TIDMCLLN
RNS Number : 3288Y
Carillion PLC
29 February 2012
Annual results for the year ended 31 December 2011
Carillion, a leading integrated support services company,
delivers another strong performance
2011 2010 Change
Revenue GBP5.1bn GBP5.1bn -
Underlying operating margin(1) 4.7% 4.2% n/a
Underlying profit before taxation(2) GBP212.0m GBP188.1m +13%
Underlying earnings per share(3) 43.0p 39.4p +9%
Profit before taxation GBP142.8m GBP167.9m -15%
Basic earnings per share 32.0p 36.9p -13%
Net (borrowing)/cash GBP(50.7)m GBP120.2m -142%
Proposed full year dividend
per share 16.9p 15.5p +9%
-- Strong financial performance
- Revenue unchanged, with the increase due to the acquisition of
Carillion Energy Services (CES) offset by the planned re-scaling of
UK construction
- Strong growth in underlying profit before taxation and
underlying earnings per share reflected a substantial increase in
total underlying operating margin from 4.2% to 4.7%
- Reported profit before taxation and basic eps includes a total
of GBP47.5m of one-off costs relating to the acquisition and
integration of CES
-- Strong balance sheet
- Strong cash flow from operations of GBP230.3m was equal to 107% of profit from operations
- Net debt of GBP50.7m was substantially better than expectations
- New revolving credit facility of GBP737.5m to 2016 and
GBP100.0m 7 to 10 year private placement financing
-- Good revenue visibility and record pipeline of contract opportunities
- 2012 revenue visibility(4) of 77% (2010: 82% for 2011)
- Order book plus probable orders of GBP19.1bn (2010: GBP19.1bn)
remains very strong
- Pipeline of contract opportunities up 29% to GBP33bn, includes
major public sector outsourcing opportunities
-- Proposed full-year dividend up 9%, reflecting a strong performance and positive outlook
(1) Before Joint Ventures net financial expense and taxation,
intangible amortisation and non-recurring operating items (see note
3 to the financial information on page 29).
(2) After Joint Ventures taxation charge of GBP3.5 million
(2010: GBP4.7 million) and before intangible amortisation,
non-recurring operating items and non-operating items (see note 3
to the financial information on page 29).
(3) Before intangible amortisation, non-recurring operating
items and non-operating items (see note 3 to the financial
information on page 29).
(4) Based on expected revenue and secure and probable orders,
which exclude variable work and re-bids.
Carillion Chairman, Philip Rogerson, commented:
"Carillion's integrated UK support services and international
business mix has once again enabled the Group to perform strongly,
despite challenging market conditions. Given the wider economic
outlook, we expect trading conditions to remain challenging in
2012. However, with a strong and resilient business, good revenue
visibility and a record pipeline of contract opportunities, we
continue to target growth in support services together with the
doubling of our revenues in the Middle East and in Canada, in each
case to around GBP1 billion, by 2015. Consequently, Carillion
remains well-positioned to deliver further growth in 2012 and
beyond".
There will be a presentation for analysts and investors today at
08.30am. A telephone dial in facility (+44 (0) 207 190 1596) will
be available for analysts and investors who are unable to attend
the presentation. The presentation can be viewed on Carillion's
website at
www.carillionplc.com/investors/investors_presentations.asp. A
replay facility is also available following the call on Toll Free
UK: 0800 358 3474 - Access Code: 4510904# and Toll Free US: 1 800
406 7325 - Access Code: 4510904#.
For further information contact:
Richard Adam, Group Finance Director tel: +44 (0) 1902 422431
John Denning, Group Corporate Affairs tel: +44 (0) 1902 316426
Director
Finsbury - James Murgatroyd and tel: +44 (0) 20 7251 3801
Gordon Simpson
29 February 2012
Notes to Editors:
Carillion is one of the UK's leading support services companies
with a substantial portfolio of Public Private Partnership projects
and extensive construction capabilities. The Group has annual
revenue of around GBP5 billion, employs around 45,000 people and
operates across the UK, the Middle East and Canada.
The Group has four business segments: Support services - this
includes facilities management, facilities services, energy
services, rail services, road maintenance, utility services and
consultancy businesses.
Public Private Partnership (PPP) projects - this includes our
investing activities in PPP projects in our chosen sectors of
defence, health, education, transport, secure, energy services and
other Government accommodation.
Middle East construction services - this includes our building
and civil engineering activities in the Middle East.
Construction services (excluding the Middle East) - this
includes our building, civil engineering and developments
activities in the UK and our construction activities in Canada.
This and other Carillion news releases can be found at
www.carillionplc.com
Photographs:
High resolution photographs are available free of charge to the
media at www.newscast.co.uk telephone + 44 (0) 208 886 5895.
Cautionary statement
This announcement may contain indications of likely future
developments and other forward-looking statements that are subject
to risk factors associated with, among other things, the economic
and business circumstances occurring from time to time in the
countries, sectors and business segments in which the Group
operates. These and other factors could adversely affect the
Group's results, strategy and prospects. Forward-looking statements
involve risks, uncertainties and assumptions. They relate to events
and/or depend on circumstances in the future which could cause
actual results and outcomes to differ materially from those
currently anticipated. No obligation is assumed to update any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Key financial figures
2011 2010 Change
-------------------------------------- ------------- ------- ------- -------
Income statement
Total revenue GBPbn 5.1 5.1 -
Total Group underlying operating
margin(1) Percentage 4.7 4.2 n/a
Support services underlying
operating margin(1) Percentage 5.2 5.2 n/a
Middle East construction services
underlying operating margin(1) Percentage 8.9 9.6 n/a
Construction services (excluding
the Middle East) underlying
operating margin(1) Percentage 3.1 1.9 n/a
Underlying profit from operations(2) GBPm 215.9 194.9 +11%
Underlying profit before taxation(3) GBPm 212.0 188.1 +13%
Profit before taxation GBPm 142.8 167.9 -15%
Underlying earnings per share(4) Pence 43.0 39.4 +9%
Basic earnings per share Pence 32.0 36.9 -13%
Dividends
Proposed interim dividend per
share Pence 16.9 15.5 +9%
Underlying proposed dividend
cover(4) Times 2.5 2.5 n/a
Basic proposed dividend cover Times 1.9 2.4 n/a
Cash flow statement
Cash generated from operations(5) GBPm 230.3 230.2 -
Underlying profit from operations
cash conversion Percentage 106.7 118.1 n/a
Deficit pension contributions GBPm 36.2 35.2 +3%
Balance sheet
Net (borrowing)/cash GBPm (50.7) 120.2 -142%
Committed borrowing facility
to 2016 GBPm 737.5 640.0 +15%
Net retirement benefit liability
(net of taxation) GBPm 229.3 182.1 +26%
Net assets GBPm 982.5 865.2 +14%
-------------------------------------- ------------- ------- ------- -------
(1) Before Joint Ventures net financial expense and taxation,
intangible amortisation and non-recurring operating items (see note
3 to the financial information).
(2) After Joint Ventures net financial expense of GBP18.8
million (2010: GBP13.9 million) and taxation charge of GBP3.5
million (2010: GBP4.7 million) and before intangible amortisation,
non-recurring operating items and non-operating items (see note 3
to the financial information).
(3) After Joint Ventures taxation charge of GBP3.5 million
(2010: GBP4.7 million) and before intangible amortisation,
non-recurring operating items and non-operating items (see note 3
to the financial information).
(4) Before intangible amortisation, non-recurring operating items and non-operating items.
(5) Before pension deficit recovery payments and non-recurring
operating items and after dividends received from Joint
Ventures.
Summary results
Carillion's integrated UK support services and international
business mix has once again enabled the Group to perform strongly,
despite challenging market conditions.
Total revenue, including joint ventures, remained unchanged at
GBP5.1 billion, primarily because the contribution from Carillion
Energy Services (CES - formerly Eaga plc) was offset by a reduction
in UK construction revenue, as we continue to make progress with
the planned re-scaling of our UK construction activities.
Underlying profit before tax(1) increased by 13 per cent to
GBP212.0 million (2010: GBP188.1 million), with the Group's
underlying operating margin increasing to 4.7 per cent (2010: 4.2
per cent), which reflects our ongoing focus on margins through
applying strict contract selectivity criteria and strong cost
management. Underlying earnings per share(2) increased by nine per
cent to 43.0 pence (2010: 39.4 pence).
Profit continues to be cash-backed, with underlying cash flow
from operations of GBP230.3 million (2010: GBP230.2 million) ahead
of underlying profit from operations of GBP215.9 million (2010:
GBP194.9 million). Net borrowing at 31 December 2011 was GBP50.7
million (2010: net cash of GBP120.2 million), significantly better
than the target we set at the half-year of reducing net debt to
below GBP125 million by the year end, following the acquisition of
CES for GBP298.4 million in April 2011.
The Group continued its strategic development with the
acquisition of CES, the largest independent energy efficiency
services company in the UK. Carillion now has the in-house
capabilities to meet the increasing demand for energy efficiency
services from existing and prospective customers. The acquisition
has also taken the Group into new energy services markets, in which
there are significant opportunities for growth. Progress with the
integration of CES remains ahead of expectations, with integration
cost savings expected to reach a run rate of GBP25 million per
annum by the end of 2013, at a one-off cost of GBP40 million.
The value of the Group's order book and probable orders at 31
December 2011 remained strong at GBP19.1 billion (2010: GBP19.1
billion), with the value of orders and probable orders acquired
with CES broadly offset by the reduction resulting from the planned
re-scaling of our UK construction activities. The Group continues
to have good revenue visibility, which at 31 December 2011 was 77
per cent(3) for 2012 (2010: 82 per cent for 2011). In addition, at
the year end the Group's pipeline of contract opportunities had
increased by 29 per cent to a record level of GBP33.1 billion
(2010: GBP25.7 billion), which continues to support our targets for
growth in 2012 and over the medium term.
The Board is recommending a final ordinary dividend for 2011 of
11.6 pence per share, making the total dividend for 2011 16.9 pence
per share (2010: 15.5 pence). This represents an increase of nine
per cent on the total paid in respect of 2010, in line with the
Group's policy of increasing the dividend in line with earnings
growth.
(1) After Joint Ventures taxation charge of GBP3.5 million
(2010: GBP4.7 million) and before intangible amortisation,
non-recurring operating items
and non-operating items.
(2) Before intangible amortisation, non-recurring operating
items and non-operating items.
(3) Based on expected revenue and secure and probable orders,
which exclude variable work and re-bids.
