TIDMCOST
RNS Number : 6987J
Costain Group PLC
21 August 2019
Costain Group PLC
("Costain" or "the Group" or "the Company")
Results for the half-year ended 30 June 2019 ("H1 2019")
Costain, the smart infrastructure solutions company, announces
its results for the first half and confirms that the Group remains
on course to deliver a full year performance in line with its
revised expectations.
-- Improved H1 margins: underlying(1) operating profit of
GBP21.2 million (H1 2018: GBP23.2 million*) with an overall
divisional operating margin of 4.0% (H1 2018: 3.5%*).
-- Strong momentum in securing new work: GBP1.1 billion of new
contract awards and extensions to existing contracts during the
first half, with the order book, as at 30 June, standing at GBP4.2
billion (H1 2018: GBP3.7 billion) including cGBP900 million revenue
secured for 2020 (H1 2018: cGBP850 million for 2019).
-- New 'Leading Edge' strategy in place: accelerating the
Group's deployment of higher margin services through leveraging our
strong client relationships and reputation for complex programme
delivery.
-- Robust balance sheet: total net assets of GBP178.4 million
including net cash of GBP40.8 million, and a positive current asset
ratio. Average month-end net cash balance during H1 2019 of GBP63.7
million (H1 2018: GBP90.8 million).
Alex Vaughan, chief executive officer, commented:
"While, as previously announced, delays to certain contract
start dates and new awards, together with a contract cancellation
will impact our full year performance, we are pleased that the
Group has continued to secure significant new work during the first
half. We therefore remain on track to deliver our revised
expectations for the current year and growth in 2020.
"We recently launched our 'Leading Edge' strategy for the
development of the business which aims to accelerate the deployment
of higher margin activities and deliver a blended divisional margin
range of 6%-7% over the medium term. The Group's structure has also
been reorganised to better align it to our clients and the markets
in which we operate.
"With this enhanced strategy and strong market backdrop,
underpinned by a robust balance sheet, we are focused on
significantly enhancing the value of Costain."
Summary financials
H1 2019 H1 2018 FY 2018
Restated*
Revenue
* including share of JVs and associates GBP599.2m GBP772.9m GBP1.489.3m
GBP594.1m GBP758.7m GBP1,463.7m
* reported
Operating profit
(-) underlying(1) GBP21.2m GBP23.2m GBP52.5m
GBP10.2m GBP21.4m GBP43.1m
* reported(3)
Profit before tax
* underlying(1) GBP19.5m GBP21.8m GBP49.7m
GBP8.4m GBP19.9m GBP40.2m
* reported(3)
Basic earnings per share
* underlying(1) 15.4p 16.6p 38.2p
* reported(3) 7.0p 15.1p 30.9p
Net cash balance(2) GBP40.8m GBP77.7m GBP118.8m
Dividend per share 3.8p 5.15p 15.15p
*H1 2018 has been restated in accordance with common practice to
reflect the decision to change the accounting treatment of Research
& Development Expenditure Credits ('RDEC'), for the 2018
year-end accounts, which is a reclassification between operating
profit and taxation of GBP0.4 million. The reported basic earnings
per share remains unchanged as a result of the restatement.
1. Before other items; amortisation of acquired intangible
assets, employment related deferred consideration and other one-off
costs as shown on the income statement.
2. Net cash balance is cash and cash equivalents less
interest-bearing loans and borrowings and excludes IFRS16 lease
liabilities of GBP30.2 million.
3. H1 2019 reported figures include the impact of the one-off
cost of GBP9.7m in respect of an arbitration award as set out in
the trading and financial performance section.
Enquiries:
Costain Tel: 01628 842 444
Alex Vaughan, Chief Executive Officer
Tony Bickerstaff, Chief Financial
Officer
Carolyn Rich, Investor Relations
Director
Sara Lipscombe, Group Communications
Director
Instinctif Partners Tel: 020 7457 2020
Mark Garraway
James Gray
Emily Smart
There will be a presentation to analysts today at 09:00 at
Instinctif Partners, 65 Gresham Street, EC2V 7NQ. To register your
attendance please contact emily.smart@instinctif.com
A webcast of the presentation and a short animation summarising
the results will be available after 2pm at
www.costain.com/results
Notes to Editors
Costain helps to improve people's lives with integrated, leading
edge, smart infrastructure solutions across the UK's energy, water,
transportation and defence markets. We help our clients improve
their business performance by increasing capacity, improving
customer service, safeguarding security, enhancing resilience,
decarbonising and delivering increased efficiency. Our vision is to
be the UK's leading smart infrastructure solutions company. We will
achieve this by focusing on blue chip clients whose major spending
plans are underpinned by strategic national needs, regulatory
commitments, legislation or essential performance requirements. We
offer our clients leading edge solutions that are digitally
optimised through the following five services which cover the whole
lifecycle of their assets: future-shaping strategic consultancy;
consultancy and advisory; digital technology solutions; asset
optimisation and complex programme delivery. Our culture and values
underpin everything we do
For more information visit www.costain.com
CHIEF EXECUTIVE OFFICER'S STATEMENT
The Group's underlying performance and strong level of new work
secured in the first half demonstrates that Costain's leading edge
services continue to be in demand from its clients and the Group
remains on course to deliver full year results in line with its
revised expectations, as set out in the trading update issued on 28
June 2019.
We have launched our new 'Leading Edge' strategy which places
greater emphasis on leveraging the Group's strong blue-chip client
relationships, and reputation for complex programme delivery,
through an accelerated deployment of higher margin services
including future-shaping strategic consultancy, consultancy and
advisory services, asset optimisation and digital technology
solutions.
Through a combination of organic and acquisitive growth, the
Group's ambition is to derive over half of its profit from higher
margin services, targeting a blended divisional margin range of
6%-7% over the medium-term. During the first half, the Group's
business mix has been enhanced with approximately 1/3 of operating
profit derived from higher margin services and 2/3 from complex
delivery activities delivering a combined 4% divisional margin
(before central costs) overall, increased from 3.5% in H1 2018. Our
ambition is to further shift this mix to 55% over the medium term,
from higher margin services with divisional margins in our new
target range.
We already have a good level of secured revenue for 2020 at
cGBP900 million (compared to cGBP850 million for FY2019 at the same
stage last year) and which is also higher margin business
overall.
Strategic update
'Leading Edge' strategy
We operate in the energy, water, transportation and defence
markets, where key strategic investment has been committed and
prioritised. These markets are evolving at a rapid pace as
population growth, climate change, customers' expectations of
improved service and public demand for action are resulting in the
need for our clients to change their business strategies and
investment priorities. Our 'Leading Edge' strategy closely aligns
our services to meet these changing needs. This strategy is rightly
ambitious and our focused implementation plan, together with a new
organisation structure, will ensure we drive value for all of our
stakeholders.
The Group's divisional structure has been re-organised to create
greater client focus and align with growing market opportunities.
We have consolidated our activities into two core divisions of
'transportation' (rail, highways and aviation) and 'natural
resources' (water, energy and defence). The Group's first half
segmental results are being presented on this new divisional basis,
including a re-presentation of the 2018 divisional results.
We are working in transportation to meet the increasing demands
on existing infrastructure to improve the nation's productivity in
the movement of goods and services, passenger experience and
journey reliability. This will enhance the UK's regional and global
connectivity to unlock economic growth, decarbonising our
environment and transitioning our infrastructure to new forms of
mobility including connected autonomous vehicles and hydrogen
trains.
To meet these demands, Network Rail has announced a 25% increase
in spending to GBP47 billion in Control Period 6 from 2019 to 2024
and a reorganisation of its business to put the 'Passenger First'.
Highways England has announced GBP25 billion of investment in its
strategic roads programme and an increase in its digital smart
motorway networks. The Government has committed the UK to be a
leader in the development and integration of connected autonomous
vehicles, a growing market opportunity expected to be worth cGBP11
billion per annum in the UK by 2030.
In water we are supporting our clients, the regulated water
companies, to enhance their business resilience to manage the
demands from climate change and population growth, protecting and
enhancing our environment, optimising the performance of their
existing infrastructure, increasing capacity and reducing energy
costs using self-generated renewable sources.
Ofwat has announced commitments to invest cGBP50 billion during
AMP 7 to meet these demands, through the development of new and
better ways of delivering the required services. As an example,
Thames Water has announced that it will invest GBP1 billion during
AMP 7 to exploit digital technology to improve business performance
and deliver efficiency benefits.
Across our energy clients we are working to ensure the safe and
reliable supply of energy, drive innovation to reduce cost,
increase the supply of renewables and meet decarbonisation targets
while responsibly decommissioning historical energy generation.
Our energy clients are responding to regulatory demands set by
Ofgem, the Nuclear Decommissioning Authority and the Oil & Gas
Authority that will include significant investment, with cGBP60
billion invested during RIIO-1. The Government's vision for a
future energy market is one where innovation brings greater choice
to consumers, allowing them to take advantage of the increased
flexibility and lower cost of a smart, low carbon energy
system.
For our defence clients we are providing risk and programme
management, project controls and consultancy support for the
delivery of major defence programmes to safeguard national
security.
In supporting our clients to shape the changing nature of our
future infrastructure we continue to sponsor 21 PhD students,
working with leading universities and business groups to further
enhance our capability and expertise to find innovative solutions
to meet our clients' needs.
We have a highly skilled and experienced workforce of c3,500
people, with over one third of our people working across
consultancy and technology roles, over 650 chartered professionals
with a diverse range of capabilities, c160 graduates developing
their skills and c150 apprentices on a structured development
programme. Our inclusion and wellbeing strategies ensure we support
our teams to be at their best, and for the second year running we
have been listed in the Times Top 50 Employers for Women and named
as one of its 'Game Changers' for the actions we have taken on
diversity.
