Final Results
Costain Group PLC
("Costain" or "the Group" or "the Company")
Results for the year ended 31 December 2012
Costain, one of the UK's leading engineering solutions providers, delivering integrated consulting, project delivery and operations and maintenance services, announces another strong performance with a 16% increase in adjusted profit before tax3 and a recommended 7.5% increase in the total dividend for the year.
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Year ended 31 December |
2012 |
2011 |
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Revenue1 |
£934.5m |
£986.3m |
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Operating Profit - Underlying2 |
£25.1m |
£24.1m |
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Profit from Operations - Adjusted3 |
£31.4m |
£23.6m |
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- Reported |
£28.0m |
£22.0m |
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Profit before tax - Adjusted3 |
£29.5m |
£25.5m |
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- Reported |
£26.1m |
£23.9m |
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Basic earnings per share - Adjusted3 |
41.4p |
31.1p |
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- Reported
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37.1p |
29.2p |
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Net cash |
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Year-end cash balance |
£105.7m |
£140.1m |
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Average month-end cash balance |
£103.4m |
£130.4m |
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Dividend per share |
10.75p |
10.0p |
1. Including share of joint ventures & associates
2. Underlying operating profit (before amortisation of acquired intangible assets and employment related acquisition consideration of £3.4m) in 2012 excludes the £2.8m one-off costs resulting from pension scheme liability actions.
3. Results stated before amortisation of acquired intangible assets & employment related acquisition consideration and after £10.5m profit arising from transfer of PFI assets into the Group's pension scheme and £2.8m one-off costs resulting from pension scheme liability actions.
Highlights
· Underlying operating profit2 up 4% to £25.1 million (2011: £24.1 million)
· Increase of 16% in adjusted profit before tax3 to £29.5 million (2011: £25.5 million)
· Adjusted basic earnings per share3 up 33% to 41.4 pence (2011: 31.1 pence), reflecting increased profits and a non-recurring tax timing benefit
· £105.7 million year-end net cash balance (2011: £140.1 million) and average month-end cash balance of £103.4 million (2011: £130.4 million)
· High quality forward order book of £2.4 billion, in excess of 90% from repeat orders including new awards and extensions to existing contracts (2011: £2.5 billion)
· Increase to over £700 million of revenue secured for 2013 as at 31 December 2012 (2011: over £650 million secured for 2012)
· Recommended increase in final dividend for the sixth successive year, taking the total for the year to 10.75 pence, a 7.5% increase on the prior year
David Allvey, Chairman, commented:
"Costain has delivered another strong performance in 2012, and our confidence in the Group's future is reflected in the Board's recommendation to increase the final dividend for the sixth successive year.
"Our progress in recent years, despite challenging economic conditions, is a reflection of the Group's strategic focus on meeting the complex needs of customers by ensuring that Costain provides integrated consulting, project delivery and operations and maintenance capability.
"The Group believes that, driven by innovation, the strategic development of the business will be accelerated as we work with customers on their future programmes.
"With a robust balance sheet, positive net cash position and banking and bonding facilities in place, we have the resources to continue to grow the business organically and by acquisition."
6 March 2013
A video interview with Andrew Wyllie, Chief Executive, and Tony Bickerstaff, Finance Director, in which they discuss the highlights of the results, is available at www.costain.com
Enquiries:
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Costain |
Tel: 01628 842 444 |
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Andrew Wyllie, Chief Executive |
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Tony Bickerstaff, Finance Director |
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Graham Read, Communications Director |
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College Hill |
Tel: 020 7457 2020 |
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Mark Garraway |
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Helen Tarbet |
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Notes to Editors (for further information please visit the company website: www.costain.com)
Costain is one of the UK's leading engineering solutions providers, delivering integrated consulting, project delivery and operations and maintenance services, with a portfolio spanning almost 150 years of innovation and technical excellence. The Group's core business segments are in Infrastructure (Highways, Rail, Power and Airports) and Natural Resources (Water, Hydrocarbons & Chemicals, Nuclear Process and Waste).
The Group's 'Choosing Costain' strategy involves focusing on blue chip customers in chosen sectors whose major spending plans are underpinned by strategic national needs, regulatory commitments or essential maintenance requirements.
Costain has worked on a number of high profile infrastructure projects in the UK, including the St Pancras railway station and the Channel Tunnel Rail Link. The Group's current major projects include the municipal waste treatment infrastructure for the Greater Manchester Waste Disposal Authority, EVAP D at Sellafield, one of the largest decommissioning nuclear projects in the UK, and the Network Rail contract for the redevelopment of London Bridge Station.
CHAIRMAN'S STATEMENT
Overview & Strategic Update
Costain has delivered another strong performance.
As a result of the implementation of our 'Choosing Costain' strategy, the Group is one of the UK's leading engineering solutions providers, delivering integrated consulting, project delivery and operations and maintenance services to major blue-chip customers in targeted market sectors.
Our success is the direct result of our focus on major customers who are continuing to invest billions of pounds in capital, operations and maintenance contracts to address essential national infrastructure requirements across the transport, energy, water and waste sectors.
During 2012, we increased the proportion of revenues from support service related activities to 29%. To meet the demands of major customers for an increasingly integrated service, we must continue to enhance and broaden the range of services we offer. The ongoing drive to develop our services particularly across engineering consultancy, and operations and maintenance will remain a key priority in 2013.
The spending plans of our customers provide a major opportunity to grow the business further. With a strong cash position, robust balance sheet and banking and bonding facilities in place, we have the resources to continue to grow the business organically and by acquisition.
Performance
Revenue, including the Group's share of joint ventures and associates, for the year was £934.5 million (2011: £986.3 million). Our focus on higher margin activities led to an increase of 4% in Group underlying operating profit of £25.1 million (2011: £24.1 million). Adjusted profit before tax increased by 16% to £29.5 million (2011: £25.5 million). Adjusted basic earnings per share were up 33% to 41.4 pence (2011: 31.1 pence), reflecting increased profits and a non-recurring tax timing benefit.
As a result of the Group's ongoing strategic focus on major blue chip customers who increasingly utilise a target cost based form of contract, our net cash position includes a lower level of advanced payments typically paid on lump sum contracts. Additionally, our increasing emphasis on support service related activities and changing industry cash flow trends, together with the cash flow timing implication of a delayed contract completion, accounted for the reduction in net cash to £105.7 million (2011: £140.1 million). We expect these trends will continue to be reflected in a lower average net cash position.
The Group has flexible financing in place with total banking and bonding facilities of £465 million with a maturity date of 30 September 2015.
We were successful in securing a number of major new contract awards and extensions to existing contracts. Consequently, the order book, as at 31 December 2012, was £2.4 billion (2011: £2.5 billion). We have increased to over £700 million the revenue secured for 2013 (2011: over £650 million secured for 2012) and it is encouraging to have started the new financial year with such long-term visibility.
Dividend
Reflecting another successful year and our continuing confidence in the long-term prospects for the Group, the Board is recommending a 7.4% increase in the final dividend, the sixth successive year of increase. If approved, the 7.25 pence per share (2011: 6.75 pence) final dividend will be paid on 24 May 2013 to shareholders on the register as at the close of business on 19 April 2013. This would bring the total dividend for the full year to 10.75 pence per share (2011: 10.00 pence), an increase of 7.5% over the prior year.
Board & Staff
The Board was pleased to announce the appointment of Jane Lodge as a Non-Executive Director with effect from 1 August 2012. Jane has also been appointed Chair of the Audit Committee, succeeding James Morley who became Senior Independent Director. James succeeded John Bryant who retired from the Board at the end of 2012 after nearly 11 years as a Board member. We would like to thank John for his considerable contribution over that time.
There were a number of operational management changes and these are covered in the Chief Executive's Review.
On behalf of the whole Board, I would like to place on record our recognition and appreciation of the excellent colleagues we have at Costain who continue to play a major role in our success.
Group Pension Scheme
The deficit on the Group's legacy Costain Pension Scheme ('CPS') at 31 December 2012 was £40.0 million net of deferred tax (2011: £39.7 million). The assumptions and sensitivities used in the valuation of the pension scheme are set out in the notes to the financial statements.