Financial reporting segments and analysis
Operating profit by financial reporting segment
Change from
2011 2010 2010
GBPm GBPm %
--------------------------------------------------- ------------ --------------- ------------
Support services 120.8 110.4 +9
Public Private Partnership projects 19.9 23.4 -15
Middle East construction services 49.1 47.5 +3
Construction services (excluding the Middle East) 57.9 41.2 +41
--------------------------------------------------- ------------ --------------- ------------
247.7 222.5 +11
Group eliminations and unallocated items (9.5) (9.0) -6
--------------------------------------------------- ------------ --------------- ------------
Profit from operations before Joint Ventures
net financial expense and taxation 238.2 213.5 +12
Share of Joint Ventures net financial expense (18.8) (13.9) -35
Share of Joint Ventures taxation (3.5) (4.7) +26
--------------------------------------------------- ------------ --------------- ------------
Underlying profit from operations 215.9 194.9 +11
Intangible amortisation (31.0) (27.6) -12
Non-recurring operating items (42.8) (9.4) -355
--------------------------------------------------- ------------ --------------- ------------
Reported profit from operations 142.1 157.9 -10
--------------------------------------------------- ------------ --------------- ------------
Support services
Change from
2010
2011 2010 %
GBPm GBPm
----------------------------- --------- --------- ------------
Revenue
- Group 2,119.8 1,842.1
- Share of Joint Ventures 225.4 266.5
----------------------------- --------- --------- ------------
2,345.2 2,108.6 +11
----------------------------- --------- --------- ------------
Underlying operating profit
(1)
- Group 105.7 92.3
- Share of Joint Ventures 15.1 18.1
----------------------------- --------- --------- ------------
120.8 110.4 +9
----------------------------- --------- --------- ------------
(1) Before intangible amortisation and non-recurring operating items.
In this segment we report the results of our facilities
management, facilities services, energy services, rail services,
road maintenance, utility services and consultancy businesses.
Revenue increased by 11 per cent to GBP2,345.2 million, with the
acquired revenue contribution from CES partially offset by the
previously reported revenue reductions arising from contract
demobilisations during 2010, notably contracts for Aviva and the
Highways Agency, and the effect of our continuing focus on margins
through contract selectivity. This focus enabled us to maintain our
operating margin in this segment at 5.2 per cent, despite
challenging market conditions, with underlying operating profit
increasing by nine per cent to GBP120.8 million, broadly half of
the Group's total underlying operating profit.
The acquisition of CES in April 2011 was an important strategic
development, driven primarily by the need to extend our support
services offering to include energy efficiency services, given that
these services are an increasingly important part of the integrated
facilities management and maintenance solutions required by our
customers. The acquisition has also taken the Group into new
markets with good prospects for growth. While the UK Government's
decision to reduce Feed-in-Tariffs for solar photovoltaic systems
(Solar PV) is expected to limit growth in the Solar PV market, CES
continues to have good growth prospects in its other markets. These
prospects have been boosted by the UK Government's announcements
regarding implementation of the provisions of the Energy Act 2011
and in particular, the Green Deal and the Energy Company Obligation
(ECO). The Green Deal, which is to receive an additional GBP200
million of Government funding, is expected to kick-start at least
GBP14 billion of investment in energy efficiency measures over the
next decade. The ECO, which the Government is committed to
introduce in October 2012, is expected to create a market worth
some GBP1.3 billion a year, initially up to 2015, but the present
Government intends to extend this period to 2020.
During 2011, we continued to win new orders by using our
extensive capabilities and nationwide resources to target large
complex contracts. At 31 December 2011, our forward order book for
support services was worth GBP12.3 billion (2010: GBP11.7 billion)
and in addition we had probable orders worth GBP0.6 billion (2010:
GBP0.5 billion). The combined value of our strong order book and
probable orders continues to provide good visibility, which at 31
December 2011 was 79 per cent(1) of expected revenue for 2012
(2010: 75 per cent(1) for 2011).
Our top 10 support services contracts account for around 26 per
cent of our revenue in this segment and with none of these
contracts due for re-bid in 2012 or 2013, we have a solid revenue
platform for the medium term. Furthermore, our pipeline of contract
opportunities continues to increase and at the year end was worth
GBP12.3 billion (2010: GBP8.3 billion) of which a major proportion
relates to public sector organisations seeking to outsource
non-core services in order to reduce operating costs. Consequently,
we continue to target growth in support services.
(1) Based on expected revenue and secure and probable orders,
which exclude variable work and re-bids.
Public Private Partnership (PPP) projects
Change from
2010
2011 2010 %
GBPm GBPm
----------------------------- -------- -------- ------------
Revenue
- Group 1.2 1.2
- Share of Joint Ventures 308.6 310.7
----------------------------- -------- -------- ------------
309.8 311.9 -1
----------------------------- -------- -------- ------------
Underlying operating profit
(2)
- Group 2.7 10.7
- Share of Joint Ventures 17.2 12.7
----------------------------- -------- -------- ------------
19.9 23.4 -15
----------------------------- -------- -------- ------------
(2) Before intangible amortisation and non-recurring operating
items.
In this segment we report the equity returns on investments in
Public Private Partnership (PPP) projects in the UK and Canada.
We combine our expertise in private finance with our support
services and construction capabilities to win and deliver fully
integrated solutions for PPP projects, in which we invest equity
and for which we secure construction contracts and long-term
support services contracts, typically for up to 35 years. The
results of our PPP construction and support services contracts are
reported in our "Construction services (excluding the Middle East)"
and "Support services" segments, respectively. Once a project is
mature, having passed from construction into the operational phase,
we have the option of selling our equity and reinvesting the
proceeds in new projects.
The one per cent reduction in revenue in 2011 reflected the sale
of our equity investments in the Queen Alexandra Hospital project
in June 2010 and three further projects in 2011, partially offset
by growth in the remainder of the portfolio. The 15 per cent
reduction in operating profit in 2011 reflected these equity sales
and the fact that profit in 2010 benefited from the receipt of
higher than normal fees upon achieving financial close on four
large projects.
In 2011, a Carillion joint venture achieved financial close on a
GBP1.7 billion, 30-year contract for the New Oakville Hospital PPP
project in Ontario, Canada, our sixth PPP hospital in Canada, in
which we expect to invest some GBP28 million of equity. During
2011, we also sold equity investments in three mature projects,
namely South Ayrshire Schools, Three Shires Hospitals and the A249
Sheppey Route. These sales generated total gross proceeds of
GBP25.4 million, which represented an average discount rate of
seven per cent, and a non-operating profit of GBP11.5 million.
At 31 December 2011, we had a portfolio of 25 financially closed
projects in which we had invested some GBP96 million of equity. The
Directors' valuation of this portfolio at 31 December 2011
increased to GBP164 million (2010: GBP135 million), based on
discounting the cash flows from our investments at nine per cent.
At 31 December 2011 we also had commitments to invest a further
GBP125 million of equity in financially closed projects that are
still in the construction phase. Our forward order book at 31
December 2011 was GBP2.7 billion (2010: GBP2.7 billion) and we had
probable orders worth GBP0.1 billion (2010: nil). In addition, we
are currently short-listed for two further projects in which we
could potentially invest up to GBP65 million, namely the Royal
Liverpool Hospital and Sheffield Highways.
Going forward, we continue to expect opportunities to add
projects to our portfolio. In Canada, Infrastructure Ontario has
published details of the first 20 projects that will form part of
the C$35 billion of investment planned over the first three years
of its new 10-year PPP programme. We expect to bid a number of
these projects in 2012, as the majority of these 20 projects are in
the healthcare sector where Carillion is a market leader. In the
UK, the review of the Private Finance Initiative (PFI) announced by
the Government in November 2011 clearly indicates that, while the
current PFI model may change, private finance will continue to play
a significant role in delivering UK public infrastructure and
services. We therefore continue to expect opportunities in the UK
over the medium term, for example from the GBP2 billion schools PFI
programme and from the National Infrastructure Plan 2011, which
comprises over 500 projects worth in excess of GBP250 billion, some
two thirds of which will be delivered using private finance.
Middle East construction services
Change from
2011 2010 2010
GBPm GBPm %
----------------------------- -------- -------- ------------
Revenue
- Group 218.9 190.9
- Share of Joint Ventures 330.0 302.1
----------------------------- -------- -------- ------------
548.9 493.0 +11
----------------------------- -------- -------- ------------
Underlying operating profit
(1)
- Group 13.9 14.0
- Share of Joint Ventures 35.2 33.5
----------------------------- -------- -------- ------------
49.1 47.5 +3
----------------------------- -------- -------- ------------
(1) Before intangible amortisation and non-recurring operating items.
In this segment we report the results of our building and civil
engineering activities in the Middle East and North Africa.
We continued to make good progress in the Middle East, with
revenue increasing by 11 per cent to GBP548.9 million. Operating
profit increased by three per cent to GBP49.1 million (2010:
GBP47.5 million), despite the operating margin reducing to 8.9 per
cent (2010: 9.6 per cent) in line with the expectations we
announced in 2010, namely that margins in this segment would ease
back to around six per cent by 2013, because all our contracts are
now competitively tendered rather than negotiated.
Our progress in 2011 continues to reflect the strength of our
markets together with the reputation we have built over the last
forty years for high-quality and on-time delivery. As well as
continuing to win contracts in the territories where we have
well-established businesses, namely Abu Dhabi, Oman and Dubai, we
successfully extended our Middle East operations to Qatar, where a
Carillion joint venture won its first contract in 2011 - a GBP395
million contract to deliver a major phase of the Msheireb Heart of
Doha development for Msheireb Properties, a subsidiary of Qatar
Foundation for Education, Science and Community Development. This
high profile and prestigious mixed-use development is worth some
GBP316 million to Carillion.
At 31 December 2011, Carillion's share of the forward order book
of our Middle East businesses was some GBP1.0 billion (2010: GBP1.0
billion) and our revenue visibility for 2012 was 70 per cent(2)
(2010: 78 per cent for 2011). In assessing our prospects in the
Middle East, our pipeline of contract opportunities is especially
important, given that we are focused on large projects that can
move quickly from tender stage to contract signature, causing
substantial movements in order book value. At 31 December 2011, our
pipeline of contract opportunities had increased substantially to a
new record level of GBP11.4 billion (2010: GBP8.8 billion).
(2) Based on expected revenue and secure and probable orders,
which exclude variable work and re-bids.
We are optimistic that during 2012 we can extend our Middle East
operations to Saudi Arabia, which has major investment programmes
in sectors where we have already established strong reputations in
our existing territories.
Given our record pipeline of contract opportunities, which
reflects the strength of our current and prospective markets, we
remain confident that we can achieve our target of doubling our
revenue in the Middle East to around GBP1 billion by 2015.
Construction services (excluding the Middle East)
Change from
2011 2010 2010
GBPm GBPm %
----------------------------- --------- --------- ------------
Revenue
- Group 1,813.3 2,202.3
- Share of Joint Ventures 34.0 23.2
----------------------------- --------- --------- ------------
1,847.3 2,225.5 -17
----------------------------- --------- --------- ------------
Underlying operating profit
(1)
- Group 54.4 40.9
- Share of Joint Ventures 3.5 0.3
----------------------------- --------- --------- ------------
57.9 41.2 +41
----------------------------- --------- --------- ------------
(1) Before intangible amortisation and non-recurring operating items.
In this segment we report the results of our UK building, civil
engineering and developments businesses, together with those of our
construction activities in Canada.
