Interim Results

Costain Group PLC
01 September 2004




Costain Group PLC

('Costain' or the 'Group')



Interim results for the six months ended 30 June 2004

Costain, the international engineering and construction group, announces
increases in turnover and profit before tax for the six months ended 30 June
2004.  Following the success of its AMP3 water contracts, Costain has recently
been awarded further frameworks from Thames Water and Yorkshire Water in respect
of the forthcoming AMP4 programme and has £350 million of work under negotiation
in the Building Division.



Financial highlights


•    Group turnover up 15% to £339.9m (2003: £296.4m)

•    Profit before tax up 33% to £8.1m (2003: £6.1m)

•    Earnings per share up 20% to 1.8p (2003: 1.5p)

•    UK operating profit of £5.1m (2003: £3.9m)

•    Forward order book at 30 June of £845m


Operational highlights

•    COGAP - successful completion of ADGAS shutdown in Abu Dhabi with 
     unblemished safety record

•    Alliance Agreement signed between Costain and China Harbour

•    Land deal concluded between Alcaidesa Inmobiliaria S.A. and
     major Spanish housing developer Ros y Falcon



Recent Events


•    Two frameworks awarded from Yorkshire Water totalling c. £35m per year for 
     five years with an option to go to ten

•    Major framework awarded from Thames Water for whole of London area clean 
     water worth c. £40m per year for five years also with an option to go ten

•    £350m of work in negotiation in the Building Division, all with key blue 
     chip clients


Commenting on the announcement, the Chairman, David Jefferies, said:

'We have had a very good first six months and are pleased with the continuing
progress of the Group.  We are especially delighted with the news post the
period end of framework wins from Thames Water and Yorkshire Water. These are
significant awards in a very important sector for Costain.  We have had a good
start to the second half and the forward order book now stands in excess of
£1bn.  I look forward to reporting on further progress at the year end.'

                                                                1 September 2004


ENQUIRIES:
Costain Group PLC                                    Tel: [phone]
Stuart Doughty, Chief Executive
Charles McCole, Finance Director
Graham Read, Public Relations

College Hill                                         Tel: [phone]
Mark Garraway
Matthew Gregorowski





Overview

We have had a successful first half recording a strong financial performance as
well as securing some notable contract successes.

In August we were pleased to be awarded contracts from Yorkshire Water and
Thames Water in respect of their forthcoming Asset Management Programmes, AMP4.
These contracts, totalling some £350m over 5 years, consolidate Costain's
leading market position in the UK water sector.  With water business currently
accounting for some 35% of the Group's contracting business, this is a key
strategic sector for Costain and we are delighted that our customers continue to
recognise our outstanding capabilities and skills in this arena.  We are
confident that we will achieve our target of deriving 50% of contracting
business turnover from asset management contracts by 2006.

Progress made across the business is covered in the review below. It is worth
highlighting here, two  achievements. First, the landmark agreement in April
between Costain and China Harbour ('the Alliance').  Since this agreement was
signed, the Alliance has submitted five pre-qualifications for major marine
works of which four (in Morocco, Mexico, Qatar and Nigeria) have successfully
progressed to full tendering.  This is an excellent achievement and is a good
example of how far Costain has progressed both in terms of how it operates and
the type of work it undertakes. Secondly, in the Building Division, we have
achieved preferred bidder status on £230m of new work and in total there are
£350m of contracts under negotiation, further evidence of our success in
pursuing a strategy of negotiating contracts to avoid the risks inherent in lump
sum contracts.

We have said previously that we continue with the reconstruction of the
Company's balance sheet and the process is well underway.


Results

The results for the six months ended 30 June 2004 show a profit before tax of
£8.1m (2003: £6.1m) up 33% on turnover up 15% at £339.9m (2003: £296.4m).
Earnings per share rose to 1.8p (2003: 1.5p), up 20%.

Profit on ordinary activities before interest grew to £7.9m (2003: £5.9m) with
the UK operations providing £5.1m against £3.9m in the comparable period last
year. Operating profit from overseas activities (including Alcaidesa) was £2.8m
compared to £2.0m in the first half of 2003.

At the half-year, the forward order book was £845m (2003: £820m).

The Group has no significant borrowings and net cash balances at the half-year
totalled £65.7m (2003: £65.1m) including the Group share of cash held by joint
arrangements (construction joint ventures) of £25.1m (2003: £34.2m). This
represents a cash outflow during the first half of the year of £5.1m.