Costain has in place a deficit recovery plan based on the latest actuarial position as at 31 March 2010, agreed with the Pension Scheme Trustee, expected to eliminate the deficit over a period of less than ten years and continues to take various decisive actions in that regard. Additionally, in February 2012, the Group announced two further actions being taken to manage the obligations in the CPS (further detail is provided within the Financial Review). In accordance with the requirement for a tri-ennial review, another full actuarial valuation of the CPS will be carried out as at 31 March 2013.
Summary & Outlook
Costain has delivered another strong performance in 2012, and our confidence in the Group's future is reflected in the Board's recommendation to increase the final dividend for the sixth successive year.
Our progress in recent years, despite challenging economic conditions, is a reflection of the Group's strategic focus on meeting the complex needs of customers by ensuring that Costain provides integrated consulting, project delivery and operations and maintenance capability.
The Group believes that, driven by innovation, the strategic development of the business will be accelerated as we work with customers on their future programmes.
With a robust balance sheet, positive net cash position and banking and bonding facilities in place, we have the resources to continue to grow the business organically and by acquisition.
David Allvey
Chairman
CHIEF EXECUTIVE'S REVIEW
Against a backdrop of changing industry dynamics and ongoing challenging economic conditions, 2012 was another year of progress at Costain.
Our focus on providing innovative and cost effective solutions to increasingly complex and large-scale national needs, along with our partnership approach, is enabling Costain to build new and extend existing long-term relationships with a range of major customers. As a result, during the year we secured new contracts and extensions of some £900 million and our year-end total order book stood at £2.4 billion.
Reflecting the increasing quality of our customer relationships, over 90% of that order book now comprises repeat orders. The order book also provides good long-term visibility with over £700 million of revenue secured for 2013, and in excess of a further £1.7 billion of revenue secured for 2014 and beyond. In addition, the Group has maintained a strong preferred bidder position of over £400 million.
Trends & Developments
During the year we saw a continuing trend amongst our major customers to consolidate their supply chains, as they seek to derive business benefits by working in a much more strategic and collaborative manner with a reduced number of preferred Tier One service providers who have the ability to deliver the entirety of their service needs.
As a consequence, our customers are rapidly changing their procurement approach, consolidating a broader range of services across consulting, project delivery and operations activities into larger, longer-term contracts. As examples of this trend, in 2012 we were appointed by Magnox as one of two service providers under a 10-year framework contract that now covers all ten of their UK nuclear sites, and we were appointed by the Oil & Pipelines Agency on a 3-year operations and maintenance contract that now covers the whole of their estate.
In this changing and competitive environment, it is essential that Costain is able to demonstrate that it has the scale, skills, experience and financial strength necessary to secure, and then deliver, a strong performance on these increasingly large and complex contracts. The Costain Group has been transformed in recent times to meet our customers' evolving requirements. We now deliver Engineering services across the full asset life-cycle, from advisory and design to operations and maintenance. Developed both organically and by acquisition, 29% of our revenue in 2012 was derived from support service activities.
The provision of an increasing range of skills and services, along with the recognised capability of our team, our acknowledged engineering expertise and reputation for reliable safe delivery has enabled us to secure large, integrated and complex projects: the contract from Network Rail for the London Bridge Redevelopment, a key part of the Thameslink programme; the Evaporator D project, one of the largest nuclear decommissioning projects in the UK, where we are utilising innovative modularisation techniques used in our oil and gas operations to deliver units to site; the Greater Manchester Waste project, one of Western Europe's largest waste PFI contracts; and with the Highways Agency, whose own assessment rates Costain as a leading supply chain partner.
During the year, we secured our first highways technology framework contract for the Welsh Government, an important contract given the increased levels of investment in technology expected in the highways sector. We also recently secured, in joint venture, our first rail electrification contract for Network Rail, with electrification forming a key part of their £37 billion investment programme.
Costain's growing in-house ability to design, procure and deliver projects is being utilised by Centrica for the delivery of its gas plant at Easington to serve the York field in the North Sea. As a result of successful delivery on the new plant, we have just been appointed by Centrica to develop the Front End Engineering design ('FEED') for a similar project at Barrow. The Aberdeen based ClerkMaxwell specialist oil and gas FEED consultancy, acquired by Costain in 2011, has almost doubled in size since acquisition.
'Engineering Tomorrow'
Engineering excellence runs through our DNA and 'Engineering Tomorrow' is the Costain commitment to identifying, developing and implementing innovative solutions to major national needs.
Our customers are increasingly looking to their preferred supply chain partners such as Costain for innovative products and services that will shorten lead times, enhance the quality of project delivery and, above all, provide cost-effective solutions. To remain a preferred Tier One supplier, we need to stay one step ahead of our peer group.
We have increased our investment in Research and Development, and have introduced the Costain Start-Up initiative to encourage and support entrepreneurial members of staff to develop their ideas into business opportunities. The 'Mario' asset management tool was one such idea, which is now being sold commercially to rail and highways customers as an addition to Costain's range of services.
We are currently undertaking consulting projects to develop Plasma Vitrification and Graphite Gasification technologies as potential solutions for addressing the treatment and storage of intermediate level nuclear waste. We are also undertaking work on behalf of the Energy Technology Institute to develop a prototype process for carbon capture.
Over the last two years, Costain has been investigating innovative ways of exploiting its broadening range of skills and market leading positions. This resulted in the announcement in June of the formation of a joint venture with Severn Trent (Severn Trent Costain) to provide complete business water and wastewater management services to high volume commercial and industrial water users.
'Costain Cares'
One of our competitive advantages is the recognition some time ago of the increasing importance customers were placing on the "good citizen" credentials of their supply-chain partners. Failure to embrace and deliver on what our customers regard as vital components of corporate and social responsibility means non qualification for tender lists. We passionately share these values and Costain believes that investment in corporate social responsibility capital is a vital investment in the Group's future success.
Core to our transformation and our value proposition to customers is our 'Costain Cares' programme which places responsible, effective and collaborative stakeholder relationships at the core of everything we do.
We received a Platinum award from Business in the Community, recognising our proactive commitment to mitigating the environmental and social aspects of our operations.
Costain places the highest priority on the effective management of Safety, Health and Environment. Further progress was made in the year and we again recorded an improved Group Accident Frequency Rate (AFR) reducing from 0.11 to a new record low of 0.09, which continues to compare favourably with our major Tier One peer group. We also received 19 Gold Awards from RoSPA and two prestigious Orders of Distinction.
Teamwork
The results generated by Costain in 2012 were delivered by an outstanding team. During the year, we increased our training and development programmes across the organisation so that we have the requisite skills and resources. There was a further increase in the number of apprentices across the Group.
There were also a number of adjustments to the senior executive team. Mark Rogerson MBE, who joined the Group in June from Serco in the new role of Chief Development Officer, has since been appointed Managing Director of the new Natural Resources division. Mark has a track record of successfully managing and growing support service businesses. The Infrastructure division will continue to be led by Managing Director Darren James.
Alan Kay, previously Managing Director of the Environment Division, and who recently completed the Advanced Management Programme at Harvard Business School, was appointed in November to the new role of Group Technical & Operations Director on the Executive Board to drive innovation, operational and engineering excellence across the Group.
Tim Bowen, previously Highways Sector Director, was appointed to the Executive Board to develop our consulting and operations activities for major customers in the Middle East. The senior management team was further strengthened by the appointment of Fiona Ware as Human Resources Director.
A New Structure
One of the strengths of Costain is the ability to focus group-wide resources to meet specific customer requirements, address opportunities and optimise returns for the Company as a whole irrespective of divisional structure.
In November, the Group announced the formation of the new Natural Resources operating division, encompassing the Water, Hydrocarbons & Chemicals, Nuclear Process and Waste sectors, combining most of the existing Energy & Process and Environment Divisions and some support service activities previously in Infrastructure. This new divisional structure will enable the Group to align itself more closely with its customers' evolving requirements and to combine further its front end process engineering, project delivery, and operations capability into an integrated service for customers.
The Natural Resources division will operate alongside the Infrastructure division which will now also include all power activities as well as the Group's activities in the highways, rail, and airports sectors. The new divisional structure took effect from 1 January 2013.
