Final Results
Costain Group PLC
13 March 2007
Costain Group PLC
('Costain' or the 'Group')
Preliminary results for the year ended 31 December 2006
Costain, the construction and property development group, announces results for
the year ended 31 December 2006 and an update on the implementation of its
strategy for profitable growth
FINANCIAL SUMMARY
• These results reflect the impact of previously announced contract
write-downs and the closure of the Group's International division
• Revenue of £886.3m (2005: £773.2m)
• Strong performances from Civil Engineering and Property divisions impacted
by underperformance of Building and COGAP divisions, resulting in
underlying profit* of £12.8m
• Previously announced management actions including taking provisions, as
advised last year, in respect of contract write-downs and closure of
International division, resulted in a loss before tax of £61.7m
(2005: profit before tax of £25.0m)
• Net cash of £53.3m (2005: £74.0m)
* loss before tax of £61.7m before result of International division (loss of
£27.3m) and before provisions in respect of contract write-downs (£47.2m)
STRATEGY IMPLEMENTATION REVIEW
• 'Being Number One' strategy has refocused management on key disciplines
and driving the business forward
• Market strengths and opportunities examined in detail confirming focus on
key target sectors
• Management team restructured giving direct reporting lines and clear
responsibilities
• Programme of efficiency improvements, with overhead, supply chain and cost
reduction initiatives in place
TRADING UPDATE
• Forward order book reflecting high-quality contracts
• Major contract awards since year end including Lewisham 'Building Schools
for the Future' and Embankment tube station
Commenting, the Chairman, David Jefferies, said:
'Costain is in a much stronger position as a result of the management actions
taken during the year. With a greater focus on establishing market leading
positions in our target sectors, we are seeing significant benefits accruing
from the implementation of the 'Being Number One' strategy.
'Looking to 2007, and following the contract write-downs, we have entered the
year with greater clarity. We are tightly managing out the few remaining legacy
contracts and, having reviewed the Group's trading prospects in detail, the
Board believes that the Group should see a significant recovery in underlying
performance this year.'
13 March 2007
ENQUIRIES:
Costain Group PLC Tel: 01628 842 444
Andrew Wyllie, Chief Executive
Tony Bickerstaff, Finance Director
Graham Read, Public Relations
College Hill Tel: 020 7457 2020
Mark Garraway
Matthew Gregorowski
CHAIRMAN'S STATEMENT
The last year saw a great deal of activity across the Group. The primary focus
of the new management team, led by Andrew Wyllie, was the implementation of the
'Being Number One' strategy for the future development of Costain. This has
introduced a significantly greater emphasis on the Group's operating
efficiencies and on deploying resources only in those areas where we believe we
can maintain or build leading market positions.
Consequently, as we announced in June 2006, we took the decision to close the
International division. This announcement included an initial write-down of £18
million in respect of closure costs and contract write-downs and a further
contract write-down of £6 million as announced in December. Costain will now
tender for and deliver any future overseas contracts through its specialist
divisions.
The Building division was another area of focus where, following a regular
business review, we announced last September that we would take an £11.9 million
write-down in view of increased uncertainty around the recovery of a number of
contract claims. The division's management team has been substantially
restructured and a new Managing Director has been appointed.
We also took steps to ensure a much needed improved performance at COGAP, our
oil & gas division. Whilst we continue to monitor progress closely, and the
Board is reviewing a range of options in respect of this division, COGAP is
benefiting from a number of recent contract awards which should lead to an
improvement in performance in line with the management's expectations.
As announced in December, and as part of the implementation of our strategy, the
management team completed a comprehensive review of the Group's contract book
including an assessment of disputed contracts and claims previously taken to
value.
The review identified that a project in Mexico, where COGAP is a sub-contractor,
had suffered cost over-runs and it also identified that the Building division
had continued to under-perform during the second half of the year.
Additionally, at that time, an examination of recent developments regarding a
number of contracts currently subject to dispute, combined with a review of
recent claim recovery history, led the Board to conclude that where recovery was
now no longer probable, or the outcome could no longer be measured reliably, it
was appropriate to write-down a significant amount of the disputed contract
values. As a result the Board determined that a further £36 million provision
in respect of these disputed contracts would be made in the accounts for the
year ended 31 December 2006.
Whilst these write-downs have been taken in the 2006 accounts, I must stress
that we will continue to vigorously pursue our entitlements on those contracts
subject to dispute.
We also implemented a broad range of actions to strengthen the underlying
performance of our operations including restructuring the Group's Executive
Board which has been reduced in size. This will ensure direct reporting lines
as well as providing clear oversight of our activities in each of our target
markets.
It is important to note that the review announced in December also confirmed the
underlying strength of our Civil Engineering and Property divisions.
In Civil Engineering, which accounts for some 80% of the forward order book, we
are focused on further building on, or developing, market leading positions in
five specialist sectors including water, highways, rail, marine and nuclear.
Nuclear is a new development for Costain but in a short period we have already
secured contracts in what is estimated to be a £30 billion market.
Our Alcaidesa Property division, which is based in Spain, continues to perform
well benefiting from the continuing strong demand for holiday developments along
the Spanish coast.
With these strongly performing divisions, and the benefits coming through from
the decisive management actions taken during the year, the Board is confident
that it has strengthened the platform on which to deliver its stated strategy.
Results
Revenue for the year (including Group's share of joint ventures and associates)
was £886.3million (2005: £773.2million).
Strong performances from the Civil Engineering and Property divisions were
impacted by the underperformance of the Building and COGAP divisions, resulting
in an underlying profit of £12.8 million.
In June, the decision was made to close the International division and provision
made for closure costs and irrecoverable costs and investments. Provisions were
also taken in the division where events in the year have resulted in the
write-down of claims recovery and the immediate recognition of certain forecast
contract losses. The resulting loss from operations in the International
division including these provisions was £27.3 million.
In addition, developments during the year regarding a number of contracts has
resulted in the need to take substantial write-downs against the anticipated
value to be received on these contracts. As a result value has been written
down and costs incurred that are not probable of being recovered totalling £47.2
million.
Loss before tax for the year ended 31 December 2006 was £61.7 million (2005:
Profit £25.0 million).
Loss after tax was £54.0 million (2005: £23.6 million profit). Loss per share
was 15.1p (2005: earnings of 5.67p).
At the year-end, the forward order book was £1.8 billion (2005: £1.9 billion),
of which £725 million relates to 2007 and of which 72% is repeat order business.
