Interim Report 2010

RNS Number : 6556R

Carillion PLC

26 August 2010

Half Yearly results for the six months ended 30 June 2010

Carillion, a leading support services company, continues to perform well with earnings growing in line with expectations.

· Underlying profit before taxation up 7% to £65.7m (2009⁽¹⁾: £61.6m)⁽²⁾, with growth more than offsetting the £14m of underlying profit before tax contributed by the non-core businesses and PPP investments sold in 2009.

· Operating margins increased in support services and Middle East construction services, and remained stable in construction services (excluding the Middle East).

· Reported profit before taxation up 17% to £58.8m (2009⁽¹⁾: £50.1m).

· Underlying earnings per share (eps) up 4% to 13.0p (2009⁽¹⁾: 12.5p)⁽³⁾, with basic eps up 21% to 12.9p (2009: 10.7p).

· Interim dividend up 4% to 4.8p (2009: 4.6p), with dividend cover maintained at 2.7 times.

· Strong balance sheet, with cash flow from operations of £104.8m (2009: £114.4m) and net cash at 30 June 2010 of £68.0m (31 December 2009: £24.9m).

· Total revenue of £2.5bn (2009⁽¹⁾: £2.8bn) reflected the disposal of non-core businesses and PPP equity investments in 2009, and a continuing focus on margins rather than revenue.

· Strong revenue visibility of 98% for 2010 and 75% for 2011, based on expected 2010 revenue and current secured and probable orders.

(1) Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12

(2) After Joint Ventures taxation of nil (2009: £2.9m) and before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information)

(3) Before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information)

Carillion Chairman, Philip Rogerson, commented:

"Carillion has continued to perform well in the first half of 2010, despite challenging market conditions in the UK. With a well-balanced and resilient UK and international business mix, strong revenue visibility and good positions in market sectors where we have substantial pipelines of contract opportunities, we expect to make further progress in the second half of 2010 in line with market expectations. Furthermore, the Board believes that the medium term prospects for the Group remain positive, with potential for strong international growth and substantial growth in UK support services."

A telephone dial in facility (+44 (0) 207 190 1596) will be available from 9:00am for analysts and investors who are unable to attend the presentation. The presentation can be viewed on Carillion's website at www.carillionplc.com/investors/investors_presentations.asp.

For further information contact:

Richard Adam, Group Finance Director tel: +44 (0) 1902 422431

John Denning, Group Corporate Affairs Director tel: +44 (0) 1902 316426

Finsbury

James Murgatroyd and Gordon Simpson tel: +44 (0) 20 7251 3801

26 August 2010

Notes to Editors:

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

In the UK, Carillion's principal market sectors are Defence, Education, Health, Facilities Management & Services, Rail, Roads, Building, Civil Engineering and Utilities Services.

In the Middle East, Carillion's principal market sectors are Construction and Facilities Management. In Canada and the Caribbean, the Group's main sectors are Health, Roads Maintenance and Construction.

Carillion's portfolio of equity investments in Public Private Partnership projects includes projects in the UK and Canada, particularly in the Defence, Education, Health and Transport sectors.

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

		2010	2009⁽¹⁾	Change
Income statement
Total revenue	£m	2,507.1	2,827.9	-11%
Support services underlying operating margin⁽²⁾	Percentage	3.9	3.4	n/a
Middle East construction services underlying operating margin⁽²⁾	Percentage	8.5	7.7	n/a
Construction services (excluding Middle East) underlying operating margin⁽²⁾	Percentage	1.1	1.1	n/a
Underlying profit from operations⁽³⁾	£m	69.8	71.0	-2%
Underlying profit before taxation⁽⁴⁾	£m	65.7	61.6	+7%
Profit before taxation	£m	58.8	50.1	+17%
Underlying earnings per share⁽⁵⁾	Pence	13.0	12.5	+4%
Basic earnings per share	Pence	12.9	10.7	+21%
Dividends
Proposed interim dividend per share	Pence	4.8	4.6	+4%
Underlying proposed dividend cover⁽⁵⁾	Times	2.7	2.7	n/a
Basic proposed dividend cover	Times	2.7	2.3	n/a
Cash flow statement
Cash generated from operations⁽⁶⁾	£m	104.8	114.4	-8%
Underlying profit from operations cash conversion	Percentage	150.0	159.6	n/a
Deficit pension contributions	£m	14.7	12.3	+20%
Balance sheet
Net cash/(borrowing)	£m	68.0	(146.0)	n/a
Committed borrowing facility to 2012	£m	640.0	590.0	n/a
Net retirement benefit liability (net of taxation)	£m	257.1	176.4	+46%
Net assets	£m	744.0	758.4	-2%

(1) Restated on adoption of International Financial reporting Interpretations Committee (IFRIC) 12

(2) Before Joint Ventures net financial expense and taxation, intangible amortisation and non-recurring operating items (see note 3 to the financial information)

(3) After Joint Ventures net finance expense of £6.8m (2009: £11.7m) and taxation of nil (2009: £2.9m) and before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information)

(4) After Joint Ventures taxation of nil (2009: £2.9m) and before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information)

(5) Before intangible amortisation, non-recurring operating items and non-operating items

(6) Before pension deficit recovery payments and non-recurring operating items and after dividends received from Joint Ventures

Summary results

The Group continues to benefit from a resilient business mix of support services, equity investments in Public Private Partnership (PPP) projects and a highly selective construction capability, which in the UK and Canada is increasingly being focused on delivering PPP projects and integrated solutions for support services customers.

As expected, total revenue, including Joint Ventures, reduced by 11 per cent to £2.5 billion (2009⁽¹⁾: £2.8 billion), due to the disposal of non-core businesses, the sale of equity investments in PPP projects, the timing of project starts and completions in the Middle East and an increased focus on margins rather than revenue.

Underlying profit before tax⁽²⁾ increased by seven per cent to £65.7 million (2009⁽¹⁾: £61.6 million) and underlying earnings per share⁽³⁾ increased by four per cent to 13.0 pence (2009⁽¹⁾: 12.5 pence). This was due to improved or stable margins in each of our business segments and a reduced interest charge, which reflected the Group moving from a net borrowing to a net cash position by the end of 2009, with a further increase in net cash at 30 June 2010.

Profit remains cash-backed with underlying cash flow from operations of £104.8 million (2009: £114.4 million) substantially ahead of underlying profit from operations of £69.8 million (2009⁽¹⁾: £71.0 million). At 30 June 2010 the Group had net cash of £68.0 million (31 December 2009: £24.9 million).

The Group continues to have very good revenue visibility and at 30 June 2010 this was 98 per cent for 2010 and 75 per cent for 2011, based on expected 2010 revenue and secured and probable orders. The Group secured over £3 billion of new orders during the first six months of the year and the order book increased to £18.9 billion at 30 June (31 December 2009⁽¹⁾: £17.9 billion), despite the sale of a further PPP equity investment that removed some £0.5 billion from the order book. In addition the Group had a pipeline of probable new orders at the half year worth £1.0 billion (31 December 2009: £2.0 billion), together with our largest ever pipeline of contract opportunities.

In view of our first half performance and prospects for the second half and for the medium term, the Board has increased the interim dividend by four per cent to 4.8 pence per share (2009: 4.6 pence).

(1) Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12.

(2) After Joint Ventures taxation of nil (2009: £2.9m) and before intangible amortisation, non-recurring operating items and non-operating items.

(3) Before intangible amortisation, non-recurring operating items and non-operating items.

Business performance

Notwithstanding challenging market conditions, Carillion continued to perform well in the first half of 2010, with underlying profit before tax⁽¹⁾ and underlying earnings per share⁽²⁾ increasing by seven per cent and four per cent respectively. This was achieved despite the effects of disposing of two non-core businesses and four investments in Public Private Partnership (PPP) projects in 2009, which reduced first half revenue by approximately £160 million and first half underlying profit before taxation⁽¹⁾ by some £14 million, compared with the first half of 2009.

Total underlying profit from operations⁽³⁾ reduced by two per cent to £69.8 million (2009⁽⁴⁾: £71.0 million), which included profit from joint ventures of £20.0 million (2009⁽⁴⁾: £28.4 million). The reduction in first half operating profit was due to a number of factors. First, the disposal of two non-core businesses - Enviros and IT Services - and the sale of four equity investments in PPP projects in 2009, which generated some £158 million of proceeds. Second, the timing of project starts in the Middle East, which, as previously indicated, will be second-half weighted in 2010. Third, a strategic decision by Aviva to take certain services in-house and fourth, our ongoing focus on margins rather than revenue.

The total margin based on underlying profit from operations⁽³⁾ increased to 2.8 per cent (2009⁽⁴⁾: 2.5 per cent), reflecting our focus on margins, notably by targeting larger contracts for customers seeking innovative, value for money services.

After a net financial expense of £4.1 million (2009: £9.4 million), which included a £1.7 million pension scheme interest expense (2009: £1.3 million), underlying profit before taxation⁽¹⁾ was £65.7 million (2009⁽⁴⁾: £61.6 million), an increase of seven per cent. Underlying earnings per share⁽²⁾ on the same measure increased by four per cent to 13.0 pence (2009⁽⁴⁾: 12.5 pence).