Revenue in this segment reduced by 17 per cent, as we continued
to make progress with our objective of re-scaling UK construction
to reduce its revenue by approximately one third, from the 2009
level of GBP1.8 billion to GBP1.2 billion, which we expect to
achieve in 2012. In 2011, UK construction revenue reduced by 24 per
cent to GBP1.3 billion (2010: GBP1.7 billion). Re-scaling is being
achieved by tightening our contract selectivity criteria to base
our UK activities progressively around the delivery of integrated
solutions for PPP projects and support services customers, and
high-quality, value-added contracts for long-term customers. As
expected, construction revenue in Canada remained broadly
unchanged.
Our decision to re-scale UK construction anticipated the
Government's cuts in capital spending of some 30 per cent in real
terms over the current four-year spending plan. It has also helped
us to improve the operating margin in this segment, as we have
avoided bidding for lower margin work at a time when the UK market
is becoming increasingly competitive. This, together with the
benefits of a number of contracts completing or moving towards
completion with favourable outturns, has enabled us to improve the
operating margin to 3.1 per cent (2010: 1.9 per cent) with
operating profit increasing by 41 per cent to GBP57.9 million.
At 31 December 2011, we had a forward order book in this segment
worth some GBP2.0 billion (2010: GBP2.8 billion) and probable
orders of GBP0.4 billion (2010: GBP0.4 billion). At the year end,
revenue visibility for 2012 was 72 per cent(1) (2010: 89 per cent
for 2011). In addition, we had a pipeline of contract opportunities
at 31 December 2011 worth approximately GBP8.4 billion (2010:
GBP7.7 billion).
In 2012, UK market conditions are expected to remain competitive
as Government cuts in capital spending continue to bite. We will
continue to re-scale our UK business by maintaining a very
selective approach to the contracts for which we bid, which will
also continue to support margins. Over the medium term, we remain
well placed to benefit from new planned public sector investment in
the UK, such as the GBP2 billion PFI schools programme and the
National Infrastructure Plan 2011, which comprises over 500
projects worth in excess of GBP250 billion over a five-year
period.
In Canada, we continue to target growth in construction over the
medium term to support our target of doubling total revenue to
around GBP1 billion by 2015. We expect the Alternative Financing
Procurement (AFP) market (similar to Public Private Partnerships in
the UK) to be an important driver of growth, particularly in
Ontario. The Ontario Government has announced details of 20
projects that comprise the first phase of its new 10-year AFP
programme, under which it plans to invest C$35 billion over the
first three years, and we expect to bid a number of these projects
in 2012.
Group income statement, cash flow and balance sheet items
Intangible amortisation
Intangible amortisation of GBP31.0 million (2010: GBP27.6
million) included GBP10.0 million in relation to CES with the
balance mainly relating to the amortisation of intangible assets
primarily arising from the acquisitions of Mowlem in 2006 and
Alfred McAlpine in 2008.
Non-recurring operating items
The non-recurring operating charge of GBP42.8 million (2010:
GBP9.4 million) relates to the payment into the CES Employee Share
Scheme in lieu of the final Carillion dividend waived by the Eaga
Partnership Trusts(2) of GBP2.8 million along with the GBP40.0
million restructuring and property exit costs associated with the
integration of CES.
Non-operating items
Non-operating profit of GBP4.6 million (2010: GBP16.8 million)
comprised a profit of GBP11.5 million on the disposal of three
Public Private Partnership equity investments and a profit of
GBP3.8 million on the sale of a small joint venture business in the
Netherlands, net of GBP7.5 million of costs relating to the
acquisition of CES and costs of GBP3.2 million associated with the
closure of minor non-core construction activities.
(1) Based on expected revenue and secure and probable orders,
which exclude variable work and re-bids. (2) The Eaga Partnership
Trusts held a 5.9% shareholding in Carillion plc immediately
following the acquisition of CES.
Net financial expense
The Group's net financial expense of GBP3.9 million (2010:
GBP6.8 million) comprised the following items: a net expense of
GBP14.0 million (2010: GBP7.6 million) in respect of borrowings and
other liabilities, with the increase compared to 2010 largely due
to higher net borrowings, following the acquisition of CES; a net
interest credit in respect of defined benefit pension schemes of
GBP3.2 million (2010: GBP3.6 million charge) due to favourable
movements in market conditions and interest received in respect of
loans to PPP Joint Venture projects of GBP6.9 million (2010: GBP4.4
million).
Taxation
The underlying Group taxation charge of GBP27.8 million, when
combined with a taxation charge on Joint Ventures of GBP3.5 million
(2010: GBP4.7 million), represented an underlying effective tax
rate of 15 per cent (2010: 16 per cent). This is significantly
below the UK standard rate of corporation tax of 26.5 per cent for
2011, because our profits in the Middle East are subject to zero or
low rates of tax and because we utilise carried forward tax losses
in the UK that were largely inherited with the acquisitions of
Mowlem and Alfred McAlpine. At 31 December 2011, the Group had
GBP348 million (2010: GBP306 million) of corporate tax losses that
are available to reduce future tax payments.
Earnings per share
Underlying earnings per share increased by nine per cent to 43.0
pence (2010: 39.4 pence), reflecting the acquisition of CES and the
substantial improvement in total operating margin. Following the
issue of 30.6 million shares on the acquisition of CES on 21 April
2011, the weighted average number of shares in issue in 2011
increased to 420.9 million (2010: 399.0 million).
Dividend
Carillion has a progressive dividend policy which aims to
increase the dividend per share broadly in line with the growth in
underlying earnings per share, subject to the investment needs of
the business. Consistent with this policy, the Board has
recommended a final dividend for the 2011 financial year of 11.6
pence per share, making the proposed full-year dividend 16.9 pence
per share (2010: 15.5 pence per share), an increase of nine per
cent on the total paid in respect of 2010. Dividend cover based on
the proposed full-year dividend of 16.9 pence per share and
underlying earnings per share is 2.5 times (2010: 2.5 times).
Cash flow
Summary of the Group's cash flow 2011 2010
GBPm GBPm
---------------------------------------- --------------------- ------------------
Underlying Group operating profit 167.2 148.9
Depreciation and other non-cash
items 32.1 32.0
Working capital (8.6) 1.2
Dividends received from Joint
Ventures 39.6 48.1
--------------------- ------------------
Underlying cash inflow from operations 230.3 230.2
Deficit pension contributions (36.2) (35.2)
Rationalisation costs (34.4) (15.6)
Interest, tax and dividends (77.1) (65.9)
Net capital income/(expenditure) 4.6 (15.3)
Acquisitions and disposals (251.4) 2.7
Other (6.7) (5.6)
--------------------- ------------------
Change in net (borrowing)/cash (170.9) 95.3
Net cash at 1 January 120.2 24.9
--------------------- ------------------
Net (borrowing)/cash at 31 December (50.7) 120.2
---------------------------------------- --------------------- ------------------
Average net borrowing(1) (218.9) (41.8)
-------------------------- ---------- -------
(1) Post the acquisition of CES in April 2011
Strong cash management is a priority and this is reflected in
the Group's track record of consistently delivering cash-backed
profit. Underlying cash flow from operations of GBP230.3 million
represents 107% of underlying profit from operations, which is a
significant achievement given the re-scaling of UK construction is,
as expected, resulting in an outflow of working capital. Deficit
recovery payments to the Group's pension funds of GBP36.2 million
are in line with the agreement reached in 2010 with the Trustees of
the Group's main defined benefit schemes. The GBP34.4 million of
rationalisation costs primarily related to the integration of CES
and the re-scaling of UK construction. Interest, tax and dividend
payments of GBP77.1 million included higher interest and dividends
payable due to the acquisition of CES. Net income of GBP4.6 million
in respect of capital items included proceeds of GBP17.2 million
following the sale of vehicles to Tarmac following the unwind of an
arrangement which had been in existence since 1999, along with the
disposal of surplus assets.
Net payments in respect of acquisitions and disposals amounted
to GBP251.4 million, including GBP249.9 million relating to the
cash element of the consideration, acquisition costs and net debt
acquired in respect of CES; net equity investments in joint
ventures of GBP31.0 million; proceeds of GBP25.2 million (net of
expenses) from the sale of equity in three Public Private
Partnership projects and proceeds of GBP6.2 million (net of
expenses) from the sale of a small joint venture in the
Netherlands.
The above items, together with other payments of GBP6.7 million,
resulted in a change in net borrowing of GBP170.9 million, leaving
the Group with net borrowing of GBP50.7 million at 31 December 2011
(2010: GBP120.2 million net cash).
Balance sheet
Summary of the Group's balance 2011 2010
sheet GBPm GBPm
--------------------------------------- -------- --------
Property, plant and equipment 134.2 157.2
Intangible assets 1,547.6 1,221.2
Investments 210.9 176.7
1,892.7 1,555.1
Inventories, receivables and payables (607.4) (613.8)
Net retirement benefit liability
(net of tax) (229.3) (182.1)
Other (22.8) (14.2)
Net operating assets 1,033.2 745.0
Net (borrowing)/cash (50.7) 120.2
-------- --------
Net assets 982.5 865.2
--------------------------------------- -------- --------
Property, plant and equipment reduced from GBP157.2 million to
GBP134.2 million largely due to the sale of vehicles to Tarmac and
the disposal of surplus assets. The increase in intangible assets
to GBP1,547.6 million was mainly due to the acquisition of CES in
April 2011. Investments increased to GBP210.9 million at the end of
2011 due largely to equity investments in PPP projects of GBP29.0
million.
At 31 December 2011, the retirement benefit liability increased
to GBP229.3 million, net of taxation (2010: GBP182.1 million), due
to a combination of a reduction in asset values following the fall
in global equity markets and an increase in obligations due to a
reduction in the discount rate, which reflected the movement in
market bond yields. The Group's ongoing total pensions charge
against profit in 2011 amounted to GBP29.3 million (2010: GBP29.9
million). The net credit to interest of GBP3.2 million relating to
pensions (2010: GBP3.6 million charge), largely reflected the
reduction in bond yields.
Acquisition of CES The Group acquired the entire share capital
of CES in 2011 for a total consideration of GBP298.4 million,
satisfied by the issue of 30.6 million Carillion plc shares and
GBP181.2 million in cash. Following an assessment of the fair value
of assets and liabilities at the acquisition date, goodwill arising
on this acquisition amounted to GBP329.1 million.
Committed bank facilities In February 2011, the Group put in
place new committed bank facilities of GBP752.5 million, which
comprise a GBP737.5 million syndicated five-year facility maturing
in March 2016 and a GBP15.0 million 364-day facility. In August
2011, we also completed a GBP100 million private placement which
comprised a GBP49 million seven-year facility at 4.38 per cent per
annum and a GBP51 million 10-year facility at 5.1 per cent per
annum. Securing these facilities reflects the Group's positive
prospects and gives the Group the financial strength to support its
strategy for sustainable profitable growth.
