TIDMCOST
RNS Number : 6552O
Costain Group PLC
11 March 2009
Costain Group PLC
("Costain" or the "Group")
Results for the year ended 31 December 2008
Costain announces a strong performance for 2008 and an increased dividend for
the year
+----------------------------+-------------------+----------------+----------------+
| Year ended 31 December | 2008 | 2007 | Change |
+----------------------------+-------------------+----------------+----------------+
| Revenue* | GBP996.0m | GBP877.9m | +13% |
+----------------------------+-------------------+----------------+----------------+
| Profit from operations | GBP18.3m | GBP16.5m | +11% |
+----------------------------+-------------------+----------------+----------------+
| Profit before tax | GBP23.1m | GBP19.8m | +17% |
+----------------------------+-------------------+----------------+----------------+
| Net cash | GBP146.6m | GBP132.8m | +10% |
+----------------------------+-------------------+----------------+----------------+
| Earnings per share | 2.9p** | 3.6p | - 19% |
+----------------------------+-------------------+----------------+----------------+
| Full year dividend | 0.75p | 0.5p | +50% |
+----------------------------+-------------------+----------------+----------------+
* Including share of joint ventures & associates
** 2008 EPS reflects the full annualised impact of the September 2007 rights
issue
Strategy has delivered profitable growth, a strong net cash balance and a record
order book by focusing on blue-chip customers with committed long-term
investment programmes
* Profit before tax up 17% to GBP23.1 million (2007: GBP19.8 million)
* Strong net cash position increased to GBP146.6 million (2007: GBP132.8 million)
* Record year-end forward order book, up 25% at GBP2.0 billion (2007: GBP1.6
billion)- repeat order customers account for 87%- includes GBP777 million
of secured work for 2009
* Preferred bidder positions over GBP1 billion (2007: over GBP800 million)
* Banking and bonding facilities extended to September 2011 and increased by 42%
to GBP285 million
* Recommended final dividend of 0.5p, increasing total payout for the year by 50%
to 0.75p (2007: 0.5p)
David Allvey, Chairman, commented:
"These very good results reinforce Costain's position as one of the most
successful businesses in the UK's construction and engineering industry.
"Our increasing momentum is underlined by over GBP500 million of significant new
contract wins already secured in 2009. We have more work secured for 2009 at
this point in the year than we did for 2008 at the comparable time last year.
"Whilst external macro economic events, including the fall in equity markets and
interest rates, will have an impact on net interest, the business continues to
perform strongly and we are on course to deliver the Board's expected operating
result in 2009.
"We remain focused on markets where there are significant spend commitments and,
with a net cash balance approaching GBP150 million, we have the resources to
continue to develop the business.
"Our confidence in the future is reflected in the Board's recommendation to
increase the total dividend for the year."
11 March 2009
Enquiries:
+----------------------------------------------+----------------------------------+
| Costain | Tel: 01628 842 444 |
+----------------------------------------------+----------------------------------+
| Andrew Wyllie, Chief Executive | |
+----------------------------------------------+----------------------------------+
| Tony Bickerstaff, Finance Director | |
+----------------------------------------------+----------------------------------+
| Graham Read, Communications Director | |
+----------------------------------------------+----------------------------------+
| | |
+----------------------------------------------+----------------------------------+
| College Hill | Tel: 020 7457 2020 |
+----------------------------------------------+----------------------------------+
| Mark Garraway | |
+----------------------------------------------+----------------------------------+
| Adam Aljewicz | |
+----------------------------------------------+----------------------------------+
Chairman's statement
Overview
I am pleased to report another year of significant progress.
Our 'Being Number One' strategy is driving the Group's success and is providing
resilience in these challenging times. To finish the year with higher revenues
and profits, a robust balance sheet, increased banking and bonding facilities, a
record order book and a growing reputation for delivery is a major achievement
and one that stands us in good stead for the year ahead.
Our clear and focused strategy is ensuring that the Group continues to win new
business in sectors where there is a commitment to expenditure. Our established
market positions in areas such as infrastructure, water, waste, energy, health
and education are of critical importance and will ensure that we continue to
deliver operational progress in 2009.
To take full advantage of market opportunities, the Group has been operationally
realigned into five divisions: Infrastructure, Environmental, Oil, Gas &
Process, Community and Property Development. As Andrew Wyllie highlights in his
Chief Executive's Review, this will also allow the business to broaden its
offering within the markets where we have identified real potential.
Results
Revenue for the year was GBP996.0 million (2007: GBP877.9 million). Profit from
operations was GBP18.3 million (2007: GBP16.5 million), an increase of 11%.
Net financing income amounted to GBP4.8 million (2007: GBP3.3 million) which
incorporated net interest income of GBP5.8 million (2007: GBP2.4 million) and a
pension scheme related net interest cost of GBP1.0 million (2007: GBP0.9 million
income).
Profit before tax was up 17% at GBP23.1 million (2007: GBP19.8 million).
Basic earnings per share amounted to 2.9p (2007: 3.6p). The 2008 earnings per
share reflects the full annualised impact of the September 2007 rights issue,
when the Group raised GBP60 million.
The Group has no significant borrowings and net cash balances at the year-end
totalled GBP146.6 million (2007: GBP132.8 million), including the Group's share
of cash held by construction joint venture arrangements of GBP34.2 million
(2007: GBP28.8 million). The average month-end net cash balance during the year
wasGBP117.4 million.
Dividend
The Board is recommending the payment of a final dividend for the year of 0.5p
per share. If approved at the forthcoming Annual General Meeting, the dividend,
which will be paid on 22 May 2009 to shareholders on the register as at 24 April
2009, would take the payment for the full year to 0.75p (2007: 0.5p), an
increase of 50% over the prior year.
Pension
As at 31 December 2008, the deficit in the UK Pension Scheme recorded in the
Group's balance sheet in accordance with IAS 19 was GBP36.1 million, net of
deferred tax, an improvement of GBP0.3 million from the position as at 31
December 2007.
Board and Staff
Mr F W Ballard and Mr Azman Sulaiman stepped down from the Board during the
year. I thank them for their contribution and we wish them well for the future.
On behalf of the Board, I would also like to thank the management and staff at
Costain for their continued hard work, dedication and loyalty. They can all be
very proud of what has been achieved over the last year.
Outlook
These very good results reinforce Costain's position as one of the most
successful businesses in the UK's construction and engineering industry.
Our increasing momentum is underlined by over GBP500 million of significant new
contract wins already secured in 2009. We have more work secured for 2009 at
this point in the year than we did for 2008 at the comparable time last year.
Whilst external macro economic events, including the fall in equity markets and
interest rates, will have an impact on net interest, the business continues to
perform strongly and we are on course to deliver the Board's expected operating
result in 2009.
We remain focused on markets where there are significant spend commitments and,
with a net cash balance approaching GBP150 million, we have the resources to
continue to develop the business.
Our confidence in the future is reflected in the Board's recommendation to
increase the total dividend for the year.
DAVID ALLVEY
Chairman
11 March 2009
Chief Executive's Review
Costain is now established as one of the UK's premier construction and
engineering businesses.
Clear Strategy
We have benefited from the continued implementation of our 'Being Number One'
strategy that deliberately focuses the business on major blue-chip customers. As
anticipated, these large sophisticated organisations, which include a range of
public, private and regulated enterprises, are seeking to work with fewer
contractors on a longer term or partnership basis.
We have targeted market sectors where we believe work will be undertaken because
of its strategic significance to the nation. Consequently, we have been working
successfully towards developing leading positions in markets such as highways,
water, waste, energy, health and education.
Our strategic focus and high quality customer base has significantly lessened
our exposure to sectors particularly susceptible to the macroeconomic climate
and has allowed us to secure a record high quality order book.
In order to provide even greater emphasis on our customers' needs, we have
realigned our operational structure into five divisions: Infrastructure,
Environmental, Oil, Gas & Process, Community and Property Development. This will
allow us to respond quickly to the changing requirements of our customers, and
ensure that Costain continues to allocate its resources effectively towards
markets with the greatest potential.
Our brand, corporate values and reputation are hugely important to us. They set
the standards by which we do business and have allowed us to attract quality
customers, suppliers and people to enable us to achieve our growth.
Delivering a strong performance
There have been a number of key achievements during the year:
* Delivered 17% growth in Group profits and 13% growth in revenues
* Strengthened the balance sheet and enhanced the net cash position to
GBP146.6 million
* Increased the profits and revenues from our civil engineering operations
* Profit from Oil, Gas & Process operations increased, with net margins in excess
of 6%
* Actively traded our PFI portfolio to re-invest in bidding for new projects
* Reduced our overheads and central costs
* Made key appointments across our executive team as part of our succession
planning
* Secured a record high quality order book of GBP2.0 billion
* Paid an interim dividend for the first time in 17 years
* Recommended a 50% increase in the total dividend payout for the year
However, the Building and Property Development divisions are not providing the
required level of returns and a number of initiatives are in place to improve
performance. Further details of these are set out in the Business Review.
Robust finances
We were successful in achieving our financial objectives for the year.
