Making tomorrow
a better place
Summary Annual Report and Accounts 2015

download report (PDF 7.8MB)

Scroll Down

Overview

Who we are

Carillion is one of the UK’s leading integrated support services companies, with a substantial portfolio of Public Private Partnership projects, extensive construction capabilities and a sector-leading ability to deliver sustainable solutions.

Our Vision

Our vision is to be the trusted partner for providing services, delivering infrastructure and creating places that bring lasting benefits to our customers and the communities in which we live and work.

Our Values

We care.
We achieve together.
We improve.
We deliver.

Our Values shape the way we do business, how we work with each other, our customers, our suppliers, our partners and all those with whom we interact when delivering our services.

What we do

We have three core capabilities – support services, project finance and construction services– and we use these individually or in combinations to design and deliver sustainable services to meet the specific needs of our customers.

Support services

This includes the provision of maintenance, facilities management and energy services for major buildings and large property estates, for both public and private sector customers, infrastructure services for roads, railways and utility networks, notably telecommunications and power transmission and distribution, and remote site accommodation services.

Project finance

This includes arranging the funding for Public Private Partnership projects to deliver public sector buildings and infrastructure, in which we invest equity and from which we win construction and long-term support services contracts.

Construction services

This includes the delivery of a wide range of buildings and infrastructure, focused on large contracts for long-term public and private sector customers for whom quality and reliability are paramount.

Where we deliver

We operate in the UK, Canada and the Middle East and North Africa and we employ 46,000 people.

Canada
Revenue +14%
£513.2m
Percentage of total Group revenue
11%
United Kingdom
Revenue +14%
£3,356.7m
Percentage of total Group revenue
73%
Middle East and North Africa
Revenue +14%
£717.0m
Percentage of total Group revenue
16%

2015 At a glance

Revenue +13%
£4.6bn
Underlying profit from operations +8%
£234.4m
Underlying operating margin
5.3%
Underlying profit before taxation +2%
£176.5m
Underlying earnings per share +4%
35.0p
Proposed full-year dividend per share +3%
18.25p
Net borrowing +4%
£169.8m
Committed funding +2%
£1.4bn
Financial performance in line with expectations
  • Strong revenue growth of 13 percent, of which 10 per cent was organic, with organic growth in all business segments
  • Good growth in underlying profit before taxation and earnings per share
  • Strong underlying cash flow from operations
  • Net borrowing reduced to £169.8 million at 31 December 2015 (2014: £177.3 million)
  • Considerable financial strength with some £1.4 billion of funding available to support our strategy for growth
Robust, high-quality order book and a growing pipeline of contract opportunities
  • New orders and probable orders worth £3.7 billion (2014: £5.1 billion), reflecting the expected impact in the first half of the UK General Election, with £2.7 billion secured in the second half of the year remained strong at £17.4 billion (2014: £18.6 billion), after removing £0.3 billion from the order book due to selling equity investments in Public Private Partnership projects
  • Strong revenue visibility for 2016 of 84 per cent (2014: 85 per cent for 2015)
  • Awarded framework agreements worth over £2.0 billion, which is not yet included in the order book or in probable orders, but will give further revenue growth opportunities
  • Pipeline of specific contract opportunities increased to £41.4 billion (2014: £39.2 billion) in markets offering good growth potential
Proposed full-year dividend increased by 3% to 18.25p (2014: 17.75p)
Well positioned to make further progress in 2016

A strong track record

Through implementing our consistent and successful strategy and integrated business model we have become a trusted partner for public and private sector customers with a track record of delivering sustainable, cost effective solutions safely and of creating positive legacies wherever we work.

We report our results in four business segments:

Support services
Support services

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

Underlying operating profit +8%
£146.6m
Order book plus probable orders -10%
£12.7bn
Public Private Partnership projects
Public Private Partnership projects

In this segment we report the financial returns generated by the investments we make in Public Private Partnership (PPP) projects in the UK and Canada, including those from the sale of equity investments.