Funding and liquidity In addition to Carillion plc's principal
borrowing facilities described above, money market and short-term
overdraft facilities are available to Carillion plc and certain
subsidiaries. Operating and finance leases are also employed to
fund longer-term assets. The quantum of committed borrowing
facilities available to the Group is regularly reviewed by the
Carillion Board and is designed to satisfy the requirements of the
Group's business plan. At 31 December 2011, the Group had undrawn
committed facilities amounting to GBP356.1 million (2010: GBP456.5
million). This excludes the Group's share of cash balances
amounting to GBP94.2 million (2010: GBP175.1 million) within
jointly controlled operations, which are outside of the Group's
facilities.
Foreign exchange
The average and year-end exchange rates used to translate the
Group's overseas operations were as follows:
GBPsterling Average Year End
2011 2010 2011 2010
------------------------- ------ ----- ----- ------
Middle East (US Dollar) 1.61 1.55 1.55 1.57
Oman (Rial) 0.62 0.60 0.60 0.60
UAE (Dirhams) 5.90 5.69 5.71 5.75
Canada (Dollar) 1.58 1.60 1.58 1.56
Trinidad (Dollar) 10.29 9.84 9.97 10.02
------------------------- ------ ----- ----- ------
Operational risk management Carillion has rigorous risk
management policies and processes to identify, mitigate and manage
strategic risks and risks specific to individual business units and
contracts, including economic, social, environmental and ethical
risks. The principal risks include managing our pension schemes,
winning work in competitive markets, maintaining high standards of
health and safety, managing major contracts, maintaining financial
discipline and being able to recruit and retain excellent
people.
Board changes
On 31 December 2011, John McDonough retired from the Board and
from the company having served as Group Chief Executive since
January 2001. John has been succeeded as Group Chief Executive by
Richard Howson. Richard has worked for Carillion for 16 years and
during that time he has successfully led our UK construction,
Middle East and Rail businesses and for the last two years he has
been our Chief Operating Officer.
John McDonough joined the Board as Group Chief Executive in
January 2001 and has made a major contribution to Carillion's
success. Under his leadership, Carillion's earnings and dividends
per share have broadly trebled as the company has been transformed
from being largely focused on UK construction into an international
support services company with a strong, selective construction
capability. John's contribution to the UK construction industry was
recently recognised by the award of a CBE in Her Majesty the
Queen's 2011 Birthday Honours list. John leaves the Board and the
company with our grateful thanks and very best wishes for his
retirement.
Philip Green joined the Board as our Senior Independent
Non-Executive Director in June 2011. Philip brings extensive
experience to the Board having previously served as Chief Executive
of United Utilities Group plc and of Royal P&O Nedlloyd. David
Garman stepped down from the Board in May 2011. Having joined the
Board as a Non-Executive Director in 2004, David served as Senior
Independent Non-Executive Director from 2005 and made a valuable
contribution to Carillion's progress and success. Andrew Dougal
joined the Board as a Non-Executive Director in October 2011.
Andrew also brings considerable experience to the Board having held
a number of senior executive positions, including Chief Executive
of Hanson plc until his retirement in 2002. Andrew has succeeded
David Maloney as chairman of the Audit Committee, as David has
stepped down from the Board having served as a Non-Executive
Director for six years, during which time he made a significant
contribution to Carillion's development and success.
Outlook and prospects
Given the wider economic outlook, we expect trading conditions
to remain challenging in 2012. However, with a strong and resilient
business, good revenue visibility and a record pipeline of contract
opportunities, we continue to target growth in support services
together with the doubling of our revenues in the Middle East and
in Canada, in each case to around GBP1 billion, by 2015.
Consequently, Carillion remains well-positioned to deliver further
growth in 2012 and beyond.
Consolidated income statement
for the year ended 31 December
-------------------------------------------------------------------------- ---------------------
2011 2010
Note GBPm GBPm
------------------------------------------ ---- ------------------------ ---------------------
Total revenue 5,051.2 5,139.0
Less: Share of jointly controlled
entities' revenue (898.0) (902.5)
------------------------------------------ ---- ------------------------ ---------------------
Group revenue 2 4,153.2 4,236.5
Cost of sales (3,761.8) (3,885.3)
------------------------------------------ ---- ------------------------ ---------------------
Gross profit 391.4 351.2
Administrative expenses (298.0) (239.3)
Group operating profit 93.4 111.9
------------------------------------------ ---- ------------------------ ---------------------
Analysed between:
Group operating profit before intangible
amortisation and non-recurring operating
items 167.2 148.9
Intangible amortisation(1) (31.0) (27.6)
Non-recurring operating items(2) 3 (42.8) (9.4)
Share of results of jointly controlled
entities 2 48.7 46.0
------------------------------------------ ---- ------------------------ ---------------------
Analysed between:
Operating profit 71.0 64.6
Net financial expense (18.8) (13.9)
Taxation (3.5) (4.7)
------------------------------------------ ---- ------------------------ ---------------------
Profit from operations 142.1 157.9
------------------------------------------ ---- ------------------------ ---------------------
Analysed between:
Profit from operations before intangible
amortisation and non-recurring operating
items 215.9 194.9
Intangible amortisation(1) (31.0) (27.6)
Non-recurring operating items(2) 3 (42.8) (9.4)
Non-operating items 3 4.6 16.8
Net financial expense 4 (3.9) (6.8)
------------------------------------------ ---- ------------------------ ---------------------
Analysed between:
Financial income 132.0 123.6
Financial expense (135.9) (130.4)
------------------------------------------ ---- ------------------------ ---------------------
Profit before taxation 142.8 167.9
------------------------------------------ ---- ------------------------ ---------------------
Analysed between:
Profit before taxation, intangible
amortisation, non-recurring operating
items and non-operating items 212.0 188.1
Intangible amortisation(1) (31.0) (27.6)
Non-recurring operating items(2) 3 (42.8) (9.4)
Non-operating items 3 4.6 16.8
------------------------------------------ ---- ------------------------ ---------------------
Taxation 5 (4.8) (15.1)
------------------------------------------ ---- ------------------------ ---------------------
Profit for the year 138.0 152.8
------------------------------------------ ---- ------------------------ ---------------------
Profit attributable to:
Equity holders of the parent 134.6 147.2
Non-controlling interests 3.4 5.6
------------------------------------------ ---- ------------------------ ---------------------
Profit for the year 138.0 152.8
------------------------------------------ ---- ------------------------ ---------------------
Earnings per share 6
Basic 32.0p 36.9p
Diluted 31.8p 36.7p
------------------------------------------ ---- ------------------------ ---------------------
(1) Arising from business combinations. (2) This includes
integration and rationalisation costs and Eaga Partnership Trusts
(EPT) related charges (see note 3).
Consolidated statement of comprehensive income
for the year ended 31 December
----------------------------------------------------------------------------------------------------------
2011 2010
------ ---------------------- ------ -------------------------
GBPm GBPm GBPm GBPm
--------------------------------------- ------ ---------------------- ------ -------------------------
Profit for the year 138.0 152.8
Net gain/(loss) on hedge of
net investment in foreign operations 0.1 (3.8)
Currency translation differences
on foreign operations 1.9 4.7
Increase in fair value of available
for sale assets 5.0 5.9
Actuarial (losses)/gains on
defined benefit pension schemes (96.6) 11.9
------ ------
(89.6) 18.7
Taxation in respect of the above 20.0 (4.7)
Share of recycled cash flow
hedges within jointly controlled
entities (net of taxation) 13.4 0.2
Share of change in fair value
of effective cash flow hedges
within jointly controlled entities
(net of taxation) (13.3) (13.4)
------ ------
Other comprehensive (expense)/income
for the year (69.5) 0.8
--------------------------------------- ------ ---------------------- ------ -------------------------
Total comprehensive income for
the year 68.5 153.6
Attributable to:
Equity holders of the parent 65.1 148.0
Non-controlling interests 3.4 5.6
--------------------------------------- ------ ---------------------- ------ -------------------------
68.5 153.6
--------------------------------------- ------ ---------------------- ------ -------------------------
Consolidated statement of changes in equity
for the year ended 31 December 2011
Fair Equity Non-controlling
Share Share Translation Hedging value Merger Retained shareholders' interests Total
capital premium reserve reserve reserve reserve earnings funds GBPm equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
At 1 January
2011 199.8 21.2 (18.1) (23.8) 5.9 393.1 277.5 855.6 9.6 865.2
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
Comprehensive
income
Profit for the
year - - - - - - 134.6 134.6 3.4 138.0
Other
comprehensive
income
Net gain on hedge
of net investment
in foreign
operations - - 0.1 - - - - 0.1 - 0.1
Currency
translation
differences on
foreign
operations - - 1.9 - - - - 1.9 - 1.9
Increase in fair
value of
available
for sale assets - - - - 5.0 - - 5.0 - 5.0
Actuarial losses
on defined
benefit
pension schemes - - - - - - (96.6) (96.6) - (96.6)
Taxation - - - - - - 20.0 20.0 - 20.0
Share of recycled
cash flow hedges
within jointly
controlled
entities
(net of taxation) - - - 13.4 - - - 13.4 - 13.4
Share of change
in fair value
of effective
cash flow hedges
within jointly
controlled
entities
(net of taxation) - - - (13.3) - - - (13.3) - (13.3)
Transfer between
reserves - - - - - (30.9) 30.9 - - -
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
Total
comprehensive
income/(expense) - - 2.0 0.1 5.0 (30.9) 88.9 65.1 3.4 68.5
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
Transactions
with owners
Contributions
by and
distributions
to owners
Share capital
issued on
acquisition
of Eaga plc 15.3 - - - - 102.4 - 117.7 - 117.7
Acquisition of
own shares - - - - - - (6.9) (6.9) - (6.9)
Equity settled
transactions
(net of deferred
taxation) - - - - - - 6.0 6.0 - 6.0
Dividends paid - - - - - - (64.6) (64.6) (3.4) (68.0)
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
Total
transactions
with owners 15.3 - - - - 102.4 (65.5) 52.2 (3.4) 48.8
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
At 31 December
2011 215.1 21.2 (16.1) (23.7) 10.9 464.6 300.9 972.9 9.6 982.5
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
Consolidated statement of changes in equity for the year ended
31 December 2010
Fair Equity Non-controlling
Share Share Translation Hedging value Merger Retained shareholders' interests Total
capital premium reserve reserve reserve reserve earnings funds GBPm equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2010 198.6 16.8 (20.1) (10.6) - 419.4 161.7 765.8 6.3 772.1
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
Comprehensive
income
Profit for the
period - - - - - - 147.2 147.2 5.6 152.8
Other
comprehensive
income
Net loss on hedge
of net investment
in foreign
operations - - (3.8) - - - - (3.8) - (3.8)
Currency
translation
differences on
foreign
operations - - 4.7 - - - - 4.7 - 4.7
Increase in fair
value of
available
for sale assets - - - - 5.9 - - 5.9 - 5.9
Actuarial gains
on defined
benefit
pension schemes - - - - - - 11.9 11.9 - 11.9
Taxation - - 1.1 - - - (5.8) (4.7) - (4.7)
Share of recycled