Cash balances have been sustained, despite the move from lump sum fixed price
contracts to framework/partnered arrangements which do have a more evenly phased
cash flow profile.


Asset Management

The Asset Management operations have successfully delivered on schedule a
programme of AMP3 contracts  to the Company's key Water Utility customer's
satisfaction. All regulatory targets for Quality and Safety were achieved for
Year 4 up to March 31 2004 and over £225m of work was delivered during the
period, meeting the outputs set by the Regulator and Environment Agency. This
was a demanding programme without a single environmental incident.

Highlights included opening the new £31m 140 Mega Litres clean water treatment
plant at Lostock Bolton for United Utilities in April, which improves the
quality of Lakeland Water supplied to Manchester customers; and also completing
all deep shafts and tunnel drives on Bath's city centre waste water treatment
for Wessex Water. This £24m scheme will be delivered on time later this year.

In the ancient market town of Lewes, Sussex we gained planning consent in
February for our designs for installing a new underground storm water storage
network for Southern Water. This will remove the risk of flooding from the town
centre. Again, the shafts and tunnels are well underway for delivering the
project in early 2005.

Good progress has been made for Thames Water in providing increased supply from
underground sources at Battersea, Waltham Abbey and East Ham. As part of BAA's
Heathrow Terminal Five development, our works for TWUL/BAA to provide a new
wastewater treatment plant at Iver South and provide transfer lines and upgrade
process treatment at Twickenham some seven miles away is projected to finish
four months early in 2005. The project, at £106m our largest individual
contract, releases vital land to allow the further development of Terminal Five
whilst providing upgraded capacity to meet the demands of Heathrow Airport in
the twenty-first century.

Costain is now in the final year of delivering an overall 5 Year programme
valued at £106m for upgraded waste treatment facilities for Yorkshire Water in
the market towns and hamlets of the East Riding of Yorkshire.

During the last nine months we have committed extensive resource to securing
water asset work for the AMP4 regulatory period programme as well as developing
a wider asset management market with the Ministry of Defence (MoD) in
outsourcing their water assets. We are preferred bidder with Severn Trent Water
for a 25-year concession valued at approximately £1bn.

Following our success with Thames Water and the two frameworks with Yorkshire
Water we are now focusing our attention on securing frameworks with Southern
Water, Dwr Cymru, United Utilities in the North West, Northumbrian Water and
Severn Trent Water.


UK Construction

Building

In May 2004 we appointed a new Director to lead the Southern Region and a new
General Manager has been recruited for the Amec/Costain/Mowlem joint venture for
ProCure 21 Health contracts.

The Diamond Synchrotron Project - £80m - is proceeding well with most of the
structural engineering work now complete.  The Met Office was also successfully
opened, with all facilities transferred, in the early part of the year, as was
the final stage of Kings College  Hospital - the Ruskin Wing.  We also saw the
substantial completion of Ormskirk Hospital, Shrewsbury Phase I and Barts.

As previously mentioned the Division has achieved preferred bidder status on
£230m of new work and in total there are £350m of contracts under negotiation.
Our philosophy of avoiding high-risk contracts continues to pay off, however,
the tender process inevitably becomes protracted as a result.

New orders in the first half of the year include residential schemes for David
Wilson Homes, Merrywalks Shopping Centre in Stroud,  a large number of Tesco
schemes, student accommodation at Canterbury and a commercial office and retail
development at Saville Row, London.  As the negotiated contracts conclude during
the second half of 2004 it is expected that the Division will achieve new orders
of £315m, an increase of 50% over 2003 new orders.  The Division is continuing
its focus on key sectors and key clients and 75% of new orders will be derived
from a handful of client relationships in the retail, residential and healthcare
markets.

Overall the Division is progressing well and on track to continue its growth
targets in line with the Costain Group Strategy.


Major Civil Engineering

The year started well at Channel Tunnel Rail Link 240 with the successful
breakthrough ahead of programme of the second tunnel drive (the first completed
in December 2003). The redevelopment of Kings Cross Underground Station and the
St Pancras Station redevelopment and extension are both progressing well.  At St
Pancras the interim station was completed on programme and opened for use at
Easter thus releasing the western section for construction.

At Chieveley, junction 13 of the M4 with the north/south A34, a major milestone
was achieved in March when during a weekend closure of the M4 the successful
demolition of an existing three span overbridge was accomplished.  The project
is due for completion late summer 2004, well ahead of programme.

