MAKING TOMORROW A BETTER PLACE - Amazon Web · PDF fileMAKING TOMORROW A BETTER PLACE. 2 Norwich Union Call Centre ... Customer expectation of a market leader ... HSBC • Carillion

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Marina Towers, Dubai

Support ServicesPresentation to Investors and Analysts18 October 2007

Support ServicesPresentation to Investors and Analysts18 October 2007

MAKING TOMORROW A BETTER PLACE

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Norwich Union Call Centre


Welcome and introduction Welcome and introduction John McDonoughGroup Chief ExecutiveJohn McDonoughGroup Chief Executive

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AgendaInterims Results recap

Middle East update

Support Services

Road maintenance services

Tour of M25 control centre

News International -The customer perspective

News International contract

Tour of News International

Richard AdamGroup Finance Director

Nick Down Regional Director – Middle East and North Africa

Don KennyExecutive Director – Business Services

Tony GatesManaging Director – Roads

Tony GatesManaging Director – Roads

Ian McDonaldManaging Director Operations, News International

Tony Lenehan Group Corporate Development Director

Dave BeaumontOperations Director, Programme HAL

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M40 Highways Maintenance


Richard AdamGroup Finance DirectorRichard AdamGroup Finance Director

Interim results recapInterim results recap

5

Revenue up 12%

UK 86%Rest ofthe World 1%

1,610.9

317.71,928.6

20071,481.0

236.61,717.6

2006

Continuing operations(1)

(1)

UK 86%

Canada and the Caribbean 4%

Middle East 9%

GroupShare ofJoint VenturesTotal

Rest ofthe World 3%

Middle East 7%

Canada and the Caribbean 4%

£m

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Support services up 43%Revenue Underlying operating profit

45%of total

Continuing operations before all exceptional items, amortisation and goodwill impairment;Before Group eliminations and unallocated items

(1)

(2)

44%of total

Investments

Investments

Support Services

Construction Services


Support Services

630.8

48.5679.3

2006GroupShare ofJoint VenturesTotal

£m749.0

109.6858.6

2007

+26%

15.0

2.417.4

200618.6

6.224.8

2007

+43%(1)

(2)

Middle East£2.5m (2006: £2.4m)

Middle East£0.2m (2006: £0.1m)

7

Construction services up 137%

51% of total

33% of total


ConstructionServices

Investments

SupportServices Support

Services

Investments

Revenue Underlying operating profit

843.0

115.8958.8

2006GroupShare ofJoint VenturesTotal

£m861.5

124.9986.4

2007

+3%

(2.3)

10.1 7.8

20069.2

9.318.5

2007

+137%(1)

Continuing operations before all exceptional items, amortisation and goodwill impairment;Before Group eliminations and unallocated items

(1)

(2)

Middle East17% (2006: 16%)£9.3m (2006: £6.1m)

Middle East9% (2006: 7%)£164.4m (2006: £119.6m) (2)

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Directors’ valuation of equity in financially closed Public Private Partnership Projects

• At 30 June 2007– £168m of equity invested/committed to 24 financially closed projects – £6m of equity to be invested in two preferred bidder projects– Shortlisted for 9 projects with a potential equity requirement of up to £71m

• At 30 Sept 2007– £171m of equity to be invested/committed to 25 financially close projects– £6m of equity to be invested in two preferred bidder projects – Shortlisted for 10 projects with a potential equity requirement of £88m

0

100

200

300

400

5% 6% 7% 8% 9% 10% 11% 12%Discount rate

NPV £m

June 2007 £277m(Dec 2006: £238m)

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Order book by segment and time

Pipeline of probable new orders June 2007 £2.0bn (June 2006: £1.6bn)