The Group has no significant borrowings and net cash balances at the full-year
totalled £53.3 million (2005: £74.0 million), including the Group's share of
cash held by joint arrangements (construction joint ventures) of £22.0 million
(2005: £25.0 million). The evolving profile of the business as indicated at the
half year, into framework / partnered client relationships will result in a more
evenly balanced cash flow profile going forward.
Covenants
As reported in the Company's announcement on 18 December 2006, the charge to the
Profit & Loss Account, arising from the provisions taken, were expected to
potentially result in the Group being in breach of certain of its banking
covenants. Following discussions with the Group's bankers, we are pleased to
advise that we have agreed all necessary waivers and adjustments for the
facilities through to June 2008.
Pensions
The Group's pension deficit as at 31 December 2006 was £48.1 million net of
deferred tax, a reduction of 31% from 31 December 2005. This is derived from
the Group's most recent actuarial review and reflects market conditions on that
date.
Dividend
The Board remains wholly committed to the resumption of dividend payments but,
in light of the impact of the provisions taken during the period, it has
concluded that it is not currently in a position to recommend a dividend.
Board
In June 2006, Tony Bickerstaff joined the Board as Finance Director. Tony has
considerable experience both in the industry and the finance arena and he is
already making a significant contribution both on the Board and across the
business.
On 25 January 2007, Dato' Ahmad Pardas Senin, a nominee of UEM Builders Berhad
and Deputy Chairman of the Group, stepped down from the Board. We were
delighted to welcome Mohd Hussein Bin Abdul Hamid, a nominee of UEM Builders
Berhad, to the Board.
Outlook
Costain is in a much stronger position as a result of the management actions
taken during the year. With a greater focus on establishing market leading
positions in our target sectors, we are seeing significant benefits accruing
from the implementation of the 'Being Number One' strategy.
Looking to 2007, and following the contract write-downs, we have entered the
year with greater clarity. We are tightly managing out the few remaining legacy
contracts and, having reviewed the Group's trading prospects in detail, the
Board believes that the Group should see a significant recovery in underlying
performance this year.
David G Jefferies
Chairman
CHIEF EXECUTIVE'S REVIEW
My focus over the last year has been the implementation of our 'Being Number
One' strategy, which is about striving for leadership through focus and
excellence. This has necessitated taking a number of hard decisions and
executing robust management actions.
We now have a solid platform to take the business forward.
Strategic Update
Costain consists of two principal activities: Construction, based in the UK, and
property development in Spain. We are investing in both of these businesses in
order to grow them against an appropriate set of clear criteria.
To maximise profitability in Construction, our strategy is focused on targeting
large 'blue chip' customers. Without exception, the trend with all of these
sophisticated customers is to work in longer-term framework or partnership
relationships with fewer contractors, providing the potential for sustainable
profit streams. These customers are also increasingly looking for an integrated
whole life-cycle service offering from their contractors. These trends are
expected to accelerate.
The outcome of this procurement approach is that the construction market is
rapidly polarising towards a small number of large contractors who have the
scale and resources to secure the increasingly large frameworks, and a smaller
number of specialist sub-contractors and regional players. Our strategy is aimed
at developing Costain into one of the large prime contractors and partners of
choice in all of our target sectors.
It is therefore critical in each of our chosen markets that we are a competitive
leading player with a demonstrable track record to deliver such a service. To
achieve this objective we need to focus our resources in the market sectors
where we have or can achieve consistently strong positions.
Costain already holds such a position in the water and highways sectors through
the Asset Management Programme (AMP4) frameworks and major schemes being
undertaken for the Highways Agency. Our aim is to develop similarly strong
positions in each of the remaining sectors we have currently selected following
detailed market research and analysis: rail, retail, health, education, nuclear,
marine, and oil & gas.
Our competitive advantage is generated through an industry-leading technical
capability combined with a demonstrable emphasis on meeting customer needs. The
company will capitalise on those skills so that we are seen as Number One in the
areas of construction and asset management where customers especially value
these services. Customer demand is also requiring us to add a maintenance and
operations capability to our product offering and initially we will be doing
this in the water and highways markets. This will ensure that we can meet our
customers developing needs for a single provider of value for money 'whole
life-cycle' services.
Markets
We believe that our target markets provide a good balance between public and
private sector customers with the former relatively unaffected by the impact of
higher interest rates. We have intentionally chosen our target sectors mindful
of the need to focus the business to develop strong positions in attractive
markets without spreading our resources too thinly. There are good opportunities
in all of our target sectors.
PFI, or related financing vehicles, will continue to be an increasingly
important mode of procurement for our public sector customers. Our PFI efforts
will be focused in the health, education and highways markets where we will
continue to grow our equity portfolio. Against a backdrop of a very buoyant
secondary market, we will continue to dispose of selected equity stakes in order
to realise profit and generate cash for reinvestment in future PFI schemes.
Following the closure of the International Division, future international
opportunities will be pursued utilising our sector-focused capabilities.
We will continue to expand our property development activities in Spain in
conjunction with our partner Banesto Bank under the Alcaidesa brand. Activities
will focus on the next phase of the original Alcaidesa site, two locations in
Granada and the marina development at La Linea. The funds necessary for this
expansion will be generated by sales from the existing portfolio or bank lending
on a non-recourse into the joint venture vehicle.
The strategy for oil and gas through COGAP has been changed so that there is
much greater focus on front-end design and the provision of project management
services. This will deliver a lower risk, profitable business.
Safety, Health & Environment ('SHE')
We have a 'zero tolerance' attitude towards accidents. The effective management
of Health and Safety will always be a key priority.
The implementation of our safety systems and processes is now being explicitly
measured to highlight excellent performance and to identify areas for
improvement, in particular overseas which is an area where we can significantly
improve on our record.
In 2006, challenging SHE targets were set and new initiatives developed to drive
forward continued improvements to our procedures and processes. The initiatives
included programmes for Behavioural Safety, the Management of Road Risk and
Occupational Health & Employee Wellbeing which will be rolled-out across the
business during 2007. Given the importance of this area, Costain will issue
shortly its first Corporate Responsibility Review.
Costain's UK Health & Safety performance and consideration for the local
community were recognised by the achievement of no less that 34 RoSPA Awards and
seven awards from the Considerate Constructors Scheme. During the year, we
rejoined the Major Contractors Group to ensure that we can share in best
practice.
The 'Save It' campaign, aimed at reducing waste through improved material and
resources management, recycling and reuse of material, has continued. A 'Save
It' DVD was produced and launched at an official ceremony in London in June
which members of the media attended along with key personnel from within the
construction industry. During 2006, the monitoring of waste was extended to
include offices which are now required to provide data on energy, water and
paper consumption as well as the amount of waste being produced.