The year-end net cash position increased to GBP146.6 million (2007:
GBP132.8 million). The Group has no significant borrowings, which is important
given the prevailing macro economic conditions.
During 2008, banking and contract bonding facilities were increased by 42% to
GBP285 million and extended to September 2011. These facilities provide the
headroom needed for us to continue to develop the business.
Record order book
As a direct result of the implementation of our customer focused strategy, we
have been greatly encouraged by the growth in our high quality order book, which
increased by 25% to a record GBP2.0 billion at the year-end (2007: GBP1.6
billion).
Despite the more difficult market conditions, we were successful in securing
over GBP1.4 billion of quality new orders during the year from a range of
blue-chip customers. We also ended the year with over GBP1.0 billion preferred
bidder positions (2007: over GBP800m) including preferred contractor for the
Special Purpose Vehicle (SPV) on the Greater Manchester Waste Disposal
Authority's PFI contract.
Reflecting the strategic focus by Costain on large customers who favour the
long-term framework or partnership approach, the level of repeat business in the
order book has increased to 87%.
The year-end Order Book included GBP777 million for work to be carried out in
2009.
During the year, we saw a number of high profile contract wins across the
business reflecting the breadth of our operations. Of particular note was the
award by the Highways Agency of their MAC Area 7 five-year maintenance contract,
the early extension of our AMP4 contract at Southern Water into the AMP5
2010-2015 period, the redevelopment of Felixstowe port for Hutchison and the
major Riverside waste facility for VonRoll.
These are all examples of work awarded on the basis of excellent customer
relationships and our growing reputation for delivery.
Since the year-end, Costain has continued to win a number of major contract
awards, including Severn Trent AMP 5, the M53 Bidston Moss viaduct refurbishment
and the Port Talbot Relief Road.
The level of tendering and estimating activity remains high supporting our
belief that our customers remain committed to their expenditure plans.
Operations
Our ability to secure high levels of repeat order business reflects our proven
track record in delivering projects safely to quality, time and budget, often
exceeding our customers' expectations.
Our Civil Engineering operations had an exceptional year, increasing profits,
revenues, margins and order book. A number of projects were completed ahead of
schedule generating early completion bonuses. Major new contract awards also
ensured that we have strengthened our position in each of our key target market
sectors and as a result the order book in the division has increased by over 30%
in the year. We are well placed to seize the opportunities that will be
presented by the anticipated future investment in major infrastructure and
environmental related projects; examples include Crossrail, high-speed rail
links, new nuclear power, waste schemes and airport expansion.
The Building division's trading performance was disappointing in the year and
further actions have been taken to address a number of operational issues. This
division now accounts for just 9% of the order book and we are concentrating on
the health and education sectors where we expect there to be significant spend
over the next few years.
PFI remains a strategically important activity given its prominence as a
procurement route for major public projects. We continued with our policy of
trading our PFI equity portfolio to reinvest in bidding for new projects and
disposed of two equity stakes in the year.
Our Oil, Gas & Process operations made excellent progress with increases in
profit, revenue and margin. The order book is also up and we benefit from
specialist expertise in the areas of nuclear design, underground gas storage and
process modularisation. This division is a core part of the Group and is well
placed to capitalise on the demand for energy related projects in the future.
Further progress has been made in closing out the legacy projects from our
International division. During the year, we achieved substantial completion on
the Costa Azul project in Mexico and the customer has operational use of the
facility. The results for the year reflect an additional provision for the
project which is expected to be completed by mid-2009 following the extension of
the project's scope by the customer.
Market conditions in Spain remained very difficult as a result of the global
economic downturn and, as anticipated Alcaidesa, our Spanish strategic land
development operation in joint venture with Santander Bank, did not complete any
land sales in the year. Construction of the 800-berth marina is progressing
well and is scheduled for completion in 2010. There has been a good level of
interest from potential customers seeking to secure berths.
There is a more detailed review of each operating division in the Business
Review.
Health, Safety and Environment
The effective management of Health, Safety and Environment remains our top
priority.
Further progress was made in the year and we recorded an improved Group Accident
Frequency Ratio (AFR) of 0.17, once again making us the best performing company
in the Major Contractors Group (MCG) peer group.
We received a total of 46 RoSPA safety awards including the prestigious Order of
Distinction for our Oil, Gas & Process operations recognising 15 consecutive
annual gold awards. The consideration we show for the local communities in which
we work was recognised by the receipt of 11 awards from the Considerate
Constructors scheme.
Notwithstanding our industry leading safety performance, there was a fatal
accident on the M25/A2 motorway project. This devastating event reinforced the
need for continuous vigilance and improvement in our safety performance.
As part of our commitment to ensuring the health and welfare of our workforce,
medical screening was provided to over 700 employees during the year.
Our efforts to mitigate the environmental impact of our operations were rewarded
by the receipt of our first Silver award following an external assessment by
Business in the Community (BiTC).
A series of challenging objectives have been set for 2009, which include
enhanced performance targets for all activities.
People
We have achieved our strong business performance by ensuring that we employ and
retain a highly talented and motivated team of people. There was a net increase
of over 200 people in the business during the year and we have made a
significant level of investment in training and development at all levels.
A growing business provides plenty of opportunity for our people to develop
their careers and achieve their full potential. Our management development
programmes have enabled many people to take on new and enhanced
responsibilities.
There were changes of responsibilities and new appointments to strengthen the
Executive Board, which is the Group's operational Board. These included Alan
Kay's appointment in the new role of Chief Operating Officer; Darren James, Alex
Vaughan and David Jenkins appointments as Managing Directors for respectively
the new Infrastructure, Community and Environmental divisions; and the promotion
of Tracey Wood to HR and Legal Director.
Our management strength in depth allows us to develop succession planning across
the whole business.
Supply Chain
Progress has been made in further rationalising our supply chain as we focus on
developing more strategic longer-term relationships and the number of suppliers
used has reduced to around 3,000, a sixth of the level on the Group's database
three years ago.
Developing supplier relationships in this mutually beneficial way enables us to
enhance the service we provide to our customers, increase innovation, access the
best project teams, improve safety and drive out cost from the production
process.
We recently hosted an annual supply chain conference which was attended by the
top-100 supply chain partners. During the event we set out our objectives,
discussed areas for collaboration and agreed clear performance targets.
Managing costs
We continue to manage costs robustly and notwithstanding the very significant
increase in revenue and order book, overhead costs in 2008 were held at the same
level as the previous year.
The move to the Group's new open plan headquarters in Maidenhead was successful
and has provided the anticipated improvements in efficiency and working
environment. The regional office in Chelmsford has been closed, as it was no
longer required to support our strategy.
In addition we outsourced part of the Group's IT function and, as a result, an
enhanced service is provided to the business at a lower cost.
Summary
We have achieved a great deal in the last year and delivered a strong business
performance, despite the very significant economic downturn.
We have a clear strategy, robust finances, a record order book and a motivated
management team. The Group is benefiting from the focus our strategy is bringing
to everything we do. We are deliberately targeting the key market sectors that
we believe will be of strategic importance to the nation and that will receive
significant investment over the next few years.
No company can be immune from the current uncertain environment, but Costain is
demonstrating resilience in these turbulent times.
We are expecting to deliver further progress in operating performance during
2009. We are confident about Costain's future, which I look forward to reporting
on during the year.
ANDREW WYLLIE
Chief Executive
11 March 2009
Business Review
CIVIL ENGINEERING
The Group's Civil Engineering division, which accounts for 85% of the Group's
order book, includes our Infrastructure (highways, rail, airports and nuclear)
and Environment (waste, water and marine) activities.
Revenue (including share of joint ventures and associates) for the year was
GBP620.0 million (2007: GBP539.3 million), with an operating profit of GBP28.0
million (2007: GBP20.0 million). The division's year-end order book was GBP1.67
billion (2007: GBP1.24 billion), an increase of 34%.
This strong performance reflects Costain's position as a leader in the delivery
of the UK's infrastructure and environmental projects.
Highways
In 2008, Costain delivered a number of major schemes for its customers and
significantly strengthened its position in the provision of maintenance
services.
A strong operational performance was underpinned by early deliveries for the
Highways Agency on M25 Junctions 1b to 3 and M27 Junctions 11 to 12 and strong
starts on the M25 Bell Common Tunnel, A34 Wolvercote Viaduct and the
Rhondda Cynon Taf Church Village by-pass projects.
Our high level of service delivery on the Highways Agency's MAC Area 10
five-year maintenance contract by our A one+ joint venture team was rewarded
with the award of the Area 7 MAC contract, further reinforcing our growing
position in this area.
In conjunction with joint venture partners, Costain is supporting the Highways
Agency in developing two of its largest Early Contractor Involvement schemes on
the M1 Junctions 10 to 13 and on the A14 Ellington to Fen Ditton.
Rail
Following the completion and acclaimed opening of St Pancras International,
Costain completed on programme the Kings Cross Eastern Range contract for
Network Rail. We have also been awarded and have commenced work on the first
stage of the Thameslink upgrade at Farringdon, which will be a key hub for
Network Rail, London Underground and the future Cross Rail scheme.
