Interim Results
Carillion PLC
06 September 2006
6 September 2006
Carillion plc 2006 Interim Results
Highlights
• Mowlem integration progressing well
• Revenue up 71% to £1,726m
• Profit before tax and exceptionals* up 23% to £24.7m
• Adjusted earnings per share up 11% to 7.9p
• Strong operating cash flow - net debt of £118m at 30 June 2006
• Dividend increased by 10% to 3.1 pence
• Order book more than doubled to £14.5bn
• PPP equity sales announced today - Directors' valuation of PPP equity
portfolio increased to £216m
Financial Summary 2006 2005
Revenue including joint ventures £1,726m £1,011m
Profit before tax
• before exceptional items* and tax on joint ventures £29.6m £21.6m
• before exceptional items* £24.7m £20.1m
• after exceptional items £11.7m £18.4m
Earnings per share
• adjusted* 7.9p 7.1p
• basic 3.5p 6.3p
* Exceptional and non-operating items, amortisation of intangible assets and
goodwill impairment: a £13m charge in 2006, £1.7m charge in 2005
Commenting, Chairman Philip Rogerson said, 'Carillion made good progress in the
first six months of 2006. The integration of Mowlem, acquired in February 2006,
has gone well, overall trading has remained positive and we have delivered a
strong financial performance.
With a large order book and positive outlook in the Group's key markets, the
Board expects Carillion to make further progress in the second half of 2006 and
slightly exceed our original expectations in the full year. The announcement
today of the disposal of some PPP equity holdings is also a clear demonstration
of the value being created from Carillion's portfolio of PPP investments.'
For further information contact
Chris Girling Finance Director 01902 422431
John Denning Director Corporate Affairs 01902 316426
CHAIRMAN'S STATEMENT
Carillion made good progress in the first six months of 2006. The integration of
Mowlem, acquired in February 2006, has gone well, overall trading has remained
positive and we have delivered a strong financial performance.
Revenue, including joint ventures, increased by 71 per cent to £1,725.7 million
(2005: £1,011.1 million), reflecting the acquisition of Mowlem and substantial
organic growth in a number of key market sectors.
Profit before tax and exceptional items rose by 23 per cent to £24.7 million
(2005: £20.1 million) and earnings per share increased by 11 per cent to 7.9
pence (2005: 7.1 pence), both slightly ahead of our expectations.
Operating cash flow continues to be strong and net debt at 30 June 2006 was £118
million. Average debt in 2006 is now expected to be well below £150 million,
substantially less than the £200 million anticipated at the time of acquiring
Mowlem.
The value of the Group's order book has more than doubled to £14.5 billion (31
December 2005: £7 billion), reflecting the acquisition of Mowlem and continuing
success in winning substantial new orders in key growth markets. We have also
maintained a substantial pipeline of probable new orders worth around £1.9
billion.
In view of our progress in the first six months of 2006 and prospects for the
second half, the Board has declared an interim dividend of 3.1 pence per share,
an increase of 10 per cent on the dividend paid in respect of the corresponding
period in 2005.
Our finance director, Chris Girling, has decided to retire from Carillion in
order to focus on non-executive directorships. The precise timing will depend on
the appointment of a successor and will follow a suitable handover period, but
is expected to be in the first half of 2007. It had been Chris's intention to
leave his executive role a little sooner, but he wished to stay on until the
acquisition and integration of Mowlem had been successfully completed. Chris
will leave the Group with the Board's grateful thanks for the outstanding
contribution he has made over the last seven years to Carillion's success.
Don Kenny, the managing director responsible for six Carillion business units,
has been appointed as an executive director with immediate effect. Don joined
Carillion from Johnson Controls in 2002, having held a number of senior
positions in Johnson Controls and prior to that in Mowlem. With extensive
experience of our key market sectors, he will make a valuable contribution to
Carillion's development and we are delighted to welcome him to the Board. Don
will continue to be responsible for our National Building, Health, Integrated
Solutions, Facilities Management, Facilities Services and TPS businesses.
I am also delighted to announce the appointment of Steve Mogford as a
non-executive director. Steve has been a main board director of BAE Systems for
over six years and is currently the Chief Operating Officer responsible for
Programmes. Steve joined BAE Systems in 1977 and held a number of senior
managing director roles before taking up his current position in 2000. Steve
brings to the Board considerable experience as a senior business leader who has
managed major capital projects in a FTSE 50 company.
In line with our policy of maximising the value we generate through investing
equity in PPP projects, we have announced today the proposed sale of a number of
equity investments to secondary market funds. The sale of these investments,
which is expected to generate cash proceeds of £46 million and an exceptional
profit of £22 million, is at an implied net present value based on an average
discount rate of less than five per cent.
The directors' valuation of Carillion's portfolio of PPP equity investments now
stands at £216 million, (December 2005: £89 million). This valuation has
increased due to the combined effects of acquiring Mowlem's equity portfolio,
reaching financial close on two new PPP projects and higher secondary market
prices for PPP equity.
With a large order book and positive outlook in the Group's key markets, the
Board expects Carillion to make further progress in the second half of 2006 and
slightly exceed its original expectations for the full year.
Philip Rogerson
Chairman
CHIEF EXECUTIVES'S REVIEW
Business performance
--------------------
When we acquired Mowlem in February 2006, we said it was an outstanding
strategic fit that would deliver a step change in the development of our
business. I am pleased to report that we have made good progress with the
integration of Carillion and Mowlem and are firmly on track to deliver the
benefits expected from this acquisition.
Our first-half profit, which was slightly ahead of our expectations, includes a
contribution from equity returns on PPP investments acquired with Mowlem, but no
profit on the revenue contributions to our Support Services and Construction
Services segments from business acquired with Mowlem. However, we expect these
businesses to make a significant contribution to profit in the second half of
the year and the Group's full-year performance to be slightly ahead of our
original expectations.
As announced in April 2006, integration cost savings are substantially ahead of
our original forecasts and we are confident that we will deliver savings at a
running rate of £15 million per annum by the end of 2006 and £23 million per
annum by the end of 2007. The contracts for which we announced revised fair
value adjustments on 24 April 2006 are progressing in line with expectations.
While there have been a number of movements in the carrying values of assets
acquired with Mowlem, the revised total fair value of assets acquired is
unchanged.
