5		28.9
Diluted earnings per share -  discontinued operations		-		(0.4)		(2.7)

(c)    Diluted earnings per share

The calculation of diluted earnings per share is based on profit as shown in note 8(b) and a weighted average number of ordinary shares outstanding calculated as follows:

In millions of shares	2008 £m	2007 £m	Year ended 31 December 2007 £m
Weighted average number of ordinary shares	368.2	280.2	280.6
Effect of share options in issue	2.9	3.0	3.0
Weighted average number of ordinary shares (diluted) at the end of the period	371.1	283.2	283.6

9    Dividends

The following dividends were paid by the Company:

	£m	2008 Pence per share	£m	2007 Pence per share	£m	Year ended 31 December 2007 Pence per share
Previous period final dividend	29.6	7.5	16.6	5.9	16.6	5.9
Current period interim dividend	-	-	-	-	9.8	3.5
	29.6	7.5	16.6	5.9	26.4	9.4

The following dividends were proposed by the Company:

	£m	2008 Pence per share	£m	2007 Pence per share	£m	Year ended 31 December 2007 Pence per share
Interim	16.2	4.1	9.8	3.5	9.8	3.5
Final	-	-	-	-	29.6	7.5
	16.2	4.1	9.8	3.5	39.4	11.0

The interim dividend for 2008 of 4.1 pence per share was approved by the Board on 28 August 2008 and will be paid on 
7 November 2008 to shareholders on the register on 5 September 2008.

10    Cash and cash equivalents and net borrowing

Cash and cash equivalents and net borrowing comprise:

	2008   £m	2007 £m	Year ended  31 December   2007   £m
Cash and cash equivalents	215.9	141.0	327.5
Bank overdrafts	(16.7)	(2.0)	(3.7)
Net cash and cash equivalents	199.2	139.0	323.8
Bank loans	(369.3)	(219.7)	(306.6)
Finance lease obligations	(80.3)	(48.5)	(48.1)
Other loans	(13.7)	(10.5)	(14.0)
Net borrowing	(264.1)	(139.7)	(44.9)

11    Pension commitments

The following expense was recognised in the income statement in respect of pension commitments:

	2008 £m	2007 £m	Year ended 31 December 2007 £m
Charge to operating profit
Current service cost relating to defined benefit schemes	(12.4)	(13.7)	(27.2)
Past service cost relating to defined benefit schemes	-	-	(0.4)
Settlements	-	-	0.7
Curtailments	-	-	3.0
Defined contribution schemes	(5.3)	(2.1)	(5.4)
Total	(17.7)	(15.8)	(29.3)
Credit/(charge) to other finance income
Expected return on retirement plan assets	58.1	41.9	86.1
Interest cost on retirement plan liabilities	(52.2)	(38.9)	(79.3)
Net finance return	5.9	3.0	6.8

The valuation of the Group's main defined benefit pension schemes were reviewed by the scheme's actuary at 30 June 2008. Based on this review, the schemes net deficits were estimated as being £108.6m at 30 June 2008, representing an increase of £84.3m since 31 December 2007. Of the increase during the period, £71.8m relates to pension schemes acquired with Alfred McAlpine plc.

  12    Reserves and statement of changes in total equity 

Reconciliation of movement in reserves

	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	Minority interests £m	Total   equity   £m
At 1 January 2008	140.6	8.6	(2.8)	(14.3)	0.9	166.2	202.4	501.6	1.3	502.9
Total recognised income and expense	-	-	(4.9)	10.3	0.8	-	(18.4)	(12.2)	1.4	(10.8)
New share capital subscribed	57.1	4.0	-	-	-	325.0	-	386.1	-	386.1
Acquisition of own shares	-	-	-	-	-	-	(4.5)	(4.5)	-	(4.5)
Share options exercised  by employees	-	-	-	-	-	-	0.7	0.7	-	0.7
Equity settled transactions  (net of deferred tax)	-	-	-	-	-	-	1.0	1.0	-	1.0
Transfer between reserves	-	-	-	-	-	(18.7)	18.7	-	-	-
Dividends paid	-	-	-	-	-	-	(29.6)	(29.6)	(1.0)	(30.6)
At 30 June 2008	197.7	12.6	(7.7)	(4.0)	1.7	472.5	170.3	843.1	1.7	844.8
At 1 January 2007	140.6	8.6	(3.4)	(9.6)	0.9	184.8	110.8	432.7	1.0	433.7
Total recognised income and expense	-	-	0.1	18.3	-	-	38.7	57.1	1.1	58.2
Share options exercised  by employees	-	-	-	-	-	-	0.8	0.8	-	0.8
Equity settled transactions  (net of deferred tax)	-	-	-	-	-	-	1.0	1.0	-	1.0
Transfer between reserves	-	-	-	-	-	(9.4)	9.4	-	-	-
Dividends paid	-	-	-	-	-	-	(16.6)	(16.6)	(1.1)	(17.7)
At 30 June 2007	140.6	8.6	(3.3)	8.7	0.9	175.4	144.1	475.0	1.0	476.0
At 1 January 2007	140.6	8.6	(3.4)	(9.6)	0.9	184.8	110.8	432.7	1.0	433.7
Total recognised income and expense	-	-	0.7	(5.3)	-	-	97.1	92.5	2.5	95.0
Share options exercised  by employees	-	-	-	-	-	-	0.9	0.9	-	0.9
Equity settled transactions  (net of deferred tax)	-	-	-	-	-	-	2.0	2.0	-	2.0
Transfer to income statement	-	-	(0.1)	-	-	-	-	(0.1)	-	(0.1)
Transfer between reserves	-	-	-	0.6	-	(18.6)	18.0	-	-	-
Dividends paid	-	-	-	-	-	-	(26.4)	(26.4)	(2.2)	(28.6)
At 31 December 2007	140.6	8.6	(2.8)	(14.3)	0.9	166.2	202.4	501.6	1.3	502.9