During 2008, Costain has continued to support London Underground on the early
stages of its important 'Cooling The Tube' programme and we also delivered the
first new underground station on an existing line for over 60 years at Wood
Lane.
The receipt of a British Construction Industry Award ('BCIA') for our work on
the Langdon Park Docklands Light Railway station has further enhanced Costain's
reputation in the rail sector.
Airports
Following Costain's appointment to the BAA Complex Build Integrator Framework,
we commenced work on the early stages of the planned redevelopment of the North
Terminal at Gatwick.
The Group also secured a contract for the delivery of ground investigation work
at Stansted and undertaken further work for Manchester Airport Group, delivering
airside pavements at both Manchester and Bournemouth airports during the year.
Nuclear
Costain is continuing to build its presence in the nuclear sector and is focused
on decommissioning opportunities and ultimately on securing work on the future
new build programme.
During the year, there was good progress on major contracts including the
Evaporator 'D' project at Sellafield and the Solid Active Waste Bunker Retrieval
project at Hunterston. Costain's coverage of the UK nuclear sites continues to
strengthen with our framework contract at Trawsfynydd being supplemented with
the award of the Magnox South framework at Berkeley and preparatory work at
Hinkley.
Water
Costain reinforced its position as the UK's leading asset management contractor
in the water sector where we delivered an excellent performance across all our
frameworks.
As a result of our exceptional delivery, Southern Water awarded our 4D joint
venture with an early extension of our contract through the AMP5 period to 2015,
providing the Group with visibility of a major earnings stream.
Elsewhere, the Group delivered 500 waste and water schemes for Yorkshire Water,
achieved all of the delivery targets for Welsh Water, completed major schemes at
Hornsey, Lane End, Wanstead and Beddington for Thames Water and provided a
diverse range of clean and waste water schemes for United Utilities.
Waste
Costain has significantly expanded its operations in the growing waste sector
and is focused on leveraging its complementary process engineering skills and
expertise from its water operations to build a major presence in the rapidly
expanding UK and European regulated marketplace.
Costain was awarded the Riverside energy-from-waste plant project at Belvedere
in Kent, a milestone in the division's expansion. We are also preferred bidder
for the design and build element of the Greater Manchester Waste Authority
contract, the largest waste services contract in Europe.
We are seeking to build on our success on waste PFI projects by bidding in
consortium for a number of future contracts. We have pre-qualified on the
Bradford and Calderdale project and will bid for others selectively in 2009.
Marine
A major achievement during the year was the award by Hutchison Port Holdings of
the Felixstowe South Reconfiguration contract where work commenced in May 2008
and will last for two and a half years. In addition, Costain's established
relationship with Canary Wharf Contractors was extended with further works
secured in joint venture for the development at Westferry Circus.
BUILDING
Revenue (including share of joint ventures and associates) for the year was
GBP285.6 million (2007: GBP254.7 million), with an operating loss of GBP5.2
million (2007: profit of GBP0.8 million).
In line with our stated strategy of actively trading our PFI portfolio in order
to invest in future opportunities, we disposed of our equity stakes in two PFIs
during the year resulting in a combined profit of GBP2.7 million.
The disappointing divisional performance reflected provisions made for
additional costs on a small number of projects, in particular on one non-core
residential project. We have taken decisive actions to improve the performance
of the division including management changes, reducing overheads, strengthening
and focusing relationships with the supply chain and improving business process
implementation. We anticipate an improvement in performance in 2009.
The division's year-end order book was reduced by 26% to GBP181 million (2007:
GBP243 million) reflecting the primary focus on health, education and retail
opportunities.
Health
A number of healthcare projects were successfully completed including the first
of Costain's Three Shires PFI batch of hospitals. Good progress is being made on
the two other batch hospitals, together with the ProCure 21 schemes in Chertsey,
Sheffield and Cheltenham.
Following the recent award, Costain has commenced work on a redevelopment scheme
at Gloucestershire Royal Hospital and a number of additional projects have also
been progressed within the ProCure 21 framework.
Education
Costain, in joint venture partnership, completed on time the first three schools
in Bradford under the Government's Building Schools for the Future ('BSF')
programme despite facing a number of operational challenges. The joint venture
has now commenced delivery of a further three new primary schools under Phase 2
of the programme and is finalising the design development of four secondary
schools for commencement in the first quarter of 2009.
Of the two schools being delivered under the Lewisham BSF, one has been
completed and the second is scheduled to be occupied in April 2009. Three
further schemes, under Phase 2 of this programme, are currently being developed.
Costain also successfully completed a number of school and university projects
elsewhere around the country including the DACI at Shrivenham and the ICMA
extension at the University of Reading.
Retail
Costain completed a total of seven projects for Tesco and Sainsbury's.
Following the award of the Newbury Parkway project, we have commenced the
construction of this retail mixed-use re-development, part of an extensive
re-generation of Newbury town centre which is expected to be completed in 2010.
OIL, GAS & PROCESS
Revenue (including share of joint ventures and associates) for the year was
GBP83.6 million (2007: GBP62.3 million) with an operating profit of
GBP5.5million (2007: GBP1.9 million). The division's order book increased 14% to
GBP115 million (2007: GBP101 million).
Building on the successful results achieved in 2007, the division performed very
well during 2008 and continues to offer significant opportunities for future
growth.
Our nuclear engineering and design activity has delivered good results and we
continue to develop this area of expertise as part of Costain's overall approach
to this important market.
Costain secured two significant awards in the important underground gas storage
sector: firstly, the Brine & Water Plant at Gaz de France's Stublach Underground
Gas Storage Facility and, secondly, the gas plant for the E.ON Holford
Underground Gas Storage Facility.
In International Gas Processing, the division is providing project management,
engineering and procurement services to a number of overseas customers. During
2008, projects were successfully completed for BG in Tunisia and Eni in
Pakistan.
In the Middle East, where Costain has been active for a number of years, the
Company is one of only four construction contractors based permanently on Abu
Dhabi's Das Island oil and gas refinery complex.
PROPERTY DEVELOPMENT
Revenue (including share of joint ventures and associates) for the year was
GBP1.1 million (2007: GBP3.6 million) with a loss of GBP2.3 million (2007:
profit GBP0.2 million).
The Spanish real estate market had a difficult year and Alcaidesa Holding,
Costain's 50% joint venture with a division of Santander Bank, has not been
immune to the economic problems impacting the market.
Alcaidesa Holding does not undertake direct residential development in Spain but
has acquired over time a land bank for which it seeks to secure Master Plan
approval and build infrastructure prior to selling on developable land to third
parties. No significant land sales were achieved in the year.
It is not expected that the market will improve in 2009 and,
consequently, action has been taken to reduce costs.
Work started in August 2008 on the construction of the 800 berth yacht marina
and associated commercial development at La Linea de la Concepcion immediately
adjacent to the Spanish border with Gibraltar. The project is progressing and
the first phase will be completed in 2010.
INTERNATIONAL
Revenue (including share of joint ventures and associates) for the year was
GBP5.7 million (2007: GBP18.0 million) with an operating loss of GBP2.0 million
(2007: GBPNil).
Following the decision in 2006 to close the International division, we continue
to workout the two last remaining contracts. During the year, we achieved
substantial completion on the Costa Azul project in Mexico and the customer has
operational use of the facility. Agreement has been reached with the customer
regarding the final value and scope of the project and we have taken an
additional provision of GBP2 million accordingly. The remaining outstanding
works will be completed in 2009.
All future international projects will be undertaken by the appropriate
specialist sector teams.
ORDER BOOK
We have a high quality order book, standing at GBP2.0 billion as at 31 December
2008, of which over GBP777 million relates to 2009 and 87% of which is repeat
business. We have also grown our preferred bidder positions to in excess of GBP1
billion.
We will maintain our focus on quality of work rather than quantity. This
approach has resulted in an order book that extends through 2015, contains a
range of excellent contracts and provides a stream of high-quality earnings for
the Group.
