Final Results 2011

Annual results for the year ended 31 December 2011

Carillion, a leading integrated support services company, delivers another strong performance

·; Strong financial performance

- Revenue unchanged, with the increase due to the acquisition of Carillion Energy Services (CES) offset by the planned re-scaling of UK construction

- Strong growth in underlying profit before taxation and underlying earnings per share reflected a substantial increase in total underlying operating margin from 4.2% to 4.7%

- Reported profit before taxation and basic eps includes a total of £47.5m of one-off costs relating to the acquisition and integration of CES

·; Strong balance sheet

- Strong cash flow from operations of £230.3m was equal to 107% of profit from operations

- Net debt of £50.7m was substantially better than expectations

- New revolving credit facility of £737.5m to 2016 and £100.0m 7 to 10 year private placement financing

·; Good revenue visibility and record pipeline of contract opportunities

- 2012 revenue visibility(4) of 77% (2010: 82% for 2011)

- Order book plus probable orders of £19.1bn (2010: £19.1bn) remains very strong

- Pipeline of contract opportunities up 29% to £33bn, includes major public sector outsourcing opportunities

·; Proposed full-year dividend up 9%, reflecting a strong performance and positive outlook

(1) Before Joint Ventures net financial expense and taxation, intangible amortisation and non-recurring operating items (see note 3 to the financial information on page 29).

(2) After Joint Ventures taxation charge of £3.5 million (2010: £4.7 million) and before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information on page 29).

(3) Before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information on page 29).

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

Carillion Chairman, Philip Rogerson, commented:

"Carillion's integrated UK support services and international business mix has once again enabled the Group to perform strongly, despite challenging market conditions. Given the wider economic outlook, we expect trading conditions to remain challenging in 2012. However, with a strong and resilient business, good revenue visibility and a record pipeline of contract opportunities, we continue to target growth in support services together with the doubling of our revenues in the Middle East and in Canada, in each case to around £1 billion, by 2015. Consequently, Carillion remains well-positioned to deliver further growth in 2012 and beyond".

There will be a presentation for analysts and investors today at 08.30am. A telephone dial in facility (+44 (0) 207 190 1596) will be available for analysts and investors who are unable to attend the presentation. The presentation can be viewed on Carillion's website at www.carillionplc.com/investors/investors_presentations.asp. A replay facility is also available following the call on Toll Free UK: 0800 358 3474 - Access Code: 4510904# and Toll Free US: 1 800 406 7325 - Access Code: 4510904#.

For further information contact:

29 February 2012

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 around 45,000 people and operates across the UK, the Middle East and Canada.

The Group has four business segments:

 Support services - this includes facilities management, facilities services, energy services, rail services, road maintenance, utility services and consultancy businesses.

Public Private Partnership (PPP) projects - this includes our investing activities in PPP projects in our chosen sectors of defence, health, education, transport, secure, energy services and other Government accommodation.

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

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

This and other Carillion news releases can be found at www.carillionplc.com

Photographs:

High resolution photographs are available free of charge to the media at www.newscast.co.uk telephone + 44 (0) 208 886 5895.

Cautionary statement

This announcement may contain indications of likely future developments and other forward-looking statements that are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries, sectors and business segments in which the Group operates. These and other factors could adversely affect the Group's results, strategy and prospects. Forward-looking statements involve risks, uncertainties and assumptions. They relate to events and/or depend on circumstances in the future which could cause actual results and outcomes to differ materially from those currently anticipated. No obligation is assumed to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Key financial figures

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

(2) After Joint Ventures net financial expense of £18.8 million (2010: £13.9 million) and taxation charge of £3.5 million (2010: £4.7 million) and before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information).

(3) After Joint Ventures taxation charge of £3.5 million (2010: £4.7 million) and before intangible amortisation, non-recurring operating items and non-operating items (see note 3 to the financial information).

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

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

Summary results

Carillion's integrated UK support services and international business mix has once again enabled the Group to perform strongly, despite challenging market conditions.

Total revenue, including joint ventures, remained unchanged at £5.1 billion, primarily because the contribution from Carillion Energy Services (CES - formerly Eaga plc) was offset by a reduction in UK construction revenue, as we continue to make progress with the planned re-scaling of our UK construction activities.

