Our performance in 2016 reflected the benefits of our consistent and successful strategy.
Underlying profit from operations +1%
Underlying operating margin
Underlying profit before taxation +1%
Underlying earnings per share +1%
Proposed full-year dividend per share
New and probable orders in 2016
In 2016, Carillion's performance was led by revenue growth and an increased margin in support services, together with good cash flow.
|Change from 2015 %|
|Public Private Partnership Projects||313.0||192.8||+62|
|Middle East Construction Services||668.3||601.6||+11|
|Construction Services (excluding the Middle East)||1,520.2||1,258.3||+21|
|Underlying operating profit|
|Public Private Partnership Projects||28.3||49.3||-43|
|Middle East Construction Services||16.1||25.3||-36|
|Construction Services (excluding the Middle East)||41.3||37.8||+9|
|Group eliminations and unallocated items||(14.5)||(14.6)||-1|
|Underlying operating profit from operations before Joint Ventures net financial expense and taxation||253.9||244.4||+4|
|Share of Joint Ventures net financial expense||(13.2)||(7.1)||-86|
|Share of Joint Ventures taxation||(4.8)||(2.9)||-66|
|Underlying operating profit from operations||235.9||234.4||+1|
|Underlying Group net financial expense||(57.9)||(57.9)||-|
|Underlying operating profit before taxation||178||176.5||+1|
|Intangible amortisation arising from business combinations||(13.8)||(20.0)||+31|
|Non-recurring operating items||(40.2)||(5.0)||-704|
|Fair value movement in derivative financial instruments||8.2||6.1||+34|
|Changes in contingent consideration relating to acquisitions||15.6||-||+100|
|Reported profit before taxation||146.7||155.1||-5|
|Revenue & Profit||2016
|Underlying profit before tax||178.0||176.5||172.9||174.7||200.0|
|Profit before taxation||146.7||155.1||142.6||110.6||164.8|
|Profit for the Year||129.5||139.4||127.5||106.3||154.9|
|Underlying operating profit margin||4.9||5.3||5.6||5.6||5.6|
|Assets & Borrowing||2016
|Net borrowing at 31 Dec||(218.9)||(169.8)||(177.3)||(215.2)||(155.8)|
|Earnings per share||2016||2015||2014||2013||2012|
|Underlying earnings per share (p)||35.3||35.0||33.7||34.7||40.4|
|Basic earnings per share (p)||28.9||30.9||28.0||23.3||34.6|
|Full year dividend per share (p)||18.45||18.25||17.75||17.50||17.25|
|Underlying proposed dividend cover (times)||1.9||1.9||1.9||2.0||2.3|
|Basic dividend cover cover (times)||1.6||1.7||1.6||1.3||2.0|
We believe that good governance is an essential part of the way we undertake our business on a day-to-day basis, while maintaining effective risk management, control and accountability.
The Board is firmly committed to the highest standards of corporate governance and considers that good governance commences with an effective Board providing strong and respected leadership.
The Non-Executive Directors bring their wide experience to the boardroom to both support and develop business strategy and operations and to constructively challenge the Executive Directors.
In addition, the Board evaluation process which we introduced in 2002 supports the culture of constructive challenge and confirms that Non-Executive Directors are independent in their judgement.Meet the board & Leadership Team
The Board remains committed to maintaining high standards of ethics and business integrity throughout the organisation recognising this to be essential to both Group performance and reputation.
Carillion is committed to the preservation of its reputation and integrity through compliance with applicable laws, regulations and ethical standards across all territories in which it operates. Carillion's clear and unequivocal approach to business integrity and ethics underlies the Group's core values.
The Ethics and Integrity Policy is designed to ensure that Carillion conducts its business to the highest ethical standards. The Ethics and Business Integrity Policy sets out the standards and behaviours that all Carillion employees are expected to meet wherever in the world we operate.
