Half Yearly Report

RNS Number : 2423M

Carillion PLC

22 August 2013

Half-year results for the six months ended 30 June 2013

In line with expectations, strong new order intake

	Six months ended 30 June 2013	Six months ended 30 June 2012⁽¹⁾⁽²⁾	Change
Revenue	£1,964.6m	£2,156.8m	-9%
Underlying profit from operations⁽³⁾	£92.3m	£85.1m	+8%
Underlying operating margin⁽³⁾	5.1%	4.3%	+19%
Underlying profit before taxation⁽³⁾	£73.5m	£72.4m	+2%
Underlying earnings per share⁽³⁾	14.7p	14.6p	+1%
Profit before taxation	£64.2m	£56.7m	+13%
Basic earnings per share	13.0p	12.1p	+7%
Interim dividend per share	5.5p	5.4p	+2%

· Financial performance in line with expectations

- Underlying profit from operations⁽³⁾ increased eight per cent, including an increased contribution from the sale of equity investments in Public Private Partnership projects

- Underlying profit before tax⁽³⁾ and underlying earnings per share⁽³⁾ increased, despite a higher net financial expense

- As expected, the planned rescaling of UK construction led to lower first-half revenue

- Net borrowing at 30 June 2013 of £270.8 million (31 December 2012: £155.8 million) reflected an outflow of working capital associated with the planned rescaling of UK construction and other expected first-half cash flow movements

- Over £1.1 billion of committed borrowing facilities and private placement funding

· Strong work-winning performance - first-half orders and probable orders up 32%

- £2.9 billion of new orders and probable orders in the first half (2012: £2.2 billion), with total orders plus probable orders at 30 June 2013 worth £18.4 billion (31 December 2012: £18.1 billion). Recent wins include:

§ £275 million extension to telecoms support services contract

§ £335 million Royal Liverpool Hospital PPP contract

§ £400 million first phase development at Battersea Power Station

§ £400 million of support services contracts in the oil sector

- Pipeline of contract opportunities worth £37.5 billion (31 December 2012: £35.2 billion)

- 93% revenue visibility⁽⁴⁾ for 2013 (2012: 92%)

· Interim dividend increased by 2% to 5.5p (2012: 5.4p)

· Full-year and medium-term targets unchanged, despite markets remaining challenging

(1)	Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items.
(2)	Restated on adoption of the amendment to IAS 19 (see note 12 to the financial information).
(3)	The underlying results stated above are based on the definitions included in the key financial figures.
(4)	Based on expected revenue and secure and probable orders, which exclude variable works and re-bids.

Carillion Chairman, Philip Rogerson, commented:

"Carillion's first-half performance was in line with the Board's expectations. Despite market conditions remaining challenging, new order intake was strong, with £2.9 billion of new orders and probable orders in the first half of the year, which enabled the Group to increase the total value of its order book plus probable orders to £18.4 billion. This, together with a strong pipeline of contract opportunities, continues to support the Group's 2013 and medium term targets."

There will be a presentation for analysts and investors today at 09.00am. A telephone dial in facility 0844 800 3850 - Access Code: 8383657 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 032 9687 - Access Code: 26563937# and Toll Free US: 1 877 482 6144 - Access Code: 26563937#.

For further information contact:

Richard Adam, Group Finance Director

John Denning, Group Corporate Affairs Director

Finsbury - James Murgatroyd and Gordon Simpson

tel: +44 (0) 1902 422431

tel: +44 (0) 20 7251 3801

22 August 2013

Notes to Editors:

Carillion is a leading integrated support services company with a substantial portfolio of Public Private Partnership projects and extensive construction capabilities. The Group had annual revenue in 2012 of some £4.4 billion, employs around 40,000 people and operates across the UK, in the Middle East and Canada.

The Group has four business segments:

Support services - this includes facilities management, facilities services, energy services, utility services, road

maintenance, rail services and consultancy business in the UK, Canada and the Middle East.

Public Private Partnership (PPP) projects - this includes investing activities in PPP projects for Government buildings and infrastructure mainly in the Defence, Health, Education, Transport and Secure accommodation sectors.

Middle East construction services - this includes building and civil engineering activities in the Middle East.

Construction services(excluding the Middle East) - this includes building, civil engineering and developments activities in the UK and 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

		2013	2012 ⁽¹⁾⁽²⁾	Change
Income statement
Total revenue	£m	1,964.6	2,156.8	-9%
Underlying profit from operations⁽³⁾	£m	92.3	85.1	+8%
Total Group underlying operating margin⁽⁴⁾	Percentage	5.1	4.3	n/a
Support services underlying operating margin⁽⁴⁾	Percentage	4.0	4.0	n/a
Middle East construction services underlying operating margin⁽⁴⁾	Percentage	4.5	6.7	n/a
Construction services (excluding the Middle East) underlying operating margin⁽⁴⁾	Percentage	3.8	4.1	n/a
Underlying profit before taxation⁽⁵⁾	£m	73.5	72.4	+2%
Profit before taxation	£m	64.2	56.7	+13%
Underlying earnings per share⁽⁶⁾	Pence	14.7	14.6	+1%
Basic earnings per share	Pence	13.0	12.1	+7%
Dividends
Proposed interim dividend per share	Pence	5.5	5.4	+2%
Underlying proposed dividend cover⁽⁶⁾	Times	2.7	2.7	n/a
Basic proposed dividend cover	Times	2.4	2.2	n/a
Cash flow statement
Cash generated from operations⁽⁷⁾	£m	5.0	35.3	-86%
Underlying profit from operations cash conversion	Percentage	5.4	41.5	n/a
Deficit pension contributions	£m	(19.2)	(13.0)	-48%
Balance sheet
Net borrowing	£m	(270.8)	(115.2)	-135%
Committed borrowing facilities maturing in 2016 and 2017	£m	802.5	737.5	+9%
Private placement borrowings maturing between 2017 and 2024	£m	310.0	100.0	+210%
Net retirement benefit liability (net of taxation)	£m	(283.8)	(247.6)	-15%
Net assets	£m	1,000.4	969.1	+3%

(1)	Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items.
(2)	Restated on adoption of the amendment to IAS 19 (see note 12 to the financial information).
(3)	After Joint Ventures net financial expense of £4.8 million (2012: £5.7 million) and taxation charge of £2.3 million (2012: £1.4 million) and before intangible amortisation and non-recurring operating items (see note 3 to the financial information).
(4)	Before Joint Ventures net financial expense and taxation, intangible amortisation and non-recurring operating items (see note 3 to the financial information).
(5)	After Joint Ventures taxation charge of £2.3 million (2012: £1.4 million) and before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information).
(6)	Before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information).
(7)	Before pension deficit recovery payments and non-recurring operating items and after dividends received from Joint Ventures.

Summary results

Carillion's first-half performance was in line with the Board's expectations. The reduction in total first-half revenue to £1,964.6 million (2012: £2,156.8 million) was driven primarily by the planned rescaling of our UK construction activities, which we believe is now largely complete.

Underlying total operating margin⁽¹⁾ increased to 5.1 per cent (2012: 4.3 per cent⁽²⁾⁽³⁾), which reflected an increased contribution to profit from the sale of equity in Public Private Partnership projects, our selective approach to the contracts for which we bid and an ongoing focus on cost management. Consequently, underlying profit from operations⁽⁴⁾ increased by eight per cent to £92.3 million (2012: £85.1 million⁽²⁾⁽³⁾).

After a £6.1 million increase in the Group's net financial expense to £18.8 million (2012: £12.7 million⁽³⁾), underlying profit before taxation⁽⁵⁾ increased by two per cent to £73.5 million (2012: £72.4 million⁽²⁾⁽³⁾). Underlying earnings per share⁽⁶⁾ increased by one per cent to 14.7 pence (2012: 14.6 pence⁽²⁾⁽³⁾).

Net borrowing increased to £270.8 million at 30 June 2013 (31 December 2012: £155.8 million), which reflected, in part, the outflow of working capital resulting from the planned rescaling of UK construction, together with other expected movements in first-half cash flow. We expect net borrowing at the year end to be lower than at the half year, as the Group moves back to generating positive net cash flow following completion of the rescaling of UK construction.

Our first-half work-winning performance was strong, with £2.9 billion of new orders and probable orders, which increased the total value of orders and probable orders to £18.4 billion (31 December 2012: £18.1 billion), despite the removal of some £0.6 billion from the order book due to the sale of equity investments in Public Private Partnership projects. The strength of our order book plus probable orders continues to provide good revenue visibility⁽⁷⁾, which is currently around 93 per cent of anticipated revenue in 2013 (2012: 92 per cent). At 30 June 2013, our pipeline of contract opportunities had increased to some £37.5 billion (31 December 2012: £35.2 billion).

The Board has increased the interim dividend by two per cent to 5.5 pence per share (2012: 5.4 pence), which is covered 2.7 times by underlying earnings per share (2012: 2.7 times ⁽²⁾⁽³⁾).

(1)	Before Joint Ventures net financial expense and taxation, intangible amortisation and non-recurring operating items.
(2)	Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items.
(3)	Restated on adoption of the amendment to IAS 19 (see note 12 to the financial information).
(4)	After Joint Ventures net financial expense of £4.8 million (2012: £5.7 million) and taxation charge of £2.3 million (2012: £1.4 million) and before intangible amortisation and non-recurring operating items.
(5)	After Joint Ventures taxation charge of £2.3 million (2012: £1.4 million) and before intangible amortisation, non-recurring operating items and non-operating items.
(6)	Before intangible amortisation, non-recurring operating items and non-operating items.
(7)	Based on expected revenue and secure and probable orders, which exclude variable work and re-bids.

Business performance

We continue to benefit from a resilient business mix, supported by our selective approach to the contracts for which we bid and an ongoing focus on rigorous cost management. The reduction in total revenue to £1,964.6 million (2012: £2,156.8 million) was due primarily to the planned rescaling of our UK construction activities, which we began in 2010 and have achieved through applying strict contract selectivity.