Underlying operating profit +43%
£49.3m
Order book plus probable orders 0%
£1.2bn
Middle East construction services
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.

Underlying operating profit +1%
£25.3m
Order book plus probable orders -11%
£0.8bn
Construction services
Construction services

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

Underlying operating profit -9%
£37.8m
Order book plus probable orders +13%
£2.7bn

Summary of business metrics

We monitor a broad range of financial and non-financial indicators to assess our performance. The data provided in this section sets out the key metrics we believe will assist our stakeholders in assessing our performance during 2015.

Chairman’s statement

Our performance in 2015 reflects the benefits of our consistent and successful strategy, which enabled us to rescale and reposition our business during the economic downturn in order to take advantage of opportunities for growth as market conditions improve.

Philip Green
Outlook

Although trading conditions remain challenging in several of our markets, we continue to see signs of some improvement, especially in the UK. The Group’s order book and pipeline of contract opportunities both remain strong, as does operating cashflow, which continues to enable the Group to invest to support our strategy for growth. Therefore, we believe the overall outlook remains positive and that the Group continues to be well positioned to make further progress in 2016.

Signature

Philip Green
Chairman
3 March 2016

Chief Executive’s overview

Our consistent and successful strategy, underpinned by our integrated business model and centralised operating platform, has enabled us to return to strong revenue growth in 2015.

Richard Howson
Our strategy

Our strategy is to achieve sustainable profitable growth by:

  • investing in our people and capabilities
  • building long-term, trusted partnerships
  • transferring knowledge and skills to new and existing markets so we can expand our support services and infrastructure activities and
  • providing a selective, high-quality construction capability.

Our strategy supports and develops the key inputs to our integrated business model, which is a major, market-leading strength for all our businesses.

Key performance indicators

1. To develop and attract excellent people to create a vibrant, diverse and flexible workforce.
68%
2. To be a recognised leader in Health & Safety and in Sustainability.
Health & Safety
22%
Sustainability
£33.8m
3. To improve customer satisfaction.
+36
4. To reduce costs and improve efficiency to support margins.
5.3%
5. To deliver cash-backed profit.
104%
Work-winning

In 2015, we won new orders and probable orders worth £3.7 billion (2014: £5.1 billion), while maintaining our selective approach to choosing the contracts for which we bid in order to support margins and achieve the cash flows we expect from contracts.

At 31 December 2015, we had total orders plus probable orders worth £17.4 billion (2014: £18.6 billion), which in absolute terms remained very strong in relation to the Group’s annual revenue. Consequently, revenue visibility for 2016 also remained strong at 84 per cent (2014: 85 per cent), which, with the exception of 2014, is as high as it has ever been at a year end.

Order book plus probable orders
Revenue visibility
84%
Potential value of framework agreements won
£2bn+
Pipeline of contract opportunities

In 2015, we were awarded several multi-year frameworks with a potential revenue value of over £2.0 billion, which was an exceptionally strong performance. Although we do not include the value of frameworks within our order book or probable orders, we expect them to generate substantial revenue in addition to that from orders and probable orders, which also supports our expectation that we will make further progress in 2016.

Furthermore, we saw the value of our pipeline of contract opportunities increase to over £41 billion, which includes only specific contracts that have passed our initial selectivity criteria and which we are either already bidding or which we expect to come to market.

Key performance indicators for 2016

In order to support our strategy and targets for growth, the Board will continue to monitor the business metrics set out above and report on the following key performance indicators for 2016, as these continue to be relevant to the Group’s development and success.

  1. To develop and attract excellent people to create a vibrant, diverse and flexible workforce.
  2. To be the recognised leader in Health & Safety and Sustainability.
  3. To improve customer satisfaction.
  4. To reduce costs and improve efficiency to support margins.
  5. To deliver cash-backed profit.
Signature

Richard Howson
Group Chief Executive
3 March 2016

Outstanding People Strong Values

Market overview

We have established strong market positions in our chosen markets.

