Alfred McAlpine acquisition adds £80m a year to Carillion bottom line

The Alfred McAlpine acquisition will add £80m to Carillion's bottom line, once integration costs are complete, according to group finance director Richard Adams.

“When you add what it [McAlpine] was delivering by way of profit, namely £40m a year, to what we’re doing, which is achieving £40m a year of savings, it will deliver a total of £80m a year," he explained.

Adams said the cost savings from integrating Alfred McAlpine into its business will reach £40m a year by the end of 2009, This is a 33% increase on the original figure of £30m.

“The figure of £30m-worth of savings had to go into the prospectus, so we had to be cautious,” explained Adams. “We are pleased with our ability to get hold of contracts in McAlpine and plug them into our system.”

Most of the back office functions in McAlpine’s support services have been dropped into Carillion’s back office - which has been outsourced to Accenture and is based in Chennai (formerly Madras) in India.

This migration of McAlpine’s former systems is on-going and will be completed by the end of September.

“It [the outsourcing] is a journey we are still on,” said Adams. “It includes financials, such as payables and receivables, as well as HR processing.”

Adams has no worries about Carillion carrying £615m goodwill as a result of what it paid for McAlpine. “We are comfortable with that,” he said.

Accounting rules mean that the figure of £615m of goodwill has to be reviewed annually to see if it has been impaired, he added.

However, McAlpine’s numerous former divisions have been stripped to the core and merged into different elements of Carillion’s existing businesses that they are no longer individually identifiable, making impairment impossible.

Adams agreed that to be the case. Which means the £615m goodwill figure will sit in the books come what may.