Intangible amortisation was £13.8 million (2009: £15.2 million), non-recurring operating and non-operating items amounted to an income of £6.9 million (2009⁽⁴⁾: £3.7 million), leaving profit before taxation of £58.8 million (2009⁽⁴⁾: £50.1 million). The Group taxation charge of £4.7 million (2009: £5.6 million) when combined with a nil charge on Joint Venture profits (2009⁽⁴⁾: £2.9 million), represented an underlying effective tax rate⁽²⁾ of 17 per cent. Profit after tax was £54.1 million (2009⁽⁴⁾: £44.5 million). After non-controlling interests of £2.6 million (2009: £2.1 million), profit attributable to Carillion shareholders was £51.5 million (2009⁽⁴⁾: £42.4 million) and basic earnings per share were 12.9 pence (2009⁽⁴⁾: 10.7 pence).

(1) After Joint Ventures taxation of nil (2009: £2.9m) and before intangible amortisation, non-recurring items and non-operating items

(2) Before intangible amortisation, non-recurring operating items and non-operating items

(3) After Joint Ventures net financial expense of £6.8m (2009: £11.7m) and taxation of nil (2009: £2.9m) and before intangible amortisation, non-recurring operating items and non-operating items

(4) Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12

Income from non-recurring operating items and non-operating items of £6.9 million comprised profit of £16.3 million on the sale of an equity investment in a Public Private Partnership (PPP) project and rationalisation costs of £9.4 million incurred to ensure that the Group's cost base reflects the expected reduction in our UK construction market as indicated in the UK Government's Emergency Budget on 22 June 2010.

The ongoing pensions charge to profit in the first half of 2010 was £14.6 million (2009: £14.4 million). After additional cash payments to the Group's pension schemes of £14.7 million, in line with the Group's pension deficit recovery plan, the Group's pension schemes had a total deficit net of tax at 30 June 2010 of £257.1 million (31 December 2009: £211.1 million).

Underlying cash flow from operations⁽¹⁾ of £104.8 million once again exceeded underlying profit from operations of £69.8 million. After the £14.7 million pension deficit recovery payment, restructuring costs of £8.6 million, interest, tax and dividend payments of £41.5 million, net capital expenditure of £6.8 million, net receipts of £11.9 million relating to acquisitions and disposals and other costs of £2.0 million, the Group had net cash at 30 June 2010 of £68.0 million (31 December 2009: £24.9 million).

Net receipts on acquisitions and disposals of £11.9 million comprised £31.3 million of proceeds from the sale of investments in PPP projects and deferred consideration of £1.6 million from the disposal of Enviros in 2009, offset by £21.0 million of net investments in PPP projects.

At 30 June, the Group's revenue visibility was 98 per cent for 2010 and 75 per cent for 2011 based on expected 2010 revenue and secured and probable orders. Despite challenging market conditions, we secured over £3 billion of new orders in the first half and our forward order book at the half year increased to £18.9 billion (31 December 2009⁽²⁾: £17.9 billion), despite the sale of our equity investment in the Queen Alexandra Hospital PPP project, which removed some £0.5 billion from the order book. Our pipeline of probable new orders was worth £1.0 billion (31 December 2009: £2.0 billion), which includes only projects where there is a very high probability that we will secure the order, such as those for which we are the preferred bidder. In addition, we have our largest ever pipeline of contract opportunities.

(1) Before pension deficit recovery payments and non-recurring operating items and after dividends received from Joint Ventures

(2) Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12

Financial reporting segments and analysis

Operating profit by financial reporting segment

			Change from
	2010	2009⁽¹⁾	2009
	£m	£m	%
Support services	43.2	42.9	+1
Public Private Partnership projects	14.7	15.7	-6
Middle East construction services	15.4	24.9	-38
Construction services (excluding the Middle East)	12.1	10.9	+11
	85.4	94.4	-10
Group eliminations and unallocated items	(8.8)	(8.8)	-
Profit from operations before Joint Ventures
net financial expense and taxation	76.6	85.6	-11
Share of Joint Ventures net financial expense	(6.8)	(11.7)	+42
Share of Joint Ventures taxation	-	(2.9)	+100
Underlying profit from operations⁽²⁾	69.8	71.0	-2
Intangible amortisation	(13.8)	(15.2)	+9
Non-recurring operating items	(9.4)	-	-

Reported profit from operations	46.6	55.8	-16

(1) Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12

(2) After Joint Ventures net financial expense of £6.8m (2009: £11.7m) and taxation of nil (2009: £2.9m) and before intangible amortisation and non recurring operating items

Support services

2010

£m

2009

£m

Change from 2009

Revenue

- Group

- Share of Joint Ventures

977.1

140.5

1,132.8

145.2

1,117.6

1,278.0

-13

Underlying operating profit⁽³⁾

- Group

- Share of Joint Ventures

35.5

7.7

35.6

7.3

43.2

42.9

(3) Before intangible amortisation and non-recurring operating items

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

Although revenue reduced by 13 per cent to £1,117.6 million, underlying operating profit increased slightly to £43.2 million, reflecting an increase in the first-half operating margin from 3.4 per cent to 3.9 per cent. The reduction in revenue was due to the disposal of non-core businesses in 2009, the loss of a contract to manage insurance claims for Aviva, which took a strategic decision to take in-house those services that involve direct contact with its customers, and our focus on margins rather than revenue.

Despite this focus on margins rather than revenue, the intake of new orders in the first half remained healthy and the value of our forward order book for support services at 30 June had increased to £11.3 billion (31 December 2009: £11.1 billion). The value of probable new orders at the half year was £0.5 billion (31 December 2009: £0.6 billion), but our pipeline of potential contract opportunities had substantially increased to over £8 billion (31 December 2009: £5.5 billion).

With good revenue visibility and a continuing focus on margins, we expect to achieve our target full-year margin of around five per cent in this segment.

As we move through 2011 into 2012 and 2013, we continue to expect outsourcing by central and local government to increase, in order to reduce public expenditure, while continuing to deliver value-for-money public services. Together with our large high-quality order book, substantial pipeline of probable orders and largest ever pipeline of contract opportunities, this offers the potential for substantial growth over the medium term.

Public Private Partnership (PPP) projects

	2010 £m	2009⁽¹⁾ £m	Change from 2009 %
Revenue - Group - Share of Joint Ventures	0.5 155.0	0.5 192.4
Revenue - Group - Share of Joint Ventures	155.5	192.9	-19
Underlying operating profit⁽²⁾ - Group - Share of Joint Ventures	9.1 5.6	- 15.7
	14.7	15.7	-6

(1) Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12

(2) Before intangible amortisation and non-recurring operating items

In this segment we report the equity returns on investments in Public Private Partnership (PPP) projects. The results of 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.

We bid projects to achieve a target internal rate of return of 15 per cent on our equity investments over the life of the concession contracts, which is typically between 25 and 35 years. Once construction of the asset is complete and the project has moved into the operational phase, with the support services contract firmly established, we have the option of selling our equity investments and reinvesting the proceeds in new projects.

During the first half, we added four new projects to our portfolio of financially closed projects - Southmead Hospital, the Rochdale and Wolverhampton Building Schools for the Future (BSF) programmes and the Forensic Services and Coroners' Complex in Toronto - in which Carillion expects to invest a combined total of £69.4 million of equity.

In June 2010, we sold our equity investment in the Queen Alexandra Hospital project, generating proceeds of £31.3 million, which reflected a discount rate of some seven per cent. Over the last seven years, we have sold a total of 29 equity investments, generating proceeds of £312 million and a pre-tax profit of £122 million.

At 30 June 2010, we had a portfolio of 26 financially closed projects in which we had invested some £55 million. The Directors' valuation of this portfolio at 30 June 2010 was approximately £141 million (31 December 2009: £115 million), based on a discount rate of nine per cent. At 30 June 2010, we had a forward order book worth £2.9 billion (31 December 2009⁽¹⁾: £2.6 billion). Probable orders had reduced to zero (31 December 2009: £0.2 billion), as a result of achieving financial close during the first half on the four projects for which we were previously the preferred bidder.

The outlook in our PPP markets continues to be positive. We are currently shortlisted for a further seven projects in the UK and Canada in which Carillion could potentially invest up to £184 million, in addition to the £129 million of commitments yet to be invested in projects still in the construction phase within the Group's existing portfolio of financially closed projects. Furthermore, we expect continuing opportunities to bid for new projects, particularly in Canada, but also in the UK, where the Coalition Government has recently confirmed that a number of new projects will proceed as Public Private Partnerships.

We therefore expect to continue generating substantial value for the Group by adding new investments to our portfolio, while continuing to explore opportunities to sell investments in mature projects, namely those that have moved from construction into the operational phase, for which there continues to be strong buying interest in the secondary equity market.

(1) Restated on adoption of International Financial Reporting Interpretations Committee (IFRIC) 12

Middle East construction services

	2010 £m	2009 £m	Change from 2009 %
Revenue - Group - Share of Joint Ventures	68.4 112.1	54.9 266.7
Revenue - Group - Share of Joint Ventures	180.5	321.6	-44
Underlying operating profit⁽²⁾ - Group - Share of Joint Ventures	2.2 13.2	3.8 21.1
	15.4	24.9	-38

(2) 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.

As expected, first half revenue reduced by 44 per cent to £180.5 million, due to the timing of project starts and completions. Underlying operating profit reduced by 38 per cent to £15.4 million, an increased operating margin of 8.5 per cent (2009: 7.7 per cent). Cashflow has also remained strong, which supported a 21 per cent increase in the dividend received from our Middle East businesses.