Construction services

Support services

Investments

Dec 2006 June 2007

4.7

8.4

2.9

£16bn £15.8bn

4.8

8.6

2.4

Dec 2006

Longer term

Next year

This year3.0

11.3

£16bn

June 2007

1.7

2.1

12.0

£15.8bn

1.7

10

Growing good quality earnings

• Positive outlook – growing number of major opportunities• Focus in support services is on revenue growth and on

moving Mowlem margins up to Carillion levels of 4% to 5% over next 3 years

• Focus in Middle East is on growing revenue at 6% margins• Focus for construction services is on improving margins

with combined UK and International moving towards 3% over next 3 years

• Expect to deliver sustainable, profitable growth

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Salam Yiti, Oman

Burj Dubai

Al Raha Beach, Abu Dhabi

Four Seasons, Dubai

Middle East updateNick DownRegional Director – Middle East and North Africa

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Markets


13

Strategy in Middle Eastand North Africa

• Aligned with Carillion Group strategy and business model• Long-term strategic relationships with key customers• Project selectivity – work/risks we understand and can

deliver• Business model key to successful revenue growth at

stable 6% margins

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Three joint venture businessesAl Futtaim-Carillion• Construction services• 49% Carillion • Dubai, Egypt (from Q4 2007) and Abu Dhabi (Q2 2008)Emrill• Support services • Carillion:Al Futtaim:Emaar (33.33% each) • DubaiCarillion Alawi• Construction services • 49% Carillion (treated as subsidiary with 100% consolidation) • Oman

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Key customers

Construction services • Dubai - Al Futtaim, Dubal, Union Properties, DP World• Oman - The Royal Court, Government departments,

Majid Al Futtaim• Egypt - Al Futtaim• Abu Dhabi - Aldar, Al Futtaim, EMAL

Support services• Dubai - Emaar, Al Futtaim, Deutsche Bank,

ABN AMRO, McKinsey

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Potential Growth

Total JV Carillionshare

£89m £50m

Total JV

£516m

Carillionshare

£274m

Total JV

£1.2bn +

Carillionshare

£600m +

2002 20112006

RevenueMiddle East and North Africa

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Further major progress since analyst visit in May 2007

• Regional construction boom set to continue • Oil revenues forecast to remain high, but prices

>$25 a barrel sufficient to support infrastructure investment plans

• Continuing growth in Dubai and Oman• Preferred bidder on new contracts in Abu Dhabi

and Egypt• Potential opportunities in Morocco and Qatar

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Dubai

• Framework agreement for next phase of Dubai Festival City development worth £3.5bn over 6 years

- Customer: Al-Futtaim- Contractor: Al Futtaim-Carillion- Value to Carillion

- 49% of £3.5bn i.e. £285m a year for 6 years- stable 6% margins

• Only 20% of Dubai Festival City built to date • Prospects for multi £bn developments for other

established customers e.g. Union Properties, Emaar and Dubal

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Festival City, DubaiFestival City, Dubai

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FestivalCentre

FestivalCentre

Festival City, DubaiFestival City, Dubai

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Four Seasons, Dubai Four Seasons, Dubai

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Egypt

• Appointed preferred bidder for £220m contract for first phase of Cairo Festival City

- Customer: Al Futtaim- Joint venture contractor: Orascom/Carillion/Al Futtaim- Value to Carillion

- 65% of 49% of £220m i.e. £70m over 2.5 years- stable 6% margins

• Potential framework agreement for remainder of Cairo Festival City worth c£1.8bn in total

- Customer: Al Futtaim- Joint venture contractor: Carillion/Al Futtaim- Value to Carillion 49% i.e. c£0.9bn over 10 years- stable 6% margins

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Cairo Festival City

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Abu Dhabi

• Al-Futtaim-Carillion appointed preferred bidder for £250m contract for early stages of £10bn Al Raha Beach development in Abu Dhabi

- Customer: Aldar- Contractor: Al-Futtaim Carillion- Value to Carillion

- 49% of £250m i.e. £123m over 2 years- stable 6% margins

• Potential for further phases of Al Raha Beach• Potential framework agreements for c£2.0bn Reem Island

development for Al Futtaim- value to Carillion c£1.0bn over 5-10 years- stable 6% margins

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Al Raha Beach, Abu Dhabi Al Raha Beach, Abu Dhabi

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Al Reem Island, Abu Dhabi

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Middle East and North Africa Carillion order book and pipeline

Confident of more than doubling Carillion’s revenue from this Region to over £600m (2006:£274m) within 5 years at stable 6% margins

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Grand Mosque, OmanGrand Mosque, Oman


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Don KennyExecutive DirectorDon KennyExecutive Director

Support ServicesSupport Services

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Support Services revenues by sector in first half of 2007