The Sirhowy Enterprise Way Project, a £38m PFI scheme to build and improve roads
in the heart of South Wales for Caerphilly County Borough Council, has commenced
and is proceeding well despite minor initial protester action.

Our Early Contractor Involvement with the Highways Agency's A303 Stonehenge
project has completed the Public Inquiry stage with the Inspector's report
anticipated soon.

We have recently been awarded the £37m Porth road contract in South Wales and
still remain optimistic with regard to future opportunities despite the
Chancellor's rather cautious view of increased spending in transportation.  Much
of the work we have currently secured runs on to 2007.


Regional Civil Engineering

The West Bay Harbour reconstruction project in Dorset is progressing well and is
due for completion at the end of 2004. We have an excellent relationship with
the client, West Dorset District Council, and indeed with local residents, and
we will be pursuing a further scheme in the area at Lyme Regis.  Another major
marine engineering scheme for an extension to the container terminal at
Felixstowe has been delayed due to slippage of materials during the initial
works. However, this contract is now progressing well and completes before the
end of the year.  We are also tendering for the next phase, in excess of £100m,
all for the client Hutchison Whampoa.

In the Airports sector, the Company has completed its third contract at John
Lennon Airport, Liverpool and has been awarded a £7m contract for new taxiway
and stands - one of a series of contracts - at the Robin Hood Airport,
Doncaster. The client for both airports is Peel Holdings. At Manchester Airport,
Costain has been responsible for routine maintenance work and is shortlisted for
long-term pavement frameworks.

Costain regional roads work has included design and planning in both Cornwall
and South Wales and the construction of a new river bridge at Monmouth, which
was recently officially opened.


Property

Good progress has been achieved in this half year at our property development in
Southern Spain, Alcaidesa, where we hold a 50% interest in Alcaidesa Holding SA,
with our joint shareholder Banesto Bank. A significant amount of infrastructure
- roads, utilities, including a water treatment plant to service the second
phase of development known as San Roque 1 & 2 - is underway and due for
completion in the Autumn.   Infrastructure to service phase three known as La
Linea 2, has also started and Alcaidesa Holding has commenced placing orders for
the construction of its second golf course and a new golf club house facility.

Two sales of large residential development enclaves were completed with
developer Ros y Falcon in the half-year along with the majority of the one
remaining Alcaidesa housing scheme called Jardines de Alcaidesa.  These sales
ensured the company met its expected profit forecast for the year to date.

Detailed negotiations have led to terms being agreed for the sale of a large
plot of land to a major international hotel chain, subject to some minor
planning matters being resolved and it is hoped this sale will be successfully
completed by the year-end giving a significant boost to the reputation of the
area.

Alcaidesa is committed to expanding its operations in the area and is in final
negotiations to make several land acquisitions ensuring a long-term future for
this business.


International

The last six months have seen Costain awarded the Construction Management
contract for the Port Ghalib (Masa Allam) leisure development on the Red Sea in
Egypt, a Kharafi project valued at US$150m. We now have operations in Egypt,
Nigeria, Tanzania, Botswana, and Zimbabwe. We also have significant new
opportunities in both  our existing businesses and in new countries within the
region.

The Group is in the advanced stages of restructuring Costain (West Africa) Plc,
after increasing its shareholding to 36% of the issued share capital. This will
allow us to take advantage of the significant opportunities within Nigeria
giving Costain real strength across its business streams in West Africa.

In the Middle East, Costain has recently appointed a new Regional Director to
restructure the regional businesses and progress its operations in Iraq.  As
part of the regional strategy, a new hub support business is being set up in
Dubai to provide support for the regions.

Although business in Iraq continues to be hindered by security issues, Costain
has benefited from its strategy of focusing on the North of the country and has
secured three contracts.  These contracts are for the provision of Master
Planning across the Kurdish region; the complete design, construction and
equipping of a medical laboratory; and provision of commercial support for the
new Erbil Airport.  Costain is also in the process of signing three further
contracts for supply of Project Management and Engineering services to the
Kurdish Regional Government.

The relationship between Costain and China Harbour, which has been evolving over
the last 12 years in Hong Kong, took a definitive step forward with the signing,
in April, of an Alliance Agreement between the two companies. The purpose of the
Alliance is to combine the extensive marine resources of China Harbour with the
international experience of Costain, to target marine related projects on a
worldwide basis. The Alliance has appointed two Business Development Managers -
Bob Aylmer from Costain, and Victor Wu from China Harbour - to develop these
opportunities.