The focus of our operating activities continues to be targeted towards our long established markets of UK, Middle East and North Africa and Canada. Within these markets our operations benefit from our ability to provide integrated solutions to address the needs of our customers, exposure to a broad mix of blue chip and government customers and our expertise across a wide range of economic sectors. This section of our annual report aims to provide an overview of the key markets and the main activity drivers in relation to our operating units. The charts below set out an analysis of Group’s revenue and order book by operating segment.

Customer Experience
Revenue
Order book (secure orders plus probable orders)

Our business model

Our integrated business model enables us to use our three core service offerings of support services, project finance and construction, either individually or in combinations, to create unique solutions for our customers, designed to meet their specific needs.

We take an integrated approach to everything we do by using all our resources and skills to:

  • select the investments we make in our people and business to support our strategy for growth
  • choose the contracts for which we bid
  • develop contract bids that offer innovative, value-for-money and sustainable solutions for our customers
  • monitor and manage the performance of the contracts we win throughout their life
  • deliver contracts safely and successfully and achieve high-levels of customer satisfaction
  • achieve our target margins and cash flows to create value for all our stakeholders, as well as value we can reinvest in our business
  • manage our ongoing cost reduction and efficiency programmes to support margins
Business Model Graphic
Resources
  • 1. Leadership in Sustainability
  • 2. Leadership in Health & Safety
  • 3. First Class Expertise
  • 4. Excellent People
  • 5. Financial Strength
How we add value
  • 6. Construction Services
  • 7. Project Finance
  • 8. Support Services
How we do it
Centralised operating platform

This enables us to implement our policies and processes consistently across the Group, to manage our back office functions efficiently, to deliver cost management and efficiency programmes effectively and provide senior management with visibility and control to support the successful delivery of individual contracts and the Group’s key objectives. This platform is also readily scaleable, which means it can accommodate the new contracts we win and the businesses we acquire.

  • Living our Values
  • High standards of corporate governance
  • Strong risk management
  • Embedding sustainability into everything we do
  • Building long-term partnerships with customers, partners and suppliers
  • First-class supply chain management
Building a sustainable business that creates value for all our stakeholders. We reinvest some of that value to continue growing our business.
  • Financial strength
  • Excellent people
  • First-class expertise
  • Leadership in Health & Safety
  • Leadership in Sustainability

Our business model in action

Support Services

National Offender Management Service

  • Living our Values
  • High standards of corporate governance
  • Strong risk management
  • Embedding sustainability into everything we do
  • Building long-term partnerships with customers, partners and suppliers
  • First-class supply chain management
Case Study 1

In January 2015, Carillion was awarded two contracts by the UK National Offender Management Service to provide facilities management services for public sector prisons in two geographical areas – the first for London and the East of England and the second for South West, South Central, Kent and Sussex. In total, these contracts involve the provision of services to 54 prisons, approximately half the total number operated by the National Offender Management Service.

These contracts were successfully mobilised on 1 June 2015 and together are worth approximately £200 million over an initial five-year period, which can be increased to seven years through two one-year extensions, subject to satisfactory performance.

Under these contracts Carillion is providing a wide range of facilities management services, involving nearly 150 service lines, including mechanical and electrical engineering maintenance, building fabric maintenance, energy management and environmental services, waste management, escort services for contractors coming into prisons, grounds maintenance and landscaping, cleaning services and minor building works.

We are also using our sector-leading experience as the largest trainer of apprentices in our sector to engage with and train prisoners to carry out some of these services in order to create for them a pathway to future employment, potentially with Carillion or with other businesses in our sector.

Our success in winning these contracts reflects our ability to understand the needs of our customers and to use all our skills and resources to design and deliver fully integrated service solutions, tailored to their needs, combined with our strong focus on quality, value for money and creating positive outcomes for the communities in which we operate and for the environment. All of this means we can work closely with the National Offender Management Service to support its objectives of providing efficient, high-quality services in public prisons in ways that benefit all its stakeholders.

