TIDMCOST
RNS Number : 4403I
Costain Group PLC
11 March 2010
This announcement replaces the announcement released on Wednesday 10 March 2010
at 7:00am under RNS No. 3379I In Note 6 to the Financial Statements, the final
dividend per share should read 0.55 pence per share, not GBP0.55p. All other
details remain unchanged.
The full amended text is shown below.
Costain Group PLC
("Costain" or "the Group" or "the Company")
Results for the year ended 31 December 2009
Costain announces a strong operational performance, a record year-end order book
and an increased dividend for the year. Further progress has been delivered by
focusing on blue-chip customers with committed long-term investment programmes
The Group is also implementing the next stage of its strategy, 'Choosing
Costain'
+----------------------------+---------------+-------------+
| Year ended 31 December | 2009 | 2008 |
+----------------------------+---------------+-------------+
| Revenue* | GBP1,061.1m | GBP996.0m |
+----------------------------+---------------+-------------+
| Profit from operations | GBP20.8m | GBP18.3m |
+----------------------------+---------------+-------------+
| Profit before tax | GBP18.1m | GBP23.1m |
+----------------------------+---------------+-------------+
| Net cash | GBP120.5m | GBP146.6m |
+----------------------------+---------------+-------------+
| Earnings per share | 2.3p | 2.9p |
+----------------------------+---------------+-------------+
| Full year dividend | 0.825p | 0.75p |
+----------------------------+---------------+-------------+
* Including share of joint ventures & associates
· Revenue of GBP1,061.1 million (GBP996.0 million) exceeds GBP1 billion for
first time in 16 years
· Profit from operations increased by 14% to GBP20.8 million (2008: GBP18.3
million)
· Profit before tax of GBP18.1 million (2008: GBP23.1 million)
· Strong net cash position of GBP120.5 million (2008: GBP146.6 million)
- average month-end cash balance of GBP125.3 million during the year (2008:
GBP117.4 million)
· Record year-end forward order book, up 30% at GBP2.6 billion (2008:
GBP2.0 billion)
- repeat order customers account for 84%
- includes c. GBP900 million of secured work for 2010
· In addition, preferred bidder positions at year-end of over GBP400
million
- increased to over GBP600 million since year-end
· Banking and bonding facilities recently extended to 2013 and increased by
20% to GBP345 million
· IAS 19 pension scheme deficit of GBP75.4 million, net of deferred tax, a
similar level to the half-year (2008: GBP36.1 million)
- defined benefit pension scheme closed to future accrual during the year
· Recommended final dividend of 0.55p, increasing total payout for the year
by 10% to 0.825p (2008: 0.75p)
'Choosing Costain'
· Implementing the next stage of our strategy - 'Choosing Costain'
· A commitment to delivering a full-service offering, from front-end
engineering consultancy and design, through construction to maintenance
· Focussing on the Infrastructure, Environment, and Energy & Process
markets where we will place emphasis on those blue-chip customers with repeat
order commitments who are looking for solutions for each phase of the 'life
cycle' of their assets
David Allvey, Chairman, commented:
"This was an excellent overall operational performance. Once again, the Group
has demonstrated its resilience in a difficult economic environment. We are
confident that our position in markets underpinned by strategic capital
expenditure, regulatory commitment or essential maintenance requirements will
continue to stand us in good stead.
"With a record year-end order book, a significant amount of work already secured
for 2010, a net cash balance of over GBP120 million and customers committed to
long-term capital investment programmes, Costain is looking to the future with
confidence. That confidence is reflected in the Board's recommendation to
increase by 10% the total dividend for the year.
"Building on our success, we are now implementing the next stage of our
strategy, 'Choosing Costain', which will ensure that the Group enhances its
position as one of the leading players in the industry."
10 March 2010
A video interview with Costain's Chief Executive Andrew Wyllie and Finance
Director Tony Bickerstaff in which they discuss the 2010 preliminary results
announcement can be viewed at www.costain.com
+---------------------------------------+-----------------------------+
| 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 | |
+---------------------------------------+-----------------------------+
Notes to Editors
Costain is an international engineering and construction group with a reputation
for technical excellence founded on more than 140 years of experience. The
Company's business segments are in Infrastructure (Highways, Rail, Nuclear and
Airports), Environment (Water, Waste and Marine), Community (Health, Education
and Retail), Energy & Process and Property Development.