In line with our strategy, we have disposed of a number of non-core businesses
acquired with Mowlem. Disposals in the first half of 2006 included Charter, a US
construction management business, Edgar Allen, a UK rail products manufacturer,
MESG, an environmental services business, and Barclay Mowlem, a construction
business in Australia, with the cash proceeds for the latter received in July
2006.
Mowlem's complementary skills and market strengths in private finance, support
services and construction have significantly enhanced our ability to provide
customers with high quality, integrated solutions in our key market sectors.
This has been evident in a number of significant new contract wins in the first
six months of 2006 and helped us to more than double the value of our order book
to £14.5 billion (December 2005: £7 billion).
Our consistent and successful strategy for growth remains unchanged. We will
therefore continue to grow support services and PPP investment activities
alongside a strong and selective construction capability and seek opportunities
to provide customers with integrated solutions by using our wide range of skills
and extensive resources. In addition to revenue growth, we are also firmly
focused on improving margins, particularly in the businesses acquired with
Mowlem, to bring them, over time, into line with those of Carillion.
We are continuing to implement our strategy through market-focused business
units: the 14 business units established immediately after acquisition are now
well established and operating in accordance with Carillion's rigorous risk
management procedures.
The cultural fit between Carillion and Mowlem is also an important factor in the
successful integration of the two businesses. The focus we have on living our
values in everything we do has been welcomed by those who joined us from Mowlem
and we have made substantial progress in this area.
Private Finance
The acquisition of Mowlem substantially increased our portfolio of equity
investments in Public Private Partnership (PPP) projects and strengthened our
pipeline of projects for which we were either the preferred bidder or
shortlisted. Having achieved financial close in April 2006 on the £12 billion
Allenby Connaught project for the Ministry of Defence, at 30 June 2006 we had a
portfolio of 31 financially closed projects in which we had invested, or
commitments to invest, some £173 million of equity. Since the half-year, we have
achieved financial close on the £880 million Joint Permanent Headquarters,
Northwood project, also for the Ministry of Defence, in which we are committed
to invest a further £10 million of equity.
We have announced today the proposed sale of eight equity investments in PPP
projects with a total book value of £24 million. The sale is expected to
generate cash proceeds of £46 million and an exceptional profit of £22 million.
The proceeds we expect from this sale reflect an average discount rate of under
5 per cent. This confirms our view that the Directors' valuation should now be
based on discounting the cash flows from our portfolio of investments at an
average discount rate of 8 per cent rather than the 10 per cent we have used
previously. On that basis, the Directors' valuation of our current portfolio,
net of the equity sales announced today, is £216 million. At 31 December 2005
the Directors' valuation was £89 million, based on a 10 per cent discount rate.
Financial reporting segments
Investments
In this segment we report the equity returns on our investments in Public
Private Partnership (PPP) projects
£m H1 2006 H1 2005
Revenue
Group 7.2 0.3
JVs 72.3 28.2
------- -------
79.5 28.5
------- -------
Operating profit* 13.2 3.4
JV Interest & tax (3.7) 0.1
------- -------
Profit from operations* 9.5 3.5
------- -------
* Before goodwill impairment of £0.1m in both years.
The substantial increase in profit from operations in this segment reflects
growing returns from Carillion's investment portfolio as well as contributions
from the investments acquired with Mowlem. The Allenby Connaught project for the
Ministry of Defence, on which we achieved financial close in April 2006, also
made a significant contribution to first half profit. Increasing profitability
in this segment, together with the £22 million exceptional profit we expect to
achieve following today's announcement of the sale of a number of PPP equity
investments, demonstrates the value being generated for the Group through these
investments.
We expect to continue to create substantial value through investing in PPP
projects. In the UK, we have a good pipeline of PPP projects for which we are
the preferred bidder or shortlisted and expect to add further projects to this
pipeline as the Government remains committed to major PPP programmes in our key
sectors. In Canada, where we are providing two of the first PPP hospitals, the
PPP market continues to grow as the Government is increasingly using PPPs for
the provision of new hospitals and roads.
Support Services
In this segment we report the results of our rail infrastructure, road
maintenance, facilities management, facilities services and consultancy
businesses.
£m H1 2006 H1 2005
Revenue
Group 638.9 460.1
JVs 48.5 3.5
------- -------
687.4 463.6
------- -------
Operating profit* 15.2 19.8
JV Interest & tax (0.6) (0.1)
------- -------
Profit from operations 14.6 19.7
------- -------
* Before amortisation of intangible assets of £1.2 m (2005: £1.0 m)
Revenue in Support Services increased due to the acquisition of Mowlem, which
contributed £155 million in the first half, and organic growth in Carillion. As
explained earlier in this statement, there is no contribution to profit in this
segment from the businesses acquired with Mowlem. The reduction in profit from
operations was due to lower revenues and margins in rail infrastructure, on
which we have commented previously. We have taken action to reduce overheads and
improve margins in our rail business through restructuring and refocusing it on
sustainable areas of the UK market, the benefits of which will begin to come
through in the second half of 2006. As a result of this action and the
significant contributions to profit expected in the second half from the
businesses acquired with Mowlem, in which we are also targeting margin
improvements, we expect full-year profit margins in this segment to be
significantly ahead of the half year.
New order intake has remained strong in our support services markets, with the
exception of UK rail infrastructure, where activity levels have continued to
decline as expected. In the UK, we had significant first half successes in the
defence, health and private sector facilities management sectors and also in the
roads maintenance market in Canada. These included the £12 billion Allenby
Connaught PPP project for the Ministry of Defence, which will generate around £3
billion of support services revenue for Carillion, a £330 million facilities
management contract for Barts and The London Hospital (as part of the PPP
project to redevelop the hospital) and a £137 million highways maintenance
contract in Alberta, Canada. In the first half we also mobilised the Housing
Prime and Regional Prime Central contracts for the Ministry of Defence, together
worth some £60 million per annum. Since the half-year, we have also achieved
financial close on an £880 million PPP project for the Ministry of Defence to
redevelop, manage and operate the Northwood Headquarters, home of the Chief of
Joint Operations. This is expected to generate around £440 million of support
services for Carillion.
The outlook in this segment continues to be positive. Overall, the UK support
services market is forecast to continue growing at around 5 per cent per annum.
