Interim Results
Costain Group PLC
30 August 2006
Costain Group PLC
('Costain' or the 'Group')
Interim results for the half year ended 30 June 2006
Costain, the engineering and construction group, today provides an update on the
decisive actions taken to implement its new 'Being Number One' strategy and
reports that the majority of its core operations performed well during the first
half of the year.
H1 2006 H1 2005
Revenue £436.2m £345.4m
(Loss)/profit from operations £(21.9)m £7.8m
(Loss)/profit before tax £(20.7)m £7.5m
(Loss)/earnings per share (5.1)p 1.8p
• Robust actions taken by the management team in implementing the
'Being Number One' strategy:
- Reposition resource behind core businesses
- Drive performance improvement
- Exit non-core activities
• Results impacted by contract claims write-downs in Building Division, poor
performance of COGAP and closure costs and contract write-downs in the
International Division
• Underlying profit of £10.1m (2005: £7.7m)*
• Strong performance from Civil Engineering
• Further key executive management appointments to enhance presence in target
sectors
• Forward order book up 19% on same period last year to £1.9bn and maintains
the record level achieved at the year-end
• £850m of revenue secured for the current year
• Pension deficit reduced by 30% since December 2005 following latest actuarial
review
• Net cash balance of £49.9m (2005: £44.4m)
* Profit from operations excluding write-downs of contract claims in the
Building Division, the International Division and before IFRS restatements in
respect of 2005 in relation to Spanish property - (see reconciliation in results
section on page 4)
Commenting, the Chairman, David Jefferies, said:
'The new management team, under the leadership of Andrew Wyllie, has taken
robust action to deal with those activities within the Group which are
underperforming and to ensure the successful operating approach, already in
place within the majority of our sectors, is adopted across the whole business.
The implementation of our strategy - 'Being Number One' - is producing a much
sharper focus on performance and delivery.
The Group continues to concentrate on developing strategic partnering agreements
and long term frameworks through which we can build market leading positions.
The overall underlying performance from the majority of our core activities
remains encouraging for the second half of the year.
Whilst we have incurred significant write-downs in the first half of this year,
the Board remains committed to the resumption of dividend payments as soon as is
financially sensible and will consider the position at the year-end in the light
of the Group's performance and prevailing trading conditions.'
30 August 2006
ENQUIRIES:
Costain Group PLC Tel: 01628 842 444
Andrew Wyllie, Chief Executive
Tony Bickerstaff, Finance Director
Graham Read, Group Communications
College Hill Tel: 020 7457 2020
Mark Garraway
Matthew Gregorowski
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT
Overview and Strategic Update
Implementation of the Group's 'Being Number One' strategy announced in March is
well underway and has led to a number of decisive actions by the new executive
management team to deliver a stronger performance within its core activities.
As a result of this focus on targeted sectors in which we can achieve market
leading positions and on performance across all the Group's activities, a
strategic decision, as already announced, was taken to close the Group's
International Division and run several of its projects through the Group's core
businesses with the remainder to be worked through by the existing project
teams.
It was also decided to bring a greater degree of focus to the operations of
Costain Oil, Gas & Process ('COGAP') and in future the business will concentrate
on niche areas within the oil & gas sector where Costain can achieve a stronger
market position and establish a platform from which to grow. COGAP's future
performance will be closely monitored and further decisive actions taken as
required.
The latest regular business review and certain developments in the last few
months has resulted in a greater level of uncertainty in relation to recovery of
certain contract claims within the Building Division. Therefore we consider that
it is appropriate to write-down £11.9m against these contract claims to the
extent they may be irrecoverable. There is no impact on the Group's cash
position.
We have recently made a number of executive management appointments which have
significantly strengthened the Group's leadership team and which will enhance
our position within the respective market sectors in which we operate. New
directors were appointed for our Highways, Rail and Nuclear activities which are
further positive steps towards creating leading positions within these important
market sectors. We have a new Group commercial director in place and have also
appointed new directors of Legal and HR.