Our markets in Abu Dhabi and Oman have remained strong, with lower activity levels in Dubai remaining in line with expectations. Carillion's share of the forward order book of our Middle East businesses had increased to £1.0 billion at 30 June 2010 (31 December 2009: £0.7 billion) and our pipeline of probable new orders increased to some £0.3 billion (31 December 2009: £0.2 billion).

Overall, the outlook for the second half of 2010 is positive, with revenue expected to grow substantially and with the operating margin remaining strong.

We continue to believe that the medium-term outlook for growth in the Middle East is positive, given the scale of planned investment in our main market sectors, notably Abu Dhabi, Oman and Qatar, where the business we established at the beginning of 2010 is now bidding its first projects. This is reflected in the size of our pipeline of contract opportunities which has increased from around £4 billion at 31 December 2009 to over £6 billion at 30 June 2010. Furthermore, we continue to look for opportunities for further geographical expansion into adjacent markets that have substantial investment programmes in infrastructure, health, education and commercial property. Overall, we believe we have the potential to double Carillion's share of revenue from our Middle East businesses over the next three to five years.

Construction services (excluding the Middle East)

	2010 £m	2009 £m	Change from 2009 %
Revenue - Group - Share of Joint Ventures	1,051.9 1.6	1,033.6 1.8
Revenue - Group - Share of Joint Ventures	1,053.5	1,035.4	+2
Underlying operating profit⁽¹⁾ - Group - Share of Joint Ventures	11.8 0.3	12.0 (1.1)
	12.1	10.9	+11

⁽¹⁾Before intangible amortisation, non-recurring operating items and non-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 and the Caribbean.

Overall performance in this segment continues to be satisfactory and in line with previously announced plans to reduce revenue from our UK construction business from £1.8 billion in 2009 to around £1.2 billion over the next three years. This reduction will be achieved by applying strict contract selectivity criteria focused on maintaining the construction capability we need in order to deliver integrated solutions for Public Private Partnership (PPP) projects and other support services customers.

The increase in first-half revenue of two per cent was driven by growth in Canada. Underlying operating profit increased by 11 per cent, with the operating margin maintained at 1.1 per cent.

At 30 June 2010, our forward order book had increased to £3.7 billion (31 December 2009: £3.5 billion) and we had a pipeline of probable new orders worth approximately £0.2 billion (31 December 2009: £1.0 billion).

In the second half of 2010, we expect continuing revenue growth in Canada driven by the strong PPP market. We expect the full year operating margin in this segment to be ahead of the 1.4 per cent we achieved in 2009, as contract selectivity will not only reduce UK revenue, but is also supporting our objective of increasing the operating margin for all our construction activities, including the Middle East, towards three per cent in 2010 (2009: 2.8 per cent).

New accounting standards and interpretations

From 1 January 2010, International Financial Reporting Interpretations Committee (IFRIC) 12 'Service concession arrangements' became effective for the Group. IFRIC 12 applies to the accounting for Public Private Partnerships (PPP) projects in which the Group participates through joint ventures. The overall impact of IFRIC 12 is to change the timing of when revenue and profit are recognised for PPP projects, but it does not affect the total profit recognised or the cash flows generated during the life of PPP projects. The principal change requires revenue and profit to be recognised during the construction period, which was not previously required, and for borrowing costs to be expensed immediately, rather than capitalised during the construction period. As IFRIC 12 has no effect on cash flows, there is no impact on the Directors' valuation of the Group's PPP portfolio. Following the adoption of IFRIC 12, comparative information for 2009 has been restated accordingly, reducing underlying profit before tax by £1.0 million at 30 June 2009 and £6.7 million at 31 December 2009. Full details of the restatement are given in note 12 to the financial information.

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 on pages 16, 28 and 45 of our 2009 Annual Report and Accounts, which was published in March 2010. The principal operational risks summarised in that report include managing our pension schemes, winning work in competitive markets, continued global economic pressures on markets, managing major contracts and maintaining financial discipline. These risks have not changed materially, other than by the addition of one new principal risk, namely our ability to recruit and retain excellent people, which we are mitigating by continuing to focus on the development and implementation of our leadership, personal development and employee engagement programmes.

Management

To support the delivery of the Group's objectives for growth, the Board has decided to appoint a Chief Operating Officer with direct responsibility for all the Group's business units and for the Group's Health and Safety and Sustainability programmes. Richard Howson has been appointed to this role with immediate effect. Richard was previously the executive director responsible for the Group's Middle East, Private Finance and UK Building businesses and for Group-wide Health and Safety. Don Kenny, who was responsible for the Group's property-related support services activities, has stepped down from the Board and as a Director of the Company. Don leaves Carillion with the Board's best wishes and grateful thanks for the significant contribution he has made to Carillion's development.

Outlook and prospects

We expect to make further progress in the second half in line with market expectations, due to our well-balanced and resilient UK and international business mix, an order book that gives us strong revenue visibility and good positions in market sectors where we have substantial pipelines of contract opportunities.

Looking further forward, we continue to believe that the outlook for the medium term also remains positive.

In the UK, our support services business is well positioned to benefit from the expected increase in Government outsourcing of non-core services, particularly as we move through 2011 into 2012 and 2013, in order to achieve the 25 per cent reduction in public sector running costs announced in the UK Government's Emergency Budget in June 2010. We believe this offers the potential for substantial growth in our UK support services business. The plans we announced in May 2010 to reduce UK construction revenue by one third over the next three years, anticipated the one third cut in gross Government capital spending on construction over the same period that was confirmed in the Emergency Budget. We will achieve this reduction by applying strict contract selectivity criteria, to focus our UK construction capability on delivering integrated solutions for Public Private Partnership projects and other support services customers.

In the Middle East, we believe we have the opportunity to double Carillion's revenue in this region to around £1 billion over the next three to five years, given the strength of our markets, especially in Abu Dhabi, Oman and Qatar, and the potential we have for further geographical expansion in this region.

In Canada, we also have strong markets, particularly Public Private Partnership projects, which we believe will not only enable us to achieve healthy growth in Canada in 2010, but will also provide the opportunity to double our revenue in Canada to around £1 billion over the next three to five years.

Unaudited condensed consolidated income statement for the six months ended 30 June
	Note	2010 £m	2009⁽¹⁾ £m	Year ended 31 December 2009⁽¹⁾ £m
Total revenue		2,507.1	2,827.9	5,629.3
Less: Share of jointly controlled entities' revenue		(409.2)	(606.1)	(1,125.1)
Group revenue	2	2,097.9	2,221.8	4,504.2
Cost of sales		(1,947.3)	(2,056.7)	(4,154.4)
Gross profit		150.6	165.1	349.8
Administrative expenses		(124.0)	(137.7)	(264.9)
Group operating profit		26.6	27.4	84.9
Analysed between:
Group operating profit before intangible amortisation and non-recurring operating items		49.8	42.6	130.9
Intangible amortisation		(13.8)	(15.2)	(30.8)
Non-recurring operating items⁽²⁾	3	(9.4)	-	(15.2)

Share of results of jointly controlled entities	2	20.0	28.4	59.2
Analysed between:
Operating profit		26.8	43.0	84.9
Net financial expense		(6.8)	(11.7)	(21.8)
Taxation		-	(2.9)	(3.9)

Profit from operations		46.6	55.8	144.1
Analysed between:
Profit from operations before intangible amortisation and non-recurring operating items		69.8	71.0	190.1
Intangible amortisation		(13.8)	(15.2)	(30.8)
Non-recurring operating items⁽²⁾	3	(9.4)	-	(15.2)

Non-operating items	3	16.3	3.7	6.4
Net financial expense	4	(4.1)	(9.4)	(14.6)
Analysed between:
Financial income		61.0	56.6	113.4
Financial expense		(65.1)	(66.0)	(128.0)

Profit before taxation		58.8	50.1	135.9
Analysed between:
Profit before taxation, intangible amortisation, non-recurring operating items and non-operating items		65.7	61.6	175.5
Intangible amortisation		(13.8)	(15.2)	(30.8)
Non-recurring operating items⁽²⁾	3	(9.4)	-	(15.2)
Non-operating items	3	16.3	3.7	6.4

Taxation	5	(4.7)	(5.6)	(11.5)
Profit for the period		54.1	44.5	124.4

Profit attributable to:
Equity holders of the parent		51.5	42.4	120.6
Non-controlling interests		2.6	2.1	3.8
Profit for the period		54.1	44.5	124.4

Earnings per share	6
Basic		12.9p	10.7p	30.5p
Diluted		12.9p	10.6p	30.3p

(1) Restated on adoption of IFRIC 12 (see note 12)

(2) This includes rationalisation costs, curtailment gain and the Office of Fair Trading penalty (see note 3)

