Interim Results
Carillion PLC
08 September 2004
8 September 2004
Carillion plc 2004 Interim Results
UK support services and construction company Carillion plc announces its interim
results for the six months ended 30 June 2004.
Highlights
• Pre-tax profit £19.9m (2003 £10.5m) pre exceptionals and goodwill
• Earnings per share 6.5p (2003 3.4p) pre exceptionals and goodwill
• Exceptional profit £7.7m on PPP equity sales
• Pre-tax loss £19.1m (2003 £7.7m profit) post exceptionals and goodwill
of £39.0m
• Strong cash flow and net cash of £88.2m
• Interim dividend up 6% to 1.675p per share
• Additional dividend of 1.0p per share from PPP equity sales
• Order book and frameworks £4.4bn plus preferred bidder for £1.7bn
Note: Exceptional items and goodwill amortisation are explained on page 4 of
this announcement. These include a £55.2 million goodwill write back, which
had no effect on net assets, arising from the disposal of Crown House.
Commenting, Chairman Sir Neville Simms said, 'Carillion made further good
progress in the first six months of 2004.
'The outlook for trading in our key markets continues to be positive. We have a
strong order book of £4.4 billion, notwithstanding the effects of selling Crown
House and two further PPP equity stakes. We also have preferred bidder positions
on five PPP contracts worth some £1.7 billion. Carillion therefore remains on
course to deliver further growth in 2004, in line with market expectations. Cash
generation is also expected to remain positive in the second half of the year
providing Carillion with a solid platform to implement its strategy for growth.'
For further information contact
Chris Girling Finance Director 01902 422431
John Denning Director Corporate Affairs 01902 316426
High resolution photographs are available free of charge to the media at
www.newscast.co.uk telephone 0207 608 1000
CHAIRMAN'S STATEMENT
Carillion made further good progress in the first six months of 2004.
Operating performance was in line with expectations, with turnover and profit
before tax, goodwill and exceptional items both firmly ahead and backed by
strong cash generation. Earnings per share before goodwill and exceptional items
were 6.5 pence (2003 3.4 pence).
The Board has declared an interim dividend of 1.675 pence, an increase of 6 per
cent on 2003.
In line with the Group's strategy for recycling its PPP equity investments, two
further equity sales were completed in June 2004 generating an exceptional
profit of £7.7 million. An additional dividend of 1.0 pence per share will be
paid with the interim dividend as the Board has again decided to return
approximately one third of the profit generated by these sales to shareholders.
The sale of Crown House in June 2004 marked another important step in the
implementation of our consistent strategy, which has transformed Carillion into
a very different company from the one we launched a little over five years ago.
Over the past five years our service offering, business mix and risk profile
have improved significantly and Carillion has been restructured into new
business groups capable of offering integrated solutions that are aligned with
the needs of our customers.
Our support services activities have increased at a compound average growth rate
of over 10 per cent per annum and now generate around half the Group's turnover
and over two thirds of its profit. Maintaining a strong construction capability
has continued to be an essential part of our strategy, but this is now more
selective as a result of tighter risk management criteria and a clear focus on
working with long-term key customers.
Carillion has also developed well-balanced market and geographical positions in
public and private sector markets, which have good growth prospects. It is
particularly well positioned to benefit from the planned increases in UK public
investment that were confirmed by the Government's recent comprehensive spending
review.
We are pleased to welcome David Garman to the Board, following his appointment
as a non-executive director. David has been Chief Executive of TDG plc since
1999, following a successful career in the food industry.
The outlook for trading in our key markets continues to be positive. We have a
strong order book of £4.4 billion, notwithstanding the effects of selling Crown
House and two further PPP equity stakes. We also have preferred bidder positions
on five PPP contracts worth some £1.7 billion. Carillion therefore remains on
course to deliver further growth in 2004, in line with market expectations. Cash
generation is also expected to remain positive in the second half of the year
providing Carillion with a solid platform to implement its strategy for growth.
Sir Neville Simms
Chairman
CHIEF EXECUTIVE'S REVIEW
Carillion has continued to build a strong platform from which to deliver its
strategy for growth both organically and by acquisition.