Since April, the Alliance has submitted five prequalifications for major marine
works, and has been successful on four projects, with the result of one
prequalification pending. These four projects, which are currently being
tendered, are situated in Morocco, Mexico, Qatar and Nigeria.

We are currently in discussion with our shareholders - United Engineers and
Kharafi - to establish formal joint businesses to take advantage of our combined
strengths in new and emerging markets.


Costain Oil, Gas & Process (COGAP)

The new COGAP management team began the year by outlining the plan for the oil,
gas & process business based on two principal areas of focus: the UK nuclear
decommissioning market and the international market for gas treatment processing
and transportation.

Over the last six months, COGAP has made considerable effort in marketing and
business development particularly in North Africa and the Middle East  and the
results of this are encouraging.

In March, one month ahead of schedule, we completed for Ferrostaal, Trinidad the
shipment of the Purge Gas Recovery Unit, a specific technology where COGAP has
considerable experience.

The latest overhaul project for the Abu Dhabi Gas Liquefaction Company (ADGAS)
at Das Island, Abu Dhabi was successfully completed at the end of April. The 38
day project was completed two days early and with no lost time for safety
incidents. In total, the project involved over 670,000 man hours with a peak day
labour force of over 2,000.

Our strategy to re-enter the nuclear market has borne fruit in the shape of some
early study work from UKAEA at Dounreay and a modularised active effluent
treatment plant for BNFL, Hunterston.


PFI

The Sirhowy Enterprise Way project reached Financial Close in January 2004. This
50:50 JV partnership with Laing Roads Ltd includes a landmark cable-stayed
bridge and has a capex value of £35m.

We anticipate reaching Financial Close on the MoD's £1bn Aquatrine C water asset
management PFI project shortly with our partners Severn Trent Water and Arup
(Costain share 22%). Financial close on the Kingston Hospital Project should
occur in October 2004 after a year of negotiation.

Construction of the Intermediate Care Facilities for Kent County Council is
proceeding satisfactorily. As part of the same Consortium, we have recently been
appointed Preferred Bidder for the Shropshire Quality In Community Service PFI
Project.

We are pleased to have prequalified in partnership with Alfred McAlpine against
stiff competition as one of three for the Three Shires project for the NHS,
comprising a number of mental health projects, requiring partnering skills. The
capex value will be between £60 and £140m depending on how many projects are
finally included. Alfred McAlpine will provide the facilities management.

Also in the bidding phase are two projects, in the health and education sectors,
for which we await announcement of the Preferred Bidder.

Phase Two of the works at Kings College Hospital, the refurbishment of the
Ruskin Wing followed our success in the Golden Jubilee Wing by being completed
ahead of programme, also won the Award for Best Operational Design (All Sectors)
at the 2004 PFI Awards Dinner.

Parc Prison at Bridgend continues to operate well whilst the new Met Office (PPP
project) has successfully passed through into the operational phase.

We continue to bid PFI projects in a focused manner, with particular
concentration on the health and education sectors.


Health and Safety


Early 2004 saw the Costain SHE Department embark upon a number of developments
designed to further enhance the SHE performance of the Company, including:

  • Gaining recognition of Costain's effort on Health & Safety at the RoSPA
    Awards ceremony where the Company received no fewer than 28 awards.

  • Achieving OHSAS 18001 accreditation.  Although a gap analysis conducted by
    the BSi auditors indicated that Costain's Health & Safety management system
    was already of a high standard, work has been progressed on the areas
    identified where some improvements were required. This has now seen Phase I
    of the assessment successfully completed and Phase 2 is scheduled to take
    place during the last week of September, following which we hope to have our
    accreditation confirmed.

  • Improving our performance and guidance relating to health issues where we
    have been working closely with the Health & Safety Executive (HSE),
    Employment Medical Advisory Service  (EMAS) and industry experts such as
    Sypol, Institute of Occupational Safety and Health and Loughborough
    University.  The HSE and EMAS representatives have commented on how pleased
    they are to have a major contractor like Costain taking a lead role in
    improving the health of the workforce.

  • Our Environmental guidance and procedures were upgraded significantly
    during 2003 with the focus of the department being concentrated on
    communicating the requirements of our Environmental Management System to the
    workforce.  To that end a series of Environmental briefings and bespoke
    courses have been conducted at a number of sites across the U.K.

  • Leading the Company's drive towards Sustainable Construction.