Underlying profit before tax(1) increased by 13 per cent to £212.0 million (2010: £188.1 million), with the Group's underlying operating margin increasing to 4.7 per cent (2010: 4.2 per cent), which reflects our ongoing focus on margins through applying strict contract selectivity criteria and strong cost management. Underlying earnings per share(2) increased by nine per cent to 43.0 pence (2010: 39.4 pence).

Profit continues to be cash-backed, with underlying cash flow from operations of £230.3 million (2010: £230.2 million) ahead of underlying profit from operations of £215.9 million (2010: £194.9 million). Net borrowing at 31 December 2011 was £50.7 million (2010: net cash of £120.2 million), significantly better than the target we set at the half-year of reducing net debt to below £125 million by the year end, following the acquisition of CES for £298.4 million in April 2011.

The Group continued its strategic development with the acquisition of CES, the largest independent energy efficiency services company in the UK. Carillion now has the in-house capabilities to meet the increasing demand for energy efficiency services from existing and prospective customers. The acquisition has also taken the Group into new energy services markets, in which there are significant opportunities for growth. Progress with the integration of CES remains ahead of expectations, with integration cost savings expected to reach a run rate of £25 million per annum by the end of 2013, at a one-off cost of £40 million.

The value of the Group's order book and probable orders at 31 December 2011 remained strong at £19.1 billion (2010: £19.1 billion), with the value of orders and probable orders acquired with CES broadly offset by the reduction resulting from the planned re-scaling of our UK construction activities. The Group continues to have good revenue visibility, which at 31 December 2011 was 77 per cent(3) for 2012 (2010: 82 per cent for 2011). In addition, at the year end the Group's pipeline of contract opportunities had increased by 29 per cent to a record level of £33.1 billion (2010: £25.7 billion), which continues to support our targets for growth in 2012 and over the medium term.

The Board is recommending a final ordinary dividend for 2011 of 11.6 pence per share, making the total dividend for 2011 16.9 pence per share (2010: 15.5 pence). This represents an increase of nine per cent on the total paid in respect of 2010, in line with the Group's policy of increasing the dividend in line with earnings growth.

(1) After Joint Ventures taxation charge of £3.5 million (2010: £4.7 million) and before intangible amortisation, non-recurring operating items and non-operating items.

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

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

Financial reporting segments and analysis

Operating profit by financial reporting segment

Support services

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

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

Revenue increased by 11 per cent to £2,345.2 million, with the acquired revenue contribution from CES partially offset by the previously reported revenue reductions arising from contract demobilisations during 2010, notably contracts for Aviva and the Highways Agency, and the effect of our continuing focus on margins through contract selectivity. This focus enabled us to maintain our operating margin in this segment at 5.2 per cent, despite challenging market conditions, with underlying operating profit increasing by nine per cent to £120.8 million, broadly half of the Group's total underlying operating profit.

The acquisition of CES in April 2011 was an important strategic development, driven primarily by the need to extend our support services offering to include energy efficiency services, given that these services are an increasingly important part of the integrated facilities management and maintenance solutions required by our customers. The acquisition has also taken the Group into new markets with good prospects for growth. While the UK Government's decision to reduce Feed-in-Tariffs for solar photovoltaic systems (Solar PV) is expected to limit growth in the Solar PV market, CES continues to have good growth prospects in its other markets. These prospects have been boosted by the UK Government's announcements regarding implementation of the provisions of the Energy Act 2011 and in particular, the Green Deal and the Energy Company Obligation (ECO). The Green Deal, which is to receive an additional £200 million of Government funding, is expected to kick-start at least £14 billion of investment in energy efficiency measures over the next decade. The ECO, which the Government is committed to introduce in October 2012, is expected to create a market worth some £1.3 billion a year, initially up to 2015, but the present Government intends to extend this period to 2020.

During 2011, we continued to win new orders by using our extensive capabilities and nationwide resources to target large complex contracts. At 31 December 2011, our forward order book for support services was worth £12.3 billion (2010: £11.7 billion) and in addition we had probable orders worth £0.6 billion (2010: £0.5 billion). The combined value of our strong order book and probable orders continues to provide good visibility, which at 31 December 2011 was 79 per cent(1) of expected revenue for 2012 (2010: 75 per cent(1) for 2011).