Along with our engineering consultancy centre in Manchester
where over 350 of our team are based, we have opened our new
enlarged technology centre in Somerset, housing c150 of our
technology specialists. This enables us to work collaboratively
with our clients to develop pioneering technology solutions.
Our strategy sees Costain differentiate itself through long-term
strategic client relationships, valuable client insight,
benefits-driven leading edge services, a reputation for making
things happen and above all our outstanding and diverse team.
Trading and financial performance
Revenue, including the Group's share of joint ventures and
associates, reduced 22% to GBP599.2 million in the first half of
the year (2018: GBP772.9 million) and resulted in underlying
operating profit decreasing by 8.6% to GBP21.2 million (2018:
GBP23.2 million). As anticipated, the Group's underlying operating
margin has increased to 3.5% (2018: 3.0%), with the overall blended
margin from the divisional activities, before central costs,
increasing to 4.0% (2018: 3.5%).
The Group's operating profit benefits from a continuing
improvement in the natural resources division where a healthier
return from the broad range of services is being delivered, and a
good return from the transportation division. The reduction in
revenue results from a lower level of capital project activity in
the period. The increase in the Group's underlying operating profit
margin reflects the changing mix of the Group's activities in line
with our strategy.
As announced in the trading update issued on 28 June, during the
first half the Group has seen a number of delays to the timing of
contract start dates and new awards and the cancellation of a
project. Consequently we announced that the revenue for the full
year will be lower than previously anticipated and underlying
operating profit for the full year is expected to be in the range
of GBP38.0 million to GBP42.0 million.
The results include a one-off charge of GBP9.7 million in
respect of an arbitration award in favour of Diamond Light Source
Limited for the cost of remedial works deemed required to the roof
at the National Synchrotron facility. The building was constructed
by the Group under a contract awarded in 2004 with the works
completed in August 2006. The sub-contractor on the project, who
undertook the installation of the roof, would have been
contractually liable for the remedial works but went into
administration in November 2017. The nature of the contract,
undertaken by our then building business, is no longer within the
Group's activities or strategy and, therefore, the underlying
trading results have been reported before the impact from this
one-off item.
Net finance expense amounted to GBP1.9 million (2018: GBP1.6
million), with the increase due to the discount unwind on leases
resulting from the introduction of IFRS16, the impact of which is
described more fully in the notes to the accounts.
Underlying profit before tax, which represents profit before
acquired intangible amortisation, employment related deferred
consideration and other one-off items, reduced by 10.6% to GBP19.5
million (2018: GBP21.8 million). Statutory reported profit before
tax was GBP8.4 million (2018: GBP19.9 million) including the impact
of the one-off cost of GBP9.7m in respect of an arbitration award
as set out above.
The Group's effective rate of tax was 10.7% on the statutory
reported basis (2018: 19.1%). The effective tax rate on the
underlying earnings was 15.4% (2018: 18.8%). The rate was below the
statutory tax rate primarily due to the release of a tax provision
following the settlement in the year of an historic tax
liability.
Underlying basic earnings per share reduced to 15.4 pence (2018:
16.6 pence). Statutory reported basic earnings per share were 7.0
pence (2018: 15.1 pence).
New work secured
Our fast-changing market place, together with Costain's strong
market position, reputation for adding value and broad range of
leading edge services enabled us to secure cGBP1.1 billion of new
work during the first half, including cGBP600m of new contract
awards with the balance resulting from broader scopes of works
and/or extensions to existing contracts.
Consequently, the Group's order book at 30 June 2019 stood at
GBP4.2 billion (30 June 2018: GBP3.7 billion), continuing to
provide good visibility for the Group's future performance.
Although the absolute size of the order book remains unchanged from
the start of the year, we consider it to be higher quality as the
shape and nature of the individual contracts reflect our changing
strategic market positioning.
For example, in the first half of the year we secured the
maintenance services contract for United Utilities, this being the
first time they have outsourced their maintenance activity as they
seek to drive material efficiency and operational improvements in
line with customer expectations and regulatory requirements.
Costain's integrated technology and consulting solutions will help
United Utilities move from a reactive 'fix-on-fail' approach to a
proactive maintenance programme thereby improving the resilience of
its assets and environmental outcomes while ensuring continuity of
supply and consequently lowering costs for its customers.
In May 2019, the Welsh Government announced its decision not to
proceed with the M4 Corridor around Newport scheme, which Costain
had developed through its planning and design stages. Consequently,
Costain's share of the construction element of the scheme (GBP0.5
billion) has been removed from the order book in the period.
In line with the Group's strategic focus on consultancy
activities, the Group secured over 100 commissions in the period,
representing a 12% increase in the Group's consultancy
revenues.
The strategic nature of Costain's long-term client relationships
has once again ensured that over 90% of the order book comprises
repeat business with existing clients and over 90% on a target-cost
contractual basis.
The order book at 30 June 2019 also provides good long-term
visibility with cGBP0.5 billion of revenue secured for the
remainder of 2019, cGBP0.9 billion for 2020 and c GBP2.8 billion
secured for 2021 and beyond.
In addition, the Group has a preferred bidder position of
cGBP600 million (2018: cGBP400 million).
Cash position
The Group continues to have a robust net cash position which at
30 June 2019 was GBP40.8 million (2018: GBP77.7 million). The
average month-end net cash was GBP63.7 million for the period
(2018: GBP90.8 million) and is expected to be circa GBP40-GBP50
million for the full year, with an anticipated increase in 2020 to
GBP50-GBP60 million.
The cash outflow in the period reflects the reversal of the
positive timing of receipts at the year-end, positive cash flow
from operations, working capital movements, dividend payments and
associated pension deficit contributions. The cash balance also
reflects the impact of the one-off charge in respect of the
arbitration award in favour of Diamond Light Source Limited for the
cost of remedial works deemed required to the roof at the National
Synchrotron facility.
The Group has implemented revised processes to ensure that
suppliers are paid promptly, with the average time taken to pay
invoices reduced to 36 days from 59 days in the same period in
2018, with the associated working capital requirement also
impacting the cash position at the end of the period.
In addition to its net cash balance, the Group has flexible
financing in place to support its future growth with total banking
facilities of GBP191.0 million, which mature in June 2022, and
GBP320 million of committed and uncommitted bonding facilities.
Capital allocation
The Group has a robust balance sheet, with a high net asset
base, positive net current assets and a net cash balance with
unutilised bank facilities available for working capital and
investment purposes. Evidence of financial strength and robust
financial management are pre-requisites for qualification to win
new work with our major clients.
A key element in the successful implementation of the Group's
strategy is the efficient allocation of capital. The Board
regularly reviews the appropriate allocation with regard to the
following priorities:
-- ensuring that the Group can effectively exploit available
organic and acquisition opportunities, deliver on its ongoing
obligations, including making regular returns to shareholders, and
address the Group's legacy pension contribution commitments
-- ensuring an appropriate mix of equity, banking and bonding
facilities to appropriately align the composition and structure of
the Group's funding with its prevailing strategic and investment
priorities and
-- maintaining a strong and flexible balance sheet, typically
with a net cash position, while being prepared to take on modest
leverage if circumstances warrant.
The Board believes that its approach to the optimal deployment
of capital generates value for all stakeholders on an efficient and
equitable basis.
Pension scheme
As at 30 June 2019, the surplus on the Group's legacy Costain
Pension Scheme in accordance with IAS 19 was GBP4.5 million (June
2018: surplus of GBP17.1 million). The decrease in surplus results
from a combination of employer contributions, better than expected
asset returns, offset by an increase in liabilities from changes in
the market-based assumptions used and inclusion of the Guaranteed
Minimum pension charge highlighted in December 2018.
Based on the actuarial valuation as at 31 March 2016, the
Company has in place a deficit reduction plan, agreed with the
pension scheme Trustee, which requires a contribution of GBP9.6
million per annum (increasing annually with inflation).
In addition, as previously implemented, the Group will continue
to make an additional contribution so that the total deficit
contributions match the total dividend amount paid by the Company
each year. In this regard, an additional contribution of GBP5.0
million was paid in the first half of the year at the time the
final dividend payment was made.
The next triennial valuation review is as at 31 March 2019 and
an appropriate deficit recovery plan is expected to be agreed well
ahead of the regulatory deadline of June 2020.
Interim Dividend
In line with the Group's dividend policy, the Board has declared
an interim dividend of 3.8 pence per share (2018: 5.15 pence per
share). The dividend will be paid on 18 October 2019 to
shareholders on the register as at the close of business on 13
September 2019.
The Board recognises the importance of regular dividends to
shareholders and the Group will continue to target dividend cover
of around 2.5 times underlying earnings. The Board is committed to
growing the dividend in line with earnings over the medium
term.
Operational review
Under our 'One Costain' operating model the Group has two core
operating and reporting divisions within the business:
transportation and natural resources.
Change to Group structure
As set out at the Group's capital markets event held on 2 July
2019, Costain has enhanced its client focus with the creation of
two new sectors, aviation (in the transportation division) and
defence (in the natural resources division), where we already
provide services to clients but also see further opportunity for
the Group.
In addition, we are consolidating our energy activities by
combining nuclear, oil and gas and power activities under one
sector in the natural resources division to optimise the delivery
of services meeting common needs across our energy client base.
Our infrastructure division has been renamed 'transportation',
comprising sectors for highways, rail and aviation. Our natural
resources division comprises sectors for water, energy and defence.
