Recommended shares
and cash acquisition
of Alfred McAlpine plc
10 December 2007
James Cooke Hospital, Cleveland
MAKING TOMORROW A BETTER PLACE
1
Agenda
Philip Rogerson
Chairman
Tower Place
MAKING TOMORROW A BETTER PLACE
2
Important legal notice
The presentation which follows is directed only at persons who (i) are persons falling within the definition of “investment
professionals” under Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”)
or (ii) any other persons to whom it may otherwise lawfully be communicated pursuant to the Order or otherwise (all such
persons being “relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or any of
its comments.
• This document does not constitute a prospectus or a prospectus equivalent document.
• This presentation does not constitute an offer to sell or invitation to purchase any securities or the solicitation of any vote for approval in any
jurisdiction.
• The information in this presentation including, without limitation, references to the anticipated effect of the acquisition by the Company of
Alfred McAlpine plc on the Company’s future earnings per share should not be interpreted as a profit forecast nor should any information
contained herein be interpreted to mean that the future earnings per share of Carillion plc following the acquisition of Alfred McAlpine plc will
necessarily match or exceed the historical published earnings per share.
• This presentation includes “forward-looking statements”. All statements other than statements of historical facts included in this presentation,
including, without limitation, those regarding the Company’s financial position, business strategy, plans and objectives of management for
future operations (including development plans and objectives relating to the Company’s services) are forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results,
performance or achievements of the Company or those markets and economies to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous
assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the
future and such assumptions may or may not prove to be correct. These forward-looking statements speak only as at the date of this
presentation. The Company expressly disclaims any obligation (other than pursuant to the Listing Rules of the UKLA) or undertaking to
disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s
expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
• The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law. Persons who are not resident in
the United Kingdom or who are subject to other jurisdictions who receive this document should inform themselves of and observe any
applicable requirements.
• The expected operational cost savings have been calculated on the basis of the existing cost and operating structures of the companies.
These statements of estimated cost savings and one-off costs for achieving them relate to future actions and circumstances which, by their
nature, involve risks, uncertainties and other factors. Because of this, the cost savings referred to may not be achieved, or those achieved
could be materially different from those estimated. The statements should not be interpreted to mean that the earnings per share in 2008, or
in any subsequent period, would necessarily match or be greater than those for the relevant preceding financial period.
3
Agenda
John McDonough
Group Chief Executive
• Creation of leading support service business
• Carillion’s strategy and strong track record
• Carillion and Alfred McAlpine
- strong strategic and financial rationale
- clear integration plan
Richard Adam
• Financial overview
Group Finance Director
- offer terms and structure
- strong synergies and returns
- robust capital structure
- fair value and pensions
- expected timetable
• Carillion 2007 trading update
John McDonough
Group Chief Executive
4
• Summary
Overview
John McDonough
Group Chief Executive
Norwich Union Call Centre
MAKING TOMORROW A BETTER PLACE
5
Creation of leading
support services business
• Recommended cash and share acquisition valuing
Alfred McAlpine at 558p(1) per share
• Carillion and Alfred McAlpine are an excellent strategic fit
• Creates a Group with
- combined revenues of £5.3bn(2)
- leading position in UK support services with revenues of
£2.6bn(2)
- enhanced positions in a wide range of growth market sectors
- increased capability in providing integrated solutions
- increased project management resources
Based on Carillion’s share price at close of business on 7 December 2007
of 363.25 pence and Carillion share exchange ratio of 1.08
(2) 2007 forecast revenues – Citigroup for Alfred McAlpine, Oriel Securities for Carillion
(1)
6
Creation of leading
support services business
• Opportunities for substantial synergy cost savings - £30m by end 2009
• Carillion’s strong cash and risk management processes and selectivity
criteria will continue to be applied to the enlarged Group
• Potential to deliver significant value for Carillion and Alfred McAlpine
shareholders
- financial returns ahead of Carillion’s WACC
- materially enhanced earnings in 2009, the first full year after
acquisition
• Carillion trading update in 2007
- continuing strong growth with underlying earnings per share up by
at least 20%
7
Carillion’s consistent and
successful strategy
• Growing support services at stable margins of 4% to 5%
• Creating value through investments in Public Private Partnership
projects
• Maintaining a strong and selective construction capability focused
on higher added-value contracts for longer term customers
• Developing and marketing integrated solutions tailored to our
customers’ needs
• Sustainable, profitable growth
8
Carillion’s business transformed 1999 - 2006
• Revenue up from £1.8bn to
£3.6bn
Pence
20
15
10
• Business mix transformed
– near doubling of support
services and investments
contribution
5
0
1999 2000 2001 2002 2003 2004 2005 2006 2007
Underlying profit before tax(3)
UK GAAP net of JV tax
(2) UK GAAP
9
Construction
Support Services
& Investments
Support Services
& Investments
£20.5m
25%
£12.2m
£18.3m
40%
60%
• Market capitalisation increased
five fold from £0.2bn to £1.0bn
(1)
2007 consensus forecast 27.0p
25
• Pre-tax profit up from £30.5m(1)