Our top 10 support services contracts account for around 26 per cent of our revenue in this segment and with none of these contracts due for re-bid in 2012 or 2013, we have a solid revenue platform for the medium term. Furthermore, our pipeline of contract opportunities continues to increase and at the year end was worth £12.3 billion (2010: £8.3 billion) of which a major proportion relates to public sector organisations seeking to outsource non-core services in order to reduce operating costs. Consequently, we continue to target growth in support services. 

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

Public Private Partnership (PPP) projects

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

We combine our expertise in private finance with our support services and construction capabilities to win and deliver fully integrated solutions for PPP projects, in which we invest equity and for which we secure construction contracts and long-term support services contracts, typically for up to 35 years. The results of our PPP construction and support services contracts are reported in our "Construction services (excluding the Middle East)" and "Support services" segments, respectively. Once a project is mature, having passed from construction into the operational phase, we have the option of selling our equity and reinvesting the proceeds in new projects.

The one per cent reduction in revenue in 2011 reflected the sale of our equity investments in the Queen Alexandra Hospital project in June 2010 and three further projects in 2011, partially offset by growth in the remainder of the portfolio. The 15 per cent reduction in operating profit in 2011 reflected these equity sales and the fact that profit in 2010 benefited from the receipt of higher than normal fees upon achieving financial close on four large projects.

In 2011, a Carillion joint venture achieved financial close on a £1.7 billion, 30-year contract for the New Oakville Hospital PPP project in Ontario, Canada, our sixth PPP hospital in Canada, in which we expect to invest some £28 million of equity. During 2011, we also sold equity investments in three mature projects, namely South Ayrshire Schools, Three Shires Hospitals and the A249 Sheppey Route. These sales generated total gross proceeds of £25.4 million, which represented an average discount rate of seven per cent, and a non-operating profit of £11.5 million.

At 31 December 2011, we had a portfolio of 25 financially closed projects in which we had invested some £96 million of equity. The Directors' valuation of this portfolio at 31 December 2011 increased to £164 million (2010: £135 million), based on discounting the cash flows from our investments at nine per cent. At 31 December 2011 we also had commitments to invest a further £125 million of equity in financially closed projects that are still in the construction phase. Our forward order book at 31 December 2011 was £2.7 billion (2010: £2.7 billion) and we had probable orders worth £0.1 billion (2010: nil). In addition, we are currently short-listed for two further projects in which we could potentially invest up to £65 million, namely the Royal Liverpool Hospital and Sheffield Highways.  

Going forward, we continue to expect opportunities to add projects to our portfolio. In Canada, Infrastructure Ontario has published details of the first 20 projects that will form part of the C$35 billion of investment planned over the first three years of its new 10-year PPP programme. We expect to bid a number of these projects in 2012, as the majority of these 20 projects are in the healthcare sector where Carillion is a market leader. In the UK, the review of the Private Finance Initiative (PFI) announced by the Government in November 2011 clearly indicates that, while the current PFI model may change, private finance will continue to play a significant role in delivering UK public infrastructure and services. We therefore continue to expect opportunities in the UK over the medium term, for example from the £2 billion schools PFI programme and from the National Infrastructure Plan 2011, which comprises over 500 projects worth in excess of £250 billion, some two thirds of which will be delivered using private finance.

Middle East construction services

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

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

We continued to make good progress in the Middle East, with revenue increasing by 11 per cent to £548.9 million. Operating profit increased by three per cent to £49.1 million (2010: £47.5 million), despite the operating margin reducing to 8.9 per cent (2010: 9.6 per cent) in line with the expectations we announced in 2010, namely that margins in this segment would ease back to around six per cent by 2013, because all our contracts are now competitively tendered rather than negotiated.

Our progress in 2011 continues to reflect the strength of our markets together with the reputation we have built over the last forty years for high-quality and on-time delivery. As well as continuing to win contracts in the territories where we have well-established businesses, namely Abu Dhabi, Oman and Dubai, we successfully extended our Middle East operations to Qatar, where a Carillion joint venture won its first contract in 2011 - a £395 million contract to deliver a major phase of the Msheireb Heart of Doha development for Msheireb Properties, a subsidiary of Qatar Foundation for Education, Science and Community Development. This high profile and prestigious mixed-use development is worth some £316 million to Carillion.