Underlying profit from operations⁽¹⁾ increased by eight per cent to £92.3 million (2012: £85.1 million⁽²⁾⁽³⁾), with the Group's underlying operating margin⁽⁴⁾ increasing to 5.1 per cent (2012: 4.3 per cent⁽²⁾⁽³⁾). First-half profit benefited from an increased contribution from the sale of equity investments in Public Private Partnership projects, which more than offset the expected reduction in profit due to the rescaling of our UK construction activities, revenue from which has broadly halved over the past two and a half years, and slightly lower profit contributions from support services and Middle East construction services. However, as previously announced, we continue to expect revenue and profit from support services and Middle East construction services to be second-half weighted.

After a net financial expense of £18.8 million (2012: £12.7 million⁽³⁾), underlying profit before taxation⁽⁵⁾ increased by two per cent to £73.5 million (2012: £72.4 million⁽²⁾⁽³⁾). The increase in the Group's net financial expense included higher charges relating to retirement benefit liabilities, the impact of the increase in net borrowing and the addition of a further £210 million of private placement funding at fixed interest rates in the second half of 2012, in line with our strategy of diversifying the Group's sources of borrowing. The total funding available to the Group is now over £1.1 billion.

After underlying Group taxation of £7.1 million (2012: £7.3 million⁽³⁾) and profit attributable to non-controlling interests of £3.3 million (2012: £2.2 million), underlying profit attributable to shareholders amounted to £63.1 million (2012: £62.9 million⁽²⁾⁽³⁾). Underlying earnings per share⁽⁶⁾ increased by one per cent to 14.7 pence (2012: 14.6 pence⁽²⁾⁽³⁾).

The underlying Group taxation charge of £7.1 million, when combined with taxation in respect of Joint Ventures of £2.3 million (2012: £1.4 million), represented an underlying effective tax rate⁽⁶⁾ of 12 per cent (2012: 12 per cent⁽²⁾⁽³⁾).

Intangible amortisation amounted to £9.3 million (2012: £15.7 million). After intangible amortisation and non-operating items, reported profit before taxation increased by 13 per cent to £64.2 million (2012: £56.7 million⁽³⁾). The Group taxation charge was £5.0 million (2012: £2.5 million⁽³⁾), leaving reported profit after taxation up nine per cent to £59.2 million (2012: £54.2 million⁽³⁾). Non-controlling interests amounted to £3.3 million (2012: £2.2 million), which left profit attributable to Carillion shareholders up eight per cent to £55.9 million (2012: £52.0 million⁽³⁾). Basic earnings per share increased by seven per cent to 13.0 pence per share (2012: 12.1 pence per share ⁽³⁾).

(1)	After Joint Ventures net financial expense of £4.8 million (2012: £5.7 million) and taxation charge of £2.3 million (2012: £1.4 million) and before intangible amortisation and non-recurring operating items.
(2)	Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items.
(3)	Restated on adoption of the amendment to IAS 19 (see note 12 to the financial information).
(4)	Before Joint Ventures net financial expense and taxation, intangible amortisation and non-recurring operating items.
(5)	After Joint Ventures taxation charge of £2.3 million (2012: £1.4 million) and before intangible amortisation, non-recurring operating items and non-operating items.
(6)	Before intangible amortisation, non-recurring operating items and non-operating items.

Pensions

The Group's pensions charge against operating profit in the first half of 2013 amounted to £15.3 million (2012: £16.1 million⁽¹⁾). The increase in the interest charge relating to pensions to £7.6 million (2012: £6.9 million⁽¹⁾), reflected the increase in the Group's net pre-tax retirement benefit liability from £305.8 million at 31 December 2011 to £351.0 million at 31 December 2012, which was primarily due to a reduction in the AA Bond rate during this period. At 30 June 2013, the Group's net post-tax retirement benefit liability was £283.8 million (31 December 2012: £269.9 million).

Cash flow

Cash flow from operations, before changes in working capital, increased to £94.4 million (2012: £89.6 million⁽¹⁾⁽²⁾). The working capital outflow of £89.4 million, comprised a number of expected outflows, including that resulting from the rescaling of UK construction, offset by cash receipts from the sale of equity in Public Private Partnership projects.

Dividends received from Joint Ventures were £10.0 million (2012: £5.8 million). We did not take a dividend from our Middle East Joint Venture business, Al Futtaim Carillion, in the first half of 2013, in line with our prudent approach to cash management. However, we continue to see signs of improvement in the UAE market and intend to keep the dividend position under review in the second half of 2013.

Committed bank facilities

In total, the Group has available funding of over £1.1 billion. This includes committed bank facilities, comprising a £737.5 million syndicated five-year facility and a £15 million three-year facility, both of which mature in March 2016, plus a £50 million four-year facility that matures in April 2017, together with private placement borrowings of £310 million maturing between 2017 and 2024.

(1)	Restated on adoption of the amendment to IAS 19 (see note 12 to the financial information).
(2)	Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items.

Financial reporting segments and analysis

Operating profit by financial reporting segment

			Change from
	2013	2012⁽¹⁾⁽²⁾	2012
	£m	£m	%
Support services	44.1	47.8	-8
Public Private Partnership projects	36.6	14.0	+161
Middle East construction services	9.9	13.6	-27
Construction services (excluding the Middle East)	19.0	25.9	-27
	109.6	101.3	+8
Group eliminations and unallocated items	(10.2)	(9.1)	-12
Profit from operations before Joint Ventures
net financial expense and taxation	99.4	92.2	+8
Share of Joint Ventures net financial expense	(4.8)	(5.7)	+16
Share of Joint Ventures taxation	(2.3)	(1.4)	-64
Underlying profit from operations⁽³⁾	92.3	85.1	+8
Intangible amortisation	(9.3)	(15.7)	+41

Reported profit from operations	83.0	69.4	+20

Support services

2013

£m

2012⁽²⁾

£m

Change from

2012

Revenue

- Group

- Share of Joint Ventures

977.6

136.4

1,057.9

122.4

1,114.0

1,180.3

-6

Underlying operating profit⁽⁴⁾

- Group

- Share of Joint Ventures

30.4

13.7

36.6

11.2

44.1

47.8

-8

In this segment we report the results of our facilities management, facilities services, energy services, rail services, road maintenance services, utility services and consultancy businesses in the UK, Canada and the Middle East.

Although revenue in support services reduced by six per cent, new contract wins have enabled us to make significant progress towards replacing the £400 million of annual revenue lost as a result of two contracts being taken in-house at the end of 2012, for strategic reasons specific to the customers in question, and because a number of energy services contracts have ended due to expected changes in Government policy and legislation. The underlying operating margin was unchanged at 4.0 per cent (2012: 4.0 per cent⁽²⁾), with underlying operating profit lower, reflecting the reduction in revenue. We continue to expect revenue and profit in this segment to be second-half weighted.

(1)	Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items.
(2)	Restated on adoption of the amendment to IAS 19 (see note 12 to the financial information).
(3)	After Joint Ventures net financial expense of £4.8 million (2012: £5.7 million) and taxation charge of £2.3 million (2012: £1.4 million) and before intangible amortisation and non-recurring operating items.
(4)	Before intangible amortisation and non-recurring operating items.

In the first half of 2013, we won orders and probable orders in support services worth some £1.4 billion, which, together with our strong pipeline of contract opportunities, supports our objectives for growth in 2013 and beyond. Notable first-half successes included an extension to the scope of a contract in the telecommunications sector worth some £275 million over four years, contracts in the oil services sector worth up to £400 million over a period of up to eight years, rail services contracts worth £247 million over four years and an £80 million, 13-year highways maintenance contract in Ontario, Canada. During the first half, we also secured energy services contracts for Green Deal and the Energy Company Obligation worth around £150 million. As we reported in our trading update on 3 July 2013, the whole of the Green Deal market has been affected by a delayed start. This is due to a number of issues, including the application of Government legislation, and slower than expected consumer take-up, and consequently early progress continues to be slow.

More positively our selection as the preferred bidder for the Royal Liverpool Hospital Public Private Partnership project includes £80 million of support services work and we have been appointed by National Grid as a framework contractor to deliver its £1.5 billion, five-year substation programme. This follows our appointment as a framework contractor to deliver National Grid's £3.2 billion, four-year overhead line programme. In the Middle East, we continue to see growth in support services with new first-half orders and probable orders worth some £30 million, in addition to our success in the oil services sector.

Since the half year, we have announced that Stockport Metropolitan Borough Council has selected Carillion and its partner CBRE as the preferred bidder to form a Joint Venture company with the Council that will be responsible for the strategic management of all the Council's property services. The contract is initially expected to be worth over £100 million, with the potential for this to grow significantly through increasing the scale and scope of service delivery.

The value of our support services order book plus probable orders at 30 June 2013 remained strong at £13.2 billion (31 December 2012: £13.1 billion). Revenue visibility⁽¹⁾ in support services currently stands at 93 per cent for 2013. The value of our pipeline of contract opportunities in support services also remained strong at some £12.0 billion at 30 June 2013 (31 December 2012: £11.5 billion), which, together with our order book, support our targets in 2013 and over the medium-term.

(1)	Based on expected revenue and secure and probable orders, which excludes variable work and re-bids.

Public Private Partnership (PPP) projects

	2013 £m	2012⁽¹⁾ £m	Change from 2012 %
Revenue - Group - Share of Joint Ventures	0.8 124.2	0.7 142.6
Revenue - Group - Share of Joint Ventures	125.0	143.3	-13
Underlying operating profit⁽²⁾ - Group - Share of Joint Ventures	31.0 5.6	7.5 6.5
	36.6	14.0	+161

(1)	Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items.
(2)	Before intangible amortisation and non-recurring operating items.

In this segment we report the equity returns on our investments in the Public Private Partnership (PPP) projects we have in the UK and in Canada.