The Company is focused on market sectors where it expects there to be a
significant investment over the next few years and where it can build and
maintain strong positions.
It has worked on a number of significant infrastructure projects in the UK,
including the St Pancras railway station and the Channel Tunnel Rail Link, and
is currently working on a number of significant projects including the municipal
waste treatment infrastructure for the Greater Manchester Waste Disposal
Authority and EVAP D at Sellafield, one of the largest nuclear projects in the
UK.
For further information please visit the company website: www.costain.com
CHAIRMAN'S STATEMENT
Overview & Strategy
I am delighted to report a strong Group performance in 2009. Indeed, in view of
the very difficult economic environment, this was an excellent result.
The successful implementation of our 'Being Number One' strategy has underpinned
the Group's progress over the last three years. It has also provided much
needed resilience in these challenging times. We again finished the year with
higher revenues, increased operating profits, a strong cash position, enhanced
banking and bonding facilities, a record year-end order book and a growing
reputation for delivery. This is a major achievement and one that stands us in
good stead for the future.
Our strategy has been about a lot more than year-on-year performance. 'Being
Number One' has enabled Costain to leverage the changing dynamics of the
contracting sector and build a portfolio of blue-chip client relationships with
customers who have committed long-term investment programmes and who are
increasingly looking to work with a select group of preferred specialist service
providers. These relationships, which generate a higher volume of repeat
business, provide an increased level of long-term earnings visibility.
Costain is now in a strong position to take advantage of new opportunities
arising from the ongoing structural changes in the sector and we are going to
expand further Costain's market position across the design and engineering,
construction, and operations and maintenance spectrum.
We have therefore invested time and effort over the last few months to develop
our successful current strategy and are pleased to unveil 'Choosing Costain'
which, whilst very much an evolution of 'Being Number One', is designed to
enhance and change the spread of business and earnings profile of Costain over
the medium term.
Our refined strategy is designed to ensure that Costain is the preferred choice
of major blue-chip customers looking for an increasingly integrated service.
Andrew Wyllie, in his Chief Executive's Review, sets out how 'Choosing Costain'
is already being implemented.
Results
Revenue for the year was GBP1,061.1 million (2008: GBP996.0 million). Profit
from operations was GBP20.8 million (2008: GBP18.3 million), an increase of 14%.
Net financing expense amounted to GBP2.7 million (2008: income GBP4.8 million)
which incorporated net interest income of GBP2.1 million (2008: GBP5.8 million)
and a pension scheme related net interest cost of GBP4.8 million (2008: GBP1.0
million).
Profit before tax was GBP18.1 million (2008: GBP23.1 million), which, as
anticipated, reflects the impact of reduced interest rates and the increased IAS
19 pension interest charge.
Basic earnings per share were therefore 2.3p (2008: 2.9p).
The Group has no significant borrowings and net cash balances at the year-end
totalled GBP120.5 million (2008: GBP146.6 million), including the Group's share
of cash held by construction joint venture arrangements of GBP36.0 million
(2008: GBP34.2 million). The average month-end net cash balance during the year
was GBP125.3 million (2008: GBP117.4m).
Dividend
The Board is recommending the payment of a final dividend for the year of 0.55
pence per share. If approved at the forthcoming Annual General Meeting, the
dividend will be paid on 21 May 2010 to shareholders on the register as at 23
April 2010. This would bring the total for the full year to 0.825 pence per
share (2008: 0.75 pence), an increase of 10% over the prior year.
Pension
As at 31 December 2009, the deficit in the UK Pension Scheme recorded in the
Group's balance sheet in accordance with IAS 19 was GBP75.4 million, net of
deferred tax (31 December 2008: GBP36.1 million).
During the year, the pension scheme asset value has increased as a result of a
recovery in the global equity markets. However, this has been more than offset
by an increase in liabilities due to an increase in inflationary expectations
and a reduction in the liability discount rate.
The most recently completed actuarial valuation of the scheme was performed by
the Scheme Actuary as at 31 March 2007. The current monthly Company
contribution of GBP0.9 million towards funding the scheme's deficit will
continue until the next formal actuarial valuation of the Scheme, as at 31 March
2010, is finalised.
As an important step in managing the pension obligation and reducing volatility,
the defined benefit pension scheme was closed to future accrual from 30
September 2009. Costain now only offers a defined contribution scheme for
employees.