cash flow hedges
within jointly
controlled
entities
(net of taxation) - - - 0.2 - - - 0.2 - 0.2
Share of change
in fair value
of effective
cash flow hedges
within jointly
controlled
entities
(net of taxation) - - - (13.4) - - - (13.4) - (13.4)
Transfer between
reserves - - - - - (26.3) 26.3 - - -
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
Total
comprehensive
income/(expense) - - 2.0 (13.2) 5.9 (26.3) 179.6 148.0 5.6 153.6
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
Transactions
with owners
Contributions
by and
distributions
to owners
New share capital
issued 1.2 4.4 - - - - - 5.6 - 5.6
Acquisition of
own shares - - - - - - (5.6) (5.6) - (5.6)
Share options
exercised by
employees - - - - - - 3.7 3.7 - 3.7
Equity settled
transactions
(net of deferred
taxation) - - - - - - (2.8) (2.8) - (2.8)
Dividends paid - - - - - - (59.1) (59.1) (2.3) (61.4)
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
Total
transactions
with owners 1.2 4.4 - - - - (63.8) (58.2) (2.3) (60.5)
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
At 31 December
2010 199.8 21.2 (18.1) (23.8) 5.9 393.1 277.5 855.6 9.6 865.2
------------------- -------- -------- ------------ -------- -------- -------- --------- -------------- ---------------- -------
Consolidated balance sheet as at 31 December
2011 2010
Note GBPm GBPm
------------------------------------ ---- --------- -----------
Non-current assets
Property, plant and equipment 134.2 157.2
Intangible assets 1,547.6 1,221.2
Retirement benefit assets - 0.9
Investments in jointly controlled
entities 159.6 134.8
Other investments 51.3 41.9
Deferred tax assets 137.6 101.7
------------------------------------ ---- --------- -----------
Total non-current assets 2,030.3 1,657.7
------------------------------------ ---- --------- -----------
Current assets
Inventories 71.6 40.6
Trade and other receivables 1,094.6 1,052.4
Cash and cash equivalents 9 490.7 396.7
Current asset investments 4.3 -
Income tax receivable 7.7 3.9
Total current assets 1,668.9 1,493.6
------------------------------------ ---- --------- -----------
Total assets 3,699.2 3,151.3
------------------------------------ ---- --------- -----------
Current liabilities
Borrowing (32.5) (52.0)
Derivative financial instruments (0.9) (0.2)
Trade and other payables (1,773.6) (1,706.8)
Provisions (45.8) (13.5)
Income tax payable (4.4) (5.1)
------------------------------------ ---- --------- -----------
Total current liabilities (1,857.2) (1,777.6)
------------------------------------ ---- --------- -----------
Non-current liabiliti es
Borrowing (508.9) (224.5)
Retirement benefit liabilities (305.8) (250.3)
Deferred tax liabilities (25.5) (28.0)
Provisions (19.3) (5.7)
------------------------------------ ---- --------- -----------
Total non-current liabilities (859.5) (508.5)
------------------------------------ ---- --------- -----------
Total liabilities (2,716.7) (2,286.1)
------------------------------------ ---- --------- -----------
Net assets 2 982.5 865.2
------------------------------------ ---- --------- -----------
Equity
Share capital 12 215.1 199.8
Share premium 21.2 21.2
Translation reserve (16.1) (18.1)
Hedging reserve (23.7) (23.8)
Fair value reserve 10.9 5.9
Merger reserve 464.6 393.1
Retained earnings 300.9 277.5
------------------------------------ ---- --------- -----------
Equity attributable to shareholders
of the parent 972.9 855.6
Non-controlling interests 9.6 9.6
------------------------------------ ---- --------- -----------
Total equity 982.5 865.2
------------------------------------ ---- --------- -----------
Consolidated cash flow statement
for the year ended 31 December
2011 2010
Note GBPm GBPm
------------------------------------------------------ ---- ----------------- ------------------------
Cash flows from operating activities
Group operating profit 93.4 111.9
Depreciation and amortisation 62.3 63.4
Loss/(profit) on disposal of property, plant
and equipment 0.6 (1.3)
Share based payment expense/(income) 2.5 (3.9)
Other non-cash movements (2.3) 1.4
Non-recurring operating items 42.8 9.4
------------------------------------------------------ ---- ----------------- ------------------------
Operating cash flows before changes in working
capital 199.3 180.9
Decrease/(increase) in inventories 19.7 (3.4)
Decrease/(increase) in trade and other receivables 53.3 (8.3)
(Decrease)/increase in trade and other payables (81.6) 12.9
------------------------------------------------------ ---- ----------------- ------------------------
Cash generated from operations before pension
deficit recovery
payments, rationalisation costs and Eaga Partnership
Trusts related charges 190.7 182.1
Deficit recovery payments to pension schemes (36.2) (35.2)
Rationalisation costs (34.4) (15.6)
Eaga Partnership Trusts related charges (0.6) -
Cash generated from operations 119.5 131.3
Financial income received 16.0 11.7
Financial expense paid (21.3) (13.5)
Acquisition costs (7.2) -
Taxation (3.8) (2.7)
------------------------------------------------------ ---- ----------------- ------------------------
Net cash flows from operating activities 103.2 126.8
------------------------------------------------------ ---- ----------------- ------------------------
Cash flows from investing activities
Disposal of property, plant and equipment 17.2 5.5
Disposal of jointly controlled entities and
other investments 11 31.4 45.8
Dividends received from jointly controlled entities 39.6 48.1
Disposal and closure of businesses 11 (1.9) (4.7)
Decrease in current asset investments 3.7 -
Acquisition of subsidiaries, net of cash acquired 11 (182.7) -
Acquisition of intangible assets (2.8) (7.5)
Acquisition of property, plant and equipment (9.8) (17.1)
Acquisition of equity in and net loan advances
to jointly controlled entities (27.6) (34.5)
Acquisition of other non-current asset investments (3.4) (3.9)
------------------------------------------------------ ---- ----------------- ------------------------
Net cash flows from investing activities (136.3) 31.7
------------------------------------------------------ ---- ----------------- ------------------------
Cash flows from financing activities
Proceeds from exercise of employee share options - 2.3
Draw down of bank and other loans 223.0 50.2
Proceeds from finance leaseback - 3.8
Payment of finance lease liabilities (15.8) (17.3)
Acquisition of own shares (6.9) -
Payments to employees in settlement of share
options (1.8) -
Dividends paid to equity holders of the parent (64.6) (59.1)
Dividends paid to non-controlling interests (3.4) (2.3)
------------------------------------------------------ ---- ----------------- ------------------------
Net cash flows from financing activities 130.5 (22.4)
------------------------------------------------------ ---- ----------------- ------------------------
Increase in net cash and cash equivalents 97.4 136.1
Net cash and cash equivalents at 1 January 391.1 252.4
Effect of exchange rate fluctuations on net
cash and cash equivalents (0.8) 2.6
------------------------------------------------------ ---- ----------------- ------------------------
Net cash and cash equivalents at 31 December 9 487.7 391.1
------------------------------------------------------ ---- ----------------- ------------------------
Notes to the condensed financial statements
1 Basis of preparation
Carillion plc (the 'Company') is a company domiciled in the
United Kingdom (UK). The condensed consolidated financial
statements of the Company for the year ended 31 December 2011
comprise the Company and its subsidiaries (together referred to as
the 'Group') and the Group's interest in jointly controlled
entities.
The Group's financial statements have been approved by the
Directors and prepared in accordance with International Financial
Reporting Standards as adopted by the European Union (adopted
IFRSs'). The following new accounting standards and interpretations
have been adopted in 2011 as they are mandatory for the year ended
31 December 2011:
-- Amendments to International Financial Reporting
Interpretations Committee (IFRIC) 14 'Prepayment of a minimum
funding requirement'
-- International Financial Reporting Interpretations Committee
(IFRIC) 19 'Extinguishing financial liabilities with equity
instruments'
-- International Accounting Standard (IAS) 24 'Related party disclosures (revised 2009)'
-- Amendment to International Accounting Standard (IAS) 32 'Classification of rights issues'
The amendment to IFRIC 14 'Prepayment of a minimum funding
requirement' removes the unintended consequence of when an entity
is subject to a minimum funding requirement (MFR) and makes an
early payment of contributions to cover those requirements. The
amendment results in a prepayment of contributions in certain
circumstances being recognised as an asset rather than an expense.
This amendment has had no impact on profit, earnings per share or
net assets in the year ended 31 December 2011.
IFRIC 19 'Extinguishing financial liabilities with equity
instruments' clarifies the accounting treatment for when an entity
renegotiates the terms of its debt, such that the liability is
extinguished, in whole or in part, by the entity issuing its own
equity instruments to the lender (referred to as a 'debt for equity
swap'). The adoption of IFRIC 19 has had no impact on profit,
earnings per share or net assets in the year ended 31 December
2011.
The amendment to IAS 24 'Related party disclosures (revised
2009)' clarifies disclosure requirements for government-related
entities and amends the definition of a related party. The
amendment to IAS 24 has had no impact on profit, earnings per share
or net assets in the year ended 31 December 2011.
The amendment to IAS 32 'Classification of rights issues' states
that if such rights are issued pro-rata to all of an entity's
existing shareholders in the same class for a fixed amount of
currency, they should be classified as equity regardless of the
currency in which the exercise price is denominated. The amendment
to IAS 32 has had no impact on profit, earnings per share or net
assets in the year ended 31 December 2011.
In addition to the above, amendments to a number of standards
under the annual improvements project to IFRS, which are mandatory
for the year ending 31 December 2011, have been adopted in 2011.
None of these amendments have had a material impact on the Group's
financial statements.
The financial information set out herein (which was approved by
the Board on 29 February 2012) does not constitute the Company's
statutory accounts for the years ended 31 December 2011 and 2010
but is derived from the 2011 statutory accounts.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of IFRS, this announcement itself does not
contain sufficient information to comply with IFRS. The Company
will make available the full financial statements that comply with
IFRS by 31 March 2012.
The statutory accounts for the year ended 31 December 2010 have
been reported on by the Company's auditors and delivered to the
Registrar of Companies. The statutory accounts for the year ended
31 December 2011 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. The auditors have
reported on those accounts; their report was unqualified, did not
include references to any matter which the auditors drew attention
by way of emphasis without qualifying their report and did not
contain statements under section 498(2) or (3) of the Companies Act
2006.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are described in the Annual Report on pages 4 to 33. The Group has
considerable financial resources, including a GBP737.5 million
committed syndicated facility expiring in March 2016. The Group has
long-term contracts with a number of customers and suppliers across
different geographic areas and industries. As a consequence, the
Directors believe that the Group is well placed to manage its
business risks successfully despite the current uncertain economic
outlook. The Directors confirm that, after making enquiries, they
have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the
foreseeable future. For this reason, they continue to adopt the
going concern basis in preparing the condensed financial statements
for the year ended 31 December 2011.