At 31 December 2011, Carillion's share of the forward order book of our Middle East businesses was some £1.0 billion (2010: £1.0 billion) and our revenue visibility for 2012 was 70 per cent(2) (2010: 78 per cent for 2011). In assessing our prospects in the Middle East, our pipeline of contract opportunities is especially important, given that we are focused on large projects that can move quickly from tender stage to contract signature, causing substantial movements in order book value. At 31 December 2011, our pipeline of contract opportunities had increased substantially to a new record level of £11.4 billion (2010: £8.8 billion).

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

We are optimistic that during 2012 we can extend our Middle East operations to Saudi Arabia, which has major investment programmes in sectors where we have already established strong reputations in our existing territories.

Given our record pipeline of contract opportunities, which reflects the strength of our current and prospective markets, we remain confident that we can achieve our target of doubling our revenue in the Middle East to around £1 billion by 2015. 

Construction services (excluding the Middle East)

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.

Revenue in this segment reduced by 17 per cent, as we continued to make progress with our objective of re-scaling UK construction to reduce its revenue by approximately one third, from the 2009 level of £1.8 billion to £1.2 billion, which we expect to achieve in 2012. In 2011, UK construction revenue reduced by 24 per cent to £1.3 billion (2010: £1.7 billion). Re-scaling is being achieved by tightening our contract selectivity criteria to base our UK activities progressively around the delivery of integrated solutions for PPP projects and support services customers, and high-quality, value-added contracts for long-term customers. As expected, construction revenue in Canada remained broadly unchanged.

Our decision to re-scale UK construction anticipated the Government's cuts in capital spending of some 30 per cent in real terms over the current four-year spending plan. It has also helped us to improve the operating margin in this segment, as we have avoided bidding for lower margin work at a time when the UK market is becoming increasingly competitive. This, together with the benefits of a number of contracts completing or moving towards completion with favourable outturns, has enabled us to improve the operating margin to 3.1 per cent (2010: 1.9 per cent) with operating profit increasing by 41 per cent to £57.9 million.

At 31 December 2011, we had a forward order book in this segment worth some £2.0 billion (2010: £2.8 billion) and probable orders of £0.4 billion (2010: £0.4 billion). At the year end, revenue visibility for 2012 was 72 per cent(1) (2010: 89 per cent for 2011). In addition, we had a pipeline of contract opportunities at 31 December 2011 worth approximately £8.4 billion (2010: £7.7 billion).

In 2012, UK market conditions are expected to remain competitive as Government cuts in capital spending continue to bite. We will continue to re-scale our UK business by maintaining a very selective approach to the contracts for which we bid, which will also continue to support margins. Over the medium term, we remain well placed to benefit from new planned public sector investment in the UK, such as the £2 billion PFI schools programme and the National Infrastructure Plan 2011, which comprises over 500 projects worth in excess of £250 billion over a five-year period.

In Canada, we continue to target growth in construction over the medium term to support our target of doubling total revenue to around £1 billion by 2015. We expect the Alternative Financing Procurement (AFP) market (similar to Public Private Partnerships in the UK) to be an important driver of growth, particularly in Ontario. The Ontario Government has announced details of 20 projects that comprise the first phase of its new 10-year AFP programme, under which it plans to invest C$35 billion over the first three years, and we expect to bid a number of these projects in 2012.

Group income statement, cash flow and balance sheet items

Intangible amortisation

Intangible amortisation of £31.0 million (2010: £27.6 million) included £10.0 million in relation to CES with the balance mainly relating to the amortisation of intangible assets primarily arising from the acquisitions of Mowlem in 2006 and Alfred McAlpine in 2008.

Non-recurring operating items

The non-recurring operating charge of £42.8 million (2010: £9.4 million) relates to the payment into the CES Employee Share Scheme in lieu of the final Carillion dividend waived by the Eaga Partnership Trusts(2) of £2.8 million along with the £40.0 million restructuring and property exit costs associated with the integration of CES.

Non-operating items

Non-operating profit of £4.6 million (2010: £16.8 million) comprised a profit of £11.5 million on the disposal of three Public Private Partnership equity investments and a profit of £3.8 million on the sale of a small joint venture business in the Netherlands, net of £7.5 million of costs relating to the acquisition of CES and costs of £3.2 million associated with the closure of minor non-core construction activities.