We are significantly rationalising our supply chain, bringing it more into line
with our business practice of working under longer term partnering agreements
with our clients. For example, we have established key strategic relationships
with three major mechanical and electrical contractors to improve supply chain
delivery across the Group. These partners will deliver coordinated working
practices and processes with increased delivery performance.
Costain is pursuing Business Excellence as a driver for change, leading towards
'Being Number One' in its chosen sectors, and has joined the British Quality
Foundation ('BQF'). The BQF helps organisations improve their performance and
achieve sustainable excellence, and each of Costain's core operations will
complete a gap analysis on current business capability in relation to the EFQM
Excellence Model, Europe's leading performance improvement methodology.
Results
The majority of the Group's core activities have performed well. We are
benefiting from continued strong levels of customer spend within our targeted
market sectors, and our forward order position has increased by more than 19% to
£1.9bn from the equivalent position in 2005 and which maintains the record level
achieved at the end of the year. This includes work secured for the next five
years of which the majority is repeat business from key clients, providing
excellent quality and visibility of earnings. £850m of revenue is already
secured for the current year.
Revenue for the half year ended 30 June 2006 was £436.2m (2005: £345.4m) with a
loss from operations of £21.9m (2005: £7.8m profit). Loss before tax was £20.7m
(2005: £7.5m profit) and loss per share was 5.1p (2005: earnings of 1.8p).
These results include £11.9m of provisions in respect of contract claims in the
Group's Building Division for which there is no cash effect. They also include
£18.0m of provisions from the closure costs and contract write-downs in the
Group's International Division, of which the future cash impact is £7.0m.
Underlying profit from operations was £10.1m for the period. This is reconciled
to the £21.9m loss from operations by deducting the provision of £11.9m in
respect of contract claims in the Building Division and the £20.1m loss from the
International Division which we are now in the process of closing.
These results include £3.5m of profit from the sale of the Group's remaining
stake in Kings College PFI during the period.
The performance of our COGAP Division for the first six months was again very
disappointing, producing a loss from operations of £1.1m on revenue of £30.8m.
As previously reported, whilst the adoption of IFRS had no impact upon the
underlying cash flows or trading activities of the Group, the 2005 interim and
full year results included certain adjustments to revenue and profits as a
result of timing differences from the Group's property development activities in
Southern Spain. This resulted in an additional £1.3m of profit previously
recognised under UK GAAP being included in the first half of 2005.
The Group has no significant borrowings and net cash balances at the half year
totalled £49.9m (2005: £44.4m), including the Group's share of cash held by
joint arrangements (construction joint ventures) of £22.1m (2005: £18.7m). The
continuing changing profile of the business into framework/partnered client
relationships is resulting in a more even cash flow profile.
The Group's pension deficit as at 30 June 2006 was £48.7m net of deferred tax, a
reduction of 30% since the year-end. This is derived from the Group's most
recent actuarial review and reflects current market conditions.
Civil Engineering
Revenue during the period was £217.0m (2005: £145.7m), with a profit from
operations of £7.9m (2005: £6.8m).
In Water, where we are market leaders, we are making considerable progress in
delivering our customers' AMP4 programmes and, as expected, are seeing good
volumes of work coming through. Our customers are delighted that we have
delivered all their first year regulatory targets.
In Rail, the Western Ticket Hall at Kings Cross was opened on schedule on 31
May, and a major milestone was reached at CTRL Project 105 at St Pancras when
the new Midlands Mainline platforms were handed over on the 17 July target date.
Midlands Mainline trains are now fully operational from these platforms.
In Highways, the £66m M25 Holmesdale Tunnel Refurbishment works commenced on
site on 9 May, and the A2/M25 Early Contractor Involvement ('ECI') scheme is
now underway. We were also awarded two further ECI projects by the Highways
Agency, namely the £25m A34 Wolvercote Viaduct Replacement and the £46m North
East Roads Package B, which includes improvements to the A19 at two separate
locations.
In Nuclear, we continue to be active on a number of projects, and have made a
number of key appointments, including a new Director of Nuclear who has more
than 20 years experience in the sector, and the Group now has a strong platform
in place from which to build this business.
