Interim Results

COSTAIN GROUP PLC 
27 August 1999


                               COSTAIN GROUP PLC

                Interim Results for the six months ended 30 June 1999


Key Points:

*   Profit before tax £0.2m (1998: £1.0m loss) after reorganisation costs of
    £2.9m (1998: nil)

*   Turnover reduced marginally to £197.3m (1998: £200.8m) on pursuit of
    higher quality business

*   Costain-Skanska joint-venture delivers further growth with £140m worth
    of contracts awarded in the last nine months

*   UK Building and Civil Engineering successfully incorporated into new
    operating division called Costain Limited and Stewart Atkinson appointed
    Managing Director

*   Staffan Schele, a nominee of Skanska Invest AB, has been appointed to
    the Board as a non-executive director


Commenting on the announcement John Armitt, Chief Executive of Costain Group
PLC, said:

'The strong London and South-East economy has given the Costain-Skanska
joint venture a successful period with the award of several significant
contracts.  One of our future aims is to continue the growth of Costain-
Skanska in other regions throughout the UK.  In Group terms, the Costain
reorganisation has continued with the emphasis on providing more focus on
customer service and reducing overheads.  We have a new company structure
coupled with a more pragmatic commercial stance and we are confident
Costain's financial stability will provide the right platform for growth in
the future.'



Enquiries:

Costain Group PLC        John Armitt, Chief Executive          0171 705 8444
                         Graham Read, Public Relations

Brunswick Group          Nigel Fairbrass                       0171 404 5959



INTERIM STATEMENT 1999


Introduction

The Costain Group has continued its recovery programme in the first half of
1999 and a major reorganisation has taken place aimed at improving service
to clients and reducing overheads.  The Costain-Skanska joint venture has
further established itself with more than £140 million worth of contracts
awarded in the last nine months.


Results

The results for the six months ended 30 June 1999 show a profit before tax
of £0.2m (1998: £1.0m loss) after reorganisation costs of £2.9m (1998: nil).
Group turnover for the period was £197.3m (1998: £200.8m).  UK turnover
increased by 10 per cent with operating profit of £2.8m before
reorganisation costs.


Finance

Net cash balances at the half-year end totalled £24.3m, including the
Group's share of cash held by joint arrangements (construction joint
ventures) of  £15.9m.


Corporate Development

The name of Costain Civil Engineering Limited was changed to Costain Limited
at the end of June 1999 as part of the reorganisation process mentioned in
the 1998 Annual Report. Costain Limited incorporates the UK Building and
Civil Engineering businesses and, as a consequence, will allow Costain to
maximise the sharing of best practice, improve the long-term development of
the Group's employees and reduce overheads. As part of this process, the
Group has centralised its support services to give a sharper focus on
clients' needs without the possible constraint of divisional structures and
Group employees have moved from London to the Maidenhead offices alongside
divisional colleagues.  Stewart Atkinson has been appointed Managing
Director of Costain Limited.


Trading and Prospects

The Group has remained committed to its policy of strengthening commercial
management with the emphasis on reducing risk and the pursuit of turnover
only where it provides adequate return. This strategy has impacted on our
current workload as financial stability takes precedence over the rapid
increase of turnover.

In the field of Transport, Costain's contracts for the M5 Avonmouth Bridge
strengthening and the A50 Derby Southern Bypass M1 Link are progressing
well. The A50 Derby Southern Bypass M1 Link has proved a technically
challenging project and Costain staff have underlined their engineering
expertise and established a successful team with the client and other
associated parties.



In London, the Costain Marine skills have been used to good effect with
notable achievements on the River Thames at Canary Wharf and at the much-
publicised Millennium Dome at Greenwich. Costain is responsible for the
construction of the Millennium Pier which was transported and installed at
the Dome on time. This was another example of Costain's considerable
engineering presence on the River Thames which has been further demonstrated
with the contract award, in joint venture with Norwest Holst, for the
construction of the £26 million Hungerford Bridge Millennium Project. This
project involves creating two light symmetrical footbridges either side of
the rail bridge between Waterloo and Charing Cross. Work continues on the
£20 million contract for the design and construction of the Freeport
Container Port's Phase II terminal in the Bahamas.