2 Segmental reporting
Segment information is presented in respect of the Group's
strategic operating segments. The operating segment reporting
format reflects the differing economic characteristics and nature
of the services provided by the Group and is the basis on which
strategic operating decisions are made by the Group Chief
Executive, who is the Group's chief operating decision maker.
Inter-segment pricing is determined on an arm's length basis.
Segment results include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis, except
finance items and income tax.
Operating segments
The Group is comprised of the following main operating
segments:
Support services
In this segment we report the results of our facilities
management, facilities services, energy services, road maintenance,
rail services, utility services and consultancy businesses.
Public Private Partnership projects
In this segment we report the results of our investing
activities in Public Private Partnership projects in our chosen
sectors of defence, health, education, transport, secure, energy
services and other Government accommodation.
Middle East construction services
In this segment we report the results of our building and civil
engineering activities in the Middle East and North Africa.
Construction services (excluding the Middle East)
In this segment we report the results of our UK building, civil
engineering and developments businesses and our construction
activities in Canada.
2 Segmental reporting (continued)
Segmental revenue and profit
2011 2010
----------------------- ----------------------------------------
Operating
profit before Operating
intangible profit before
amortisation intangible
and amortisation
non-recurring and non-recurring
operating operating
Revenue items Revenue items
GBPm GBPm GBPm GBPm
----------------------------------------- ------- -------------- -------------------- ------------------
Support services
Group 2,119.8 105.7 1,842.1 92.3
Share of jointly controlled entities 225.4 15.1 266.5 18.1
----------------------------------------- ------- -------------- -------------------- ------------------
2,345.2 120.8 2,108.6 110.4
Inter-segment 75.2 - 107.3 -
----------------------------------------- ------- -------------- -------------------- ------------------
Total 2,420.4 120.8 2,215.9 110.4
----------------------------------------- ------- -------------- -------------------- ------------------
Public Private Partnership projects
Group 1.2 2.7 1.2 10.7
Share of jointly controlled entities 308.6 17.2 310.7 12.7
----------------------------------------- ------- -------------- -------------------- ------------------
309.8 19.9 311.9 23.4
Inter-segment - - - -
----------------------------------------- ------- -------------- -------------------- ------------------
Total 309.8 19.9 311.9 23.4
----------------------------------------- ------- -------------- -------------------- ------------------
Middle East construction services
Group 218.9 13.9 190.9 14.0
Share of jointly controlled entities 330.0 35.2 302.1 33.5
----------------------------------------- ------- -------------- -------------------- ------------------
548.9 49.1 493.0 47.5
Inter-segment - - - -
----------------------------------------- ------- -------------- -------------------- ------------------
Total 548.9 49.1 493.0 47.5
----------------------------------------- ------- -------------- -------------------- ------------------
Construction services (excluding the
Middle East)
Group 1,813.3 54.4 2,202.3 40.9
Share of jointly controlled entities 34.0 3.5 23.2 0.3
----------------------------------------- ------- -------------- -------------------- ------------------
1,847.3 57.9 2,225.5 41.2
Inter-segment 0.4 - 4.2 -
----------------------------------------- ------- -------------- -------------------- ------------------
Total 1,847.7 57.9 2,229.7 41.2
----------------------------------------- ------- -------------- -------------------- ------------------
Group eliminations and unallocated items (75.6) (9.5) (111.5) (9.0)
----------------------------------------- ------- -------------- -------------------- ------------------
Consolidated
Group 4,153.2 167.2 4,236.5 148.9
Share of jointly controlled entities 898.0 71.0 902.5 64.6
----------------------------------------- ------- -------------- -------------------- ------------------
Total 5,051.2 238.2 5,139.0 213.5
----------------------------------------- ------- -------------- -------------------- ------------------
2 Segmental reporting (continued)
Reconciliation of operating segment results to reported
results
2011 2010
GBPm GBPm
---------------------------------------------------------- --------------------- ------
Group and share of jointly controlled entities' operating
profit before intangible amortisation and non-recurring
operating items 238.2 213.5
Net financial expense
- Group (3.9) (6.8)
- Share of jointly controlled entities (18.8) (13.9)
Share of jointly controlled entities' taxation (3.5) (4.7)
---------------------------------------------------------- --------------------- ------
Underlying profit before taxation 212.0 188.1
Intangible amortisation (31.0) (27.6)
Non-recurring operating items (42.8) (9.4)
Non-operating items 4.6 16.8
---------------------------------------------------------- --------------------- ------
Profit before taxation 142.8 167.9
Taxation (4.8) (15.1)
Profit for the year 138.0 152.8
---------------------------------------------------------- --------------------- ------
2 Segmental reporting (continued)
Additional segmental information on intangible amortisation,
non-recurring operating items and non-operating items is set out
below:
2011 2010
--------------------------- ---------------- --------------------------------------
Non-recurring Non-recurring Non-
Intangible operating Non-operating Intangible operating operating
amortisation items items amortisation items items
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------------ ------------- ---------------- ------------ ------------- ---------
Support services (26.1) (40.6) (4.3) (19.8) (0.4) -
Public Private Partnership
projects - - 11.5 - - 16.8
Construction services
(excluding
the Middle East) (4.9) (2.2) (2.6) (7.8) (6.1) -
Unallocated group items - - - - (2.9) -
----------------------------- ------------ ------------- ---------------- ------------ ------------- ---------
Total (31.0) (42.8) 4.6 (27.6) (9.4) 16.8
----------------------------- ------------ ------------- ---------------- ------------ ------------- ---------
Depreciation and amortisation and capital expenditure arise in
the following segments:
2011 2010
--------------------------- -------------------------------------------
Depreciation Depreciation
and Capital and Capital
amortisation expenditure amortisation expenditure
GBPm GBPm GBPm GBPm
---------------------------------- ------------- ------------ ----------------------------- ------------
Support services (40.3) (4.1) (37.0) (10.8)
Middle East construction services (2.1) (1.1) (2.1) (2.1)
Construction services (excluding
the Middle East) (6.4) (0.4) (11.2) (1.9)
Unallocated group items (13.5) (7.8) (13.1) (14.5)
---------------------------------- ------------- ------------ ----------------------------- ------------
Total (62.3) (13.4) (63.4) (29.3)
---------------------------------- ------------- ------------ ----------------------------- ------------
2 Segmental reporting (continued)
Segmental net assets
2011 2010
-------------------------------------------------- -------------------------------------------------
Net Net
operating operating
Operating Operating assets/ Operating Operating assets/
assets liabilities (liabilities) assets liabilities (liabilities)
GBPm GBPm GBPm GBPm GBPm GBPm
Support services
Intangible assets (1) 1,268.9 - 1,268.9 936.5 - 936.5
Operating assets 610.0 - 610.0 486.4 - 486.4
Investments 11.6 - 11.6 9.6 - 9.6
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Total operating
assets 1,890.5 - 1,890.5 1,432.5 - 1,432.5
Total operating
liabilities - (622.1) (622.1) - (475.7) (475.7)
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Net operating
assets/(liabilities) 1,890.5 (622.1) 1,268.4 1,432.5 (475.7) 956.8
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Public Private
Partnership projects
Operating assets 7.9 - 7.9 5.5 - 5.5
Investments 93.2 - 93.2 74.5 - 74.5
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Total operating
assets 101.1 - 101.1 80.0 - 80.0
Total operating
liabilities - (9.6) (9.6) - (11.6) (11.6)
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Net operating
assets/(liabilities) 101.1 (9.6) 91.5 80.0 (11.6) 68.4
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Middle East
construction services
Operating assets 226.5 - 226.5 172.2 - 172.2
Investments 57.3 - 57.3 48.9 - 48.9
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Total operating
assets 283.8 - 283.8 221.1 - 221.1
Total operating
liabilities - (224.8) (224.8) - (192.4) (192.4)
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Net operating
assets/(liabilities) 283.8 (224.8) 59.0 221.1 (192.4) 28.7
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Construction services
(excluding
the Middle East)
Intangible assets (1) 264.5 - 264.5 269.4 - 269.4
Operating assets 425.4 - 425.4 548.2 - 548.2
Investments 48.8 - 48.8 43.7 - 43.7
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Total operating
assets 738.7 - 738.7 861.3 - 861.3
Total operating
liabilities - (928.2) (928.2) - (1,022.7) (1,022.7)
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Net operating
assets/(liabilities) 738.7 (928.2) (189.5) 861.3 (1,022.7) (161.4)
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Consolidated before
Group items
Intangible assets (1) 1,533.4 - 1,533.4 1,205.9 - 1,205.9
Operating assets 1,269.8 - 1,269.8 1,212.3 - 1,212.3
Investments 210.9 - 210.9 176.7 - 176.7
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Total operating
assets 3,014.1 - 3,014.1 2,594.9 - 2,594.9
Total operating
liabilities - (1,784.7) (1,784.7) - (1,702.4) (1,702.4)
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Net operating
assets/(liabilities)
before Group items 3,014.1 (1,784.7) 1,229.4 2,594.9 (1,702.4) 892.5
Group items
Deferred tax
assets/(liabilities) 137.6 (25.5) 112.1 101.7 (28.0) 73.7
Net cash/(borrowing) 490.7 (541.4) (50.7) 396.7 (276.5) 120.2
Retirement benefits
(gross of
taxation) - (305.8) (305.8) 0.9 (250.3) (249.4)
Income tax 7.7 (4.4) 3.3 3.9 (5.1) (1.2)
Other 49.1 (54.9) (5.8) 53.2 (23.8) 29.4
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
Net
assets/(liabilities) 3,699.2 (2,716.7) 982.5 3,151.3 (2,286.1) 865.2
--------------------- --------- ----------- -------------------------- --------- ----------- -------------------------
(1) Arising from business combinations.