Building
Revenue was £158.3m (2005: £155.6m) with a loss from operations of £7.9m (2005:
£0.4m) including a provision of £11.9m resulting from the write down of contract
claims. The results also include £3.5m profit from the sale of the remaining
equity stake in Kings College PFI.
Whilst we continue to vigorously pursue our entitlement on contract claims,
indications from legal opinions and the outcomes from resolution processes in
the last few months have led us to make appropriate write-downs against the
anticipated value of certain contract claims to reflect the position at 30 June
2006.
As we highlighted in our 2005 annual report, following rapid growth in 2005
which stretched resources across the Division, the operational team has been
considerably strengthened in early 2006 with additional high quality and
experienced people. Key management changes are being made and robust actions
have been taken to strengthen procurement and operational controls but there
still remains much work to do in order to deliver acceptable returns. This
business is also now tendering for work on a more selective basis targeting blue
chip clients with potential for repeat order business to improve future
profitability.
We are reorganizing the Division in line with our focus on strengthening our
presence in the key sectors of Health, Education and Retail in order to increase
our commitment to sector expertise and customer delivery.
In Health, the first phases of the Shropshire Community Services PFI were
completed, as were two schemes at Sheffield and Alderhey as part of the
Government's Procure21 initiative. We reached an agreement with Amec and Mowlem
that we will proceed on our Procure21 framework with the Department of Health on
our own and are confident of taking a leading position in the healthcare sector.
In Education, as part of the Integrated Bradford consortium, we were selected by
Bradford Council to deliver its Building Schools for the Future ('BSF')
programme, worth approximately £400m to the consortium over a 30-year period.
We were also awarded a £34m contract to build student accommodation for the
London School of Economics at Northumberland House in Westminster, due to be
completed in the spring of 2007.
In Retail, we have significantly strengthened our working relationship with
Tesco during the first half, completing three projects at Roneo Corner,
Martlesham, and Ilfracombe, and commenced work on a further six projects at
Southend, Beckton, Chelmsford, Royston, Borehamwood and Exeter.
Property Development
Our development activities in Southern Spain were in line with expectations with
our share of the Spanish property joint venture generating a profit after tax of
£2.1m (2005: £3.6m).
At Alcaidesa, major land sales were completed, with further disposals contracted
and due for completion in the second half of the year. Construction of the
second golf course should be completed by November. The new club house, which
will serve both golf courses, is under construction and is on track to meet its
July 2007 completion date.
At Granada, further land was purchased at Salobrena to add to our existing
holdings. Good progress was made towards achieving planning consent on the
existing site, which will significantly enhance its value. We also opened a new
office in March in Motril, from which we will expand and manage new operations
in this province. Further land opportunities in the area have been identified
and are being pursued.
Costain Oil, Gas & Process ('COGAP')
COGAP had a disappointing performance. Revenue during the first six months was
£30.8m (2005: £25.3m) with an operating loss of £1.1m (2005: profit of £0.3m)
The management team has taken action to more closely align COGAP's operations to
those niche areas where we have specific expertise and can grow our market
presence. In line with this increased focus, COGAP has been awarded a £6m
contract by Eni Pakistan Limited to provide engineering, procurement services
and construction management support services.
COGAP's progress will be closely monitored and further action taken in future
if necessary.
International
Following persistent underperformance, management took the strategic decision to
close the International Division and following detailed analysis regarding costs
of closure and ongoing contractual obligations, this provision has been assessed
at £18m. This provision includes the write-down of contractual values, historic
claims, potentially irrecoverable funding together with the cost of closure.
Costain will continue to pursue international opportunities but now only within
each of its core activities, providing they complement the Group's strategy of
focusing on key targeted sectors.
Health, Safety & Environment
Health & Safety is an utmost priority as we strive to maintain a zero tolerance
approach towards accidents. Our performance in this area was recognised during
the period at the 2006 RoSPA Awards when Costain received no fewer than 28
awards, comprising one Commendation in the Construction Industry Sector Award,
20 Golds including five Gold Project Achievement awards in recognition of
excellence in project delivery, six Silvers and one Bronze Award. Six of these
awards were received through our COGAP Division, including the prestigious Order
of Distinction.