Public Private
Partnership projects

Midland Metropolitan
Hospital

  • Living our Values
  • High standards of corporate governance
  • Strong risk management
  • Embedding sustainability into everything we do
  • Building long-term partnerships with customers, partners and suppliers
  • First-class supply chain management
Case Study 2

In August 2015, a Carillion joint venture The Hospital Company (Sandwell) Limited was selected as the preferred bidder by the Sandwell and West Birmingham Hospitals NHS Trust to finance, design, build and maintain the new Midland Metropolitan Hospital, under a 30-year concession contract using the UK Government’s PF2 procurement model. Financial close on this project was achieved in December 2015 and construction work is now underway on site, with completion scheduled for late 2018.

Carillion will invest £13 million of equity in the project, as well as building the hospital at a capital cost of £297 million and delivering facilities management and life-cycle maintenance services that are expected to generate approximately £140 million of revenue over the concession period.

PPP projects draw upon all our resources and skills in order to create integrated solutions for public sector buildings and infrastructure that offer value for money by delivering high standards of design and efficiency at the lowest whole-life cost. Carillion has delivered over 60 Public Private Partnership projects, including more than 20 healthcare projects, making us a global leader in the PPP market.

The new Midland Metropolitan Hospital will be a state-of-the-art facility with over 680 beds and 13 operating theatre suites that will support the Trust in delivering significant improvements in healthcare services for the people of Sandwell and West Birmingham. It has been designed to meet the best international standards to make it truly patient focused and to support the efficient delivery of high-quality clinical services. It has also been designed to the highest standards of sustainability, with a number of innovative design features, including a fully enclosed Winter Garden, car parking within the hospital building on the ground and first floor to create a secure environment for patients and staff, and full separation of clinical activities and journeys from the public and non-clinical activities.

As a leading provider of training and apprenticeships, we are also using this project as another opportunity to provide training and apprenticeships for local people as well as maximising the use of local suppliers, to the benefit of the local economy.

Middle East
Construction Services

Dubai World
Trade Centre

  • Living our Values
  • High standards of corporate governance
  • Strong risk management
  • Embedding sustainability into everything we do
  • Building long-term partnerships with customers, partners and suppliers
  • First-class supply chain management
Case Study 3

In October 2015, the Dubai World Trade Centre awarded Carillion the main contract to deliver a further phase of the Dubai Trade Centre District (DTCD), worth £125 million.

Carillion has operated in the United Arab Emirates (UAE) through its Joint Venture with the Al Futtaim Group for around 50 years, during which time we have established a market leading reputation, with an outstanding track record of delivering iconic buildings throughout the UAE and this latest contract award reflects and enhances that reputation

At the time of this contract award, we were nearing the successful completion of the first phase of the DTCD development, the contract for which was awarded in March 2014. Winning the contract for the next phase of this development is just one of many examples across the Group of our success in winning repeat work with long-term customers, for whom integrated solutions that meet high standards of quality, reliability, Health & Safety and sustainability are paramount.

The DTCD is a major development located between the current Dubai International Convention Centre and Emirates Towers in the heart of the City’s Central Business District. The vision for the DTCD is to create the world’s leading destination for all major exhibitions, conferences and events, with the whole development designed and built to best-in-class quality standards.

For example, this latest phase, like the first one, includes international office accommodation that has achieved LEED® Gold Certification(1) from the US Green Building Council – an industry benchmark for green building performance covering design, construction, operation and maintenance.

The news that we had been awarded this latest phase of the DTCD development was announced during a visit by the then UK Minister for Trade, Lord Livingston, to highlight Carillion’s success as a leading example of how British expertise is playing a key role in the development and growth of Dubai’s infrastructure.

Construction Services
(excluding the Middle East)

Liverpool
Football Club

  • Living our Values
  • High standards of corporate governance
  • Strong risk management
  • Embedding sustainability into everything we do
  • Building long-term partnerships with customers, partners and suppliers
  • First-class supply chain management
Case Study 4

In December 2014, Carillion signed a contract with Liverpool Football Club (LFC) to expand the main stand at the Club’s world famous Anfield Stadium, together with associated improvement works, on which construction began on site early in 2015. The contract will add around 8,500 seats to the main stand, increasing its capacity to over 20,000 and making it one of the largest single stands in Europe with best-in-class hospitality facilities, and increase the overall capacity of Anfield to some 54,000. The work is scheduled for completion during the 2016/2017 football season.