In a number of our key market sectors we expect significant opportunities for
further growth particularly in defence, education, health and private sector
facilities management. We remain cautious on the outlook for the UK rail market,
which we expect to continue declining, albeit it at a more modest rate. In
Canada, the outsourcing of roads maintenance remains a growth market and our
facilities management activities will increase as service delivery in our two
PPP hospitals comes on stream in the second half of 2006. We also expect to be
bidding for two further PPP hospitals and our first PPP road project in Canada,
in the second half. Our joint venture facilities management business in the
Middle East is also expected to grow strongly.
Construction Services
In this segment, we report the results of our UK building, civil engineering and
developments businesses and the construction activities of International
Regional businesses.
£m H1 2006 H1 2005
Revenue
Group 843.0 478.4
JVs 115.8 40.6
------- -------
958.8 519.0
------- -------
Operating profit 7.8 2.3
JV Interest & tax (2.2) (1.2)
------- -------
Profit from operations* 5.6 1.1
------- -------
* Before a JV exceptional charge of £0.6 m in 2005
Revenue and profit from operations increased substantially in this segment, due
largely to growth in our Middle East joint venture business, supplemented by
substantial organic growth in our UK markets, particularly in our National and
Regional Building businesses. As explained earlier in this statement, there is
no contribution to profit in this segment from businesses acquired with Mowlem.
However, these businesses are expected to make a significant contribution to
profit in the second half. Consequently, we expect full-year profit margins in
this segment to be ahead of those for 2005. Beyond that, we shall continue to
target opportunities for margin growth, particularly in the businesses acquired
with Mowlem.
New order intake has also been strong in most of our construction markets, in
particular UK building, UK roads civil engineering and the Middle East. The
regional civil engineering business acquired with Mowlem is going through a
period of consolidation in line with our strategy and risk management criteria,
but is expected to begin growing from its new base in 2007. In addition to the
Allenby Connaught project for the Ministry of Defence, which will generate £600
million of building revenue for Carillion, we continued to make good progress in
the retail, offices and mixed-use developments sectors of the commercial
building market and in education, health and prisons, where we have framework
contracts in both England and Scotland. In the first half, we also signed the
£122 million Early Contractor Involvement contract to upgrade the A74 between
Carlisle and Guardsmill to motorway standard. Since the half-year, we have
achieved financial close on the Northwood Headquarters PPP project for the
Ministry of Defence, adding a further £150 million to our construction order
book.
The outlook in this segment is for continuing growth. Overall, the UK
construction market is forecast to grow in line with GDP or better over the next
three years. Against this background, we expect particular opportunities for
growth in a number of our key market sectors, most notably defence, education
and health. In the Middle East, we expect further growth, driven by the Festival
City project in Dubai and emerging opportunities in other countries,
particularly Abu Dhabi. We also have good opportunities for growth in the medium
to longer term in Canada, where we are well positioned to bid for further PPP
projects.
John McDonough
Chief Executive
Consolidated income statement
for the 6 months to 30 June 2006
Note Half year to Half year to Year to
30 June 2006 30 June 2005 31 December
(unaudited) (unaudited) 2005
(audited)
£m £m £m
Total revenue 1,725.7 1,011.1 2,284.2
Less: Share of jointly
controlled entities
revenue (236.6) (72.3) (258.7)
--------- -------- ---------
Revenue 1,489.1 938.8 2,025.5
Cost of sales (1,403.4) (869.1) (1,888.6)
--------- -------- ---------
Gross profit 85.7 69.7 136.9
Administrative expenses (87.7) (56.2) (104.6)
--------- -------- ---------
Group operating (loss)/
profit before exceptional
reorganisation costs 2 (2.0) 13.5 32.3
Exceptional reorganisation
costs 4 (5.7) - -
--------- -------- ---------
Group operating (loss)/
profit (7.7) 13.5 32.3
--------------------------------------------------------------------------------
Jointly controlled
entities 2,3
Operating profit 21.1 5.4 20.3
Net financing income/
(expenses) (1.6) 0.3 1.1
Exceptional items 4 - (0.8) (0.8)
Income tax (4.9) (1.3) (5.0)
--------------------------------------------------------------------------------
Share of results of
jointly controlled
entities 14.6 3.6 15.6
--------- -------- ---------
Profit from operations 2 6.9 17.1 47.9
---------------------------------------------
Financial income 5 51.4 27.7 54.4
Financial expenses 5 (46.6) (26.4) (50.4)
---------------------------------------------
--------- -------- ---------
Net financing income 5 4.8 1.3 4.0
--------- -------- ---------
Profit before tax 11.7 18.4 51.9
Income tax expense 6 (1.6) (4.3) (11.1)
--------- -------- ---------
Profit for the period 10.1 14.1 40.8
========= ======== =========
Attributable to:
Equity holders of the parent 9.0 13.3 39.3
Minority interests 1.1 0.8 1.5
--------- -------- ---------
Profit for the period 10.1 14.1 40.8
========= ======== =========
Earnings per share 7
Basic 3.5p 6.3p 18.7p
Diluted 3.5p 6.2p 18.4p
========= ======== =========
Total dividend declared
for the period 8 3.1p 2.8p 8.0p
========= ======== =========
Consolidated statement of recognised income and expense
for the 6 months to 30 June 2006
Half year to Half year to Year to
30 June 2006 30 June 2005 31 December
(unaudited) (unaudited) 2005
(audited)
£m £m £m
Foreign exchange translation
adjustments 0.3 1.5 1.6
Actuarial gains and losses on
defined benefit pension schemes (5.8) (12.1) 6.7
Group share of change in fair
value of cash flow hedges within jointly
controlled entities (net of tax) 5.4 (2.2) (1.3)
--------- -------- ---------