Education £4.9m

Defence £133.1m

Canada £32.3mMiddle East £2.5m

UK Road Maintenance £97.9m

Facilities Management and Services £372.8m

Health £65.8m

Rail £149.3m

Total = £858.6m

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The Market SizeBy Numbers• In its widest definition the FM

market is estimated at c£100bn per annum; growing to c£130bn per annum by 2012

• Management-led FM in the UK is estimated between £2bn-£4bn per annum

• 55% of the market (including commodity services) remains in-house

• Total growth rate of 13% over next 3 years

Evidence• UK FM Market

Development Report

• BSRIA, Frost & Sullivan

• BSRIA 2005

• UK FM Market Development Report

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The Carillion Property Lifecycle Capability

Key attributes• People• Culture• Capability• Systems and Processes• Specialists Tools• Track-record of evolving the

integration ‘continuum’

Carillion uses its wide range of capabilities and skills to deliver integrated solutions for our customers

Customer expectation of a market leader• Ability to create value from both vertical and horizontal integration• Thought leadership and new delivery models• Excellent integration• Excellent execution

Carillion asIntegrator

WorkplaceBrief

Design

OutputSpecification

SiteSelection

Disposal

FM

Relocation Construction

Life CycleReplacement

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Capabilities Customer Drivers

Strategic AssetManagement

Corporate Real Estate

Capital Projects and FM

Multi-service delivery

Management capability

Design, build, finance, operate

Technical Skill

Multi-skilling

Total cost of occup’nOne stop shop for Property services

Efficiency through integration

FM Expertise

Better Task Management

Cost certainty

Strategic PropertyManagement

Reduced overhead

Cost & technical expertise

PFI

Differentiated

Cos

t foc

used

Valu

e fo

cuse

d

Bundled

TFM

ManagingAgent

Integratedservices

Property LifecycleSolution

Traditional

Singleservice

The Integration Continuum

Becoming commoditised

Carillion operates across this spectrum

Opportunity to differentiate and lever scale & capability

Commoditised

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Some of our Key Customers

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PME

• Mechanical and electrical engineering maintenance• Acquired March 2005• In 2004

- Revenue £162m- Operating margin 2.2%

• In 2007 - Estimated revenue c£260m- Estimated operating margin 3.5%

• Outlook - Strong double digit revenue growth- Margins rising to 4% - 5%

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PME - Engineering ExcellenceMarket focused products providing further differentiation• Critical Environments maintenance• National service coverage to consistent high standards• Energy / CSR solution • Environmental hygiene solution (Water & Air hygiene)• Technically embedded knowledge combined with the wider • Carillion family to provide integrated building lifecycle offeringDelivery• 2,600 calls processed through help desks each day• Service 200 million sq metres of clients property in London –

600,000 sq metres within critical environments. • 3,500 staff employed throughout the UK – 1800 mobile engineers• Forward order book £500m

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Critical Environments National

Solutions

PMEKey Clients Include:

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BT

• Total Facilities Management for over 7,000 UK properties • Contract value c£110m per annum.• Monteray JV - Carillion (51%) • Initial 5-year contract awarded in 2001 and extended to

March 2009• Output specification for services - Guaranteed Maximum Price• Project works delivered to agreed schedule of rates

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HSBC

• Carillion awarded contract to provide Facilities Management and capital project management services for UK portfolio in 2001

• 5-year contract worth c£90m per annum• 960,000 sq metres• 2,000 properties – branch and non-branch• Estates liaison and Mechanical & Electrical maintenance,

cleaning, catering, waste and energy management, security, project management and project delivery

• Delivers a guaranteed maximum price on services and responsibility for the management of the whole capital programme

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Norwich Union

• Domestic insurance claims handling service• Fully integrated service solution from call centres

to completion of repairs • Contract value c£150m per annum• 3-year contract awarded in 2006 • Carillion re-engineered the whole process from people to

technology• Improved customer experience• Consolidated the repair supply chain; improved value

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Defence

• Share of accessible market with Ministry of Defence approximately 16%

• Presence on 25% of Ministry of Defence Establishments with responsibility for 6,800 buildings and 43,000 houses

• Order book c£6bn• 4 Major integrated solutions with turnover £400m pa

- 2 Public Private Partnership projects - 2 Prime contracts

• Preferred bidder for c£250m Royal School of Military Engineering project – expect financial close in May 2008