The Future
Costain has delivered another strong performance and demonstrated again that it has the right strategy to drive profitable growth even through the most challenging of economic conditions.
We entered 2013, having already secured over £700 million of work for the year and we continue to benefit from a strong pipeline and high levels of tendering activity.
Looking forward, we expect the rate of change in Costain to accelerate as we take further steps to broaden our services and enhance our product range. We believe that we will continue to be successful by further increasing the agility of the business to react to customer's changing requirements and by driving innovation and new technology across all of our operations in line with our commitment to 'Engineering Tomorrow'.
I look forward to reporting on further progress during the year.
ANDREW WYLLIE
Chief Executive
OPERATIONAL REVIEW
We continue to focus and prioritise our group-wide resources on new business opportunities with those major customers who are committing significant expenditure on addressing pressing national needs. During last year, the most attractive opportunities have been in the rail and highways sectors within the infrastructure division.
Infrastructure
The Infrastructure division, which incorporated activities in the highways, rail, and airports sectors, had a very successful year in which revenue (including share of joint ventures and associates) increased to £562.3 million (2011: £466.0 million) as investment in business development enabled the Group to take advantage of a number of major opportunities in the market. As a result, adjusted profit from operations rose to £26.1 million (2011: £10.2 million). The significantly improved profit performance reflects strong operating returns and additional gains on successfully completed and final accounted projects. The order book for the division has grown to £1.6 billion (2011: £1.5 billion) and the level of tendering activity remains high.
In Rail, during the period, the Group, in joint venture, secured its fifth contract with Crossrail for the construction and fit out of the intermediate shafts and headhouses at Eleanor Street and Mile End Park in London, along with the connecting adits to the main running tunnels. Work is also progressing well on the major London Bridge Station redevelopment project for Network Rail, in which Costain is providing integrated services including design, construction, logistical and environmental operations whilst ensuring the station remains open throughout.
Costain continues to be a leading supplier to the Highways Agency and significant progress is being made with the large portfolio of professional services, construction and maintenance contracts in which it is engaged for this customer. New contract awards during the period under review include the upgrade of the A8 Belfast to Larne carriageway for the Northern Ireland Roads Service, appointment to both lots of the Highways Agency Asset Support Framework and a four-year technology contract awarded by the Welsh Government for the maintenance of Road Network Communications and Tunnel Systems across Wales, involving the maintenance and fault repair of complex technology systems such as CCTV cameras, variable messaging signs (VMS), emergency telephones and traffic signals along major strategic routes.
The Riverside Resource Recovery Energy from Waste facility at Belvedere is now fully operational and the final account has been agreed.
Environment
The Environment division focused on the water and waste markets as well as the specific requirements of a number of long term customers. Customer spend in this market is underpinned by regulatory and legislative requirements and we expect this to grow over the medium and long term as the market in the UK undergoes major change.
Revenue (including share of joint ventures and associates) in the division for the year was £232.6 million (2011: £375.4 million), with profit from operations, including the profit on PFI transfers, of £15.0 million (2011: £17.5 million). The reduction in revenue has been influenced by our strategic priority on other activities in the Group. Operating profits in this division declined significantly in the period following the one-off margin benefits from successful close-out of a number of legacy issues well within our allowances in the comparative period and as a result of additional costs to complete a project. The division finished the year with a forward order book of £0.6 billion (2011 £0.8 billion), with the reduction again reflecting the Group's strategic focus on other opportunities.
In the water sector, the Group is making good progress on the AMP5 framework contracts with Northumbrian Water, Severn Trent, Southern Water, United Utilities and Welsh Water. During the period the Group was also awarded a contract by Severn Trent Water to replace its largest covered service reservoir sited near Ambergate in Derbyshire.
In anticipation of the significant changes taking place in the water sector since the Department for Environment Food and Rural Affairs (DEFRA) altered the regulations to allow more businesses to be able to choose their water supplier, Costain entered into a joint venture with Severn Trent, called Severn Trent Costain (STC), to provide complete business water and wastewater management services to high volume commercial and industrial water users.
Costain's position in the water sector gives the Group a strong platform to win new contracts and extensions as the water sector prepares for the next regulatory review period, commencing in 2014.
In the waste sector, the Group is completing the PFI contract for the Greater Manchester Waste Disposal Authority. The majority of the facilities on the scheme, which utilises a range of sophisticated waste management technologies, have been handed over with the remainder in an extended commissioning phase and commercial discussion regarding completion continuing.
Energy & Process
The Energy & Process division undertook work in the hydrocarbons and chemicals, nuclear process and power sectors.
Revenue (including share of joint ventures and associates) in the division for the year was £137.7 million (2011: £143.4 million) with adjusted profit from operations of £2.5 million (2011: £4.7 million). During the year, the profits in the division have been impacted by the reduced revenue, higher business development costs, restructuring costs and additional costs to complete on two projects. The division finished the year with a forward order book of £178 million (2011: £215 million).
In Hydrocarbons & Chemicals, the Group is continuing to carry out projects for a number of customers both in the UK and overseas. We have benefitted greatly from ClerkMaxwell, acquired in 2011, which is enabling us to take advantage of a number of exciting opportunities in the high growth upstream oil and gas service sector.
During the period the Group also secured a three-year £60 million asset support contract, awarded by the Oil and Pipelines Agency for the operation and maintenance of the Government Pipeline and Storage System. The additional support services capabilities afforded the Group by the acquisition of Promanex in August 2011, were instrumental in securing this contract and demonstrates the value in enhancing existing capabilities through targeted acquisition.
In Nuclear Process, we continued to make good progress during the course of the year in our various projects across the UK, including Evaporator D at Sellafield, one of the UK's largest nuclear decommissioning projects, which has seen the delivery of further modules to site during the period. The Group was also appointed, as one of two suppliers, to the Magnox framework contract, for the delivery of construction, infrastructure and maintenance projects across all ten sites which are operated by Magnox on behalf of the Nuclear Decommissioning Authority. The project work which Costain will deliver includes: the design, construction and maintenance of permanent buildings and structures, infrastructure maintenance and extension works incorporating construction, civil engineering structures and ground works projects.
In Power, the Group continues its work with the Energy Technologies Institute, developing carbon dioxide reduction technology for use in coal fired power stations, a critical factor in the UK's ability to meet its stated climate change targets.
Land Development
Our non-core Land Development activity in Spain continued to be subject to challenging market conditions. Revenue was £1.9 million (2011: £1.5 million) and the loss after tax was £2.3 million (2011 £2.0 million). As anticipated, no significant land sales were completed in the year and we continue our moratorium on development activity on our land-bank until the market improves and maximum shareholder value can be secured for the assets. Our activities during the year have been focused on our leisure businesses of golf courses and our 600-berth yacht marina adjacent to Gibraltar which has reported increased levels of activity during the year.
FINANCE DIRECTOR'S REVIEW
Costain delivered another year of good financial performance.
The Group generated a 4% increase in underlying operating profit for the year to £25.1 million (2011: £24.1 million). Profit from operations, before other items, for the year was £31.4 million (2011: £23.6 million).
Group revenue, including share of joint ventures and associates, was £934.5 million for the twelve months to 31 December 2012 (2011: £986.3 million). The increased profitability, on reduced revenue, reflects the Group's focus on higher margin work.
During the year the Group transferred two PFI investments into The Costain Pension Scheme ('CPS') at an agreed value of £20.3 million which resulted in a profit on the transfer of £10.5 million. In addition the Group implemented an Enhanced Transfer Value and Pension Increase Exchange offers to the members of the CPS which resulted in a one-off accounting cost of £2.8 million in the year.
Profit before tax, before other items2, for the year ended 31 December 2012 increased to £29.5 million (2011: £25.5 million). Basic earnings per share, before other items2, amounted to 41.4 pence (2011: 31.1 pence per share), reflecting increased profits and a non-recurring tax timing benefit. Reported basic earnings per share were 37.1 pence (2011: 29.2 pence).
During the year the Group secured a number of new contracts and extensions and the Group's order book stood at £ 2.4 billion (31 December 2011: £2.5 billion).