We use our private finance, construction and support services capabilities to create fully integrated solutions, which help to differentiate our offering and enable us to win PPP projects in which we make equity investments and for which we secure long-term support services contracts and good quality construction contracts. The support services and construction services we provide as part of delivering PPP projects are reported in our support services and construction services (excluding the Middle East) segments, respectively. Once a project has passed from construction into the operational phase, we have the option of selling our equity investment and reinvesting the proceeds in new projects.

Our portfolio of financially closed projects continues to perform well. Revenue reduced as a result of selling investments in the second half of 2012 and in the first half of 2013. The investments we sold in the first half of 2013 generated a pre-tax profit of £31.3 million and cash proceeds of approximately £113 million, which represented an average discount rate of seven per cent. In 2012, the profit attributable to these investments was some £4.8 million.

At 30 June 2013, we had a portfolio of 20 financially closed projects in which we had invested approximately £60 million of equity and into which we are committed to invest a further £84 million. The Directors' valuation of existing investments in this portfolio of financially closed projects was some £82 million at 30 June 2013, based on discounting the cash flows from our equity investments at nine per cent.

The value of our order book plus probable orders in this segment at 30 June 2013 was approximately £1.8 billion (31 December 2012: £2.2 billion), with the reduction due to equity sales in the first half of 2013.

The outlook in this segment remains positive, as we have a number of significant project opportunities that would significantly increase the value of our investment portfolio. During the first half of 2013, we were selected as the preferred bidder for the £335 million Royal Liverpool Hospital project in which we expect to invest £25 million of equity. In addition, we are currently shortlisted for five projects - four hospitals in Canada and a hospital in Turkey - in which we could invest a combined total of up to £55 million of equity. Furthermore, we continue to have our largest ever pipeline of project opportunities in Canada where we expect to become shortlisted for further hospital projects during 2013. In the UK, we believe that more projects will come to market over the medium term, notably in the health, education and transport sectors. We also continue to explore opportunities to use our private finance expertise in new international markets.

Middle East construction services

	2013 £m	2012 £m	Change from 2012 %
Revenue - Group - Share of Joint Ventures	100.1 121.7	90.8 110.8
Revenue - Group - Share of Joint Ventures	221.8	201.6	+10
Underlying operating profit⁽¹⁾ - Group - Share of Joint Ventures	6.3 3.6	4.0 9.6
	9.9	13.6	-27

(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.

First-half revenue increased, as growth from new contract awards is beginning to come through. Given the strength of our order book and with signs that the pace of contract awards in the Middle East is picking up, we remain confident of delivering further growth in the second half and continue to expect healthy double-digit percentage growth in the full year. The first-half operating margin reduced to 4.5 per cent (2012: 6.7 per cent). As expected, this reduction was due to more competitive market conditions, a number of projects being at an early phase in their delivery and costs associated with the growth of our footprint in the region. We expect operating profit to be second-half weighted and although the full-year margin is expected to be lower than that in 2012, we remain confident of achieving our medium-term target margin of six per cent in this segment.

In the first half of 2013, we won orders and probable orders worth some £0.6 billion. Notable successes for Al Futtaim Carillion included a £120 million contract for a luxury hotel in Abu Dhabi, and in Oman, Carillion Alawi won a £130 million contract for the Oman Convention and Exhibition Centre. Carillion Alawi has also been selected as the preferred bidder for a £90 million contract in the leisure sector in Oman, for which we expect to sign the contract in the second half of the year. During the first half of 2013, we also agreed a letter of intent to deliver our first project in Saudi Arabia, worth some £120 million.

At 30 June 2013, Carillion's share of the order book plus probable orders of our Middle East businesses increased to approximately £1.1 billion (31 December 2012: £0.8 billion) and revenue visibility⁽²⁾ for 2013 is currently 91 per cent. Our pipeline of contract opportunities in the Middle East also increased and stood at £12.3 billion at 30 June 2013 (31 December 2012: £11.4 billion), as we continue to focus on countries with major long-term investment programmes, which supports our objective of doubling our share of revenue from our Middle East businesses to around £1 billion at a margin of six per cent, by 2015.

(2)	Based on expected revenue and secure and probable orders, which exclude variable work and re-bids.

Construction services (excluding the Middle East)

	2013 £m	2012 £m	Change from 2012 %
Revenue - Group - Share of Joint Ventures	499.0 4.8	629.5 2.1
Revenue - Group - Share of Joint Ventures	503.8	631.6	-20
Underlying operating profit⁽¹⁾ - Group - Share of Joint Ventures	18.9 0.1	25.9 -
	19.0	25.9	-27

(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.

The reduction in first-half revenue was primarily due to the planned rescaling of our UK construction activities, which we have achieved through tightening contract selectivity to focus our activities increasingly around the delivery of integrated solutions for PPP projects and support services customers, and projects for other customers with whom we have long-term partnerships. We believe that rescaling is now largely complete and expect second-half revenue in this segment to be higher than that in the first half.

The operating margin reduced to 3.8 per cent (2012: 4.1 per cent). This is in line with our expectations, because, as we have previously explained, some of the factors that have helped to increase margins during the process of rescaling, namely lower bid costs, the action we took to reduce overheads and favourable out-turns on contracts being completed, are temporary. In 2013, we will continue to benefit from these factors to a lesser degree, as well as from maintaining a highly selective approach to the contracts for which we bid, and our full-year margin target of around four per cent remains unchanged. Furthermore, by maintaining our selective approach, we continue to believe that our normalised, medium-term margin in this segment will remain ahead of the industry average.

In the first half of 2013, we won new orders and probable orders worth some £0.7 billion. Notable first-half successes included a £400 million contract for Battersea Power Station Development Company, a £73 million contract for Argent to deliver a further phase of its King's Cross redevelopment and contracts for Ask worth some £50 million. In addition, our selection as the preferred bidder for the Royal Liverpool Hospital PPP project includes £335 million of construction work. At 30 June 2013, the value of orders and probable orders in this segment was approximately £2.3 billion (31 December 2012: £2.0 billion). Revenue visibility⁽²⁾ for 2013 is currently 90 per cent.

(2)	Based on expected revenue and secure and probable orders, which exclude variable work and re-bids.

At 30 June 2013, we had a pipeline of contract opportunities worth some £9.9 billion (31 December 2012: £10.7 billion) and we continue to target second-half revenue growth in 2013. The medium-term outlook for this business segment remains unchanged. In the UK, we expect some opportunities for growth over the medium term, consistent with our highly selective approach to the contracts for which we bid. In Canada, we continue to have a very strong pipeline of opportunities, a substantial proportion of which are PPP projects, and which we expect to make a strong contribution to achieving our target of increasing total revenue in Canada to around £1 billion by 2015.

Operational and financial 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. The Group's risk management policies and processes, together with the Group's principal operational and financial risks and the measures being taken to mitigate and manage these risks, are described in our 2012 Annual Report and Accounts, published in February 2013 and these have not fundamentally changed. The principal operational risks summarised on page 23 of that report include continuing to win work in competitive markets, managing our pension schemes, managing major contracts successfully, selecting high-quality joint venture and supply chain partners, attracting, developing and retaining excellent people, and maintaining high standards of performance in respect of Health and Safety and other regulatory requirements. The principal financial risks summarised on pages 33 and 34 of our 2012 Annual Report and Accounts, include continuing to manage our overseas operations (country risk) and treasury risk (including funding, liquidity, currency and counterparty).

Outlook and prospects

Given the strength of our order book and pipeline of contract opportunities, our full-year and medium-term targets remain unchanged, despite markets remaining challenging.

Unaudited condensed consolidated income statement for the six months ended 30 June
	Note	2013 £m	2012⁽¹⁾⁽²⁾ £m	Year ended 31 December 2012⁽²⁾ £m
Total revenue		1,964.6	2,156.8	4,402.8
Less: Share of jointly controlled entities' revenue		(387.1)	(377.9)	(736.6)
Group revenue	2	1,577.5	1,778.9	3,666.2
Cost of sales		(1,430.3)	(1,615.7)	(3,279.4)
Gross profit		147.2	163.2	386.8
Administrative expenses		(111.4)	(120.7)	(240.4)
Profit on disposal of Public Private Partnership equity investments		31.3	6.7	13.2
Group operating profit		67.1	49.2	159.6
Analysed between:
Group operating profit before intangible amortisation and non-recurring operating items		76.4	64.9	193.6
Intangible amortisation⁽³⁾		(9.3)	(15.7)	(31.4)
Non-recurring operating items⁽⁴⁾	3	-	-	(2.6)

Share of results of jointly controlled entities	2	15.9	20.2	34.3
Analysed between:
Operating profit		23.0	27.3	52.0
Net financial expense		(4.8)	(5.7)	(16.0)
Taxation		(2.3)	(1.4)	(1.7)

Profit from operations		83.0	69.4	193.9
Analysed between:
Profit from operations before intangible amortisation and non-recurring operating items		92.3	85.1	227.9
Intangible amortisation⁽³⁾		(9.3)	(15.7)	(31.4)
Non-recurring operating items⁽⁴⁾	3	-	-	(2.6)

Non-operating items	3	-	-	(1.2)
Net financial expense	4	(18.8)	(12.7)	(27.9)
Analysed between:
Financial income		4.0	7.5	15.3
Financial expense		(22.8)	(20.2)	(43.2)

Profit before taxation		64.2	56.7	164.8
Analysed between:
Profit before taxation, intangible amortisation, non-recurring operating items and non-operating items		73.5	72.4	200.0
Intangible amortisation⁽³⁾		(9.3)	(15.7)	(31.4)
Non-recurring operating items⁽⁴⁾	3	-	-	(2.6)
Non-operating items	3	-	-	(1.2)

Taxation	5	(5.0)	(2.5)	(9.9)
Profit for the period		59.2	54.2	154.9

Profit attributable to:
Equity holders of the parent		55.9	52.0	148.8
Non-controlling interests		3.3	2.2	6.1
Profit for the period		59.2	54.2	154.9

Earnings per share	6
Basic		13.0p	12.1p	34.6p
Diluted		13.0p	12.0p	34.4p

(1) Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items (see note 13).