Profit before tax, goodwill and exceptional items was £19.9 million (2003 £10.5
m) on turnover 9 per cent higher at £1,017 million (2003 £933 m). Profit
continues to be backed by strong cash flow, which is reflected in the Group net
interest credit of £0.4 million and net cash at the half year of £88.2 million,
excluding finance leases of £14.7 million.
Our underlying tax rate reduced to 27 per cent as we continue to access past tax
losses. Earnings per share before goodwill and exceptional items were 6.5 pence
(2003 3.4 p).
There was a net exceptional charge of £37.1 million (2003 £1.0 m). This included
exceptional profits of £9.3 million on the sale of Crown House, £7.7 million on
the sale of PPP equity and £2.6 million on the sale of fixed assets. It also
included a write back of goodwill previously written off to reserves of £55.2
million associated with the sale of Crown House that had no effect on net
assets, and £1.5 million of other costs. Goodwill amortisation was £1.9 million
(2003 £1.8 m).
Our strategy of recycling our PPP equity investments to create a sustainable new
profit stream continues to demonstrate the value created by these investments.
The two sales completed in June 2004 generated proceeds of £20.5 million, which
again supported the directors' valuation of the Group's equity portfolio. The
three PPP equity sales completed to date have generated total proceeds of £36.5
million and exceptional profits of £18.9 million. The directors' valuation of
the Group's equity portfolio is now some £80 million, based on discounting the
cash flows from these investments at 10 per cent.
Agreement was reached in May 2004 with Network Rail for the transfer of rail
maintenance contracts to Network Rail and this was completed successfully on 24
July 2004. In respect of the assets transferring we received £17.6 million from
Network Rail.
Having secured new orders in the first six months of 2004 worth £1.2 billion, we
continue to have a strong order book and framework contracts worth £4.4 billion,
after a reduction of £0.6 billion due to the disposals of Crown House and the
two PPP equity investments.
We are also the preferred bidder for five PPP projects, which are expected to
generate turnover for Carillion of around £1.7 billion. This includes our recent
success in becoming preferred bidder for a schools PPP project in Renfrewshire,
with a construction value in the region of £100 million.
Investments
£m H1 2004 H1 2003
Turnover 31.0 31.6
Operating profit* 3.7 3.0
Pre-tax profit** 0.9 0.6
* Before goodwill amortisation of £0.1m (2003 Nil)
** Before exceptional profit of £7.7m from sale of PPP equity (2003 Nil)
Our portfolio of 12 operational PPP projects in which we have equity investments
continues to perform well. Carillion is also an equity investor in three further
projects that have reached financial close and are now in the construction phase
and progressing satisfactorily.
In June 2004, we sold two further PPP equity investments - the Group's entire 50
per cent shareholding in the M40 project and 50 per cent of its 100 per cent
holding in the A249 road project. These sales generated proceeds of £20.5
million and an exceptional profit of £7.7 million. No tax was payable on this
profit as the Group can claim tax relief by way of substantial shareholder
exemption.
In the first half of 2004, financial close was reached on the £130 million A249
road project in Kent in which we expect to invest some £3 million of equity.
Since the half year, financial close has been reached on the £80 million
Birmingham and Solihull LIFT project, in which our equity investment is expected
to be £1.7 million. We have also reached financial close on a £34 million
project to provide additional facilities at Darent Valley Hospital in Kent. This
is being partly funded through bonds that were put in place when the first
Darent Valley Hospital PPP project was refinanced last year and before Carillion
sold its equity interest in the concession.
Carillion is currently the preferred bidder for five PPP projects, namely the
Queen Alexandra Hospital in Portsmouth, two hospitals in Canada (the William
Osler in Toronto and the Royal Ottawa), a social housing project in Derbyshire
and the Renfrewshire Schools project. We expect to invest over £15 million of
equity in these five projects, which have a potential order book value for
Carillion of approximately £1.7 billion, including our share of construction,
maintenance, facilities management and concession company turnover.
Carillion is also shortlisted for six PPP projects. These projects would require
an estimated equity investment by Carillion of £30 million and have an estimated
order book value for the Group in excess of £2.5 billion.