People
Our success is dependent on having the very best team of people, properly
trained and motivated, who are rewarded and recognised for their efforts.
Costain now has an Executive Board Director responsible for Human Resources.
Our people management and development processes are being upgraded to meet the
challenges of a competitive market for talented people. Examples include the
introduction of an executive development programme, staff engagement survey,
annual performance awards, training for front line supervisors together with
graduate and project management forums to support structured middle and senior
management development.
Recruitment policies have been updated, the team strengthened and major
improvements made in responses to job applicants. Direct recruitment continues
to be very successful. Working with the Construction Industry Training Board,
Costain is driving skills development within the industry and continuing to
build on its Building Awareness initiative. New initiatives focusing on
Graduate Development, Executive Development and High Potential programmes have
been introduced. Senior promotions have already resulted from these actions.
The Company was shortlisted for the Best Places to Work in Construction Awards
2006 and a staff engagement survey underlined the commitment of staff. Whilst
confirming many of the Group's strengths, the survey also identified a number of
challenges and action plans to address these have been put in place.
The Executive Board has been reduced in size and restructured. Senior
executives now have clear responsibility to grow our business and deliver profit
in each of our target markets. In some areas this represents a change in
approach, most significantly in the Building division where we have moved away
from five relatively autonomous regional business units to a single operation
structured around our key customers.
Supply Chain
In order to improve profitability it is essential that we also work with fewer
supply partners in a more strategic long-term relationship. In 2006, we launched
the Partners for Progress alliance with three M&E providers in the Building
division and similar alliances are being developed for the big spend elements.
There remains a lot of work to do to achieve our objectives in this area and
progress needs to be accelerated. We are acutely aware that the number of
reliable sub-contractors is reducing due to market consolidation and we must
therefore make Costain an attractive proposition to our suppliers.
Overheads
New procedures have been put in place to actively manage the overheads, which
are largely driven by people, bid and office costs.
We continue to review the most effective utilisation of office space and last
year closed our Liverpool, Dubai and Pretoria offices.
Summary
We have had to take robust management action to address a number of fundamental
issues and we will continue to take such action when necessary. Consequently,
Costain is in a much stronger position to meet the demands of an increasingly
competitive marketplace. We are confident we will see a significant recovery in
the Group's performance this year and our absolute focus on key sectors is
providing a platform for longer-term profitable growth.
I look forward to reporting on future progress.
Andrew Wyllie
Chief Executive
OPERATIONAL REVIEW
Civil Engineering
The division recorded a profit of £10.3 million (2005: £16.0 million) on revenue
of £488.1 million (2005: £329.8 million) including the £7.7 million impact of
write-downs as a result of significant developments in the year on the recovery
of values related to historic contracts.
The strong growth in revenue reflects Costain's leading positions in key civil
engineering markets.
Water
2006 saw a consolidation of Costain's position as a leading contractor to the UK
water sector with a firm focus on performance and delivery.
All Costain's AMP3 framework customers have now been retained for the AMP4
period. These customers - Southern Water, Thames Water, United Utilities,
Wessex Water and Yorkshire Water - have continued the Costain relationship but
with both increased scope and value. In addition, two more water framework
clients, Bristol Water and Welsh Water, have been added. This broad-based
portfolio provides a stable platform of work and opportunities through to 2010.
Within our Southern Water Framework, where we are working in joint venture with
United Utilities and Montgomery Watson Harza, we achieved all of our AMP4 Year
One targets. In addition to delivery on cost, time and our quality obligations,
our Health and Safety record was recognised by a RoSPA Gold Award to the Joint
Venture in its first year of trading.
Costain has continued to deliver against a demanding schedule for Southern Water
and now has the majority of schemes designed and is on site at over half of the
240 schemes. We are on target to deliver all of the time/cost/quality
requirements. In addition, in a separate joint venture with Black and Veatch,
Costain is on schedule to commission in 2007 a major new £75 million waste water
treatment plant at Margate.
Our successful partnership with Southern Water has been recognised with two
National Awards; the BCIA Best Practice Award for the £15 million Lewes Old Town
Flooding Scheme and the Utilities IT Award for our Programme Management Systems.
The £100m Perry Oaks/Iver South Scheme for BAA and Thames Water was handed over
on time. This project, which included substantial additional works, met all
BAA's requirements for the nearby Terminal 5 at Heathrow.
Our Thames Water Framework team was awarded the £36 million Hornsey WTW and,
also with Thames, we provided early contractor involvement for a number of
significant major projects in advance of a final decision to proceed to
procurement and award.
Elsewhere, frameworks for United Utilities, Welsh Water and Yorkshire Water are
continuing to deliver to programme and meet all of the AMP4 requirements. We
have started the drive to win AMP5 work which will commence in 2010.
Additionally, our 25 year Aquatrine PFI contract for the MoD, where we are in
joint venture with Severn Trent, continues to deliver water and waste water
services to some 1,500 sites.
Highways
Early Contractor Involvement ('ECI') schemes for the Highways Agency
successfully proceeded to the construction phase. These included the £120
million A2/A282 at Dartford and the £75 million M25 Holmesdale Tunnel
Refurbishment projects.
The largest single investment by a local authority in highways, the £90 million
Porth Relief Road, was opened as planned in December to the immense satisfaction
of the client and stakeholders alike.
Costain is also involved with ECI schemes such as the £370 million M1 Widening
(Junctions 10 to 13), the £30 million A34 Wolvercote Viaduct, the £52 million
M25 Rapid Widening (Junctions 1b to 3) and the £20 million A40 scheme awarded by
the Welsh Assembly.
The Company's position as a leader in the Highways sector was underlined by
achieving one of the industry's leading scores in the Highways Agency's
Capability Assessment Toolkit, enabling continued success in pre-qualification
for Highways Agency opportunities.
Our Highways sector strategy is now focused on diversifying our service delivery
to include maintenance and framework schemes supporting our aim of being the
first choice for clients.
Rail
Costain began 2006 with two of the most prestigious projects in the sector. The
award winning St Pancras Station Redevelopment, part of the Channel Tunnel Rail
Link, and the Hammersmith and City Line Station at White City, with its
technically demanding bridge slide, achieved considerable profile and praise.
More success has been achieved during the year. In London new work was secured
underground, for both London Underground Limited ('LUL'), Metronet and Tube
Lines, and overground for Docklands Light Railway (DLR).