Proposed Share Consolidation
At the forthcoming annual general meeting of the Company, shareholders will be
asked to approve a proposed share consolidation on the basis of one ordinary
share in the Company with a nominal value of 50 pence each for every ten
ordinary shares with a nominal value of 5 pence held on 6 May 2010.
The purpose of the share consolidation is, amongst other things, to reduce the
volatility in the Company's share price, thereby enabling a more consistent
valuation of the Company. Further details in respect of the proposed share
consolidation will be set out in the Company's notice of annual general meeting.
If approved by shareholders, it is expected that the share consolidation will
become effective on 7 May 2010.
Board Changes
The following Board changes were announced during the year.
Mr Saad Shehata, a non executive Director and nominee of Mohammed Abdulmohsin
Al-Kharafi & Sons WLL ("Kharafi") retired from the Board with effect from 23
June 2009. Mr Samer Younis, also a nominee of Kharafi, was appointed to the
Board as a non-executive Director with effect from the same date.
Mr Mohd Hussein Ab Hamid resigned from the Group Board with effect from 4
December 2009, following his retirement from the UEM Group of Companies ("UEM").
We thank both Saad and Hussein for their efforts and commitment to Costain over
the years.
Staff
On behalf of the whole Board, I would like to express our gratitude to all our
colleagues at Costain. The excellent performance during the year is the result
of the efforts of everyone at the Group and we recognise their hard work and
dedication across the business.
Summary & Outlook
This was an excellent overall operational performance. Once again, the Group
has demonstrated its resilience in a difficult economic environment. We are
confident that our position in markets underpinned by strategic capital
expenditure, regulatory commitment or essential maintenance requirements will
continue to stand us in good stead.
With a record year-end order book, a significant amount of work already secured
for 2010, a net cash balance of over GBP120 million and customers committed to
long-term capital investment programmes, Costain is looking to the future with
confidence. That confidence is reflected in the Board's recommendation to
increase by 10% the total dividend for the year.
Building on our success, we are now implementing the next stage of our strategy,
'Choosing Costain', which will ensure that the Group enhances its position as
one of the leading players in the industry.
DAVID ALLVEY
Chairman
10 March 2010
CHIEF EXECUTIVE'S REVIEW
During the year we achieved further significant progress, consolidating our
position as one of the UK's premier engineering and construction businesses.
In what was a challenging economic environment, we are pleased to report a
growth in profit from operations, an increase in revenues, a significant
increase in the order book, a strong net cash position and a recommendation to
increase the dividend for the year.
Costain is recognised as a major industry player. In 2009, the business received
numerous awards including "Major Contractor of the Year" from New Civil Engineer
magazine for an unprecedented second successive year and the "Supreme Award"
from Construction News.
The Group's operations continued to benefit from the deliberate focus on
targeted blue chip customers whose major spending plans are underpinned by
strategic national priorities in chosen sectors. Costain has a proven scale and
capability to deliver complex solutions to major customers and as a result has
entered 2010 with a strong order book and pipeline of opportunities.
Later in my review, I will set out in detail how we are building on our strong
market position, how we will take advantage of the opportunities arising from
what we expect to be a period of difficult economic conditions and, finally, how
we are preparing for sustained economic recovery in the medium term.
First, to the year under review.
2009: Delivering Another Strong Performance
The Group has continued to make good progress during the year, particularly
against the backcloth of economic recession, with a number of key achievements.
Of particular note:
- Revenue (including share of joint ventures and associates) exceeded GBP1
billion for the first time in 16 years
- Operating profits increased by 14%
- The Order Book at the year-end stood at GBP2.6 billion, up 30%, and
underpins our long-term visibility
- We saw increased operating profits and revenue across our core
Infrastructure, Environment and Energy & Process divisions
- Our strong net cash position was maintained at over GBP120 million
- The Board has recommended an increased final dividend
We have also taken robust action with our Community division, which we continue
to scale down, and the Spanish Land Development operation which are not
providing the required level of returns. Further details are set out in the
Business Review.
Growth in Core Operations
We have increased profits, revenues and the order books across all three of our
core divisions: Environment, Infrastructure and Energy & Process.
The Environment division incorporates our activities in the water, waste and
marine sectors. The division's order book increased by 66% to GBP1.3 billion as
a result of securing a number of major long-term contract wins. With
significant legislation and regulation in these markets, we expect a high level
of investment to continue in these sectors over the coming years.
