The finance directors of the UK’s four largest listed contractors are in discussions to agree a common way of presenting their private finance initiative revenue and profit to the City.
The move is the brainchild of Chris Girling, Carillion’s new finance director, who says the value of contractors’ PFI portfolios is not factored into their share prices.
Girling, who joined Carillion from engineering group Vosper Thornycroft and has worked in the car and aerospace industries, is talking to his counterparts at Balfour Beatty, Amec and Laing.
He said the aim of the initiative was to make it easier for analysts to understand the PFI. “The analysts have precious little time, so we need a common and transparent approach to help them,” he said. “We all have opinions on the subject of accounting for PFI and agreeing what information we give to the City should help that.”
Carillion expects to make about £10m a year over the next 25 years from the 14 PFI projects on its books. But, like other contractors, it feels the value is not reflected in its share price.
Carillion, Balfour and Laing have all started trying to help analysts value their PFI portfolios by using similar graphs. These show the three PFI profits streams – construction margin, facilities management profit over the concession and dividend on equity.
Many contractors also report revenue and profit from the PFI in different parts of their businesses. “It may be a forlorn hope, but if we all used the same segmental reporting it would help, too,” said Girling.
Girling met with Balfour’s Ian Tyler on Tuesday and is planning meetings with Adrian Ewer of Laing and Amec’s Stuart Siddall.
Ewer said: “I think a common approach is beginning to happen by default and I am beginning to detect a change in City sentiment. But I am 100% behind the idea of getting a common approach.”
Stephen Williams, analyst at Williams de Broë, said: “The City doesn’t really understand PFI in terms of profit and what it could be worth, so its value is either underrated or ignored. A common approach would lead to better share valuations.”