In London, further significant bidding opportunities are being pursued with DLR,
Network Rail, LUL, Metronet, Tube Lines and developers. Prospects for 2007 were
further strengthened with the award by Metronet in February 2007 of a £30
million contract for the refurbishment of Embankment tube station.
Nuclear
The Nuclear sector presents a potential market opportunity of £30 billion over
the next 30 years. Under the guidance of the Nuclear Decommissioning Authority
(NDA) which came into force in April 2005, the market has been reinvigorated
with significant restructuring and contract placement as the NDA drives
efficiency targets. We are developing our track record and resource base to
meet these opportunities.
Significant among contract awards in 2006 were the Sellafield additional
Evaporator D contract at £90 million, which commenced its Front End Engineering
Design phase in September, and a feasibility study for the application of plasma
technology to reduce in size and stabilise intermediate-level wet waste. This
plasma technology should generate construction opportunities of approximately
£350 million while also providing equivalent 'whole life' cost savings to the
customer via the size reduction impact on future storage requirements.
The £5 million Hunterston Modular Active Effluent Treatment Plant was
successfully assembled and commissioned off-site and is currently completing
on-site installation.
Work also continues on existing contracts at UKAEA Winfrith Dragon 1 Deplanting
contract, BNG Magnox Trawsfynydd Strategic Integrated Framework and AWE
Aldermaston and Burghfield.
Marine
Costain successfully completed two challenging coastal defence contracts in
Withernsea (for Yorkshire Council) and at Whitstable (for Canterbury City
Council) in 2006. The Whitstable Coastal Works project, involving the
construction of new groynes and 80,000m3 beach replenishment over a 2km
workfront, was opened in October by Ian Pearson, the Minister of State for
Climate Change and Environment. Costain has secured pre-qualification status on
a number of beach replenishment and rock armour contracts as a result of the
quality of work at Whitstable. These projects will be tendered during 2007.
Costain continued working with Hutchison Ports on the construction of an upgrade
to their Container Port at Thamesport on the Medway River.
Costain was awarded the £17 million St. Germans Pumping Station project, near
Wisbech in Cambridgeshire, by the Middle Level Commissioners.
Despite delays, it is expected that major developments at Felixstowe South
Reconfiguration (Hutchison Ports) and London Gateway Port (Dubai Ports World)
will go ahead and we are in tender negotiations to secure a share of these
opportunities.
Building
The division recorded a loss of £25.9 million (2005: £4.3 million profit) on
revenue of £298.0 million (2005: £321.6 million) including the £25 million
impact of contract write-downs (see Note 3 in the Notes to the Accounts).
The Building division continued to underperform during the year and actions have
been taken to improve performance and position the division as a leading player
in its sector. These ongoing actions include appointing new management,
restructuring the business around customer rather than geographic lines,
reducing overheads, rationalising the supply chain, being more selective about
work tendered for and improving business processes including training and
developing our management teams.
As part of its planned Public Finance Initiative ('PFI') reinvestment strategy,
the Group's remaining shareholding in the Kings College Hospital PFI Project was
sold during the year realising a profit of £3.6 million and, in January 2007,
the Group sold its shareholding in the Bridgend Prison PFI project, realising a
profit of £2.7 million.
Retail
Following the success of delivering six Tesco projects in 2006, mainly in the
South East, we have now extended our operations more widely across the southern
half of the country. We now have a focused strategy and a core team for Tesco
which enables us to respond to larger, complex projects including mixed use and
distribution. A number of opportunities are at bid stage and we have a strong
pipeline of opportunities.
In Enfield, we completed a development for ING Real Estate Development on time
and within budget. This £33 million project comprises 21,000 sq ft of retail
and leisure space, a 520 space car park and a new road system. Costain oversaw
the management and co-ordination of the retail fit out companies to ensure
trading started in October, in time for the important Christmas period.
Health
A number of healthcare projects were successfully completed including six
facilities in Shropshire built for Shropshire County Council under the Private
Finance Initiative. The facilities provide day-care facilities for the elderly,
disabled and people with learning disabilities. All six buildings were handed
over to the client between April and September 2006.
Planning continued in 2006 with the three NHS Trusts involved in the 3 Shires
batched PFI projects. The three projects are expected to reach their separate
financial closures in the first half of 2007 when construction is anticipated to
begin.
New work secured during the year includes projects at Cheltenham General
Hospital, St Peter's Hospital (Chertsey), Shelton Hospital (Shrewsbury) and
further developments at Sheffield Children's Hospital.
The Kingston PFI hospital project has suffered delays and cost overruns and is
due for completion in the first half of 2007.
Education
In joint venture partnership with Amey - Ferrovial, Costain achieved financial
close on the £84 million first phase of the Bradford Building Schools for the
Future ('BSF') programme. Exclusive negotiations are now underway on the next
phase valued at approximately £120 million. The total programme for Bradford,
which is one of the early pathfinder BSF schemes, is valued at over £400million.
Elsewhere in the BSF programme, Costain in partnership with VT Group as '
Learning21', has been appointed as preferred bidder for the Lewisham BSF scheme.
Elsewhere, during the year, construction of five secondary schools as part of
the Kent and Ealing grouped PFIs and a new City Academy for John Madejski in
Reading all progressed. Featherstone Primary School was delivered on time in the
summer of 2006.
Oil & Gas
The division recorded a loss of £19.5 million (2005: loss of £1.0 million) on
revenue of £57.2 million (2005: £52.1 million) including the £14.5 million
impact of contract write-downs (see Note 3 in the Notes to the Accounts).
The division has continued to underperform. It was decided to bring a greater
degree of focus to the operations and the business is concentrated on niche
areas within the oil & gas sector where Costain can achieve a stronger market
position and establish a platform from which to grow. The division's future
performance will be closely monitored and further decisive actions taken as
required.
The nitrogen rejection plant project for Pemex in Mexico, where Costain is a
sub-contractor, suffered cost over-runs. Construction is now well advanced and
the plant will be completed in the latter half of 2007. Costain is in
commercial discussions with the main contractor.
In UK oil & gas, the Volatile Organic Compounds project (VOC) for
ConocoPhillips, Teesside passed the 70% completion mark on schedule and within
budget. New projects awarded include the front-end engineering design of the
Ineos Stublach underground gas storage facility. Several other such facilities
are planned around the UK.
Costain was awarded a £6 million contract by Eni Pakistan Limited for the
provision of engineering, procurement and construction management support
services over a three-year period. In the Middle East, our operation in Abu
Dhabi secured the $51 million Storex contract from ADMA OPCO, a repeat order
customer. The work involves the completion of a number of small packages over a
four-year period.