(1) Based on expected revenue and secure and probable orders, which exclude variable work and re-bids.(2) The Eaga Partnership Trusts held a 5.9% shareholding in Carillion plc immediately following the acquisition of CES.

Net financial expense

The Group's net financial expense of £3.9 million (2010: £6.8 million) comprised the following items: a net expense of £14.0 million (2010: £7.6 million) in respect of borrowings and other liabilities, with the increase compared to 2010 largely due to higher net borrowings, following the acquisition of CES; a net interest credit in respect of defined benefit pension schemes of £3.2 million (2010: £3.6 million charge) due to favourable movements in market conditions and interest received in respect of loans to PPP Joint Venture projects of £6.9 million (2010: £4.4 million).

Taxation

The underlying Group taxation charge of £27.8 million, when combined with a taxation charge on Joint Ventures of £3.5 million (2010: £4.7 million), represented an underlying effective tax rate of 15 per cent (2010: 16 per cent). This is significantly below the UK standard rate of corporation tax of 26.5 per cent for 2011, because our profits in the Middle East are subject to zero or low rates of tax and because we utilise carried forward tax losses in the UK that were largely inherited with the acquisitions of Mowlem and Alfred McAlpine. At 31 December 2011, the Group had £348 million (2010: £306 million) of corporate tax losses that are available to reduce future tax payments.

Earnings per share

Underlying earnings per share increased by nine per cent to 43.0 pence (2010: 39.4 pence), reflecting the acquisition of CES and the substantial improvement in total operating margin. Following the issue of 30.6 million shares on the acquisition of CES on 21 April 2011, the weighted average number of shares in issue in 2011 increased to 420.9 million (2010: 399.0 million).

Dividend

Carillion has a progressive dividend policy which aims to increase the dividend per share broadly in line with the growth in underlying earnings per share, subject to the investment needs of the business. Consistent with this policy, the Board has recommended a final dividend for the 2011 financial year of 11.6 pence per share, making the proposed full-year dividend 16.9 pence per share (2010: 15.5 pence per share), an increase of nine per cent on the total paid in respect of 2010. Dividend cover based on the proposed full-year dividend of 16.9 pence per share and underlying earnings per share is 2.5 times (2010: 2.5 times).

Cash flow

(1) Post the acquisition of CES in April 2011

Strong cash management is a priority and this is reflected in the Group's track record of consistently delivering cash-backed profit. Underlying cash flow from operations of £230.3 million represents 107% of underlying profit from operations, which is a significant achievement given the re-scaling of UK construction is, as expected, resulting in an outflow of working capital. Deficit recovery payments to the Group's pension funds of £36.2 million are in line with the agreement reached in 2010 with the Trustees of the Group's main defined benefit schemes. The £34.4 million of rationalisation costs primarily related to the integration of CES and the re-scaling of UK construction. Interest, tax and dividend payments of £77.1 million included higher interest and dividends payable due to the acquisition of CES. Net income of £4.6 million in respect of capital items included proceeds of £17.2 million following the sale of vehicles to Tarmac following the unwind of an arrangement which had been in existence since 1999, along with the disposal of surplus assets.

Net payments in respect of acquisitions and disposals amounted to £251.4 million, including £249.9 million relating to the cash element of the consideration, acquisition costs and net debt acquired in respect of CES; net equity investments in joint ventures of £31.0 million; proceeds of £25.2 million (net of expenses) from the sale of equity in three Public Private Partnership projects and proceeds of £6.2 million (net of expenses) from the sale of a small joint venture in the Netherlands.

The above items, together with other payments of £6.7 million, resulted in a change in net borrowing of £170.9 million, leaving the Group with net borrowing of £50.7 million at 31 December 2011 (2010: £120.2 million net cash).

Balance sheet

Property, plant and equipment reduced from £157.2 million to £134.2 million largely due to the sale of vehicles to Tarmac and the disposal of surplus assets. The increase in intangible assets to £1,547.6 million was mainly due to the acquisition of CES in April 2011. Investments increased to £210.9 million at the end of 2011 due largely to equity investments in PPP projects of £29.0 million.