	Unaudited condensed consolidated statement of comprehensive income for the six months ended 30 June
			2010		2009⁽¹⁾		Year ended 31 December 2009⁽¹⁾
		£m	£m	£m	£m	£m	£m
Profit for the period			54.1		44.5		124.4
Net (loss)/gain on hedge of net investment in foreign operations		(4.2)		6.0		1.0
Currency translation differences on foreign operations		9.6		(29.1)		(20.0)
	Currency translation differences relating to non-controlling interests	-		(0.1)		0.1
	Increase in fair value of available for sale assets	9.5		-		-
	Actuarial losses on defined benefit pension schemes	(77.0)		(154.0)		(220.0)
		(62.1)		(177.2)		(238.9)
Taxation in respect of the above		22.7		41.5		61.3
Share of recycled cash flow hedges within jointly controlled entities (net of taxation)		0.1		8.3		8.3
Share of change in fair value of effective cash flow hedges within jointly controlled entities (net of taxation)		(5.1)		2.5		(4.2)

Other comprehensive expense for the period			(44.4)		(124.9)		(173.5)
Total comprehensive income/(expense) for the period			9.7		(80.4)		(49.1)

Attributable to:
	Equity holders of the parent		7.1		(82.4)		(53.0)
Non-controlling interests			2.6		2.0		3.9
			9.7		(80.4)		(49.1)

(1) Restated on adoption of IFRIC 12 (see note 12)

Unaudited condensed consolidated statement of changes in equity

for the six months ended 30 June 2010

	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 2010 as previously reported	198.6	16.8	(20.1)	(15.4)	-	419.4	171.6	770.9	6.3	777.2
Impact of adoption of IFRIC 12	-	-	-	4.8	-	-	(9.9)	(5.1)	-	(5.1)
At 1 January 2010 as restated	198.6	16.8	(20.1)	(10.6)	-	419.4	161.7	765.8	6.3	772.1
Comprehensive income
Profit for the period	-	-	-	-	-	-	51.5	51.5	2.6	54.1
Other comprehensive income
Net loss on hedge of net investment in foreign operations	-	-	(4.2)	-	-	-	-	(4.2)	-	(4.2)
Currency translation differences on foreign operations	-	-	9.6	-	-	-	-	9.6	-	9.6
Increase in fair value of available for sale assets	-	-	-	-	9.5	-	-	9.5	-	9.5
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	-	(77.0)	(77.0)	-	(77.0)
Taxation	-	-	1.2	-	-	-	21.5	22.7	-	22.7
Share of recycled cash flow hedges within jointly controlled entities (net of taxation)	-	-	-	0.1	-	-	-	0.1	-	0.1
Share of change in fair value of effective cash flow hedges within jointly controlled entities (net of taxation)	-	-	-	(5.1)	-	-	-	(5.1)	-	(5.1)
Transfer between reserves	-	-	-	-	-	(13.2)	13.2	-	-	-
Total comprehensive income	-	-	6.6	(5.0)	9.5	(13.2)	9.2	7.1	2.6	9.7
Transactions with owners
Contributions by and distributions to owners
New share capital issued	1.2	4.4	-	-	-	-	-	5.6	-	5.6
Acquisition of own shares	-	-	-	-	-	-	(5.6)	(5.6)	-	(5.6)
Share options exercised by employees	-	-	-	-	-	-	3.7	3.7	-	3.7
Equity settled transactions (net of deferred tax)	-	-	-	-	-	-	(1.1)	(1.1)	-	(1.1)
Dividends paid	-	-	-	-	-	-	(39.9)	(39.9)	(0.5)	(40.4)
Total transactions with owners	1.2	4.4	-	-	-	-	(42.9)	(37.3)	(0.5)	(37.8)

At 30 June 2010	199.8	21.2	(13.5)	(15.6)	9.5	406.2	128.0	735.6	8.4	744.0

Unaudited condensed consolidated statement of changes in equity

for the six months ended 30 June 2009

	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 2009 as previously reported	197.8	12.9	(0.9)	(17.0)	-	449.1	222.3	864.2	3.4	867.6
Impact of adoption of IFRIC 12	-	-	-	2.3	-	-	1.9	4.2	-	4.2
At 1 January 2009 as restated	197.8	12.9	(0.9)	(14.7)	-	449.1	224.2	868.4	3.4	871.8
Comprehensive income⁽¹⁾
Profit for the period	-	-	-	-	-	-	42.4	42.4	2.1	44.5
Other comprehensive income
Net gain on hedge of net investment in foreign operations	-	-	6.0	-	-	-	-	6.0	-	6.0
Currency translation differences on foreign operations	-	-	(29.1)	-	-	-	-	(29.1)	-	(29.1)
Currency translation differences relating to non- controlling interest	-	-	-	-	-	-	-	-	(0.1)	(0.1)
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	-	(154.0)	(154.0)	-	(154.0)
Taxation	-	-	(1.7)	-	-	-	43.2	41.5	-	41.5
Share of recycled cash flow hedges within jointly controlled entities (net of taxation)	-	-	-	8.3	-	-	-	8.3	-	8.3
Share of change in fair value of effective cash flow hedges within jointly controlled entities (net of taxation)	-	-	-	2.5	-	-	-	2.5	-	2.5
Transfer between reserves	-	-	-	-	-	(14.5)	14.5	-	-	-
Total comprehensive income	-	-	(24.8)	10.8	-	(14.5)	(53.9)	(82.4)	2.0	(80.4)
Transactions with owners
Contributions by and distributions to owners
New share capital issued	0.1	0.4	-	-	-	-	-	0.5	-	0.5
Equity settled transactions (net of deferred tax)	-	-	-	-	-	-	1.7	1.7	-	1.7
Dividends paid	-	-	-	-	-	-	(35.2)	(35.2)	-	(35.2)
Total transactions with owners	0.1	0.4	-	-	-	-	(33.5)	(33.0)	-	(33.0)

At 30 June 2009	197.9	13.3	(25.7)	(3.9)	-	434.6	136.8	753.0	5.4	758.4

⁽¹⁾Restated on adoption of IFRIC 12 (see note 12)

Unaudited condensed consolidated statement of changes in equity

for the year ended 31 December 2009

	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 2009 as previously reported	197.8	12.9	(0.9)	(17.0)	-	449.1	222.3	864.2	3.4	867.6
Impact of adoption of IFRIC 12	-	-	-	2.3	-	-	1.9	4.2	-	4.2
At 1 January 2009 as restated	197.8	12.9	(0.9)	(14.7)	-	449.1	224.2	868.4	3.4	871.8
Comprehensive income⁽¹⁾
Profit for the period	-	-	-	-	-	-	120.6	120.6	3.8	124.4
Other comprehensive income
Net gain on hedge of net investment in foreign operations	-	-	1.0	-	-	-	-	1.0	-	1.0
Currency translation differences on foreign operations	-	-	(20.0)	-	-	-	-	(20.0)	-	(20.0)
Currency translation differences relating to non-controlling interest	-	-	-	-	-	-	-	-	0.1	0.1
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	-	(220.0)	(220.0)	-	(220.0)
Taxation	-	-	(0.2)	-	-	-	61.5	61.3	-	61.3
Share of recycled cash flow hedges within jointly controlled entities (net of taxation)	-	-	-	8.3	-	-	-	8.3	-	8.3
Share of change in fair value of effective cash flow hedges within jointly controlled entities (net of taxation)	-	-	-	(4.2)	-	-	-	(4.2)	-	(4.2)
Transfer between reserves	-	-	-	-	-	(29.7)	29.7	-	-	-
Total comprehensive income	-	-	(19.2)	4.1	-	(29.7)	(8.2)	(53.0)	3.9	(49.1)
Transactions with owners
Contributions by and distributions to owners
New share capital issued	0.8	3.9	-	-	-	-	-	4.7	-	4.7
Acquisition of own shares	-	-	-	-	-	-	(4.2)	(4.2)	-	(4.2)
Share options exercised by employees	-	-	-	-	-	-	0.5	0.5	-	0.5
Equity settled transactions (net of deferred tax)	-	-	-	-	-	-	2.8	2.8	-	2.8
Dividends paid	-	-	-		-	-	(53.4)	(53.4)	(1.0)	(54.4)
Total transactions with owners	0.8	3.9	-	-	-	-	(54.3)	(49.6)	(1.0)	(50.6)

At 31 December 2009	198.6	16.8	(20.1)	(10.6)	-	419.4	161.7	765.8	6.3	772.1

⁽¹⁾Restated on adoption of IFRIC 12 (see note 12)

Unaudited condensed consolidated balance sheet

as at 30 June

	Note	2010 £m	2009⁽¹⁾ £m	At 31 December 2009⁽¹⁾ £m
Non-current assets
Property, plant and equipment		162.5	163.8	168.2
Intangible assets		1,230.7	1,258.8	1,241.3
Retirement benefit assets		2.6	2.9	2.6
Investments in jointly controlled entities		128.5	247.6	125.8
Other investments		56.7	-	46.2
Deferred tax assets		144.8	123.1	132.5

Total non-current assets		1,725.8	1,796.2	1,716.6

Current assets
Inventories		37.9	40.3	37.2
Trade and other receivables		1,114.5	1,136.7	1,038.4
Cash and cash equivalents	9	327.5	296.1	267.2
Income tax receivable		2.7	1.5	4.6
Derivative financial instruments		0.1	-	1.0

Total current assets		1,482.7	1,474.6	1,348.4

Total assets		3,208.5	3,270.8	3,065.0

Current liabilities
Borrowing		(42.4)	(56.3)	(54.0)
Derivative financial instruments		-	(1.8)	-
Trade and other payables		(1,779.1)	(1,742.9)	(1,683.6)
Provisions		(14.0)	(17.3)	(12.5)
Income tax payable		(9.0)	(10.5)	(11.3)