Property Development - Alcaidesa
The division recorded a profit after tax of £3.9 million (2005: £14.0 million)
on revenue of £13.2 million (2005: £45.0 million). The profit reported in 2005
reflected adjustments to revenue and profits which came about through timing
differences in adopting IFRS.
The Group's Spanish property development business, Alcaidesa Holding S.A., in
which Costain holds a 50% interest, continues to perform well and achieved sales
during the year of seven serviced development land enclaves, totalling 18.77
hectares, for residential development schemes.
The second Alcaidesa golf course has been completed and will open for play in
Summer 2007 along with the new Clubhouse which is progressing to plan.
In conjunction with its local joint venture partner, Alcaidesa Holding S.A.
added to its existing land bank in Salobrena, near Granada, by purchasing
further adjoining developable land of some seven hectares. Provisional revised
planning designation has now been secured and we expect to complete definitive
residential and commercial planning approvals during 2007.
Negotiations continue on a potential marina development in La Linea, immediately
adjacent to Gibraltar.
The Spanish operations continue to use their own financial resources to fund
infrastructure and land purchase investments on a non-recourse basis.
International
The division recorded a loss of £27.3 million (2005: £2.9 million) on revenue of
£29.8 million (2005: £24.7 million) including the £25.4 million impact of
closure costs and contract write-downs (see Note 3 in the Notes to the
Accounts).
In line with the Group's strategy of deploying resources only in those areas
where it believes it can maintain and or build leading market positions, the
decision was taken during the year to close the International division and a
number of offices. Costain will now tender for and deliver any future overseas
contracts through its specialist divisions.
Existing contracts are being worked through to completion and appropriate
provisions have been taken where necessary. These include the Costa Azul
breakwater project in Mexico which is a complex project that is targeted for
completion on schedule at the end of this year. It should be noted, however,
that given the nature of this project, should there be a delay, the financial
penalties could be significant. We are taking a number of actions to mitigate
this risk and have also deployed a very experienced and well-resourced team to
work, in conjunction with our joint venture partners, China Harbour Engineering
& Construction, on delivery of the project.
Following the closure of the International division, the Group has also sold all
of its trading activities in Nigeria including the minority interest in Costain
(West Africa) PLC, a company listed on the Lagos Stock Exchange. This
represents a complete exit from the country.
Following the completion of a number of projects, the Group completed the safe
withdrawal of all of its staff from the Kurdish region of Iraq.
FINANCIAL REVIEW
Results
Loss before tax for the year ended 31 December 2006 was £61.7 million (2005:
Profit £25.0million) on revenue (including Group's share of joint ventures and
associates) up 15% compared to 2005 at £886.3 million.
During the year several key decisions were taken regarding the activities of the
Group that have impacted considerably on the financial results for the year. In
June, the decision was made to close the International division and provision
made for closure costs and irrecoverable costs and investments. Provisions were
also taken in the division where events in the year have resulted in the
write-down of claims recovery and the immediate recognition of certain forecast
contract losses. The resulting loss from operations in the International
division including these provisions was £27.3 million.
In addition, developments during the year regarding a number of contracts has
resulted in the need to take substantial write-downs against the anticipated
value to be received on these contracts. As a result value has been written
down and costs incurred that are not probable of being recovered totalling £47.2
million.
The underlying profit (being the loss before tax, before the result of the
International division and before contract write-downs) for the year ended 31
December 2006 was £12.8 million.
Net interest receivable amounted to £2.8 million (2005: £0.6 million payable).
Basic loss per share amounts to 15.1p (2005: 6.7p earnings per share).
Cash Flow and Borrowings
The net cash position of £53.3 million (2005: £74.0 million) includes £3.1
million of borrowings (2005: £1.2 million).
The cash position is affected by monthly and contract specific cycles, in order
to accommodate these flows the Group maintains a range of bank facilities. The
continuing change in the profile of the business will result in a more evenly
balanced cash flow profile going forward.
Order Book
The order book reduced slightly during the year from the record level last year
end to £1.8 billion (2005: £1.9 billion), of which 79% is in the Civil
Engineering activities.
Shareholders' Funds
As a result of the loss for the year, the negative shareholder equity position
has been increased to £55.2 million (2005: £22.5 million negative). This
includes the impact of the deficit, net of deferred tax, in the pension scheme
of £48.1 million (2005: £69.5 million deficit).
Treasury Controls
Policy
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 resource 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.
Foreign Currency Exposure
Translation Exposure: the results of the Group's overseas activities are
translated into sterling using the cumulative average exchange rates for the
period concerned. The balance sheets of overseas subsidiaries are translated at
closing exchange rates.
Transaction Exposure: the Group has transactional currency exposure arising from
subsidiaries' commercial activities overseas in currencies other than the
subsidiaries' operating currencies. In such circumstances, the Group requires
its subsidiaries to use forward currency contracts to minimise the currency
exposure unless a natural hedge exists elsewhere within the Group.
Interest Rate Risks and Exposure
The Group holds financial instruments for two main purposes: to finance its
operations and to manage the interest rate and currency risks arising from its
operations and its sources of finance. Various financial instruments (for
example, trade debtors, trade creditors, accruals and prepayments) arise
directly from the Group's operations. The Group finances its operations through
a mixture of working capital and bank borrowings. With the Group's low level of
borrowings, the main exposure to interest rate fluctuations arises from surplus
cash, which is generally deposited with one of the Group's relationship banks.
Liquidity Risk
Group policy is to ensure that projected financing needs are supported by
adequate committed facilities.
The Group renegotiated borrowing facilities with its relationship banks to a
maturity dated of 30 June 2008. In addition to its borrowing facilities, the
Group has extended its contract bonding facilities with its relationship banks
and surety companies, all of which facilities will now subsist until 30 June
2008.
As a result of the loss for the year the Group has renegotiated all financial
covenants within its facilities with its relationship banks and surety
companies. These have all been reset through to June 2008.
Going Concern
The Directors believe, after due and careful enquiry, that the Group has
sufficient resources for its present requirements and, therefore, consider it
appropriate to adopt the going concern basis in preparing the 2006 financial
statements.