to £82.1m
• Earnings per share up from
12.0p(2) to 23.5p
Underlying earnings per share
30
£61.6m
75%
Construction
1999 £30.5m
2006 £82.1m
1999 UKGAAP, net of JV tax; 2006 IFRS.
Both years before exceptional items and amortisation
(3)
Strong acquisition track record
• Acquired Mowlem in February 2006 for £350m plus debt of £120m
• Step change in Carillion’s development, consistent with strategy
for growth
• Doubled annual revenue to c£4bn
• Successfully integrated Mowlem ahead of schedule and
implemented
- Carillion’s policies and risk management processes
- Carillion’s strong focus on cash management
• Acquisition benefits exceeding expectations
• Carillion (excluding Mowlem) also delivered strong organic growth
- c18% increase in profit(1) in 2006
(1)
10
Before Group and JV tax, all exceptional items, amortisation and goodwill impairment
Mowlem benefits ahead of expectations
Benefits ahead of original expectations
• Increased synergy cost savings (running rates)
- £15m per annum by end 2006 (original expectation £10m)
- £26m per annum by end 2007 (original expectation £15m)
- one-off costs of £28m (original expectation £10m)
• Increased earnings
- significantly earnings enhancing in 2006
(original expectation – earnings neutral)
- on track to deliver materially enhanced earnings per share in 2007
of at least 20%
• Exceeding target IRR of 15%
11
Alfred McAlpine
Compelling strategic and financial rationale
• Complementary skills and market strengths
- creates a leading UK support services business with revenues
of £2.6bn(1)
- enhanced ability to provide integrated solutions
- increased project management resources to support Middle East
growth
• Acceleration of strategy
- growing support services revenues at stable margins of 4% to 5%
- growing construction margins towards 3% over next three years
• Cost synergies - a run rate of £30m by end 2009
• Materially enhanced earnings in 2009 - first full year after acquisition
• Financial returns ahead of Carillion’s WACC
(1)
12
2007 forecast revenues – Citigroup for Alfred McAlpine, Oriel Securities for Carillion
A leading support services business
(2006 revenues)
Alfred McAlpine plc c£1.1bn
Project Services
c£400m
Infrastructure Services
c£315m
Business Services
c£430m
Civil Engineering
c£260m
Government Services
(Road Maintenance)
£85m
Facilities Management
£290m
Special Projects
c£140m
Utilities Services
£230m
IT Services
£60m
Asset Management
and Consultancy Services
£80m
13
A leading support services and
construction business (2006 revenues)
Carillion plc c£3.6bn
UK
£3,153m
Middle East
£274m
Canada and Caribbean
c£163m
Defence
£232m
Construction
£268m
Public Private Partnership Projects
and other Construction £117m
Education
£151m
Facilities Management
& Services £6m
Road maintenance and other
Facilities Management £46m
Health
£229m
Facilities Management
& Services £697m
Rail
£368m
Roads
£224m
Building
£863m
Civil Engineering
£241m
PPP Equity returns
£148m
14
c£2.6bn of support service revenues
(1)
in 2007
Reporting segments
c£2.6bn
0.8
c£2.5bn
0.4
Alfred McAlpine
1.8
Carillion
2.1
c£0.2bn
Support
Services
15
Construction
Services
Investments
(2)
(1)
2007 forecast revenues – Citigroup for Alfred McAlpine, Oriel Securities for Carillion
(2)
Adjusted for sale of Alfred McAlpine’s PPP equity portfolio in November 2007
Substantial order books
Carillion
c£16bn
c£15.9bn
8.4
8.5
Support services
2.9
2.1
Construction
services
4.7
5.3
Investments
Dec 2006 Oct 2007
Alfred McAlpine
c£4bn
2.2
Business Services
0.8
Project Services
1.0
Infrastructure Services
