Pre Close Trading Update

RNS Number : 9909Y

Costain Group PLC

06 January 2011

 



Costain Group PLC

("Costain" or "the Group")

Pre Close Trading Update

Costain, which expects to announce preliminary results for the year ended 31 December 2010 on Wednesday 9 March 2011, is issuing a trading update ahead of entering its Close Period.

Trading update

Since the announcement of the Group's Interim Management Statement on 8 November 2010, Costain has continued to perform well and consequently finished the year in line with the Board's expectations.

The Group's operations have continued to benefit from its 'Choosing Costain' strategy of focussing on targeted blue chip customers in chosen sectors whose major spending plans are underpinned by strategic national needs, regulatory commitments or essential maintenance requirements. Costain has a proven scale and capability to deliver successfully complex solutions in markets with significant potential, including power, waste, rail and nuclear and will continue to broaden its capability in providing a range of lifecycle solutions to its customers and, as a result, has entered 2011 with a strong order book and pipeline of opportunities.

As at 31 December 2010, the Group's Forward Order Book was £2.4 billion (2009: £2.6 billion), and included circa £800 million of work secured for 2011.

The order book has benefited from a number of major contract awards during the year, including:

-     Bond Street station upgrade, in joint venture, for London Underground;

-     5-year MAC 14 highways maintenance contract

-     Highways Agency Managed Motorway framework

-     A 10-year nuclear framework contract for Magnox South 

-     Cable tunnel infrastructure for National Grid

-     Welsh Water AMP 5 contract

-     Lewisham BSF contract for the construction of four schools; and

-     Highways contract for Neath Port Talbot County Borough Council

In addition, the Group is currently preferred bidder on contracts with an aggregate value of more than £400 million and the level of tendering activity for the Group's target customers remains very high.

Costain maintained its strong cash position in excess of £100 million and no significant borrowings.

The further improvement of the Group's future cash flows as a result of the PFI transfer to significantly reduce the pension deficit, announced with the Interim Management Statement in November 2010, will also strengthen the Group's financial position going forward.

Revised Approach to Mouchel Group plc

The Group has announced separately today that it has approached the Board of Mouchel Group plc with a significantly enhanced proposed all share offer for the entire issued and to be issued share capital of Mouchel.

The Board of Costain continues to believe that there is a compelling strategic rationale for combining Mouchel and Costain, with the significant benefits that such a combination would provide for both sets of shareholders.

Accordingly, the Board of Costain looks forward to discussing this significantly enhanced proposal with the board of Mouchel as soon as possible.

The full announcement can be viewed at http://www.costain.com

Summary 

The Board is pleased to report that the Group made good progress in 2010, and that the year concluded in line with its expectations which will also benefit from the additional £7.5 million profit resulting from the PFI transfer transaction completed during the year.

Andrew Wyllie, Chief Executive, commented:

"Whilst economic conditions are expected to remain challenging, we continue to benefit from our strategy of focusing on major customers in chosen sectors whose major spending plans are underpinned by strategic national needs, regulatory commitments or essential maintenance requirements, as evidenced by the strength of our order book and the type of contracts that we are winning."

6 January 2010

There will be a conference call for analysts at 08.00 this morning (Thursday 6^th January 2011).  Please contact Adam Aljewicz on 020 7457 2020 or at [e-mail] for details.

Enquiries:

Costain	Tel: [phone]
Andrew Wyllie, Chief Executive
Tony Bickerstaff, Finance Director
Graham Read, Communications Director
Investec	Tel. [phone]
David Currie
Charles Batten
James Rudd
College Hill	Tel: [phone]
Mark Garraway
Mike Davies
Adam Aljewicz

 Notes to Editors

Costain is an international engineering and construction group with a reputation for technical excellence founded on more than 140 years of experience. The Group has significant and growing consultancy and maintenance activities, alongside a leading construction and engineering capability.  At 30 June 2010, 14 per cent. of Costain's £2.5 billion order book was in operations and maintenance.

The Group continues to benefit from its 'Choosing Costain' strategy of focussing on targeted blue chip customers in chosen sectors whose major spending plans are underpinned by strategic national needs, regulatory commitments or essential maintenance requirements.  The Group continues to develop its scale and resources to meet successfully the increasingly complex delivery programmes and outsourcing needs of major customers. 