Sustainability

The Costain Group remains committed to the effective management of our
environmental risks.  Through the hard work of project staff and ongoing support
of the SHE Team, we continue to maintain our environmental management systems
ISO14001 certification; whilst our continual improvement procedures will ensure
our accreditation persists.

The last six months has seen Costain embark on a drive to integrate the
principle of sustainable  construction within our business. Workshops with key
individuals from across Costain helped formulate the type and structure of our
strategy; these workshops also provided us with an understanding of our key
client requirements enabling us to draft a strategy with the Costain business
philosophy to the fore.

To aid us in our drive for sustainable construction, a Sustainability Advisory
Group has been established with champions nominated for the three key areas of
Social, Economic and Environment.  Sponsored by the Chief Executive and chaired
by the Group SHE Director, the group also includes independent professional
advisors from the Environment Agency, the CITB and an environmental consultant.


Business Systems

Costain continues to invest capital and energy with regard to the business
systems strategy. Having completed the development of operational Best Practice,
a skills transfer and awareness programme has been running with approximately
1,000 days of training already completed.

The Company launched an Internet Business Portal, named iCosnet, which now
supports over 3,500 employees, clients and members of the Supply Chain in the
delivery of knowledge, best practice and contract documentation throughout our
UK and international operations. The system received 1.2m document access hits
during June.

A project has been initiated to replace back office systems with a modern
integrated set of commercial and financial systems, further streamlining the
business and laying foundations for the delivery of e-procurement and trading
capability for the future.


Board

Dato' Abdul Wahid Omar, a nominee of UEM Builders Berhad, our largest
shareholder, resigned as Deputy Chairman and as a non-executive director of the
Company with effect from 16 July 2004 following his departure from the UEM Group
to take up his new appointment as the Chief Executive Officer of Telekom
Malaysia. At the same time the Board warmly welcomed Mr Ahmad Pardas Senin, a
nominee of UEM Builders Berhad, as a non-executive director. Mr Senin is the
Managing Director/Chief Executive of United Engineers (Malaysia) Berhad, the
Malaysian infrastructure development conglomerate. Concurrently, Mr Senin also
serves as Managing Director/Chief Executive Officer of UEM World Berhad, Deputy
Chairman of PLUS Expressways Berhad,  and UEM Builders Berhad and non-executive
director of Pharmaniaga Berhad, all of which are companies listed on the
Malaysian Securities Exchange. Mr Senin was elected Deputy Chairman of the
Company on 16 July 2004.

Mrs Leslie Rogers, a non-executive director of the Company, advised that the
relocation of her home overseas and family commitments were making it difficult
for her to fulfil her role in the Company and accordingly she resigned as a
non-executive director with effect from 15 July 2004. Mrs Rogers was a nominee
of Raymond International WLL and is not being replaced on the board by that
major shareholder.

Mr Mohd Azman Sulaiman, a nominee of UEM Builders Berhad was welcomed as a
non-executive director of the Company on 30 June 2004 following the resignation
of Mr Aminuddin Yusof Lana on that day. Mr Sulaiman is a director responsible
for business development for the UEM Group of companies.

The Board are most grateful for the commitment and contribution made by Dato'
Wahid Omar, Mrs Leslie Rogers and Mr Lana.

The Company also announced on 21 July 2004 that it had appointed Hawkpoint
Partners Limited as its financial advisors.


Share Capital

On 2 April 2004, the London Stock Exchange admitted to trading a further
7,999,990 ordinary shares of 10p each fully paid ranking pari passu with
existing ordinary shares. The shares were issued pursuant to a Share Warrant
Instrument by way of Deed Poll dated 29 March 2001 in which the Company's
bankers were granted share warrants in return for refinancing the Company's
existing term facilities at that time. A total of 1,600,000 warrants were issued
and each warrant gave the recipient a right to subscribe for 10 ordinary shares
in the Company. The exercise price was 112.25p per warrant. No warrants now
remain in issue.


Awards

Following the Company's success at the RoSPA awards, there were two additional
national achievements. The new Met Office headquarters in Exeter, a Costain
joint venture, was voted 'Best Office Building of the Year' at the highly
prestigious Building Services Awards. In addition, the Costain Group magazine,
Blueprint, was voted by the International Building Press as the Best Commercial
House Magazine in the UK construction industry.


