Annual Report & Accounts 2009

RNS Number : 1339K

Carillion PLC

13 April 2010

 

Carillion plc

(the "Company")

Annual Report and Accounts 2009 and

Notice of Annual General Meeting 2010

Following the release on 3 March 2010 of the Company's preliminary full year results announcement for the year ended 31 December 2009 (the "Preliminary Announcement"), the Company announced it had published its Annual Report and Accounts for 2009 (the "Annual Report and Accounts") on 23 March 2010.

The Company's 2010 AGM will be held at Austin Court, 80 Cambridge Street, Birmingham B1 2NP on Wednesday  5 May 2010 at 12 noon.

Copies of the Annual Report and Accounts, the Notice of the Annual General Meeting for 2010 and the Preliminary Announcement are available to view on the Company's website at www.carillionplc.com

In accordance with Disclosure and Transparency Rule 6.3.5(2)(b) additional information is set out in the appendices to this announcement. This additional information should be read in conjunction with the Preliminary Announcement.

The Preliminary Announcement included a set of condensed financial statements prepared in accordance with IAS 34 and a fair review of the development and performance of the business and the position of the Company and the Carillion Group.  

Tim George

Deputy Company Secretary

Carillion plc

13 April 2010

Appendices

Appendix A: Responsibility Statement

Each of the current directors of Carillion plc, whose names and functions are listed below, confirms to the best of his or her knowledge:

1.   the financial statements, prepared in accordance with the applicable set of accounting standards and contained in the Carillion plc Annual Report and Accounts 2009 give a true and fair view of the assets, liabilities, financial position and profit of Carillion plc and the Carillion Group taken as a whole; and

2.   the business review, contained in the Directors' Report and the operating and financial review section in the Carillion plc Annual Report and Accounts 2009, includes a fair review of the development and performance of the business and the position of Carillion plc and the Carillion Group taken as a whole, together with the principal risks and uncertainties they face.

The Board:

Philip Rogerson - Chairman

John McDonough - Group Chief Executive

Richard Adam - Group Finance Director

David Garman - Senior Independent Non-Executive Director

Richard Howson - Executive Director

Don Kenny - Executive Director

David Maloney - Non-Executive Director

Steve Mogford - Non-Executive Director

Vanda Murray OBE - Non-Executive Director

Appendix B: Principal risks and uncertainties

Operational risk management

Carillion has rigorous policies and processes in place to identify, mitigate and manage strategic risks and those specific to individual businesses and contracts, including economic, social, environmental and ethical risks.  These are summarised on page 16 of the Group Chief Executive's review.

The following description of the most significant areas of risk for the Carillion Group is extracted from pages 16 and 17 of the Annual Report and Accounts.

We apply our risk management processes to every aspect of our operations from choosing our market sectors and the contracts for which we bid, to the selection of our customers, partners and suppliers. We also apply them to every stage of a contract from its inception to completion, in order to deliver high quality services for our customers and the cash-backed profit we expect.  The principal risks facing the Group are summarised in the table below, together with the measures we have in place to mitigate and manage these risks.

Risk	Mitigation
·      Managing our pension schemes to ensure that scheme liabilities are within a range appropriate to our capital base.	·      The Group's main defined benefit schemes have been closed to future accruals and been replaced with defined contribution schemes.  Investment policies are reviewed regularly to ensure that employee and company contributions, together with scheme benefits, remain appropriate.
·      Continuing to win orders in markets that are more competitive.	·      Maintaining a firm focus on cost reduction and efficiency to remain competitive. We are committed to "living" our values in everything we do to ensure we listen to, and understand the needs of, our customers and offer solutions tailored to meet their needs.
·      The impact of the current global economic downturn on the financial stability of our customers, partners and suppliers.	·      We apply rigorous selectivity criteria to the choice of customers, projects, partners and suppliers, in relation to their financial stability, the security of project funding and contractual terms and conditions.
·      Managing major contracts to ensure they are delivered on time, to budget and to the required standards.	·      We apply rigorous selectivity criteria to ensure that we take on contracts only where we understand the risks involved and can manage them. We apply equally rigorous policies and processes to monitor and manage contract performance.
·      Maintaining financial discipline.	·      We apply strong cash management policies and processes to deliver cash-backed profit.

Financial risk

The following description of the areas of significant risk for the Carillion Group is extracted from page 28 and 29 of the Annual Report and Accounts.

Treasury policy and financial risk management

The Group has a centralised Treasury function whose primary role is to manage funding, liquidity and financial risks.  In addition, Treasury sources and administers contract bond and guarantee facilities for the Group.  Treasury is not a profit centre and does not enter into speculative transactions.  The Board sets policies within which Treasury operates that ensure the most effective financing of the Group's operations and limit exposure to financial risk.

Financial risk

The areas of significant financial risk facing the Group relate to funding and liquidity, counter party risk, foreign exchange and interest rates.

Funding and liquidity

In addition to Carillion plc's principal borrowing facilities described on page 28 of the Annual Report and Accounts, money market and short-term overdraft facilities are available to Carillion plc and certain subsidiaries.  Operating 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 2009, the Group had undrawn committed facilities amounting to £518.4 million (2008: £242.3 million). This excludes the Group's share of cash balances amounting to £144.5 million (2008: £157.7 million) within jointly controlled operations, which are outside of the Group's facilities. These cash balances are available to the Group to the extent that they are not needed to meet the working capital requirements of the jointly controlled operations.

Counterparty risk

The Carillion Group undertakes significant financial transactions only with counter parties that have strong credit ratings.  The limits and requirements in respect of such transactions are reviewed regularly by the Board of Carillion plc.