In the Infrastructure division, which incorporates our activities in the
highways, rail and airports sectors, we continued to increase our highways
maintenance activity which accounts for the majority of the Group's growing
maintenance related activities which, in turn, now represent 13% of the Group's
total Order Book. The division has a substantial pipeline of future work
opportunities, including the Crossrail project in London.
The Energy & Process division, which undertakes work in the hydrocarbons and
chemicals, nuclear processing and power sectors, had an excellent year. We
secured further work on the major EVAP D nuclear decommissioning project at
Sellafield. There is a growing recognition of the need to invest in UK energy
infrastructure and, as a consequence, we see potential for further growth in
this sector.
Our Land Development activity in Spain, which is a joint venture with Santander
Bank, continued to be subject to very difficult market conditions and, as
anticipated, no land transactions were completed. Meanwhile, construction of
the marina, near Gibraltar, is nearing completion and, with the first berth
sales having been secured, the facility will be operational by mid-2010.
The Community division, which encompasses our activities in the health,
education and retail sectors, has been intentionally scaled down as we continue
to allocate resources to more attractive opportunities. In line with our policy
of trading our PFI equity portfolio to reinvest in bidding for new projects, we
disposed of two equity stakes in the year.
A more detailed review of each operating division is contained within the
Business and Operational Review.
Order Book: up 30% at GBP2.6 billion
A 30% increase in the quality Order Book during a difficult year, is a major
achievement. In addition, we ended the year with preferred bidder positions in
excess of GBP400 million.
The Order Book includes GBP1.6 billion of new orders comprising a range of major
contract wins across the business. Of particular note was the contract for the
Greater Manchester Waste Disposal Authority, AMP 5 contracts for Severn Trent
and United Utilities, the Evaporator D nuclear contract, and a further Highways
Agency five-year Management Agent Contract (MAC) contract.
Given our strategic focus on blue chip customers with long-term or multi-project
investment programmes, our repeat order level has remained well over 80%. We
were also delighted to secure a number of major new customers during the year
including Severn Trent Water.
The Order Book includes circa GBP900 million of work to be carried out in 2010,
which is ahead of the equivalent figure at the start of last year. The larger,
longer-term contracts being awarded to us by our customers provide significantly
enhanced visibility of future revenues.
Since the year-end, we have continued to secure major new contracts and
preferred bidder positions, including Welsh Water AMP 5 and, in various joint
ventures, the A8 highways project in Northern Ireland, the Royal Oak tunnel
portal for Crossrail, appointment to the GBP2.0 billion Highways Agency Major
Project Framework and the MAC 14 five-year highways maintenance contract. As a
consequence, the order book has been maintained at GBP2.6 billion and our
preferred bidder position has increased to over GBP600 million.
Market conditions are expected to remain challenging but, as a result of our
strategy, we have a good pipeline of opportunities and our bidding teams remain
fully occupied.
Strong Finances
The Group is in a healthy financial position.
We maintained a strong net cash position, which at the end of the year was
GBP120.5 million. The average month end cash balance increased to GBP125.3
million, up from an average of GBP117.4 million in 2008. The Group has no
significant borrowings.
Our banking and bonding facilities have recently been extended to 2013, and
increased by 20% to GBP345 million. We therefore have the necessary headroom
available to capitalise on market opportunities as they arise and achieve our
longer-term strategic objectives.
Health, Safety and the Environment
Costain places the highest priority on the effective management of Health,
Safety and the Environment. The Group has a policy requiring all staff and
supply chain partners to possess an appropriate safety competency card and
members of the Board demonstrated leadership in this respect by obtaining their
CSCS card.
Further improvement in performance was achieved in the year, with the Group
Accident Frequency Rate (AFR) reducing from 0.17 to 0.16, which continues to
compare favourably with our major contractor peer group. We remain fully
committed to continue to achieve improvements in this performance in the future.
People
Our people are core to the development and success of Costain and we have some
of the best people in the industry. We are investing across the organisation to
ensure that we continue to have the skills and resources necessary to deliver
exceptional business performance. This investment in training and development,
with a focus on providing opportunities and advancement, means that Costain is
increasingly recognised as an "employer of choice".
A key initiative in 2009 was the introduction of a new on-line "Performance
Review and Career Development" review process which is already providing better
and more comprehensive management information for managing the business.