Comparative financial information has been re-presented to reflect
the Company's nuclear activities transferring from the previously
reported Infrastructure division to the current natural resources
division.
Transportation
The division had revenue (including joint ventures and
associates) of GBP380.2 million (2018: GBP531.2 million) and
underlying operating profit of GBP14.6 million (2018: GBP18.8
million). The revenue and profit reduction results from a lower
level of lower-margin, large capital project activity compared to
the prior year. The underlying operating margin in the period has
increased to 3.8% from 3.5%, towards the Group's strategic target,
and is anticipated to be at a similar level for the full year. The
margin has been impacted by the continued investment in work
winning and an increase in the level of technology capability
overhead, in line with a strategic change in mix of services, to
pursue the market opportunities available.
The division has a forward order book of GBP3.0 billion (2018:
GBP2.8 billion).
Highways
Costain is a leading provider of services and technology to
Highways England, the Government-owned body responsible for
operating England's strategic road network. In the first half of
2019 we mobilised two new regional delivery partnerships with
Highways England, following our appointment to frameworks in the
North and East of England, and we are now preparing a group of
schemes to improve the A1 trunk road in the North-East. We have
also made excellent progress on Highways England's flagship
project, the A14 Cambridge to Huntingdon improvement, which when
complete in 2020 will transform journeys along this strategically
important corridor to the East Coast ports and to science and
technology employment sites in Cambridgeshire.
We remain one of the largest providers to Highways England's
smart motorways programme and are continuing to upgrade the M1
motorway between junctions 13 and 16 with digital technology that
improves capacity, reliability and safety. Our technology centre in
Somerset develops and manufactures the digital signs and
communications technology needed to operate smart motorway schemes
and is continuing to develop new systems to meet the needs of an
increasingly digital motorway network. Our technology team is also
leading the way in connected vehicle systems and is piloting the
next generation of these systems with Highways England and Kent
County Council on the A2 and M2 routes in the South-East.
We are also continuing to support Highways England's operations
division with asset management contracts in Kent, Sussex and the
North East and is working with East Sussex County Council to manage
and improve the roads across this county.
In Wales, work is continuing to complete the A465 Heads of the
Valleys road on the fringe of the Brecon Beacons National Park, a
complex and environmentally sensitive project, that will radically
improve east-west communications and help to unlock the economic
potential of the region. As previously reported, the project has
experienced significant additional scope and we continue to look to
resolve the associated impact on the cost and schedule in
accordance with the contractual process. This includes the
escalation by the client using the resolution mechanism under the
contract of a specific matter which has been previously decided in
Costain's favour in adjudication.
We have been appointed as the strategic development partner to
Bradford Council, expanding our reach into local authority
transportation consultancy. We have also been appointed by the
Department for Transport as a prime supplier to its STARTwo
management consultancy framework, under which we will offer advice
to the Government on a range of strategic transportation
issues.
Rail
Costain's rail business continues to focus on Network Rail,
Crossrail, Crossrail2 and High Speed 2 in addition to developing
new opportunities with other rail clients throughout the UK.
In the period, we agreed the final account for the on-network
section of Crossrail to the East of London, which is now fully
operational, ahead of the opening of the Elizabeth Line route.
Elsewhere we are completing contracts for Crossrail at Paddington
and Bond Street stations and across the central section of the
network where we are responsible for tunnel systems and technology,
in accordance with supplemental agreements reached with the
client.
The upgrade of London Bridge Station was completed and handed
back into service in the period, completing over seven years' work
to transform one of London's busiest stations to meet the needs of
modern-day commuters by improving station capacity, reducing
congestion and creating around 70 new retail and leisure units in
the station precincts.
In Scotland, we have substantially completed overhead
electrification works on the Stirling-Dunblane-Alloa route,
achieving new levels of efficiency in the delivery of
electrification projects and helping to create programme
improvements and a reduced carbon footprint on this line.
On High Speed 2, we are continuing to lead an extensive
programme of enabling works across the southern section of the new
route between Euston Station, Old Oak Common and West Ruislip. In
parallel, we are continuing with the detailed planning, programming
and design of the southern main works contracts, where construction
is expected to commence in early 2020.
Our railway design capabilities continue to grow and we have
been appointed by Network Rail and Innovate UK to develop an
automated design tool which has the potential to transform the way
in which railway works are designed in the future.
At Gatwick Airport Station, we have been appointed to deliver
the construction phase of this critical project, following our
successful leadership of the planning and design stages. The scheme
will improve passenger safety and convenience at the station whilst
eliminating the overcrowding issues between the platforms and the
airport. Work is expected to begin in early 2020 with completion
during 2022.
Aviation
We are developing new business across the aviation sector,
offering airport operators strategic consultancy and programme
management capabilities together with associated design and
technology services. The UK aviation sector is expected to grow
rapidly in the next five years, with substantial investments
expected to be made at Heathrow and Gatwick along with regional
airports in Manchester, Birmingham and Bristol.
An early success in the period was our appointment as an
innovation partner to Heathrow Airport Limited, where we are
advising the airport on carbon management.
Natural Resources
The natural resources division, which operates in the water,
energy and defence markets, made significant progress during the
period.
Revenue (including share of joint ventures and associates) was
GBP216.0m (2018: GBP238.9m) with an increased underlying operating
profit of GBP9.2m (2018: GBP7.8m), a net margin of 4.3% (2018:
3.3%).
The significant improvement in the margin performance reflects
strong growth in profits in water and defence sector activities, as
we begin to deliver a higher quality order book. In energy, revenue
has reduced following completion of the aggregate jetty at Hinkley
in the period.
The division had a forward order book at 30 June 2019 of
GBP1.2bn (2018: GBP0.9bn), reflecting wins of GBP0.5bn in the first
half of 2019 including some significant contract awards within the
regulated AMP 7 cycle in the water sector. The higher quality order
book will enable sustainable growth in margins.
Water
Our Leading Edge strategy is bringing innovation and new
technology to meet our clients' changing requirements, as we
support them to improve and maintain water quality standards,
enhance supply resilience and meet anticipated demographic
shifts.
We are now in the final year of the five-year AMP 6 programmes
for Thames Water, Severn Trent and Southern Water. Our engagement
has enabled our water scientists to optimise existing asset
performance, increase capacity in the network, address shortcoming
in regulatory performance and deliver significant savings for our
clients. Our AMP 6 contract with Thames Water includes an element
of incentivisation, aligned to the client's objectives, estimated
through the life of the contract and finalised at the end of the
programme.
Our joint venture for the east section of the Thames Tideway
project is progressing well. This major project will form an
integral part of the modernisation of London's Victorian sewerage
system and will improve water quality in the River Thames,
providing capacity to cope with the demands of the city well into
the 22nd century.
Our bid activity for AMP 7 continues, with the next five-year
regulatory period commencing in 2020. We are pleased to have
secured new contract awards for AMP 7 including United Utilities
Managed Service Provider, health and safety assurance consultancy
framework for Yorkshire Water in joint venture with Arup, Capital
Delivery Framework for Severn Trent Water and ongoing relationships
with other water companies.
In Glasgow, the Shieldhall tunnel contract for Scottish Water to
improve water quality and resilience of supply was fully completed,
including agreement of the final account.
Energy
With a rapidly changing energy mix, Costain is playing a key
role in safeguarding the future resilience of the network,. We are
working to shape the future of our decarbonisation infrastructure,
with the UK Government committing to a zero net carbon target by
2050.
We continue play an important role in nuclear new build,
decommissioning and security, focussing on helping our clients
generate energy that is clean and sustainable. Our growing
programme management team continue to provide project controls
services across the EDF nuclear reactor fleet. Our work at
Sellafield on the Decommission Delivery Partner framework, a
contract that runs to 2026, is making a positive contribution
towards the decommissioning of the nation's legacy nuclear
facilities.
We are working with National Grid, Cadent, SGN and Ineos,
supported by PhD research, shaping how to transition our energy
needs from conventional gas to hydrogen gas. Our engineering
technology team are developing early studies to capture carbon
dioxide from an industrial cluster in Scotland and store it in
redundant oil and gas fields in the Northern UK continental
shelf.
In energy networks and storage, our team is ensuring that energy
companies build greater resilience and transition from centralised
to decentralised energy systems. This includes providing asset
management and programme management services in contracts with
Cadent and National Grid.
The Peterborough and Huntingdon compressor stations project,
where Costain is designing and managing its delivery, will increase
system resilience and reduce overall risk on the National
Transmission System by replacing ageing assets. This is National
Grid's largest current upgrade project to comply with the
Industrial Emissions Directive and Pollution Prevention and Control
regulations.
In oil, gas and hydrocarbon generation, our team is shaping the
future of the UK's energy industry by helping our clients to
optimise business value from their critical onshore and offshore
assets. We continue to provide ongoing support services to Total
and Phillips 66 at their Immingham refineries, along with Drax, EDF
and Tata, as well as programme development services and design
services to key energy operators both on and off-shore in the
UK.
In the period we have continued to secure new contracts for our
oil and gas process technology service offering and several
strategic development consultancy services. This includes the
front-end engineering design of new oil export facilities at
Essar's Stanlow refinery to increase capacity, as well as
supporting Ineos examine various options for plant life extension
at their Kinneil Terminal in Scotland. From our Aberdeen
engineering centre, we are also engaged in a significant number of
studies for Premier Oil, Ithica and Taqa.
We have also secured strategic advisory commissions for Cadent
RIIO2 Gas Distribution Strategy, and separately AGI cost model
benchmarking. In addition, we have also secured asset optimisation
consultancy for National Grid at St Fergus Gas Terminal running
until March 2021.