Total current liabilities		(1,844.5)	(1,828.8)	(1,761.4)

Non-current liabilities
Borrowing		(217.1)	(385.8)	(188.3)
Retirement benefit liabilities		(360.0)	(249.9)	(296.4)
Deferred tax liabilities		(33.4)	(40.0)	(37.3)
Provisions		(9.5)	(7.9)	(9.5)

Total non-current liabilities		(620.0)	(683.6)	(531.5)

Total liabilities		(2,464.5)	(2,512.4)	(2,292.9)

Net assets	2	744.0	758.4	772.1

Equity
Share capital	13	199.8	197.9	198.6
Share premium		21.2	13.3	16.8
Translation reserve		(13.5)	(25.7)	(20.1)
Hedging reserve		(15.6)	(3.9)	(10.6)
Fair value reserve		9.5	-	-
Merger reserve		406.2	434.6	419.4
Retained earnings		128.0	136.8	161.7

Equity attributable to shareholders of the parent		735.6	753.0	765.8
Non-controlling interests		8.4	5.4	6.3
Total equity		744.0	758.4	772.1

⁽¹⁾ Restated on adoption of IFRIC 12 (see note 12)

Unaudited condensed consolidated cash flow statement for the six months ended 30 June
	Note	2010 £m	2009 £m	Year ended 31 December 2009 £m
Cash flows from operating activities
Group operating profit		26.6	27.4	84.9
Depreciation amortisation		31.8	33.3	67.7
Loss on disposal of property, plant and equipment		0.1	2.1	2.5
Share based payment (income)/expense		(1.5)	2.4	3.9
Other non-cash movements		(0.3)	(12.2)	(4.5)
Non-recurring operating items		9.4	-	15.2

Operating profit before changes in working capital		66.1	53.0	169.7
(Increase)/decrease in inventories		(0.7)	(0.2)	4.1
(Increase)/decrease in trade and other receivables		(64.6)	(16.6)	107.3
Increase/(decrease) in trade and other payables		78.7	57.6	(51.5)

Cash generated from operations before pension deficit recovery payments and rationalisation costs		79.5	93.8	229.6
Deficit recovery payments to pension schemes		(14.7)	(12.3)	(29.0)
Rationalisation costs		(8.6)	(6.5)	(17.1)

Cash generated from operations		56.2	75.0	183.5
Financial income received		5.1	6.0	11.6
Financial expense paid		(6.8)	(13.8)	(23.3)
Taxation		0.4	4.1	2.9

Net cash flows from operating activities		54.9	71.3	174.7

Cash flows from investing activities
Disposal of property, plant and equipment		2.0	4.0	5.5
Disposal of investments in jointly controlled entities		31.3	13.8	100.7
Dividends received from jointly controlled entities		25.3	20.6	38.6
Disposal of businesses, net of cash disposed of		1.6	35.4	57.2
Acquisition of intangible assets		(1.3)	(0.8)	(4.3)
Acquisition of property, plant and equipment		(7.5)	(28.1)	(48.5)
Acquisition of equity in and loan advances to jointly controlled entities		(20.0)	(5.5)	(15.2)
Acquisition of other non-current asset investments		(1.0)	-	-

Net cash flows from investing activities		30.4	39.4	134.0

Cash flows from financing activities
Proceeds from issue of share capital		-	0.5	1.0
Proceeds from exercise of employee share options		2.3	-	-
Proceeds from finance leaseback		3.8	-	-
Draw down/(repayment) of bank and other loans		21.6	(41.4)	(233.6)
Payment of finance lease liabilities		(9.3)	(8.4)	(16.8)
Dividends paid to equity holders of the parent		(39.9)	(35.2)	(53.4)
Dividends paid to non-controlling interests		(0.3)	-	(1.0)

Net cash flows from financing activities		(21.8)	(84.5)	(303.8)

Increase in net cash and cash equivalents for the period		63.5	26.2	4.9
Net cash and cash equivalents at 1 January		252.4	250.0	250.0
Effect of exchange rate fluctuations on net cash and cash equivalents		2.2	(3.8)	(2.5)

Net cash and cash equivalents at period end	9	318.1	272.4	252.4

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 2010 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 2010 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services 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 2009, which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union, except for the following accounting standards and interpretations which are effective for the Group from 1 January 2010:

· International Accounting Standard (IAS) 27 'Consolidated and separate financial statements (revised 2008)'

· International Financial Reporting Standard (IFRS) 3 'Business combinations (revised 2008)'

· International Financial Reporting Interpretations Committee (IFRIC) 12 'Service concession arrangements'

· International Financial Reporting Interpretations Committee (IFRIC) 15 'Agreements for the construction of real estate'

· International Financial Reporting Interpretations Committee (IFRIC) 16 'Hedges of a net investment in a foreign operation'

IAS 27 'Consolidated and separate financial statements (revised 2008)' and IFRS 3 'Business combinations (revised 2008)' include revisions relating to the accounting for acquisitions. The principal change in accounting policy is that attributable transaction costs relating to business acquisitions which complete on or after 1 January 2010 are expensed in the income statement in the period incurred. Previously such costs would have been capitalised as part of goodwill relating to the acquisition. In addition, the term 'non-controlling interest' has been introduced to replace the term 'minority interest'. The revisions to IAS 27 and IFRS 3 have had no impact on profit, earnings per share or net assets in the six months ended 30 June 2010.

IFRIC 12 'Service concession arrangements' applies to the accounting for Public Private Partnership (PPP) projects in which the Group participates through jointly controlled entities. Principally, the impact of IFRIC 12 on the Group's PPP projects is to:

· Recognise revenue and profit during the construction period which was not previously required

· Expense borrowing costs in relation to financial asset projects which previously were capitalised on the balance sheet

· Re-assess the obligation in relation to life cycle maintenance of the asset constructed

The overall impact of IFRIC 12 is to change the timing of when profits are recognised in PPP projects but it does not impact the total profit recognised or cash flows during the life of the PPP project. Comparative information has been restated for the effect of the retrospective application of IFRIC 12 as disclosed in note 12.

IFRIC 15 'Agreement for the construction of real estate' clarifies the situations when a contract for the construction of property should be accounted for in accordance with IAS 11 'Construction contracts' or IAS 18 'Revenue'. Where a contract comprises separately identifiable components, the fair value of the total consideration is required to be allocated to each component and revenue is then recognised depending upon whether the component relates to the construction of an asset (in accordance with IAS 11) or the rendering of services or delivery of goods (in accordance with IAS 18) based upon a risks and rewards approach. The adoption of IFRIC 15 has had no impact on profit, earnings per share or net assets in the six months ended 30 June 2010.

IFRIC 16 'Hedges of a net investment in a foreign operation' clarifies the accounting treatment of hedges in a foreign operation, specifically, the nature of the item to be hedged and the amount for which a hedging relationship can be designated, where in the Group the hedging item can be held and the treatment on a disposal of a foreign operation. The adoption of IFRIC 16 has had no impact on profit, earnings per share or net assets in the six months ended 30 June 2010.

The comparative financial information for the year ended 31 December 2009 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 2009 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 Business Performance section earlier. The Group also considerable financial resources, including a £590m committed syndicated facility expiring on 30 September 2012. The Group has long-term contracts with a number of customers 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.

Operating segments

The Group comprises of the following main operating segments:

Support services

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

Public Private Partnership projects

In this segment we report the equity returns on our investments in Public Private Partnership projects in our chosen sectors of Defence, Health, Education, Transport, Secure and other Government accommodation.

Middle East construction services

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

Construction services (excluding the Middle East)

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

2 Segmental reporting (continued)

Segmental revenue and profit

		2010		2009⁽¹⁾		Year ended 31 December 2009⁽¹⁾
		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		977.1	35.5	1,132.8	35.6	2,108.3	102.9
Share of jointly controlled entities		140.5	7.7	145.2	7.3	281.2	14.8
		1,117.6	43.2	1,278.0	42.9	2,389.5	117.7
Inter-segment		53.3	-	69.6	-	117.7	-

Total		1,170.9	43.2	1,347.6	42.9	2,507.2	117.7

Public Private Partnership projects
	Group	0.5	9.1	0.5	-	1.1	-
Share of jointly controlled entities		155.0	5.6	192.4	15.7	417.3	30.7
		155.5	14.7	192.9	15.7	418.4	30.7
Inter-segment		-	-	-	-	-	-

Total		155.5	14.7	192.9	15.7	418.4	30.7

Middle East construction services
	Group	68.4	2.2	54.9	3.8	130.2	6.8
Share of jointly controlled entities		112.1	13.2	266.7	21.1	423.4	40.2
		180.5	15.4	321.6	24.9	553.6	47.0
Inter-segment		-	-	-	-	-	-

Total		180.5	15.4	321.6	24.9	553.6	47.0

Construction services (excluding the Middle East)
Group		1,051.9	11.8	1,033.6	12.0	2,264.6	31.7
Share of jointly controlled entities		1.6	0.3	1.8	(1.1)	3.2	(0.8)
		1,053.5	12.1	1,035.4	10.9	2,267.8	30.9
Inter-segment		0.7	-	15.1	-	57.7	-