(0.1) (12.8) 7.0
Tax in respect of above 1.7 3.7 (1.5)
--------- -------- ---------
Income and expense recognised
directly in equity 1.6 (9.1) 5.5
Profit for the period 10.1 14.1 40.8
--------- -------- ---------
Total recognised income and
expense for the period 11.7 5.0 46.3
========= ======== =========
Attributable to:
Equity holders of the parent 10.6 4.2 44.8
Minority interests 1.1 0.8 1.5
--------- -------- ---------
Total recognised income and
expense for the period 11.7 5.0 46.3
========= ======== =========
Consolidated balance sheet
at 30 June 2006
Notes At 30 June 2006 At 30 June 2005 At 31 December
(unaudited) (unaudited) 2005
(audited)
£m £m £m
Assets
Non-current assets
Property, plant
and equipment 134.4 79.7 100.9
Intangible
assets 9 569.0 62.6 62.3
Retirement
benefit assets 5.4 5.3 6.4
Investments in
jointly
controlled
entities 162.4 52.7 62.7
Other
investments 19.6 4.7 4.7
Deferred tax
assets 88.2 40.3 35.2
-------- -------- ---------
Total non-current
assets 979.0 245.3 272.2
-------- -------- ---------
Current assets
Inventories 25.9 18.9 21.2
Income tax
receivable 0.5 1.4 0.2
Trade and other
receivables 997.2 493.2 459.7
Cash and cash
equivalents 214.1 147.0 180.9
Assets
classified as
held for sale 4.5 - -
-------- -------- ---------
Total current
assets 1,242.2 660.5 662.0
-------- -------- ---------
Total assets 2,221.2 905.8 934.2
-------- -------- ---------
Liabilities
Current liabilities
Borrowings (31.1) (23.3) (17.0)
Derivative
financial
instruments (0.1) (0.5) (0.3)
Trade and other
payables (1,313.2) (571.4) (600.4)
Provisions - (1.5) -
Income tax
payable (15.3) (17.7) (13.3)
Liabilities
classified as
held for sale (9.5) - -
-------- -------- ---------
Total current
liabilities (1,369.2) (614.4) (631.0)
-------- -------- ---------
Non current liabilities
Borrowings (301.4) (62.7) (73.1)
Retirement
benefit
liabilities (170.1) (103.5) (74.3)
Deferred tax
liabilities (7.0) (11.3) (6.0)
Provisions (1.7) (0.4) -
-------- -------- ---------
Non current
liabilities (480.2) (177.9) (153.4)
-------- -------- ---------
Total
liabilities (1,849.4) (792.3) (784.4)
-------- -------- ---------
Net assets 371.8 113.5 149.8
======== ======== =========
Equity
Issued share
capital 140.4 107.3 107.4
Share premium 8.5 7.3 8.2
Merger reserve 192.4 8.2 8.2
Other reserves (6.2) (16.8) (9.2)
Retained
earnings 35.7 6.3 34.1
-------- -------- ---------
Equity
attributable to
equity holders
of the parent 370.8 112.3 148.7
Minority
interests 1.0 1.2 1.1
-------- -------- ---------
Total equity 371.8 113.5 149.8
======== ======== =========
Consolidated statement of cash flows
for the six months to 30 June 2006
Note At 30 June 2006 At 30 June 2005 At 31 December
(unaudited) (unaudited) 2005
(audited)
£m £m £m
Cash flows from operating
activities
Cash generated
from operations -
continuing 11 49.3 5.0 73.8
Financial
expenses paid (7.2) (2.1) (4.6)
Income taxes paid (1.2) (10.4) (19.5)
-------- -------- ---------
Net cash flows
from operating
activities 40.9 (7.5) 49.7
-------- -------- ---------
Cash flows from investing
activities
Disposal of
property, plant
and equipment 0.8 5.5 7.3
Disposal of
investments in
jointly
controlled
entities - 0.1 0.6
Disposal of other
non-current
investments - 3.4 3.4
Financial income
received 6.2 4.1 7.4
Dividends
received from
jointly
controlled
entities 7.4 3.3 8.4
Disposal of
businesses, net
of cash disposed
of 10 26.7 - -
Acquisition of
subsidiary, net
of cash acquired 10 (122.1) (43.6) (37.1)
Acquisition of
property, plant
and equipment (22.1) (15.1) (34.2)
Acquisition of
intangible assets (0.3) (2.2) (4.3)
Acquisition of
investments in
jointly
controlled
entities (2.5) - (2.3)
Acquisition of
other non-current
investment (1.4) - -
-------- -------- ---------
Net cash flows
from investing
activities (107.3) (44.5) (50.8)
-------- -------- ---------
Cash flows from financing
activities
Proceeds from the
issue of share
capital 0.4 0.7 1.7
Draw down of
borrowings 107.1 2.2 3.4
Repayment of
borrowings - - (2.8)
Payment of
finance lease
liabilities (2.5) (1.8) (3.7)
Dividends paid to
equity holders of
the parent (14.5) (10.2) (16.1)
Dividends paid to
minority
interests (1.2) (1.7) (2.5)
-------- -------- ---------
Net cash flows
from financing
activities 89.3 (10.8) (20.0)
-------- -------- ---------
Net
increase/(decrease) in
cash and
cash equivalents 22.9 (62.8) (21.1)
Cash and cash
equivalents at
beginning of
period 169.7 189.6 189.6
Effect of
exchange rate
fluctuations on
cash held (1.1) 1.4 1.2
-------- -------- ---------
Cash and cash
equivalents at
end of period 191.5 128.2 169.7
-------- -------- ---------
Cash and cash equivalents
comprise:
Cash and cash
equivalents 214.1 147.0 180.9
Bank overdrafts (22.6) (18.8) (11.2)
-------- -------- ---------
191.5 128.2 169.7
======== ======== =========
Notes
1 Basis of preparation
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 2005.
No new accounting policies have been adopted in the six months to 30 June 2006.
Carillion plc (the 'Company') is a company domiciled in the United Kingdom (UK).
The consolidated interim financial statements of the Company for the six months
to 30 June 2006 comprise the Company and its subsidiaries (together referred to
as the 'Group') and the Group's interest in jointly controlled entities.
The comparative financial information for the year ended 31 December 2005 does
not constitute the company's statutory accounts for that financial year. The
statutory accounts for the year ended 31 December 2005 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 237
(2) or (3) of the Companies Act 1985.
2 Segment reporting
Segment information is presented in the consolidated interim financial
statements in respect of the Group's business segments, which are the primary
basis of segment reporting. The business segment reporting format reflects the
Group's management and internal reporting structure.
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.
Business segments
The Group is comprised of the following main business segments:
• Construction Services: UK building, development and civil engineering
activities and international regional construction activities.