Construction Services
£m H1 2004 H1 2003
Turnover 481.5 475.5
Operating profit/(loss) 0.1 (7.9)
Performance in Construction Services was satisfactory and in line with
expectations. Volumes in our UK Building and International businesses moved
firmly ahead to offset expected reductions in PPP and UK civil engineering
activity. PPP construction turnover and profit were lower due to the timing of
project completions and new starts. However, this will improve going forward as
projects started in the first half of 2004 move further into construction and
others for which we are the preferred bidder reach financial close.
Our UK Building business has continued to make solid progress, winning new
contracts in its main market sectors worth over £300 million in the first half
of the year. These included mixed-use and high-rise developments in Manchester,
Birmingham and London worth over £100 million and retail projects in the
Midlands and South East worth over £90 million.
Our International businesses also built on the good progress they made in 2003,
winning new contracts worth approximately £340 million. Our businesses in Canada
and the Middle East have been particularly successful. Since the half year we
have announced new highways maintenance contracts in Ontario worth £100 million
and that our joint venture partnership in Dubai has won a £175 million contract
for the construction of a retail and entertainment centre, which forms part of
the ongoing multi-billion pound Festival City development.
Support Services
£m H1 2004 H1 2003
Turnover 518.5 442.5
Operating profit* 23.0 22.7
* Before goodwill amortisation of £1.8 m (2003 £1.8m)
Support Services benefited from higher volumes in rail, which continues to
perform well, supported by satisfactory performances in our facilities
management and road maintenance businesses.
Higher costs associated with development and bidding activities in our Health
and Defence businesses are reflected in slightly reduced margins at the
half-year. However, margins are expected to move up in the second half of 2004.
The full-year effects in 2004 of transferring rail maintenance to Network Rail
will be in line with the previously announced decreases of around £100 million
of turnover and £7 million of profit. However, we are already making good
progress towards replacing this lost turnover having won £300 million of new
rail contracts in the first half of 2004, the largest of which being a framework
contract for the renewal of track and switches and crossings with an estimated
value of at least £250 million.
Other notable successes in this segment included a road maintenance contract for
Warwickshire County Council worth up to £84 million and facilities management
contracts worth over £70 million.
John McDonough
Chief Executive
Consolidated Profit and Loss Account
For the half year ended 30 June 2004
Half year to Half year to Year to
30 June 2004 30 June 2003 31 December
(unaudited) (unaudited) 2003
£m £m (audited)
£m
Total turnover 1,016.8 932.6 1,977.6
Less: share of joint ventures'
turnover (55.9) (57.4) (116.7)
--------- --------- --------
Group turnover 960.9 875.2 1,860.9
========= ========= ========
Group operating profit before
exceptional operating items 9.9 3.8 38.1
Exceptional operating items - - (33.1)
--------- --------- --------
Group operating profit 9.9 3.8 5.0
Share of operating profit in joint
ventures 10.3 8.1 14.3
--------- --------- --------
Total operating profit 20.2 11.9 19.3
Profit on sale of tangible fixed
assets 2.6 - -
Profit on sale of fixed asset
investments 7.7 - 11.8
--------- --------- --------
(Loss)/profit on sale of
businesses : Group (47.4) (1.1) (1.5)
Joint ventures - 0.1 0.2
--------- --------- --------
(47.4) (1.0) (1.3)
--------- --------- --------
(Loss)/profit on ordinary
activities before interest (16.9) 10.9 29.8
--------- --------- --------
Net interest (payable)/receivable:
Group 0.4 (0.8) (0.5)
Joint ventures (2.6) (2.4) (5.5)
--------- --------- --------
(2.2) (3.2) (6.0)
--------- --------- --------
(Loss)/profit on ordinary
activities before taxation (19.1) 7.7 23.8
Taxation on (loss)/profit on
ordinary activities (4.7) (2.4) (13.8)
--------- --------- --------
(Loss)/profit on ordinary
activities after taxation (23.8) 5.3 10.0
Equity minority interests (0.9) (0.8) (1.7)
--------- --------- --------
(Loss)/profit for the financial
period (24.7) 4.5 8.3
Equity dividends (5.6) (3.3) (14.1)
--------- --------- --------
Retained (loss)/profit for the
Group and its share of joint
ventures (30.3) 1.2 (5.8)
========= ========= ========
Earnings per ordinary share (11.9)p 2.2p 4.0p
- Basic
- Diluted (11.8)p 2.1p 4.0p
Adjusted earnings per ordinary
share 5.7p 2.6p 15.2p
- Basic (before exceptional items)
- Diluted (before exceptional
items) 5.7p 2.6p 15.1p
- Basic (before exceptional items
and goodwill amortisation) 6.5p 3.4p 16.8p
========= ========= ========
Dividends per ordinary share 2.675p 1.575p 6.75p
========= ========= ========
The above results are wholly derived from continuing operations.