From the outset, building a strong and trusted partnership with LFC has been at the heart of delivering this contract successfully. This is essential to deliver the high standards of operational efficiency, Health & Safety and engagement, both with LFC and the local community, required for the successful delivery of the contract. For example, we are using an innovative programme and construction techniques to manage the work in order to minimise its effects on the Club’s activities by keeping the main stand fully operational for every football fixture throughout the contract. Prior to every game, our match-day liaison team meet with the Club’s safety team, stadium management and the Liverpool City Council Licensing Authority to inspect the existing stand and access routes, to ensure that all the match-day safety requirements are in place. A match-day Inspection Plan has been developed in partnership with LFC and the City Council, which has to be complete before the stand can be formally handed over to LFC for use on match days.

A key element of the contract was to lift into place a 650 tonne, 140 metre long roof truss with pinpoint accuracy, which was televised as well as being watched live on twitter and by local people from the surrounding streets. The lift was overseen by an independent panel of safety experts, which reviewed and confirmed the engineering procedures used. Two important pieces of club history, the Shankly Gates and the Hillsborough Memorial, have been safely stored and will be re-integrated respectfully into the new building.

Minimising the impact of the contract on the local community, with whom engagement and communication are key priorities, is also an essential part of this contract. We have also held local job fairs and we are committed to provide placements for at least 50 apprentices for local people.

Sustainability – making us a better business

At Carillion we continue to lead the way in sustainability. It is an integral part of our business model, it is embedded in all our decision-making and it is fundamental to how we create value for all stakeholders. Our sustainable approach gives us a competitive advantage through innovation, efficiency, responsiveness and building strong partnerships.

22%
58%
£33.8m
98%
+36
31%
98A
94%
1%
68%

Awards

PWC’s Building Public Trust Award for Sustainability Reporting

Award

Chartered Institute of Procurement & Supply (CIPS) Corporate Certification Standard

Award

Operational risk management – A key process

Rigorous risk management is critical to the attainment of our strategic objectives and it continues to remain a key part of our business model.

The Board is responsible for determining the Group’s risk appetite in pursuit of its strategic objectives and for maintaining a robust system of risk management (including a regular review of principal risks) to mitigate any potential impacts associated with these risks.

Performance and financial review

In 2015, the Group delivered strong revenue growth with profit and earnings in line with expectations.

Signature

Richard Adam FCA
Group Finance Director

Richard Adam

Summary financial performance

  2015
£m
2014
£m
Change
from 2014
%
Revenue
Support Services 2,534.2 2,323.9 +9
Public Private Partnership projects 192.8 162.5 +19
Middle East construction services 601.6 500.7 +20
Construction services (excluding the Middle East) 1,258.3 1,084.8 +16
  4,586.9 4,071.9 +13
Underlying operating profit
Support Services 146.6 135.9 +8
Public Private Partnership projects 49.3 34.5 +43
Middle East construction services 25.3 25.1 +1
Construction services (excluding the Middle East) 37.8 41.5 -9
  259.0 237.0 +9
Group eliminations and unallocated items (14.6) (11.0) -33
Underlying operating profit from operations before Joint Ventures net financial expense and taxation 244.4 226.0 +8
Share of Joint Ventures net financial expense (7.1) (6.4) -11
Share of Joint Ventures taxation (2.9) (2.7) -7
Underlying operating profit from operations 234.4 216.9 +8
Underlying Group net financial expense (57.9) (44.0) -32
Underlying operating profit before taxation 176.5 172.9 +2
Intangible amortisation arising from business combinations (20.0) (16.8) -19
Non-recurring operating items (5.0) - -100
Non-operating items (2.5) (9.9) +75
Fair value movement in derivative financial instruments 6.1 (3.6) +69
Reported profit before taxation 155.1 142.6 +9