2 Segmental reporting (continued)
Geographic information - by origin
2011 2010
GBPm GBPm
---------------------------------------------------- ---------------------- ---------
United Kingdom
Total revenue from external customers 3,664.0 3,848.6
Less: share of jointly controlled entities' revenue (386.7) (469.6)
---------------------------------------------------- ---------------------- ---------
Group revenue from external customers 3,277.3 3,379.0
---------------------------------------------------- ---------------------- ---------
Non-current assets 1,628.8 1,317.1
---------------------------------------------------- ---------------------- ---------
Middle East
Total revenue from external customers 561.3 504.2
Less: share of jointly controlled entities' revenue (342.4) (313.3)
---------------------------------------------------- ---------------------- ---------
Group revenue from external customers 218.9 190.9
---------------------------------------------------- ---------------------- ---------
Non-current assets 66.7 56.3
---------------------------------------------------- ---------------------- ---------
Canada
Total revenue from external customers 782.3 709.8
Less: share of jointly controlled entities' revenue (147.4) (70.5)
---------------------------------------------------- ---------------------- ---------
Group revenue from external customers 634.9 639.3
---------------------------------------------------- ---------------------- ---------
Non-current assets 145.9 137.9
---------------------------------------------------- ---------------------- ---------
Rest of the World
Total revenue from external customers 43.6 76.4
Less: share of jointly controlled entities' revenue (21.5) (49.1)
---------------------------------------------------- ---------------------- ---------
Group revenue from external customers 22.1 27.3
---------------------------------------------------- ---------------------- ---------
Non-current assets - 1.9
---------------------------------------------------- ---------------------- ---------
Consolidated
Total revenue from external customers 5,051.2 5,139.0
Less: share of jointly controlled entities' revenue (898.0) (902.5)
---------------------------------------------------- ---------------------- ---------
Group revenue from external customers 4,153.2 4,236.5
---------------------------------------------------- ---------------------- ---------
Non-current assets
---------------------------------------------------- ---------------------- ---------
Total of geographic analysis above 1,841.4 1,513.2
Retirement benefit assets - 0.9
Other investments 51.3 41.9
Deferred tax assets 137.6 101.7
---------------------------------------------------- ---------------------- ---------
Total non-current assets 2,030.3 1,657.7
---------------------------------------------------- ---------------------- ---------
2 Segmental reporting (continued)
Revenue from the Group's major customer, the UK Government, is
shown below:
Public Private Construction
Partnership services (excluding
Support services projects the Middle East) Total
GBPm GBPm GBPm GBPm
Year ended 31 December
2011 920.4 188.3 1,499.7 2,608.4
Year ended 31 December
2010 782.5 222.7 1,263.0 2,268.2
3 Non-recurring operating items and non-operating items
2011 2010
Non-recurring operating items GBPm GBPm
---------------------------------------- ------ --------------------
Integration and rationalisation costs (40.0) (9.4)
Eaga Partnership Trusts related charges (2.8) -
---------------------------------------- ------ --------------------
(42.8) (9.4)
---------------------------------------- ------ --------------------
Integration and rationalisation costs of GBP40.0 million
primarily relates to redundancy and property exit costs arising
from a review of the Group's requirements following the acquisition
of Carillion Energy Services (CES - formerly Eaga plc), including
relatively modest costs associated with focusing the Canadian
construction services business on the growing Public Private
Partnership market in the region.
The Group operates a Share Incentive Plan (SIP) under which
qualifying CES partners may receive free shares. The Eaga
Partnership Trusts (EPT) waived its entitlement to the 2010 final
dividend paid during the year amounting to GBP3.0 million. Of this
GBP3.0 million, GBP2.5 million has been paid to acquire Carillion
plc shares to satisfy the UK SIP awards which vest immediately and
the remaining GBP0.5 million will be paid to fund the international
SIP awards when they vest in three years time. These awards give
rise to a charge under International Financial Reporting Standard 2
'Share-based payment' of GBP2.8 million. The Group is not committed
to make any awards under the SIP in excess of those funded by EPT.
Where the award of shares under the SIP is fully funded by the
waiver of dividends by the EPT, there is no material net impact on
the net debt or net assets of the Group over the contractual life
of the plan compared to if the EPT had not waived it's dividends.
As this charge has arisen from the decision by the EPT to waive its
entitlement to dividends and is outside of the control of the
normal operating parameters of the Group, the charge is classified
as a non-recurring operating item.
Rationalisation costs of GBP9.4 million in 2010 relate to
non-recurring redundancy and other associated costs incurred to
ensure that the Group's cost base reflects the expected reduction
in the UK construction market as indicated in the UK Government's
Emergency Budget on 22 June 2010 and confirmed in the Comprehensive
Spending Review in October 2010.
An income tax credit of GBP11.9 million (2010: GBP1.6 million)
relating to the above has been included within taxation in the
income statement.
2011 2010
Non-operating items GBPm GBPm
---------------------------------------------------- -------------------------- ---------------------
Profit on disposal of jointly controlled entity and
other investments 15.3 16.8
Acquisition costs (7.5) -
Closure of non-core businesses (3.2) -
4.6 16.8
---------------------------------------------------- -------------------------- ---------------------
In the year ended 31 December 2011, the Group disposed of its
equity investment in three Public Private Partnership jointly
controlled entities. The disposals generated cash consideration of
GBP25.4 million (before disposal costs of GBP0.2 million) and a
non-operating profit of GBP11.5 million. There is no income tax
associated with this profit.
In addition, the Group disposed of a small joint venture in the
Netherlands. The disposal generated a cash consideration of GBP6.9
million (before disposal costs of GBP0.7 million) and a
non-operating profit of GBP3.8 million. There is no income tax
associated with this profit.
Acquisition costs in 2011 of GBP7.5 million relate to adviser
costs incurred in relation to the CES acquisition contracts and due
diligence procedures. An income tax credit of GBP0.6 million has
been included in the income statement in respect of these
costs.
During the year a number of small non-core businesses were
closed at a cost of GBP3.2 million. An income tax credit of GBP0.6
million has been included in the income statement in respect of
these costs.
In the year ended 31 December 2010, the Group disposed of its
equity interest in two Public Private Partnership investments. The
disposals generated cash consideration of GBP45.8 million and a
non-operating profit of GBP16.8 million. There is no income tax
associated with this profit.
4 Financial income and expense
2011 2010
GBPm GBPm
---------------------------------------------- ---------------------- --------------------------
Financial income
Bank interest receivable 1.6 1.1
Other interest receivable 14.4 10.6
Expected return on retirement plan assets 116.0 111.9
---------------------------------------------- ---------------------- --------------------------
132.0 123.6
---------------------------------------------- ---------------------- --------------------------
Financial expense
Interest payable on bank loans and overdrafts (9.6) (3.3)
Other interest payable and similar charges (13.5) (11.6)
Interest cost on retirement plan obligations (112.8) (115.5)
---------------------------------------------- ---------------------- --------------------------
(135.9) (130.4)
---------------------------------------------- ---------------------- --------------------------
Net financial expense (3.9) (6.8)
---------------------------------------------- ---------------------- --------------------------
Other interest payable and similar charges include finance lease
charges of GBP2.7 million (2010: GBP3.7 million). No borrowing
costs have been capitalised in either 2011 or 2010 as they are not
material.
5 Income tax
The Group's income tax expense (including the Group's share of
jointly controlled entities' income tax) for the year ended 31
December 2011 is calculated based on an underlying income tax rate
of 15% (2010: 16%). This effective rate differs to the UK standard
corporation tax rate of 26.5% (2010: 28%) primarily due to items
such as the effect of tax rates in foreign jurisdictions and the
recognition of deferred tax on trading losses.
6 Earnings per share
(a) Basic earnings per share
The calculation of earnings per share for the year ended 31
December 2011 is based on the profit attributable to equity holders
of the parent of GBP134.6 million (2010: GBP147.2 million) and a
weighted average number of ordinary shares in issue of 420.9
million (2010: 399.0 million), calculated as follows:
In millions of shares 2011 2010
---------------------------------------------------------- ------ ------
Issued ordinary shares at 1 January 399.7 397.3
Effect of shares issued in the year 21.4 1.9
Effect of own shares held by Employee Share Ownership
Plan and Qualifying Employee Share Ownership Trust (0.2) (0.2)
Weighted average number of ordinary shares at 31 December 420.9 399.0
---------------------------------------------------------- ------ ------
6 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-recurring operating items
and non-operating items.
2011 2010
-------------- --------------
Profit Profit
before before
tax Tax tax Tax
GBPm GBPm GBPm GBPm
-------------------------------------------------- ------- ----- ------- -----
Profit before taxation
Profit before taxation as reported in the
income statement 142.8 4.8 167.9 15.1
Amortisation of intangible assets arising
from business combinations 31.0 9.9 27.6 8.7
Non-recurring operating items 42.8 11.9 9.4 1.6
Non-operating items (4.6) 1.2 (16.8) -
Underlying profit before taxation 212.0 27.8 188.1 25.4
----- -----
Underlying taxation (27.8) (25.4)
Underlying profit attributable to non-controlling
interests (3.4) (5.6)
-------------------------------------------------- ------- ----- -------
Underlying profit attributable to shareholders 180.8 157.1
-------------------------------------------------- ------- ----- -------
2011 2010
Pence per Pence per
share share
-------------------------------------------------------- ---------- ----------
Earnings per share
Basic earnings per share 32.0 36.9
Amortisation of intangible assets arising from business
combinations 5.0 4.7
Non-recurring operating items 7.3 2.0
Non-operating items (1.3) (4.2)
-------------------------------------------------------- ---------- ----------
Underlying basic earnings per share 43.0 39.4
-------------------------------------------------------- ---------- ----------
Underlying diluted earnings per share (post-tax basis) 42.7 39.2
-------------------------------------------------------- ---------- ----------
6 Earnings per share (continued)
(c) Diluted earnings per share
The calculation of diluted earnings per share is based on profit
as shown in note 6 (a) and (b) and a weighted average number of
ordinary shares outstanding calculated as follows:
In millions of shares 2011 2010
Weighted average number of ordinary shares 420.9 399.0
Effect of share options in issue 2.5 1.7
----------------------------------------------------- ----- -----
Weighted average number of ordinary shares (diluted)
at 31 December 423.4 400.7
----------------------------------------------------- ----- -----
7 Dividends
The following dividends were paid by the Company:
2011 2010
---- --------- ---- ---------
Pence per Pence per
GBPm share GBPm share
------------------------------ ---- --------- ---- ---------
Previous year final dividend 43.0 10.7 39.9 10.0
Current year interim dividend 21.6 5.3 19.2 4.8
------------------------------ ---- --------- ---- ---------
Total 64.6 16.0 59.1 14.8
------------------------------ ---- --------- ---- ---------
The following dividends were proposed by the Company in respect
of the financial year ending 31 December:
2011 2010
---- --------- ---- ---------
Pence per Pence per
GBPm share GBPm share
-------- ---- --------- ---- ---------
Interim 21.6 5.3 19.2 4.8
Final 49.9 11.6 42.8 10.7
-------- ---- --------- ---- ---------
Total 71.5 16.9 62.0 15.5
-------- ---- --------- ---- ---------
The final dividend for 2011 of 11.6 pence per share was approved
by the Board on 29 February 2012 and, subject to approval by
shareholders at the Annual General Meeting, will be paid on 15 June
2012 to shareholders on the register on 18 May 2012.
8 Pension commitments
The following expense was recognised in the income statement in
respect of pension commitments:
2011 2010
GBPm GBPm
--------------------------------------------------------- ------- -------
(Charge)/credit to operating profit
Current service cost relating to defined benefit schemes (6.6) (7.1)
Curtailments - 0.4
Defined contribution schemes (22.7) (22.8)
--------------------------------------------------------- ------- -------
Total (29.3) (29.5)
--------------------------------------------------------- ------- -------
Credit/(charge) to other financial income and expense
Expected return on retirement plan assets 116.0 111.9
Interest cost on retirement plan obligations (112.8) (115.5)
--------------------------------------------------------- ------- -------
Net financial income/(expense) 3.2 (3.6)
--------------------------------------------------------- ------- -------
The valuation of the Group's main defined benefit pension
schemes were reviewed by the schemes' actuary at 31 December
2011.