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Defence

Housing Prime Contract• Fully integrated service to 43,000 family houses

across England & Wales• 7 year Maximum Price Target Cost contract

awarded Nov 2005, option for 3 – year extension • 50% Joint Venture• Contract value c.£700m - Carillion c£350m• c30,000 helpdesk calls per month• c17,000 repairs per month• c1,200 houses prepared for new occupants

per month• Life Cycle fund of c£25m per annum

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DefenceProject Allenby / Connaught• 35 year c.£12bn (Carillion 50%) Public Private Partnership • Commenced July 06 • 20% of British Army (18,700 Personnel with total dependency over 21,000)

• Equity- £120m total- £60m Carillion

• Services- £130m per annum- Integrated service delivery

365/24/7- Direct delivery 50%, sub-contract

50% - 48,000 Helpdesk call per annum

• Construction- £1.26bn value 10 year

construction programme- 357 new builds, 141 refurbished &

435 demolished- 74% living accommodation, 24%

technical, 2% other- 11,500 new and refurbished en-

suite single living accommodation

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Health • Service solutions in the UK and Canada for

- 12 hospitals and over 40 health sector facilities- c6,000 patient beds - 5,000 Facilities Management staff- 4.9 million patient meals per year, 3.5 million hospital cleaning hours

per annum • PPP hospitals - 9 fully operational, 2 in construction

- Property Lifecycle Solutions a key success factor - 25 to 33.5 year contracts, paid on availability and output Key

Performance Indicators- Successfully benchmarked first 4 hotel services contracts

• Independent Sector Treatment Centres - Preferred bidder for 2 - c£60m of clinical and non-clinical services over 5 years

45

Education

• Building Schools for the Future (BSF) – c£45bn programme over 10-15 years• Framework contractor for £1.6bn Academy Schools programme • Primary Schools investment c£10bn • Public Private Partnership schools programme in Scotland• Property Lifecycle Solutions essential for success• Recently won first BSF contract

- South Tyneside and Gateshead c£175m- 14 schools in first wave - Initial contract also includes primary Health Care facilities - Further schools to follow in subsequent waves - Potential for contract to include other community regeneration facilities

• Shortlisted on Nottingham City and Tameside BSF projects, c£400m• Shortlisted for Sunderland City Academy c£100m

46

Facilities Management and ServicesLocal Authorities

• Carillion is one of 5 approved suppliers as part of Office of Government Commerce framework to deliver property and facilities management solutions for public sector customers

• Framework prescribes principal commercial terms and enables rapid low cost procurement

• Primary route for Carillion into local government market • Major market opportunity – outsourcing management led

property teams and re-engineering local supply chains to delivering fully integrated property solutions

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Facilities Management and Services Northamptonshire County Council

• Outsourced its property team to Carillion through Office of Government Commerce framework

- Managing agent- Value c£3.5m per annum

• Negotiated transfer of responsibility for the whole supply chaindelivery

- Total Facilities Management- Value c£15m per annum

• Carillion also offering added value solutions for workspace management in collaboration with Northants property partners

- Integrated Property Partnership- Value determined through gain share mechanism

48

Outlook and prospects

• Unprecedented level of opportunities• Public and private sector outsourcing • Targeting management-led solutions in key target markets • Prospects for delivering double digit revenue growth over

the medium term

49

Road Maintenance Services Road Maintenance Services Tony GatesManaging Director, Carillion RoadsTony GatesManaging Director, Carillion Roads

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Carillion Roads

Revenue in first half of 2007 • Projects c£39m• Support Services c£98mOutlook• Projects – growth through Early Contractor Involvement

programme• Support Services – growth, particularly Local Authority

road maintenance and Public Private Partnership projects

51

Carillion Roads

• Projects Portfolio – Early Contractor Involvement projects for Highways Agency

• Support Services Portfolio- Local Authority Maintenance

- Warwickshire, Surrey, Wolverhampton, Bristol- Highways Agency Maintenance

- Area 5, 8 and 12- Operation and Maintenance for M40 and A249 Public Private Partnership projects

• Technology Team

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Area 5 Term Maintenance Contract