The way Carillion delivers this policy is reflected in the way the Group competes for business and delivers its services, focused on quality, value for money and the reliability and reputation of its employees.Download the Ethics and Business Integrity Policy (PDF) Download the Carillion Code of Ethics (PDF)
Carillion takes extremely seriously the prevention and detection of fraud, bribery and corruption and any other fraudulent or corrupt activity. It will not tolerate them in any form. The Board is fully committed to promoting a zero tolerance approach across the Carillion Group. There is a Fraud Policy in existence.
It is prohibited for a Carillion employee to offer or receive gifts or hospitality that could influence or be perceived to be capable of influencing the outcome of transactions or decisions relating to Carillion's business. There is a Gifts and Hospitality Policy. Insider trading. Those who have access to inside information are advised of their responsibilities under the insider dealing rules. There is a Carillion Insider Dealing Code.
All Carillion employees must disclose or seek direction on any issues that could potentially conflict with their responsibilities to the Company. There is a Conflicts of Interest Policy.
Carillion seeks to ensure that it maintains its ethical standards and behaves respectfully when working with others. The relationships with Carillion's suppliers and business partners are based on the principle of fair and honest dealings at all times and in all ways. Carillion expects its suppliers and business associates and joint venture partners to extend the same high standards to all others with whom they do business, including employees, sub-contractors and other third parties. There is a Purchasing and Supply Chain Code of Ethics and a Sustainable Supplier Charter.
Carillion plc, its subsidiaries and associated companies under Carillion control have a policy that all business activities are carried out in full compliance with competition laws - the laws which prevent anti-competitive behaviour. Competition law prevents companies from carrying out any activities that restrict competition and makes illegal activities such as price fixing, unfair pricing, market sharing and refusal to supply customers. There is a Competition Compliance Guide.
Carillion aims to maintain high standards of conduct by preventing criminal activity through money laundering. There is a Money Laundering Policy.
Carillion supports the belief that human rights are universal and adheres to the principles of human rights in its operations. Carillion supports the United Nations Declaration on Human Rights and works hard to ensure that in all areas of interaction with its employees, clients, suppliers, third parties, interviewees and joint venture parties that everyone is protected and treated absolutely fairly. Carillion has a Health & Safety Policy and an Equal Opportunities and Diversity Policy. Law and regulation. Carillion respects the rule of law in all our dealings and has minimum standard compliance with all law and regulation to which its businesses are subject. Carillion has legal compliance programmes for:
As a response to the introduction of the Bribery Act 2010, the Ethics and Compliance Office was established in 2010. This Office reviews and monitors compliance and ensures that Carillion maintains high ethical standards. It reports to the Business Integrity Committee on key global compliance risks and functional activity.
All of Carillion's employees have a responsibility to protect Carillion's assets, including information and goodwill as well as property. Carillion encourages its people to raise genuine concerns about malpractice at the earliest possible stage and in the right way. There is a Whistleblowing Policy and an Ethics and Business Integrity Incident Response Plan.
More information about Whistleblowing
This Ethics and Business Integrity Policy is applied by all Carillion's businesses through a series of detailed procedures. They allow Carillion to carry into practice its reputation for conducting business to the highest ethical standards, which are essential to its relationships with customers, businesses partners, employees, shareholders and the public. The detailed procedures reflect the way Carillion competes for business; through the quality and value of its work and through the reliability and reputation of its people.
The Ethics and Business Integrity Policy is overseen by the Business Integrity Committee, and its implementation is reviewed annually by the Board.
Recognising that external appointments can broaden experience and knowledge and so be of benefit to the Company, Executive Directors are permitted, at the discretion of the Board, to accept a limited number of such appointments and retain the fees received for such appointments.
The appointment of a Director is a matter for resolution by the Board as a whole, taking advice from the Nominations Committee.
For the Board appointment of Alison Horner, the Nominations Committee has used the services of the executive recruitment consultants, the Lygon Group. Details of potential candidates are provided by the consultants and initially reviewed by a sub-committee of the Nominations Committee. Meetings with selected candidates are then held with the Directors.
Subsequently, the Nominations Committee meets to recommend an appointment, which is then proposed to the Board for approval. The fees of Non-Executive Directors are determined by the Board as a whole, taking into account the commitment required and participation in the work of committees and other advisory services in relation to the business of the Group.