Building On Success: 'Choosing Costain'
The Group's 'Being Number One' strategy, successfully implemented since 2006,
has established Costain as one of the UK's leading engineering and construction
businesses.
The Group's success has provided it with a platform that, alongside the ongoing
and rapid changes taking place in the Group's marketplace, presents Costain with
the opportunity to further consolidate its position and to target the delivery
of an even more ambitious development strategy.
Therefore, we are now implementing our 'Choosing Costain' strategy, which
provides a blueprint for the Group's next stage of development in line with the
significant changes in the industry that Costain expects to take place over the
next decade.
The way in which we work and our commitment to increasingly deliver a
full-service offering, from front-end engineering consultancy and design,
through construction to maintenance. This will reinforce Costain as the number
one choice. It will help to ensure that customers, partners, staff, suppliers
and investors will continue to make the informed choice to work successfully
with Costain.
'Choosing Costain', whilst evolutionary in nature, is a strategy based on
established success and provides an ambitious vision for the further development
of the Costain Group.
'Choosing Costain'
Our vision is to be one of the UK's top solutions providers, with the scale and
resources to successfully meet the increasingly complex and challenging needs of
major customers.
Costain will continue to focus its efforts on customers with major multi-billion
pound strategic investment programmes which, irrespective of economic
environments, are core to the UK's sustainable "life support systems" and are
therefore deemed essential.
Over the next decade, we believe that those programmes will be primarily in
three growth markets:-
Infrastructure - particularly Highways, Rail and Airports
Environment - particularly Water and Waste
Energy & Process - particularly Nuclear, Power, and Hydrocarbons &
Chemicals
In these markets we will place emphasis on those large blue-chip customers with
repeat order commitments who are looking for solutions for each phase of the
"life-cycle" of their assets.
These large customers are imposing increasingly strict criteria in selecting
their preferred contractors. In particular, customers are looking for
contractors capable of providing the full "life-cycle" of services. This
process is in turn creating significant barriers to entry. In order to succeed,
it is essential that Costain has the scale and ability to deploy the resources
required by such customers.
Consequently, Costain will look to build on its current strengths - and broaden
and improve the quality of earnings streams - by accelerating the development of
an integrated front-end engineering consultancy and back-end care and
maintenance operations to sit either side of our proven strength in
construction:
Consulting - one of the fastest growing areas of the Costain business
Construction - strong market position with world class expertise in
delivering major complex projects
Care - operations and maintenance, already 13% of our Group
order book
The 'Choosing Costain' strategy provides significant opportunity for growth by
developing our capability across the full life-cycle of products for our
customers. In addition, we can deliver an over-arching solution through a
concession or private finance approach.
Resources will always be targeted on those opportunities that provide the
greatest potential return at an acceptable risk profile.
The primary geographic focus of the business in the medium term will be the UK
although international opportunities will be pursued in line with this customer
focused strategy, particularly in the Energy and Process related activities.
It is anticipated that the growth aspirations and ambition for the business will
be achieved by organic growth and by suitable acquisitions in line with
strategy.
Why Choose Costain?
Costain's competitive advantage has been built on its ability to understand the
complex business needs of its large customers and to develop cost effective,
innovative and technically robust solutions to those business requirements. We
then mobilise the necessary technical, consultancy, process, human and financial
resources to integrate and consistently deliver the resulting major projects and
frameworks to time, budget and quality, thus providing real value for money.
Our solutions to customers will be delivered under the single unifying Costain
brand. Coordination of separate business activities will be done internally to
ensure that the customer is presented with an integrated service and a single
senior point of contact within Costain.
We must continue to attract and retain the very best people if we are to deliver
on our strategic objectives. The 'Choosing Costain' strategy provides a wide
range of career opportunities and the scope for our people to grow. They will
be suitably rewarded for delivering outstanding performance.
The way in which we work and our continuing commitment to deliver on our
promises will also help ensure that customers, partners, staff, suppliers and
investors will choose to work successfully with Costain in the future.
The Costain values represent the essence of the business and set the benchmark
of performance for our people. They give direction and structure to everything
we do and adherence to these values is paramount.
It is our unswerving commitment and compliance to these principles that allows
us to achieve excellence in performance.
Summary
We can be pleased with the strong business performance delivered in 2009,
particularly in view of the difficult macroeconomic conditions we faced.
Costain has once again demonstrated its resilience.