As a result of the Group's ongoing strategic focus on major blue chip customers who increasingly utilise a target cost based form of contract, our net cash position includes a lower level of advanced payments typically paid on lump sum contracts. Additionally, our increasing emphasis on support service related activities, changing industry cash flow trends, together with the cash flow timing implication of a delayed contract completion, accounted for the reduction in net cash to £105.7 million (2011: £140.1 million). We expect these trends will continue to be reflected in a lower average net cash position.
The results of the Group's operating divisions are considered in the operational review section and are shown in the segmental analysis in the financial statements.
Interest
Net finance expense amounted to £1.9 million (2011: £1.9 million income). The interest payable on bank overdrafts and other similar charges was £1.8 million (2011: £1.7 million) and the interest income from bank deposits and other loans and receivables amounted to £1.0 million (2011: £1.8 million). In addition, the net finance expense included the difference between the expected return on the pension scheme's assets of £26.3 million (2011: £32.3 million) and the interest cost on the present value of the pension scheme's liabilities of £27.4 million (2010: £30.5 million) being a net expense of £1.1 million (2011: £1.8 million income).
In accordance with IAS 19, the pension scheme deficit position was reassessed as at 31 December 2012. As a consequence of the new requirements of IAS 19, requiring a change in the method of calculation, the net pension interest expense will increase in 2013 to £2.1 million.
Tax
The Group's effective rate of tax was 7.3% of the profit before tax (2011: 21.8%). The lower than normal rate of tax arose owing to tax relief on the transfer of PFI assets to The Costain Pension Scheme, Research and Development tax relief claims, the utilisation of brought forward tax losses, timing differences and capital allowances, not previously recognised as deferred tax assets, and the effect on the brought forward deferred tax balances of the reduced rate of corporation tax of 23% from 1 April 2013.
Dividend
The Board has recommended a final dividend for the year of 7.25 pence per share (2011: 6.75 pence per share) to bring the total for the year to 10.75 pence per share (2011: 10.0 pence per share), an increase of 7.5%.
As in previous years, the Group will make an additional cash contribution to the pension scheme equal to the amount of dividend paid to shareholders.
Shareholders' Equity
Shareholders' equity increased in the year to £31.8 million (2011: £30.8 million). The profit for the year amounted to £24.2 million and other comprehensive expenses to £19.1 million. The movements are detailed in the consolidated statements of comprehensive income and expense and changes in equity in the financial statements. The most significant element was the actuarial loss on the Group's defined benefit pension scheme.
Pensions
As at 31 December 2012, the Group's pension scheme deficit in accordance with IAS 19, net of deferred tax, was £40.0 million (2011: £39.7 million). The scheme deficit position has increased primarily as a result of a reduction in the discount rate, based on corporate bond yields, used to calculate the liabilities.
In February 2012, the Group announced two further actions being taken to manage the obligations in the CPS. The first of these was the transfer of the Group's interest in two PFI investments into the CPS at an agreed value of £20.3 million which was completed on 22 February 2012 and resulted in an accounting profit on the transfer of £10.5 million. The second action was the implementation of Enhanced Transfer Value ('ETV') and Pension Increase Exchange ('PIE') offers to the members of the CPS. The ETV and PIE exercises have resulted in a reduction in the scheme liabilities and assets of approximately £35 million and have resulted in a one-off accounting cost of £2.8 million expensed in 2012.
A full actuarial valuation of the CPS was last performed by the Scheme Actuary as at 31 March 2010 and a recovery plan agreed with the Trustee of the Scheme. In accordance with the requirement for a tri-ennial review, another full actuarial valuation of the CPS will be carried out as at 31 March 2013.
Cash Flow and Borrowings
The Group has a positive net cash balance, which was £105.7 million as at 31 December 2012 (2011: £140.1 million) and included £1.7 million of borrowings (2011: £1.6 million) and cash held by jointly controlled operations of £29.6 million (2011: £33.6 million).
As set out in the consolidated cash flow statement, during the year, the Group had an operating cash outflow, together with outflows for payment of dividends and matching pension deficit contributions. The average month-end cash balance during 2012 was £103.4 million (2010: £130.4 million).
The cash position is affected by monthly and contract specific cycles and in order to accommodate these cyclical flows, the Group seeks to maintain a base cash balance.
Key Risks and Uncertainties
The principal risks and uncertainties of the business, and the factors which mitigate these risks, are set out in the Group's Annual Report and include the economic outlook, change of government policy on spending, competition, pension liabilities, acquisition integration, operational delivery, loss of IT systems, supply chain and customer failure and people retention. The Board continuously assesses and monitors these risks and the Chairman's Statement, Chief Executive's Review and business and operations review in these financial statements include consideration of uncertainties affecting the Group.
Accounting policies and significant areas of judgment and estimation
A summary of the significant accounting policies of the Group is set out in the Notes to the financial statements. There has been no significant change to the accounting policies in the year and there is no material effect on the Financial statements of new accounting standards adopted in the period.
The Notes to the financial statements also include the significant areas of judgment and estimation used in preparation of the financial statements.
The most critical accounting policies and significant areas of judgment and estimation arise from the accounting for defined benefit pension schemes under IAS 19 Employee benefits, the accounting for long-term contracts under IAS 11 and assessments of the carrying value of land, property, goodwill and intangible assets.
Contract Bonding and Banking Facilities
The Group's long-term contracting business is dependent on it being able to supply performance and other bonds as necessary. This means maintaining adequate facilities from banks and surety bond providers to meet the current and projected usage requirements. The Group has contract bonding and banking facilities of £465 million with a maturity date of 30 September 2015 with its relationship banks and surety companies.
Going Concern
The Directors have acknowledged the guidance 'Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009' published by the Financial Reporting Council in October 2009. The Directors have considered the Group's financial requirements, its current order book and future opportunities and its available bonding facilities. Having reviewed the latest projections, including the application of reasonable downside sensitivities, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. Accordingly, the Group continues to adopt the going concern basis in preparing these financial statements.
Treasury
The Group's treasury and funding activities are undertaken by a centralised treasury function. Its primary activities are to manage the Group's liquidity, funding and financial risk, principally arising from movements in interest rates and foreign currency exchange rates.
The Group's policy is to ensure that adequate liquidity and financial resources are available to support the
Group's growth development, while managing these risks. The Group's policy is not to engage in speculative transactions. Group Treasury operates as a service centre within clearly defined objectives and controls and is subject to periodic review by internal audit.
Liquidity Risk
The Group finances its operations primarily by a mixture of working capital, funds from shareholders and retained profits. The Directors regularly monitor cash usage and forecast usage to ensure that projected financing needs are supported by adequate cash reserves or bank facilities.
Foreign Currency Exposure
Translation exposure: the results of the Group's overseas activities are translated into sterling at rates approximating to the foreign exchange rates ruling at the dates of the transactions. The balance sheets of overseas subsidiaries and investments are translated at foreign exchange rates ruling at the balance sheet date.
Transaction exposure: the Group has a small transactional currency exposure arising from subsidiaries' commercial activities overseas and, where appropriate, the Group requires its subsidiaries to use forward currency contracts to minimise any currency exposure unless a natural hedge exists elsewhere within the Group.
Interest Rate Risks and Exposure
The Group holds relatively minor financial instruments for two main purposes: to finance its operations and, currently only within its PFI investments, to manage the interest rate risks arising from its operations and its sources of finance. Various financial instruments (for example, trade receivables and trade payables) arise directly from the Group's operations.
With the Group's cash balances and low level of borrowings, the main exposure to interest rate fluctuations within the Group's operations arises from surplus cash, which is generally deposited with the Group's relationship banks. Within the investments in joint ventures and associates, interest rate movements will affect the value of swaps classified as cash flow hedges and this will impact the Group's equity.