In advising the Board on such fees, it is the policy of the Executive Directors to seek independent external advice concerning the appropriateness of the amounts by comparison with general practice. The level of fees currently payable to the Non- Executive Directors is based on independent external advice.
In accordance with the UK Corporate Governance Code, all directors submit themselves for re-election at the Annual General Meeting.
The service contracts of the Executive Directors and the terms and conditions of appointment of the Non-Executive Directors are available for inspection at the registered office of the Company during normal business hours on any weekday (bank holidays excepted) and at the Annual General Meeting.
Directors are provided with a comprehensive information pack on joining the Company and are advised of their legal and other duties and obligations as a director of a listed company. In addition, all new Directors receive induction on their appointment covering such matters as the operation and activities of the Group, the role of the Board and the Company's corporate governance procedures.
Directors are also briefed by the Company's external advisers, where appropriate, on changes to legislation or regulation or market practice as well as receiving briefings from business units throughout the year. The regular updating of Directors' skills and knowledge is encouraged, including in relation to environmental, sustainability and governance matters, and a procedure has been established whereby the Company Secretary is notified by Directors of their requirements in this respect.
Training for Directors is kept under review during the year.
The Executive Directors and the Director of Group Corporate Affairs meet regularly with representatives of major shareholders in order to foster the mutual understanding of objectives. Meetings are also held with other shareholders and prospective shareholders.
The details of these meetings are reported to the Board. The Chairman and Senior Independent Non-Executive Director are available for meetings with representatives of major shareholders as required. The Chairman and Company Secretary have also met with major shareholders and fund managers to discuss governance matters.
Private and institutional shareholders are encouraged to attend the Company's Annual General Meeting. The Company complies fully with the provisions of the UK Corporate Governance Code in respect of the notice, content of agenda and conduct of its Annual General Meetings.
The principal Board committees are the Remuneration Committee, the Audit Committee, the Nominations Committee, the Business Integrity Committee and the Health, Safety and Sustainability Committee. The Company Secretary acts as Secretary to each of these committees.
The Committee consists entirely of independent Non-Executive Directors and determines and makes recommendations on the Group's remuneration policy and framework to recruit, retain and reward Executive Directors and senior executives.Terms of Reference (PDF)
The Audit Committee consists entirely of independent Non-Executive Directors. All members of the Audit Committee have recent and relevant financial experience. Appointments to the Committee are made by the Board.Terms of Reference (PDF) Auditor Independence Policy (PDF)
The Committee reviews the Board structure, size, composition, balance of skills, knowledge and experience of the Board and makes recommendations to the Board with regard to any changes that are deemed desirable. The Committee also reviews succession planning to ensure that processes and plans are in place with regard to both Board and senior appointments.Terms of Reference (PDF)
The Committee reviews and oversees the implementation of the Group's Ethics and Business Integrity Policy and monitors the Group's compliance with relevant legislation such as the Bribery Act 2010 and the Competition Act 2006.Terms of Reference (PDF)
The Committee reviews and oversees the implementation of the Group's Sustainability strategy, values and policies.Terms of Reference (PDF)
The Audit Committee consists entirely of independent Non-Executive Directors:
Appointments to the Committee are made by the Board.
The Audit Committee has in attendance at meetings, by invitation of the Committee, Executive Directors, representatives of the external auditors, (KPMG Audit Plc), the Group Head of Risk and the Head of Internal Audit. It is also able to invite others as it requires from time to time. The Committee also meets privately with both the external and internal auditors.
The responsibilities of the Audit Committee include:
The Committee is authorised by the Board to (i) seek any necessary information to fulfil its duties (ii) call any member of staff to be questioned at a meeting of the Committee as and when required and (iii) obtain external professional advice, at the Company's expense, which might be necessary for the fulfilment of its duties.
The members of the Committee receive fees as Non-Executive Directors which also reflect their membership of the Audit Committee and other Board Committees. The chairman of the Audit Committee receives and additional fee for this role.
The Audit Committee and Board place great emphasis on the objectivity of the Group's auditor, KPMG Audit plc, in their reporting to shareholders.