June 2007
• Carillion pipeline of probable new orders £3.3bn at October 2007
(31 Dec 2006: £1.6bn)
• Alfred McAlpine pipeline of opportunities over £2.0bn at June 2007
16
Leading support services business
• Creates one of the UK’s leading support services businesses
with c£2.6bn(1) of revenues
• Enhanced skills and capabilities in existing and new growth
market sectors
• Strengthens integrated service offering
• Entry into higher margin IT services sector
• Cross-selling opportunities
- Enviros/Consultancy
- IT Services
- M&E
(1)
17
2007 forecast revenues – Citigroup for Alfred McAlpine, Oriel Securities for Carillion
Enhanced construction resource
• Complementary positions in UK building and infrastructure
• Combined strengths in key sectors
- education, defence, industrial, offices, mixed use
developments, leisure and transport infrastructure
- strong relationships with Local Authorities
• Increased project management resources to support strong growth
opportunities in Middle East
• Significant margin opportunities from integration through applying
- selectivity and risk management
- strong focus on cash management
18
Clear integration plan
• Thorough due diligence carried out to provide clear
integration plan
• Full access to, and co-operation of, Alfred McAlpine
• Experienced, multi-disciplinary full-time integration team
• Team will comprise senior managers from Carillion and
Alfred McAlpine
• Detailed integration plan already in place
• Totally focused on delivering benefits in line with strict
financial discipline
19
Financial overview
Richard Adam
Group Finance Director
Alfred McAlpine Government Services
MAKING TOMORROW A BETTER PLACE
20
Offer terms and structure
• Recommended shares and cash acquisition
• Terms
- 1.08 new Carillion shares per Alfred McAlpine share
- 165.4p in cash per Alfred McAlpine share
- values each Alfred McAlpine share at 558p(1)
• Values Alfred McAlpine’s issued share capital at £572m
• Cash element of £174m funded from existing borrowing facilities
• Mix and match facility and loan note alternative available
• Alfred McAlpine shareholders entitled to Carillion 2007 final dividend
(1)
21
Based on Carillion’s share price at close of business on 7 December 2007 of 363.25
pence and share exchange ratio of 1.08
Strong synergies and returns
• Synergy cost savings at run rate of £30m by end 2009
• Savings from
- eliminating duplication in management teams, head and
regional offices
- property rationalisation
- back office/shared services
- supply chain
• Total one-off cost of delivering savings of c£30m over two
years 2008 and 2009
• Substantial increase in shareholder value - expect
- returns ahead of Carillion’s weighted average cost
of capital
- materially enhanced earnings in 2009, the first full year
after acquisition
22
Robust capital structure
• 114m Carillion ordinary shares to be issued – 29% of issued share
capital of enlarged Group
• Net borrowings at 30 June 2007
- Carillion £140m
- Alfred McAlpine £35m
• Existing Carillion borrowing facilities of £590m will comfortably cover
- current net borrowing levels
- cash element of consideration
- working capital requirements
- integration costs
- adequate headroom
• Strong focus on cash management and balance sheet efficiency
• Expect net borrowings to be around £300m at December 2008
23
Fair value and pensions
• Prudent view of fair value of assets to be taken
– ongoing review
• At 30 June 2007 Alfred McAlpine pension schemes had net deficit of
£14.5m (Alfred McAlpine assumptions)