(2) Restated on adoption of the amendment to IAS 19 (see note 12).

(3) Arising from business combinations.

(4) This includes Eaga Partnership Trust (EPT) related charges (see note 3).

Unaudited condensed consolidated statement of comprehensive income for the six months ended 30 June
		2013		2012⁽¹⁾		Year ended 31 December 2012¹⁾
	£m	£m	£m	£m	£m	£m
Profit for the period		59.2		54.2		154.9

Items that will not be reclassified subsequently to profit or loss:
Actuarial losses on defined benefit pension schemes	(28.1)		(24.1)		(58.7)
Taxation relating to items that will not be reclassified	6.5		2.8		8.4
	(21.6)		(21.3)		(50.3)

Items that may be reclassified subsequently to profit or loss:
(Loss)/gain on hedge of net investment in foreign operations	(2.5)		1.1		1.5
Currency translation differences on foreign operations	10.3		3.3		(8.8)
Movement in fair value of cash flow hedging derivatives	11.3		-		(7.1)
Reclassification of effective portion of cash flow hedging derivatives to profit	(12.4)		-		2.1
Increase in fair value of available for sale assets	-		1.2		4.9
Reclassification of fair value movements on disposal of available for sale assets	(15.6)		-		-
Taxation relating to items that may be reclassified	0.6		(0.3)		(0.4)
Share of recycled cash flow hedges within jointly controlled entities (net of taxation)	13.6		3.9		10.4
Share of change in fair value of effective cash flow hedges within jointly controlled entities (net of taxation)	0.6		(4.6)		(3.2)
	5.9		4.6		(0.6)
Other comprehensive expense for the period net of tax		(15.7)		(16.7)		(50.9)
Total comprehensive income for the period		43.5		37.5		104.0

Attributable to:
Equity holders of the parent		40.2		35.3		97.9
Non-controlling interests		3.3		2.2		6.1
		43.5		37.5		104.0

(1) Restated on adoption of the amendment to IAS 19 (see note 12).

Unaudited condensed consolidated statement of changes in equity

for the six months ended 30 June 2013

	Share capital £m	Share premium £m	Translation reserve £m	Hedging reserve £m	Fair value reserve £m	Merger reserve £m	Retained earnings £m	Equity shareholders’ funds £m	Non-controlling interests £m	Total equity £m

At 1 January 2013	215.1	21.2	(23.8)	(21.5)	15.8	433.2	358.9	998.9	10.6	1,009.5
Comprehensive income
Profit for the period	-	-	-	-	-	-	55.9	55.9	3.3	59.2
Other comprehensive income
Net loss on hedge of net investment in foreign operations	-	-	(2.5)	-	-	-	-	(2.5)	-	(2.5)
Currency translation differences on foreign operations	-	-	10.3	-	-	-	-	10.3	-	10.3
Movement in fair value of cash flow hedging derivatives	-	-	-	11.3	-	-	-	11.3	-	11.3
Reclassification of effective portion of cash flow hedging derivatives to profit	-	-	-	(12.4)	-	-	-	(12.4)	-	(12.4)
Reclassification of fair value movements on disposal of available for sale assets	-	-	-	-	(15.6)	-	-	(15.6)	-	(15.6)
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	-	(28.1)	(28.1)	-	(28.1)
Taxation	-	-	0.6	-	-	-	6.5	7.1	-	7.1
Share of recycled cash flow hedges within jointly controlled entities (net of taxation)	-	-	-	13.6	-	-	-	13.6	-	13.6
Share of change in fair value of effective cash flow hedges within jointly controlled entities (net of taxation)	-	-	-	0.6	-	-	-	0.6	-	0.6
Transfer between reserves	-	-	-	-	-	(9.3)	9.3	-	-	-
Total comprehensive income/(expense)	-	-	8.4	13.1	(15.6)	(9.3)	43.6	40.2	3.3	43.5
Transactions with owners
Contributions by and distributions to owners
Acquisition of own shares	-	-	-	-	-	-	(1.2)	(1.2)	-	(1.2)
Equity settled transactions (net of deferred taxation)	-	-	-	-	-	-	0.1	0.1	-	0.1
Dividends paid	-	-	-	-	-	-	(51.0)	(51.0)	(0.5)	(51.5)
Total transactions with owners	-	-	-	-	-	-	(52.1)	(52.1)	(0.5)	(52.6)

At 30 June 2013	215.1	21.2	(15.4)	(8.4)	0.2	423.9	350.4	987.0	13.4	1,000.4

Unaudited condensed consolidated statement of changes in equity

for the six months ended 30 June 2012

	Share capital £m	Share premium £m	Translation reserve £m	Hedging reserve £m	Fair value reserve £m	Merger reserve £m	Retained earnings £m	Equity shareholders' funds £m	Non-controlling interests £m	Total equity £m

At 1 January 2012	215.1	21.2	(16.1)	(23.7)	10.9	464.6	300.9	972.9	9.6	982.5
Comprehensive income
Profit for the period⁽¹⁾	-	-	-	-	-	-	52.0	52.0	2.2	54.2
Other comprehensive income
Net gain on hedge of net investment in foreign operations	-	-	1.1	-	-	-	-	1.1	-	1.1
Currency translation differences on foreign operations	-	-	3.3	-	-	-	-	3.3	-	3.3
Increase in fair value of available for sale assets	-	-	-	-	1.2	-	-	1.2	-	1.2
Actuarial losses on defined benefit pension schemes⁽¹⁾	-	-	-	-	-	-	(24.1)	(24.1)	-	(24.1)
Taxation⁽¹⁾	-	-	(0.3)	-	-	-	2.8	2.5	-	2.5
Share of recycled cash flow hedges within jointly controlled entities (net of taxation)	-	-	-	3.9	-	-	-	3.9	-	3.9
Share of change in fair value of effective cash flow hedges within jointly controlled entities (net of taxation)	-	-	-	(4.6)	-	-	-	(4.6)	-	(4.6)
Transfer between reserves	-	-	-	-	-	(15.7)	15.7	-	-	-
Total comprehensive income/(expense)	-	-	4.1	(0.7)	1.2	(15.7)	46.4	35.3	2.2	37.5
Transactions with owners
Contributions by and distributions to owners
Equity settled transactions (net of deferred taxation)	-	-	-	-	-	-	(0.5)	(0.5)	-	(0.5)
Dividends paid	-	-	-	-	-	-	(48.5)	(48.5)	(1.9)	(50.4)
Total transactions with owners	-	-	-	-	-	-	(49.0)	(49.0)	(1.9)	(50.9)

At 30 June 2012	215.1	21.2	(12.0)	(24.4)	12.1	448.9	298.3	959.2	9.9	969.1

(1) Restated on adoption of the amendment to IAS 19 (see note 12).

Unaudited condensed consolidated statement of changes in equity

for the year ended 31 December 2012

	Share capital £m	Share premium £m	Translation reserve £m	Hedging reserve £m	Fair value reserve £m	Merger reserve £m	Retained earnings £m	Equity shareholders' funds £m	Non-controlling interests £m	Total equity £m

At 1 January 2012	215.1	21.2	(16.1)	(23.7)	10.9	464.6	300.9	972.9	9.6	982.5
Comprehensive income
Profit for the year⁽¹⁾	-	-	-	-	-	-	148.8	148.8	6.1	154.9
Other comprehensive income
Net gain on hedge of net investment in foreign operations	-	-	1.5	-	-	-	-	1.5	-	1.5
Currency translation differences on foreign operations	-	-	(8.8)	-	-	-	-	(8.8)	-	(8.8)
Movement in fair value of cash flow hedging derivatives	-	-	-	(7.1)	-	-	-	(7.1)	-	(7.1)
Reclassification of effective portion of cash flow hedging derivatives to profit	-	-	-	2.1	-	-	-	2.1	-	2.1
Increase in fair value of available for sale assets	-	-	-	-	4.9	-	-	4.9	-	4.9
Actuarial losses on defined benefit pension schemes⁽¹⁾	-	-	-	-	-	-	(58.7)	(58.7)	-	(58.7)
Taxation⁽¹⁾	-	-	(0.4)	-	-	-	8.4	8.0	-	8.0
Share of recycled cash flow hedges within jointly controlled entities (net of taxation)	-	-	-	10.4	-	-	-	10.4	-	10.4
Share of change in fair value of effective cash flow hedges within jointly controlled entities (net of taxation)	-	-	-	(3.2)	-	-	-	(3.2)	-	(3.2)
Transfer between reserves	-	-	-	-	-	(31.4)	31.4	-	-	-
Total comprehensive income/(expense)	-	-	(7.7)	2.2	4.9	(31.4)	129.9	97.9	6.1	104.0
Transactions with owners
Contributions by and distributions to owners
Acquisition of own shares	-	-	-	-	-	-	(3.0)	(3.0)	-	(3.0)
Equity settled transactions (net of deferred taxation)	-	-	-	-	-	-	2.3	2.3	-	2.3
Cash settlement of vested equity settled transactions	-	-	-	-	-	-	(0.8)	(0.8)	-	(0.8)
Dividends paid	-	-	-	-	-	-	(70.4)	(70.4)	(8.2)	(78.6)
Non-controlling interests acquired	-	-	-	-	-	-	-	-	3.1	3.1
Total transactions with owners	-	-	-	-	-	-	(71.9)	(71.9)	(5.1)	(77.0)

At 31 December 2012	215.1	21.2	(23.8)	(21.5)	15.8	433.2	358.9	998.9	10.6	1,009.5

(1) Restated on adoption of the amendment to IAS 19 (see note 12).