8 Pension commitments (continued)
A summary of defined benefit obligations and scheme assets is
given below:
2011 2010
GBPm GBPm
-------------------------------------------- --------------------- ---------
Present value of defined benefit obligation (2,203.7) (2,128.6)
Fair value of scheme assets 1,897.9 1,888.6
Minimum funding requirement - (9.4)
-------------------------------------------- --------------------- ---------
Net pension liability (305.8) (249.4)
Deferred tax on the above 76.5 67.3
-------------------------------------------- --------------------- ---------
Net pension liability after tax (229.3) (182.1)
-------------------------------------------- --------------------- ---------
The principal assumptions used by the independent qualified
actuaries in providing the International Accounting Standard (IAS)
19 position were:
2011 2010
--------------------------------------- ------ ------
Rate of increase in salaries 3.5% 4.4%
Rate of increase in pensions 3.0% 3.4%
Inflation rate - Retail Price Index 3.0% 3.4%
Inflation rate - Consumer Price Index 1.9% 2.8%
Discount rate 4.8% 5.4%
--------------------------------------- ------ ------
9 Cash and cash equivalents and net (borrowing)/cash
Cash and cash equivalents and net (borrowing)/cash comprise:
2011 2010
GBPm GBPm
------------------------------ ------------------- -------
Cash and cash equivalents 490.7 396.7
Bank overdrafts (3.0) (5.6)
------------------------------ ------------------- -------
Net cash and cash equivalents 487.7 391.1
Bank loans (399.7) (201.4)
Finance lease obligations (38.4) (53.8)
Other loans (100.3) (15.7)
------------------------------ ------------------- -------
Net (borrowing)/cash (50.7) 120.2
------------------------------ ------------------- -------
Reconciliation of net cash flow to movement in net (borrowing)/cash:
--------------------------------------------------------------------------
2011 2010
GBPm GBPm
------------------------------------------------------- -------- -------
Increase in net cash and cash equivalents 97.4 136.1
Net cash and cash equivalents in subsidiaries
acquired 1.5 -
Draw down of bank and other loans (223.0) (50.2)
Proceeds from finance leaseback - (3.8)
Payment of finance lease liabilities 15.8 17.3
------------------------------------------------------- -------- -------
Change in net (borrowing)/cash resulting from
cash flows (108.3) 99.4
Net borrowing in subsidiaries acquired (61.5) -
Finance lease additions (0.8) (0.4)
Currency translation differences (0.3) (3.7)
------------------------------------------------------- -------- -------
Change in net (borrowing)/cash (170.9) 95.3
Net cash at 1 January 120.2 24.9
------------------------------------------------------- -------- -------
Net (borrowing)/cash at 31 December (50.7) 120.2
------------------------------------------------------- -------- -------
10 Related party transactions
The Group has made sales to the Group's jointly controlled
entities, which are in the normal course of business and on
commercial terms, amounting to GBP776.1 million in the year ended
31 December 2011 (2010: GBP841.4 million). Amounts receivable from
jointly controlled entities amounted to GBP128.5 million (2010:
GBP105.5 million) and amounts payable to jointly controlled
entities amounted to GBP15.5 million (2010: GBP15.5 million).
11 Acquisitions and disposals
Acquisitions
On 14 February 2011, Carillion plc purchased 41,580,041 Eaga plc
shares in the market, representing 16.5% of the issued share
capital, at a cash cost of GBP49.9 million.
On 21 April 2011, the Group obtained control of the remaining
issued share capital of Eaga plc, which when combined with the cost
for acquiring shares on 14 February 2011, resulted in a total
consideration of GBP298.4 million. The total consideration was
satisfied by the issue of 30.6 million 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 384.36 pence and
GBP181.2 million in cash.
On acquisition, Eaga plc was rebranded Carillion Energy Services
(CES). CES is a leading provider of energy efficiency solutions.
The Group believes that the acquisition represents a strategic move
that will provide the Group with a strong position in a number of
new and attractive markets and enhance its ability to provide
existing and new customers with integrated support services
solutions. The Group believes it can achieve synergies in the
enlarged Group of GBP25 million per annum by the end of 2013 with
one-off costs of delivering those savings in the region of GBP40
million.
The acquisition had the following effect on the Group's assets
and liabilities:
Fair Fair
value value Accounting Acquired
Carrying adjustments adjustments policy intangible Recognised
amounts - goodwill - other adjustments assets values
Acquiree's net
assets/(liabilities)
at the acquisition date: GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- --------- ------------- ------------- ------------- ------------ ------------
Property, plant and equipment 12.5 - - - - 12.5
Intangible assets 61.1 (61.1) - - 29.4 29.4
Investments 1.0 - - - - 1.0
Deferred tax assets 20.9 - 4.8 1.7 - 27.4
Inventories 54.0 - - - - 54.0
Trade and other receivables 103.7 - - (6.6) - 97.1
Income tax 3.2 - - - - 3.2
Derivative assets 1.7 - - - - 1.7
Current asset investments 8.0 - - - - 8.0
Net cash and cash equivalents (1.5) - - - - (1.5)
Borrowing (60.0) - - - - (60.0)
Trade and other payables (156.1) - - - - (156.1)
Retirement benefit liabilities (0.8) - - - - (0.8)
Deferred tax liabilities - - - - (7.6) (7.6)
Provisions (20.0) - (19.0) - - (39.0)
---------------------------------- --------- ------------- ------------- ------------- ------------ ------------
Net identifiable assets and
liabilities 27.7 (61.1) (14.2) (4.9) 21.8 (30.7)
---------------------------------- --------- ------------- ------------- ------------- ------------
Goodwill recognised on
acquisition 329.1
---------------------------------- --------- ------------- ------------- ------------- ------------ ------------
Total consideration 298.4
---------------------------------- --------- ------------- ------------- ------------- ------------ ------------
Based on the assessment of the recognised values of assets and
liabilities, goodwill arising on the acquisition amounted to
GBP329.1 million. The goodwill recognised represents the benefits
of cost savings arising from the elimination of duplication and the
potential for significant cross-selling opportunities within the
enlarged Group, together with providing the enlarged Group with
access to energy efficiency markets that have substantial growth
prospects.
11 Acquisitions and disposals (continued)
The principal fair value adjustment relates to GBP61.1 million
of goodwill on the CES balance sheet at the date of acquisition
which is reclassified at the same value as goodwill on Carillion's
balance sheet under the requirements of International Financial
Reporting Standards. A contingent liability of GBP14.2 million has
been recognised for the future distributions to employees from the
Eaga Partnership Trusts (EPT) which crystallises a National
Insurance cost to the company. A full provision has been recognised
at the current employer National Insurance rate of 13.8% on the
total assets currently held by the EPT which are available for
distribution. The timing and quantum of future distributions are
determined by the EPT. The GBP4.9 million accounting policy
adjustment results from applying Carillion's policy in respect of
expensing rather than capitalising certain costs associated with
the securing of new contracts. The GBP21.8 million of acquired
intangible assets relates to the value ascribed to acquired
customer lists and contracts, net of attributable deferred tax.
Total consideration for the acquisition of GBP298.4 million
comprised of GBP117.7 million of equity shares issued and GBP181.2
million of cash. The value of equity shares issued is based on the
mid-market price of Carillion plc shares at the close of business
on 20 April 2011 of 384.36 pence and the total number of shares
issued of 30,613,192.
The cash out flow associated with this acquisition of GBP182.7
million comprises of total cash paid of GBP181.2 million and net
bank overdrafts acquired of GBP1.5 million.
In the period from acquisition to 31 December 2011, CES
contributed revenue of GBP379.8 million and a reported loss after
tax of GBP27.9 million (after rationalisation costs and intangible
amortisation) to consolidated profit for the year. If the
acquisition had occurred on 1 January 2011, total revenue would
have been GBP5,293.0 million and profit after tax would have been
GBP120.8 million for the year ended 31 December 2011.
Disposals and closure of businesses
During 2011, the Group disposed of equity investments in three
Public Private Partnership projects and a small jointly controlled
entity in the Netherlands. The disposals generated a cash
consideration of GBP31.4 million (net of expenses paid of GBP0.9
million) which is included in the cash flow statement within
disposal of jointly controlled entity and other investments and a
non-operating profit of GBP15.3 million (see note 3). A cash
outflow of GBP1.9 million is shown in the cash flow statement
within disposal and closure of businesses and comprises of the
payment of costs in relation to disposals made in 2009 of GBP1.6
million and GBP0.3 million in relation to non-core business
closures (see note 3).
12 Share capital
On 21 April 2011, 30,613,192 shares were issued in relation to
the acquisition of Carillion Energy Services (formerly Eaga plc).
The issued and fully paid share capital at 31 December 2011 was
430.3 million shares (2010: 399.7 million).
13 Guarantees and contingent liabilities
The Group has entered into guarantees in respect of letters of
credit issued by banks in relation to deferred equity payments,
interest payments in jointly controlled entities and performance
contracts in Public Private Partnership jointly controlled
entities. These guarantees in total amount to GBP192.8 million (31
December 2010: GBP144.7 million) with the increase since December
2010 reflecting increasing commitments during the construction
phase in respect of Public Private Partnership projects. There has
been no material change to the contingent liabilities of the Group
in the year ended 31 December 2011.
14 Company information
This preliminary announcement was approved by the Board of
Directors on 29 February 2012. The 2011 Annual Report will be
posted to all shareholders by 31 March 2012 and both this statement
and the 2011 Annual Report will be available on the internet at
www.carillionplc.com or on request from the Company Secretary,
Carillion plc, Birch Street, Wolverhampton, WV1 4HY.
Forward-looking statements
This report may contain certain statements about the future
outlook for Carillion plc. Although the Directors believe their
expectations are based on reasonable assumptions, any statements
about future outlook may be influenced by factors that could cause
actual outcomes and results to be materially different.
Governing law
This report of Carillion plc for the year ended 31 December 2011
has been drawn up and presented for the purposes of complying with
English law. Any liability arising out of or in connection with the
report for the year ended 31 December 2011 will be determined in
accordance with English law.
Directors' responsibilities
This preliminary announcement complies with the Disclosure and
Transparency Rules (DTR) of the United Kingdom's Financial Services
Authority. The preliminary announcement is the responsibility of,
and has been approved by, the Directors of Carillion plc.
The responsibility statement below has been prepared in
connection with the Company's full Annual Report for the year ended
31 December 2011. Certain parts thereof are not included in this
announcement.
The Directors of Carillion plc confirm that to the best of their
knowledge
-- the financial statements prepared in accordance with IFRS as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit of the Company
and the undertakings included in the consolidation taken as a
whole, and
-- the Operating and Financial Review includes a fair review of
the development and performance of the business and the position of
the Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties they face.
On behalf of the Board
Richard Adam
Group Finance Director
29 February 2012
This information is provided by RNS
The company news service from the London Stock Exchange
END
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