• Support Services: Rail infrastructure, roads maintenance, facilities
management and other support services.
• Investments: Equity returns on investments in Public Private Partnership
(PPP) projects.
Notes (continued)
2 Segment reporting (continued)
Half year to Construction Support Investments Eliminations Consolidated
30 June 2006 Services Services and unallocated
head office
£m £m £m £m £m
Revenue from
external
customers 843.0 638.9 7.2 - 1,489.1
Inter-segment
revenue - 14.8 - (14.8) -
----- ------ ---- ------ -------
Segment
revenue 843.0 653.7 7.2 (14.8) 1,489.1
----- ------ ---- ------ -------
Segment
trading result (2.3) 12.8 4.6 - 15.1
Amortisation/
impair-ment of
intangible
assets - (1.2) (0.1) (6.0) (7.3)
Unallocated
expenses - - - (9.8) (9.8)
----- ------ ---- ------ -------
Group
operating
profit before
exceptional
re-organisation
costs (2.3) 11.6 4.5 (15.8) (2.0)
Exceptional
reorganisation
costs - - - (5.7) (5.7)
Share of
profit of
associates and
jointly
controlled
entities 7.9 1.8 4.9 - 14.6
----- ------ ---- ------ -------
Profit from
operations 5.6 13.4 9.4 (21.5) 6.9
----- ------ ---- ------
Net financing
income 4.8
Income tax
expense (1.6)
------
Profit for the
period 10.1
======
Notes (continued)
2 Segment reporting (continued)
Half year to Construction Support Investments Eliminations Consolidated
30 June 2005 Services Services and unallocated
head office
£m £m £m £m £m
Revenue from
external
customers 478.4 460.1 0.3 - 938.8
Inter-segment
revenue - 10.9 - (10.9) -
----- ------ ---- ------ -------
Segment
revenue 478.4 471.0 0.3 (10.9) 938.8
----- ------ ---- ------ -------
Segment
trading result 0.1 19.6 0.4 - 20.1
Amortisation/
impair-ment of
intangible
assets - (1.0) (0.1) - (1.1)
Unallocated
expenses - - - (5.5) (5.5)
----- ------ ---- ------ -------
Group
operating
profit before
exceptional
re-organisation
costs 0.1 18.6 0.3 (5.5) 13.5
Exceptional
reorganisation
costs - - - - -
Share of
profit of
associates and
jointly
controlled
entities 0.4 0.1 3.1 - 3.6
----- ------ ---- ------ -------
Profit from
operations 0.5 18.7 3.4 (5.5) 17.1
----- ------ ---- ------
Net financing
income 1.3
Income tax
expense (4.3)
----- ------ ---- ------ -------
Profit for the
period 14.1
=======
Notes (continued)
2 Segment reporting (continued)
Year to 31 Construction Support Investments Eliminations Consolidated
December Services Services and unallocated
2005 head office
£m £m £m £m £m
Revenue from
external
customers 1,050.1 974.6 0.8 - 2,025.5
Inter-segment
revenue 0.3 28.6 - (28.9) -
----- ------ ---- ------ -------
Segment
revenue 1,050.4 1,003.2 0.8 (28.9) 2,025.5
----- ------ ---- ------ -------
Segment
trading result 4.8 39.9 0.8 - 45.5
Amortisation/
impair-ment of
intangible
assets - (2.5) (0.3) - (2.8)
Unallocated
expenses - - - (10.4) (10.4)
----- ------ ---- ------ -------
Group
operating
profit before
exceptional
re-organisation
costs 4.8 37.4 0.5 (10.4) 32.3
Exceptional
reorganisation
costs - - - - -
Share of
profit of
associates and
jointly
controlled
entities 8.2 0.5 6.9 - 15.6
----- ------ ---- ------ -------
Profit from
operations 13.0 37.9 7.4 (10.4) 47.9
----- ------ ---- ------
Net financing
income 4.0
Income tax
expense (11.1)
----- ------ ---- ------ -------
Profit for the
period 40.8
=======
2 Segment reporting (continued)
Half year Construction Support Investments Eliminations Consolidated
to Services Services and unallocated
30 June head office
2006
£m £m £m £m £m
Segment
assets 705.9 448.2 7.2 - 1,161.3
Investments
in jointly
controlled
entities 35.4 4.6 122.4 - 162.4
Unallocated
assets - - - 897.5 897.5
------- ----------- ----------- ----------- -----------
Total
assets 741.3 452.8 129.6 897.5 2,221.2
------- ----------- ----------- ----------- -----------
Segment
liabilities (890.0) (333.3) (18.0) - (1,241.3)
Unallocated
liabilities - - - (608.1) (608.1)
------- ----------- ----------- ----------- -----------
Total
liabilities (890.0) (333.3) (18.0) (608.1) (1,849.4)
------- ----------- ----------- ----------- -----------
Net assets/
liabilities) (148.7) 119.5 111.6 289.4 371.8
======= ========= ========= ========= =========
Capital
expenditure 2.3 7.9 - 10.8 21.0
Depreciation
and
amortisation 1.9 7.2 - 7.9 17.0
Impairment
losses - - 0.1 - 0.1
======= ========= ========= ========= =========
2 Segment reporting (continued)
Half year Construction Support Investments Eliminations Consolidated
to Services Services and unallocated
30 June head office
2005
£m £m £m £m £m
Segment
assets 371.4 286.0 6.8 - 664.2
Investments
in jointly
controlled
entities 24.2 0.8 27.7 - 52.7
Unallocated
assets - - 188.9 188.9
------- ----------- ----------- ----------- ------------
Total
assets 395.6 286.8 34.5 188.9 905.8
------- ----------- ----------- ----------- ------------
Segment
liabilities (348.1) (240.7) (5.2) - (594.0)
Unallocated
liabilities - - - (198.3) (198.3)
------- ----------- ----------- ----------- ------------
Total
liabilities (348.1) (240.7) (5.2) (198.3) (792.3)
------- ----------- ----------- ----------- ------------
Net assets/
liabilities) 47.5 46.1 29.3 (9.4) 113.5
======= ========= ========= ========= =========
Capital
expenditure 5.8 6.0 - 9.3 21.1
Depreciation
and
amortisation 1.6 5.1 - 2.0 8.7
Impairment
losses - - 0.1 - 0.1
======= ========= ========= ========= =========
2 Segment reporting (continued)
Year to 31 Construction Support Investments Eliminations Consolidated
December Services Services and unallocated