Unaudited condensed consolidated balance sheet

as at 30 June

	Note	2013 £m	2012 £m	At 31 December 2012 £m
Non-current assets
Property, plant and equipment		122.2	126.2	127.1
Intangible assets		1,534.1	1,532.4	1,540.1
Retirement benefit assets		2.2	-	0.7
Investments in jointly controlled entities		183.2	174.9	176.4
Other investments		8.1	55.0	61.5
Derivative financial instruments		4.2	-	-
Deferred tax assets		125.2	133.5	121.4

Total non-current assets		1,979.2	2,022.0	2,027.2

Current assets
Inventories		61.6	80.8	55.3
Trade and other receivables		1,092.3	1,049.4	1,108.7
Cash and cash equivalents	9	338.7	456.9	657.1
Derivative financial instruments		1.9	0.5	0.4
Current asset investments		2.3	2.2	2.5
Income tax receivable		6.8	1.9	10.8

Total current assets		1,503.6	1,591.7	1,834.8

Total assets		3,482.8	3,613.7	3,862.0

Current liabilities
Borrowing		(67.1)	(54.0)	(35.3)
Derivative financial instruments		-	-	(7.1)
Trade and other payables		(1,455.0)	(1,674.6)	(1,615.2)
Provisions		(21.5)	(34.7)	(27.0)
Income tax payable		(5.0)	(3.4)	(3.8)

Total current liabilities		(1,548.6)	(1,766.7)	(1,688.4)

Non-current liabilities
Borrowing		(542.4)	(518.1)	(777.6)
Other payables		-	-	(9.4)
Retirement benefit liabilities		(371.5)	(325.9)	(351.7)
Deferred tax liabilities		(14.1)	(20.7)	(16.2)
Provisions		(5.8)	(13.2)	(9.2)

Total non-current liabilities		(933.8)	(877.9)	(1,164.1)

Total liabilities		(2,482.4)	(2,644.6)	(2,852.5)

Net assets	2	1,000.4	969.1	1,009.5

Equity
Share capital	15	215.1	215.1	215.1
Share premium		21.2	21.2	21.2
Translation reserve		(15.4)	(12.0)	(23.8)
Hedging reserve		(8.4)	(24.4)	(21.5)
Fair value reserve		0.2	12.1	15.8
Merger reserve		423.9	448.9	433.2
Retained earnings		350.4	298.3	358.9

Equity attributable to shareholders of the parent		987.0	959.2	998.9
Non-controlling interests		13.4	9.9	10.6
Total equity		1,000.4	969.1	1,009.5

Unaudited condensed consolidated cash flow statement for the six months ended 30 June
	Note	2013 £m	2012⁽¹⁾⁽²⁾ £m	Year ended 31 December 2012⁽²⁾ £m
Cash flows from operating activities
Group operating profit		67.1	49.2	159.6
Depreciation and amortisation		21.9	30.3	62.2
Loss on disposal of property, plant and equipment		-	1.0	1.6
Profit on disposal of Public Private Partnership equity investments		(31.3)	(6.7)	(13.2)
Other non-cash movements		(4.6)	3.3	(5.5)
Non-recurring operating items		-	-	2.6

Operating profit before changes in working capital		53.1	77.1	207.3
(Increase)/decrease in inventories		(5.6)	(9.3)	15.2
Decrease/(increase) in trade and other receivables		36.2	41.7	(36.6)
Decrease in trade and other payables		(195.1)	(99.3)	(143.5)

Cash (used in)/generated from operations before pension deficit recovery payments and rationalisation costs		(111.4)	10.2	42.4
Deficit recovery payments to pension schemes		(19.2)	(13.0)	(30.2)
Rationalisation costs		(4.4)	(19.2)	(28.6)

Cash used in operations		(135.0)	(22.0)	(16.4)
Financial income received		5.1	7.5	15.8
Financial expense paid		(15.0)	(12.2)	(27.3)
Acquisition costs		(0.3)	-	(0.6)
Taxation		0.7	4.8	2.9

Net cash flows from operating activities		(144.5)	(21.9)	(25.6)

Cash flows from investing activities
Disposal of property, plant and equipment		0.4	0.9	2.7
Disposal of jointly controlled entities and other investments	11	106.4	26.4	45.9
Dividends received from jointly controlled entities		10.0	5.8	13.6
Disposal and closure of businesses		(0.3)	-	(3.8)
Decrease in current asset investments		0.2	2.1	1.8
Acquisition of subsidiaries, net of cash acquired	11	(6.9)	-	(4.9)
Acquisition of intangible assets		(1.6)	(3.2)	(3.7)
Acquisition of property, plant and equipment		(3.2)	(7.3)	(14.6)
Acquisition of equity in and net loan advances to jointly controlled entities		(3.3)	(16.3)	(19.7)
Acquisition of other non-current asset investments		(3.8)	(1.5)	(3.0)

Net cash flows from investing activities		97.9	6.9	14.3

Cash flows from financing activities
(Repayment)/draw down of bank and other loans		(250.2)	14.7	277.2
Repayment of finance lease liabilities		(12.0)	(7.4)	(16.8)
Acquisition of own shares		(1.2)	-	(3.0)
Payment to employees in settlement of share options		-	(0.1)	(0.8)
Dividends paid to equity holders of the parent		(51.0)	(48.5)	(70.4)
Dividends paid to non-controlling interests		(0.5)	(1.9)	(8.2)

Net cash flows from financing activities		(314.9)	(43.2)	178.0

(Decrease)/increase in net cash and cash equivalents for the period		(361.5)	(58.2)	166.7
Net cash and cash equivalents at 1 January		652.2	487.7	487.7
Effect of exchange rate fluctuations on net cash and cash equivalents		4.5	(0.6)	(2.2)
Net cash and cash equivalents at period end	9	295.2	428.9	652.2

(1) Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items (see note 13).

(2) Restated on adoption of the amendment to IAS 19 (see note 12).

1 Basis of preparation

Carillion plc (the 'Company') is a company domiciled in the United Kingdom (UK). The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2013 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interest in jointly controlled entities.

The condensed consolidated interim financial statements for the six months ended 30 June 2013 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.

This interim financial information has been prepared applying the accounting policies and presentation which were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2012, which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union, except for the following standards and interpretations which are effective for the Group from 1 January 2013:

- Amendment to International Accounting Standard (IAS) 1 'Presentation of items of other comprehensive income'

- Amendment to International Accounting Standard (IAS) 19 'Employee benefits'

- International Financial Reporting Standard (IFRS) 13 'Fair value measurement'.

The amendment to IAS 1 'Presentation of items of other comprehensive income' increases the required level of disclosure within the statement of comprehensive income. The amendment requires items within the statement of comprehensive income to be analysed between items that will not be reclassified subsequently to profit and loss and items that will be reclassified subsequently to profit or loss in accordance with the respective IFRS standard to which the item relates. The amendment has been applied retrospectively and hence the presentation of items in the statement of comprehensive income has been restated to reflect the change. The amendment to IAS 1 has had no impact on profit, earnings per share or net assets in the six months ended 30 June 2013.

The amendment to IAS 19 'Employee benefits' makes significant changes to the recognition and measurement of the defined benefit pension expense and termination benefits and disclosures relating to all employee benefits. The interest cost and expected return on scheme liabilities and assets used in the previous version of IAS 19 have been replaced with a 'net interest' amount which is calculated by applying the discount rate to the net defined benefit obligation. This amendment has a corresponding impact on actuarial gains and losses recognised in the statement of comprehensive income, with no overall change to the net retirement benefit liability in the balance sheet. Furthermore, certain costs previously recorded as part of finance expenses have now been presented within administrative expenses. Comparative information has been restated for the effect of the retrospective application of the amendment to IAS 19 as disclosed in note 12.

IFRS 13 'Fair value measurement' establishes a single framework for measuring fair value that is required by other standards. The standard applies to both financial and non-financial items measured at fair value. The standard defines fair value on the basis of an 'exit price' and uses a 'fair value hierarchy', which results in a market-based, rather than entity-specific, measurement. The standard will impact upon the measurement of fair value for certain assets and liabilities as well as the associated disclosures. The adoption of this standard has had no material impact on profit, earnings per share or net assets in the period ended 30 June 2013.

The following standards and interpretations which are not yet effective and have not been early adopted by the Group will be adopted in future accounting periods:

- International Financial Reporting Standard (IFRS) 9 'Financial instruments'

- International Financial Reporting Standard (IFRS) 10 'Consolidated financial statements'

- International Financial Reporting Standard (IFRS) 11 'Joint arrangements'

- International Financial Reporting Standard (IFRS) 12 'Disclosure of interests in other entities'.

None of the standards above are expected to have a material impact on the Group.

For the year ended 31 December 2012, profit from the disposal of equity investments in Public Private Partnership projects was presented within Group operating profit in the income statement. Previously such profits were presented within non-operating items. Comparative information for the six months ended 30 June 2012 has been restated accordingly as disclosed in note 13.

The comparative financial information for the year ended 31 December 2012 does not constitute the Company's statutory accounts for the purposes of section 434 of the Companies Act 2006 for that financial year. The statutory accounts for the year ended 31 December 2012 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified, did not include references to any matter which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under section 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 interim management review. The Group has considerable financial resources, including £802.5 million of committed bank facilities expiring in 2016 and 2017 and £310.0 million of private placement notes expiring between 2017 and 2024. 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 interim financial statements.

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 in the UK, Canada and the Middle East.

Public Private Partnership projects

In this segment we report the equity returns on our investments in Public Private Partnership projects for Government buildings and infrastructure mainly in defence, health, education, transport and secure accommodation sectors.

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.