Consolidated Statement of Total Recognised Gains and Losses
Half year to Half year to Year to
30 June 2004 30 June 2003 31 December
2003
(unaudited) (unaudited) (audited)
£m £m £m
(Loss)/profit for the financial
period:
Group (31.4) 0.2 2.7
Joint ventures 6.7 4.3 5.6
--------- --------- --------
(24.7) 4.5 8.3
Exchange rate movements - - (1.3)
--------- --------- --------
Total recognised gains and
losses for the period (24.7) 4.5 7.0
========= ========= ========
Consolidated Balance Sheet
At 30 June 2004 At 30 June 2003 At 31
(unaudited) restated December 2003
(unaudited) restated
(audited)
£m £m £m
Fixed assets
Intangible assets 19.4 47.2 21.3
Tangible assets 62.9 57.0 68.1
--------- --------- --------
Investments in joint ventures :
Share of gross assets 611.5 648.9 639.7
Share of gross liabilities (573.8) (618.9) (599.7)
--------- --------- --------
37.7 30.0 40.0
Loan advances 27.7 25.0 33.1
--------- --------- --------
65.4 55.0 73.1
Other investments 0.1 0.1 0.1
--------- --------- --------
Total investments 65.5 55.1 73.2
--------- --------- --------
147.8 159.3 162.6
--------- --------- --------
Current assets
Stocks 56.2 42.7 46.3
Debtors 491.9 547.1 511.3
Investments 4.4 8.4 4.7
Cash at bank and in hand 146.5 65.8 128.1
--------- --------- --------
699.0 664.0 690.4
--------- --------- --------
Creditors: amounts falling due
within one year
Borrowings (58.6) (21.6) (14.0)
Other creditors (582.0) (556.9) (621.2)
--------- --------- --------
(640.6) (578.5) (635.2)
--------- --------- --------
--------- --------- --------
Net current assets
Due within one year 33.7 59.5 26.1
Debtors due after more than one
year 24.7 26.0 29.1
--------- --------- --------
58.4 85.5 55.2
--------- --------- --------
Total assets less current
liabilities 206.2 244.8 217.8
--------- --------- --------
Creditors: amounts falling due
after more than one year
Borrowings (14.4) (75.7) (53.9)
Other creditors (9.7) (11.2) (7.6)
--------- --------- --------
(24.1) (86.9) (61.5)
--------- --------- --------
Provisions for liabilities and
charges (4.6) (7.6) (4.7)
--------- --------- --------
Net assets 177.5 150.3 151.6
========= ========= ========
Financed by:
Capital and reserves
Called up share capital 107.0 106.5 107.0
Reserves 68.2 41.5 42.3
--------- --------- --------
Equity shareholders' funds 175.2 148.0 149.3
Equity minority interests 2.3 2.3 2.3
--------- --------- --------
177.5 150.3 151.6
========= ========= ========
The interim report was approved by the Board of Directors on 8 September 2004.