Outlook

There has been a lot of comment recently on the availability of both public and
private funds for infrastructure related projects and the impact this is having
on the industry.  Whilst there has undoubtedly been some cutbacks as Government
expenditure has been constrained nonetheless there remains a significant amount
of work available for tender.  However, performance and the ability to add value
are becoming more crucial issues in terms of clients' choice of appropriate
contractors. In the more competitive environment, those companies that have
reacted to these changes have considerable opportunities in the future,
particularly in terms of pursuing long term relationships ensuring the stability
of their business.

Against this background we are pleased with our start to the second half. The
forward order book has increased to over £1bn, with the award of the 5-year
frameworks with an option of going to 10 years from Yorkshire and Thames, and a
number of frameworks still to be awarded.  We also have a considerable volume of
work in the pipeline, which should ensure future levels of turnover and
profitability in line with our strategy.

Our philosophy over the last three years is delivering profitable business and
we look forward to reporting on further progress in the future.


David G Jefferies
Chairman


Stuart J Doughty
Chief Executive


31 August 2004


                               COSTAIN GROUP PLC
              Interim results for the half-year ended 30 June 2004


Consolidated Profit and Loss Account


                                                             Reviewed but      Reviewed but
                                                                unaudited         unaudited           Audited
Half year ended 30 June,                          Notes              2004              2003              2003
year ended 31 December                                          Half year         Half year              Year

                                                                       £m                £m                £m
Turnover
Group and share of joint ventures                  1                339.9             296.4             650.2
Less: share of joint ventures turnover                             (15.7)             (3.2)            (26.7)
Group undertakings                                                  324.2             293.2             623.5

Group operating profit
Group undertakings                                                    4.5               3.9               5.4
Share of operating profit of joint ventures                           3.4               2.0              10.1
Profit on ordinary activities before interest      1                  7.9               5.9              15.5

Net interest receivable/(payable) and similar
charges
Group undertakings                                                    1.2               0.8               1.7
Joint ventures                                                      (0.5)             (0.2)             (0.3)
Other finance charges                              2                (0.5)             (0.4)             (0.8)
Profit on ordinary activities before taxation                         8.1               6.1              16.1
Taxation                                                            (1.7)             (0.9)             (2.9)
Profit on ordinary activities after taxation                          6.4               5.2              13.2
Minority interests                                                      -                 -                 -
Retained for the period                                               6.4               5.2              13.2


Earnings per share - basic                         3                 1.8p              1.5p              3.8p
Earnings per share - diluted                       3                 1.8p              1.5p              3.7p


All results derive from continuing operations




                               COSTAIN GROUP PLC

              Interim results for the half-year ended 30 June 2004


Consolidated Cash Flow Statement


                                                                   Reviewed          Reviewed
                                                                        but               but
                                                                  unaudited         unaudited               Audited
Half year ended 30 June,                                               2004              2003                  2003
year ended 31 December                                            Half year         Half year                  Year
                                                         £m             £m     £m          £m        £m          £m

Net cash outflow from operating activities                            (7.4)             (7.2)                 (5.8)

Net cash inflow from returns on investments and
servicing of finance                                                    1.2               0.8                   1.7

Tax paid                                                                  -                 -                 (0.2)

Capital expenditure and financial investment
Capital expenditure less sales of tangible fixed assets 0.1                   (0.1)                 (1.8)
Repayments by joint ventures                            0.2                       -                   6.2
Additions to  investments                                -                        -                 (0.1)
Net cash inflow/(outflow) from capital expenditure                      
and financial investment                                                0.3             (0.1)                   4.3

Net cash outflow before financing                                     (5.9)             (6.5)                     -

Financing

Loan (repayments)/drawdowns                            (0.1)                     -                   0.3

   Issue of ordinary share capital (Note 3)             0.9                    0.9                   0.9
                                                                        0.8               0.9                   1.2
(Decrease)/increase in cash                                           (5.1)             (5.6)                   1.2





Reconciliation of Net Cash Flow to Movement in Net Cash

                                                                     £m                    £m                    £m
(Decrease)/increase in cash                                       (5.1)                 (5.6)                   1.2
Cash outflow/(inflow) from loan financing                           0.1                     -                 (0.3)
New finance leases                                                    -                 (0.6)                 (0.8)
Currency realignment                                                0.1                     -                 (0.8)
Opening net cash                                                   70.6                  71.3                  71.3
Closing net cash                                                   65.7                  65.1                  70.6