Consolidated income statement
Year ended 31 December
+------------------------------------------------+--------+---------+--+---------+
| | Notes | 2008 | | 2007 |
+------------------------------------------------+--------+---------+--+---------+
| | | GBPm | | GBPm |
+------------------------------------------------+--------+---------+--+---------+
| | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Revenue (Group and share of joint ventures and | 2 | 996.0 | | 877.9 |
| associates) | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Share of joint ventures and associates | 7 | (93.4) | | (130.3) |
+------------------------------------------------+--------+---------+--+---------+
| Group revenue | | 902.6 | | 747.6 |
+------------------------------------------------+--------+---------+--+---------+
| | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Cost of sales | | (861.3) | | (716.2) |
+------------------------------------------------+--------+---------+--+---------+
| Gross profit | | 41.3 | | 31.4 |
+------------------------------------------------+--------+---------+--+---------+
| | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Administrative expenses | | (21.8) | | (21.7) |
+------------------------------------------------+--------+---------+--+---------+
| | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Group operating profit | | 19.5 | | 9.7 |
+------------------------------------------------+--------+---------+--+---------+
| | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Profit on sales of investments | | - | | 2.7 |
+------------------------------------------------+--------+---------+--+---------+
| Profit on sales of interests in joint ventures | | 2.7 | | 3.2 |
| and associates | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Share of results of joint ventures and | 7 | (3.9) | | 0.9 |
| associates | | | | |
+------------------------------------------------+--------+---------+--+---------+
| | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Profit from operations | 2 | 18.3 | | 16.5 |
+------------------------------------------------+--------+---------+--+---------+
| | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Financial income | 3 | 34.8 | | 29.6 |
+------------------------------------------------+--------+---------+--+---------+
| Finance costs | 3 | (30.0) | | (26.3) |
+------------------------------------------------+--------+---------+--+---------+
| Net financing income | | 4.8 | | 3.3 |
+------------------------------------------------+--------+---------+--+---------+
| | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Profit before tax | | 23.1 | | 19.8 |
+------------------------------------------------+--------+---------+--+---------+
| | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Income tax expense | 5 | (4.9) | | (3.8) |
+------------------------------------------------+--------+---------+--+---------+
| | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Profit for the year attributable to equity | | 18.2 | | 16.0 |
| holders of the parent | | | | |
+------------------------------------------------+--------+---------+--+---------+
| | | | | |
+------------------------------------------------+--------+---------+--+---------+
| Earnings per share - basic | 4 | 2.9p | | 3.6p |
+------------------------------------------------+--------+---------+--+---------+
| Earnings per share - diluted | 4 | 2.9p | | 3.5p |
+------------------------------------------------+--------+---------+--+---------+
During the year and the previous year, no businesses were acquired. In the
previous year, the impact on the results of the businesses disposed was not
material and, therefore, all results are classified as arising from continuing
operations.
+-----------------------------------------------+--------+--------+--+--------+
| | | 2008 | | 2007 |
+-----------------------------------------------+--------+--------+--+--------+
| Dividends per ordinary share: | 6 | | | |
+-----------------------------------------------+--------+--------+--+--------+
| Final 2007 - paid 2008 | | - | | 0.50p |
+-----------------------------------------------+--------+--------+--+--------+
| Interim 2008 - paid 2008 | | 0.25p | | - |
+-----------------------------------------------+--------+--------+--+--------+
| Final 2008 - proposed | | 0.50p | | - |
+-----------------------------------------------+--------+--------+--+--------+
Consolidated statement of recognised income and expense
Year ended 31 December
+--+---------------------------------------------+--------+--------+--+--------+
| | Notes | 2008 | | 2007 |
+------------------------------------------------+--------+--------+--+--------+
| | | GBPm | | GBPm |
+------------------------------------------------+--------+--------+--+--------+
| | | | | |
+------------------------------------------------+--------+--------+--+--------+
| Exchange differences on translation of foreign | | 9.7 | | 2.0 |
| operations | | | | |
+------------------------------------------------+--------+--------+--+--------+
| Cash flow hedges: | | | | |
+------------------------------------------------+--------+--------+--+--------+
| | Effective portion of changes in fair value | | 0.7 | | (0.1) |
| | (net of tax) during year - Group | | | | |
+--+---------------------------------------------+--------+--------+--+--------+
| | Effective portion of changes in fair value | | (10.9) | | (0.3) |
| | (net of tax) during year - joint ventures | | | | |
| | and associates | | | | |
+--+---------------------------------------------+--------+--------+--+--------+
| | Joint ventures and associates disposed | | (0.7) | | 0.2 |
| | during year | | | | |
+--+---------------------------------------------+--------+--------+--+--------+
| Change in fair value of assets classified as | | - | | (2.6) |
| available for sale | | | | |
+------------------------------------------------+--------+--------+--+--------+
| Actuarial (losses)/gains on defined benefit | | (10.5) | | 11.7 |
| pension scheme | | | | |
+------------------------------------------------+--------+--------+--+--------+
| Tax recognised on actuarial (losses)/gains | | 3.0 | | (3.3) |
| recognised directly in equity | | | | |
+------------------------------------------------+--------+--------+--+--------+
| Tax rate adjustment to brought forward | | - | | (1.7) |
| actuarial losses recognised directly in equity | | | | |
+------------------------------------------------+--------+--------+--+--------+
| Net (loss)/income recognised directly in | | (8.7) | | 5.9 |
| equity | | | | |
+------------------------------------------------+--------+--------+--+--------+
| | | | | |
+------------------------------------------------+--------+--------+--+--------+
| Profit for the year | | 18.2 | | 16.0 |
+------------------------------------------------+--------+--------+--+--------+
| | | | | |
+------------------------------------------------+--------+--------+--+--------+
| Total recognised income and expense for the | 10 | 9.5 | | 21.9 |
| year attributable to equity holders of the | | | | |
| parent | | | | |
+--+---------------------------------------------+--------+--------+--+--------+
Consolidated balance sheet
As at 31 December
+----------------------------------------------+--------+---------+--+--------+
| | Notes | 2008 | | 2007 |
+----------------------------------------------+--------+---------+--+--------+
| | | GBPm | | GBPm |
+----------------------------------------------+--------+---------+--+--------+
| ASSETS | | | | |
+----------------------------------------------+--------+---------+--+--------+
| Non-current assets | | | | |
+----------------------------------------------+--------+---------+--+--------+
| Property, plant & equipment | | 7.7 | | 3.5 |
+----------------------------------------------+--------+---------+--+--------+
| Intangible assets | | 1.8 | | 2.7 |
+----------------------------------------------+--------+---------+--+--------+
| Investments in joint ventures | | 32.2 | | 29.0 |
+----------------------------------------------+--------+---------+--+--------+
| Investments in associates | | 0.1 | | 2.2 |
+----------------------------------------------+--------+---------+--+--------+
| Loans to joint ventures | | 9.5 | | 7.3 |
+----------------------------------------------+--------+---------+--+--------+
| Loans to associates | | 0.9 | | 1.6 |
+----------------------------------------------+--------+---------+--+--------+
| Other receivables | | 6.0 | | 6.7 |
+----------------------------------------------+--------+---------+--+--------+
| Deferred income tax assets | | 18.9 | | 21.2 |
+----------------------------------------------+--------+---------+--+--------+
| Total non-current assets | | 77.1 | | 74.2 |
+----------------------------------------------+--------+---------+--+--------+
| | | | | |
+----------------------------------------------+--------+---------+--+--------+
| Current assets | | | | |
+----------------------------------------------+--------+---------+--+--------+
| Inventories | | 1.6 | | 2.0 |
+----------------------------------------------+--------+---------+--+--------+
| Trade and other receivables | | 180.3 | | 150.3 |
+----------------------------------------------+--------+---------+--+--------+
| Cash and cash equivalents | 8 | 147.3 | | 133.4 |
+----------------------------------------------+--------+---------+--+--------+
| Total current assets | | 329.2 | | 285.7 |
+----------------------------------------------+--------+---------+--+--------+
| Total assets | | 406.3 | | 359.9 |
+----------------------------------------------+--------+---------+--+--------+
| | | | | |
+----------------------------------------------+--------+---------+--+--------+
| EQUITY | | | | |
+----------------------------------------------+--------+---------+--+--------+
| Share capital | | 31.7 | | 31.4 |
+----------------------------------------------+--------+---------+--+--------+
| Share premium | | 1.7 | | 1.1 |
+----------------------------------------------+--------+---------+--+--------+
| Foreign currency translation reserve | | 10.6 | | 0.9 |
+----------------------------------------------+--------+---------+--+--------+
| Hedging reserve | | (12.7) | | (1.8) |
+----------------------------------------------+--------+---------+--+--------+
| Retained earnings | | 2.3 | | (4.2) |
+----------------------------------------------+--------+---------+--+--------+
| Total equity attributable to equity holders | 10 | 33.6 | | 27.4 |
| of the parent | | | | |