The KPMG audit director and manager is present at Audit Committee meetings to ensure full communication of matters relating to the audit.
The overall performance of the auditor is reviewed annually by the Audit Committee, taking into account the views of management, and feedback is provided to senior members of KPMG unrelated to the audit. This activity also forms part of KPMG's own system of quality control. The Audit Committee also has discussions with the auditor, without management being present, on the adequacy of controls and on any judgmental areas. These discussions have proved satisfactory to date.
The scope of the forthcoming year's audit is discussed in advance by the Audit Committee.
Audit fees are reviewed by the Audit Committee after discussions between the businesses and the local KPMG offices and are then referred to the Board for approval. Rotation of audit director's responsibilities within KPMG is required by their profession's ethical standards. The current audit director responsible for the Carillion engagement is in his second year of signing the report. There is also rotation of key members within the audit team.
Assignments awarded to KPMG and its associates have been and are subject to controls by management that have been agreed by the Audit Committee so that audit independence is not compromised.
In summary, the procedures are:
Audit related services: as auditor this is the main area of work of KPMG and its associates. If any additional accounting support is required then this is considered competitively;
Tax consulting: in cases where they are best suited, Carillion uses KPMG and its associates but the Group also uses other tax consultancies. Significant pieces of tax work are evaluated competitively;
General and systems consulting: all significant consulting projects are subject to competitive tender.
Other than audit, the Group Finance Director is required to give prior approval of work carried out by KPMG and its associates in excess of a predetermined threshold; part of this review is to determine that other potential providers of the services have been adequately considered.
These controls provide the Audit Committee with adequate confidence in the independence of KPMG in their reporting on the audit of the Group.
Carillion has rigorous operational risk management policies and processes to identify, mitigate and manage strategic Group-wide risks and risks specific to our individual business units and contracts, including economic, social, environmental and ethical risks.
Carillion has a Group Head of Risk who is responsible for:
- Advising on strategic risks affecting the Group
- Conducting independent risk appraisals of all projects prior to them being submitted to the Major Projects Committee, which is a Committee of the Board with delegated authority to sanction major commitments and transactions, including capital expenditure, major contracts and business acquisitions and disposals, up to specified levels of risk, beyond which they are referred to the Board
- Overseeing risk training across the Group.
Our risk management processes are applied to every aspect of our operations, from choosing the geographies in which we operate, our market sectors and the contracts for which we bid, to the selection of our customers, partners and suppliers. We also apply them to every stage of a contract, from its inception to completion, in order to deliver value-for-money services for our customers and the cash-backed profit we expect.
The Board regularly reviews the risks facing the Group to ensure they are up to date and the appropriate measures are in place to mitigate and manage them.
Carillion's remuneration policy is to provide the Executive Directors with appropriate incentives to encourage enhanced performance in a manner consistent with the Group's objectives and to reward them in a fair and responsible manner for their individual contributions to the success of the Group.
Carillion's remuneration philosophy is that reward should be used to incentivise Executive Directors in a manner that is consistent with the Group's objectives.
The package has been designed based on the following key principles:
Focus: To attract, develop and retain excellent people
Policy: To reward all employees fairly according to their role, experience and performance and with due regard to actual and expected market conditions and the financial performance of the Group.
Focus: Alignment with interests of shareholders
Policy: A substantial proportion of the package for the Executive Directors is delivered in the Company's shares to ensure that the interests of executives are aligned with shareholders. This is further supported by shareholding guidelines ensuring that a meaningful portion of each Executive Directors' personal wealth is linked to the share price performance.
Focus: Pay for performance
Policy: A substantial proportion of Executive Director remuneration is variable, linked to the Group's performance, in particular, to the delivery of sustained profitable growth and to the performance of the individual.
Focus: Be a recognised leader in Health & Safety and sustainability
Policy: To ensure that remuneration arrangements support our sustainability agenda, the quality of performance in terms of business results and leadership is considered, including achieving high standards in respect of Carillion's Health & Safety, environmental and social performance targets.
This is further supported by the introduction of strategic objectives into the LEAP from 2014 which include specific and quantifiable sustainability metrics.
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