• At 30 June 2007, Carillion’s pension schemes had net deficit of £27m
(Carillion assumptions)
• Deficit recovery payment to Carillion’s pension schemes of £38m in
2008 and c£19m per annum in 2009 and 2010
• Alfred McAlpine pension scheme being discussed with Trustee
24
Expected timetable
• Documents posted to shareholders – December 2007 / January 2008
• Shareholder meetings for Carillion and Alfred McAlpine
– February 2008
• Court sanctions Scheme of Arrangement – February 2008
• Expected completion – February / March 2008
• Carillion preliminary results announcement – March 2008
• Carillion interim management statement – April 2008
25
Carillion 2007
trading update
News International, Broxbourne
26
20% growth in underlying earnings per share
• Expect to deliver underlying earnings per share growth of at least
20% in 2007
• Effective tax rate expected to reduce to 25%
• Mowlem synergy cost savings at run rate of £26m per annum by
end 2007
• Average net borrowings in 2007 on target to be below £150m
• Net debt at 31 December now expected to be below £80m
• Order book at 31 December expected to be £15.7bn and pipeline of
probable new orders of £3.3bn
• Positive trading conditions in the Group’s UK and international markets
• Middle East revenues now expected to more than double to over £600m
within 3 years instead of 5
• Board expects outlook to remain positive and Carillion to continue its
strong momentum in 2008 and over the medium term
27
Summary
John McDonough
Group Chief Executive
Alfred McAlpine Business Services
MAKING TOMORROW A BETTER PLACE
28
Compelling strategic and
financial rationale
• Acquisition consistent with Carillion’s strategy for growth
• Excellent strategic fit with complementary skills and market strengths
• Increased project management resources
• Clear integration plan
• Substantial cost synergies
• Focus on cash management and balance sheet efficiency
• Substantial increase in shareholder value
- returns ahead of WACC
- materially enhanced earnings in first full year, 2009
29
Appendices
Alfred McAlpine Business Services
MAKING TOMORROW A BETTER PLACE
30
Directors’ valuation of equity in financially
closed Public Private Partnership Projects
NPV £m
400
300
June 2007 £277m
(Dec 2006: £238m)
200
100
0
5%
6%
7%
8%
9%
10% 11%
12%
Discount rate
• 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 closed projects
– £6m of equity to be invested in two preferred bidder projects
– shortlisted for 10 projects with a potential equity requirement of £88m
31
Financially closed Public Private
Partnership projects at 30 June 2007
Project
Financial
close date
Status
Equity
Concession invested to
period
date
years
£m
Roads
A55 North Wales
A249
1998
2004
Operational
Operational
27.0
30.0
5.3
3.0-
5.3
3.0
50.0
50.0
50.2
Other Transport
Notts Express Transit
Alice to Darwin Railway
2000
2001
Operational
Operational
30.0
50.0
3.4
26.1
3.4
28.0
12.5
13.9
22.0
28.2
Hospitals / Healthcare
Glasgow Southern General
The Great Western Hospital, Swindon
Harplands Hospital
Oxford John Radcliffe
William Osler Hospital
Royal Ottawa Hospital
Queen Alexandra Hospital, Portsmouth
Lewisham Hospital
James Cooke Hospital, Cleveland
1999
1999
1999
2003
2004
2004
2005
2004
1999
Operational
Operational
Operational
Operational
In construction
Operational
In construction
Operational
Operational
27.0
27.0
29.0
33.5
25.0
20.0
35.0
30.0
30.0
0.6
(4.6)
1.1
6.7
0.6
(4.6)
1.1
6.7
4.7
0.7
12.2
3.8
3.2
50.0
33.3
50.0
50.0
13.0
10.0
50.0
50.0
19.0
5.1
53.1
8.8
69.1
24.9
5.7
134.0
30.3
26.4
4.7
0.7
3.8
3.2
Cont . . .