Construction is well underway for a major Retail project, known as The
Chimes, at Uxbridge, West London where Costain-Skanska has the £70 million
design and build contract for a new shopping and leisure centre for Capital
Shopping Centres. The Costain-Skanska partnership has also recorded a
notable achievement in the Hotels sector with the award of the £46 million
project for the major refurbishment and extension of the Great Western Royal
Hotel at Paddington, London to provide a four star hotel with 355 rooms. The
contract was awarded by Muirgold and the Hotel will be operated by Hilton
International.

Costain-Skanska has also been successful with the award of two projects in
the Commercial Development market with a £30 million contract for the
Northgate House development in London and for stage one of a £32 million
prestigious project, also in London.

In Utilities, successful relationships continue with Welsh Water and Thames
Water and our partnering project at Afan, near Port Talbot with Welsh Water
and Hyder Consulting, is one of the projects selected as a Demonstration
Project under the Government's 'Movement for Innovation' initiative to
improve the construction process and deliver premier performance for
clients.

In the PFI market, the £30 million Pimlico School project has achieved
conditional planning consent and been given the go-ahead by both Westminster
City Council and the Government. It is also hoped to achieve financial close
on the £70 million King's College Hospital PFI before this year-end.

In International markets, we are being constrained by a lack of good
commercial opportunities in South-East Asia and the Middle East. However,
Costain has been awarded a contract for the construction management of the
US$200 million Pyramid Heights development in Giza. It involves commercial,
retail, leisure and residential facilities set on high ground overlooking
the Pyramids of Giza and the city of Cairo.  In South-East Asia, we reduced
our operations last year in anticipation of lower levels of business. In
Hong Kong, Costain has, together with China Harbour, been awarded part of
the giant West Rail project by the Kowloon Canton Railway Corporation. The
contract involves reclaiming land from the sea and creating a seawall to
enable a station to be built on the site. Final valuation discussions
continue for the Landside Infrastructure project and arbitration proceedings
for the Tsing Ma suspension bridge are on going.

Costain Oil, Gas & Process has gone through a programme of restructuring
reflecting the market changes within the industry sector and is strongly
positioned to increase its turnover once the market picks up. COGAP achieved
another successful shutdown on Das Island and good progress has been
maintained on the Natural Gas Terminal for Shell in East Anglia and a
Natural Gas expansion project for British Gas in Tunisia. A successful
conclusion to the discussions for financial entitlement for the QGPC project
in Qatar has yet to be achieved.



The Board

Mr Staffan Schele, a nominee of Skanska Invest AB, has been appointed to the
Board as a non-executive director with effect from August 25th, 1999. He
replaces Mikael Ekdahl who has resigned.


Year 2000

The Group's Year 2000 Project is well advanced and in some instances
complete and Year 2000 compliance for all business critical hardware,
software and embedded systems will be achieved in good time for Year 2000.

As part of the Year 2000 Project, the Group is liaising with subcontractors,
suppliers, consultants and business partners to ensure so far as is possible
that there will be Year 2000 compliance throughout the business chain.

The Group continues to review past projects where equipment may be exposed
to the Year 2000 date change issue and where risks are identified the third
parties are being advised and, where appropriate, informed of the remedial
action that is necessary.

Draft contingency plans have been prepared in order to deal with any
unforeseen failure, including steps to mitigate risks arising from non-
compliance outside the Group.

The incremental costs of achieving Year 2000 compliance in respect of the
Group's software and hardware will be absorbed by the Group's policy of
continuous updating of software and hardware.  The cost of additional
resources directed specifically to the Year 2000 Project and the replacement
of hardware which would not otherwise have been replaced is not expected to
be material.


Conclusion

The Costain reorganisation has given the Group a market-driven structure
which will introduce improvements to the client service and the Costain-
Skanska partnership is considerably strengthened due to the award of several
significant contracts.