Looking ahead, our continued success will be built on our leading positions in
markets that are underpinned by strategic capital expenditure, regulatory
commitment and essential maintenance requirements.
We have come a long way in a few years. Our 'Being Number One' strategy has
delivered significant value. It is now time to build on that success and,
despite the current economic environment which we expect to continue, we are
excited at the opportunities that lie ahead.
Our 'Choosing Costain' strategy is designed both to reinforce further the
Group's resilience in difficult times and to prepare for the opportunities we
expect to materialise as economic recovery starts to take hold.
The economic environment remains challenging but, with a strong operational
business and a strategy for the ongoing development of the Group, we are looking
to the future with confidence.
ANDREW WYLLIE
Chief Executive
10 March 2010
BUSINESS & OPERATIONAL REVIEW
Environment
The Environment division, which accounts for 50% of the Group's Order Book,
includes Costain's water, waste and marine activities.
Revenue (including share of joint ventures and associates) for the year was
GBP426.1 million (2008: GBP417.0 million), with an operating profit of GBP11.7
million (2008: GBP11.6 million). The division's year-end order book was GBP1.3
billion (2008: GBP0.8 billion), an increase of over 60%.
This strong performance reflects Costain's established position as a leader in
the delivery of the UK's environmental projects.
In Water, the Group continued delivery of major AMP4 programmes of clean and
waste water schemes for Yorkshire Water, Welsh Water, United Utilities, Thames
Water, Bristol Water and Southern Water.
It was a significant year in terms of securing major contracts under the fifth
five-year Asset Management Programme (AMP5) which runs from 2010 to 2015.
Following outstanding delivery across all of our existing AMP4 contracts,
Costain has continued to be successful in renewing and securing new AMP 5
contracts. During 2009 we renewed the relationship with United Utilities for
another five years and secured a GBP400 million 10-year framework for new AMP
customer, Severn Trent Water. Since the year-end we have also renewed the
relationship with Welsh Water for a further five years.
During the year, Costain, in joint venture, was also awarded the GBP225 million
Brighton & Hove waste water treatment works contract for Southern Water.
This combination of major projects and framework contracts provides the Group
with a significant long-term earnings stream.
In Waste, continued growth and expansion was underlined in the first half of
2009 with the award of the GBP400 million Greater Manchester Waste Authority
contract, the largest waste services contract in Europe. This was secured by
leveraging Costain's complementary skills in waste and process engineering and
provides a firm platform for future growth. Costain is currently actively
engaged in submission of PFI proposals for major waste facilities and further
opportunities in this growing sector.
In Marine, the Felixstowe South Reconfiguration project is well advanced and is
due to be completed in December 2010. This project, for a 730m deepwater
container quay, will also provide 32 hectares of associated container yard and
port service areas. St. Germans pumping station is now entering the
commissioning phase, with the main building completed, representing the second
largest pumping station in Europe.
During the year, the Costa Azul breakwater project in Mexico was completed.
Costain's marine capability significantly enhances its competitive advantage in
a number of key sectors, including nuclear and power.
Infrastructure
The Infrastructure division accounts for 38% of the Group's Order Book and
includes Costain's highways, rail and airports activities.
Revenue (including share of joint ventures and associates) was GBP364.8 million
(2008: GBP208.7 million), with an operating profit of GBP16.9 million (2008
GBP14.4 million). The division's year-end order book increased by 10% to GBP1.0
billion (2008: GBP0.9 billion).
Costain continues to build on its strong market leading position in
infrastructure and this performance reflects the Group's reputation for premium
quality delivery of large-scale projects in this sector. The Group's
achievements in infrastructure demonstrate a good delivery record and also
provide confidence that Costain is in an advantageous position to secure
continued progress in these sectors on schemes such as Crossrail, the Highways
Agency's Managed Motorway Programme, London Underground's station enhancement
programme and new Nuclear Power Stations to support the continued and growing
investment by customers in the infrastructure markets.
The Group had another good year in the Highways sector with a number of new
awards. Significantly Costain's Highways Operations and Maintenance joint
venture is now the leading supplier to the UK's Highways Agency and currently is
responsible for maintaining approximately one third of the Agency's UK motorway
and road network.
At the beginning of 2009, Costain delivered both the major M27 widening schemes
at J11/12 and J3/4, ahead of schedule and budget. The Group also commenced the
first of the Highways Agency's Managed Motorway Programme projects on the M1
between Junctions 10 to 13 following on from the its Early Contractor
Involvement contract to develop the scheme.