Summarised Consolidated Cash Flow Statement
Half year to 30 Half year to 30 Year to 31
June 2004 June 2003 December 2003
(unaudited) (unaudited) (audited)
£m £m £m
Net cash
inflow/(outflow)
from
operating
activities 12.8 (26.9) 84.2
Distributions
received from
joint ventures 4.7 13.8 14.7
Net cash
outflow from
returns on
investments
and servicing
of finance (0.2) (1.5) (2.1)
Corporate
taxation
(paid)/received (7.1) (0.8) 0.5
Net cash
outflow from
capital
expenditure
and financial
investments (6.5) (6.0) (10.8)
Net cash
inflow/(outflow)
from
acquisitions
and disposals 20.7 (0.2) (5.6)
Equity
dividends paid (10.8) (6.9) (10.1)
-------- -------- --------
Net cash
inflow/(outflow)
before
management of
liquid
resources and
financing 13.6 (28.5) 70.8
Net cash
(outflow)/inflow
from
management of
liquid
resources (48.4) 4.0 (25.4)
Financing (0.3) 11.4 (21.6)
-------- -------- --------
(Decrease)/
increase in cash
in the period (35.1) (13.1) 23.8
======== ======== ========
Reconciliation of Operating Profit to Operating Cash Flows
Half year to Half year to Year to
30 June 2004 30 June 2003 31 December
2003
£m £m £m
Group
operating
profit before
exceptional
items 9.9 3.8 38.1
Depreciation 8.6 7.3 15.0
Reversal of
impairment in
tangible fixed
asset - - (2.2)
Loss/(profit)
on disposal of
fixed assets 0.2 (0.1) 0.1
Change in
market value
of current
asset
investments - (0.2) -
Amortisation
of goodwill 1.9 1.8 3.8
(Increase)/
decrease in
stocks (10.0) 3.7 0.9
Decrease/
(increase) in
debtors 9.2 (16.1) 22.6
(Decrease)/
increase in
creditors due
within one
year (10.8) (27.1) 10.4
Increase/
(decrease) in
creditors due
after more
than one year 2.1 (2.4) (5.9)
Decrease in
provisions - - (0.9)
Increase in
bills of
exchange 1.7 2.9 3.0
-------- -------- --------
Net cash
inflow/(outflow)
from
operating
activities
before
exceptional
items 12.8 (26.4) 84.9
Exceptional
operating cash
spend - (0.5) (0.7)
-------- -------- --------
Net cash
inflow/(outflow)
from
operating
activities 12.8 (26.9) 84.2
======== ======== ========
Reconciliation of Net Cash Flow to Movement in Net Funds
Half year to Half year to 3 Year to
30 June 2004 30 June 2003 31 December
2003
£m £m £m
(Decrease)/increase in
cash (35.1) (13.1) 23.8
Increase/(decrease) in
short term deposits 48.4 (4.0) 25.4
Cash (inflow)/outflow
from drawdown of debt (0.9) (12.4) 20.9
Cash outflow from finance
leases 1.4 1.0 2.2
-------- -------- --------
Movement in net funds
resulting from cash flows 13.8 (28.5) 72.3
Exchange rate movements - - 0.4
Non cash movements from
finance leases (0.5) (0.9) (10.4)
-------- -------- --------
Movement in net funds in
the period 13.3 (29.4) 62.3
Net funds/(debt) at start
of period 60.2 (2.1) (2.1)
-------- -------- --------
Net funds/(debt) at end
of period 73.5 (31.5) 60.2
======== ======== ========
Analysis of changes in Net Funds
At Cash flows Non cash At
1 January 2004 movements 30 June 2004
£m £m £m £m
Cash at bank and in hand 70.7 (30.0) - 40.7
Bank overdrafts (11.3) (5.1) - (16.4)
---------- --------- --------- --------
59.4 (35.1) - 24.3
Short term deposits 57.4 48.4 - 105.8
Bank loans (39.4) - - (39.4)
Other loans (1.6) (0.9) - (2.5)
Finance leases (15.6) 1.4 (0.5) (14.7)
---------- --------- --------- --------
Net funds 60.2 13.8 (0.5) 73.5
========== ========= ========= ========
Notes to the accounts
1. Basis of preparation
The interim report, which is unaudited, has been prepared using the accounting
policies set out in the 2003 Annual Report, except as noted below.
The Group owns shares in Carillion plc via its Employee Share Ownership Plan
(ESOP) trust. The purpose of this trust is to hold shares that may subsequently
be awarded to Executive Directors and senior employees under share incentive
schemes. In previous periods the purchase costs of these shares were treated as
fixed asset investments.
During the period the Group adopted UITF 38 'Accounting for ESOP trusts'. The
affect of this has been to recognise the cumulative value of shares held by the
trust as a deduction in shareholders' funds rather than as a fixed asset
investment. The impact of the change in accounting policy is disclosed in Note
7.
The financial information included in this report does not constitute statutory
accounts for the purpose of section 240 of the Companies Act 1985. The
comparative figures for the financial year ended 31 December 2003 are not the
Company's statutory accounts for that financial year. Those accounts have been
reported on by the Company's auditor and have been delivered to the Registrar of
Companies. The report of the auditor was unqualified and did not contain a
statement under Section 237(2) or (3) of the Companies Act 1985.