As part of the 4Delivery consortium, Costain was awarded a RoSPA Gold Award for
project delivery for Southern Water in its first year of operation. The Group
also won two further client awards for Yorkshire Water and were short listed for
an additional three. Of particular note is the People Award which underpins our
commitment and success in developing and maintaining integrated, collaborative
teams with our clients. We were also awarded the George Gibby Award for 2006
for an outstanding Civil Engineering Project, for Sirhowy Enterprise Way.
As part of our drive to reduce waste and achieve further cost savings, in June
we officially launched our new 'Save It' initiative in order to promote the
reduction of waste through improved material and resource management and the
recycling and re-use of material. This is an essential part of a much bigger
sustainability campaign which has seen the implementation of sustainable
construction best practices and techniques across the business. We will report
on this in more detail at the end of the year.
Board
Tony Bickerstaff joined the Board as Group finance director on 5 June 2006
following Charles McCole's decision to step down.
Outlook
The new management team, under the leadership of Andrew Wyllie, has taken robust
action to deal with those activities within the Group which are underperforming
and to ensure the successful operating approach, already in place within the
majority of our sectors, is adopted across the whole business. The
implementation of our strategy - 'Being Number One' - is producing a much
sharper focus on performance and delivery.
The Group continues to concentrate on developing strategic partnering agreements
and long term frameworks through which we can build market leading positions.
The overall underlying performance from the majority of our core activities
remains encouraging for the second half of the year.
The Board remains committed to the resumption of dividend payments as soon as is
financially sensible and will consider the position at the year-end in the light
of the Group's performance and prevailing trading conditions.
David G Jefferies - Chairman
Andrew Wyllie - Chief Executive
Consolidated Income Statement
Half-year ended 30 June, Notes 2006 2005 2005
year ended 31 December Half-year Half-year Year
£m £m £m
+--------+ +--------+ +--------+
Revenue (Group and share of joint ventures | | | | | |
and associates) 2 | 436.2| | 345.4| | 773.2|
Share of joint ventures and associates 5 | (63.9)| | (21.9)| | (95.1)|
+--------+ +--------+ +--------+
Group revenue 372.3 323.5 678.1
-------- -------- --------
Group operating (loss)/profit (22.6) 4.5 8.7
Sale of interest in joint venture 3.5 - 3.5
Share of results of joint ventures and
associates 5 (2.8) 3.3 13.4
-------- -------- --------
(Loss)/profit from operations 2 (21.9) 7.8 25.6
Finance income 3 13.2 12.0 23.5
Finance costs 3 (12.0) (12.3) (24.1)
-------- -------- --------
Net financing income/(costs) 1.2 (0.3) (0.6)
-------- -------- --------
(Loss)/profit before tax (20.7) 7.5 25.0
Income tax 2.6 (1.1) (1.4)
-------- -------- --------
(Loss)/profit for the period 2 (18.1) 6.4 23.6
-------- -------- --------
Attributable to:
Equity holders of the parent (18.1) 6.4 23.6
Minority interests - - -
-------- -------- --------
(Loss)/earnings per share - basic 4 (5.1)p 1.8p 6.7p
(Loss)/earnings per share - diluted 4 (5.0)p 1.8p 6.5p
Consolidated Statement of Recognised Income and Expense
Half-year ended 30 June, 2006 2005 2005
year ended 31 December Half-year Half-year Year
£m £m £m
Exchange differences on translation of foreign operations 0.3 (0.8) (0.9)
Cash flow hedges:
Effective portion of changes in fair value (net of
tax) during period - Group 0.1 - (0.6)
Effective portion of changes in fair value (net of
tax) during period - joint ventures and associates 3.2 (1.8) (2.7)
Fair value adjustment of asset held for sale (3.4) - 3.4
Actuarial gains/(losses) on defined benefit pension
schemes 30.0 (7.5) 0.2
Tax recognised on actuarial (gains)/losses recognised
