I am delighted to report that Carillion achieved its objective of delivering materially enhanced earnings in 2009, despite challenging market conditions.

This strong performance reflects the resilience of the Group’s business mix, the strength of the management team and the skills and commitment of Carillion’s people. On behalf of the Board, I should like to thank all our employees for the contribution they have made to Carillion’s success in 2009.

In line with the Group’s strategy, support services continues to make the largest contribution to earnings. This was supported by a good performance in Public Private Partnership (PPP) projects, which more than offset the expected decline in UK construction revenue, and substantial growth in Middle East and Canada construction services.

By the year end, cost savings from integrating the Carillion and Alfred McAlpine businesses had reached a run rate of £50 million per annum, in line with our expectations, and this made a significant contribution to margin and earnings growth.

Revenue including joint ventures increased by four per cent to £5.4 billion (2008: £5.2 billion) and underlying profit before tax⁽¹⁾ increased by 16 per cent to £182.2 million (2008: £157.5 million). Underlying earnings per share⁽²⁾ increased by 14 per cent to 39.0 pence (2008: 34.3 pence).

The Group’s profit was again strongly cash-backed, with underlying cash flow from operations of £268.2 million (2008: £198.3 million) substantially ahead of underlying profit from operations of £196.8 million (2008: £165.2 million). This, together with proceeds from the sale of equity investments in PPP projects and from the disposal of non-core businesses, has enabled the Group to achieve a net cash position of £24.9 million at 31 December 2009 (2008: net borrowing of £226.7 million).

The Group continues to have a substantial high-quality forward order book that was worth approximately £17.7 billion at the year end (2008: £20.4 billion), with the reduction since December 2008 primarily due to the sale of equity in PPP projects and the disposal of non-core businesses. Beyond that we have a strong pipeline of probable orders and contract opportunities, particularly in support services where we have our largest ever pipeline.

In view of the Group’s performance in 2009 and prospects for 2010, the Board is recommending a final ordinary dividend for 2009 of 10.0 pence per share, making the total dividend for 2009 14.6 pence per share, an increase of 12 per cent on the total paid in respect of 2008 (13.0 pence).

In December 2009, the executive responsibilities for the Group’s UK Building, Private Finance and Middle East businesses were combined to streamline Board responsibilities and reflect the strategic development and needs of these businesses, which share common skill sets. Richard Howson who has been Managing Director of the Middle East businesses since July 2007, was appointed to the Board on 10 December 2009 as the Executive Director responsible for those businesses and for our UK Building and Private Finance businesses. Richard brings to the Board considerable knowledge and experience that will enable him to make a significant contribution to the Group’s future development.

David Hurcomb, the Executive Director responsible for UK Building and Private Finance, decided to step down from the Board on 8 December 2009. David left the Group with the Board’s best wishes and grateful thanks for the contribution he has made to Carillion and to the development of our UK Building business in particular.

In view of the wider economic environment we continue to expect market conditions to remain challenging in 2010. However, our performance has demonstrated that the Group has a resilient business mix, including strong international businesses, a substantial high-quality order book, a good pipeline of contract opportunities, good cash flow and a strong balance sheet. Consequently, the Group continues to be well positioned and the Board believes that it will make further progress in 2010.

(1)

After Joint Ventures taxation of £6.5 million (2008: £10.7 million) and before intangible amortisation, impairment of other investments, non-recurring operating items and non-operating items

(2)

Before intangible amortisation, impairment of other investments, non-recurring operating items and non-operating items.

Philip Rogerson
Chairman
3 March 2010