2005 head office
£m £m £m £m £m
Segment
assets 306.3 323.0 5.3 - 634.6
Investments
in jointly
controlled
entities 33.6 1.2 28.3 (0.4) 62.7
Unallocated
assets - - - 236.9 236.9
------- ----------- ----------- ----------- ------------
Total
assets 339.9 324.2 33.6 236.5 934.2
------- ----------- ----------- ----------- ------------
Segment
liabilities (340.7) (229.0) (4.3) - (574.0)
Unallocated
liabilities - - - (210.4) (210.4)
------- ----------- ----------- ----------- ------------
Total
liabilities (340.7) (229.0) (4.3) (210.4) (784.4)
------- ----------- ----------- ----------- ------------
Net assets/
liabilities) (0.8) 95.2 29.3 26.1 149.8
======= ========= ========= ========= =========
Capital
expenditure 4.0 29.9 - 20.1 54.0
Depreciation
and
amortisation 2.4 12.7 - 4.1 19.2
Impairment
losses - 1.0 0.3 - 1.3
======= ========= ========= ========= =========
Geographic segments
Half year to United Kingdom Europe Rest of World Consolidated
30 June 2006
£m £m £m £m
Revenue from external
customers 1,354.8 45.0 89.3 1,489.1
========= ========= ========= =========
Segment assets 2,033.5 65.6 122.1 2,221.2
========= ========= ========= =========
Capital expenditure 17.2 0.1 3.7 21.0
========= ========= ========= =========
Geographic segments
Half year to United Kingdom Europe Rest of World Consolidated
30 June 2005
£m £m £m £m
Revenue from external
customers 841.3 15.5 82.0 938.8
========= ========= ========= =========
Segment assets 763.6 18.3 123.9 905.8
========= ========= ========= =========
Capital expenditure 15.2 0.4 5.5 21.1
========= ========= ========= =========
Geographic segments
Year to 31 United Kingdom Europe Rest of World Consolidated
December 2005
£m £m £m £m
Revenue from external
customers 1,796.7 40.2 188.6 2,025.5
========= ========= ========= =========
Segment assets 780.4 15.1 138.7 934.2
========= ========= ========= =========
Capital expenditure 32.7 0.6 20.7 54.0
========= ========= ========= =========
Notes (continued)
3 Share of results of jointly controlled entities
The group's share of the results of jointly controlled entities is analysed
below:
Half year to Half year to Year to
30 June 2006 30 June 2005 31 December
(unaudited) (unaudited) 2005
(audited)
£m £m £m
Revenue 236.6 72.3 258.7
----- --- ---
Operating profit 21.1 5.4 20.3
Net finance (expense)/income (1.6) 0.3 1.1
----- --- ---
Profit before tax and
non-operating items 19.5 5.7 21.4
Exceptional items (see note 4) - (0.8) (0.8)
----- --- ---
Profit before tax 19.5 4.9 20.6
Income tax (4.9) (1.3) (5.0)
----- --- ---
Profit after tax 14.6 3.6 15.6
===== === ===
The Group's share of the operating profit of jointly controlled entities arises
in the following business segments:
Half year to Half year to Year to
30 June 2006 30 June 2005 31 December
(unaudited) (unaudited) 2005
(audited)
£m £m £m
Construction Services 10.1 2.2 12.1
Support Services 2.4 0.2 0.7
Investments 8.6 3.0 7.5
--- --- ---
21.1 5.4 20.3
=== === ===
Notes (continued)
4 Exceptional items
Reorganisation costs of £5.7m primarily include redundancy and associated costs
following a review of the Group's structure on the acquisition of Mowlem plc on
23 February 2006.
The exceptional item in jointly controlled entities of £0.8m in 2005 relates to
the sale of a small non-core plant hire business.
5 Financial income and expenses
Half year to Half year to Year ended
30 June 2006 30 June 2005 31 December
(unaudited) (unaudited) 2005
(audited)
£m £m £m
Financial income
Bank interest receivable 3.9 1.9 4.3
Other interest receivable 5.3 2.0 3.1
Expected return on retirement plan
assets 42.2 23.8 47.0
--- --- ---
51.4 27.7 54.4
--- --- ---
Financial expenses
Interest payable on bank loans and
overdrafts (5.7) (0.9) (1.7)
Other interest payable and similar
charges (1.5) (1.2) (2.9)
Interest cost on retirement plan
obligations (39.4) (24.3) (45.8)
--- --- ---
(46.6) (26.4) (50.4)
=== === ===
Net financing income 4.8 1.3 4.0
=== === ===
6 Income taxes
Reconciliation of effective tax rate
The current tax expense (including the Group's share of joint ventures tax) for
the six months to 30 June 2006 is calculated based on the estimated average
annual effective income tax rate of 27% (six months to 30 June 2005: 27%), as
compared to the tax rates expected to be enacted or substantively enacted at the
annual balance sheet date of 30% (six months to 30 June 2005: 30% ). Differences
between the estimated average annual effective income tax rate and statutory
rate include but are not limited to the effect of tax rates in foreign
jurisdictions, non-deductible expenses, tax incentives not recognised in profit
or loss, the effect of tax losses utilised and under/over provisions in previous
years.
Notes (continued)
7 Earnings per share
(a) Basic
The calculation of basic earnings per share for the six months to 30 June 2006
is based on the profit for the period of £9.0 million (six months to 30 June
2005: £13.3 million; year to 31 December 2005: £39.3 million) and a weighted
average number of ordinary shares outstanding during the six months to 30 June
2006 of 257.7 million (six months to 30 June 2005: 210.4 million; year to 31
December 2005: 210.5 million). The weighted average number of shares excludes
shares held by the Employee Share Ownership Plan and the QUEST, which together
amount to 3.8 million shares in total (six months to 30 June 2005: 4.1 million;
year to 31 December 2005: 4.1 million).