directly in equity (9.0) 2.3 -
-------- -------- --------
Net income/(expense) recognised directly in equity 21.2 (7.8) (0.6)
(Loss)/profit for the period (18.1) 6.4 23.6
-------- -------- --------
Total recognised income and expense for the period 3.1 (1.4) 23.0
-------- -------- --------
Effect of change in accounting policy:
Effect of adoption of IAS 32 and IAS 39 (net of tax) on 1
January 2005 (with 2004 not restated) on hedging reserve
- Group - 0.2 0.2
Effect of adoption of IAS 32 and IAS 39 (net of tax) on 1
January 2005 (with 2004 not restated) on hedging reserve
- joint ventures and associates - (1.9) (1.9)
-------- -------- --------
3.1 (3.1) 21.3
-------- -------- --------
Attributable to:
Equity holders of the parent 3.1 (3.1) 21.4
Minority interests - - (0.1)
-------- -------- --------
3.1 (3.1) 21.3
-------- -------- --------
Consolidated Balance Sheet
Half-year ended 30 June, Notes 2006 2005 2005
year ended 31 December Half-year Half-year Year
£m £m £m
ASSETS
Non-current assets
Property, plant & equipment 5.8 4.6 5.9
Intangible assets 3.9 2.1 3.5
Investments in joint ventures 5 27.1 16.1 27.6
Investments in associates 5 1.0 0.2 0.2
Loans to joint ventures 2.6 0.4 0.2
Loans to associates 0.4 3.0 3.0
Other investments 1.0 1.0 4.4
Other debtors 7.3 9.8 10.2
Deferred tax assets 24.6 33.4 31.1
-------- -------- --------
Total non-current assets 73.7 70.6 86.1
-------- -------- --------
Current assets
Inventories 2.0 1.9 2.0
Trade and other receivables 184.3 179.9 166.5
Cash and cash equivalents 51.2 45.3 75.2
-------- -------- --------
Total current assets 237.5 227.1 243.7
-------- -------- --------
Total assets 311.2 297.7 329.8
======== ======== ========
EQUITY
Share capital 17.9 17.7 17.8
Share premium 0.5 - 0.4
Special reserve 12.9 13.6 13.1
Fair value reserve - - 3.4
Foreign currency translation reserve (0.9) (1.1) (1.2)
Hedging reserve (1.7) (3.5) (5.0)
Retained earnings (47.8) (74.3) (51.0)
-------- -------- --------
Total equity attributable to equity
holders of the parent (19.1) (47.6) (22.5)
-------- -------- --------
Minority interests - 0.1 -
-------- -------- --------
Total equity (19.1) (47.5) (22.5)
-------- -------- --------
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings 0.1 0.3 0.2
Retirement benefit obligations 69.5 107.2 99.3
Other payables 2.4 2.0 7.2
Long-term provisions 4.9 3.1 6.8
-------- -------- --------
Total non-current liabilities 76.9 112.6 113.5
-------- -------- --------
Current liabilities
Trade and other payables 243.4 226.4 233.3
Current tax liabilities 3.2 2.8 3.2
Overdrafts 0.2 0.5 0.2
Interest bearing loans and borrowings 1.0 0.1 0.8
Provisions 5.6 2.8 1.3
-------- -------- --------
Total current liabilities 253.4 232.6 238.8
-------- -------- --------
Total liabilities 330.3 345.2 352.3
-------- -------- --------
Total equity and liabilities 311.2 297.7 329.8
======== ======== ========
Consolidated Cash Flow Statement
Half-year ended 30 June, 2006 2005 2005
year ended 31 December Half-year Half-year Year
£m £m £m
Cash flows from operating activities
(Loss)/profit for the period (18.1) 6.4 23.6
Adjustments for:
Depreciation and amortisation 1.2 0.5 1.5
Finance income (13.2) (12.0) (23.5)
Finance costs 12.0 12.3 24.1
Share based payments expense 0.2 0.1 0.2
Income tax (2.6) 1.1 1.4
Sale of interest in joint venture (3.5) - (3.5)
Share of results of joint ventures and associates 2.8 (3.3) (13.4)
Release of provision against investment - - (0.3)
-------- -------- --------
Operating (loss)/profit before changes in working
capital and provisions (21.2) 5.1 10.1
Increase in inventories - (0.9) (1.1)
Increase in receivables (14.2) (33.0) (15.1)
Increase in payables 5.3 13.0 24.2
Movement in provisions and employee benefits (1.4) (0.2) (3.0)
-------- -------- --------
Cash (used by)/from operations (31.5) (16.0) 15.1
Interest paid (0.2) (0.2) (0.1)
Income taxes paid - - -
-------- -------- --------
Net cash (used by)/from operating activities (31.7) (16.2) 15.0
-------- -------- --------