                               COSTAIN GROUP PLC

              Interim results for the half-year ended 30 June 2004


Consolidated Balance Sheet

                                                                     Reviewed but     Reviewed but         Audited
                                                                        unaudited        unaudited

Half year as at 30 June,                                      Notes          2004             2003            2003
year as at 31 December                                                  Half year        Half year            Year


                                                                               £m               £m              £m
Fixed assets
Tangible assets                                                               4.5              3.7             4.9
Investments                                                                   1.0              1.1             1.0
Investments in joint ventures                                   5
     Share of gross assets                                                   92.4             60.1            75.7
     Share of gross liabilities                                            (70.8)           (40.3)          (55.6)
                                                                             21.6             19.8            20.1
                                                                             27.1             24.6            26.0

Current assets
Other debtors and stocks                                                    150.4            123.3           124.0
Cash at bank, monies on deposit and in hand                                  66.8             65.9            72.0
                                                                            217.2            189.2           196.0

Creditors: amounts falling due within one year
Borrowings                                                                  (0.4)            (0.3)           (0.5)
Other creditors                                                           (211.8)          (190.6)         (193.9)
                                                                          (212.2)          (190.9)         (194.4)

Net current assets/(liabilities)
Due within one year                                                         (2.9)            (6.0)           (4.2)
Debtors due after more than one year                                          7.9              4.3             5.8
                                                                              5.0            (1.7)             1.6

Total assets less current liabilities                                        32.1             22.9            27.6

Creditors: amounts falling due after more than one year
Borrowings                                                                  (0.7)            (0.5)           (0.9)
Other creditors and provisions                                              (7.8)           (12.3)           (8.8)

Net assets excluding pension liability                                       23.6             10.1            17.9
Pension liability                                               4          (54.1)           (23.7)          (54.5)
Net liabilities including pension liability                                (30.5)           (13.6)          (36.6)

Equity shareholders' funds                                                 (30.6)           (13.7)          (36.7)
Minority interests                                                            0.1              0.1             0.1
                                                                           (30.5)           (13.6)          (36.6)



                               COSTAIN GROUP PLC

              Interim results for the half-year ended 30 June 2004


Notes to the Accounts


1.       Business and geographical segment information by origin

In the opinion of the Directors, the only material classes of business are the
administering of the engineering and construction projects and property
development in Spain.  All items below are engineering and construction projects
unless stated otherwise.

                         Turnover                                                Operating profit/(loss)
                              2004           2003            2003          2004            2003             2003
                         Half year      Half year            Year     Half year       Half year             Year

                                £m             £m              £m            £m              £m               £m

United Kingdom               317.1          280.5           587.7           5.1             3.9              7.6
Rest of the world -            
property development           5.1            1.6            21.0           3.2             1.1              9.5
                                                             

Rest of the world -           
engineering &
construction                  17.7           14.3            41.5         (0.4)             0.9            (0.9)        

Reorganisation costs             -              -               -             -               -            (0.7)

                             339.9          296.4           650.2           7.9             5.9             15.5



2.       Other finance charges

The other finance charges comprise the expected return on the assets of the
pension scheme less the expected increase in the present value of the scheme
liabilities.  The expected return and the increase in present value are based on
the value of assets and liabilities of the pension scheme at the start of the
period.



3.       Earnings per share

The calculation of earnings per share is based on profit after taxation and 
minority interests of £6.4m (2003 half year £5.2m, 2003 full year £13.2m) 
and the number of shares set out below:
                                                             2004              2003                2003

                                                           Half year         Half year          Full year
Weighted average number of shares for basic earnings per 349,224,269       343,238,585        344,300,294
share calculation
Dilutive potential ordinary shares:
Warrants                                                       -             4,837,386          5,161,400
SAYE Scheme                                                6,698,821         3,967,466          4,710,920
Total dilutive potential ordinary shares                   6,698,821         8,804,852          9,872,320
Weighted average number of shares for fully diluted      355,923,090       352,043,437        354,172,614
earnings per share calculation



The number of shares has been adjusted for the issue of 7,999,990 ordinary
shares following the exercise of warrants, which raised £0.9m.

                               COSTAIN GROUP PLC

              Interim results for the half-year ended 30 June 2004

4.       Pension liability

The pension liability has not been revalued at the balance sheet date.  This is 
in accordance with FRS17, which does not require revaluations for interim 
accounts. The change in the liability in the half-year resulted from the
timing of contributions to the scheme.