(b) Underlying performance
A reconciliation of profit before tax and basic earnings per share, as reported
in the income statement, to adjusted profit before tax and basic earnings per
share, is set out below:
Profit before Half year to 30 June Half year to 30 June Year to 31 December
tax 2006 2005 2005
£m £m £m
Profit before
tax as
reported in
the income
statement 11.7 18.4 51.9
Amortisation
of intangible
assets arising
from business
combinations 7.2 1.0 2.5
Impairment of
goodwill 0.1 0.1 0.3
Loss on
disposal of
business - 0.6 0.8
Reorganisation
costs 5.7 - -
--- --- ---
Adjusted
profit before
tax 24.7 20.1 55.5
=== === ===
Half year to 30 June 2006 Half year to 30 June 2005 Year to 31 December 2005
£m Pence per share £m Pence per share £m Pence per share
Profit
attributable
to equity
holders of the
parent 9.0 3.5 13.3 6.3 39.3 18.7
Reorganisation
costs 5.7 2.2 - - - -
Group share of
joint ventures
non-operating
items (net of
tax) - - 0.6 0.3 0.8 0.4
Less taxation
in respect of
above (1.5) (0.6) - - - -
--- --- --- --- --- ---
Profit before
exceptional
items 13.2 5.1 13.9 6.6 40.1 19.1
Amortisation/
impairment of
intangible
assets 7.3 2.8 1.1 0.5 2.8 1.3
--- --- --- --- --- ---
Profit before
exceptional
items
and
amortisation/
impairment
of intangible
assets 20.5 7.9 15.0 7.1 42.9 20.4
==== ==== ==== === ==== ====
Diluted
adjusted
earnings per
share 7.9 7.0 20.1
Notes (continued)
7 Earnings per share (continued)
(c) Diluted earnings per share
Diluted earnings per 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:
Half year to Half year to Year to
30 June 2006 30 June 2005 31 December
(unaudited) (unaudited) 2005
(audited)
Million Million Million
Number of ordinary shares per
basic earnings per share
calculations 257.7 210.4 210.5
Effect of shares under option 2.8 3.1 3.1
--- --- ---
260.5 213.5 213.6
=== === ===
8 Dividends
The following dividends were paid by the company:
Half year to 30 June 2006 Half year to 30 June 2005 Year to 31 December 2005
£m Pence per £m Pence per £m Pence per
share share share
Previous
period
final
dividend 14.5 5.2 10.2 4.825 10.1 4.825
Current
period
interim
dividend - - - - 6.0 2.8
------------- ------------- ------------- ------------- ------------- -------------
14.5 5.2 10.2 4.825 16.1 7.625
============= ============= ============= ============= ============= =============
The following dividends were declared by the company in respect of each
accounting period presented:
Half year to 30 June 2006 Half year to 30 June 2005 Year to 31 December 2005
£m Pence per £m Pence per £m Pence per
share share share
Interim
dividend 8.7 3.1 6.0 2.8 6.0 2.8
Final
dividend - - - - 14.6 5.2
------------- ------------- ------------- ------------- ------------- -------------
8.7 3.1 6.0 2.8 20.6 8.0
============= ============= ============= ============= ============= =============
The interim dividend for 2006 of 3.1 pence per share was approved by the Board
on 6 September 2006 and has not been included as a liability as at 30 June 2006.
This interim dividend will be paid on 10 November 2006 to shareholders on the
register at the close of business on 15 September 2006.
Notes (continued)
9 Intangible assets
Goodwill Customer Total arising Computer Total
contracts and from business software and
lists combinations licences
£m £m £m £m £m
Cost
At 1 January
2006 53.6 6.2 59.8 8.7 68.5
Acquisitions
(see note 10) 396.1 100.0 496.1 - 496.1
Goodwill
acquired (see
note 10) 18.0 - 18.0 - 18.0
Additions - - - 0.3 0.3
Reclassification - - - 0.2 0.2
--------------- --------------- --------------- --------------- ---------------
At 30 June
2006 467.7 106.2 573.9 9.2 583.1
=============== =============== =============== =============== ===============
Amortisation
and impairment
losses
At 1 January
2006 - 2.5 2.5 3.7 6.2
Amortisation - 7.2 7.2 0.5 7.7
Reclassification - - - 0.2 0.2
--------------- --------------- --------------- --------------- ---------------
At 30 June
2006 - 9.7 9.7 4.4 14.1
=============== =============== =============== =============== ===============
Net book
value
At 31 December
2005 53.6 3.7 57.3 5.0 62.3
=============== =============== =============== =============== ===============
At 30 June
2006 467.7 96.5 564.2 4.8 569.0
=============== =============== =============== =============== ===============
10 Acquisitions and disposals
Acquisitions
On 23 February 2006, the Group acquired the entire share capital of Mowlem plc
for total consideration of £348.7 million. The company and its subsidiaries
operate in a number of sectors and industries, particularly construction,
facilities management and Public Private Partnerships. In the period from
acquisition to 30 June 2006 Mowlem plc contributed profit before tax of £2.7
million to the consolidated profit for the interim period. If the acquisition
had occurred on 1 January 2006, Group revenue would have been £1,738.5 million
and profit before tax would have been £4.0 million for the six months to 30 June
2006.
Effect of acquisitions
The acquisition had the following effect on the Group's assets and liabilities.
Notes (continued)
10 Acquisitions and disposals (continued)
Net assets at the acquisition date
Carrying Provisional Accounting Provisional
amounts fair value policy recognised
adjustments adjustment values
£m £m £m £m
Property,
plant and
equipment 25.9 (2.4) - 23.5
Intangible
assets 18.0 - - 18.0
Investments in
jointly
controlled
entities 24.5 72.7 (8.8) 88.4
Other
investments 15.0 - - 15.0
Deferred tax
assets 30.9 15.3 6.3 52.5
Inventories 17.9 (4.2) - 13.7
Trade and
other
receivables 457.1 (20.0) - 437.1
Assets held
for sale 76.3 56.9 - 133.2
Cash and cash
equivalents 11.6 (8.1) - 3.5
Borrowings (126.4) 0.4 - (126.0)
Trades and
other payables (560.2) 32.4 2.9 (524.9)
Income tax (4.2) 1.3 - (2.9)
Retirement
benefit
liabilities (95.5) - (21.0) (116.5)
Liabilities
held for sale (125.9) (34.4) - (160.3)
Provisions (1.7) - - (1.7)
--- --- --- ---
Net
identifiable
assets and
liabilities (236.7) 109.9 (20.6) (147.4)
--- --- --- ---
Provisional
goodwill and
intangible
assets
recognised on
acquisition 496.1
---
Consideration 348.7
===
Of the provisional goodwill of £496.1m, £100.0m has provisionally been
identified as relating to customer contracts and relationships that require
classification as intangible assets. This review of intangible assets acquired
is still ongoing and will be completed by the year end. A charge of £6.0m has
been included the income statement in relation to the amortisation of these
intangible assets. Provisional goodwill of £396.1m has arisen on the acquisition
of Mowlem plc because of a large number of other customer contracts and
relationships that do not meet the criteria for recognition as an intangible
asset at the date of acquisition.