CONSOLIDATED PROFIT AND LOSS ACCOUNT


Half year ended 30 June,      Notes          1999       1998       1998
year ended 31 December                       Half       Half       Year
                                             year       year           
                                                                       
                                               £m         £m         £m
Turnover                                                               
Group and share of joint                                               
ventures
Continuing operations             1         199.6      204.2      391.5
Less: share of joint                                                   
ventures turnover                           (2.3)      (3.4)      (9.6)
                                           ______     ______     ______
Group undertakings                          197.3      200.8      381.9
                                           ______     ______     ______
Group operating loss                                                   
Continuing operations                                                  
Group undertakings                          (0.9)      (2.6)      (2.7)
Share of operating loss of                                             
joint ventures                              (0.3)      (0.4)      (0.5)
                                           ______     ______     ______
                                  1         (1.2)      (3.0)      (3.2)
Discontinued operations                         -        0.8        0.8
                                           ______     ______     ______
                                            (1.2)      (2.2)      (2.4)
                                                                       
Profit on sale of fixed                                                
assets
Continuing operations                         1.2          -        0.4
                                           ______     ______     ______
Profit/(loss) on ordinary                                              
activities before interest                      -      (2.2)      (2.0)
                                                                       
Net interest                                                           
receivable/(payable) and
similar charges
Group undertakings                            0.4        1.5        3.0
Joint ventures                              (0.2)      (0.3)      (0.5)
                                           ______     ______     ______
Profit/(loss) on ordinary                                              
activities before taxation                    0.2      (1.0)        0.5
Taxation                                        -      (0.2)      (0.7)
                                           ______     ______     ______
Profit/(loss) on ordinary                                              
activities after taxation                     0.2      (1.2)      (0.2)
Minority interests                              -        0.1        0.3
                                           ______     ______     ______
Retained/(deficit) for the                                             
period                                        0.2      (1.1)        0.1
                                           ______     ______     ______
Earnings/(loss) per share         2         0.1p       (0.3)p      0.0p       
                                                              
                                                                       
                                                                       
                                                                       

CONSOLIDATED CASHFLOW STATEMENT


Half year ended 30                  1999              1998             1998
June,                               Half              Half             Year
year ended 31 December              year              year                 
                                                                           
                            £m        £m       £m       £m               £m
                                                                           
Net cash outflow from                                                      
operating activities              (13.6)            (15.8)           (22.4)
                                                                           
Net cash inflow from                                                       
returns on investments                                                     
and servicing of                                                           
finance                              0.4               1.5              3.0
                                                                           
Tax paid                           (0.4)             (0.3)            (0.5)
                                                                           
Capital expenditure and                                                    
financial investment
Sales of tangible fixed                                                    
assets less capital                                               
expenditure                1.7                1.1            (1.3)
Funding of investments   (0.1)              (2.2)            (2.7)         
                         _____             ______            _____         
Net cash                                                                   
inflow/(outflow) from                                                      
capital expenditure and                                                    
financial investment                                                       
                                     1.6             (1.1)            (4.0)
                                  ______            ______           ______
Net cash outflow before                                                    
financing                         (12.0)            (15.7)           (23.9)
                                                                           
Financing                                                                  
Net loan repayments      (1.1)              (2.2)            (0.9)         
                         _____             ______            _____         
Net cash outflow from                                                      
financing                          (1.1)             (2.2)            (0.9)
                                  ______            ______           ______
Decrease in cash                  (13.1)            (17.9)           (24.8)
                                                                           
Cash outflow from                                                          
reduction in loan                                                          
financing                            1.1               2.2              0.9
Exchange differences               (0.6)             (0.1)            (0.6)
                                  ______            ______           ______
Movement in net cash              (12.6)            (15.8)           (24.5)
                                                                           
Opening net cash                    36.9              61.4             61.4
                                  ______            ______           ______
Closing net cash                    24.3              45.6             36.9
                                  ______            ______           ______
                                                                           