+----------------------------------------------+--------+---------+--+--------+
| | | | | |
+----------------------------------------------+--------+---------+--+--------+
| LIABILITIES | | | | |
+----------------------------------------------+--------+---------+--+--------+
| Non-current liabilities | | | | |
+----------------------------------------------+--------+---------+--+--------+
| Retirement benefit obligations | 9 | 50.2 | | 50.6 |
+----------------------------------------------+--------+---------+--+--------+
| Other payables | | 2.4 | | 3.7 |
+----------------------------------------------+--------+---------+--+--------+
| Provisions for other liabilities and charges | | 8.0 | | 5.0 |
+----------------------------------------------+--------+---------+--+--------+
| Total non-current liabilities | | 60.6 | | 59.3 |
+----------------------------------------------+--------+---------+--+--------+
| | | | | |
+----------------------------------------------+--------+---------+--+--------+
| Current liabilities | | | | |
+----------------------------------------------+--------+---------+--+--------+
| Trade and other payables | | 305.0 | | 268.1 |
+----------------------------------------------+--------+---------+--+--------+
| Income tax liabilities | | 1.7 | | 1.8 |
+----------------------------------------------+--------+---------+--+--------+
| Overdrafts | 8 | 0.4 | | - |
+----------------------------------------------+--------+---------+--+--------+
| Interest bearing loans and borrowings | | 0.3 | | 0.6 |
+----------------------------------------------+--------+---------+--+--------+
| Provisions for other liabilities and charges | | 4.7 | | 2.7 |
+----------------------------------------------+--------+---------+--+--------+
| Total current liabilities | | 312.1 | | 273.2 |
+----------------------------------------------+--------+---------+--+--------+
| Total liabilities | | 372.7 | | 332.5 |
+----------------------------------------------+--------+---------+--+--------+
| Total equity and liabilities | | 406.3 | | 359.9 |
+----------------------------------------------+--------+---------+--+--------+
Consolidated cash flow statement
Year ended 31 December
+---------------------------------------------------------+-------+--------+--+---------+
| |Notes | 2008 | | 2007 |
+---------------------------------------------------------+-------+--------+--+---------+
| | | GBPm | | GBPm |
+---------------------------------------------------------+-------+--------+--+---------+
| Cash flows from operating activities | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Profit for the year | | 18.2 | | 16.0 |
+---------------------------------------------------------+-------+--------+--+---------+
| Adjustments for: | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Depreciation and amortisation | | 3.1 | | 2.8 |
+---------------------------------------------------------+-------+--------+--+---------+
| Financial income | 3 | (34.8) | | (29.6) |
+---------------------------------------------------------+-------+--------+--+---------+
| Finance costs | 3 | 30.0 | | 26.3 |
+---------------------------------------------------------+-------+--------+--+---------+
| Share-based payments expense | | 0.6 | | 0.2 |
+---------------------------------------------------------+-------+--------+--+---------+
| Income tax | 5 | 4.9 | | 3.8 |
+---------------------------------------------------------+-------+--------+--+---------+
| Profit on sales of investments | | - | | (2.7) |
+---------------------------------------------------------+-------+--------+--+---------+
| Profit on sales of interests in joint ventures and | | (2.7) | | (3.2) |
| associates | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Share of results of joint ventures and associates | 7 | 3.9 | | (0.9) |
+---------------------------------------------------------+-------+--------+--+---------+
| Amounts written off equity and loan to associate | 7 | 0.4 | | - |
+---------------------------------------------------------+-------+--------+--+---------+
| Cash from operations before changes in working capital | | 23.6 | | 12.7 |
| and provisions | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Decrease in inventories | | 0.4 | | 0.4 |
+---------------------------------------------------------+-------+--------+--+---------+
| (Increase)/decrease in receivables | | (24.7) | | 13.3 |
+---------------------------------------------------------+-------+--------+--+---------+
| Increase in payables | | 35.5 | | 1.9 |
+---------------------------------------------------------+-------+--------+--+---------+
| Movement in provisions and employee benefits | | (11.5) | | (8.0) |
+---------------------------------------------------------+-------+--------+--+---------+
| Cash from operations | | 23.3 | | 20.3 |
+---------------------------------------------------------+-------+--------+--+---------+
| | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Interest paid | | (0.7) | | (0.5) |
+---------------------------------------------------------+-------+--------+--+---------+
| Income tax paid | | - | | (0.3) |
+---------------------------------------------------------+-------+--------+--+---------+
| Net cash from operating activities | | 22.6 | | 19.5 |
+---------------------------------------------------------+-------+--------+--+---------+
| | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Cash flows used by investing activities | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Interest received | | 6.5 | | 2.8 |
+---------------------------------------------------------+-------+--------+--+---------+
| Dividends received from joint ventures | | 0.7 | | - |
+---------------------------------------------------------+-------+--------+--+---------+
| Additions to property, plant & equipment | | (5.8) | | (0.8) |
+---------------------------------------------------------+-------+--------+--+---------+
| Additions to intangible assets | | (0.1) | | (0.2) |
+---------------------------------------------------------+-------+--------+--+---------+
| Additions to investments | | - | | (0.2) |
+---------------------------------------------------------+-------+--------+--+---------+
| Disposal of subsidiary, net of cash disposed | | - | | (1.4) |
+---------------------------------------------------------+-------+--------+--+---------+
| Proceeds from sales of investments and interests in | | 5.0 | | 9.4 |
| joint ventures and associates | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Loans to joint ventures and associates | | (11.7) | | (10.1) |
+---------------------------------------------------------+-------+--------+--+---------+
| Net cash used by investing activities | | (5.4) | | (0.5) |
+---------------------------------------------------------+-------+--------+--+---------+
| | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Cash flows (used by)/from financing activities | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Issue of ordinary share capital | | 0.7 | | 65.0 |
+---------------------------------------------------------+-------+--------+--+---------+
| Share issue costs | | - | | (4.5) |
+---------------------------------------------------------+-------+--------+--+---------+
| Ordinary dividends paid | | (4.5) | | - |
+---------------------------------------------------------+-------+--------+--+---------+
| Repayment of borrowings | | (0.3) | | (1.0) |
+---------------------------------------------------------+-------+--------+--+---------+
| Payment of finance lease liabilities | | - | | (0.1) |
+---------------------------------------------------------+-------+--------+--+---------+
| Net cash (used by)/from financing activities | | (4.1) | | 59.4 |
+---------------------------------------------------------+-------+--------+--+---------+
| | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Net increase in cash, cash equivalents and overdrafts | | 13.1 | | 78.4 |
+---------------------------------------------------------+-------+--------+--+---------+
| | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Cash, cash equivalents and overdrafts at beginning of | 8 | 133.4 | | 55.0 |
| the year | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
| Effect of foreign exchange rate changes | | 0.4 | | - |
+---------------------------------------------------------+-------+--------+--+---------+
| Cash, cash equivalents and overdrafts at end of the | 8 | 146.9 | | 133.4 |
| year | | | | |
+---------------------------------------------------------+-------+--------+--+---------+
Notes to the financial statements
1Basis of preparation
Costain Group PLC (the Company) is a public limited company incorporated in the
United Kingdom. The consolidated financial statements of the Company for the
year ended 31 December 2008 comprise the Group and the Group's interests in
associates and jointly controlled entities and have been prepared and approved
by the directors in accordance with International Financial Reporting Standards
as adopted for use in the EU in accordance with EU law (IAS Regulation EC
1606/2002).
The financial information set out herein (which was authorised for issue by the
directors on 11 March 2009) does not constitute the Company's statutory accounts
for the years ended 31 December 2008 or 2007 but is derived from those accounts.
Statutory accounts for 2007 have been delivered to the Registrar of Companies,
and those for 2008 will be delivered in advance of the Company's Annual General
Meeting. The auditors have reported on those accounts; their reports were
unqualified and did not include reference to any matters to which the auditors
drew attention by way of emphasis without qualifying their reports and did not
contain statements under section 237(2) or (3) of the Companies Act 1985.
2Business and geographical segment information by origin
In the opinion of the directors, the business segments are Civil Engineering,
Building, Oil, Gas & Process and International, which undertake engineering and
construction projects, Property Development operations in Spain and Central
costs. PFI investments are allocated to the appropriate segment depending on the
nature of the construction element within the concession. These represent the
Group's primary segments. Secondary segments are presented geographically.
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis. Central
costs comprise mainly corporate expenses. Segment capital expenditure is the
total cost incurred during the period to acquire segment assets that are
expected to be used for more than one period.