Tony Bickerstaff,
Finance Director
Consolidated income statement
|
Year ended 31 December |
|
2012 |
|
2011 |
||||
|
|
Notes |
Before |
Other items |
Total |
|
Before |
Other items |
Total |
|
|
|
£m |
£m |
£m |
|
£m |
£m |
£m |
|
Continuing operations |
|
|
|
|
|
|
|
|
|
Revenue |
2 |
934.5 |
- |
934.5 |
|
986.3 |
- |
986.3 |
|
Less: Share of revenue of joint ventures and associates |
9 |
(86.1) |
- |
(86.1) |
|
(117.8) |
- |
(117.8) |
|
Group revenue |
|
848.4 |
- |
848.4 |
|
868.5 |
- |
868.5 |
|
Cost of sales |
|
(794.2) |
- |
(794.2) |
|
(818.8) |
- |
(818.8) |
|
Gross profit |
|
54.2 |
- |
54.2 |
|
49.7 |
- |
49.7 |
|
|
|
|
|
|
|
|
|
|
|
Administrative expenses |
|
(29.1) |
- |
(29.1) |
|
(25.6) |
- |
(25.6) |
|
Pension liability management |
|
(2.8) |
- |
(2.8) |
|
- |
- |
- |
|
Amortisation of acquired intangible assets |
|
- |
(1.7) |
(1.7) |
|
- |
(0.9) |
(0.9) |
|
Employment related deferred consideration |
|
- |
(1.7) |
(1.7) |
|
- |
(0.7) |
(0.7) |
|
|
|
|
|
|
|
|
|
|
|
Group operating profit |
|
22.3 |
(3.4) |
18.9 |
|
24.1 |
(1.6) |
22.5 |
|
|
|
|
|
|
|
|
|
|
|
Profit on sale of non-consolidated subsidiary |
|
- |
- |
- |
|
0.5 |
- |
0.5 |
|
Profit on sales of interests in joint ventures and associates |
|
10.5 |
- |
10.5 |
|
0.3 |
- |
0.3 |
|
Share of results of joint ventures and associates |
9 |
(1.4) |
- |
(1.4) |
|
(1.3) |
- |
(1.3) |
|
|
|
|
|
|
|
|
|
|
|
Profit from operations |
2 |
31.4 |
(3.4) |
28.0 |
|
23.6 |
(1.6) |
22.0 |
|
|
|
|
|
|
|
|
|
|
|
Finance income |
4 |
27.3 |
- |
27.3 |
|
34.1 |
- |
34.1 |
|
Finance expense |
4 |
(29.2) |
- |
(29.2) |
|
(32.2) |
- |
(32.2) |
|
Net finance (expense)/income |
|
(1.9) |
- |
(1.9) |
|
1.9 |
- |
1.9 |
|
|
|
|
|
|
|
|
|
|
|
Profit before tax |
|
29.5 |
(3.4) |
26.1 |
|
25.5 |
(1.6) |
23.9 |
|
Income tax |
5 |
(2.5) |
0.6 |
(1.9) |
|
(5.6) |
0.4 |
(5.2) |
|
Profit for the year attributable to equity holders of the parent |
|
27.0 |
(2.8) |
24.2 |
|
19.9 |
(1.2) |
18.7 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
6 |
41.4p |
(4.3)p |
37.1p |
|
31.1p |
(1.9)p |
29.2p |
|
Diluted |
6 |
40.0p |
(4.1)p |
35.8p |
|
30.0p |
(1.8)p |
28.2p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The impact of business disposals in either year was not material and, therefore, all results are classified as arising from continuing operations.
|
||||||||
|
Consolidated statement of comprehensive income and expense |
|||||
|
|
|
|
|
|
|
|
Year ended 31 December |
|||||
|
|
|
|
|
|
|
|
|
|
|
2012 |
|
2011 |
|
|
|
|
£m |
|
£m |
|
|
|
|
|
|
|
|
Profit for the year |
|
24.2 |
|
18.7 |
|
|
|
|
|
|
|
|
|
Exchange differences on translation of foreign operations |
|
(1.1) |
|
(0.8) |
|
|
Cash flow hedges |
|
|
|
|
|
|
|
Group: |
|
|
|
|
|
* |
Effective portion of changes in fair value during year |
|
- |
|
(0.1) |
|
* |
Net changes in fair value transferred to the income statement |
|
0.1 |
|
0.2 |
|
|
|
|
|
|
|
|
|
Joint ventures and associates: |
|
|
|
|
|
* |
Effective portion of changes in fair value (net of tax) during year |
|
(0.4) |
|
(2.8) |
|
* |
Net changes in fair value (net of tax) transferred to the income statement |
|
4.0 |
|
- |
|
|
|
|
|
|
|
|
Actuarial losses on defined benefit pension scheme |
|
(24.4) |
|
(22.1) |
|
|
Tax recognised on actuarial losses recognised directly in equity |
|
2.7 |
|
3.0 |
|
|
Other comprehensive expense for the year |
|
(19.1) |
|
(22.6) |
|
|
|
|
|
|
|
|
|
Total comprehensive income/(expense) for the year attributable to equity holders of the parent |
|
5.1 |
|
(3.9) |
|
|
Consolidated statement of changes in equity |
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
Share capital |
Share premium |
Translation reserve |
Hedging reserve |
Retained earnings |
Total equity |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
At 1 January 2011 |
31.7 |
2.0 |
6.8 |
(2.2) |
(0.7) |
37.6 |
|
Profit for the year |
- |
- |
- |
- |
18.7 |
18.7 |
|
Other comprehensive income/(expense) |
- |
- |
(0.8) |
(2.7) |
(19.1) |
(22.6) |
|
Transfer between reserves |
- |
- |
0.1 |
- |
(0.1) |
- |
|
Issue of ordinary shares under employee share option plans |
0.6 |
1.1 |
- |
- |
(0.2) |
1.5 |
|
Equity-settled share-based payments |
- |
- |
- |
- |
1.4 |
1.4 |
|
Dividends paid |
0.1 |
0.2 |
- |
- |
(6.1) |
(5.8) |
|
At 31 December 2011 |
32.4 |
3.3 |
6.1 |
(4.9) |
(6.1) |
30.8 |
|
At 1 January 2012 |
32.4 |
3.3 |
6.1 |
(4.9) |
(6.1) |
30.8 |
|
Profit for the year |
- |
- |
- |
- |
24.2 |
24.2 |
|
Other comprehensive income/(expense) |
- |
- |
(1.1) |
3.7 |
(21.7) |
(19.1) |
|
Issue of ordinary shares under employee share option plans |
0.3 |
- |
- |
- |
(0.3) |
- |
|
Equity-settled share-based payments |
- |
- |
- |
- |
2.1 |
2.1 |
|
Dividends paid |
0.1 |
0.4 |
- |
- |
(6.7) |
(6.2) |
|
At 31 December 2012 |
32.8 |
3.7 |
5.0 |
(1.2) |
(8.5) |
31.8 |
|
Consolidated statement of financial position |
||||||
|
|
|
|
|
|
|
|
|
As at 31 December |
|
|
|
|
|
|
|
|
|
|
|
2012 |
|
2011 |
|
|
|
Notes |
|
£m |
|
£m |
|
Assets |
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
Intangible assets |
|
8 |
|
18.7 |
|
20.3 |
|
Property, plant and equipment |
|
|
|
9.1 |
|
11.4 |
|
Investments in equity accounted joint ventures |
9 |
|
36.1 |
|
21.4 |
|
|
Investments in equity accounted associates |
9 |
|
1.6 |
|
1.4 |
|
|
Loans to equity accounted joint ventures |
|
|
- |
|
13.7 |
|
|
Loans to equity accounted associates |
|
|
2.7 |
|
6.4 |
|
|
Other |
|
|
|
17.5 |
|
16.4 |
|
Deferred tax |
|
|
|
17.4 |
|
17.4 |
|
Total non-current assets |
|
|
|
103.1 |
|
108.4 |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Inventories |
|
|
|
1.7 |
|
2.3 |
|
Trade and other receivables |
|
|
|
181.5 |
|
188.0 |
|
Cash and cash equivalents |
|
10 |
|
107.4 |
|
141.7 |
|
Total current assets |
|
|
|
290.6 |
|
332.0 |
|
Total assets |
|
|
|
393.7 |
|
440.4 |
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
Share capital |
|
|
|
32.8 |
|
32.4 |
|
Share premium |
|
|
|
3.7 |
|
3.3 |
|
Foreign currency translation reserve |
|
|
|
5.0 |
|
6.1 |
|
Hedging reserve |
|
|
|
(1.2) |
|
(4.9) |
|
Retained earnings |
|
|
|
(8.5) |
|
(6.1) |
|
Total equity attributable to equity holders of the parent |
|
|
31.8 |
|
30.8 |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
Retirement benefit obligations |
|
11 |
|
51.9 |
|
52.9 |
|
Other payables |
|
|
|
5.0 |
|
6.1 |
|
Provisions for other liabilities and charges |
|
|
1.9 |
|
2.3 |
|
|
Total non-current liabilities |
|
|
|
58.8 |
|
61.3 |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
297.6 |
|
342.9 |
|
Income tax liabilities |
|
|
|
1.7 |
|
1.7 |
|
Bank overdrafts |
|
10 |
|
1.7 |
|
1.6 |
|
Provisions for other liabilities and charges |
|
|
2.1 |
|
2.1 |
|
|
Total current liabilities |
|
|
|
303.1 |
|
348.3 |
|
Total liabilities |
|
|
|
361.9 |
|
409.6 |
|
Total equity and liabilities |
|
|
|
393.7 |
|
440.4 |
|
Consolidated cash flow statement |
|
|
|
|
|