At Hinkley Point C, we have completed the marine aggregate jetty
for EDF. The project experienced significant changes and cost
growth and we continue to pursue agreement of the final account for
the project, in accordance with the contractual process.
Defence
In defence, we continue to develop our proven applied risk and
programme management and project controls consultancy.
Our programme management contract for AWE is progressing well
and Costain has added value through the application of digital
surveys and solutions.
We continue to provide core support to the MoD's defence
equipment programmes, where Costain is designing and implementing
new efficient ways of programme and project controls delivery. This
is yielding the benefit of increased programme confidence and cost
mitigation impacts.
Our team is also shaping the future of the procurement and
resource logistics through strategic advisory and training delivery
for MoD, sharing industry best practice on project controls and
risk mitigation.
Alcaidesa
Alcaidesa is a non-core activity in Spain in which Costain owns
operating assets of two golf courses with an associated parcel of
land, and a 624-berth marina concession adjacent to Gibraltar.
Revenue in the period was GBP3.0 million (2018: GBP2.8 million)
with a GBP0.1 million operating loss (2018: breakeven). We continue
to review our options for this non-core asset.
Risks and uncertainties
The Board continually assesses and monitors the key risks of the
business. The key risks that could affect the Group's medium-term
performance, and the factors that mitigate these risks, are set out
on pages 46 - 51 of the Group's Annual Report for 2018, a copy of
which is available from our website www.costain.com.
Summary and outlook
While, as previously announced, delays to certain contract start
dates and new awards, together with a contract cancellation will
impact our full year performance, we are pleased that the Group has
continued to secure significant new work during the first half. We
therefore remain on track to deliver our revised expectations for
the current year and growth in 2020.
We recently launched our 'Leading Edge' strategy for the
development of the business which aims to accelerate the deployment
of higher margin activities and deliver a blended divisional margin
range of 6%-7% over the medium term. The Group's structure has also
been reorganised to better align it to our clients and the markets
in which we operate.
With this enhanced strategy and strong market backdrop,
underpinned by a robust balance sheet, we are focused on
significantly enhancing the value of Costain.
Alex Vaughan
Chief Executive Officer
21 August 2019
Condensed consolidated income statement
Half-year ended 2019 2018 2018
30 June, Half-year Half-year Year
year ended 31 December Unaudited Unaudited Audited
Restated
------------------------- ------------------------------ ------------------------------ ----------------------------------
Under Other Under Other Under Other
lying items Total lying items Total lying items Total
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------- -------- --------- --------- -------- --------- ----------- -------- -----------
Revenue
including
share of joint
ventures and
associates 3 599.2 - 599.2 772.9 - 772.9 1,489.3 - 1,489.3
Less: Share
of revenue
of joint
ventures
and associates (5.1) - (5.1) (14.2) - (14.2) (25.6) - (25.6)
----------------- ------ --------- -------- --------- --------- -------- --------- ----------- -------- -----------
Group revenue 594.1 - 594.1 758.7 - 758.7 1,463.7 - 1,463.7
Cost of sales
before other
items (554.3) - (554.3) (714.2) - (714.2) (1,373.8) - (1,373.8)
Historical
building
project
arbitration
award 3 - (9.7) (9.7) - - - - - -
----------------- ------ --------- -------- --------- --------- -------- --------- ----------- -------- -----------
Cost of sales (554.3) (9.7) (564.0) (714.2) - (714.2) (1,373.8) - (1,373.8)
Gross profit 39.8 (9.7) 30.1 44.5 - 44.5 89.9 - 89.9
Administrative
expenses
before
other items (18.6) - (18.6) (21.3) - (21.3) (37.4) - (37.4)
Pension GMP
equalisation
charge 3 - - - - - - - (8.6) (8.6)
RDEC grant
income 3 - - - - - - - 2.6 2.6
Amortisation
of acquired
intangible
assets 3 - (1.1) (1.1) - (1.5) (1.5) - (3.0) (3.0)
Employment
related
deferred
consideration 3 - (0.2) (0.2) - (0.3) (0.3) - (0.4) (0.4)
----------------- ------ --------- -------- --------- --------- -------- --------- ----------- -------- -----------
Administrative
expenses (18.6) (1.3) (19.9) (21.3) (1.8) (23.1) (37.4) (9.4) (46.8)
----------------- ------ --------- -------- --------- --------- -------- --------- ----------- -------- -----------
Group operating
profit 21.2 (11.0) 10.2 23.2 (1.8) 21.4 52.5 (9.4) 43.1
Share of
results
of joint
ventures
and associates 0.1 - 0.1 0.1 - 0.1 0.3 - 0.3
----------------- ------ --------- -------- --------- --------- -------- --------- ----------- -------- -----------
Profit from
operations 3 21.3 (11.0) 10.3 23.3 (1.8) 21.5 52.8 (9.4) 43.4
Finance income 0.4 - 0.4 0.3 - 0.3 0.4 - 0.4
Finance expense (2.2) (0.1) (2.3) (1.8) (0.1) (1.9) (3.5) (0.1) (3.6)
----------------- ------ --------- -------- --------- --------- -------- --------- ----------- -------- -----------
Net finance
expense 4 (1.8) (0.1) (1.9) (1.5) (0.1) (1.6) (3.1) (0.1) (3.2)
----------------- ------ --------- -------- --------- --------- -------- --------- ----------- -------- -----------
Profit before
tax 19.5 (11.1) 8.4 21.8 (1.9) 19.9 49.7 (9.5) 40.2
Taxation 5 (3.0) 2.1 (0.9) (4.1) 0.3 (3.8) (9.1) 1.7 (7.4)
----------------- ------ --------- -------- --------- --------- -------- --------- ----------- -------- -----------
Profit for
the period
attributable
to equity
holders
of the parent 16.5 (9.0) 7.5 17.7 (1.6) 16.1 40.6 (7.8) 32.8
----------------- ------ --------- -------- --------- --------- -------- --------- ----------- -------- -----------
Earnings per
share
Basic 6 15.4p (8.4)p 7.0p 16.6p (1.5)p 15.1p 38.2p (7.3)p 30.9p
Diluted 6 15.1p (8.2)p 6.9p 16.3p (1.5)p 14.8p 37.4p (7.2)p 30.2p
* See note 14 for details regarding the restatement as a result
of a change in accounting policy
During the period, previous period and previous year the impact
of business disposals was not material and, therefore, all results
are classified as arising from continuing operations.
Condensed consolidated statement of comprehensive income and
expense
Half-year ended 30 June, 2019 2018 2018
year ended 31 December Half-year Half-year Year
unaudited unaudited audited
GBPm GBPm GBPm
------------------------------------------------------------- ------------ ------------ ----------
Profit for the period 7.5 16.1 32.8
------------------------------------------------------------- ------------ ------------ ----------
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation
of foreign operations (0.2) (0.1) 0.2
Net investment hedge
* Effective portion of changes in fair value during
period (0.3) 0.2 0.1
* Net changes in fair value transferred to the income
statement - - -
Cash flow hedges:
* Effective portion of changes in fair value during
period (0.4) (1.8) (0.1)
* Net changes in fair value transferred to the income
statement 0.5 0.3 -
Total items that may be reclassified
subsequently to profit or loss (0.4) (1.4) 0.2
------------------------------------------------------------- ------------ ------------ ----------
Items that will not be reclassified
to profit or loss:
Remeasurement of defined benefit obligations (2.1) 31.4 13.3
Tax recognised on remeasurement of
defined benefit obligations 0.4 (5.9) (2.5)
Total items that will not be reclassified
to profit or loss (1.7) 25.5 10.8
------------------------------------------------------------- ------------ ------------ ----------
Other comprehensive (expense)/income
for the period (2.1) 24.1 11.0
------------------------------------------------------------- ------------ ------------ ----------
Total comprehensive income for the
period attributable to equity holders
of the parent 5.4 40.2 43.8
------------------------------------------------------------- ------------ ------------ ----------
Condensed consolidated statement of changes in equity
Share Share Translation Hedging Retained Total
capital premium reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ---------- ---------- ------------- ---------- ----------- ---------
At 1 January 2018 -
audited 52.8 12.1 2.3 0.8 81.4 149.4
Profit for the period - - - - 16.1 16.1
Other comprehensive
income/(expense) - - 0.1 (1.5) 25.5 24.1
Issue of ordinary shares
under employee share
option plans 0.3 0.2 - - - 0.5
Shares purchased to
satisfy employee share
schemes - - - - (1.3) (1.3)
Equity-settled share-based
payments - - - - 1.3 1.3
Dividend paid (note
7) 0.1 1.0 - - (9.8) (8.7)
------------------------------ ---------- ---------- ------------- ---------- ----------- ---------
At 30 June 2018 - unaudited 53.2 13.3 2.4 (0.7) 113.2 181.4
Profit for the period - - - - 16.7 16.7
Other comprehensive
income/(expense) - - 0.2 1.4 (14.7) (13.1)
Issue of ordinary shares
under employee share
option plans 0.2 1.4 - - (0.3) 1.3
Shares purchased to
satisfy employee share
schemes - - - - - -
Equity-settled share-based
payments - - - - 1.0 1.0
Dividend paid (note
7) 0.1 0.3 - - (5.4) (5.0)
------------------------------ ---------- ---------- ------------- ---------- ----------- ---------
At 31 December 2018
- audited 53.5 15.0 2.6 0.7 110.5 182.3
Profit for the period - - - - 7.5 7.5
Other comprehensive
income/(expense) - - (0.5) 0.1 (1.7) (2.1)
Issue of ordinary shares
under employee share
option plans 0.4 0.3 - - - 0.7
Shares purchased to
satisfy employee share
schemes - - - - (0.9) (0.9)
Equity-settled share-based
payments - - - - 0.9 0.9
Dividend paid (note
7) 0.1 0.6 - - (10.7) (10.0)
------------------------------ ---------- ---------- ------------- ---------- ----------- ---------
At 30 June 2019 - unaudited 54.0 15.9 2.1 0.8 105.6 178.4