CONSOLIDATED BALANCE SHEET


Half year as at 30 June,                     1999         1998         1998
year as at 31 December                       Half         Half         Year
                                             year         year             
                                                                           
                                                                           
                                               £m           £m           £m
                                                                           
Fixed assets                                  6.7          7.6          7.4
Investments                                   1.3          1.5          1.4
Investments in joint ventures                                              
     Share of gross assets                   16.0         12.5         15.3
     Share of gross liabilities            (15.1)       (10.5)       (12.7)
                                          _______      _______      _______
                                              8.9         11.1         11.4
                                          _______      _______      _______
Current assets                                                             
Debtors - pension fund prepayment            38.5         40.8         39.5
Other debtors and stocks                    150.4        154.4        120.9
Cash at bank, monies on deposit                                            
and in hand                                  33.0         55.3         47.1
                                          _______      _______      _______
                                            221.9        250.5        207.5
                                          _______      _______      _______
Creditors: amounts falling due                                             
within one year
Borrowings                                    2.6          2.1          3.6
Other creditors                             186.9        202.3        169.3
                                          _______      _______      _______
                                            189.5        204.4        172.9
                                          _______      _______      _______
Net current assets                                                         
Due within one year                         (5.5)          0.2        (5.7)
Debtors due after more than one                                            
year                                         37.9         45.9         40.3
                                          _______      _______      _______
                                             32.4         46.1         34.6
                                          _______      _______      _______
                                                                           
Total assets less current                                                  
liabilities                                  41.3         57.2         46.0
                                                                           
Borrowings falling due after more                                          
than one year                                 6.1          7.6          6.6
Other creditors falling due after                                          
more than one year and provisions            16.7         31.1         20.5
                                          _______      _______      _______
Net assets                                   18.5         18.5         18.9
                                          _______      _______      _______
                                                                           
Ordinary shareholders' funds                 18.1         17.9         18.5
Minority interests                            0.4          0.6          0.4
                                          _______      _______      _______
                                             18.5         18.5         18.9
                                          _______      _______      _______
                                                                           



NOTES TO THE ACCOUNTS


1.  Geographical segment information - continuing operations

    In the opinion of the directors the administering of engineering and
    construction projects is the only material class of business.

                                Turnover                  Operating
                                                        (loss)/profit

                     1999       1998      1998     1999      1998      1998
                     Half       Half      Full     Half      Half      Full
                     year       year      year     year      year      year
                       £m         £m        £m       £m        £m        £m
                                                                             
    United                                           
    Kingdom         150.8      137.4      280.9        -     (3.9)     (0.7)
    Rest of the                                                              
    world            48.8       66.8     110.6     (1.2)       0.9     (2.5)
                   ______    _______    _______  _______    _______   _______
                        
                    199.6      204.2      391.5    (1.2)      (3.0)     (3.2)
                   ______    _______    _______  _______    _______   _______
                        
                                                                             

2.   Earnings/(loss) per share

     The calculation of earnings/(loss) per share is based on profit after
     taxation and minority interests of £0.2m (1998 half year losses £1.1m,
     1998 full year profit £0.1m) and 337,136,350 ordinary shares (1998 half
     year 337,136,350, 1998 full year 337,136,350) being the weighted average
     number of shares in issue during the period.



Except for the introduction of FRS 12, Provisions, contingent liabilities
and contingent assets, the results of the Group for the six months to 30
June 1999 and 30 June 1998 were prepared in accordance with the accounting
policies stated in the Company's 1998 statutory accounts and are unaudited.
Compliance with the requirements of FRS 12 has had no significant impact on
the results of the Group.

The figures for the year ended 31 December 1998 do not constitute the
Company's statutory accounts within the meaning of Section 240 of the
Companies Act 1985, but are extracted from them.  The Company's statutory
accounts for 1998 were delivered to the Registrar of Companies.  The
Company's auditors have reported on those accounts; their report was
unqualified and did not contain statements under Section 237 of the
Companies Act 1985.