Year ended 31 December |
|
|
|
|
|
|
|
2012 |
|
2011 |
|
|
Notes |
£m |
|
£m |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
24.2 |
|
18.7 |
|
Adjustments for: |
|
|
|
|
|
Share of results of joint ventures and associates |
9 |
1.4 |
|
1.3 |
|
Finance income |
4 |
(27.3) |
|
(34.1) |
|
Finance expense |
4 |
29.2 |
|
32.2 |
|
Income tax |
5 |
1.9 |
|
5.2 |
|
Profit on sales of interests in joint ventures and associates |
3 |
(10.5) |
|
(0.3) |
|
Profit on sale of non-consolidated subsidiary |
|
- |
|
(0.5) |
|
Depreciation of property, plant and equipment |
|
2.3 |
|
1.9 |
|
Amortisation of intangible assets |
|
1.8 |
|
0.9 |
|
Employment related deferred consideration |
|
1.7 |
|
0.7 |
|
Share-based payments expense |
|
2.9 |
|
1.9 |
|
Cash from operations before changes in working capital and provisions |
|
27.6 |
|
27.9 |
|
Decrease/(increase) in inventories |
|
0.6 |
|
(1.0) |
|
Decrease/(increase) in receivables |
|
4.1 |
|
(10.1) |
|
(Decrease)/increase in payables |
|
(48.1) |
|
25.0 |
|
Movement in provisions and employee benefits |
|
(6.5) |
|
(7.1) |
|
Cash (used by)/from operations |
|
(22.3) |
|
34.7 |
|
Interest received |
|
1.0 |
|
1.8 |
|
Interest paid |
|
(1.8) |
|
(1.7) |
|
Net cash (used by)/from operating activities |
|
(23.1) |
|
34.8 |
|
|
|
|
|
|
|
Cash flows from/(used by) investing activities |
|
|
|
|
|
Dividends received from joint ventures and associates |
|
0.6 |
|
1.4 |
|
Additions to property, plant and equipment |
|
(0.8) |
|
(2.9) |
|
Additions to intangible assets |
|
(0.1) |
|
(0.1) |
|
Proceeds of disposal of property, plant and equipment |
|
0.6 |
|
0.2 |
|
Additions to loans to joint ventures and associates |
|
(5.4) |
|
(13.5) |
|
Loan repayments by joint ventures and associates |
|
- |
|
0.4 |
|
Proceeds from sale of interest in joint venture |
|
- |
|
0.3 |
|
Proceeds from sale of subsidiary |
|
- |
|
0.5 |
|
Acquisitions of subsidiaries (net of acquired cash and cash equivalents and overdrafts) |
|
- |
|
(21.1) |
|
Net cash used by investing activities |
|
(5.1) |
|
(34.8) |
|
|
|
|
|
|
|
Cash flows from/(used by) financing activities |
|
|
|
|
|
Issue of ordinary share capital |
|
- |
|
1.5 |
|
Ordinary dividends paid |
|
(6.2) |
|
(5.8) |
|
Net cash used by financing activities |
|
(6.2) |
|
(4.3) |
|
|
|
|
|
|
|
Net decrease in cash, cash equivalents and overdrafts |
|
(34.4) |
|
(4.3) |
|
|
|
|
|
|
|
Cash, cash equivalents and overdrafts at beginning of the year |
10 |
140.1 |
|
144.3 |
|
Effect of foreign exchange rate changes |
|
- |
|
0.1 |
|
Cash, cash equivalents and overdrafts at end of the year |
10 |
105.7 |
|
140.1 |
Notes to the financial statements
1 Basis of preparation
Costain Group PLC ("the Company") is a public limited company incorporated in the United Kingdom. The consolidated financial statements of the Company for the year ended 31 December 2012 comprise the Group and the Group's interests in associates and jointly controlled entities and have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted for use in the EU in accordance with EU law (IAS Regulation EC 1606/2002).
The financial information set out herein (which was authorised for issue by the directors on 6 March 2013) does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2011 but is derived from those accounts. Statutory accounts for 2011 have been delivered to the Registrar of Companies, and those for 2012 will be delivered in advance of the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not include reference to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under section 498(2) or (3) of the Companies Act 2006.
Whilst the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to fully comply with IFRS.
The directors have acknowledged the guidance "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009" published by the Financial Reporting Council in October 2009. The directors have considered these requirements, the Group's current order book and future opportunities and its available bonding facilities. Having reviewed the latest projections, including the application of reasonable downside sensitivities, the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.
Accordingly, they continue to adopt the going concern basis in preparing these financial statements.
|
Notes to the financial statements - continued Basis of preparation - continued Significant areas of judgment and estimation
|
|
The estimates and underlying assumptions used in the preparation of these financial statements are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. |
|
The most critical accounting policies and significant areas of judgment and estimation arise from the accounting for defined benefit pension schemes under IAS 19 Employee benefits, the accounting for long-term contracts under IAS 11 Construction contracts, assessments of the carrying value of land and the carrying value of goodwill and acquired intangible assets. |
|
Defined benefit pension schemes require significant judgments in relation to the assumptions for inflation, future pension increases, investment returns and member longevity that underpin the valuation. Each year in selecting the appropriate assumptions, the directors take advice from an independent qualified actuary. The assumptions and resultant sensitivities are set out in Note 11. |
|
The majority of the Group's activities are undertaken via long-term contracts and these contracts are accounted for in accordance with IAS 11, which requires estimates to be made for contract costs and revenues. In many cases, these contractual obligations span more than one financial period. Also, the costs and revenues may be affected by a number of uncertainties that depend on the outcome of future events and may need to be revised as events unfold and uncertainties are resolved. |
|
Management bases its judgments of costs and revenues and its assessment of the expected outcome of each long-term contractual obligation on the latest available information, this includes detailed contract valuations and forecasts of the costs to complete. The estimates of the contract position and the profit or loss earned to date are updated regularly and significant changes are highlighted through established internal review procedures. The impact of any change in the accounting estimates is then reflected in the financial statements. |
|
Alcaidesa Holding SA, one of the Group's joint ventures, operates in the Spanish real estate market and holds land and property within its current and non-current assets. The company has also developed and operates a marina under a long-term concession agreement. At 31 December 2012, a review of the net realisable value of each of its land holdings and the carrying value of the marina assets was undertaken, including the use of external valuations, and provisions, if considered necessary, have been reflected in these financial statements.