Total		1,054.2	12.1	1,050.5	10.9	2,325.5	30.9

Group eliminations and unallocated items		(54.0)	(8.8)	(84.7)	(8.8)	(175.4)	(10.5)

Consolidated
	Group	2,097.9	49.8	2,221.8	42.6	4,504.2	130.9
Share of jointly controlled entities		409.2	26.8	606.1	43.0	1,125.1	84.9

Total		2,507.1	76.6	2,827.9	85.6	5,629.3	215.8

⁽¹⁾ Restated on adoption of IFRIC 12 (see note 12)

2 Segmental reporting (continued)

Reconciliation of operating segment results to reported results

		2010 £m	2009⁽¹⁾ £m	Year ended 31 December 2009⁽¹⁾ £m
Group and share of jointly controlled entities’ operating
profit before intangible amortisation and non-recurring operating items		76.6	85.6	215.8
	Net financial expense
	– Group	(4.1)	(9.4)	(14.6)
	– Share of jointly controlled entities	(6.8)	(11.7)	(21.8)
Share of jointly controlled entities’ taxation		-	(2.9)	(3.9)
Underlying profit before taxation		65.7	61.6	175.5
	Intangible amortisation	(13.8)	(15.2)	(30.8)
	Non-recurring operating items	(9.4)	-	(15.2)
Non-operating items		16.3	3.7	6.4
Profit before taxation		58.8	50.1	135.9
Taxation		(4.7)	(5.6)	(11.5)
Profit for the period		54.1	44.5	124.4

⁽¹⁾ Restated on adoption of IFRIC 12 (see note 12)

2 Segmental reporting (continued)

Additional segmental information on intangible amortisation, non-recurring operating items and non-operating items is set out below:

			2010			2009⁽¹⁾	Year ended 31 December 2009⁽¹⁾
	Intangible amortisation £m	Non-recurring operating items £m	Non-operating items £m	Intangible amortisation £m	Non-operating items £m			Intangible amortisation £m	Non-recurring operating items £m	Non-operating items £m




Support services	(9.8)	(0.4)	-	(11.2)	1.5			(22.5)	(4.6)	10.3
Public Private Partnership projects	-	-	16.3	-	2.2			-	-	(3.9)
Construction services (excluding the Middle East)	(4.0)	(6.4)	-	(4.0)	-			(8.3)	(9.7)	-
Unallocated group items	-	(2.6)	-	-	-			-	(0.9)	-

Total	(13.8)	(9.4)	16.3	(15.2)	3.7			(30.8)	(15.2)	6.4

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

	2010		2009		Year ended 31 December 2009
	Depreciation and amortisation £m	Capital expenditure £m	Depreciation and amortisation £m	Capital expenditure £m	Depreciation and amortisation £m	Capital expenditure £m
Support services	(18.4)	(6.1)	(21.2)	(13.7)	(42.5)	(30.3)
Middle East construction services	(1.0)	(1.1)	(1.1)	(1.4)	(2.0)	(1.9)
Construction services (excluding the Middle East)	(5.2)	(0.1)	(5.3)	(1.8)	(11.1)	(4.3)
Unallocated group items	(7.2)	(4.0)	(5.7)	(12.0)	(12.1)	(16.6)

Total	(31.8)	(11.3)	(33.3)	(28.9)	(67.7)	(53.1)

⁽¹⁾ Restated on adoption of IFRIC 12 (see note 12)

2 Segmental reporting (continued)

Segmental net assets

		2010						2009⁽¹⁾		Year ended 31 December 2009⁽¹⁾
		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⁽²⁾		946.7	-	946.7		973.6	-	973.6		956.5	-	956.5
Operating assets		442.1	-	442.1		478.0	-	478.0		434.4	-	434.4
Investments		11.4	-	11.4		10.1	-	10.1		11.3	-	11.3
Total operating assets		1,400.2	-	1,400.2		1,461.7	-	1,461.7		1,402.2	-	1,402.2
Total operating liabilities		-	(513.2)	(513.2)		-	(592.3)	(592.3)		-	(528.9)	(528.9)
Net operating assets/(liabilities)		1,400.2	(513.2)	887.0		1,461.7	(592.3)	869.4		1,402.2	(528.9)	873.3
Public Private Partnership projects
	Operating assets	7.4	-	7.4	4.7		-	4.7	5.5		-	5.5
Investments		79.7	-	79.7		148.2	-	148.2		65.8	-	65.8
Total operating assets		87.1	-	87.1		152.9	-	152.9		71.3	-	71.3
Total operating liabilities		-	(15.6)	(15.6)		-	(12.8)	(12.8)		-	(15.4)	(15.4)
Net operating assets/(liabilities)		87.1	(15.6)	71.5		152.9	(12.8)	140.1		71.3	(15.4)	55.9
Middle East construction services
Operating assets		129.3	-	129.3		55.2	-	55.2		101.6	-	101.6
Investments		44.0	-	44.0		39.7	-	39.7		45.4	-	45.4
Total operating assets		173.3	-	173.3		94.9	-	94.9		147.0	-	147.0
Total operating liabilities		-	(155.0)	(155.0)		-	(63.5)	(63.5)		-	(127.0)	(127.0)
Net operating assets/(liabilities)		173.3	(155.0)	18.3		94.9	(63.5)	31.4		147.0	(127.0)	20.0
Construction services (excluding the Middle East)
Intangible assets ⁽²⁾		272.7	-	272.7		279.0	-	279.0		276.0	-	276.0
Operating assets		622.8	-	622.8		644.7	-	644.7		583.4	-	583.4
Investments		50.1	-	50.1		49.6	-	49.6		49.5	-	49.5
Total operating assets		945.6	-	945.6		973.3	-	973.3		908.9	-	908.9
Total operating liabilities		-	(1,031.1)	(1,031.1)		-	(988.2)	(988.2)		-	(939.6)	(939.6)
Net operating assets/(liabilities)		945.6	(1,031.1)	(85.5)		973.3	(988.2)	(14.9)		908.9	(939.6)	(30.7)
Consolidated before Group items
Intangible assets ⁽²⁾		1,219.4	-	1,219.4		1,252.6	-	1,252.6		1,232.5	-	1,232.5
Operating assets		1,201.6	-	1,201.6		1,182.6	-	1,182.6		1,124.9	-	1,124.9
Investments		185.2	-	185.2		247.6	-	247.6		172.0	-	172.0
Total operating assets		2,606.2	-	2,606.2		2,682.8	-	2,682.8		2,529.4	-	2,529.4
Total operating liabilities		-	(1,714.9)	(1,714.9)		-	(1,656.8)	(1,656.8)		-	(1,610.9)	(1,610.9)
Net operating assets/(liabilities) before Group items		2,606.2	(1,714.9)	891.3		2,682.8	(1,656.8)	1,026.0		2,529.4	(1,610.9)	918.5

	Group items
Deferred tax		144.8	(33.4)	111.4		123.1	(40.0)	83.1		132.5	(37.3)	95.2
Net cash/(borrowing)		327.5	(259.5)	68.0		296.1	(442.1)	(146.0)		267.2	(242.3)	24.9
	Retirement benefit (gross of taxation)	2.6	(360.0)	(357.4)	2.9		(249.9)	(247.0)	2.6		(296.4)	(293.8)
	Income tax	2.7	(9.0)	(6.3)	1.5		(10.5)	(9.0)	4.6		(11.3)	(6.7)
Other		124.7	(87.7)	37.0		164.4	(113.1)	51.3		128.7	(94.7)	34.0

Net assets/(liabilities)		3,208.5	(2,464.5)	744.0		3,270.8	(2,512.4)	758.4		3,065.0	(2,292.9)	772.1

⁽¹⁾Restated on adoption of IFRIC 12 (see note 12) and the representation of investments between operating segments

⁽²⁾Arising from business combinations

2 Segmental reporting (continued)

Geographic information - by origin

		2010 £m	2009⁽¹⁾ £m	Year ended 31 December 2009⁽¹⁾ £m
United Kingdom
Total revenue from external customers		2,015.2	2,234.7	4,444.0
Less: share of jointly controlled entities' revenue		(267.7)	(309.2)	(640.6)
Group revenue from external customers		1,747.5	1,925.5	3,803.4

Non-current assets		1,405.4	1,521.7	1,409.8

Middle East
	Total revenue from external customers	185.9	327.5	564.4
Less: share of jointly controlled entities' revenue		(117.5)	(272.6)	(434.2)
Group revenue from external customers		68.4	54.9	130.2

Non-current assets		53.1	48.1	53.7

Canada and the Caribbean
	Total revenue from external customers	271.9	237.6	541.2
Less: share of jointly controlled entities' revenue		(1.2)	(2.2)	(3.6)
Group revenue from external customers		270.7	235.4	537.6

Non-current assets		118.1	95.8	114.6

Rest of the World
	Total revenue from external customers	34.1	28.1	79.7
Less: share of jointly controlled entities' revenue		(22.8)	(22.1)	(46.7)
Group revenue from external customers		11.3	6.0	33.0

Non-current assets		1.8	4.6	3.4

Consolidated
	Total revenue from external customers	2,507.1	2,827.9	5,629.3
Less: share of jointly controlled entities' revenue		(409.2)	(606.1)	(1,125.1)
Group revenue from external customers		2,097.9	2,221.8	4,504.2

Non-current assets

Total of geographic analysis above		1,578.4	1,670.2	1,581.5
	Retirement benefit assets	2.6	2.9	2.6
Deferred tax assets		144.8	123.1	132.5
Total non-current assets		1,725.8	1,796.2	1,716.6

⁽¹⁾Restated on adoption of IFRIC 12 (see note 12)

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 2010	371.8	135.9	603.2	1,110.9
Six months ended 30 June 2009	457.1	85.0	488.1	1,030.2
Year ended 31 December 2009	823.8	175.3	1,065.6	2,064.7

3 Non-recurring operating items and non-operating items

Non-recurring operating items	2010 £m	2009 £m	Year ended 31 December 2009 £m
Curtailment gain	-	-	0.1
Rationalisation costs	(9.4)	-	(9.9)
Office of Fair Trading penalty	-	-	(5.4)
	(9.4)	-	(15.2)

Rationalisation costs of £9.4m in 2010 relate to non-recurring redundancy and other associated costs incurred to ensure that the Group's cost base reflects the expected reduction in our UK construction market as indicated in the UK Government's Emergency Budget on 22 June 2010.