Consolidated income statement
Year ended 31 December Notes 2006 2005
£m £m
Revenue (Group and share of joint ventures and associates) 2 886.3 773.2
Share of joint ventures and associates 7 (137.9) (95.1)
Group revenue 748.4 678.1
Cost of sales (785.9) (650.7)
Gross (loss) / profit (37.5) 27.4
Administrative expenses (20.9) (18.7)
Group operating (loss) / profit (58.4) 8.7
Profit on sale of investment 3.6 -
Profit on sale of interest in joint venture - 3.5
Amounts written off loans to associate (2.7) -
Share of results of joint ventures and associates 7 (7.0) 13.4
(Loss) / profit from operations 3 (64.5) 25.6
Finance income 4 26.7 23.5
Finance costs 4 (23.9) (24.1)
Net financing income / (costs) 2.8 (0.6)
(Loss) / profit before tax (61.7) 25.0
Income tax credit / (expense) 6 7.7 (1.4)
(Loss) / profit for the period attributable to equity holders of 2 (54.0) 23.6
the parent
Earnings per share - basic 5 (15.1)p 6.7p
Earnings per share - diluted 5 (15.1)p 6.5p
During the year and the previous year, no businesses were acquired or disposed
and therefore all results arise from continuing operations.
Consolidated statement of recognised income and expense
Year ended 31 December Notes 2006 2005
£m £m
Exchange differences on translation of foreign operations - (0.9)
Cash flow hedges:
Effective portion of changes in fair value (net of tax) 0.3 (0.6)
during period - Group
Effective portion of changes in fair value (net of tax) 3.1 (2.7)
during period - joint ventures and associates
Change in fair value of assets classified as available for (0.8) 3.4
sale
Actuarial gains on defined benefit pension schemes 26.0 0.2
Tax recognised on actuarial gains recognised directly in (7.8) -
equity
Net income / (expense) recognised directly in equity 20.8 (0.6)
(Loss) / profit for the period (54.0) 23.6
Total recognised income and expense for the period 9 (33.2) 23.0
Attributable to:
Equity holders of the parent (33.2) 23.1
Minority interests - (0.1)
(33.2) 23.0
Consolidated balance sheet
As at 31 December Notes 2006 2005
£m £m
ASSETS
Non-current assets
Property, plant & equipment 5.7 5.9
Intangible assets 3.4 3.5
Investments in joint ventures 25.0 27.6
Investments in associates 1.2 0.2
Loans to joint ventures 3.3 0.2
Loans to associates 2.0 3.0
Other investments 3.6 4.4
Other debtors 10.1 10.2
Deferred tax assets 30.6 31.1
Total non-current assets 84.9 86.1
Current assets
Inventories 2.4 2.0
Trade and other receivables 160.6 166.5
Cash and cash equivalents 8 56.4 75.2
Total current assets 219.4 243.7
Total assets 304.3 329.8
EQUITY
Share capital 17.9 17.8
Share premium 0.6 0.4
Special reserve 12.8 13.1
Fair value reserve 2.6 3.4
Foreign currency translation reserve (1.2) (1.2)
Hedging reserve (1.6) (5.0)
Retained earnings (86.3) (51.0)
Total equity attributable to equity holders of the parent (55.2) (22.5)
Minority interests - -
Total equity 9 (55.2) (22.5)
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings - 0.2
Retirement benefit obligations 68.7 99.3
Other payables 6.6 7.2
Provisions 4.1 6.8
Total non-current liabilities 79.4 113.5
Current liabilities
Trade and other payables 266.1 233.3
Tax liabilities 2.7 3.2
Overdrafts 8 1.4 0.2
Interest bearing loans and borrowings 1.7 0.8
Provisions 8.2 1.3
Total current liabilities 280.1 238.8
Total liabilities 359.5 352.3
Total equity and liabilities 304.3 329.8
Consolidated cash flow statement
Year ended 31 December Notes 2006 2005
£m £m
Cash flows from operating activities
(Loss)/profit for the period (54.0) 23.6
Adjustments for:
Depreciation and amortisation 2.7 1.5
Finance income 4 (26.7) (23.5)
Finance costs 4 23.9 24.1
Share based payments expense 9 0.3 0.2
Income tax 6 (7.7) 1.4
Profit on sale of investment (3.6) -
Profit on sale of interest in joint venture - (3.5)
Share of loss/(profit) of joint ventures and associates 7 7.0 (13.4)
Additions to/(release) of provisions against loans to joint 2.7 (0.3)
ventures & associates
Operating (loss)/profit before changes in working capital and (55.4) 10.1
provisions
Increase in inventories (0.4) (1.1)
Decrease/(increase) in receivables 2.2 (15.1)
Increase in payables 32.6 24.2
Movement in provisions and employee benefits (2.6) (3.0)
Cash (used by)/from operations (23.6) 15.1
Interest paid (0.3) (0.1)
Income taxes paid (0.2) -
Net cash (used by)/from operating activities (24.1) 15.0
Cash flows from investing activities
Interest received 2.6 2.4
Additions to property, plant and equipment (1.9) (2.4)
Additions to intangible assets (0.9) (3.1)
Proceeds from sale of fixed assets 0.2 -
Additions to investments (0.1) (0.2)
Proceeds from sale of investments 7.1 -
Capital repayments by investments - 1.3
Dividend received from joint venture 6.1 -
Loans to joint ventures and associates (10.2) (2.6)
Net cash from/(used by) investing activities 2.9 (4.6)
Cash flows from financing activities
Issue of ordinary share capital 9 0.3 0.5
New loans 0.9 0.4
Payment of finance lease liabilities (0.2) (0.3)
Net cash from financing activities 1.0 0.6
Net (decrease)/ increase in cash and cash equivalents (20.2) 11.0
Cash and cash equivalents at beginning of period 75.0 63.5
Effect of foreign exchange rate changes 0.2 0.5
Cash and cash equivalents at end of period 55.0 75.0
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1 Basis of preparation
These financial statements 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 above does not constitute the Company's
statutory accounts for the years ended 31 December 2006 or 2005 but is derived
from those accounts. Statutory accounts for 2005 have been delivered to the
Registrar of Companies, and those for 2006 will be delivered following the
Company's Annual General Meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under section 237
(2) or (3) of the Companies Act 1985.
The directors prepared their 2006 interim financial information on a going
concern basis though noted that contract write downs and provisions in respect
of their Building and International divisions had caused a breach in their
banking and surety covenants. Further contract write-downs in the second half of
the year resulted in the Group renegotiating all of its facilities and covenant
levels to June 2008. These renegotiations are now complete with all covenants
re-set accordingly.
Having assessed their working capital and bonding requirements against the
revised facilities, and the associated covenants against the Group's forecasts,
the directors have a reasonable expectation that the company has adequate
resources to continue in operational existence for the foreseeable future. For
this reason, they continue to adopt the going concern basis in preparing the
accounts.