------------------------------ ---------- ---------- ------------- ---------- ----------- ---------
Condensed consolidated statement of financial position
Half-year as at 30 June, 2019 2018 2018
year as at 31 December Half-year Half-year Year
unaudited unaudited audited
GBPm GBPm GBPm
---------------------------------------- ---- ------------ ------------ ----------
Assets
Non-current assets
Intangible assets 8 58.2 60.0 58.5
Property, plant and equipment 8 71.4 40.7 40.0
Investments in equity accounted
joint ventures 0.4 0.3 0.4
Investments in equity accounted
associates 0.4 0.7 0.5
Loans to equity accounted associates 1.5 1.6 1.6
Retirement benefit asset 9 4.5 17.1 -
Other 2.4 7.2 3.6
Deferred tax 1.4 3.2 2.7
---------------------------------------- ---- ------------ ------------ ----------
Total non-current assets 140.2 130.8 107.3
---------------------------------------- ---- ------------ ------------ ----------
Current assets
Inventories 1.8 1.3 1.5
Trade and other receivables 311.1 345.0 276.5
Cash and cash equivalents 130.5 158.1 189.3
---------------------------------------- ---- ------------ ------------ ----------
Total current assets 443.4 504.4 467.3
---------------------------------------- ---- ------------ ------------ ----------
Total assets 583.6 635.2 574.6
---------------------------------------- ---- ------------ ------------ ----------
Equity
Share capital 11 54.0 53.2 53.5
Share premium 15.9 13.3 15.0
Foreign currency translation reserve 2.1 2.4 2.6
Hedging reserve 0.8 (0.7) 0.7
Retained earnings * 105.6 113.2 110.5
---------------------------------------- ---- ------------ ------------ ----------
Total equity attributable to equity
holders of the parent 178.4 181.4 182.3
---------------------------------------- ---- ------------ ------------ ----------
Liabilities
Non-current liabilities
Retirement benefit obligations 9 - - 4.2
Other payables 0.4 3.5 0.9
Interest-bearing loans and borrowings 60.5 60.5 60.5
Lease liabilities 15.6 - -
Provisions for other liabilities
and charges 0.1 - -
---------------------------------------- ---- ------------ ------------ ----------
Total non-current liabilities 76.6 64.0 65.6
---------------------------------------- ---- ------------ ------------ ----------
Current liabilities
Trade and other payables 282.8 364.0 313.2
Taxation 0.9 4.3 2.6
Interest-bearing loans and borrowings 29.2 19.9 10.0
Lease liabilities 14.8 - -
Provisions for other liabilities
and charges 0.9 1.6 0.9
---------------------------------------- ---- ------------ ------------ ----------
Total current liabilities 328.6 389.8 326.7
---------------------------------------- ---- ------------ ------------ ----------
Total liabilities 405.2 453.8 392.3
---------------------------------------- ---- ------------ ------------ ----------
Total equity and liabilities 583.6 635.2 574.6
---------------------------------------- ---- ------------ ------------ ----------
* See note 14 for details regarding the restatement as a result
of a change in accounting policy
Condensed consolidated cash flow statement
Half-year ended 30 June, 2019 2018 2018
year ended 31 December Half-year Half-year Year
unaudited unaudited audited
GBPm GBPm GBPm
-------------------------------------------- ------------ ------------ ----------
Cash flows from operating activities
Profit for the period 7.5 16.1 32.8
Adjustments for:
Share of results of joint ventures
and associates (0.1) (0.1) (0.3)
Finance income (0.4) (0.3) (0.4)
Finance expense 2.3 1.9 3.6
Taxation 0.9 3.8 7.4
Depreciation of property, plant
and equipment 8.4 2.0 3.2
Amortisation of intangible assets 1.2 1.7 3.4
Employment related deferred consideration 0.2 0.3 0.4
Pension GMP equalisation charge - - 8.6
Share-based payments expense 0.9 1.5 2.9
Shares purchased to satisfy employee
share schemes (0.9) (1.3) (1.3)
--------------------------------------------- ------------ ------------ ----------
Cash from operations before changes
in working capital and provisions 20.0 25.6 60.3
(Increase)/decrease in inventories (0.3) 0.1 (0.1)
(Increase)/decrease in receivables (33.4) (64.1) 8.6
(Decrease)/increase in payables (32.5) (40.0) (90.9)
Movement in provisions and employee
benefits (10.7) (9.5) (15.8)
--------------------------------------------- ------------ ------------ ----------
Cash used by operations (56.9) (87.9) (37.9)
Interest received 0.2 0.1 0.4
Interest paid (1.3) (1.1) (2.4)
Taxation paid (0.6) (4.2) (8.2)
--------------------------------------------- ------------ ------------ ----------
Net cash used by operating activities (58.6) (93.1) (48.1)
Cash flows from investing activities
Dividends received from joint ventures
and associates 0.3 0.2 0.5
Additions to property, plant and
equipment (9.3) (0.3) (1.0)
Additions to intangible assets (0.9) - (0.3)
Proceeds of disposals of property,
plant and equipment and intangible
assets 2.4 1.4 2.1
Net cash (used by)/from investing
activities (7.5) 1.3 1.3
Cash flows from financing activities
Issue of ordinary share capital 0.7 0.5 1.8
Ordinary dividends paid (10.0) (8.7) (13.7)
New leases 3.9 - -
Principal element of lease payments (6.5) - -
Drawdown of loans 20.0 20.0 30.0
Repayment of loans (0.7) (10.5) (30.5)
--------------------------------------------- ------------ ------------ ----------
Net cash from/(used by) financing
activities 7.4 1.3 (12.4)
Net decrease in cash, cash equivalents
and overdrafts (58.7) (90.5) (59.2)
Cash, cash equivalents and overdrafts
at beginning of the period 189.3 248.7 248.7
Effect of foreign exchange rate
changes (0.1) (0.1) (0.2)
Cash, cash equivalents and overdrafts
at end of the period 130.5 158.1 189.3
--------------------------------------------- ------------ ------------ ----------
* See note 14 for details regarding the restatement as a result
of a change in accounting policy
Notes to the interim financial statements
1. General information
Costain Group PLC (the Company) is a public limited company
incorporated in the United Kingdom. The address of its registered
office and principal place of business is Costain House, Vanwall
Business Park, Maidenhead, Berkshire SL6 4UB.
The condensed consolidated interim financial statements are
presented in pounds sterling, rounded to the nearest hundred
thousand.
The comparative figures for the financial year ended 31 December
2018 are not the Company's full 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 498 (2) or (3) of the Companies
Act 2006.
2. Statement of compliance
This interim financial information for the half-year ended 30
June 2019 has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the European Union and with the
Disclosure and Transparency Rules of the Financial Conduct
Authority.
The accounting policies, presentation and methods of computation
adopted in the preparation of these condensed consolidated interim
financial statements are consistent with those followed in the
preparation of the Group's Annual Financial Statements for the year
ended 31 December 2018, which were prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union except for the adoption of new and amended
standards as set out below. They do not include all the information
required for full annual financial statements and should be read in
conjunction with the Consolidated Financial Statements of the Group
as at and for the year ended 31 December 2018.
New standards adopted by the Group
IFRS 16 Leases replaces IAS 17 Leases along with three
Interpretations (IFRIC 4 Determining whether an Arrangement
contains a Lease, SIC 15 Operating Leases-Incentives and SIC 27
Evaluating the Substance of Transactions Involving the Legal Form
of a Lease). The standard is mandatory for reporting periods
beginning on or after 1 January 2019.
Under the new standard, an asset (the right-of-use asset) and a
financial liability are recognised. The only exceptions are short
term and low value leases.
Costain Group has applied the modified retrospective approach to
the transition to IFRS 16, recognising the cumulative effect at the
date of initial application (1 January 2019). On transition, for
leases previously accounted as operating leases with a lease term
of less than 12 months and for leases of low-value assets, the
Group has applied the optional exemptions in the standard to not
recognise right-of-use assets but to account for the lease expense
on a straight-line basis over the remaining lease term.
The Group has elected not to include initial direct costs in the
measurement of the right-of-use asset for operating leases in
existence at the date of initial application of IFRS 16. The Group
also elected to measure the right-of-use assets at an amount equal
to the lease liability adjusted for any prepaid or accrued lease
payments that existed at the date of transition. Instead of
performing an impairment review on the right-of-use assets at the
date of initial application, the Group has relied on its historic
assessment as to whether leases were onerous immediately before the
date of initial application of IFRS 16 and has benefited from the
use of hindsight for determining lease term when considering
options to extend and terminate leases. The Group has also elected
not to reassess whether a contract is, or contains, a lease at the
date of initial application. Instead, for contracts entered into
before the transition date the Group relied on its assessment made
applying IAS 17 Leases and IFRIC 4 Determining whether an
arrangement contains a lease.
The impact of the adoption of this standard and the new
accounting policy is discussed in note 14.
Impact of standards issued but not yet effective, and therefore
not applied in these financial statements
The directors do not currently anticipate that the adoption of
any other standard or interpretation that has been issued but is
not yet effective will have a material impact on the financial
statements of the Group in future periods.