Cash flows from investing activities
Interest received 1.2 1.3 2.4
Additions to property, plant & equipment (0.7) (1.8) (2.4)
Additions to intangible assets (0.8) - (3.1)
Additions to investments (2.0) (0.2) (0.2)
Sale of interest in joint venture 7.1 - -
Capital repayments by investments - - 1.3
Dividend received from joint venture 2.6 - -
Loans to joint ventures and associates 0.2 (1.2) (2.6)
-------- -------- --------
Net cash from/(used by) investing activities 7.6 (1.9) (4.6)
-------- -------- --------
Cash flows from financing activities
Issue of ordinary share capital 0.2 - 0.5
New loans 0.2 - 0.4
Payment of loans and finance lease liabilities (0.1) (0.5) (0.3)
-------- -------- --------
Net cash from/(used by) financing activities 0.3 (0.5) 0.6
-------- -------- --------
Net (decrease)/increase in cash and cash equivalents (23.8) (18.6) 11.0
Cash and cash equivalents at beginning of period 75.0 63.5 63.5
Effect of foreign exchange rate changes (0.2) (0.1) 0.5
-------- -------- --------
Cash and cash equivalents at end of period 51.0 44.8 75.0
-------- -------- --------
Notes to the Interim Financial Statements
These interim financial statements do not constitute statutory accounts within
the meaning of the Companies Act 1985 and are unaudited. The Board approved the
unaudited interim financial statements on 30 August 2006.
1. Basis of preparation
This interim financial information has been prepared applying the accounting
policies and presentation that were applied in the preparation of the company's
published consolidated financial statements for the year ended 31 December 2005.
The interim financial information is prepared on a going concern basis which the
directors believe to be appropriate for the following reasons. The group meets
its day to day working capital and bonding requirements through banking and
surety company facilities. The interim results include £11.9m of write downs and
provisions in respect of contract claims in the Group's Building division. They
also include £18.0m of provisions from the closure costs and contract
write-downs in the Group's International division. As a result of these
provisions, the Group is in breach of its banking and surety covenants in
respect of the rolling 12 month EBITDA clause at 30 June 2006 and therefore the
facilities are now technically repayable on demand.
However, the Group continues to meet all other covenants and immediate
indications from the Group's facility providers are that the breach will be
waived. Given that discussions with the facility providers are on-going at the
time of the Board's approval of the interim financial statements, there can be
no certainty in relation to these matters. The financial statements do not
include any adjustments that would result from a withdrawal of the facilities by
the Group's bankers or surety providers or those facilities proving
insufficient.
The directors have prepared projected cash flow information for the period
ending twelve months from the date of their approval of this interim financial
information. On the basis of this cash flow information and discussions with the
Group's facility providers, the directors are confident that the facilities will
continue to be provided and that the Group will continue to operate within its
non EBITDA covenants. The directors are also confident that formal waiver of the
EBITDA breach at 30 June 2006 and any future breaches given the rolling 12 month
basis, will be received and that this clause will be re-negotiated in the
Group's favour.
2. Business and geographical segment information by origin
In the opinion of the Directors, the business segments are Civil Engineering,
Building, Oil Gas & Process and International, which undertake engineering and
construction projects, the Group's property development operation in Spain and
central costs. These represent the Group's primary segments. Secondary segments
are presented geographically.
* Revenue in the tables below includes the Group's share of joint ventures and
associates.
