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Agenda

Carillion provides facilities management services for hundreds of thousands of buildings, including the UK head office of insurance broker and risk advisor, Marsh, pictured here in the heart of London. 1. Agenda. Welcome and Introduction

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Agenda

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  1. Carillion provides facilities management services for hundreds of thousands of buildings, including the UK head office of insurance broker and risk advisor, Marsh, pictured here in the heart of London 1

  2. Agenda Welcome and Introduction Lunch UK Government 2010 Spending Review General discussion and Q&A

  3. 2010 Spending Review (SR)current expenditure SR confirmed the Departmental Current Expenditure totals announced in the Emergency Budget in June 2010 Over 4-year plan period of 2011/12 to 2104/15, Departmental Current Expenditure rises by 4.7% in cash terms from £543bn in 2010/11 to £569bn in 2014/15 Within these cash totals there is wide variation Local Government cut by 20% - Defence increased by 6% Home Office and Justice cut by 14% - Education increased by 9% Transport cut by 10% - Health increased by 14% HMRC no change In real terms ie after the effects of inflation, which the Government estimates will be 2.4% per annum or 10% over the plan period, most Departments will need to make savings Defence, Education and Health, key existing sectors for Carillion, fared relatively well

  4. 2010 Spending Review (SR) current expenditure SR current expenditure plans are in line with Carillion’s previously announced expectations Reductions in running costs will lead to more public sector outsourcing as Government has announced it will increase the role of the private sector in service delivery consider opportunities for major re-engineering of procurement and service delivery Local Authorities (LA) are under major pressure to deliver savings increasing number of LAs looking at outsourcing opportunities bidding some £1.7bn of LA contracts and tracking LA contract opportunities worth around £2.5bn Potential increase in outsourcing by Central Government Departments Continue to expect revenue benefits towards the end of 2011 4

  5. 2010 Spending Review (SR) Departmental Expenditure Limits - capital SR planned capital investment is slightly higher than proposed in the Emergency Budget by up to £2.3bn a year over 4-year plan period of 2011/12 to 2014/15 Total Capital Departmental Expenditure Limit reduced by 22% in cash terms from £51.6bn in 2010/11 to £40.2bn in 2014/15 In real terms, the reduction is 32%, based on the Government’s estimate for inflation of 2.4% per annum ie 10% over the 4-year plan period But the outlook in Carillion’s key sectors is relatively positive Defence, Health and Transport fared better in the SR Education cut in line with revision to Building Schools for the Future (BSF) programme, but Carillion retained 68% of its BSF programmes, compared with an average of 32% for all contractors

  6. 2010 Spending Review (SR)Departmental Expenditure Limits - capital Overall reduction in capital spending was broadly in-line with Carillion’s expectations Carillion therefore remains well positioned in UK construction having announced in May 2010 strategic decision to focus UK construction capability on integrated solutions for Public Private Partnerships and support services customers annual revenue will consequently reduce by one third, from £1.8bn in 2009 to £1.2bn, over next 3 years Revenue reduction is being delivered through strict contract selectivity Selectivity will help to support margins by avoiding more competitive, lower margin work Hence, we believe Carillion is well placed and “ahead of the curve” in managing the effects of the 32% real terms reduction in Government capital spending 6

  7. National Infrastructure Plan 2010 First ever UK infrastructure Plan Recognises infrastructure investment is vital to economic growth and international competitiveness £200bn of investment over the next 5 years prioritised to support economic growth, focusing on Transport Energy Digital communications Water Waste Majority of investment in Transport and Energy Private finance will play key role in delivering Infrastructure Plan 7

  8. Summary and conclusions No significant surprises in the Spending Review (SR) Remain well placed to benefit from an increase in public sector outsourcing as Government seeks to reduce running costs Continue to expect the revenue benefits from increased outsourcing to come through towards the end of 2011 Clear signs that outsourcing opportunities are already increasing, notably Local Authorities (LA) bidding some £1.7bn of LA contracts tracking a further £2.5bn of LA contract opportunities SR capital investment plans are slightly better than expected outlook in Carillion’s main sectors of Defence, Education, Health and Transport is relatively positive Focusing UK construction activity on integrated solutions annual revenue will reduce by one third from £1.8bn in 2009 to £1.2bn over the next three years UK Infrastructure Plan 2010 £200bn of investment over the next 5 years Private finance will play a key role 8

  9. Appendix 1 UK Government Spending Review 2010 Departmental Current Expenditure(1) Breakdown of Public SectorCurrent Expenditure (£bn) 2010/11 2011/12 2012/13 2013/14 2014/15 4 year Baseline Plan Plan Plan Plan % change Defence Transport CLG Communities CLG Local Government Education Business, Innovation & Skills Health Scotland Home Office & Justice Energy & Climate Change Wales Northern Ireland Culture, Media & Sport Environment, Food & Rural Affairs Work and Pensions HMRC Other Total Departmental Current Expenditure 35.4 6.0 2.2 29.0 53.1 19.3 97.7 25.4 19.6 1.2 13.7 14.8 6.1 2.6 158.5 39.7 19.0 543.3 35.9 6.2 2.0 26.6 53.9 19.2 101.1 25.5 19.3 1.6 13.6 15.2 6.2 2.5 163.4 40.9 19.5 552.6 37.0 6.0 1.8 24.9 55.1 18.6 104.2 26 18.5 1.4 13.7 15.4 7.4 2.3 165.7 40.2 19.6 557.8 37.2 5.9 1.7 24.7 56.6 18.3 107.8 26.3 17.7 1.4 13.9 15.6 6.2 2.2 166.7 38.9 21.8 562.9 37.6 5.4 1.3 23.3 58.0 17.9 111.3 26.5 17.2 1.1 14.0 15.9 6.1 2.1 171.4 39.8 20.0 568.9 6% -10% -41% -20% 9% -7% 14% 4% -12% -8% 2% 7% 0% -19% 8% 0% 5% 4.7% (1) All figures are cash spending limits 9

  10. Appendix 2 UK Government Spending Review 2010 Departmental Expenditure Limits – Capital(1) Breakdown of gross investment figuresDepartment expenditure limits - capital budgets (£bn) 2010/11 2011/12 2012/13 2013/14 2014/15 4 year Baseline Plan Plan Plan Plan % change Defence Transport CLG Communities Education Business, Innovation & Skills Health Scotland Home Office & Justice Energy & Climate Change Wales Northern Ireland Culture, Media & Sport Environment, Food & Rural Affairs Other Total Capital DEL 8.6 7.7 6.8 7.6 1.8 5.1 3.4 1.4 1.7 1.7 1.2 1.2 0.6 2.8 51.6 8.9 7.7 3.3 4.9 1.2 4.4 2.5 0.9 1.5 1.3 0.9 1.3 0.4 4.3 43.5 9.1 8.1 2.3 4.2 1.1 4.4 2.5 0.8 2 1.2 0.9 0.4 0.4 4.4 41.8 9.2 7.5 1.8 3.3 0.8 4.4 2.2 0.7 2.2 1.1 0.8 0.1 0.4 4.7 39.2 8.7 7.5 2.0 3.4 1,0 4.6 2.3 0.8 2.7 1.1 0.8 0.0 0.4 4.9 40.2 1% -3% -71% -55% -44% -10% -32% -43% 59% -37% -32% -100% -33% 75% -22.1% (1) All figures are cash spending limits 10

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