Going concern
After making enquiries and reviewing the latest forecasts, the
directors believe that the Group has adequate resources to continue
in operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing the
interim financial statements.
Income statement presentation - Other items
In order to aid understanding of the underlying and overall
performance of the Group, certain amounts are shown in the
consolidated income statement in a separate column headed 'Other
items'. Items are included under this heading where the Board
considers them to be of a one-off and unusual nature or related to
the accounting treatment of acquisitions, this includes
amortisation of acquired intangibles and employment related
deferred consideration. These are adjusted because they are not
long term in nature and, hence, will not reflect the long-term
performance of the Group.
Principal risks and significant areas of judgement and
estimation
The Group's principal risks and uncertainties are consistent
with those noted in the Annual Report for the year ended 31
December 2018. The Directors consider that the significant areas of
judgement made by management that have significant effect on the
Group's performance and estimates with a significant risk of
material adjustment in the second half of the year are unchanged
from those identified on pages 48 to 51 of the Annual Report for
the year ended 31 December 2018.
The Board approved the unaudited interim financial statements on
21 August 2019.
3. Business segment information
The Group has two core business segments: natural resources and
transportation plus Alcaidesa in Spain. The core segments are
strategic business units with separate management and have
different core customers or offer different services. This
information is provided to the Chief Executive who is the chief
operating decision maker.
Restructuring
During the period, the Group transferred the nuclear business
from within the Infrastructure segment to natural resources and the
remaining Infrastructure segment has been renamed transportation.
Comparative segmental information has been represented to reflect
the current segments.
Half-year ended 30 June Natural Central
2019 Resources Transportation Alcaidesa costs Total
GBPm GBPm GBPm GBPm GBPm
External revenue 210.9 380.2 3.0 - 594.1
Share of revenue of JVs
and associates 5.1 - - - 5.1
-------------------------------- ------------ ---------------- ----------- --------- -------
Total segment revenue 216.0 380.2 3.0 - 599.2
-------------------------------- ------------ ---------------- ----------- --------- -------
Group operating profit/(loss) 9.2 14.6 (0.1) (2.5) 21.2
Share of results of JVs
and associates 0.1 - - - 0.1
-------------------------------- ------------ ---------------- ----------- --------- -------
Profit/(loss) from operations
before other items 9.3 14.6 (0.1) (2.5) 21.3
Other items:
Historical building project
arbitration award (9.7) - - - (9.7)
Amortisation of acquired
intangible assets (0.5) (0.6) - - (1.1)
Employment related deferred
consideration (0.2) - - - (0.2)
-------------------------------- ------------ ---------------- ----------- --------- -------
Profit/(loss) from operations (1.1) 14.0 (0.1) (2.5) 10.3
-------------------------------- ------------ ---------------- ----------- ---------
Net finance expense (1.9)
-------------------------------- ------------ ---------------- ----------- --------- -------
Profit before tax 8.4
-------------------------------- ------------ ---------------- ----------- --------- -------
Half-year ended 30 June Natural Central
2018 Resources Transportation Alcaidesa costs Total
GBPm GBPm GBPm GBPm GBPm
External revenue 236.0 519.9 2.8 - 758.7
Share of revenue of JVs
and associates 2.9 11.3 - - 14.2
-------------------------------- ------------ ---------------- ----------- --------- -------
Total segment revenue 238.9 531.2 2.8 - 772.9
-------------------------------- ------------ ---------------- ----------- --------- -------
Group operating profit/(loss) 7.8 18.8 - (3.4) 23.2
Share of results of JVs
and associates 0.1 - - - 0.1
-------------------------------- ------------ ---------------- ----------- --------- -------
Profit/(loss) from operations
before other items 7.9 18.8 - (3.4) 23.3
Other items:
Amortisation of acquired
intangible assets (0.4) (1.1) - - (1.5)
Employment related deferred
consideration (0.3) - - - (0.3)
-------------------------------- ------------ ---------------- ----------- --------- -------
Profit/(loss) from operations 7.2 17.7 - (3.4) 21.5
-------------------------------- ------------ ---------------- ----------- ---------
Net finance expense (1.6)
-------------------------------- ------------ ---------------- ----------- --------- -------
Profit before tax 19.9
-------------------------------- ------------ ---------------- ----------- --------- -------
Year ended 31 December Natural Central
2018 Resources Transportation Alcaidesa costs Total
GBPm GBPm GBPm GBPm GBPm
External revenue 472.7 985.6 5.4 - 1,463.7
Share of revenue of JVs
and associates 7.1 18.5 - - 25.6
-------------------------------- ------------ ---------------- ----------- --------- ---------
Total segment revenue 479.8 1,004.1 5.4 - 1,489.3
-------------------------------- ------------ ---------------- ----------- --------- ---------
Group operating profit/(loss) 18.7 41.4 (0.7) (6.9) 52.5
Share of results of JVs
and associates 0.3 - - - 0.3
-------------------------------- ------------ ---------------- ----------- --------- ---------
Profit/(loss) from operations
before other items 19.0 41.4 (0.7) (6.9) 52.8
Other items:
Pension GMP equalisation
charge - - - (8.6) (8.6)
RDEC grant income - - - 2.6 2.6
Amortisation of acquired
intangible assets (1.4) (1.6) - - (3.0)
Employment related deferred
consideration (0.4) - - - (0.4)
-------------------------------- ------------ ---------------- ----------- --------- ---------
Profit/(loss) from operations 17.2 39.8 (0.7) (12.9) 43.4
-------------------------------- ------------ ---------------- ----------- ---------
Net finance expense (3.2)
-------------------------------- ------------ ---------------- ----------- --------- ---------
Profit before tax 40.2
-------------------------------- ------------ ---------------- ----------- --------- ---------
4. Net finance expense
Finance expense includes the interest cost on the net
liabilities of the pension scheme of GBPNil (2018 half-year: GBP0.2
million, 2018 year: GBP1.4 million) and discount unwind of GBP0.6
million (GBP0.1 million relating to employment related deferred
consideration and GBP0.5 million relating to lease liabilities of
right-of-use assets) (2018 half-year: GBPNil, 2018 year GBP0.1
million).
5. Taxation
Half-year ended 30 June, 2019 2018 2018
year ended 31 December Half-year Half-year Year
GBPm GBPm GBPm
-------------------------------------------- ------------ ------------ -------
Current tax 1.1 (1.8) (2.9)
Deferred tax (2.0) (2.0) (4.5)
-------------------------------------------- ------------ ------------ -------
Tax expense in the condensed consolidated
income statement (0.9) (3.8) (7.4)
-------------------------------------------- ------------ ------------ -------
Effective tax rate 10.7% 19.1% 18.4%
The estimation of income tax liabilities in the Interim
Financial Statements is based on the estimated average annual
effective income tax rate applied to the pre-tax income of the
interim period.
6. Earnings per share
The calculation of earnings per share is based on profit for the
period of GBP7.5 million (2018 half-year: GBP16.1 million, 2018
year: GBP32.8 million) and the number of shares set out below:
2019 2018 2018
Half-year Half-year Year
millions millions millions
---------------------------------------------- ------------ ------------ ----------
Weighted average number of ordinary
shares in issue
for basic earnings per share calculation 107.4 106.0 106.3
Dilutive potential ordinary shares
arising from employee share schemes 2.1 2.8 2.3
---------------------------------------------- ------------ ------------ ----------
Weighted average number of ordinary
shares in issue for fully diluted earnings
per share calculation 109.5 108.8 108.6
---------------------------------------------- ------------ ------------ ----------
7. Dividends
Dividend Half-year Half-year Year ended
per share ended 30 ended 30 31 December
pence June 2019 June 2018 2018
GBPm GBPm GBPm
Final dividend for the year
ended 31 December 2017 9.25 - 9.8 9.8
Interim dividend for the year
ended 31 December 2018 5.15 - - 5.4
Final dividend for the year
ended 31 December 2018 10.00 10.7 - -
------------------------------------- ------------ ------------ ------------ --------------
Amount recognised as distributions
to equity holders in the period 10.7 9.8 15.2
------------------------------------- ------------ ------------ ------------ --------------
Dividends settled in shares (0.7) (1.1) (1.5)
------------------------------------- ------------ ------------ ------------ --------------
Dividends settled in cash 10.0 8.7 13.7
------------------------------------- ------------ ------------ ------------ --------------
The proposed interim dividend of 3.8 pence (2018: 5.15 pence)
has not been included as a liability in these interim financial
statements because it had not been approved at the period end date.
The dividend totalling GBP4.1 million will be paid on 18 October
2019 to shareholders on the register at the close of business on 13
September 2019. A scrip dividend alternative will be offered.