Foreign exchange

The Group hedges all significant currency transaction exposures using foreign exchange risk management techniques.  In order to protect the Group's balance sheet from the impact of exchange rate volatility, foreign currency net assets are hedged using matching currency loans equivalent to at least 60 per cent of the net asset value, where these assets exceed the equivalent of £10 million.  Profits arising within overseas subsidiaries are not hedged unless it is planned to make a distribution.  Such distributions are then treated as currency transactions and hedged accordingly.

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

	Average		Year End
£sterling	2009	2008	2009	2008
Middle East (US Dollar	1.56	1.84	1.61	1.44
Oman (Rial)	0.60	0.71	0.62	0.55
UAE (Dirham)	5.72	6.75	5.93	5.28
Canada (Dollar	1.78	1.95	1.69	1.77
Trinidad (Dollar)	9.81	11.52	10.23	9.04

Interest rates

The Group's borrowing facilities are at floating rates of interest linked to the London Inter Bank Offered Rate, UK base rate or prevailing local currency interest rates.  Short-term bank deposits and foreign currency hedging transactions are executed only with highly credit-rated authorised counterparties and credit exposures to counterparties are monitored regularly so that exposure to any one counterparty is either within Board approved limits or approved by the Board.  The Group has not entered into interest rate derivatives to fix or hedge interest rate risk and currently none are outstanding.  Certain longer-term assets have been financed using fixed rate leases.

Carillion has invested equity in a number of Joint Venture Special Purpose Companies (SPC) to deliver Public Private Partnership projects.  SPCs obtain funding for these projects in the form of long-term bank loans or corporate bonds without recourse to the Joint Venture partners and secured on the assets of the SPC.  A number of SPCs have entered into interest rate derivatives as a means of hedging interest rate risk.  These derivatives are interest rate swaps that effectively fix the rate of interest payable.

Credit risk

Credit risk arises on financial instruments such as trade receivables, short-term bank deposits and foreign currency hedging contracts.  Policies and procedures exist to ensure that customers have an appropriate credit history. Short-term bank deposits and foreign currency hedging transactions are executed only with highly credit-rated authorised counterparties based on ratings issued by the major rating agencies. Counterparty exposure positions are monitored regularly so that credit exposures to any one counterparty are approved at main board level or within predetermined limits. The maximum exposure to credit risk is represented by the carrying value of each financial asset.

Appendix C: Related parties

Identity of related parties
The Group has related party relationships with its key management personnel and jointly controlled entities.
Transactions with key management personnel
The Group's key management personnel are the Executive and Non-Executive Directors as identified in the Remuneration Report on page 48.
In addition to their salaries, the Group also provides non cash benefits to Executive Directors, and contributes to a defined contribution plan on their behalf.
Executive Directors also participate in the Group's share incentive programme.
Non-Executive Directors receive a fee for their services to the Carillion plc Board.
Full details of key management personnel compensation is given in the Remuneration Report on pages 47 to 53.
Other than disclosed in the Remuneration Report, there were no other transactions with key management personnel in either the current or preceding year.
The IFRS 2 cost charged to administrative expenses relating to share options of key management personnel amounted to £2.0 million (2008: £1.8 million).
Transactions with jointly controlled entities
The table below summarises the principal receivable and payable balances, together with sales to the Group's jointly controlled entities, which are in the normal course of business and on commercial terms:
			2009			2008
		Sales	Receivables	Payables	Sales	Receivables	Payables
		£m	£m	£m	£m	£m	£m
PPP jointly controlled entities
Aspire Defence Holdings Limited		191.4	1.9	-	185.7	0.3	-
Inspiredspaces Nottingham Limited		45.3	6.6	-	6.5	-	-
Eastbury Park (Holdings) Limited		45.1	2.1	-	76.8	-	-
Inspiredspaces STaG Limited		40.6	5.1	(4.5)	11.3	-	-
The Hospital Company (QAH Portsmouth) Holdings Limited		34.8	0.1	-	101.6	0.6	-
Holdfast Training Services Limited		32.0	0.5	-	-	-	-
Inspiredspaces Nottingham (Project Company 1) Limited		22.6	3.3	-	13.0	-	-
Inspiredspaces Tameside (Project Company 1) Limited		16.7	1.5	-	-	-	-
Inspiredspaces Durham Limited		14.1	1.1	-	-	-	-
Clinicenta (Hertfordshire) Ltd		13.9	-	-	-	-	-
Integrated Accommodation Services Limited		12.0	11.3	-	0.7	0.1	-
Inspiredspaces STaG (Holdings) Limited		11.1	-	(10.0)	12.6	-	-
Inspiredspaces Tameside Limited		7.9	0.2	-	-	-	-
Education 4 Ayrshire (Holdings) Limited		5.5	1.8	(5.2)	29.9	1.4	-
Sheppey Route (Holdings) Limited		1.8	2.0	-	1.5	0.9	(0.2)
Aspire Services Limited		-	-	-	-	-	(3.2)
Others		27.0	1.4	-	30.6	1.0	(0.7)
		521.8	38.9	(19.7)	470.2	4.3	(4.1)
Other jointly controlled entities
CarillionEnterprise Limited		45.3	-	(3.2)	67.3	6.6	(8.7)
Al Futtaim Carillion LLC		3.9	3.0	(0.7)	4.8	5.0	(0.2)
Carillion Richardson Partnership		-	14.3	(6.2)	-	-	(6.2)
CR Thanet Limited Partnership		0.1	0.1	-	7.3	1.7	(4.5)
Carillion Richardson		-	-	(10.8)	-	17.6	(10.2)
Others		1.2	0.3	(0.2)	1.3	1.8	(1.7)
		572.3	56.6	(40.8)	550.9	37.0	(35.6)

 

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