5.             Joint ventures

The analysis of the Group's share of joint ventures is set out below:

                                                   2004 Half Year
                                                      Alcaidesa          Other           Total
                                                          £m               £m              £m
Turnover                                                 5.1             10.6            15.7

Profit on ordinary activities before taxation            3.1             (0.2)            2.9
Taxation                                               (0.8)                 -          (0.8)
Profit on ordinary activities after taxation             2.3             (0.2)            2.1

Fixed assets                                            11.6               0.3           11.9
Current assets                                          28.5              52.0           80.5
Current liabilities                                   (19.7)             (4.3)         (24.0)
Creditors due after one year                               -            (46.8)         (46.8)
Investments in joint ventures                           20.4               1.2           21.6


                                                   2003 Half Year
                                                      Alcaidesa         Other           Total
                                                          £m               £m              £m
Turnover                                                 1.6              1.6             3.2

Profit on ordinary activities before taxation            1.0              0.8             1.8
Taxation                                                  -                -               -
Profit on ordinary activities after taxation             1.0              0.8             1.8

Fixed assets                                             3.8              0.3             4.1
Current assets                                           22.8            33.2            56.0
Current liabilities                                     (8.5)           (1.1)           (9.6)
Creditors due after one year                              -            (30.7)          (30.7)
Investments in joint ventures                            18.1             1.7            19.8


                                                      2003 Year
                                                      Alcaidesa         Other           Total
                                                          £m               £m              £m
Turnover                                                21.0              5.7            26.7

Profit on ordinary activities before taxation            9.3              0.5             9.8
Taxation                                               (2.3)                -           (2.3)
Profit on ordinary activities after taxation             7.0              0.5             7.5

Fixed assets                                             8.3              0.3             8.6
Current assets                                          31.2             35.9            67.1
Current liabilities                                   (20.9)            (3.4)          (24.3)
Creditors due after one year                               -           (31.3)          (31.3)
Investments in joint ventures                           18.6              1.5            20.1




                               COSTAIN GROUP PLC
              Interim results for the half-year ended 30 June 2004


5.             Joint ventures (continued)
                                                           2004              2003           2003
                                                        Half year          Half year        Year
                                                           £m                 £m             £m

Financial commitments                                     3.0                  -              -

Capital commitments                                      21.9                2.2            7.3


The commitments relate to joint ventures involved in Private Finance Initiative
schemes and the capital commitments to construction work being undertaken by the
Costain Group. All figures are the Group's share.

The results of the Group for the six months to 30 June 2004 and 30 June 2003
were prepared in accordance with the accounting policies stated in the Company's
2003 statutory accounts. The Interim Report and Accounts are unaudited but have
been reviewed by the Company's auditors and their Independent Review Report is
set out below.

The figures for the year ended 31 December 2003 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 2003 have
been 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.



INDEPENDENT REVIEW REPORT BY KPMG AUDIT PLC TO COSTAIN GROUP PLC

Introduction

We have been engaged by the Company to review the financial information set out
in the attached Consolidated Profit and Loss Account, Consolidated Cash Flow
Statement, Consolidated Balance Sheet and Notes to the Accounts and we have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.

This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority.  Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose.  To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the Company
for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors.  The directors
are responsible for preparing the interim report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual accounts except where they are to be changed in the next annual
accounts in which case any changes, and the reasons for them, are to be
disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom.  A review consists principally of making
enquiries of Group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed.  A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower level of assurance than an audit.  Accordingly we do
not express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2004.



KPMG Audit Plc

Chartered Accountants


London
31 August 2004




SHAREHOLDER INFORMATION


The Company's Registrar is Lloyds TSB Registrars, The Causeway, Worthing, West
Sussex BN99 6DA.  Their web site address is www.lloydstsb-registrars.co.uk.  For
enquiries regarding your shareholding, please telephone [phone].  You can
also view up-to-date information about your holdings by visiting the shareholder
web site at www.shareview.co.uk.  Please ensure that you advise Lloyds TSB
Registrars promptly of a change of name or address.


ShareGIFT


The Orr Mackintosh Foundation (ShareGIFT) operates a charity share donation
scheme for shareholders with small parcels of shares whose value makes it
uneconomic to sell them.  Details of the scheme are available on the ShareGIFT
Internet Site www.sharegift.org.  Lloyds TSB Registrars can provide stock
transfer forms on request.  Donating shares to charity in this way gives rise
neither to a gain nor a loss for Capital Gains Tax purposes.  This service is
completely free of charge.





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