NOTES TO THE PRELIMINARY ANNOUNCEMENT - continued
2 Business and geographical segment information by origin
In the opinion of the directors, the business segments are Civil Engineering,
Building, Oil Gas & Process, International, which undertake engineering and
construction projects, the Property Development operations in Spain and Central
costs. These represent the Group's primary segments. Secondary segments are
presented geographically.
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis. Central
costs comprise mainly corporate expenses. Segment capital expenditure is the
total cost incurred during the period to acquire segment assets that are
expected to be used for more than one period.
Year ended Civil Building Oil, Gas & International Property Central Total
Engineering Process Development costs
31 December 2006
£m £m £m £m £m £m £m
Revenue
Group revenue 400.3 288.5 51.4 8.2 - - 748.4
Share of revenue of 87.8 9.5 5.8 21.6 13.2 - 137.9
JVs and associates
Total revenue 488.1 298.0 57.2 29.8 13.2 - 886.3
Group operating 10.0 (29.6) (19.8) (13.0) - (6.0) (58.4)
loss
Profit on sale of - 3.6 - - - - 3.6
investments
Provision against - - - (2.7) - - (2.7)
loans to associate
Share of profit of 0.3 0.1 0.3 (11.6) 3.9 - (7.0)
JVs and associates
Segment result 10.3 (25.9) (19.5) (27.3) 3.9 (6.0) (64.5)
Net financing 2.8
income
Income tax credit 7.7
Loss for the period (54.0)
Group assets 106.4 52.1 19.0 8.3 - - 185.8
Investments in and 3.9 2.3 (0.2) 1.6 23.9 - 31.5
loans to JVs and
associates
Segment assets 110.3 54.4 18.8 9.9 23.9 - 217.3
Unallocated assets 87.0
Total assets 304.3
Group liabilities (147.9) (90.7) (26.7) (13.0) - (1.0) (279.3)
Provisions against (0.6) (1.0) (0.2) (3.9) - -
JVs and associates (5.7)
Segment liabilities (148.5) (91.7) (26.9) (16.9) - (1.0) (285.0)
Unallocated (74.5)
liabilities
Total liabilities (359.5)
Capital expenditure 1.0 1.0 0.1 0.7 2.8
Depreciation/
amortisation 1.0 1.0 0.3 0.4 2.7
NOTES TO THE PRELIMINARY ANNOUNCEMENT - continued
Business and geographical segment information by origin - continued
Year ended Civil Building Oil, Gas & International Property Central Total
Engineering Process Development costs
31 December 2005
£m £m £m £m £m £m £m
Revenue
Group revenue 309.1 315.5 44.5 9.0 - - 678.1
Share of revenue of 20.7 6.1 7.6 15.7 45.0 - 95.1
JVs and associates
Total revenue 329.8 321.6 52.1 24.7 45.0 - 773.2
Group operating 16.0 1.2 (1.2) (2.5) - (4.8) 8.7
profit
Profit on sale of - 3.5 - - - - 3.5
interest in joint
venture
Share of profit of - (0.4) 0.2 (0.4) 14.0 - 13.4
JVs and associates
Segment result 16.0 4.3 (1.0) (2.9) 14.0 (4.8) 25.6
Net financing costs (0.6)
Income tax expense (1.4)
Profit for the 23.6
period
Group assets 93.0 65.5 21.3 12.7 - - 192.5
Investments in and 0.6 0.4 0.3 3.2 26.5 - 31.0
loans to JVs and
associates
Segment assets 93.6 65.9 21.6 15.9 26.5 - 223.5
Unallocated assets 106.3
Total assets 329.8
Group liabilities (99.1) (104.0) (19.3) (9.6) - (15.7) (247.7)
Provisions against (1.8) (2.1) (0.2) - - - (4.1)
JVs and associates
Segment liabilities (100.9) (106.1) (19.5) (9.6) - (15.7) (251.8)
Unallocated (100.5)
liabilities
Total liabilities (352.3)
Capital expenditure 2.2 2.1 0.3 0.9 - - 5.5
Depreciation/ 0.5 0.5 0.3 0.2 - - 1.5
amortisation
Revenue Segment result
2006 2005 2006 2005
£m £m £m £m
United Kingdom 816.9 673.4 (22.1) 16.3
Spain 13.2 45.0 3.9 14.0
Rest of the world 56.2 54.8 (46.3) (4.7)
886.3 773.2 (64.5) 25.6
Assets Capital expenditure
2006 2005 2006 2005
£m £m £m £m
United Kingdom 175.3 177.2 2.1 4.3
Spain 25.6 26.5 - -
Rest of the world 16.4 19.8 0.7 1.2
217.3 223.5 2.8 5.5
NOTES TO THE PRELIMINARY ANNOUNCEMENT - continued
3 Contract write-downs and costs associated with exit from the
International division
During the year, the Group announced the following significant amounts charged
to the income statement. The figures have been included within the results of
the relevant business segment.
Civil Building Oil, Gas & International Total
Engineering Process
£m £m £m £m £m
Contract write-downs 7.7 25.0 14.5 - 47.2
Charges in respect of the - - - 25.4 25.4
International division
72.6
Contract write-downs
Following events and developments during the year, the amounts recoverable on a
number of contracts have been written down. As a result the following have been
included in the income statement for the year ended 31 December 2006.
Write-downs have been made on certain contracts against the value of claims and
variations recognised previously in revenue in accordance with the Group's
accounting policy. This de-recognition reflects changes in the estimates over
the probability of recovery of these amounts. Such changes in estimate reflect
specific circumstances arising in the year, which have led the Group to consider
the amount previously recorded to be no longer probable of recovery, or where
the amount of recovery can no longer be reliably measured. As a result, £32.8m
has been de-recognised through the revenue line in the year.
A charge of £14.4m in respect of works during the year that are not probable of
being recovered is included in cost of sales. This includes immediate
recognition of losses on certain contracts where costs are anticipated to exceed
the total contract revenues.
International
On 30 June 2006, the Group took the strategic decision to exit from the
International division following persistent underperformance. This decision
required the Group to fulfil its remaining contractual obligations, some of
which will be on-going throughout 2007, recover outstanding contractual amounts,
realise its remaining investments and wind up the residual business.
Events in the year on certain of these contract obligations have resulted in the
immediate recognition of forecast losses, totalling £12.0m, based on the
estimated cost to completion. This amount has been included in the Group's
share of joint ventures and associates.