In the year ended 31 December 2009, as part of the strategy for managing defined benefit pension scheme risk, the benefits for members of the Alfred McAlpine Pension Plan were no longer linked to final salary resulting in a curtailment gain of £0.1m (net of expenses of £3.2m).

Rationalisation costs in 2009 of £9.9m relate to non-recurring redundancy and other associated costs incurred in the rationalisation of the Group's structure, including ensuring that the size of the Group's UK construction capability reflects the expected decline in our general construction markets, while maintaining the capability to support the delivery of Public Private Partnership projects and meet the needs of the support services business.

The Office of Fair Trading (OFT) penalty of £5.4m was imposed on Carillion JM Limited (CJM) (formerly Mowlem) in 2009 following the conclusion of the OFT's investigation of cover pricing in the construction industry (under the Competition Act 1998). The penalty relates to CJM's construction business and relates entirely to the period prior to CJM's acquisition by Carillion. No other member of the Group was subject to the investigation.

An income tax credit in respect of the half year ended 30 June 2010 of £2.6m (31 December 2009: £2.8m) relating to the above has been included in the income statement.

Non-operating items	2010 £m	2009⁽¹⁾ £m	Year ended 31 December 2009⁽¹⁾ £m
Profit/(loss) on disposal of investments in jointly controlled entities	16.3	2.2	(3.9)
Profit on disposal of businesses	-	1.5	10.3
	16.3	3.7	6.4

⁽¹⁾Restated on adoption of IFRIC 12 (see note 12)

In the six months ended 30 June 2010, the Group disposed of it's equity investment in a Public Private Partnership jointly controlled entity. The disposal generated cash consideration of £31.3m and a non-operating profit of £16.3m.

During 2009, the Group disposed of two non-core businesses, Carillion IT Services Limited and Enviros Group Limited, generating a total provisional profit on disposal of £10.3m. There is no income tax associated with any of the non-operating items in any of the above periods.

4 Financial income and expense

		2010 £m	2009 £m	Year ended 31 December 2009 £m
Financial income
Bank interest receivable		0.7	0.7	1.1
	Other interest receivable	4.4	5.3	10.5
Expected return on retirement plan assets		55.9	50.6	101.8
		61.0	56.6	113.4
Financial expense
	Interest payable on bank loans and overdrafts	(2.1)	(8.0)	(10.5)
	Other interest payable and similar charges	(5.4)	(6.1)	(13.5)
Interest cost on retirement plan obligations		(57.6)	(51.9)	(104.0)
		(65.1)	(66.0)	(128.0)
Net financial expense		(4.1)	(9.4)	(14.6)

No borrowing costs qualified for capitalisation 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 2010 is calculated based on the estimated average annual effective underlying income tax rate of 17% (six months ended 30 June 2009: 20%). This effective rate differs to the UK standard corporation tax rate of 28% (six months ended 30 June 2009: 28%) due to items such as the effect of tax rates in foreign jurisdictions, the agreement of certain issues with the tax authorities and the recognition of deferred tax on trading losses. No income tax has been charged on jointly controlled entities' profits due to the combination of non-taxable profits arising in the Middle East and the resolution of certain issues with the tax authorities in relation to PPP jointly controlled entities.

The UK Government's Emergency Budget on 22 June 2010 announced a fall in the mainstream corporation tax rate from 28% to 27% with effect from 1 April 2011. This fall in rate would have had an immaterial impact on the above rate of 17%, if the change in rate had been substantively enacted at the balance sheet date.

6 Earnings per share

(a) Basic earnings per share

The calculation of earnings per share for the six months ended 30 June 2010 is based on the profit attributable to equity holders of the parent of £51.5m (six months ended 30 June 2009 restated: £42.4m; year ended 31 December 2009 restated: £120.6m) and a weighted average number of ordinary shares in issue of 398.5m (six months ended 30 June 2009: 395.5m; year ended 31 December 2009: 396.0m), calculated as follows:

In millions of shares	2010	2009	Year ended 31 December 2009
Issued ordinary shares at beginning of period	397.3	395.7	395.7
Effect of shares issued in the period	1.5	0.2	0.7
Effect of own shares held by Employee Share Ownership Plan and Qualifying Employee Share Ownership Trust	(0.3)	(0.4)	(0.4)

Weighted average number of ordinary shares	398.5	395.5	396.0

6 Earnings per share (continued)

(b) Underlying performance

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

		2010		2009⁽¹⁾		Year ended 31 December 2009⁽¹⁾
		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		58.8	4.7	50.1	5.6	135.9	11.5
	Amortisation of intangible assets arising from business combinations	13.8	3.9	15.2	4.3	30.8	8.6
Curtailment gain		-	-	-	-	(0.1)	-
Rationalisation costs		9.4	2.6	-	-	9.9	2.8
	Office of Fair Trading penalty	-	-	-	-	5.4	-
Profit on disposal of investments and businesses		(16.3)	-	(3.7)	-	(6.4)	-
Underlying profit before taxation		65.7	11.2	61.6	9.9	175.5	22.9
Underlying taxation		(11.2)		(9.9)		(22.9)
Underlying profit attributable to non-controlling interests⁽²⁾		(2.6)		(2.1)		(5.0)
Underlying profit attributable to shareholders		51.9		49.6		147.6

⁽¹⁾Restated on adoption of IFRIC 12 (see note 12)

⁽²⁾A reconciliation of non-controlling interests as reported in the income statement to underlying profit attributable to non-controlling interests shown above is set out below:

	2010 £m	2009 £m	Year ended 31 December 2009 £m
Profit attributable to non-controlling interests as reported in the income statement	2.6	2.1	3.8
Rationalisation costs (net of tax)	-	-	1.2
Underlying basic earnings per share	2.6	2.1	5.0

		2010 Pence per share	2009⁽¹⁾ Pence per share	Year ended 31 December 2009⁽¹⁾ Pence per share
Earnings per share
Basic earnings per share		12.9	10.7	30.5
	Amortisation of intangible assets arising from business combinations	2.5	2.7	5.6
	Rationalisation costs - Group	1.7	-	1.8
	- attributable to non-controlling interests	-	-	(0.3)
	Office of Fair Trading penalty	-	-	1.4
Profit on disposal of investments and businesses		(4.1)	(0.9)	(1.7)
Underlying basic earnings per share		13.0	12.5	37.3
Underlying diluted earnings per share (post-tax basis)		13.0	12.4	37.1

⁽¹⁾Restated on adoption of IFRIC 12 (see note 12)

6 Earnings per share (continued)

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	2010	2009	Year ended 31 December 2009
Weighted average number of ordinary shares	398.5	395.5	396.0
Effect of share options in issue	1.7	3.1	2.2

Weighted average number of ordinary shares (diluted)	400.2	398.6	398.2

7 Dividends

The following dividends were paid by the Company:

		2010		2009		Year ended 31 December 2009
	£m	Pence per share	£m	Pence per share	£m	Pence per share
Previous period final dividend	39.9	10.0	35.2	8.9	35.2	8.9
Current period interim dividend	-	-	-	-	18.2	4.6

Total	39.9	10.0	35.2	8.9	53.4	13.5

The following dividends were proposed by the Company:

		2010		2009		Year ended 31 December 2009
	£m	Pence per share	£m	Pence per share	£m	Pence per share
Interim	19.2	4.8	18.2	4.6	18.2	4.6
Final	-	-	-	-	39.7	10.0

Total	19.2	4.8	18.2	4.6	57.9	14.6

The interim dividend for 2010 of 4.8 pence per share was approved by the Board on 26 August 2010 and will be paid on
10 November 2010 to shareholders on the register on 10 September 2010.

8 Pension commitments

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

			2010 £m		2009 £m		Year ended 31 December 2009 £m
(Charge)/credit to operating profit
Current service cost relating to defined benefit schemes			(3.5)		(5.3)		(8.1)
	Curtailments		-		-		3.3
Defined contribution schemes			(11.1)		(9.1)		(20.5)

Total			(14.6)		(14.4)		(25.3)

Credit/(charge) to other financial income and expense
	Expected return on retirement plan assets		55.9		50.6		101.8
Interest cost on retirement plan obligations		(57.6)		(51.9)		(104.0)

Net financial expense		(1.7)		(1.3)		(2.2)

The valuation of the Group's main defined benefit pension schemes were reviewed by the scheme's actuary at 30 June 2010.