For the half-year Civil Building Oil, Gas & International Property Central Total
ended Engineering Process Development costs
30 June 2006
£m £m £m £m £m £m £m
Revenue * 217.0 158.3 30.8 22.9 7.2 - 436.2
-------------------------------------------------------------------------------------
Group operating profit/(loss)
(loss) 7.5 (11.5) (1.2) (14.6) - (2.8) (22.6)
Sale of interest in
joint venture - 3.5 - - - - 3.5
Share of results of
joint ventures and
associates 0.4 0.1 0.1 (5. 5) 2.1 - (2.8)
-------------------------------------------------------------------------------------
Segment result 7.9 (7.9) (1.1) (20.1) 2.1 (2.8) (21.9)
----------------------------------------------------------------------------
Net financing income 1.2
Income tax 2.6
---------
Loss for the period (18.1)
---------
For the half-year ended Civil Building Oil, Gas & International Property Central Total
30 June 2005 Engineering Process Development costs
£m £m £m £m £m £m £m
Revenue * 145.7 155.6 25.3 8.4 10.4 - 345.4
-------------------------------------------------------------------------------------
Group operating profit
/(loss) 6.8 0.4 0.2 (0.8) - (2.1) 4.5
Share of results of
joint ventures and
associates - - 0.1 (0.4) 3.6 - 3.3
-------------------------------------------------------------------------------------
Segment result 6.8 0.4 0.3 (1.2) 3.6 (2.1) 7.8
----------------------------------------------------------------------------
Net financing costs (0.3)
Income tax (1.1)
---------
Profit for the period 6.4
---------
2. Business and geographical segment information by origin continued
For the year ended Civil Building Oil, Gas & International Property Central Total
31 December 2005 Engineering Process Development costs
£m £m £m £m £m £m £m
Revenue * 329.8 321.6 52.1 24.7 45.0 - 773.2
-------------------------------------------------------------------------------------
Group operating profit/(loss) 16.0 1.2 (1.2) (2.5) - (4.8) 8.7
Sale of interest in joint
venture - 3.5 - - - - 3.5
Share of results of
joint ventures and
associates - (0.4) 0.2 (0.4) 14.0 - 13.4
-------------------------------------------------------------------------------------
Segment result 16.0 4.3 (1.0) (2.9) 14.0 (4.8) 25.6
---------------------------------------------------------------------------
Net financing costs (0.6)
Income tax (1.4)
----------
Profit for the period 23.6
----------
Revenue * (Loss)/ profit from operations
2006 2005 2005 2006 2005 2005
Half-year Half-year Year Half-year Half-year Year
£m £m £m £m £m £m
United Kingdom 390.6 310.9 673.4 (4.4) 5.7 16.3
Spain 7.2 10.4 45.0 2.1 3.6 14.0
Rest of the world 38.4 24.1 54.8 (19.6) (1.5) (4.7)
--------------------------------------------------------------------------------------------
436.2 345.4 773.2 (21.9) 7.8 25.6
--------------------------------------------------------------------------------------------
3. Finance income and costs
Finance income includes the expected return on the assets of the pension scheme
of £12.0m (2005 half-year £10.7m, 2005 year £21.1m) and finance costs include
the expected increase in the present value of the scheme liabilities of £11.9m
(2005 half-year £12.1m, 2005 year £23.9m). 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.
4. Earnings per share
The calculation of earnings per share is based on loss for the
period of £18.1m (2005 half-year profit £6.4m, 2005 year profit £23.6m) and the
number of shares set out below:
2006 2005 2005
Half-year Half-year Year
Weighted average number of shares for basic earnings per 356,875,207 353,136,352 353,355,346
share calculation
Dilutive potential ordinary shares:
SAYE Scheme 6,567,096 8,578,793 7,945,390
----------- ----------- -----------
Weighted average number of shares for fully diluted
earnings per share calculation 363,442,303 361,715,145 361,300,736
----------- ----------- -----------
The nominal value of share capital was reduced and the share premium account
written off during the first half of 2005 following the shareholder and
subsequent court approval of the capital reduction. The excess after
eliminating the accumulated deficit of the Company was transferred to a special
reserve.