Group revenue has also been impacted by a reversal of £6.8m in respect of
amounts previously recognised on claims and variations. As per the description
above on contract write-downs, changes in estimate with respect to recovery of
these balances reflect specific circumstances arising in the year. These
developments have led the Group to consider the amount previously recorded to be
no longer probable of recovery.
A write-down of £2.7m has been made against the carrying values of loans to
Costain West Africa Plc, an associated company. Further irrecoverable costs of
£3.4m in respect of the International division as a whole have been charged to
cost of sales.
A provision of £0.5m in respect of closure costs has been included in
administration expenses.
NOTES TO THE PRELIMINARY ANNOUNCEMENT - continued
4 Net financing income / (costs)
2006 2005
£m £m
Interest income 2.6 2.4
Expected return on the assets of the pension scheme 24.1 21.1
Financial income 26.7 23.5
Interest expense (0.3) (0.1)
Losses on foreign exchange forward contracts - (0.1)
Expected increase in the present value of the scheme liabilities (23.6) (23.9)
Finance costs (23.9) (24.1)
Net financing income / (costs) 2.8 (0.6)
5 Earnings per share
The calculation of earnings per share is based on loss attributable to equity
holders of the parent of £54.0m (2005 profit: £23.6m) and the number of shares
set out below:
2006 2005
Weighted average number of shares for basic earnings per share 357,050,423 353,355,346
calculation
Dilutive potential ordinary shares:
SAYE Scheme 6,314,913 7,945,390
Weighted average number of shares for fully diluted earnings per share 363,365,336 361,300,736
calculation
The anti-dilutive effect of the potential ordinary shares have been excluded for
the purposes of calculating the 2006 diluted earnings per share because this
would increase the diluted earnings per share.
6 Income tax
2006 2005
£m £m
On (loss) / profit for the year:
United Kingdom corporation tax at 30% 0.1 (1.0)
Adjustments in respect of prior years 0.2 -
Current tax credit / (charge) for the year 0.3 (1.0)
Deferred taxation 6.6 (0.4)
Adjustments in respect of prior years 0.8 -
Total income tax credit / (expense) in the income statement 7.7 (1.4)
2006 2005
£m £m
Tax reconciliation:
(Loss) / profit on ordinary activities before taxation (61.7) 25.0
Income tax at 30% 18.5 (7.5)
Rate adjustments relating to overseas profits (0.2) 0.1
Share of results of joint ventures and associates at 30% (2.1) 4.0
Disallowed provisions and expenses (4.4) (1.6)
Profits relieved by capital losses 1.1 1.0
(Increase) / reversal of temporary differences (6.2) 2.6
Adjustments in respect of prior years 1.0 -
Total income tax credit / (expense) in the income statement 7.7 (1.4)
The income tax expense above does not include any amounts for joint ventures and
associates, whose results are disclosed in the income statement net of tax.
NOTES TO THE PRELIMINARY ANNOUNCEMENT - continued
7 Investments
The analysis of the Group's share of joint ventures and associates is set out
below:
2006 2005
Alcaidesa Other Alcaidesa Other
Holding 4Delivery joint Holding 4Delivery joint
SA Ltd ventures Associates Total SA Ltd ventures Associates Total
£m £m £m £m £m £m £m £m £m £m
Revenue 13.2 84.6 26.5 13.6 137.9 45.0 16.5 21.0 12.6 95.1
Profit/(loss) 6.1 - (10.9) 0.1 (4.7) 22.5 - 0.8 (1.1) 22.2
before tax
Income tax expense (2.2) - (0.1) - (2.3) (8.5) - (0.3) - (8.8)
Profit/(loss) for 3.9 - (11.0) 0.1 (7.0) 14.0 - 0.5 (1.1) 13.4
the period
Non-current assets 5.7 - 7.2 2.4 15.3 7.4 - 0.7 2.0 10.1
Current assets 33.6 25.1 82.1 51.4 192.2 40.2 4.4 63.6 20.5 128.7
Current (8.1) (25.1) (20.0) (12.9) (66.1) (15.6) (4.4) (19.5) (7.5) (47.0)
liabilities
Non-current (7.3) - (68.2) (39.7) (115.2) (5.5) - (43.7) (14.8) (64.0)
liabilities
Investments in 23.9 - 1.1 1.2 26.2 26.5 - 1.1 0.2 27.8
joint ventures and
associates
Financial - - 9.3 - 9.3 - - 9.5 - 9.5
commitments
Capital - - 25.1 - 25.1 - - 36.3 - 36.3
commitments
Net interest receivable by joint ventures and associates in 2006 was £1.8m
(2005: £1.6m payable).
The financial commitments relate to joint ventures involved in Private Finance
Initiative (PFI) schemes and the capital commitments to construction work being
undertaken by the Costain Group. All figures are the Group's share.
8 Cash and cash equivalents
Cash at bank and in hand is analysed below and includes the Group's share of
cash held by joint arrangements of £22.0m (2005: £25.0m).
Group
2006 2005
£m £m
Cash and cash equivalents 56.4 75.2
Bank overdrafts (1.4) (0.2)
Cash and cash equivalents in the statement of 55.0 75.0
cash flows
9 Capital and reserves
Group Share
Share premium Special Fair value Translation Hedging Retained Minority Total
capital account reserve reserve reserve reserve earnings Total interests equity
£m £m £m £m £m £m £m £m £m £m
At 1 January 2005 35.3 119.5 - - (0.4) (1.7) (199.0) (46.3) 0.1 (46.2)
Total recognised
income & expense - - - 3.4 (0.8) (3.3) 23.8 23.1 (0.1) 23.0
Share based - - - - - - 0.2 0.2 - 0.2
payments
Capital reduction (17.6) (119.5) 13.6 - - - 123.5 - - -
Shares issued 0.1 0.4 (0.5) - - - 0.5 0.5 - 0.5
At 31 December 17.8 0.4 13.1 3.4 (1.2) (5.0) (51.0) (22.5) - (22.5)
2005
At 1 January 2006 17.8 0.4 13.1 3.4 (1.2) (5.0) (51.0) (22.5) - (22.5)
Total recognised - - - (0.8) - 3.4 (35.8) (33.2) - (33.2)
income & expense
Share based - - - - - - 0.2 0.2 - 0.2
payments
Shares issued 0.1 0.2 (0.3) - - - 0.3 0.3 - 0.3
At 31 December 17.9 0.6 12.8 2.6 (1.2) (1.6) (86.3) (55.2) - (55.2)
2006
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