Segmental revenue and profit

	2013		2012⁽¹⁾⁽²⁾		Year ended 31 December 2012⁽²⁾
	Revenue	Operating profit before intangible amortisation and non-recurring operating items	Revenue	Operating profit before intangible amortisation and non-recurring operating items	Revenue	Operating profit before intangible amortisation and non-recurring operating items
	£m	£m	£m	£m	£m	£m
Support services
Group	977.6	30.4	1,057.9	36.6	2,131.4	100.0
Share of jointly controlled entities	136.4	13.7	122.4	11.2	228.3	20.9
	1,114.0	44.1	1,180.3	47.8	2,359.7	120.9
Inter-segment	43.7	-	35.8	-	87.3	-

Total	1,157.7	44.1	1,216.1	47.8	2,447.0	120.9

Public Private Partnership projects
Group	0.8	31.0	0.7	7.5	1.3	17.3
Share of jointly controlled entities	124.2	5.6	142.6	6.5	286.4	16.5
	125.0	36.6	143.3	14.0	287.7	33.8
Inter-segment	-	-	-	-	-	-

Total	125.0	36.6	143.3	14.0	287.7	33.8

Middle East construction services
Group	100.1	6.3	90.8	4.0	261.4	13.8
Share of jointly controlled entities	121.7	3.6	110.8	9.6	212.2	15.2
	221.8	9.9	201.6	13.6	473.6	29.0
Inter-segment	0.3	-	-	-	-	-

Total	222.1	9.9	201.6	13.6	473.6	29.0

Construction services (excluding the Middle East)
Group	499.0	18.9	629.5	25.9	1,272.1	73.0
Share of jointly controlled entities	4.8	0.1	2.1	-	9.7	(0.6)
	503.8	19.0	631.6	25.9	1,281.8	72.4
Inter-segment	2.2	-	-	-	3.2	-

Total	506.0	19.0	631.6	25.9	1,285.0	72.4

Group eliminations and unallocated items	(46.2)	(10.2)	(35.8)	(9.1)	(90.5)	(10.5)

Consolidated
Group	1,577.5	76.4	1,778.9	64.9	3,666.2	193.6
Share of jointly controlled entities	387.1	23.0	377.9	27.3	736.6	52.0

Total	1,964.6	99.4	2,156.8	92.2	4,402.8	245.6

(1) Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items (see note 13).

(2) Restated on adoption of the amendment to IAS 19 (see note 12).

Reconciliation of operating segment results to reported results

	2013 £m	2012⁽¹⁾⁽²⁾ £m	Year ended 31 December 2012⁽²⁾ £m
Group and share of jointly controlled entities' operating
profit before intangible amortisation and non-recurring operating items	99.4	92.2	245.6
Net financial expense
- Group	(18.8)	(12.7)	(27.9)
- Share of jointly controlled entities	(4.8)	(5.7)	(16.0)
Share of jointly controlled entities' taxation	(2.3)	(1.4)	(1.7)
Underlying profit before taxation	73.5	72.4	200.0
Intangible amortisation⁽³⁾	(9.3)	(15.7)	(31.4)
Non-recurring operating items⁽³⁾	-	-	(2.6)
Non-operating items⁽³⁾	-	-	(1.2)
Profit before taxation	64.2	56.7	164.8
Taxation	(5.0)	(2.5)	(9.9)
Profit for the period	59.2	54.2	154.9

(1) Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items (see note 13).

(2) Restated on adoption of the amendment to IAS 19 (see note 12).

(3) Intangible amortisation, non-recurring operating items and non-operating items arise in the following segments:

			2013				2012⁽¹⁾	Year ended 31 December 2012
	Intangible amortisation £m	Non-recurring operating items £m	Non-operating items £m	Intangible amortisation £m	Non-recurring operating items £m	Non-operating items £m			Intangible amortisation £m	Non-recurring operating items £m	Non-operating items £m




Support services	(8.2)	-	-	(14.2)	-	-			(28.4)	(2.6)		(1.2)
Construction services (excluding the Middle East)	(1.1)	-	-	(1.5)	-	-			(3.0)	-		-

Total	(9.3)	-	-	(15.7)	-	-			(31.4)	(2.6)		(1.2)

(1) Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items (see note 13).

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

	2013		2012		Year ended 31 December 2012
	Depreciation and amortisation £m	Capital expenditure £m	Depreciation and amortisation £m	Capital expenditure £m	Depreciation and amortisation £m	Capital expenditure £m
Support services	(13.6)	(4.3)	(20.2)	(4.6)	(40.7)	(13.6)
Middle East construction services	(0.9)	(0.3)	(1.0)	(0.5)	(2.0)	(1.1)
Construction services (excluding the Middle East)	(1.5)	(0.3)	(2.0)	(0.3)	(4.0)	(0.5)
Unallocated Group items	(5.9)	(3.7)	(7.1)	(5.1)	(15.5)	(12.1)

Total	(21.9)	(8.6)	(30.3)	(10.5)	(62.2)	(27.3)

Segmental net assets

	2013					2012	Year ended 31 December 2012
	Operating assets £m	Operating liabilities £m	Net operating assets/ (liabilities) £m	Operating assets £m	Operating liabilities £m	Net operating assets/ (liabilities) £m	Operating assets £m	Operating liabilities £m	Net operating assets/ (liabilities) £m
Support services
Intangible assets ⁽¹⁾	1,253.1	-	1,253.1	1,254.7	-	1,254.7	1,261.3	-	1,261.3
Operating assets	567.3	-	567.3	616.5	-	616.5	626.7	-	626.7
Investments	15.1	-	15.1	14.1	-	14.1	9.8	-	9.8
Total operating assets	1,835.5	-	1,835.5	1,885.3	-	1,885.3	1,897.8	-	1,897.8
Total operating liabilities	-	(514.9)	(514.9)	-	(572.2)	(572.2)	-	(587.0)	(587.0)
Net operating assets/(liabilities)	1,835.5	(514.9)	1,320.6	1,885.3	(572.2)	1,313.1	1,897.8	(587.0)	1,310.8
Public Private Partnership projects
Operating assets	5.8	-	5.8	7.1	-	7.1	6.8	-	6.8
Investments	55.9	-	55.9	100.5	-	100.5	112.1	-	112.1
Total operating assets	61.7	-	61.7	107.6	-	107.6	118.9	-	118.9
Total operating liabilities	-	(9.3)	(9.3)	-	(17.4)	(17.4)	-	(17.8)	(17.8)
Net operating assets/(liabilities)	61.7	(9.3)	52.4	107.6	(17.4)	90.2	118.9	(17.8)	101.1
Middle East construction services
Operating assets	287.3	-	287.3	223.7	-	223.7	263.4	-	263.4
Investments	78.4	-	78.4	65.8	-	65.8	73.0	-	73.0
Total operating assets	365.7	-	365.7	289.5	-	289.5	336.4	-	336.4
Total operating liabilities	-	(270.7)	(270.7)	-	(241.8)	(241.8)	-	(260.6)	(260.6)
Net operating assets/(liabilities)	365.7	(270.7)	95.0	289.5	(241.8)	47.7	336.4	(260.6)	75.8
Construction services (excluding the Middle East)
Intangible assets ⁽¹⁾	260.8	-	260.8	262.9	-	262.9	261.2	-	261.2
Operating assets	372.1	-	372.1	380.0	-	380.0	363.5	-	363.5
Investments	41.9	-	41.9	49.5	-	49.5	43.0	-	43.0
Total operating assets	674.8	-	674.8	692.4	-	692.4	667.7	-	667.7
Total operating liabilities	-	(680.0)	(680.0)	-	(868.9)	(868.9)	-	(798.2)	(798.2)
Net operating assets/(liabilities)	674.8	(680.0)	(5.2)	692.4	(868.9)	(176.5)	667.7	(798.2)	(130.5)
Consolidated before Group items
Intangible assets ⁽¹⁾	1,513.9	-	1,513.9	1,517.6	-	1,517.6	1,522.5	-	1,522.5
Operating assets	1,232.5	-	1,232.5	1,227.3	-	1,227.3	1,260.4	-	1,260.4
Investments	191.3	-	191.3	229.9	-	229.9	237.9	-	237.9
Total operating assets	2,937.7	-	2,937.7	2,974.8	-	2,974.8	3,020.8	-	3,020.8
Total operating liabilities	-	(1,474.9)	(1,474.9)	-	(1,700.3)	(1,700.3)	-	(1,663.6)	(1,663.6)
Net operating assets/(liabilities) before Group items	2,937.7	(1,474.9)	1,462.8	2,974.8	(1,700.3)	1,274.5	3,020.8	(1,663.6)	1,357.2

Group items
Deferred tax assets/(liabilities)	125.2	(14.1)	111.1	133.5	(20.7)	112.8	121.4	(16.2)	105.2
Net cash/(borrowing)	338.7	(609.5)	(270.8)	456.9	(572.1)	(115.2)	657.1	(812.9)	(155.8)
Retirement benefits (gross of taxation)	2.2	(371.5)	(369.3)	-	(325.9)	(325.9)	0.7	(351.7)	(351.0)
Income tax	6.8	(5.0)	1.8	1.9	(3.4)	(1.5)	10.8	(3.8)	7.0
Other	72.2	(7.4)	64.8	46.6	(22.2)	24.4	51.2	(4.3)	46.9

Net assets/(liabilities)	3,482.8	(2,482.4)	1,000.4	3,613.7	(2,644.6)	969.1	3,862.0	(2,852.5)	1,009.5

(1) Arising from business combinations.