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Year ended | Civil |Building |Oil, Gas |International | Property |Central | Total |
| 31 December 2008 |Engineering | | & | |Development | costs | |
| | | | Process | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Group revenue | 554.5 | 267.7 | 79.7 | 0.7 | - | - | 902.6 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Share of revenue of | 65.5 | 17.9 | 3.9 | 5.0 | 1.1 | - | 93.4 |
| JVs and associates | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Total revenue | 620 | 285.6 | 83.6 | 5.7 | 1.1 | - | 996.0 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Group operating | 28.2 | (8.5) | 5.5 | - | - | (5.7) | 19.5 |
| profit/(loss) | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Profit on sales of | - | 2.7 | - | - | - | - | 2.7 |
| JVs and associates | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Share of results of | (0.2) | 0.6 | - | (2.0) | (2.3) | - | (3.9) |
| JVs and associates | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Segment result | 28.0 | (5.2) | 5.5 | (2.0) | (2.3) | (5.7) | 18.3 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Net financing income | | | | | | | 4.8 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Income tax expense | | | | | | | (4.9) |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Profit for the year | | | | | | | 18.2 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Group assets | 141.4 | 27.4 | 26.0 | 2.5 | 0.1 | - | 197.4 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Investments in and | 0.2 | 1.3 | 0.3 | 5.7 | 35.2 | - | 42.7 |
| loans to JVs and | | | | | | | |
| associates | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Segment assets | 141.6 | 28.7 | 26.3 | 8.2 | 35.3 | - | 240.1 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Unallocated assets | | | | | | | 166.2 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Total assets | | | | | | | 406.3 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Group liabilities | (208.3) | (63.6) | (35.0) | (4.9) | - | (0.5) |(312.3) |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Provisions against | - | (7.8) | - | - | - | - | (7.8) |
| JVs and associates | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Segment liabilities | (208.3) | (71.4) | (35.0) | (4.9) | - | (0.5) |(320.1) |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Unallocated | | | | | | | (52.6) |
| liabilities | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Total liabilities | | | | | | |(372.7) |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Capital expenditure | 3.7 | 1.0 | 1.2 | - | - | - | 5.9 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Depreciation/amortisation | 1.9 | 0.7 | 0.5 | - | - | - | 3.1 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
Business and geographical segment information by origin - continued
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Year ended | Civil |Building |Oil, Gas |International | Property |Central | Total |
| 31 December 2007 |Engineering | | & | |Development | costs | |
| | | | Process | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Group revenue | 441.4 | 249.7 | 53.8 | 2.7 | - | - | 747.6 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Share of revenue of | 97.9 | 5.0 | 8.5 | 15.3 | 3.6 | - | 130.3 |
| JVs and associates | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Total revenue | 539.3 | 254.7 | 62.3 | 18.0 | 3.6 | - | 877.9 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Group operating | 16.9 | (2.3) | 1.7 | (0.2) | - | (6.4) | 9.7 |
| profit/(loss) | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Profit on sale of | - | 2.7 | - | - | - | - | 2.7 |
| investment | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Profit on sales of | 3.0 | - | - | 0.2 | - | - | 3.2 |
| JVs and associates | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Share of results of | 0.1 | 0.4 | 0.2 | - | 0.2 | - | 0.9 |
| JVs and associates | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Segment result | 20.0 | 0.8 | 1.9 | - | 0.2 | (6.4) | 16.5 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Net financing income | | | | | | | 3.3 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Income tax expense | | | | | | | (3.8) |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Profit for the year | | | | | | | 16.0 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Group assets | 115.0 | 29.4 | 17.9 | 2.9 | - | - | 165.2 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Investments in and | 1.6 | 8.8 | 0.1 | 3.4 | 26.2 | - | 40.1 |
| loans to JVs and | | | | | | | |
| associates | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Segment assets | 116.6 | 38.2 | 18.0 | 6.3 | 26.2 | - | 205.3 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Unallocated assets | | | | | | | 154.6 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Total assets | | | | | | | 359.9 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Group liabilities | (168.5) | (77.3) | (24.4) | (5.0) | - | (0.6) |(275.8) |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Provisions against | (0.8) | (2.7) | (0.2) | - | - | - | (3.7) |
| JVs and associates | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Segment liabilities | (169.3) | (80.0) | (24.6) | (5.0) | - | (0.6) |(279.5) |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Unallocated | | | | | | | (53.0) |
| liabilities | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Total liabilities | | | | | | |(332.5) |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| | | | | | | | |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Capital expenditure | 0.3 | 0.1 | 0.5 | 0.1 | - | - | 1.0 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
| Depreciation/amortisation | 1.7 | 0.8 | 0.2 | 0.1 | - | - | 2.8 |
+---------------------------+-------------+----------+----------+---------------+-------------+---------+---------+
+--------------+---------------+--------------+----+----------------++-----------------+
| | Revenue | | Segment result |
+--------------+------------------------------+----+-----------------------------------+
| | 2008 | 2007 | | 2008 | 2007 |
+--------------+---------------+--------------+----+-----------------+-----------------+
| | GBPm | GBPm | | GBPm | GBPm |
+--------------+---------------+--------------+----+-----------------+-----------------+
| United | 969.6 | 833.8 | | 20.6 | 16.3 |
| Kingdom | | | | | |
+--------------+---------------+--------------+----+-----------------+-----------------+
| Spain | 1.1 | 3.6 | | (2.3) | 0.2 |
+--------------+---------------+--------------+----+-----------------+-----------------+
| Rest of the | 25.3 | 40.5 | | - | - |
| world | | | | | |
+--------------+---------------+--------------+----+-----------------+-----------------+
| | 996.0 | 877.9 | | 18.3 | 16.5 |
+--------------+---------------+--------------+----+-----------------+-----------------+
| | | | | | |
+--------------+---------------+--------------+----+-----------------+-----------------+
| | Segment assets | | Capital expenditure |
+--------------+------------------------------+----+-----------------------------------+
| | 2008 | 2007 | | 2008 | 2007 |
+--------------+---------------+--------------+----+----------------+------------------+
| | GBPm | GBPm | | GBPm | GBPm |
+--------------+---------------+--------------+----+----------------+------------------+
| United | 181.3 | 167.4 | | 5.0 | 0.6 |
| Kingdom | | | | | |
+--------------+---------------+--------------+----+----------------+------------------+
| Spain | 35.3 | 26.2 | | - | - |
+--------------+---------------+--------------+----+----------------+------------------+
| Rest of the | 23.5 | 11.7 | | 0.9 | 0.4 |
| world | | | | | |
+--------------+---------------+--------------+----+----------------+------------------+
| | 240.1 | 205.3 | | 5.9 | 1.0 |
+--------------+---------------+--------------+----+----------------++-----------------+
3Net financing income
+------------------------------------------------------+--------+--+--------+
| | 2008 | | 2007 |
+------------------------------------------------------+--------+--+--------+
| | GBPm | | GBPm |
+------------------------------------------------------+--------+--+--------+
| Interest income from bank deposits | 5.6 | | 2.4 |
+------------------------------------------------------+--------+--+--------+
| Interest income on loans to related parties | 0.9 | | 0.5 |
+------------------------------------------------------+--------+--+--------+
| Expected return on defined benefit pension scheme | 28.3 | | 26.7 |
| assets | | | |
+------------------------------------------------------+--------+--+--------+
| Financial income | 34.8 | | 29.6 |
+------------------------------------------------------+--------+--+--------+
| | | | |
+------------------------------------------------------+--------+--+--------+
| Interest expense | (0.7) | | (0.5) |
+------------------------------------------------------+--------+--+--------+
| Interest cost on the present value of the defined | (29.3) | | (25.8) |
| benefit obligations | | | |
+------------------------------------------------------+--------+--+--------+
| Finance costs | (30.0) | | (26.3) |
+------------------------------------------------------+--------+--+--------+
| | | | |
+------------------------------------------------------+--------+--+--------+
| Net financing income | 4.8 | | 3.3 |
+------------------------------------------------------+--------+--+--------+
Interest income on loans to related parties relates to shareholder loan interest
receivable from the Group's investments in joint ventures and associates.
4Earnings per share
The calculation of earnings per share is based on profit attributable to equity
holders of the parent of GBP18.2 million (2007: GBP16.0 million) and the number
of shares set out below:
+---------------------------------------------+-------------+--+-------------+
| | 2008 | | 2007 |
+---------------------------------------------+-------------+--+-------------+
| Weighted average number of ordinary shares | 631,910,512 | | 449,535,401 |
| in issue for basic earnings per share | | | |
| calculation | | | |
+---------------------------------------------+-------------+--+-------------+
| Dilutive potential ordinary shares: | | | |
+---------------------------------------------+-------------+--+-------------+
| SAYE Scheme | 2,123,412 | | 5,404,067 |
+---------------------------------------------+-------------+--+-------------+
| Weighted average number of ordinary shares | 634,033,924 | | 454,939,468 |
| in issue for diluted earnings per share | | | |
| calculation | | | |
+---------------------------------------------+-------------+--+-------------+
In 2007, the weighted average number of shares and the number of dilutive
potential ordinary shares were adjusted to take account of the bonus element of
the additional equity raised by way of a rights issue in that year.
5Income tax
+----------------------------------------------------------+-------+--+----------+
| | 2008 | | 2007 |
+----------------------------------------------------------+-------+--+----------+
| | GBPm | | GBPm |
+----------------------------------------------------------+-------+--+----------+
| On profit for the year: | | | |
+----------------------------------------------------------+-------+--+----------+
| United Kingdom corporation tax at 28.5% (2007: 30.0%) | - | | 0.1 |
+----------------------------------------------------------+-------+--+----------+
| Adjustments in respect of prior years | 0.1 | | 0.8 |
+----------------------------------------------------------+-------+--+----------+
| Overseas taxation | - | | (0.3) |
+----------------------------------------------------------+-------+--+----------+
| Current tax credit for the year | 0.1 | | 0.6 |
+----------------------------------------------------------+-------+--+----------+
| | | | |
+----------------------------------------------------------+-------+--+----------+
| Deferred taxation | (5.0) | | (4.0) |
+----------------------------------------------------------+-------+--+----------+
| Adjustments in respect of prior years | - | | (0.4) |
+----------------------------------------------------------+-------+--+----------+
| | | | |
+----------------------------------------------------------+-------+--+----------+
| Total income tax expense in the income statement | (4.9) | | (3.8) |
+----------------------------------------------------------+-------+--+----------+
+----------------------------------------------------------+-------+--+----------+
| | 2008 | | 2007 |
+----------------------------------------------------------+-------+--+----------+
| | GBPm | | GBPm |
+----------------------------------------------------------+-------+--+----------+
| Tax reconciliation: | | | |
+----------------------------------------------------------+-------+--+----------+
| Profit before tax | 23.1 | | 19.8 |
+----------------------------------------------------------+-------+--+----------+
| | | | |
+----------------------------------------------------------+-------+--+----------+
| Income tax at 28.5% (2007: 30.0%) | (6.6) | | (5.9) |
+----------------------------------------------------------+-------+--+----------+
| Rate adjustments relating to overseas profits | 0.5 | | 0.4 |
+----------------------------------------------------------+-------+--+----------+
| Share of results of joint ventures and associates at | (1.1) | | 0.3 |
| 28.5% (2007: 30.0%) | | | |
+----------------------------------------------------------+-------+--+----------+
| Disallowed provisions and expenses | (0.8) | | (0.5) |
+----------------------------------------------------------+-------+--+----------+
| Non-taxable gains and profits relieved by capital losses | 0.8 | | 1.8 |
| | | | |
+----------------------------------------------------------+-------+--+----------+
| Unrelieved overseas tax | - | | (0.2) |
+----------------------------------------------------------+-------+--+----------+
| Decrease/(increase) in temporary differences | 2.1 | | (0.4) |
+----------------------------------------------------------+-------+--+----------+
| Rate adjustment relating to deferred tax | 0.1 | | 0.3 |
+----------------------------------------------------------+-------+--+----------+
| Adjustments in respect of prior years | 0.1 | | 0.4 |
+----------------------------------------------------------+-------+--+----------+
| Total income tax expense in the income statement | (4.9) | | (3.8) |
+----------------------------------------------------------+-------+--+----------+
The income tax above does not include any amounts for joint ventures and
associates, whose results are disclosed in the income statement net of tax.