8. Non-current assets
Acquired Other Total Land Plant Total
intangible intangible intangible and and tangible
assets assets assets buildings equipment fixed
assets
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
Cost
At 1 January 2018 79.2 8.4 87.6 32.9 32.7 65.6
Currency movements - - - - - -
Additions - - - 0.1 0.2 0.3
Disposals - (1.0) (1.0) (0.6) (0.7) (1.3)
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 30 June 2018 79.2 7.4 86.6 32.4 32.2 64.6
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 1 July 2018 79.2 7.4 86.6 32.4 32.2 64.6
Currency movements - - - 0.4 0.1 0.5
Additions - 0.3 0.3 (0.1) 0.8 0.7
Disposals - - - (0.6) (0.9) (1.5)
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 31 December 2018 79.2 7.7 86.9 32.1 32.2 64.3
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
Adjustment on transition
to IFRS 16 - - - 17.8 15.2 33.0
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
Restated cost at 1
January 2019 79.2 7.7 86.9 49.9 47.4 97.3
Currency movements - - - (0.1) - (0.1)
Additions - 0.9 0.9 1.9 7.4 9.3
Disposals - - - (0.1) (5.0) (5.1)
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 30 June 2019 79.2 8.6 87.8 51.6 49.8 101.4
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
Amortisation/depreciation
At 1 January 2018 18.4 6.7 25.1 2.9 19.7 22.6
Currency movements - - - - - -
Charge for the period 1.5 0.2 1.7 0.4 1.6 2.0
Disposals - (0.2) (0.2) - (0.7) (0.7)
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 30 June 2018 19.9 6.7 26.6 3.3 20.6 23.9
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 1 July 2018 19.9 6.7 26.6 3.3 20.6 23.9
Currency movements - - - 0.1 - 0.1
Charge for the period 1.6 0.2 1.8 0.4 0.8 1.2
Disposals - - - - (0.9) (0.9)
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 31 December 2018 21.5 6.9 28.4 3.8 20.5 24.3
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 1 January 2019 21.5 6.9 28.4 3.8 20.5 24.3
Currency movements - - - - - -
Charge for the period 1.1 0.1 1.2 2.8 5.6 8.4
Disposals - - - (1.2) (1.5) (2.7)
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 30 June 2019 22.6 7.0 29.6 5.4 24.6 30.0
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
Net book value
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 30 June 2019 56.6 1.6 58.2 46.2 25.2 71.4
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 1 January 2019 57.7 0.8 58.5 46.8 26.9 73.7
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 31 December 2018 57.7 0.8 58.5 28.3 11.7 40.0
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 30 June 2018 59.3 0.7 60.0 29.1 11.6 40.7
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
At 1 January 2018 60.8 1.7 62.5 30.0 13.0 43.0
---------------------------- ------------- ------------- ------------ ------------ ------------- -------------
Included in the net carrying value amount of property, plant and equipment
are right-of-use assets as follows:
Total
Land and Plant and right-of-use
buildings equipment assets
GBPm GBPm GBPm
-------------------------- ---------------- ---------------- -------------------
At 30 June 2019 18.4 11.8 30.2
------------------------------ ---------------- ---------------- -------------------
At 1 January 2019 18.5 15.2 33.7
------------------------------ ---------------- ---------------- -------------------
9. Retirement benefit obligations
2019 2018 2018
Half-year Half-year Year
GBPm GBPm GBPm
----------------------------------------------- ------------ ------------ ---------
Present value of defined benefit obligations (810.6) (759.6) (752.7)
Fair value of scheme assets 815.1 776.7 748.5
----------------------------------------------- ------------ ------------ ---------
Recognised asset/(liability) for defined
benefit obligations 4.5 17.1 (4.2)
----------------------------------------------- ------------ ------------ ---------
The Group has recognised an asset on the basis that any surplus
of deficit contributions to The Costain Pension Scheme would be
recoverable by way of a refund, as the Group has the unconditional
right to any surplus once all the obligations of the Scheme have
been settled.
Movement in present value of defined 2019 2018 2018
benefit obligations: Half-year Half-year Year
GBPm GBPm GBPm
------------------------------------------- ------------ ------------ --------
Opening balance 752.7 803.4 803.4
Past service cost - GMP equalisation
charge - - 8.6
Interest cost 10.4 9.9 19.6
Remeasurements - demographic assumptions (9.2) - (25.9)
Remeasurements - financial assumptions 74.4 (42.6) (20.7)
Remeasurements - experience assumptions - 6.1 3.9
Benefits paid (17.7) (17.2) (36.2)
------------------------------------------- ------------ ------------ --------
Closing balance 810.6 759.6 752.7
------------------------------------------- ------------ ------------ --------
Movement in fair value of scheme assets: 2019 2018 2018
Half-year Half-year Year
GBPm GBPm GBPm
------------------------------------------- ------------ ------------ --------
Opening balance 748.5 779.5 779.5
Interest income 10.4 9.7 19.2
Remeasurements - return on assets 63.1 (5.1) (29.4)
Contributions by employer 10.9 9.9 15.7
Administrative expenses (0.1) (0.1) (0.3)
Benefits paid (17.7) (17.2) (36.2)
------------------------------------------- ------------ ------------ --------
Closing balance 815.1 776.7 748.5
------------------------------------------- ------------ ------------ --------
The following actuarial assumptions have been used in the IAS 19
valuations of the Group's defined benefit pension scheme, which was
closed to new members in May 2005 and to future accrual in
September 2009 (expressed as weighted averages):
2019 2018 2018
Half-year Half-year Year
% % %
--------------------------- ------------ ------------ -------
Discount rate 2.20 2.80 2.80
Future pension increases 3.00 2.90 3.00
Inflation assumption 3.15 3.00 3.20
--------------------------- ------------ ------------ -------
The discount rate, inflation and pension increase and mortality
assumptions have a significant effect on the amounts reported.
Changes in these assumptions would have the following effects on
the Group's defined benefit scheme:
Pension
liability
GBPm
-------------------------------------------------- ------------
Increase discount rate by 0.25%, decreases
pension liability by 33.0
Decrease inflation (and pension increases)
by 0.25%, decreases pension liability by 29.0
Increase life expectancy by one year, increases
pension liability by 34.0
-------------------------------------------------- ------------
10. Financial instruments
The Group's centralised function manages financial risk,
principally arising from liquidity and funding risks and movements
in foreign currency rates, in accordance with policies agreed by
the Directors. At 30 June 2019, the Group had foreign currency
contracts designated as cash flow hedges of future transactions
over a period of up to 3 years as summarised below and interest
rate swaps that fix the effective LIBOR rate of GBP60.0 million of
borrowings to June 2021. The carrying value represents the fair
value of the contract; the cash flows represent the pounds sterling
commitments. There were no ineffective hedges at the reporting
date.
Foreign exchange 2019 2018 2018
contracts Half-year Half-year Year
Carrying Cash flows Carrying Cash flows Carrying Cash flows
amount amount amount
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ---------- ------------ ---------- ------------ ---------- ------------
Purchases 0.7 (17.9) (0.9) (15.5) 0.7 (18.1)
Sales (0.1) (4.2) 0.1 3.0 (0.1) (2.6)
---------------------- ---------- ------------ ---------- ------------ ---------- ------------
0.6 (22.1) (0.8) (12.5) 0.6 (20.7)
Interest rate swaps (0.2) (1.3) 0.1 (1.6) 0.2 (1.5)
---------------------- ---------- ------------ ---------- ------------ ---------- ------------
0.4 (23.4) (0.7) (14.1) 0.8 (22.2)
---------------------- ---------- ------------ ---------- ------------ ---------- ------------
The Group's investment in Alcaidesa Holding SA is hedged by euro
currency contracts which mitigate the foreign currency risk arising
from the subsidiary's net assets. The value of the forward sale
contracts at 30 June 2019 was EUR28.0 million (2018 half-year
EUR28.0 million, 2018 year EUR28.0 million). No ineffectiveness was
recognised from the net investment hedge.
11. Share capital
Issued capital as at 30 June 2019 amounted to GBP54.0 million
(2018 half-year: GBP53.2 million, 2018 year: GBP53.5 million) and
comprised 107,906,505 ordinary shares of 50 pence each.
On 17 May 2019, pursuant to the Scrip Dividend Scheme,
shareholders elected to receive 197,710 ordinary shares of 50 pence
each in the Company in lieu of cash in respect of all or part of
their final dividend for the year ended 31 December 2018.
The Company operates a Long-Term Incentive Plan (LTIP) and a
Share Deferral Plan (SDP), together with a legacy Deferred Share
Bonus Plan (DSBP), under which directors and senior employees can
receive awards of shares subject to defined performance targets
being achieved by the Group. During the period ended 30 June 2019,
the Company issued 570,000 shares on 8 April 2019 to the Employee
Benefit Trust in order to satisfy outstanding awards under the
LTIP. Full details of these plans are disclosed in the annual
financial statements.
During the period ended 30 June 2019, the Company issued 124,947
shares on exercise of options granted under the 2015 3-year SAYE
scheme.
12. Related party transactions
Details of transactions between the Group and The Costain
Pension Scheme are included in Note 9. There have been no other
changes in the nature of related party transactions since the last
annual financial statements as at and for the year ended 31
December 2018.
13. Contingent liabilities
Group bank borrowing facilities and bank and surety bond
facilities are supported by cross guarantees given by the Company
and participating companies in the Group. At 30 June 2019, amounts
drawn under the bonding facilities amounted to GBP99.2 million
(2018 half-year GBP99.2 million, 2018 year GBP99.9 million).
There are contingent liabilities in respect of performance bonds
and other undertakings entered into and legal claims arising, all
in the ordinary course of business. None are anticipated to result
in material liabilities except as already provided.
14. Change in accounting policies
This note explains the impact of the adoption of IFRS 16 Leases
from 1 January 2019 and discloses the new accounting policies that
have been applied from 1 January 2019. It also explains the impact
of adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue
from Contracts with Customers on the Group's financial statements
from 1 January 2018 and the Group's change in accounting policy
regarding Research and development expenditure credits (RDEC).
2019 Changes in Accounting Policy
IFRS 16 Leases
The Group has adopted IFRS 16 Leases using the modified
retrospective approach as described in the standard. Comparative
information has not been restated and continues to be reported
under IAS 17 Leases and IFRIC 4 Determining whether an arrangement
contains a lease.
Lease liabilities
On adoption of IFRS 16, the Group recognised liabilities in
relation to leases which had previously been classified as
operating leases and short-term cancellable leases under the
principles of IAS 17 Leases. These liabilities were measured at the
present value of the remaining lease payments, discounted using the
lessee's incremental borrowing rate as of 1 January 2019. The
weighted average incremental borrowing rate applied to the Group's
lease assets was 3.2%.