Georgraphic information - by origin	2013 £m	2012 £m	Year ended 31 December 2012 £m
United Kingdom
Total revenue from external customers	1,378.4	1,614.5	3,247.9
Less: share of jointly controlled entities' revenue	(197.8)	(204.7)	(394.6)
Group revenue from external customers	1,180.6	1,409.8	2,853.3

Non-current assets	1,583.6	1,610.2	1,586.7

Middle East and North Africa
Total revenue from external customers	230.7	208.0	487.1
Less: share of jointly controlled entities' revenue	(129.6)	(117.2)	(225.7)
Group revenue from external customers	101.1	90.8	261.4

Non-current assets	87.5	76.2	78.1

Canada
Total revenue from external customers	347.6	325.7	650.9
Less: share of jointly controlled entities' revenue	(59.7)	(56.0)	(116.3)
Group revenue from external customers	287.9	269.7	534.6

Non-current assets	172.6	147.1	178.8

Rest of the World
Total revenue from external customers	7.9	8.6	16.9
Less: share of jointly controlled entities' revenue	-	-	-
Group revenue from external customers	7.9	8.6	16.9

Non-current assets	-	-	-

Consolidated
Total revenue from external customers	1,964.6	2,156.8	4,402.8
Less: share of jointly controlled entities' revenue	(387.1)	(377.9)	(736.6)
Group revenue from external customers	1,577.5	1,778.9	3,666.2

Non-current assets
Total of geographic analysis above	1,843.7	1,833.5	1,843.6
Retirement benefit assets	2.2	-	0.7
Other investments	8.1	55.0	61.5
Deferred tax assets	125.2	133.5	121.4
Total non-current assets	1,979.2	2,022.0	2,027.2

Revenue from the Group's major customer, the UK Government, are shown below:

	Support services £m	Public Private Partnership projects £m	Construction services (excluding the Middle East) £m	Total £m
Six months ended 30 June 2013	446.9	68.2	371.3	886.4
Six months ended 30 June 2012	461.7	88.4	479.4	1,029.5
Year ended 31 December 2012	924.1	175.4	990.1	2,089.6

3 Eaga Partnership Trusts related charges and non-operating items

Non-recurring operating items

2013

£m

2012

£m

Year ended

31 December

2012

£m

Eaga Partnership Trusts related charges

(2.6)

The Group operates a Share Incentive Plan (SIP) under which qualifying Carillion Energy Services partners may receive free shares. In 2012, the Eaga Partnership Trusts (EPT) waived part of its entitlement to the 2011 final dividend and all of its entitlement to the 2012 interim dividend paid during the year amounting to £2.6 million. This £2.6 million has been used to satisfy UK SIP awards which vest immediately. These awards give rise to a charge under International Financial Reporting Standard 2 'Share based payment' of £2.6 million. The Group is not committed to make any awards under the SIP in excess of those funded by the 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 its 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.

An income tax credit of £0.6 million at 31 December 2012 relating to the above has been included within taxation in the income statement.

Non-operating items	2013 £m	2012⁽¹⁾ £m	Year ended 31 December 2012 £m
Acquisition costs	-	-	(0.9)
Closure of non-core businesses	-	-	(0.3)
	-	-	(1.2)

(1) Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items (see note 13).

Acquisition costs in 2012 of £0.9 million relate to adviser costs incurred in relation to the Bouchier Group acquisition contract and due diligence procedures. There is no income tax associated with this charge.

In 2012, costs of £0.3 million arose on the disposal and closure of a number of non-core businesses. An income tax credit of £0.3 million has been included in the income statement in respect of these costs.

4 Financial income and expense

	2013 £m	2012⁽¹⁾ £m	Year ended 31 December 2012⁽¹⁾ £m
Financial income
Bank interest receivable	0.3	0.8	0.4
Other interest receivable	3.7	6.7	14.9
	4.0	7.5	15.3
Financial expense
Interest payable on bank loans and overdrafts	(4.1)	(5.5)	(11.5)
Other interest payable and similar charges	(11.1)	(7.8)	(17.9)
Net interest expense on defined benefit obligation	(7.6)	(6.9)	(13.8)
	(22.8)	(20.2)	(43.2)
Net financial expense	(18.8)	(12.7)	(27.9)

No borrowing costs have been capitalised in any of the above periods.

5 Income tax

The Group's income tax expense (including the Group's share of jointly controlled entities income tax) for the six months ended 30 June 2013 is calculated based on the estimated average annual effective underlying income tax rate of 12 per cent (six months ended 30 June 2012: 12 per cent⁽¹⁾; 31 December 2012: 11 per cent⁽¹⁾). This effective rate differs to the UK standard corporation tax rate of 23.3 per cent (six months ended 30 June 2012: 24.5 per cent; 31 December 2012: 24.5 per cent) primarily due to items such as the effect of tax rates in foreign jurisdictions, certain exemptions available relating to gains on the disposal of shares and the recognition of deferred tax on trading losses.

The UK Government's Budget on 20 March 2013 announced new phased reductions in the main corporation tax rate over the next two years. The reduction in rate to 21 per cent with effect from 1 April 2014 and the reduction in rate to 20 per cent with effect from 1 April 2015 were both substantively enacted on 2 July 2013. If the above changes had been substantively enacted at the balance sheet date they would have increased the Group's effective underlying tax rate of 12 per cent by approximately two per cent.

(1) Restated on adoption of the amendment to IAS 19 (see note 12).

6 Earnings per share

(a) Basic

The calculation of earnings per share for the six months ended 30 June 2013 is based on the profit attributable to equity holders of the parent of £55.9 million (six months ended 30 June 2012: £52.0 million; year ended 31 December 2012: £148.8 million) and a weighted average number of ordinary shares in issue of 430.1 million (six months ended 30 June 2012: 430.1 million; year ended 31 December 2012: 430.1 million), calculated as follows:

In millions of shares	2013	2012	Year ended 31 December 2012
Issued ordinary shares at beginning of period	430.3	430.3	430.3
Effect of own shares held by Employee Share Ownership Plan and Qualifying Employee Share Ownership Trust	(0.2)	(0.2)	(0.2)

Weighted average number of ordinary shares	430.1	430.1	430.1

(b) Underlying performance

A reconciliation of profit before taxation and basic earnings per share, as reported in the income statement, to underlying profit before taxation and earnings per share is set out below. The adjustments made in arriving at the underlying performance measures are made to illustrate the impact of non-trading and non-recurring items.

	2013		2012^{(1) (2)}		Year ended 31 December 2012⁽²⁾
	Profit before tax £m	Tax £m	Profit before tax £m	Tax £m	Profit before tax £m	Tax £m
Profit before taxation
Profit before taxation as reported in the income statement	64.2	5.0	56.7	2.5	164.8	9.9
Amortisation of intangible assets arising from business combinations	9.3	2.1	15.7	4.8	31.4	9.3
Non-recurring operating items	-	-	-	-	2.6	0.6
Non-operating items	-	-	-	-	1.2	0.3
Underlying profit before taxation	73.5	7.1	72.4	7.3	200.0	20.1
Underlying taxation	(7.1)		(7.3)		(20.1)
Underlying profit attributable to non-controlling interests	(3.3)		(2.2)		(6.1)
Underlying profit attributable to shareholders	63.1		62.9		173.8

	2013 Pence per share	2012⁽¹⁾⁽²⁾ Pence per share	Year ended 31 December 2012⁽²⁾ Pence per share
Earnings per share
Basic earnings per share	13.0	12.1	34.6
Amortisation of intangible assets arising from business combinations	1.7	2.5	5.1
Non-recurring operating items	-	-	0.5
Non-operating items	-	-	0.2
Underlying basic earnings per share	14.7	14.6	40.4
Underlying diluted earnings per share (post-tax basis)	14.6	14.6	40.2

(1) Restated following the change in presentation of profits on the disposal of Public Private Partnership equity investments from non-operating items to operating items (see note 13).

(2) Restated on adoption of the amendment to IAS 19 (see note 12).

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	2013	2012	Year ended 31 December 2012
Weighted average number of ordinary shares	430.1	430.1	430.1
Effect of share options in issue	1.4	1.9	2.1

Weighted average number of ordinary shares (diluted)	431.5	432.0	432.2

7 Dividends

The following dividends were paid by the Company:

		2013		2012		Year ended 31 December 2012
	£m	Pence per share	£m	Pence per share	£m	Pence per share
Previous period final dividend	51.0	11.85	48.5	11.6	48.5	11.6
Current period interim dividend	-	-	-	-	21.9	5.4

Total	51.0	11.85	48.5	11.6	70.4	17.0

The following dividends were proposed by the Company:

		2013		2012		Year ended 31 December 2012
	£m	Pence per share	£m	Pence per share	£m	Pence per share
Interim	23.7	5.5	23.2	5.4	21.9	5.40
Final	-	-	-	-	51.0	11.85

Total	23.7	5.5	23.2	5.4	72.9	17.25

The interim dividend for 2013 of 5.5 pence per share was approved by the Board on 22 August 2013 and will be paid on
6 November 2013 to shareholders on the register on 6 September 2013.

8 Pension commitments

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

	2013 £m	2012⁽¹⁾ £m	Year ended 31 December 2012⁽¹⁾ £m
Charge to operating profit
Current service cost relating to defined benefit schemes	(3.1)	(3.6)	(5.9)
Administrative expenses relating to defined benefit schemes	(2.2)	(2.3)	(4.5)
Defined contribution schemes	(10.0)	(10.2)	(20.0)

Total	(15.3)	(16.1)	(30.4)


Net interest expense on defined benefit obligation	(7.6)	(6.9)	(13.8)

(1) Restated on adoption of the amendment to IAS 19 (see note 12).

The valuation of the Group's main defined benefit pension schemes were reviewed by the schemes' actuary at 30 June 2013.