6Dividends per share
During the period, the 2007 final dividend of 0.50 pence (2006: Nil pence) per
share was paid to shareholders (GBP3.0 million in cash and GBP0.1 million via
scrip alternative). The Company also paid an interim 2008 dividend of 0.25 pence
(2007: nil pence) per share (GBP1.5 million in cash and GBP0.1million via scrip
alternative).
A final dividend in respect of the year ended 31 December 2008 of GBP0.50p per
share, amounting to a total dividend of GBP3.2 million, is to be proposed at the
Annual General Meeting. If approved, the dividend is expected to be paid on 22
May 2009. These financial statements do not reflect this dividend payable. The
payment will be matched by a contribution to the Group's defined benefit pension
scheme.
7Investments
The analysis of the Group's share of joint ventures and associates is set out
below:
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| | 2008 | 2007 |
+-------------------+----------------------------------------------+---------------------------------------------+
| |Alcaidesa | Other |Associates | Total |Alcaidesa | Other |Associates | Total |
| | Holding | joint | | | Holding | joint | | |
| | SA |ventures | | | SA |ventures | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| Revenue | 1.1 | 71.8 | 20.5 | 93.4 | 3.6 | 118.7 | 8.0 | 130.3 |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| | | | | | | | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| (Loss)/profit | (3.3) | (1.3) | (0.1) | (4.7) | 0.4 | 0.6 | 0.6 | 1.6 |
| before tax | | | | | | | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| Income tax | 1.0 | (0.1) | (0.1) | 0.8 | (0.2) | (0.2) | (0.3) | (0.7) |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| (Loss)/profit for | (2.3) | (1.4) | (0.2) | (3.9) | 0.2 | 0.4 | 0.3 | 0.9 |
| the year | | | | | | | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| | | | | | | | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| Non-current | 13.3 | 75.0 | 72.6 | 160.9 | 7.7 | 45.0 | 72.9 | 125.6 |
| assets | | | | | | | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| Current assets | 40.6 | 29.6 | 14.4 | 84.6 | 31.0 | 59.1 | 22.1 | 112.2 |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| Current | (2.9) | (51.1) | (9.2) | (63.2) | (1.9) | (45.1) | (8.8) | (55.8) |
| liabilities | | | | | | | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| Non-current | (19.2) | (53.1) | (77.7) | (150.0) | (10.6) | (57.5) | (82.7) |(150.8) |
| liabilities | | | | | | | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| Investments in | 31.8 | 0.4 | 0.1 | 32.3 | 26.2 | 1.5 | 3.5 | 31.2 |
| joint ventures | | | | | | | | |
| and associates | | | | | | | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| | | | | | | | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| Financial | 5.8 | 3.5 | 4.7 | 14.0 | - | 3.5 | 6.8 | 10.3 |
| commitments | | | | | | | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| | | | | | | | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
| Capital | - | 0.2 | 10.5 | 10.7 | - | 23.5 | 27.3 | 50.8 |
| commitments | | | | | | | | |
+-------------------+-----------+----------+------------+----------+-----------+----------+------------+---------+
Net interest payable by joint ventures and associates in 2008 was GBP2.6 million
(2007: GBP0.3 million payable).
The financial commitments relate to Alcaidesa and joint ventures involved in PFI
schemes and the capital commitments to construction work being undertaken by the
Costain Group. All figures are the Group's share.
8Cash and cash equivalents
Cash and cash equivalents are analysed below, and include the Group's share of
cash held by jointly controlled operations of GBP34.2 million (2007: GBP28.8
million).
+--------------------------------------------------+--------+--+--------+
| | 2008 | | 2007 |
+--------------------------------------------------+--------+--+--------+
| | GBPm | | GBPm |
+--------------------------------------------------+--------+--+--------+
| Cash and cash equivalents | 147.3 | | 133.4 |
+--------------------------------------------------+--------+--+--------+
| Bank overdrafts | (0.4) | | - |
+--------------------------------------------------+--------+--+--------+
| Cash, cash equivalents and overdrafts in the | 146.9 | | 133.4 |
| cash flow statement | | | |
+--------------------------------------------------+--------+--+--------+
9Employee benefits
Pensions
The Group operates a defined benefit pension scheme in the United Kingdom and a
number of defined contribution type pension plans in the United Kingdom and
overseas. Contributions are paid by subsidiary undertakings and employees. The
total pension charge for the Group in the Consolidated income statement was
GBP8.4 million (2007: GBP7.2 million).
Defined benefit scheme
The defined benefit scheme was closed to new members on 1 June 2005 and from 1
April 2006, future benefits were calculated on a Career Average Revalued
Earnings basis. A full actuarial valuation of the scheme was carried out at 31
March 2007 and was updated to 31 December 2008 by a qualified independent
actuary.
+----------------------------------------+---------+--+---------+--+---------+
| | 2008 | | 2007 | | 2006 |
+----------------------------------------+---------+--+---------+--+---------+
| | GBPm | | GBPm | | GBPm |
+----------------------------------------+---------+--+---------+--+---------+
| | | | | | |
+----------------------------------------+---------+--+---------+--+---------+
| Present value of defined benefit | (435.8) | | (511.1) | | (509.4) |
| obligations | | | | | |
+----------------------------------------+---------+--+---------+--+---------+
| Fair value of scheme assets | 385.6 | | 460.5 | | 440.7 |
+----------------------------------------+---------+--+---------+--+---------+
| Recognised liability for defined | (50.2) | | (50.6) | | (68.7) |
| benefit obligations | | | | | |
+----------------------------------------+---------+--+---------+--+---------+
Movements in present value of defined benefit obligations:
+------------------------------------------------+----------+--+--------+
| | 2008 | | 2007 |
+------------------------------------------------+----------+--+--------+
| | GBPm | | GBPm |
+------------------------------------------------+----------+--+--------+
| | | | |
+------------------------------------------------+----------+--+--------+
| At 1 January | 511.1 | | 509.4 |
+------------------------------------------------+----------+--+--------+
| Current service cost | 4.7 | | 5.8 |
+------------------------------------------------+----------+--+--------+
| Past service cost | 1.2 | | 1.2 |
+------------------------------------------------+----------+--+--------+
| Interest cost | 29.3 | | 25.8 |
+------------------------------------------------+----------+--+--------+
| Actuarial gains | (94.6) | | (15.9) |
+------------------------------------------------+----------+--+--------+
| Benefits paid | (19.8) | | (19.5) |
+------------------------------------------------+----------+--+--------+
| Contributions by members | 3.9 | | 4.3 |
+------------------------------------------------+----------+--+--------+
| At 31 December | 435.8 | | 511.1 |
+------------------------------------------------+----------+--+--------+
Movements in fair value of scheme assets:
+------------------------------------------------+----------+--+--------+
| | 2008 | | 2007 |
+------------------------------------------------+----------+--+--------+
| | GBPm | | GBPm |
+------------------------------------------------+----------+--+--------+
| | | | |
+------------------------------------------------+----------+--+--------+
| At 1 January | 460.5 | | 440.7 |
+------------------------------------------------+----------+--+--------+
| Expected return on scheme assets | 28.3 | | 26.7 |
+------------------------------------------------+----------+--+--------+
| Actuarial losses | (105.1) | | (4.2) |
+------------------------------------------------+----------+--+--------+
| Contributions by employer | 17.8 | | 12.5 |
+------------------------------------------------+----------+--+--------+
| Contributions by members | 3.9 | | 4.3 |
+------------------------------------------------+----------+--+--------+
| Benefits paid | (19.8) | | (19.5) |
+------------------------------------------------+----------+--+--------+
| At 31 December | 385.6 | | 460.5 |
+------------------------------------------------+----------+--+--------+
Expense recognised in the income statement:
+------------------------------------------------+----------+--+--------+
| | 2008 | | 2007 |
+------------------------------------------------+----------+--+--------+
| | GBPm | | GBPm |
+------------------------------------------------+----------+--+--------+
| | | | |
+------------------------------------------------+----------+--+--------+
| Current service cost | 4.7 | | 5.8 |
+------------------------------------------------+----------+--+--------+
| Past service cost | 1.2 | | 1.2 |
+------------------------------------------------+----------+--+--------+
| Interest cost on defined benefit obligations | 29.3 | | 25.8 |
+------------------------------------------------+----------+--+--------+
| Expected return on scheme assets | (28.3) | | (26.7) |
+------------------------------------------------+----------+--+--------+
| Total | 6.9 | | 6.1 |
+------------------------------------------------+----------+--+--------+
The expense is recognised in the following line items in the income statement:
+------------------------------------------------+----------+--+--------+
| | 2008 | | 2007 |
+------------------------------------------------+----------+--+--------+
| | GBPm | | GBPm |
+------------------------------------------------+----------+--+--------+
| | | | |
+------------------------------------------------+----------+--+--------+
| Cost of sales | 5.2 | | 6.2 |
+------------------------------------------------+----------+--+--------+
| Administrative expenses | 0.7 | | 0.8 |
+------------------------------------------------+----------+--+--------+
| Financial income | (28.3) | | (26.7) |
+------------------------------------------------+----------+--+--------+
| Finance costs | 29.3 | | 25.8 |
+------------------------------------------------+----------+--+--------+
| Total | 6.9 | | 6.1 |
+------------------------------------------------+----------+--+--------+
Employee benefits - continued
Pensions - continued
Principal actuarial assumptions (expressed as weighted averages):
+----------------------------------------------------+-------+--+--------+
| | 2008 | | 2007 |
+----------------------------------------------------+-------+--+--------+
| | % | | % |
+----------------------------------------------------+-------+--+--------+
| | | | |
+----------------------------------------------------+-------+--+--------+
| Discount rate | 6.60 | | 5.80 |
+----------------------------------------------------+-------+--+--------+
| Expected rate of return on scheme assets | 6.07 | | 6.14 |
+----------------------------------------------------+-------+--+--------+
| Future salary increases | 2.85 | | 3.40 |
+----------------------------------------------------+-------+--+--------+
| Future pension increases | 2.85 | | 3.40 |
+----------------------------------------------------+-------+--+--------+
| Inflation assumption | 2.85 | | 3.40 |
+----------------------------------------------------+-------+--+--------+
The expected rate of return on scheme assets is determined by reference to
relevant indices. The overall expected rate of return is calculated by weighting
the individual rates in accordance with the anticipated balance in the scheme's
investment portfolio.