5. Joint ventures and associates
The analysis of the Group's share of joint ventures (JVs) and associates is set
out below:
2006 Half-year
Alcaidesa Other JVs Associates Total
£m £m £m £m
Revenue 7.2 52.6 4.1 63.9
-------- -------- -------- --------
Profit before tax 3.1 (4.4) (0.5) (1.8)
Income tax expense (1.0) - - (1.0)
-------- -------- -------- --------
Profit for the period 2.1 (4.4) (0.5) (2.8)
-------- -------- -------- --------
Non-current assets 6.5 5.2 1.9 13.6
Current assets 41.3 62.6 48.6 152.5
Current liabilities (18.1) (26.6) (7.4) (52.1)
Non-current liabilities (3.5) (40.3) (42.1) (85.9)
-------- -------- -------- --------
Investments in joint ventures and
associates 26.2 0.9 1.0 28.1
-------- -------- -------- --------
Presentation in the balance sheet in respect of joint ventures and associates
restricts the minimum carrying value of 'other joint ventures' and 'associates'
(above) to £nil. Where the carrying value is negative, the corresponding loan
value to those investments has been reduced or, where future funding obligations
exist, a provision made.
2005 Half-year
Alcaidesa Other JVs Associates Total
£m £m £m £m
Revenue 10.4 8.5 3.0 21.9
------------------------------------------------------------
Profit before tax 5.7 0.3 (0.6) 5.4
Income tax expense (2.1) - - (2.1)
------------------------------------------------------------
Profit for the period 3.6 0.3 (0.6) 3.3
------------------------------------------------------------
Non-current assets 9.6 0.2 5.4 15.2
Current assets 42.6 68.1 9.1 119.8
Current liabilities (32.2) (9.1) (4.5) (45.8)
Non-current liabilities (4.0) (59.1) (9.8) (72.9)
------------------------------------------------------------
Investments in joint ventures and
associates 16.0 0.1 0.2 16.3
------------------------------------------------------------
5. Joint ventures and associates continued
2005 Year
Alcaidesa Other JVs Associates Total
£m £m £m £m
Revenue 45.0 37.5 12.6 95.1
------------------------------------------------------------
Profit before tax 22.5 0.8 (1.1) 22.2
Income tax expense (8.5) (0.3) - (8.8)
------------------------------------------------------------
Profit for the period 14.0 0.5 (1.1) 13.4
------------------------------------------------------------
Non-current assets 7.4 0.7 2.0 10.1
Current assets 40.2 68.0 20.5 128.7
Current liabilities (15.6) (23.9) (7.5) (47.0)
Non-current liabilities (5.5) (43.7) (14.8) (64.0)
------------------------------------------------------------
Investments in joint ventures and
associates 26.5 1.1 0.2 27.8
------------------------------------------------------------
2006 2005 2005
Half-year Half-year Year
£m £m £m
Financial commitments 10.3 5.4 9.5
----------------------------------------
Capital commitments 28.4 20.6 36.3
----------------------------------------
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 comparative figures for the financial year ended 31 December 2005 are not
the company's statutory accounts for that financial year. Those accounts have
been reported on by the company's auditors and delivered to the registrar of
companies. The report of the auditors was (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a statement
under section 237(2) or (3) of the Companies Act 1985.
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.
Independent review report to Costain Group PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2006 which comprises the Consolidated Income
Statement, the Consolidated Balance Sheet, the Consolidated Statement of
Recognised Income and Expense, the Consolidated Cash Flow Statement and the
related notes. 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 of the Financial Services Authority 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 any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the UK. A review consists
principally of making enquiries of 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 excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with International Statements on Auditing (UK and Ireland) 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 2006.
Emphasis of matter - Going concern
In forming our conclusion, which is not qualified, we have considered the
adequacy of the disclosures made in note 1 to the financial information
concerning the group's ability to continue as a going concern. That note
discloses uncertainty as to the continuation and adequacy of the group's banking
and surety facilities, which indicates the existence of a material uncertainty
which may cast significant doubt over its ability so to continue.
KPMG Audit Plc
Chartered accountants
London
30 August 2006
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