|
|
Reviewing the carrying value of goodwill and intangible assets recognised on acquisition requires judgments, principally, in respect of growth rates and future cash flows of cash generating units, the useful lives of intangible assets and the selection of discount rates used to calculate present values. |
|
Notes to the financial statements - continued
2 Operating segments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment information is based on four business segments: Environment, Infrastructure, Energy & Process and Land Development operations in Spain. The segments are strategic business units with separate management reporting to a segment managing director and have different core customers or offer different services. This information is provided to the Chief Executive who is the chief operating decision maker. The segments are discussed in the Business review section of these financial statements. |
|||||
|
2012 |
|
Environment |
Infrastructure |
Energy & Process |
Land Development |
Central |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
Segment revenue |
|
|
|
|
|
|
||
|
External revenue |
148.5 |
562.3 |
137.6 |
- |
- |
848.4 |
||
|
Share of revenue of joint ventures and associates |
84.1 |
- |
0.1 |
1.9 |
- |
86.1 |
||
|
Total segment revenue |
232.6 |
562.3 |
137.7 |
.9 |
- |
934.5 |
||
|
|
|
|
|
|
|
|
|
|
|
Segment profit/(loss) |
|
|
|
|
|
|
||
|
Operating profit/(loss) |
|
3.6 |
26.1 |
2.5 |
- |
(7.1) |
25.1 |
|
|
Pension liability management |
|
- |
- |
- |
- |
(2.8) |
(2.8) |
|
|
Profit on sales of interests in joint ventures and associates |
10.5 |
- |
- |
- |
- |
10.5 |
||
|
Share of results of joint ventures and associates |
0.9 |
- |
- |
(2.3) |
- |
(1.4) |
||
|
Profit/(loss) from operations before other items |
15.0 |
26.1 |
2.5 |
(2.3) |
(9.9) |
31.4 |
||
|
Other items: |
|
|
|
|
|
|
||
|
Amortisation of acquired intangible assets |
- |
(1.6) |
(0.1) |
- |
- |
(1.7) |
||
|
Employment related deferred consideration |
- |
(0.9) |
(0.8) |
- |
- |
(1.7) |
||
|
Profit/(loss) from operations |
15.0 |
23.6 |
1.6 |
(2.3) |
(9.9) |
28.0 |
||
|
|
|
|
|
|
|
|
(1.9) |
|
|
Net finance expense |
|
|
|
|
|
|||
|
Profit before tax |
|
|
|
|
|
26.1 |
||
Notes to the financial statements - continued
Operating segments - continued
|
2011 |
Environment |
Infrastructure |
Energy & Process |
Land Development |
Central |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
Segment revenue |
|
|
|
|
|
|
|
External revenue |
281.8 |
448.5 |
138.2 |
- |
- |
868.5 |
|
Share of revenue of joint ventures and associates |
93.6 |
17.5 |
5.2 |
1.5 |
- |
117.8 |
|
Total segment revenue |
375.4 |
466.0 |
143.4 |
1.5 |
- |
986.3 |
|
|
|
|
|
|
|
|
|
Segment profit/(loss) |
|
|
|
|
|
|
|
Operating profit/(loss) |
16.1 |
10.2 |
4.6 |
- |
(6.8) |
24.1 |
|
Profit on sale of non-consolidated subsidiary |
0.5 |
- |
- |
- |
- |
0.5 |
|
Profit on sale of interest in joint venture |
0.3 |
- |
- |
- |
- |
0.3 |
|
Share of results of joint ventures and associates |
0.6 |
- |
0.1 |
(2.0) |
- |
(1.3) |
|
Profit/(loss) from operations before other items |
17.5 |
10.2 |
4.7 |
(2.0) |
(6.8) |
23.6 |
|
Other items: |
|
|
|
|
|
|
|
Amortisation of acquired intangible assets |
- |
(0.7) |
(0.2) |
- |
- |
(0.9) |
|
Employment related deferred consideration |
- |
(0.3) |
(0.4) |
- |
- |
(0.7) |
|
Profit/(loss) from operations |
17.5 |
9.2 |
4.1 |
(2.0) |
(6.8) |
22.0 1.9 |
|
Net finance income |
|
|
|
|
|
|
|
Profit before tax |
|
|
|
|
|
23.9 |
3 Profit on sale of interest in joint ventures and associates
In February 2012, the Group transferred two PFI investments to The Costain Pension Scheme for £20.3 million realising a profit of £10.5 million. As a result of this transfer, £4.0 million of fair value adjustments on the PFI financial assets relating to cash flow hedges were recycled through the income statement, making up part of the £10.5 million profit.
Notes to the financial statements - continued
|
4 Net finance (expense)/income |
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
2012 |
2011 |
||||||||
|
|
|
|
|
|
|
|
£m |
£m |
||||||||
|
Interest income from bank deposits |
|
|
0.3 |
0.4 |
||||||||||||
|
Interest income on loans to related parties |
|
|
0.7 |
1.4 |
||||||||||||
|
Expected return on defined benefit pension scheme assets |
|
|
26.3 |
32.3 |
||||||||||||
|
Finance income |
|
|
|
|
|
|
27.3 |
34.1 |
||||||||
|
|
|
|
||||||||||||||
|
Interest payable on bank overdrafts and other similar charges |
(1.8) |
(1.7) |
||||||||||||||
|
Interest cost on the present value of the defined benefit obligations |
(27.4) |
(30.5) |
||||||||||||||
|
Finance expense |
|
|
|
|
|
|
(29.2) |
(32.2) |
||||||||
|
Net finance (expense)/income |
|
|
|
|
(1.9) |
1.9 |
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Interest income on loans to related parties relates to shareholder loan interest receivable from investments in equity accounted joint ventures and associates. |
||||||||||||||||
|
5 Income tax |
|
|
|
|
|
|
2012 |
2011 |
|
|||||||
|
|
|
|
|
|
|
|
£m |
£m |
|
|||||||
|
On profit for the year |
|
|
|
|
|
|
|
|
||||||||
|
United Kingdom corporation tax at 24.5% (2011: 26.5%) - Adjustment in respect of prior years |
0.1 |
0.1 |
|
|||||||||||||
|
Current tax credit for the year |
|
0.1 |
0.1 |
|
||||||||||||
|
Deferred tax charge for current year |
|
(2.2) |
(5.9) |
|
||||||||||||
|
Adjustment in respect of prior years |
|
|
|
|
0.2 |
0.6 |
|
|||||||||
|
Deferred tax charge for the year |
|
(2.0) |
(5.3) |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Income tax expense in the consolidated income statement |
|
|
(1.9) |
(5.2) |
|
|||||||||||
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|||||||
|
|
|
|
|
|
|
|
£m |
£m |
|
|||||||
|
Tax reconciliation |
|
|
|
|
|
|
|
|||||||||
|
Profit before tax |
26.1 |
23.9 |
|
|||||||||||||
|
Income tax at 24.5% (2011: 26.5%) |
|
|
(6.4) |
(6.3) |
|
|||||||||||
|
Share of results of joint ventures and associates at 24.5% (2011: 26.5%) |
|
(0.3) |
(0.3) |
|
||||||||||||
|
Disallowed provisions and expenses |
|
|
|
(0.2) |
(0.3) |
|
||||||||||
|
Non-taxable gains and profits relieved by capital losses |
|
2.6 |
0.3 |
|
||||||||||||
|
Utilisation of previously unrecognised temporary differences |
|
1.5 |
0.3 |
|
||||||||||||
|
Rate adjustments relating to deferred taxation and overseas profits and losses |
|
|
0.6 |
0.4 |
|
|||||||||||
|
Adjustments in respect of prior years |
|
|
|
|
0.3 |
0.7 |
|
|||||||||
|
Income tax expense in the consolidated income statement |
|
(1.9) |
(5.2) |
|
||||||||||||
Notes to the financial statements - continued
|
6 Earnings per share |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
The calculation of earnings per share is based on profit of £24.2 million (2011: £18.7 million) and the number of shares set out below. |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
2012 |
2011 |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
Number |
Number |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
(millions) |
(millions) |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Weighted average number of ordinary shares in issue for basic earnings per share calculation
|
65.3 |
64.1 |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Dilutive potential ordinary shares arising from employee share schemes
|
2.3 |
2.2 |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Weighted average number of ordinary shares in issue for diluted earnings per share calculation |
67.6 |
66.3 |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
7 Dividends |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
Dividend per share |
2012 |
2011 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
pence |
£m |
£m |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Final dividend for the year ended 31 December 2010 |
6.25 |
- |
3.9 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Interim dividend for the year ended 31 December 2011 |
3.25 |
- |
2.2 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Final dividend for the year ended 31 December 2011 |
6.75 |
4.4 |
- |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Interim dividend for the year ended 31 December 2012 |
3.50 |
2.3 |
- |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Amount recognised as distributions to equity holders in the year |
6.7 |
6.1 |
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Dividends settled in shares |
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(0.5) |
(0.3) |
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Dividends settled in cash |
6.2 |
5.8 |
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Notes to the financial statements - continued
|
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10 Cash and cash equivalents |
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Cash and cash equivalents are analysed below, and include the Group's share of cash held by jointly controlled operations of £29.6 million (2011: £33.6 million). |
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2012 |
2011 |
||||||
|
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|
£m |
£m |
||||||
|
Cash and cash equivalents |
|
|
|
107.4 |
141.7 |
|||||||
|
Bank overdrafts |
|
|
|
|
(1.7) |
(1.6) |
||||||
|
Cash, cash equivalents and overdrafts in the cash flow statement |
105.7 |
140.1 |
||||||||||
Notes to the financial statements - continued
|
11 Pensions |
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A defined benefit pension scheme is operated in the United Kingdom and a number of defined contribution pension schemes are in place in the United Kingdom and Overseas. Contributions are paid by subsidiary undertakings and employees. The total pension charge in the income statement was £9.2 million comprising £8.1 million included in operating costs plus £1.1 million included in net finance expense (2011: £3.5 million, comprising £5.3 million in operating costs less £1.8 million in net finance income). |
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Defined benefit scheme |
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|
The defined benefit scheme was closed to new members on 31 May 2005 and from 1 April 2006 future benefits were calculated on a Career Average Revalued Earnings basis. The scheme was closed to future accrual of benefits to members on 30 September 2009. A full actuarial valuation of the scheme was carried out at 31 March 2010 and was updated to 31 December 2012 by a qualified independent actuary.