Weighted average life expectancy from age 65 as per mortality tables used to
determine benefits at 31 December 2008 and 31 December 2007 is:
+------------------+------------+--+-----------+---+---------+--+------------+
| | 2008 | | 2007 |
+------------------+---------------------------+---+-------------------------+
| | Male | | Female | | Male | | Female |
| | (years) | | (years) | |(years) | | (years) |
+------------------+------------+--+-----------+---+---------+--+------------+
| Currently aged | 20.3 | | 23.1 | | 20.2 | | 23.0 |
| 65 | | | | | | | |
+------------------+------------+--+-----------+---+---------+--+------------+
| Non-retirees | 21.3 | | 24.0 | | 21.2 | | 24.0 |
+------------------+------------+--+-----------+---+---------+--+------------+
The scheme is closed to new entrants and with time the average age of the
remaining members will increase. Under the projected unit method, the service
cost will increase as the average age of members' increases.
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 | | Pension |
| |liability | | cost |
+---------------------------------------------+-----------+--+------------+
| | GBPm | | GBPm |
+---------------------------------------------+-----------+--+------------+
| | | | |
+---------------------------------------------+-----------+--+------------+
| Decrease discount rate by 0.25%, increases | 16.2 | | 0.4 |
| pension liability and pension cost by: | | | |
+---------------------------------------------+-----------+--+------------+
| Decrease inflation (and pension increases) | 14.2 | | 1.3 |
| by 0.25%, decreases pension liability and | | | |
| pension cost by: | | | |
+---------------------------------------------+-----------+--+------------+
| Increase life expectancy by one year, | 10.1 | | 0.8 |
| increases pension liability and pension | | | |
| cost by: | | | |
+---------------------------------------------+-----------+--+------------+
Defined contribution plans
The Group operates a number of defined contribution pension plans. The total
expense relating to these plans in the current year was GBP1.5 million (2007:
GBP1.1 million).
10Capital and reserves
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| | Share | Share |Special | Fair |Translation |Hedging | Merger |Retained | Total |
| |capital |premium |reserve | value | reserve |reserve |Reserve |earnings |Equity |
| | | | |reserve | | | | | |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| | | | | | | | | | |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| At 1 January 2007 | 17.9 | 0.6 | 12.8 | 2.6 | (1.2) | (1.6) | - | (86.3) | (55.2) |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| Total recognised | - | - | - | (2.6) | 2.1 | (0.2) | - | 22.6 | 21.9 |
| income & expense | | | | | | | | | |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| Share-based payments | - | - | - | - | - | - | - | 0.2 | 0.2 |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| Shares issued | 13.5 | 0.5 | (12.8) | - | - | - | 46.5 | 12.8 | 60.5 |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| Transfer | - | - | - | - | - | - | (46.5) | 46.5 | - |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| At 31 December 2007 | 31.4 | 1.1 | - | - | 0.9 | (1.8) | - | (4.2) | 27.4 |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| | | | | | | | | | |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| At 1 January 2008 | 31.4 | 1.1 | - | - | 0.9 | (1.8) | - | (4.2) | 27.4 |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| Total recognised | - | - | - | - | 9.7 | (10.9) | - | 10.7 | 9.5 |
| income & expense | | | | | | | | | |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| Share-based payments | - | - | - | - | - | - | - | 0.5 | 0.5 |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| Shares issued | 0.2 | 0.5 | - | - | - | - | - | - | 0.7 |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| Dividend paid | 0.1 | 0.1 | - | - | - | - | - | (4.7) | (4.5) |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
| At 31 December 2008 | 31.7 | 1.7 | - | - | 10.6 | (12.7) | - | 2.3 | 33.6 |
+----------------------+---------+---------+---------+---------+-------------+---------+---------+----------+--------+
11Related party transactions
The Group has related party relationships with its major shareholders,
subsidiaries, joint ventures and associates and jointly controlled operations,
in relation to the sales of construction services and materials and the
provision of staff. The total value of these services in 2008 was GBP137.7
million (2007: GBP127.7 million).
12 Principal risks and uncertainties
There are a number of potential risks and uncertainties which could have a
material impact on the Group's business, financial condition or results of
operations. The Group has specific policies and procedures which are designed to
identify, manage and mitigate business risks. The principal risks and
uncertainties faced by the Group are detailed in the Annual Report 2008 and are
included by reference in the Directors' Report.
These risks and uncertainties include: general economic and political activity,
including the extent of any governmental regulation, taxation and interest
rates; the Group's ability to attract, develop and retain highly skilled
management and personnel; the risk of non-compliance with laws, regulations and
standards relating to health and safety and the environment; the pension deficit
and the risk that contributions may have to be increased to cover funding
shortfalls; change in the UK Government's policies with regard to improving
public infrastructure, buildings and services specifically in areas where the
Group would expect to compete for work; the risk of incorrectly
budgeting/costing long-term contracts; failing to win contracts including the
failure to close-out contracts because funding was not available for the
project; a failure to meet schedule requirements within contracts which could
adversely affect the Group's reputation and/or expose the Group to financial
liability; financial failure within the supply chain or the supply chain being
responsible for late or inadequate delivery or poor quality of work on a project
which damages the Group's reputation and/or causes it to suffer financial loss;
a loss of IT systems; claims that exceed the limits of insurance or are
uninsurable and procurement delays.
13Forward-looking statements
The announcement contains certain forward-looking statements. The
forward-looking statements are not intended to be guarantees of future
performance but are based on current views and assumptions and involve known and
unknown risks, uncertainties and other factors that may cause actual results to
differ from any future results or developments expressed or implied from the
forward-looking statements.
14Responsibility statements
The Company's statutory accounts for the year ended 31 December 2008 comply with
the Disclosure and Transparency Rules of the United Kingdom's Financial Services
Authority in respect of the requirement to produce an annual financial report.
We confirm on behalf of the Board that to the best of our knowledge:
* the Company's financial statements for the year ended 31 December 2008 have been
prepared in accordance with IFRS as adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the Company
and the undertakings included in the consolidation taken as a whole; and
* the Business Review which is incorporated into the Directors' Report in those
financial statements, includes a fair review of the development and performance
of the business and the position of the Company and the undertakings included in
the consolidation taken as a whole, together with a description of the principal
risks and uncertainties they face.
On behalf of the Board:
D P ALLVEY
Chairman
ANDREW WYLLIE
Chief Executive
This information is provided by RNS
The company news service from the London Stock Exchange
END
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