32
Total
Noncommitted Equity recourse
equity share
debt
£m
%
£m
46.0
Financially closed Public Private
Partnership projects at 30 June 2007
Project
Financial
close date
Status
Equity
Concession invested to
period
date
years
£m
Total
Noncommitted Equity recourse
equity share
debt
£m
%
£m
Accommodation
University of Greenwich
New Accommodation Project (GCHQ)
University of Hertfordshire
Renfrewshire Schools
South Ayrshire Schools
Allenby/Connaught
Bansley Schools
Exeter Schools
Redcar & Cleveland Schools
Swarcliffe Social Housing
Northwood
Total
33
1995
2000
2002
2005
2006
2006
2005
2004
2005
2005
2006
Operational
Operational
Operational
In construction
In construction
In construction
In construction
Operational
Operational
In construction
In construction
30.0
30.0
32.0
32.5
33.0
35.0
25.0
30.0
30.0
30.0
25.0
9.0
3.0
0.1
2.2
4.6
2.5
0.1
9.0
3.0
3.7
3.1
60.0
2.2
4.6
2.5
1.3
10.1
75.5
167.6
100.0
40.0
50.0
30.0
47.5
50.0
50.0
50.0
50.0
33.3
50.0
171.2
31.9
28.1
1.4
731.6
20.9
46.0
26.8
3.1
11.4
1,576.2
Public Private Partnership pipeline
at 30 June 2007
Construction
£m
Preferred bidder projects
Beds & Herts Independent Sector
Treatment Centres
London North Independent Sector
Treatment Centres
Projects shortlisted
Bedford & Luton Courts
Three Counties Police CCs
M25
Tyneside & Gateshead Schools
Nottingham Schools
Tameside Schools
Bishopriggs Prison
Sault Area Hospital, Canada (2)
Niagara Hospital Canada
(1)
34
To be decided
(2)
Maintenance/Facilities Equity and Concession Payment
revenue(1)
Management
sub debt
basis Concession
£m
years
£m
£m
£m
49
131
4.0
82
Activity
5
6
166
2.2
114
Activity
5
up to 30
up to 60
up to 50
up to 50
up to 100
up to 85
up to 120
up to 120
up to 600
up to 30
up to 20
up to 40
up to 50
up to 80
up to 2
up to 3
up to 45
up to 3
up to 3
up to 5
up to 4
up to 3
up to 3
Availability
Availability
Availability
Availability
Availability
Availability
Availability
Availability
Availability
30
25
30
25
25
25
25
25
25
Achieved financial close in August 2007
*
*
*
*
*
*
*
*
*
Important legal notice
THIS DOCUMENT IS NOT A PROSPECTUS. IT DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER
OF SECURITIES, OR CONSTITUTE SOLICITATION OF ANY OFFER OF SECURITIES. ANY ACCEPTANCE
OR RESPONSE TO THE ACQUISITION SHOULD BE MADE ONLY ON THE BASIS OF THE INFORMATION
REFERRED TO IN THE SCHEME DOCUMENT AND THE PROSPECTUS.
• Copies of the prospectus, the Carillion shareholder circular and the scheme document will, from the
date of posting to Alfred McAlpine shareholders or Carillion shareholders (as appropriate), be available
for inspection at the Document Viewing Facility which is situated at The Financial Services Authority, 25
The North Colonnade, Canary Wharf, London E14 5HS.
• Copies of the Carillion shareholder circular, the scheme document and the prospectus will, from the
date of posting to Alfred McAlpine shareholders or Carillion shareholders (as appropriate), be available
for inspection by Carillion shareholders at the offices of Carillion plc, Birch Street, Wolverhampton, WV1
4HY during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted)
and at the offices of Slaughter and May, One Bunhill Row, London, EC1Y 8YY during normal business
hours on any weekday (Saturdays, Sundays and public holidays excepted).
• Copies of the scheme document and the prospectus will, from the date of posting to Alfred
McAlpine shareholders or Comet shareholders (as appropriate), be available for inspection by Alfred
McAlpine shareholders at the offices of Alfred McAlpine plc, Kinnaird House, 1 Pall Mall East, London,
SW1Y 5AZ during normal business hours on any weekday (Saturdays, Sundays and public holidays
excepted) and at the offices of CMS Cameron McKenna LLP, Mitre House, 160 Aldersgate Street, London,
EC1A 4DD during normal business hours on any weekday (Saturdays, Sundays and public holidays
excepted).
35
Recommended shares
and cash acquisition
of Alfred McAlpine plc
James Cooke Hospital, Cleveland
MAKING TOMORROW A BETTER PLACE
36