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|
2012 |
2011 |
2010 |
|
|
|
|
|
|
£m |
£m |
£m |
|
Present value of defined benefit obligations |
(610.7) |
(600.8) |
(576.7) |
||||
|
Fair value of scheme assets |
558.8 |
547.9 |
537.1 |
||||
|
Recognised liability for defined benefit obligations |
|
(51.9) |
(52.9) |
(39.6) |
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|
Movements in present value of defined benefit obligations:
|
|
|
|
||||
|
|
2012 |
2011 |
|||||
|
|
|
|
|
|
|
£m |
£m |
|
At 1 January |
|
|
|
600.8 |
576.7 |
||
|
Interest cost |
|
|
|
27.4 |
30.5 |
||
|
Amendments (Pension Increase Exchange 'PIE') |
|
|
(1.7) |
- |
|||
|
Plan Settlements (Enhanced Transfer Value 'ETV') |
|
|
(29.3) |
- |
|||
|
Actuarial losses |
|
|
|
40.7 |
18.2 |
||
|
Benefits paid |
|
|
|
(27.2) |
(24.6) |
||
|
At 31 December |
|
|
|
|
|
610.7 |
600.8 |
|
Movements in fair value of scheme assets:
|
|
|
|
|
|||
|
|
|
2012 |
2011 |
||||
|
|
|
|
|
|
|
£m |
£m |
|
At 1 January |
|
|
|
547.9 |
537.1 |
||
|
Expected return on scheme assets |
|
|
|
26.3 |
32.3 |
||
|
Actuarial (losses)/gains |
|
|
|
16.2 |
(3.9) |
||
|
Contributions by employer |
|
|
|
28.4 |
7.0 |
||
|
Plan Settlements (ETV) |
|
|
|
(32.8) |
- |
||
|
Benefits paid |
|
|
|
(27.2) |
(24.6) |
||
|
At 31 December |
|
|
|
|
|
558.8 |
547.9 |
|
Notes to the financial statements - continued
11 Pensions (continued) |
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|
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||
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|||||||
|
(Expense)/income recognised in the income statement: |
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|
|
|
|||
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
|
|
|
|
£m |
£m |
|
Pension liability management (ETV and PIE, including costs of £0.9 million)
Interest cost on defined benefit obligations |
|
(2.8)
(27.4) |
-
(30.5) |
||||
|
Expected return on scheme assets |
|
26.3 |
32.3 |
||||
|
Total |
|
|
|
|
|
(3.9) |
1.8 |
|
|
|
|
|
|
|
|
|
|
Fair value of scheme assets and the return on scheme assets:
|
|
2012 |
2011 |
||||
|
|
|
|
|
|
|
£m |
£m |
|
Equities |
|
|
184.2 |
173.9 |
|||
|
High yield bonds |
|
|
46.2 |
52.8 |
|||
|
Government bonds |
|
|
195.8 |
223.4 |
|||
|
Infrastructure and property |
|
|
63.8 |
43.7 |
|||
|
Absolute return funds and cash |
|
|
68.8 |
54.1 |
|||
|
Total
|
|
|
558.8 |
547.9 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal actuarial assumptions (expressed as weighted averages): |
|
|
|||||
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
|
|
|
|
% |
% |
|
Discount rate |
|
|
4.40 |
4.80 |
|||
|
Expected rate of return on scheme assets |
|
|
4.40 |
4.95 |
|||
|
Future pension increases |
|
|
2.85 |
2.90 |
|||
|
Inflation assumption |
|
|
2.95 |
3.00 |
|||
|
The expected rate of return on scheme assets is determined by reference to relevant indices. The overall expected rate of return is calculated by weighting the individual rates in accordance with the anticipated balance in the scheme's investment portfolio. |
|||||||
|
Notes to the financial statements - continued
11 Pensions (continued) |
|
|
|
|||||
|
Weighted average life expectancy from age 65 as per mortality tables used to determine benefits at 31 December 2012 and 31 December 2011 is: |
||||||||
|
|
|
|
|
|
2012 |
2011 |
||
|
|
|
|
|
|
Male |
Female |
Male |
Female |
|
|
|
|
|
|
(years) |
(years) |
(years) |
(years) |
|
Currently aged 65 |
|
|
|
|
21.7 |
23.8 |
21.5 |
23.7 |
|
Non-retirees |
|
|
|
|
24.5 |
25.6 |
24.4 |
25.6 |
|
|
|
|
|
|
|
|
|
|
|
The discount rate, inflation and pension increase and mortality assumptions have a significant effect on the amounts reported. Changes in these assumptions would have the following effects on the defined benefit scheme: |
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|
|
Pension |
Pension |
|
|
|
|
|
|
|
|
liability |
cost |
|
|
|
|
|
|
|
|
£m |
£m |
|
Increase discount rate by 0.25%, decreases pension liability and increases pension cost by |
|
28.2 |
1.1 |
|||||
|
Decrease inflation, pension increases by 0.25%, decreases pension liability and reduces pension cost by |
|
25.4 |
1.1 |
|||||
|
Increase life expectancy by one year, increases pension liability and increases pension cost by |
|
16.7 |
0.7 |
|||||
|
|
|
|
|
|
|
|
|
|
|
The expected pension cost for 2013 under IAS 19 (Revised), which becomes effective for 2013, is a £0.6 million operating expense and a £2.1 million finance expense.
The Group expects to contribute an amount equal to dividends paid to shareholders and the expenses of administration to its defined benefit scheme in the next financial year. |
||||||||
|
|
|
|
|
|
|
|
|
|
|
Defined contribution schemes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Several defined contribution pensions are operated. The total expense relating to these plans was £5.3 million (2011: £5.3 million). |
||||||||
Notes to the financial statements - continued
12 Related party transactions
The Group has related party relationships with its major shareholders, subsidiaries, joint ventures and associates and jointly controlled operations, in relation to the sales of construction services and materials and the provision of staff and with The Costain pension scheme. The total value of these services in 2012 was £126.7 million (2011: £133.1 million); transactions with The Costain Pension scheme are included in Note 11.
13 Forward-looking statements
The announcement contains certain forward-looking statements. The forward-looking statements are not intended to be guarantees of future performance but are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors that may cause actual results to differ from any future results or developments expressed or implied from the forward-looking statements.
14 Responsibility statements
The Company's statutory accounts for the year ended 31 December 2012 comply with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority in respect of the requirement to produce an annual financial report.
We confirm on behalf of the Board that to the best of our knowledge:
· the Company's financial statements for the year ended 31 December 2012 have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
· the Business Review which is incorporated into the Directors' Report in those financial statements, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.
On behalf of the Board:
D P ALLVEY
Chairman
ANDREW WYLLIE
Chief Executive
This information is provided by RNS
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