At 31 December 2011, the retirement benefit liability increased to £229.3 million, net of taxation (2010: £182.1 million), due to a combination of a reduction in asset values following the fall in global equity markets and an increase in obligations due to a reduction in the discount rate, which reflected the movement in market bond yields. The Group's ongoing total pensions charge against profit in 2011 amounted to £29.3 million (2010: £29.9 million). The net credit to interest of £3.2 million relating to pensions (2010: £3.6 million charge), largely reflected the reduction in bond yields.

Acquisition of CESThe Group acquired the entire share capital of CES in 2011 for a total consideration of £298.4 million, satisfied by the issue of 30.6 million Carillion plc shares and £181.2 million in cash. Following an assessment of the fair value of assets and liabilities at the acquisition date, goodwill arising on this acquisition amounted to £329.1 million.

Committed bank facilities In February 2011, the Group put in place new committed bank facilities of £752.5 million, which comprise a £737.5 million syndicated five-year facility maturing in March 2016 and a £15.0 million 364-day facility. In August 2011, we also completed a £100 million private placement which comprised a £49 million seven-year facility at 4.38 per cent per annum and a £51 million 10-year facility at 5.1 per cent per annum. Securing these facilities reflects the Group's positive prospects and gives the Group the financial strength to support its strategy for sustainable profitable growth.

Funding and liquidityIn addition to Carillion plc's principal borrowing facilities described above, money market and short-term overdraft facilities are available to Carillion plc and certain subsidiaries. Operating and finance leases are also employed to fund longer-term assets. The quantum of committed borrowing facilities available to the Group is regularly reviewed by the Carillion Board and is designed to satisfy the requirements of the Group's business plan. At 31 December 2011, the Group had undrawn committed facilities amounting to £356.1 million (2010: £456.5 million). This excludes the Group's share of cash balances amounting to £94.2 million (2010: £175.1 million) within jointly controlled operations, which are outside of the Group's facilities.  

Foreign exchange

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

Operational risk managementCarillion has rigorous risk management policies and processes to identify, mitigate and manage strategic risks and risks specific to individual business units and contracts, including economic, social, environmental and ethical risks. The principal risks include managing our pension schemes, winning work in competitive markets, maintaining high standards of health and safety, managing major contracts, maintaining financial discipline and being able to recruit and retain excellent people.

Board changes

On 31 December 2011, John McDonough retired from the Board and from the company having served as Group Chief Executive since January 2001. John has been succeeded as Group Chief Executive by Richard Howson. Richard has worked for Carillion for 16 years and during that time he has successfully led our UK construction, Middle East and Rail businesses and for the last two years he has been our Chief Operating Officer.

John McDonough joined the Board as Group Chief Executive in January 2001 and has made a major contribution to Carillion's success. Under his leadership, Carillion's earnings and dividends per share have broadly trebled as the company has been transformed from being largely focused on UK construction into an international support services company with a strong, selective construction capability. John's contribution to the UK construction industry was recently recognised by the award of a CBE in Her Majesty the Queen's 2011 Birthday Honours list. John leaves the Board and the company with our grateful thanks and very best wishes for his retirement.

Philip Green joined the Board as our Senior Independent Non-Executive Director in June 2011. Philip brings extensive experience to the Board having previously served as Chief Executive of United Utilities Group plc and of Royal P&O Nedlloyd. David Garman stepped down from the Board in May 2011. Having joined the Board as a Non-Executive Director in 2004, David served as Senior Independent Non-Executive Director from 2005 and made a valuable contribution to Carillion's progress and success. Andrew Dougal joined the Board as a Non-Executive Director in October 2011. Andrew also brings considerable experience to the Board having held a number of senior executive positions, including Chief Executive of Hanson plc until his retirement in 2002. Andrew has succeeded David Maloney as chairman of the Audit Committee, as David has stepped down from the Board having served as a Non-Executive Director for six years, during which time he made a significant contribution to Carillion's development and success.

Outlook and prospects

Given the wider economic outlook, we expect trading conditions to remain challenging in 2012. However, with a strong and resilient business, good revenue visibility and a record pipeline of contract opportunities, we continue to target growth in support services together with the doubling of our revenues in the Middle East and in Canada, in each case to around £1 billion, by 2015. Consequently, Carillion remains well-positioned to deliver further growth in 2012 and beyond.

