WET News

8 Leaders 2014 The LeADeRS 2014 Selective bidding pays off for Carillion Carillion's Utility Services operation has topped our sales per employee Top 10 table. The group says it is well-positioned for the •ture as its markets improve C arillion is a leading integrated support services company that comprises four business segments – support services, Public Private Partnership projects, Middle East construction services and construction services, excluding the Middle East. The latest statement from the group is that trading so far this year is in line with board expectations, and that "work winning has remained healthy". It expects to resume revenue growth in 2014, especially in the UK construction industry. The group says that "being very selective" in terms of the contracts for which it bids remains central to its strategy for supporting margins, which continue to be in line with expectations. Its focus has been on larger projects and on customers with whom it has long- term relationships, especially those for Sales per Employee £K Carillion US 384.3 Interserve 334 Morgan Sindall 320.7 MWH 300.2 Imtech 272 Galliford Try 251 Black & Veatch 248.9 Bam Nuttall 243.9 AECOM 243.5 ACWA 241.7 "Being very selective in terms of the contracts for which we bid remains central to our strategy for supporting margins..." whom it provides integrated solutions. Work winning has continued to be healthy with £1.5B of new orders and probable orders in the year to date. Notable successes in support services include signing contracts for Royal Bank of Scotland, Arqiva and Canadian Natural Resources that together are worth £370M. Group expectations for 2014 remain unchanged, and it is well positioned for the future as the medium-term outlook across our markets continues to improve. Last year, Carillion continued to respond decisively to challenging market conditions, including completing the rescaling of its UK construction activities and the restructuring of its energy services business, which are now aligned in size to their respective markets, while continuing to develop and strengthen its positions in new and existing markets that offer good opportunities for growth. The reduction in total revenue to £4.1B (2012: £4.4B) was primarily due to the rescaling of its UK construction activities to ensure they are aligned in size to our chosen sectors of the market. Also, Carillion says the overall quality and risk profile of its business mix has improved, because it has remained very selective in choosing the contracts it bids for. Revenue in support services was also slightly lower than in 2012, due to the Green Deal and Energy Company Obligation markets offering fewer opportunities than originally expected, which more than offset the strong growth the company achieved in other support services markets.Revenue in support services was also slightly lower than in 2012, due to the Green Deal and Energy Company Obligation markets offering fewer opportunities than originally expected, which more than offset the strong growth it achieved in other support services markets. Net borrowing closed last year at £215.2M (2012: £155.8M), down from a peak of £270.8M last June, despite the additional second-half cash costs relating to the restructuring of our energy services business and the acquisition of John Laing Integrated Services, with a positive second-half working capital movement consistent with completing the rescaling of its UK construction activities. Carillion has reshaped its business, creating a platform from which it can now go forward. By the year end, its UK construction activities had been rescaled, a process that began in 2010, with a stabilised revenue run-rate from Carillion 24 Birch Street, Wolverhampton www.carillionplc.com leaders 2104 9 The Numbers 10 11 12 %chaNge Sales £M 265.6 292.1 287.5 -1.6 Gross profit £M 9.9 3.5 8.6 142.2 Operating profit £M -10 19 -8.4 -144.3 Pre-tax profit £M 27.7 16.7 -11.5 -169 Staff 1,432 939 748 -20.3 Net assets £M -20.3 -7.7 -18.2 -135.2 The raTIOs 10 11 12 % chaNge Return on capital % -136.3 -216.3 63.5 -129.3 Gross margin % 3.7 1.2 3 146.1 Operating margin % -3.8 6.5 -2.9 -145 Net margin % 10.4 5.7 -4 -170.1 Sales/employee £K 185.5 311.1 384.3 23.5 these activities. The group says rescaling has created a strong, high-quality construction business in the UK, which is capable of achieving growth, while continuing to be selective in terms of the contracts for which it bids in order to maintain its operating margin above the industry average. The energy services business has also been restructured. At the same time, the company has developed and strengthened its positions in new and existing markets that offer good opportunities for growth. It entered the support services market for oil sector customers in late 2012 through the acquisition of the Bouchier Group in Canada and by winning a major contract for Petroleum Development Oman in the Middle East. In the UK the group continued to win support services contracts for both public and private sector customers, including local authorities, as a number of these authorities look to the private sector for help in reducing costs and improving efficiency. It also became the preferred bidder for a number of substantial support services contracts for private sector customers, including Royal Bank of Scotland and Arqiva, a major achievement given that relatively few large contracts for private sector customers have come to market in recent years. The group has also continued to be successful in winning support services contracts for infrastructure, particularly in the rail and telecommunications sectors.

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