2. Segmental analysis
a) Group including share of joint ventures
Turnover Half year to Half year to Year to
30 June 2004 30 June 2003 31 December
2003
£m £m £m
Class of business:
Investments 31.0 31.6 67.5
Support services 518.5 442.5 933.5
Construction services 481.5 475.5 1,001.8
Internal trading (14.2) (17.0) (25.2)
----------- ----------- -----------
1,016.8 932.6 1,977.6
=========== =========== ===========
Geographical origin:
UK 835.2 789.0 1,633.2
Europe 104.2 89.4 212.3
Rest of the world 77.4 54.2 132.1
----------- ----------- -----------
1,016.8 932.6 1,977.6
=========== =========== ===========
The analysis of turnover by geographical market served is not materially
different from that by geographical origin.
2. Segmental analysis (continued)
Profit on ordinary activities before interest
Half year to 30 June 2004 Before Exceptional After
exceptional items exceptional
items items
£m £m £m
Class of business:
Investments 3.6 7.7 11.3
Support
services 21.2 2.6 23.8
Construction
services 0.1 (47.4) (47.3)
Corporate
centre (4.7) - (4.7)
----------- ----------- -----------
20.2 (37.1) (16.9)
=========== =========== ===========
Geographical origin:
UK 19.9 (36.6) (16.7)
Europe (0.2) (0.5) (0.7)
Rest of the world 0.5 - 0.5
----------- ----------- -----------
20.2 (37.1) (16.9)
=========== =========== ===========
Half year to 30 June 2003 Before Exceptional After
exceptional items exceptional
items items
£m £m £m
Class of business:
Investments 3.0 - 3.0
Support
services 20.9 - 20.9
Construction
services (7.9) (1.0) (8.9)
Corporate
centre (4.1) - (4.1)
----------- ----------- -----------
11.9 (1.0) 10.9
=========== =========== ===========
Geographical origin:
UK 11.5 (1.3) 10.2
Europe 0.5 - 0.5
Rest of the world (0.1) 0.3 0.2
----------- ----------- -----------
11.9 (1.0) 10.9
=========== =========== ===========
Year to 31 December 2003 Before Exceptional After
exceptional items exceptional
items items
£m £m £m
Class of business:
Investments 8.5 11.8 20.3
Support services 47.5 (32.8) 14.7
Construction services 5.5 (1.6) 3.9
Corporate centre (9.1) - (9.1)
----------- ----------- -----------
52.4 (22.6) 29.8
=========== =========== ===========
Geographical origin:
UK 48.6 (23.0) 25.6
----------- ----------- -----------
Europe 3.9 - 3.9
Rest of the World (0.1) 0.4 0.3
----------- ----------- -----------
52.4 (22.6) 29.8
=========== =========== ===========
b) Share of joint ventures
Half year to 30 June 2004 Half year to 30 June 2003 Year to 31 December 2003
Turnover Profit on Turnover Profit on Turnover Profit on
ordinary ordinary ordinary
activities activities activities
before before before
interest interest interest
£m £m £m £m £m £m
Class of
business:
Investments 28.6 5.8 31.2 5.5 65.1 11.5
Support
services 1.5 1.9 2.9 - 3.8 (1.9)
Construction
services 25.8 2.6 23.3 2.7 47.8 4.9
------- -------- ------- -------- ------- ----------
55.9 10.3 57.4 8.2 116.7 14.5
======= ======== ======= ======== ======= ==========
Construction services is stated after the share of exceptional items in joint
ventures as disclosed in Note 3.