Blunts Farm

Aveley

Swanley

Breakspear

Scratchwood Denham

Sunbury

Leatherhead

Heston

Hatfield

West Hall

53


• 1,100 carriageway km of motorway and all-purpose trunk roads – (M25 54%, other motorways 31%, all-purpose trunk roads 15%)

• Initially a 7-year contract to August 2008• Contract likely to be extended to April 2009• Annual revenue depends on variable work – expect

c£50m in 2007

54


• Routine & Cyclical Maintenance 24/7• Winter Maintenance• Incident Management

- Network Control Centre- Incident Support Units- Highways Agency Traffic Officer Service Liaison- Repairs to asset Damage

• Asset Renewal and Improvement

55


Collaboration• Highways Agency• Mouchel Parkman• 6 Police Forces plus Fire and Ambulance• Highways Agency Traffic Officer Service• Environment Agency• Local Authorities

56


Innovation• Professional Incident Management

- Co-location with Highways Agency Control Centre- First dedicated and enhanced Incident Support

Unit Service- Introduction of Highways Agency Traffic Officer

Service• Dedicated R&D – sponsored PhD• Efficient Use of Roadspace • Safety Improvements e.g. new “taper”

57

Winter Maintenance Gritter, Denham Depot Winter Maintenance Gritter, Denham Depot

58

Remote grass cutting Remote grass cutting

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Incident Support vehicles operate from maintenance motorway depots

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Mobile variable message sign

61

Major incident – M1 junction 5

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Major incident –M25 junction 9, Oaklawn Overbridge

63

Environmental protectionEnvironmental protection

64

Future Changes

• M25 Design Build Finance and Operate opportunity- Area 5 and Dartford Crossings- Widening and Operation and Maintenance - 30-year concession- Bidding as part of “FLOW” (Carillion 20%, Vinci

40%, Costain 20%, Laing 20%)- Short-listed 1 of 3- Estimated project value c£5bn (£2bn construction,

£3bn operation and maintenance)- Total equity investment up to £250m- Carillion equity investment up to £50m

65

The Customer PerspectiveThe Customer PerspectiveIan McDonaldManaging DirectorOperations, News International

Ian McDonaldManaging DirectorOperations, News International

66

News International News International Tony LenehanGroup Corporate Development Director

Tony LenehanGroup Corporate Development Director

67

Scope of Work

• New generation of print facilities• New colour based print technology• Enhanced print production capacity• Multiple locations

Eurocentral KnowsleyBroxbourne

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Scale and Specification

• £650m capital investment programme

• 250 000 sq metres heavily serviced industrial building space

• 19no Colourman 500 presses– new technological applications

• Secure and environmentally controlled buildings

69

Carillion integrated solution

• Combines Carillion’s wide range of skills and resources • Project management

- design to delivery of fully operational facilities • Construction services c£270m for three facilities

- Broxbourne c£190m • Facilities management

- Broxbourne c£15m over 5 years

70

Procurement andScope Development• Concept design solutions established at all locations

pre tender• Competitive two stage tender commenced October 04• Proposals submitted January 05• Single action 2nd stage negotiation commenced March 05• Kells deleted• New designs commenced for Eurocentral and Knowsley

March 05• Broxbourne value engineering and design optimisation

commenced March 05

71

Carillion Differentiation

• National geographic coverage• Quality of people and proposals• Capacity to offer integrated solution• Clear understanding of challenge• Dedicated Carillion organisational infrastructure• Executive level commitment

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Business Drivers

• Scheme affordability challenge• Necessity to reconcile scope with operational need• Absolute programme constraints• Requirement for major redesign• Certainty and consistency of delivery

73

Programme Outline

102 weeksOct 07 Broxbourne

99 weeksJun 07Knowsley

81 weeksDec 06Eurocentral

DurationCompletionStart on SiteLocation

74

Change Parameters

• Base scope £224m• Enhanced scope £290m• Redesign/value engineering 12 weeks• Cost pressure £36m• Potential prolongation 26 weeks

75

Integration ModelConventional Process:

OperationsConstructionProcurementPricingDesign

HAL Bespoke Process:

DesignProcurement

PricingIntegration

ConstructionOperations

• Programme advantage

• Holistic decision making

• Control within defined parameters

• Collaborative model

76

Carillion Integrated Solutions

Core Team

Carillion Integrated Solutions

Core Team

Esta

blis

h Sc

ope

Esta

blis

h Sc

ope

Des

ign

Des

ign

New

Fac

ilitie

s’C

onst

ruct

ion

New

Fac

ilitie

s’C

onst

ruct

ion

Man

aged

Equ

ipm

ent S

ervi

ceM

anag

ed E

quip

men

t Ser

vice

Faci

litie

s Se

rvic

es

Surp

lus

Site

s’R

edev

elop

men

tIn

tegr

ated

Sol

utio

ns fo

r NI S

uppl

iers

Exem

plar

Pro

gram

me

for B

AA

Frm

wk

Capability Alignment: Project Teams/Consultants/Subcontractors/SuppliersCapability Alignment: Project Teams/Consultants/Subcontractors/Suppliers

Core BusinessDeliverySupport

BuildingDesignFM/FS

DevelopmentsRoads/Civ Eng

Consultancy

Functional Support

Commercial IMSHR

Supply Chain Rep

rogr

amm

e/A

ctiv

ity C

onso

lidat

ion

Rep

rogr

amm

e/A

ctiv

ity C

onso

lidat

ion

Prog

ram

me

Act

ivity

Sch

edul

ing

Prog

ram

me

Act

ivity

Sch

edul

ing

Integrated Programme Development/DeliveryIntegrated Programme Development/Delivery

Base Scope Enhanced Scope Potential Future Scope

Integrated Solution

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Solution Characteristics

• Value based decision making• Incentivised contract structures• Management of change and control of design development• Change control and managed implementation• Optimised design solution:

- model scheme for Eurocentral- press numbers reduced for Knowsley- enhanced operational adjacencies introduced at

Broxbourne

78

Organisational Integration

News InternationalManagement

Team

BroxbourneDesign/

ConstructProject Team

KnowsleyDesign/


EurocentralDesign/


Managed Equipment

ServiceProgramme

Team

Future ScopeFS/Developments

NI Supplier IS

Programme HALPrincipals Group

Carillion/NIIntegrated Core

Team

CarillionBusiness

Units

79

Outcomes

• Secure programme• Programme wide consistency of quality and specification• Change Implemented without programme impact• Final Accounts agreed for construction activity prior to

completion• Successful parallel development of design with equipment

integration• Scope of integrated solution enhanced• Positive cash flow and enhanced cash backed margin• Potential for future joint business collaboration established • World class benchmark realised

80

Resurfacing M25 Junction 7


John McDonoughGroup Chief ExecutiveJohn McDonoughGroup Chief Executive

81

Summary and conclusions • Carillion is a UK leader in support services • Total support services revenues in first half of 2007 of c£859m up 26% on 2006• Operating profit in first half of 2007 up 43% to £24.8m • Facilities management and services

- Targeting integrated solutions for large complex estates - Differentiation by using wide range of skills and resources to deliver

Property Lifecycle Solutions- Excellent blue chip and public sector customer base - Strong positions in growth market sectors

• Road maintenance- Leading supplier to Highways Agency and Local Authorities - Good medium terms prospects for growth, especially in Local Authority

market • Overall outlook in support services is for continuing double-digit revenue growth

over the medium term at 4% to 5% margins

82

Summary and conclusions • Considerable further progress in Middle East since analyst visit in

May 2007• Al Futtaim Carillion Joint Venture awarded preferred bidder positions

for contracts worth c£470m for Cairo Festival City and Al Raha Beach development in Abu Dhabi

• Joint venture signed framework agreement for next phase of DubaiFestival City worth c£3.5bn

• Potential framework agreements for Joint Venture - Cairo Festival City worth c£1.8bn – Carillion share £0.9bn- Al Reem Island development worth c£2.0bn – Carillion c£1.0bn

• Continuing growth in Oman• Confident of more than doubling Carillion’s share of revenue from

Middle East and North Africa to over £600m within 5 years at stable 6% margins

83

Marina Towers, Dubai

Support Services18 October 2007


Documents

MAKING TOMORROW A BETTER PLACE - Amazon Web · PDF fileMAKING TOMORROW A BETTER PLACE. 2 Norwich Union Call Centre ... Customer expectation of a market leader ... HSBC • Carillion