Over the next decade, the Board believes that those programmes will be primarily in three growth markets:-

Infrastructure                 - particularly Highways, Rail and Airports

Environment                  - particularly Water and Waste

Energy & Process           - particularly Nuclear, Power, and Hydrocarbons & Chemicals

Therefore, Costain's strategy is both to build on the Group's current strengths and to broaden and improve the quality of earnings streams by accelerating the development of an integrated business, providing front-end engineering consultancy, construction and ongoing care and maintenance services. As previously announced, it is expected that the Group's growth aspirations for the business will be achieved through a combination of organic growth and by suitable acquisitions in line with strategy. 

Costain has worked on a number of significant infrastructure projects in the UK, including the St Pancras railway station and the Channel Tunnel Rail Link, and is currently working on a number of significant projects including the municipal waste treatment infrastructure for the Greater Manchester Waste Disposal Authority and EVAP D at Sellafield, one of the largest nuclear projects in the UK.

A copy of this announcement will shortly be available, free of charge, on the Company's website at www.costain.com

Forward looking statements

This announcement contains statements about Costain and Mouchel that are or may be forward looking statements.  All statements other than statements of historical facts included in this announcement may be forward looking statements. Without limitation, any statements preceded or followed by or that include the words "targets", "plans" "believes", "expects", "aims", "intends", "will", "may", "anticipates", "estimates", "projects" or words or terms of similar substance or the negative thereof, are forward looking statements.  Forward looking statements include statements relating to, among other things: Costain's expected growth markets over the next decade and the expected benefits of the proposed combination of Costain and Mouchel.

Such forward looking statements involve risks and uncertainties that could significantly affect expected results and are based on certain key assumptions.  Many factors could cause actual results to differ materially from those projected or implied in any forward looking statements, including, among others, risks relating to the successful combination of Mouchel with Costain; higher than anticipated costs relating to the combination of Mouchel with Costain; and facts relating to Mouchel that may impact the timing or amount of benefit realised from the combination that are unknown to Costain.  Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date hereof.  Costain disclaims any obligation to update any forward looking or other statements contained herein, except as required by applicable law.

Disclosure requirements of the Takeover Code (the "Code")

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified.  An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s).  An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified.  Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror.  A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8.  A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on [phone].

This announcement does not constitute an offer and it should not be construed as constituting an offer nor does it evidence a firm intention to make an offer, the making of which is not subject to any pre-conditions. This announcement does not amount to any commitment to make or proceed with an offer and is not intended to give rise to any obligation to make an announcement pursuant to Rule 2.2 of the Takeover Code or otherwise. Accordingly, there can be no certainty that any offer will ultimately be made. The making of any offer will be subject to a number of pre-conditions, including the satisfactory completion of due diligence and the recommendation of the board of Mouchel. Costain reserves the right to waive any or all of such pre-conditions. In addition, Costain reserves the right to amend any of the potential terms of such an offer that have been mentioned in this announcement, in the event that (i) the board of Mouchel agrees and recommends any such change, (ii) a third party announces a firm intention to make an offer for Mouchel, or (iii) Mouchel announces, declares or pays a dividend or any other distribution or other payments to its shareholders. Further, Costain reserves the right to vary the form and/or mix of consideration and/or introduce other forms of consideration in relation to any offer.

This announcement does not constitute an offer to purchase any securities, or an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any offer to purchase or sell securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. No offering of securities may be made in the United States except pursuant to registration under the US Securities Act of 1933 or an exemption from registration.

The release, distribution or publication of this announcement in jurisdictions other than the UK may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the UK should inform themselves about and observe any applicable requirements.

Unless otherwise determined by Costain, this announcement and any proposed offer will not be made, directly or indirectly, in or into any jurisdiction where to do so would violate the laws of that jurisdiction (a "Restricted Jurisdiction") or the United States, or by the use of any means or instrumentally (including, without limitation, telex, facsimile transmission, telephone, internet or other forms of electronic communication) of interstate or foreign commerce, or of any facility of a national securities exchange of any Restricted Jurisdiction or the United States.  Unless so determined by Costain, the proposed offer will not be capable of acceptance by any such use, means or instrumentally or facility of any Restricted Jurisdiction or the United States.

Copies of this announcement will not be, and must not be, directly or indirectly, mailed or otherwise forwarded (including, without limitation, by telex, facsimile transmission, telephone, internet or other forms of electronic communication), distributed or sent in, into or from any Restricted Jurisdiction or the United States.

 

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