A summary of defined benefit obligations and scheme assets is given below:

	2013 £m	2012 £m	Year ended 31 December 2012 £m
Present value of defined benefit obligation	(2,428.8)	(2,228.2)	(2,352.5)
Fair value of scheme assets	2,068.8	1,917.3	2,012.3
Minimum funding requirement	(9.3)	(15.0)	(10.8)

Net pension liability	(369.3)	(325.9)	(351.0)
Deferred tax on the above	85.5	78.3	81.1
Net pension liability after tax	(283.8)	(247.6)	(269.9)

The principal assumptions used by the independent qualified actuaries in providing the IAS 19 position were:

	30 June 2013	31 December 2012
Rate of increase in salaries	3.85%	3.40%
Rate of increase in pensions	3.30%	2.90%
Inflation rate - Retail Price Index	3.35%	2.90%
Inflation rate - Consumer Price Index	2.50%	2.05%
Discount rate	4.75%	4.55%

9 Cash and cash equivalents and net borrowing

Cash and cash equivalents and net borrowing comprise:

	2013 £m	2012 £m	Year ended 31 December 2012 £m
Cash and cash equivalents	338.7	456.9	657.1
Bank overdrafts	(43.5)	(28.0)	(4.9)
Net cash and cash equivalents	295.2	428.9	652.2
Bank loans	(218.7)	(413.3)	(466.2)
Finance lease obligations	(27.9)	(30.5)	(34.5)
Other loans	(319.4)	(100.3)	(307.3)

Net borrowing	(270.8)	(115.2)	(155.8)

Reconciliation of cash flow to movement in net borrowing:
	2013£m	2012 £m	Year ended 31 December 2012 £m
(Decrease)/increase in net cash and cash equivalents	(361.5)	(58.2)	166.7
Repayment /(draw down) of bank and other loans	250.2	(14.7)	(277.2)
Repayment of finance lease liabilities	12.0	7.4	16.8
Change in net borrowing resulting from cash flows	(99.3)	(65.5)	(93.7)
Net borrowing in subsidiaries acquired	-	-	(4.6)
Finance lease additions	(5.0)	-	(9.0)
Currency translation differences	(10.7)	1.0	2.2
Change in net borrowing	(115.0)	(64.5)	(105.1)
Net borrowing at 1 January	(155.8)	(50.7)	(50.7)

Net borrowing	(270.8)	(115.2)	(155.8)

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 £242.6 million in the six months ended 30 June 2013 (six months ended 30 June 2012: £345.4 million; year ended 31 December 2012: £988.4 million). Amounts receivable from jointly controlled entities amounted to £105.8 million (31 December 2012: £107.7 million) and amounts payable to jointly controlled entities amounted to £17.9 million (31 December 2012: £55.3 million).

11 Acquisitions and disposals

On 11 December 2012, the Group acquired a 49 per cent equity shareholding in the Bouchier Group for a cash consideration of £23.8 million. The consideration is payable in instalments, with £4.9 million paid in December 2012 and £6.9 million paid in March 2013, with the latter being included in the cash flow statement within acquisition of subsidiaries, net of cash acquired. A remaining instalment of £12.0 million is payable in January 2014 which has been included as deferred consideration payable within current liabilities in the balance sheet. The Group has options to acquire the remaining 51 per cent of the equity over the next 10 years for a consideration capped at £43.1 million. The Bouchier Group is being consolidated as a subsidiary on the basis of the terms of these options and the power granted as a shareholder which enable Carillion management to exert control. A provisional assessment has been made of the fair value of the net assets acquired of £3.0 million. On the basis of this assessment the provisional goodwill on the acquisition amounts to £20.8 million. The finalisation of the completion process is not yet complete and therefore the goodwill arising on the acquisition is provisional. The Bouchier Group, which is based in Alberta, Canada, provides a range of services, including road maintenance and management. The acquisition complements the Group's existing support services activities in Canada and provides access to substantial new growth markets. Due to the immaterial nature of this acquisition, the full disclosures required under International Financial Reporting Standard 3 'Business combinations' have not been presented.

In the six months to 30 June 2013, the Group disposed of it's interest in a number of Public Private Partnership projects. The disposals generated a cash consideration of £113.3 million (of which £6.4 million was received on exchange of contracts in 2012), which together with disposal costs of £0.5 million is included in the cash flow statement within disposal of jointly controlled entity and other investments, and an operating profit of £31.3 million, which is included in Group operating profit within the Public Private Partnership projects segment.

12 Change of accounting policy

Upon the adoption of the amendment to IAS 19 on 1 January 2013, the Group has restated prior period information, which has had the following impact on reported profit and earnings per share:

		Six months ended 30 June 2012		Year ended 31 December 2012
		£m	£m	£m	£m
Income statement
Profit before tax as previously reported			64.1		179.5
Impact of amendment to IAS 19	operating profit	(2.3)		(4.5)
	net financial expense	(5.1)		(10.2)
			(7.4)		(14.7)
Profit before tax restated			56.7		164.8

Taxation as previously reported		(4.3)		(13.3)
Impact of amendment to IAS 19		1.8		3.4
Taxation restated			(2.5)		(9.9)
Profit after tax restated			54.2		154.9

			Pence per share		Pence per share
Earnings per share as previously reported			13.4		37.2
Impact of amendment to IAS 19			(1.3)		(2.6)
Earnings per share restated			12.1		34.6

Diluted earnings per share as previously reported			13.3		37.0
Impact of amendment to IAS 19			(1.3)		(2.6)
Diluted earnings per share restated			12.0		34.4

The amendment to IAS 19 has also reduced underlying earnings per share by 1.3 pence for the six months ended 30 June 2012 and 2.6 pence for the year ended 31 December 2012.

Statement of comprehensive income	Six months ended 30 June 2012		Year ended 31 December 2012
	Actuarial losses	Deferred tax	Actuarial losses	Deferred tax
	£m	£m	£m	£m
As previously reported	(31.5)	4.6	(73.4)	11.8
Impact of amendment to IAS 19	7.4	(1.8)	14.7	(3.4)
As restated	(24.1)	2.8	(58.7)	8.4

As described in note 1, the amendment to IAS 19 has changed the accounting for defined benefit schemes and termination benefits. The interest cost and expected return on scheme assets used in the previous version of IAS 19 have been replaced with a 'net interest' amount which is calculated by applying a discount rate to the net defined benefit obligation. This amendment has a corresponding impact on actuarial gains and losses recognised in the statement of comprehensive income, with no overall change to the net retirement benefit liability in the balance sheet. Furthermore, certain costs previously recorded as part of finance expenses have now been presented within administrative expenses.

13 Change in presentation

As described in note 1, in the second half of 2012, profit from the disposal of equity investments in Public Private Partnership projects has been presented within Group operating profit in the income statement. Previously, such profits were presented within non-operating items. Following this change in presentation, comparative information for the six months ended 30 June 2012 has been restated accordingly, which has had the following impact on underlying profit before taxation, non-operating items and underlying earnings per share:

		Six months ended 30 June 2012
		As adjusted for IAS 19	Impact of change	As restated
Underlying profit before taxation	£m	65.7	6.7	72.4
Non-operating items	£m	6.7	(6.7)	-
Underlying earnings per share	Pence	13.1	1.5	14.6

There is no impact on reported profit before taxation and basic and diluted earnings per share.

14 Financial instruments

Fair values

Financial instruments carried at fair value in the balance sheet are non-current asset investments and derivative financial instruments. The fair value of non-current asset investments is determined based on a level 3 valuation method, using valuation techniques that include inputs that are not based on market data. Fair value is calculated by discounting expected future cash flows using asset specific discount rates, with the movement in fair value each year recognised in the fair value movement on available for sale assets in the statement of comprehensive income.

The movement in the fair value of non-current asset investments derived using a level 3 valuation method is show below:

	£m
At 1 January 2013	60.8
Additions	3.8
Disposals	(57.6)
Fair value of equity interests retained on partial disposal	0.4

At 30 June 2013	7.4

The fair value of non-current asset investments is most sensitive to movements in the discount rate used. A one percentage point increase in the discount rate would reduce the fair value by £0.5 million.

The fair value of derivative financial instruments is based on a level 2 valuation method, using inputs from quoted prices in active markets, with the movement in fair value each year recognised in administrative expenses in the income statement.

The fair value of other financial assets and financial liabilities are a reasonable approximation of their carrying values and have therefore not been disclosed.

Financial risk management

The Group's financial risk management objectives and policies at 30 June 2013 have not materially altered and are consistent with those disclosed in the consolidated financial statements for the year ended 31 December 2012.

15 Share capital

The issued and fully paid share capital at 30 June 2013 was 430.3 million shares (30 June 2012: 430.3 million; 31 December 2012: 430.3 million).

16 Estimates

The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 December 2012, except in relation to key assumptions used to determine defined benefit pension obligations as disclosed in note 8 and the provisional assessment of goodwill and intangible assets arising on the acquisition of the Bouchier Group as disclosed in note 11.

17 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 £168.9 million (31 December 2012: £177.6 million). There has been no material change to the contingent liabilities of the Group in the six months ended 30 June 2013.

18 Company information

This preliminary announcement was approved by the Board of Directors on 22 August 2013. The 2013 interim results will be posted to all shareholders by 4 September 2013 and both this statement and the 2013 interim results will be available on the internet at www.carillionplc.com or on request from the Company Secretary, Carillion plc, Birch Street, Wolverhampton, WV1 4HY.

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 six months ended 30 June 2013 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 six months ended 30 June 2013 will be determined in accordance with English law.

Directors' responsibilities

This interim report complies with the Disclosure and Transparency Rules (DTR) of the United Kingdom's Financial Conduct Authority in respect of the requirements to produce a half-yearly financial report. The interim report is the responsibility of, and has been approved by, the Directors of Carillion plc.

The Directors of Carillion plc confirm that to the best of their knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union

· the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months of 2013 and description of principal risks and uncertainties for the remaining six months)

· the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of any material related party transactions during the first six months of 2013 that have materially affected the financial position or performance of the Group and any changes in the related party transactions described in the 2012 Annual Report that could do so).

On behalf of the Board

Richard Adam FCA

Group Finance Director

22 August 2013

Independent review report to Carillion plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013, which comprises the unaudited condensed consolidated income statement, the unaudited condensed consolidated statement of comprehensive income, the unaudited condensed consolidated statement of changes in equity, the unaudited condensed consolidated balance sheet, the unaudited condensed consolidated cash flow statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority ('the UK FCA'). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union (EU). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34: 'Interim Financial Reporting' as adopted by the EU.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410: 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

Darren Turner

For and on behalf of KPMG Audit Plc

Chartered Accountants

One Snow Hill

Snow Hill Queensway

Birmingham

B4 6GH

22 August 2013

This information is provided by RNS

The company news service from the London Stock Exchange

END

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