The fair value adjustments made at acquisition relate to:
- market value adjustments to the carrying value of investments in PPP
jointly controlled entities
- the reclassification of Edgar Allen Limited and Charter as available
for sale assets and liabilities and the subsequent adjustment to their net
realisable value following the decision to dispose of the businesses post
acquisition
- the recognition of a deferred tax asset on a proportion of
corporation tax trading losses
The accounting policy adjustments made relate to :
- the reversal of the fair value uplift to finance debtors within PPP
jointly controlled entities
- the recognition of the full defined benefit pension scheme deficits
on balance sheet following the reversal of the corridor approach to the
recognition of actuarial gains and losses
- a re-alignment of the treatment of investment related bid cost
recoveries at financial close on PPP projects
Consideration for the acquisition comprises the following:
£m
Cash 117.3
Equity shares issued 223.1
Attributable costs 8.3
----------------
348.7
================
The value of equity shares issued is based on the quoted mid-market price of
Carillion plc shares at the close of business on the day preceding the effective
date of acquisition of £3.39 and the total number of equity shares issued of
65.8 million.
Attributable costs include direct advisor costs incurred in relation to the
acquisition contracts and due diligence procedures.
Cash flows associated with the acquisition are included in the cash flow
statement as follows:
£m
Cash paid (117.3)
Attributable costs paid (8.3)
--------------
(125.6)
Cash and cash equivalents acquired 3.5
--------------
Net cash outflow on acquisition (122.1)
==============
Disposals
During the acquisition of Mowlem plc, certain businesses were identified as
being non-core operations for disposal. In addition, there were a number of
businesses which had not been identified as available for sale by Mowlem plc
prior to acquisition.
In the post acquisition period the Group disposed of the following Mowlem plc
businesses;
Edgar Allen Limited
Charter
Mowlem Environmental Sciences Group
Barclay Mowlem Limited
These businesses were included in the acquisition balance sheet of Mowlem Plc as
assets and liabilities held for sale and are therefore carried at fair value,
which represents proceeds on disposal less costs to sell. These fair values were
realised on subsequent disposal and consequently no profit or loss has arisen.
The cash effect has been reflected in the Group cash flow statement as follows:
£m
Consideration received (net of disposal costs paid) 49.8
Cash in businesses disposed of (23.1)
----------------
Cash inflow from disposal of businesses 26.7
================
Notes (continued)
11 Reconciliation of profit for the period to cash generated from operations
Half year to Half year to Year to
30 June 2006 30 June 2005 31 December
(unaudited) (unaudited) 2005
(audited)
£m £m £m
Cash flows from operating
activities
Profit for the period 10.1 14.1 40.8
Depreciation, amortisation and
impairment 17.1 8.8 20.5
(Profit)/loss on sale of property,
plant and equipment 0.5 (0.5) (0.9)
Share based payment expense 0.6 0.5 1.2
Other non-cash movements 2.2 0.9 (3.2)
Share of results of jointly
controlled entities (14.6) (3.6) (15.6)
Net financing income (4.8) (1.3) (4.0)
Income tax expense 1.6 4.3 11.1
Exceptional reorganisation costs 5.7 - -
--- --- ---
Operating profit before changes in
working capital and provisions 18.4 23.2 49.9
Increase in inventories 8.8 (0.5) (2.6)
(Increase)/decrease in trade and
other receivables (147.0) (60.3) (26.4)
Increase/(decrease) in trade and
other payables 196.4 53.0 65.1
Decrease in provisions - (0.4) (2.2)
--- --- ---
Cash generated from operations
before pension scheme
contributions and exceptional
costs 76.6 15.0 83.8
Pension scheme contributions (23.0) (10.0) (10.0)
Exceptional reorganisation costs (4.3) - -
--- --- ---
Cash generated from operations 49.3 5.0 73.8
=== === ===
Pension scheme contributions of £23.0m in the half year to 30 June 2006 relate
to lump sum contributions agreed with the trustees of the Carillion, Staff, 'B'
and Public Sector schemes in order to reduce the deficits in those schemes.
The pension scheme contribution of £10.0 million in 2005 relates to a one-off
payment into the pension scheme of PMG following the acquisition of the company
in March 2005.
12 Reconciliation of Equity Shareholders' Funds
Half year to Half year to Year to
30 June 2006 30 June 2005 31 December
(unaudited) (unaudited) 2005
(audited)
£m £m £m
Recognised income and expense for
the period 10.6 4.2 44.8
Equity settled transactions (net
of tax) 0.4 0.5 0.9
Share options exercised by
employees 2.1 0.4 0.7
New share capital subscribed 223.5 0.7 1.7
Dividends paid to equity holders
of the parent (14.5) (10.2) (16.1)
--- --- ---
Net movement in equity
shareholders' funds 222.1 (4.4) 32.0
Opening equity shareholders' funds 148.7 116.7 116.7
--- --- ---
Closing equity shareholders' funds 370.8 112.3 148.7
=== === ===
Independent review report to Carillion plc
Introduction
We have been instructed by the Company to review the financial information, for
the six months ended 30 June 2006 which comprises consolidated income statement,
consolidated statement of recognised income and expense, consolidated balance
sheet, consolidated statement of cash flows and the related notes. 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 any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
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 excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Statements on Auditing (UK and
Ireland) 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 2006.
KPMG Audit Plc
Chartered Accountants
2 Cornwall Street
Birmingham
B3 2DL
6th September 2006
This information is provided by RNS
The company news service from the London Stock Exchange
CBUPQUUQ