3. Exceptional items
Half year to 30 June 2004 Half year to 30 June 2003 Year to 31
December 2003
Gross Tax Gross Tax Gross Tax
£m £m £m £m £m £m
Operating
items:
Group
Impairment of
goodwill - - - - (25.0) -
Impairment of
goodwill
previously
written off to
reserves - - - - (8.1) -
------- ------- -------- ------- -------- -------
- - - - (33.1) -
------- ------- -------- ------- -------- -------
Non-operating
items:
Group
Profit on sale
of fixed asset
investments 7.7 - - - 11.8 -
------- ------- -------- ------- -------- -------
Profit on sale
of fixed
assets 2.6 (0.8) - - - -
Loss on sale
of businesses (47.4) 1.3 (1.1) 0.1 (1.5) (0.2)
------- ------- -------- ------- -------- -------
(37.1) 0.5 (1.1) 0.1 10.3 (0.2)
Joint
ventures
Profit on sale
of businesses - - 0.1 - 0.2 -
Interest
payable - - - - (0.6) 0.2
------- ------- -------- ------- -------- -------
(37.1) 0.5 (1.0) 0.1 9.9 -
------- ------- -------- ------- -------- -------
Total
exceptional
items (37.1) 0.5 (1.0) 0.1 (23.2) -
======= ======= ======== ======= ======== =======
Further disclosure on the Group's sale of businesses and fixed asset investments
can be found in Note 8 and on the sale of fixed assets in Note 9.
4. Taxation
Based on profit projections for the year to 31 December 2004, the Group's
forecast full year effective tax rate on profit before exceptional items and
goodwill amortisation is estimated to be 27%. The tax charge in respect of the
profit arising in the six month period to 30 June 2004 has been calculated by
reference to the expected full year tax rate. The forecast full year rate is
lower than the standard rate of UK tax due to the utilisation of UK tax losses
arising in prior years.
5. Dividends
The interim ordinary dividend of 2.675p per share (2003: 1.575p) will be paid on
12 November 2004, to shareholders on the register at the close of business on 17
September 2004. The interim dividend for 2004 includes 1.0p per share that
represents a return to shareholders of a proportion of the profit generated on
the disposal of PPP equity shareholdings as disclosed in Note 8. The Dividend
Reinvestment Plan will also be offered to shareholders who authorise or who have
already authorised the company to apply their cash dividends to the market
purchase of additional ordinary shares in Carillion plc.
6. Earnings per ordinary share
(a) Basic
Earnings per ordinary share is calculated by dividing the loss for the financial
period, amounting to £24.7m (six months ended 30 June 2003: £4.5m profit; year
ended 31 December 2003: £8.3m profit) by 208.1m (six months ended 30 June 2003:
207.5m; year ended 31 December 2003: 207.6m) ordinary shares being the weighted
average number of shares in issue during the period. The weighted average number
of shares excludes shares held by the Employee Share Ownership Plan and the
QUEST, which amount to 5.6m shares in total.
6. Earnings per ordinary share (continued)
(b) Adjusted
A reconciliation of the basic earnings per ordinary share to the adjusted
amounts shown on the face of the profit and loss account is set out below in
order to illustrate the impact of all exceptional items (as disclosed in Note 3)
and goodwill amortisation.
Half year to Half year to Year to
30 June 2004 30 June 2003 31 December 2003
£m Pence per £m Pence per £m Pence per
share share share
(Loss)/profit
attributable
to
shareholders (24.7) (11.9) 4.5 2.2 8.3 4.0
Exceptional
items:
Impairment of
goodwill - - - - 33.1 15.9
Profit on sale
of fixed asset
investments (7.7) (3.7) - - (11.8) (5.6)
Profit on sale
of fixed
assets (2.6) (1.2) - - - -
Loss on sale
of businesses 47.4 22.7 1.0 0.5 1.3 0.6
Interest
payable - - - - 0.6 0.3
Less taxation
in respect of
the above (0.5) (0.2) (0.1) (0.1) - -
------- ------- ------- ------- ------ -------
Profit before
all exceptional
items 11.9 5.7 5.4 2.6 31.5 15.2
Amortisation
of goodwill 1.9 0.9 1.8 0.9 3.8 1.8
Less taxation
in respect of
the above (0.2) (0.1) (0.2) (0.1) (0.4) (0.2)
======= ======= ======= ======= ====== =======
Profit before
all exceptional
items and 13.6 6.5 7.0 3.4 34.9 16.8
goodwill
amortisation ======= ======= ======= ======= ====== =======
(c) Diluted
Diluted earnings per ordinary share have been calculated using the same
numerators as set out in (a) and (b) above and by reference to the following
number of shares:
Number of ordinary shares
At 30 June At 30 June At 31 December
2004 2003
m 2003 m
m
Number of ordinary
shares per basic
earnings per share