 (1) Arising from business combinations. (2) This includes integration and rationalisation costs and Eaga Partnership Trusts (EPT) related charges (see note 3).

Consolidated statement of changes in equity

for the year ended 31 December 2011

Consolidated statement of changes in equity for the year ended 31 December 2010

Consolidated balance sheet as at 31 December

1 Basis of preparation

Carillion plc (the 'Company') is a company domiciled in the United Kingdom (UK). The condensed consolidated financial statements of the Company for the year ended 31 December 2011 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interest in jointly controlled entities.

The Group's financial statements have been approved by the Directors and prepared in accordance with International Financial Reporting Standards as adopted by the European Union (adopted IFRSs'). The following new accounting standards and interpretations have been adopted in 2011 as they are mandatory for the year ended 31 December 2011:

·; Amendments to International Financial Reporting Interpretations Committee (IFRIC) 14 'Prepayment of a minimum fundingrequirement'

·; International Financial Reporting Interpretations Committee (IFRIC) 19 'Extinguishing financial liabilities with equityinstruments'

·; International Accounting Standard (IAS) 24 'Related party disclosures (revised 2009)'

·; Amendment to International Accounting Standard (IAS) 32 'Classification of rights issues'

The amendment to IFRIC 14 'Prepayment of a minimum funding requirement' removes the unintended consequence of when an entity is subject to a minimum funding requirement (MFR) and makes an early payment of contributions to cover those requirements. The amendment results in a prepayment of contributions in certain circumstances being recognised as an asset rather than an expense. This amendment has had no impact on profit, earnings per share or net assets in the year ended 31 December 2011.

IFRIC 19 'Extinguishing financial liabilities with equity instruments' clarifies the accounting treatment for when an entity renegotiates the terms of its debt, such that the liability is extinguished, in whole or in part, by the entity issuing its own equity instruments to the lender (referred to as a 'debt for equity swap'). The adoption of IFRIC 19 has had no impact on profit, earnings per share or net assets in the year ended 31 December 2011.

The amendment to IAS 24 'Related party disclosures (revised 2009)' clarifies disclosure requirements for government-related entities and amends the definition of a related party. The amendment to IAS 24 has had no impact on profit, earnings per share or net assets in the year ended 31 December 2011.

The amendment to IAS 32 'Classification of rights issues' states that if such rights are issued pro-rata to all of an entity's existing shareholders in the same class for a fixed amount of currency, they should be classified as equity regardless of the currency in which the exercise price is denominated. The amendment to IAS 32 has had no impact on profit, earnings per share or net assets in the year ended 31 December 2011.

In addition to the above, amendments to a number of standards under the annual improvements project to IFRS, which are mandatory for the year ending 31 December 2011, have been adopted in 2011. None of these amendments have had a material impact on the Group's financial statements.

The financial information set out herein (which was approved by the Board on 29 February 2012) does not constitute the Company's statutory accounts for the years ended 31 December 2011 and 2010 but is derived from the 2011 statutory accounts.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement itself does not contain sufficient information to comply with IFRS. The Company will make available the full financial statements that comply with IFRS by 31 March 2012.

The statutory accounts for the year ended 31 December 2010 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2011 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. 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 Annual Report on pages 4 to 33. The Group has considerable financial resources, including a £737.5 million committed syndicated facility expiring in March 2016. The Group has long-term contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. The Directors confirm that, after making enquiries, they have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the condensed financial statements for the year ended 31 December 2011.

2 Segmental reporting

Segment information is presented in respect of the Group's strategic operating segments. The operating segment reporting format reflects the differing economic characteristics and nature of the services provided by the Group and is the basis on which strategic operating decisions are made by the Group Chief Executive, who is the Group's chief operating decision maker.

Inter-segment pricing is determined on an arm's length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis, except finance items and income tax.

Operating segments

The Group is comprised of the following main operating segments:

Support services

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

Public Private Partnership projects

In this segment we report the results of our investing activities in Public Private Partnership projects in our chosen sectors of defence, health, education, transport, secure, energy services 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.

2 Segmental reporting (continued)

Segmental revenue and profit