The following is a reconciliation of total operating lease
commitments (2018 Annual Report note 24) at 31 December 2018 to the
lease liabilities recognised at 1 January 2019:
Land and Other operating Total
buildings leases
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------------- ------ ----------- -------- -------- ------- -------
Total committed operating
lease commitments disclosed
at 31 December 2018 18.1 9.0 27.1
------------------------------------------------------------- ------ ----------- -------- -------- ------- -------
Recognition exemptions:
* Leases of low value assets - (1.9) (1.9)
* Hindsight adjustment of lease length 1.7 - 1.7
------------------------------------------------------------- ------ ----------- -------- -------- ------- -------
Variable lease payments
not recognised 1.7 (1.9) (0.2)
------------------------------------------------------------- ------ ----------- -------- -------- ------- -------
* Non-committed operating lease commitments recognised
for IFRS 16 - 10.4 10.4
* Leases of less than one-year duration - (1.6) (1.6)
------------------------------------------------------------- ------ ----------- -------- -------- ------- -------
Non-committed operating
leases recognised - 8.8 8.8
------------------------------------------------------------- ------ ----------- -------- -------- ------- -------
Operating lease liabilities
before discounting 19.8 15.9 35.7
------------------------------------------------------------- ------ ----------- -------- -------- ------- -------
Discounted using incremental
borrowing rate (2.0) (0.7) (2.7)
Total lease liabilities
recognised under IFRS 16
at 1 January 2019 17.8 15.2 33.0
------------------------------------------------------------- ------ ----------- -------- -------- ------- -------
Comprising:
Current lease liabilities 13.4
Non-current lease liabilities 19.6
------------------------------------------------------------- ------ ----------- -------- -------- ------- -------
Total lease liabilities 33.0
------------------------------------------------------------- ------ ----------- -------- -------- ------- -------
There was no impact on the operating leases
commitments as lessor disclosure.
Right-of-use assets
The associated right-of-use assets were measured at amounts
equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments relating to the lease recognised in the
statement of financial position as at 31 December 2018.
GBPm
Land and buildings 17.8
Plant and equipment 20.0
--------------------------------- ------
Total right-of-use assets 33.0
--------------------------------- ------
The recognised right-of-use assets are included in note 8.
Adjustment to balance sheet items
The change in accounting policy increased tangible fixed assets
at 1 January 2019 (right-of-use assets) as above by GBP33.0 million
and increased liabilities by a matching credit (current
liabilities: GBP13.4 million and non-current liabilities GBP19.6
million).
Significant accounting policies
As described above, the Group has applied IFRS 16 using the
modified retrospective approach and therefore comparative
information has not been restated. This means comparative
information is still reported under IAS 17 and IFRIC 4.
Accounting policy applicable before 1 January 2019
Leases
Leases principally comprise operating leases. Payments made
under operating leases are recognised as an expense in the income
statement on a straight-line basis over the lease term. Any
incentives to enter into operating leases are recognised as a
reduction of rental expense over the lease term on a straight-line
basis.
Accounting policy applicable from 1 January 2019
Leases
Where the Group is party to a lease, except for short-term
leases or leases of low value assets (as noted below), the Group
recognises a right-of-use asset and a lease liability upon lease
commencement.
The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date, any
initial direct costs incurred and an estimate of costs to dismantle
and remove or to restore the underlying asset or the site on which
is located, less any lease incentives received.
The asset is subsequently depreciated using the straight-line
method from the commencement date to the earlier of the end of the
useful life of the asset or the end of lease term. The estimated
useful lives of right-of-use assets are determined on the same
basis as those of property, plant and equipment. In addition, the
right-of-use asset is reduced by any impairment losses and adjusted
for certain remeasurements of the lease liability associated with
changes to the lease term.
The lease liability is initially measured at the present value
of the lease payments payable over the lease term, discounted at
the incremental borrowing rate.
The amount charged to the income statement comprises the
depreciation of the right-of-use asset and the imputed interest on
the lease liability
Payments associated with short-term leases and leases of
low-value assets are recognised on a straight-line basis as an
expense in the income statement. Short-term leases are leases with
a lease term of 12 months or less.
2018 Changes in Accounting Policy
IFRS 9 Financial Instruments - impact of adoption
IFRS 9 replaces the provisions of IAS 39 that relate to the
recognition, classification and measurement of financial assets and
financial liabilities, derecognition of financial instruments,
impairment of financial assets and hedge accounting. The adoption
of IFRS 9 Financial Instruments from 1 January 2018 did not result
in changes to the Group's accounting policies nor adjustments to
the amounts recognised in the consolidated financial
statements.
IFRS 15 Revenue from Contracts with Customers - impact of
adoption
The Group adopted IFRS 15 Revenue from Contracts with Customers
from 1 January 2018, which resulted in changes in accounting
policies and adjustments to the amounts recognised in the financial
statements. In accordance with the transition provisions in IFRS
15, the Group adopted the modified retrospective approach and
restated the brought forward reserves as at 1 January 2018. A full
reconciliation of the impact of the adoption of IFRS 15 is included
in the Group's 2018 Annual Report on pages 170-171.
Research and development expenditure credits (RDEC)
The Group changed its accounting policy for research and
development expenditure credits for 2018 because these credits have
characteristics similar to government grants and it is considered
more appropriate to offset the income against the relevant
expenditure rather than reflect them in the tax charge. The Group
changed its process for collating this data during 2018 and this
enabled collection of more current data rather than the lag
previously experienced. This will reduce the size of balancing
adjustments in respect of prior period grants included in the
current year. As a consequence, as part of the policy change the
Group included the prior year amounts in other items in 2018.
15. Cautionary forward-looking statements
These results contain forward-looking statements based on
current expectations and assumptions. Various known and unknown
risks, uncertainties and other factors may cause actual results to
differ from any future results or developments expressed or implied
from the forward-looking statements. Each forward-looking statement
speaks only as of the date of this document. The Group accepts no
obligation to publicly revise or update these forward-looking
statements or adjust them to future events or developments, whether
as a result of new information, future events or otherwise, except
to the extent legally required.
Responsibility Statement of the Directors in respect of the
interim financial report
Each of the directors of Costain Group PLC confirms, to the best
of his or her knowledge, that:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the Group during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
On behalf of the Board
Paul Golby CBE - Chairman
Alex Vaughan - Chief Executive
21 August 2019
Independent review report to Costain Group PLC
Report on the interim financial statements
Our conclusion
We have reviewed Costain Group PLC's interim financial
statements (the "interim financial statements") in the results for
the half-year ended 30 June 2019 of Costain Group PLC. Based on our
review, nothing has come to our attention that causes us to believe
that the interim financial statements are not prepared, in all
material respects, in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed consolidated statement of financial position as at 30 June 2019;
-- the Condensed consolidated income statement and Condensed
consolidated statement of comprehensive income and expense for the
period then ended;
-- the Condensed consolidated cash flow statement for the period then ended;
-- the Condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the results for the
half-year ended 30 June 2019 have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The results for the half-year ended 30 June 2019, including the
interim financial statements, is the responsibility of, and has
been approved by, the directors. The directors are responsible for
preparing the results for the half-year ended 30 June 2019 in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the results for the half-year ended 30 June
2019 based on our review. This report, including the conclusion,
has been prepared for and only for the company for the purpose of
complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and
for no other purpose. We do not, in giving this conclusion, accept
or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the results for
the half-year ended 30 June 2019 and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
21 August 2019
Unsolicited mail
The Company is legally obliged to make its share register
available to the general public. Consequently, some shareholders
may receive unsolicited mail, including correspondence from
unauthorised investment firms. Shareholders who wish to limit the
amount of unsolicited mail they receive can contact The Mailing
Preference Service at www.mpsonline.org.uk or on 0345 0700705.
Further guidance can also be found on the Company's website at
www.costain.com.
Company's Registrar
The Company's Registrar is Equiniti. For enquiries regarding
your shareholding, please telephone 0371 384 2250. If you are
calling from outside the UK, please telephone +44(0) 121 415 7047.
Lines are open 08.30am to 05.30pm, Monday to Friday. You can also
view up to date information about your shareholdings by visiting
the shareholder website at www.shareview.co.uk. Please ensure that
you advise Equiniti promptly of any change of name or address.
Scrip dividend scheme
A scrip dividend alternative will be offered in respect of the
interim dividend enabling shareholders to receive new ordinary
shares instead of cash if they so wish. Those shareholders who have
already elected to join the scheme will automatically have their
dividend form sent to them.
Shareholders wishing to join the scheme should return a
completed mandate form to the Registrar, Equiniti, by 13 September
2019. Copies of the mandate form and scrip dividend brochure can be
downloaded from the Company's website at www.costain.com or
obtained from Equiniti by telephoning 0371 384 2268 or +44 (0) 121
415 7173 if calling from outside the UK.
Dividend payments
If your dividend is not currently paid directly into your bank
or building society account and you would like to benefit from this
service, please contact Equiniti on 0371 384 2250 who will be
pleased to assist. By receiving your dividends in this way, you can
avoid the risk of cheques getting lost in the post.
ShareGIFT
The Orr Mackintosh Foundation (ShareGift - Registered Charity
No. 1052686) operates a charity share donation scheme for
shareholders with small parcels of shares whose value makes it
uneconomical to sell them. Details of the scheme are available on
the ShareGift website www.sharegift.org and Equiniti 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SEMFWSFUSEDA
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