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

	2010 £m	2009 £m	31 December 2009 £m
Present value of defined benefit obligation	(2,095.8)	(1,793.7)	(2,028.5)
Fair value of scheme assets	1,738.4	1,557.4	1,741.4
Minimum funding requirement	-	(10.7)	(6.7)

Net pension liability at period end	(357.4)	(247.0)	(293.8)
Deferred tax on the above	100.3	70.6	82.7
Net pension liability after tax at period end	(257.1)	(176.4)	(211.1)

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

	30 June 2010	31 December 2009
Rate of increase in salaries	4.2%	4.4%
Rate of increase in pensions	3.2%	3.4%
Inflation rate	3.2%	3.4%
Discount rate	5.5%	5.8%

9 Cash and cash equivalents and net cash/(borrowing)

Cash and cash equivalents and net cash/(borrowing) comprise:

		2010 £m	2009 £m	31 December 2009 £m
Cash and cash equivalents		327.5	296.1	267.2
Bank overdrafts		(9.4)	(23.7)	(14.8)
Net cash and cash equivalents at period end		318.1	272.4	252.4
	Bank loans	(173.4)	(327.8)	(141.4)
	Finance lease obligations	(61.4)	(68.0)	(64.6)
Other loans		(15.3)	(22.6)	(21.5)

Net cash/(borrowing) at period end		68.0	(146.0)	24.9

Reconciliation of cash flow to movement in net cash/(borrowing):
		2010 £m	2009 £m	Year ended 31 December 2009 £m
Increase in net cash and cash equivalents for the period		63.5	26.2	4.9
(Draw down)/repayment of bank and other loans		(21.6)	41.4	233.6
	Proceeds from finance leaseback	(3.8)	-	-
Payment of finance lease liabilities		9.3	8.4	16.8
Change in net cash/(borrowing) resulting from cash flows		47.4	76.0	255.3
	Finance lease additions	-	(0.2)	(0.4)
Currency translation differences		(4.3)	4.9	(3.3)
Change in net cash/(borrowing) during the period		43.1	80.7	251.6
Net cash/(borrowing) at 1 January		24.9	(226.7)	(226.7)

Net cash/(borrowing) at period end		68.0	(146.0)	24.9

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 £372.4m in the six months ended 30 June 2010 (six months ended 30 June 2009: £274.3m; year ended 31 December 2009: £572.3m). Amounts receivable from jointly controlled entities amounted to £61.2m (31 December 2009: £56.6m) and amounts payable to jointly controlled entities amounted to £38.1m (31 December 2009: £40.8m).

11 Disposals

In June 2010, the Group disposed of it's equity investment in a Public Private Partnership jointly controlled entity. The disposal generated a cash consideration of £31.3m and a non-operating profit of £16.3m.

12 New accounting standards and interpretations

As described in note 1, IFRIC 12 clarifies the accounting for Public Private Partnership (PPP) projects which the Group participates in through jointly controlled entities. The overall impact of IFRIC 12 is to change the timing of when profits are recognised in PPP projects but it does not impact the total profit recognised or cash flows during the life of the PPP project. This has resulted in a restatement of the Group's share of the results of jointly controlled entities and the non-operating profit arising from the disposal of investments in jointly controlled entities.

The adoption of IFRIC 12 has had an impact on the Group's share of movements in the fair value of interest rate swaps within PPP jointly controlled entities. For a number of jointly controlled entities, the impact of IFRIC 12 on its carrying value in the Group's balance sheet requires the Group's share of fair value movements in interest rate swaps to be restricted to avoid the carrying value of the jointly controlled entities concerned from becoming negative. This adjustment has been reflected in the statement of comprehensive income.

Upon the adoption of (IFRIC) 12 on 1 January 2010 the Group has restated prior period information, which has had the following impact on reported profit, earnings per share and net assets:

£m unless otherwise stated		Six months ended 30 June 2009		Year ended 31 December 2009

Income statement
Total revenue as previously reported			2,722.9		5,426.5
Impact of adoption of IFRIC 12			105.0		202.8

Total revenue as restated			2,827.9		5,629.3

Share of jointly controlled entities' revenue as previously reported			501.1		922.3
Impact of adoption of IFRIC 12			105.0		202.8

Share of jointly controlled entities' revenue as restated			606.1		1,125.1

Profit before tax as previously reported			51.9		147.7
	Impact of adoption of IFRIC 12 on share of jointly controlled entities
	- operating profit	(0.4)		(1.5)
	- net financial expense	(1.0)		(7.8)
- - taxation		0.4		2.6
Impact of adoption of IFRIC 12 on underlying⁽¹⁾ profit before tax			(1.0)		(6.7)
Impact of adoption of IFRIC 12 on non-operating items			(0.8)		(5.1)

Profit before tax as restated			50.1		135.9

^{(1) As defined in note 6b}

12 New accounting standards and interpretations (continued)

£m unless otherwise stated		Six months ended 30 June 2009 £m		Year ended 31 December 2009 £m

Earnings per share as previously reported (pence)			11.2		33.4
Impact of IFRIC 12 as noted above (pence)			(0.5)		(2.9)

Earnings per share as restated (pence)			10.7		30.5

Diluted earnings per share as previously reported (pence)			11.1		33.2
Impact of IRFIC 12 as noted above (pence)			(0.5)		(2.9)

Diluted earnings per share as restated (pence)			10.6		30.3
Statement of comprehensive income
Share of recycled cash flow hedges within jointly controlled entities as previously reported			9.9		9.9
Impact of adoption of IFRIC 12			(1.6)		(1.6)

Share of recycled cash flow hedges within jointly controlled entities as restated			8.3		8.3

Share of change in fair value of effective cash flow hedges within jointly controlled entities as previously reported			(5.2)		(8.3)
Impact of adoption of IFRIC 12			7.7		4.1

Share of change in fair value of effective cash flow hedges within jointly controlled entities as restated			2.5		(4.2)


	Balance sheet
	Net assets as previously reported		749.9		777.2
Impact of adoption of IFRIC 12 on investments in jointly controlled entities			8.5		(5.1)

Net assets as restated			758.4		772.1

In 2009 the adoption of IFRIC 12 reduced underlying⁽¹⁾ profit before tax from £62.6m to £61.6m and underlying⁽¹⁾ earnings per share from 12.8 pence to 12.5 pence at 30 June 2009 and reduced underlying⁽¹⁾ profit before tax from £182.2m to £175.5m and underlying⁽¹⁾ earnings per share from 39.0 pence to 37.3 pence at 31 December 2009.

In the six months ended 30 June 2010, the adoption of IFRIC 12 reduced the Group's share of results of jointly controlled entities and therefore underlying⁽¹⁾ profit before tax from £68.5m to £65.7m and consequently underlying⁽¹⁾ earnings per share reduced from 13.7 pence to 13.0 pence.

The adoption of IFRIC 12 also increased non-operating profit in the six months ended 30 June 2010 by £6.5m, therefore reported profit before tax increased from £55.1m to £58.8m and consequently basic and diluted earnings per share increased from 12.0 pence to 12.9 pence. In the statement of comprehensive income, IFRIC 12 reduced the loss recognised on the Group's share of the change in fair value of effective cash flow hedges within jointly controlled entities by £0.7m. The adoption of IFRIC 12 increased net assets in the six months ended 30 June 2010 by £4.4m.

⁽¹⁾As defined in note 6b

13 Share capital

During the six months ended 30 June 2010, 2,310,106 shares were issued to the Group's Employee Ownership Plan in order to satisfy the exercise of employee share options. The issued and fully paid share capital at 30 June 2010 was 399.6m shares (30 June 2009: 395.9m; 31 December 2009: 397.3m).

14 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 2009, except in relation to key assumptions used to determine defined benefit pension obligations as disclosed in note 8.

15 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 and performance contracts in Public Private Partnership (PPP) jointly controlled entities. These guarantees in total amount to £187.6m (31 December 2009: £82.4m) with the increase since December 2009 reflecting commitments in respect of PPP projects that reached financial close in the first half of 2010. There has been no material change to the contingent liabilities of the Group in the six months ended 30 June 2010.

16 Company information

This preliminary announcement was approved by the Board of Directors on 26 August 2010. The 2010 interim results will be posted to all shareholders by 13 September 2010 and both this statement and the 2010 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.

Directors' responsibilities

This interim report complies with the Disclosure and Transparency Rules (DTR) of the United Kingdom's Financial Services 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 2010 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 2010 that have materially affected the financial position or performance of the Group and any changes in the related party transactions described in the 2009 Annual Report that could do so).

On behalf of the Board

Richard Adam

Group Finance Director

26 August 2010

Forward-looking statements

This report may contain certain statements about the future outlook for Carillion plc. Although we believe our 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 2010 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 2010 will be determined in accordance with English law.

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 2010, which comprises the condensed consolidated income statement, the condensed consolidated balance sheet, the condensed consolidated statement of cash flows, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity 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 Services Authority ('the UK FSA'). 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 FSA.

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 2010 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

D K Turner

For and on behalf of KPMG Audit Plc

Chartered Accountants

One Snow Hill

Snow Hill Queensway

Birmingham

B4 6GH

26 August 2010

This information is provided by RNS

The company news service from the London Stock Exchange

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