calculations 208.1 207.5 207.6
Adjustments to
reflect dilutive
shares under option 2.1 1.9 1.7
-------- --------- --------
Number of ordinary
shares per diluted
earnings per share
calculations 210.2 209.4 209.3
======== ========= ========
7. Reconciliation of movements in consolidated equity shareholders' funds
Half year to Half year to Year to
30 June 2004 30 June 2003 31 December
2003
£m £m £m
(Loss)/profit for the financial
period
Group (31.4) 0.2 2.7
Joint ventures 6.7 4.3 5.6
--------- --------- ----------
Dividends (24.7) 4.5 8.3
(5.6) (3.3) (14.1)
--------- --------- ----------
Retained (loss)/profit for
the Group and its share of
joint ventures (30.3) 1.2 (5.8)
Exchange movements - - (1.3)
New share capital subscribed
by QUEST 0.1 - 1.5
Other new share capital
subscribed 0.1 - -
Goodwill written back on
disposal 55.2 5.5 5.5
Impairment of goodwill
previously written off to
reserves - - 8.1
Issue/(purchase) of own
shares 0.8 (0.2) (0.2)
--------- --------- ----------
Net addition to equity
shareholders' funds 25.9 6.5 7.8
Opening equity shareholders'
funds 149.3 141.5 141.5
--------- --------- ----------
Closing equity shareholders'
funds 175.2 148.0 149.3
========= ========= ==========
Opening equity shareholders'
funds as previously reported 155.5 147.5 147.5
Prior year adjustments (see
Note 1) (6.2) (6.0) (6.0)
--------- --------- ----------
Opening equity shareholders'
funds as restated 149.3 141.5 141.5
========= ========= ==========
8. Acquisitions and disposals
In May 2004 the Group disposed of its mechanical and electrical engineering
business, Crown House Engineering. The movements that relate to this disposal
are summarised below:
Book Value
£m
Tangible fixed assets (0.7)
Stocks (0.1)
Debtors due within one year (14.9)
Creditors due within one year 26.5
----------
Net liabilities disposed of 10.8
Fair value of consideration receivable 2.0
Goodwill written back on disposal (55.2)
Provision against retained contracts (3.5)
----------
Loss on disposal (45.9)
==========
Consideration is stated after deducting costs associated with the disposal of
£0.7m.
Consideration includes £1.1m in debtors that is subject to agreement of the
completion accounts. Costs of disposal includes £0.5m in accruals. The cash flow
relating to the disposal of Crown House Engineering is therefore £1.4m.
In addition to the above disposal, the Group incurred costs of £1.5m associated
with the closure of a number of small non-core operations.
In June 2004, the Group disposed of its 50% equity shareholding in UK Highways
M40 (Holdings) Limited for consideration (net of disposal costs) of £19.0m. In
addition, in June 2004 the Group disposed of 50% of its 100% equity shareholding
in Sheppey Route (Holdings) Limited for £1.2m. The total profit on these
disposals amounted to £7.7m.
9. Network Rail
In May 2004 a contractual agreement was reached with Network Rail to transfer
the assets and undertakings relating to the Group's five rail maintenance
contracts. Two contracts transferred on 29 May 2004 and the remaining three
transferred on 24 July 2004.
The assets transferred consisted primarily of plant, equipment, consumables and
stocks. In addition the Group wrote off a prepayment of pension contributions
relating to transferring employees. The book value of assets at the date of the
agreement was £13.8 million. A profit of £2.6 million arose on the transfer of
the tangible fixed assets as disclosed in Note 3. Other terms of the transfer
agreement dealt with the settlement of contract claims in the normal course of
business, the costs of transfer and the separation terms. Full provision has
been made for anticipated costs from the balance of amounts received on
settlement, the quantum of which is subject to a confidentiality undertaking
with Network Rail.
Independent review report by KPMG Audit Plc to Carillion plc
Introduction
We have been instructed by the Company to review the financial information set
out on pages 8 to 15 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company for
our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where they
are to be changed in the next annual accounts in which case any changes, and the
reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4: 'Review of interim financial information' issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2004.
KPMG Audit Plc
Chartered Accountants, Birmingham
8 September 2004
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