13    Acquisitions and Disposals

Acquisitions    

On 12 February 2008, the Company acquired the entire issued share capital of Alfred McAlpine plc for consideration of £554.5m (excluding attributable costs of £10.4m). The consideration was satisfied by the issue of 112.9m Carillion plc shares valued at the quoted mid-market price at the close of business on the day preceding the effective date of acquisition of 337.75p and £171.7m in cash and £1.3m of loan notes.

Alfred McAlpine plc, its subsidiaries and jointly controlled entities operate in a number of sectors and industries, particularly facilities management, infrastructure services, civil engineering and construction. In the period from acquisition to 30 June 2008, Alfred McAlpine plc contributed a reported loss before tax of £18.2m to the consolidated profit for the period. If the acquisition had occurred on 1 January 2008, Group revenue would have been £2,210.7m and reported profit before tax would have been £27.1m for the six months ended 30 June 2008.

Acquired net assets at the acquisition date:

	Carrying amounts £m	Fair value adjustments £m	Accounting policy adjustments £m	Acquired intangibles £m	Recognised values £m
Property, plant and equipment	26.4	(0.7)	-	-	25.7
Intangible assets	184.5	(184.5)	-	125.4	125.4
Investments in jointly controlled entities	13.4	0.9	-	-	14.3
Deferred tax assets	47.3	0.9	-	-	48.2
Inventories	11.2	-	-	-	11.2
Trade and other receivables	212.8	-	(15.5)	-	197.3
Assets held for sale	16.7	2.3	-	-	19.0
Cash and cash equivalents	46.8	-	-	-	46.8
Borrowings	(143.2)	-	-	-	(143.2)
Trade and other payables	(292.2)	0.3	-	-	(291.9)
Income tax	(1.4)	-	-	-	(1.4)
Retirement benefit liabilities	(58.7)	(3.2)	-	-	(61.9)
Deferred tax liabilities	(2.9)	2.9	-	(35.1)	(35.1)
Provisions	(4.5)	-	-	-	(4.5)
Net identifiable assets and liabilities	56.2	(181.1)	(15.5)	90.3	(50.1)
Goodwill recognised on acquisition					615.0
Total consideration (including attributable costs)					564.9

The principal fair value adjustment relates to £184.5 million of goodwill on the Alfred McAlpine balance sheet at the date of acquisition which will be reclassified at the same value as goodwill on Carillion's balance sheet under the requirements of International Financial Reporting Standards.

The £15.5 million accounting policy adjustment results from applying Carillion's policy in respect of expensing rather than capitalising certain mobilisation costs associated with the commencement of new contracts.

The £90.3 million of acquired intangibles relates to the value ascribed to acquired customer lists and contracts.

Based on the provisional assessment of fair value, goodwill arising on the acquisition is expected to be £615.0m. The goodwill recognised on acquisition represents the present value of future income streams expected to be generated from margin growth in the Alfred McAlpine plc businesses together with identifiable cost savings within the enlarged Group.

Total consideration for the acquisition comprises the following:

	£m
Equity shares issued	381.5
Cash	171.7
Loan notes issued	1.3
	554.5
Attributable costs	10.4
Total consideration	564.9

Attributable costs include direct advisor costs incurred in relation to the acquisition contracts and due diligence procedures.

13         Acquisitions and Disposals (continued)

Cash flows associated with the acquisition are included in the cash flow statement as follows:

	£m
Cash paid	171.7
Attributable costs paid	10.4
	182.1
Cash and cash equivalents acquired	(46.8)
Net cash outflow on acquisition	135.3

Disposals

In May and June 2008, the Group disposed of equity investments in four Public Private Partnership jointly controlled entities. The disposals generated a cash consideration of £35.7m (after deducting disposal costs of £0.2m) and a non-operating profit of £22.1m.

In February and March 2008, the Group received £25.9m of cash consideration relating to the disposal of four Public Private Partnership jointly controlled entities announced by Alfred McAlpine plc prior to acquisition. These disposals do not generate any profit in the post acquisition period as the investments were included at fair value in the acquired balance sheet of Alfred McAlpine plc.

14     Company information

This preliminary announcement was approved by the Board of Directors on 28 August 2008. The 2008 interim results will be posted to all shareholders by 8 September 2008 and both this statement and the 2008 interim results will be available on the internet at www.carillionplc.com or on request from the Company Secretary, Carillion plc, Birch Street, Wolverhampton, WV1 4HY.

 

END

 

 

IR PUUCCRUPRGQM