In Rail, Costain successfully completed the refurbishment of the Grade 1 listed
King's Cross Station Eastern Range for Network Rail and achieved all 'key output
zero' deliverables at Farringdon Station on the ambitious Thameslink programme.
The Group delivered a major part of London Underground's 'Cooling the Tube'
programme on the Victoria line including fans to remove some 120m3 of warm air
per second.
In Airports, Costain is a preferred contractor at Gatwick and working on site at
the airport's North Terminal. The Group has secured the renewal of its
successful five-year framework with the Manchester Airport Group.
Community
The Community division includes the Group's reduced health, education and retail
activities.
Revenue (including share of joint ventures and associates) for the year was
GBP167.8 million (2008: GBP285.6 million), with an operating loss of GBP8.4
million (2008: loss of GBP5.2 million).
The substantial reduction in revenue reflects the previously announced decision
to scale down the division as we continue to re-allocate resources to more
attractive opportunities. The increased loss reflects additional costs
necessary to complete a number of projects together with restructuring costs and
reduced overhead recovery as the operations are scaled down.
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 GBP2.0 million.
In Health, a number of healthcare projects were successfully completed including
the remaining two of the three 3-Shires PFI batch of hospitals and five new
ProCure21 facilities.
In Education, Costain, in joint venture partnership, achieved financial close on
four further secondary schools in Bradford under the Government's 'Building
Schools for the Future' ('BSF') programme. Two schools under the Lewisham BSF
have been completed and delivered and the first Phase 2 school has commenced on
site.
In Retail, construction of the new development in Gracechurch Street is expected
to complete in the second half of 2010 and the Newbury Parkway town centre
redevelopment project is expected to complete in 2011.
Energy & Process
Revenue (including share of joint ventures and associates) for the year was
GBP101.2 million (2008: GBP83.6 million) with an operating profit of GBP9.3
million (2008: GBP5.5 million). The division's order book increased 57% to
GBP180 million (2008: GBP115 million).
The division saw further success in 2009, building on the progress made in the
prior year, and continues to see major opportunities for future growth. The
division comprises three core activities including Hydrocarbons & Chemicals,
Nuclear and Power. During the year, final agreement was reached on the
completed Pemex Project in Mexico.
During the year, Costain completed the Brine & Water Plant associated with the
Storengy (GDF SUEZ) Underground Gas Storage Facility at Stublach in Cheshire. At
the neighbouring Holford underground gas storage site, Costain is delivering the
Gas Plant on a similar facility for E.ON.
In Nuclear, significant progress has been made on the engineering and
construction of the Evaporator D project at Sellafield, one of the UK's largest
nuclear decommissioning projects. The Group continues to build its capability
in this sector and currently has in excess of 300 specialists based in
Manchester.
The operation in Abu Dhabi continued to undertake a number of contracts on the
Das Island oil and gas facility.
Costain's ability to bring innovative and effective solutions to complex
problems is a significant attraction to customers in the energy and process
market. Additional key resources have been added to the team as part of our
continued investment to significantly grow our activity in this area.
Land Development
Revenue for the year was GBP1.2 million (2008: GBP1.1 million) with a loss after
tax of GBP2.6 million (2008: loss of GBP2.3 million). The loss in the year
represents operating and interest costs and a land value write down.
As previously reported, the real estate market in Spain has been significantly
impacted by the global recession. The Group's joint venture development
company, Alcaidesa, continues to secure infrastructure development planning
consents on its land bank. This process adds long-term value to the land bank
and will facilitate land sales to developers as the market improves.
The construction of the 600-berth yacht marina, adjacent to Gibraltar, is on
target and is expected to be operational in Summer 2010. We have started
forward selling and letting berths and the Group is looking at opportunities to
develop associated commercial activities subject to pre-lettings.
An external assessment of the book value of land held has been carried out and,
as a consequence, a small write down on one piece of land due to market
conditions and planning constraints was necessary.
Results for the year ended 31 December 2009
Consolidated income statement
Year ended 31 December
+----------------------------------------+-------+---------+----------+---------+
| |Notes | 2009 | | 2008 |
+----------------------------------------+-------+---------+----------+---------+
| | | GBPm | | GBPm |
+----------------------------------------+-------+---------+----------+---------+
| | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Revenue (Group and share of joint | 2 | 1,061.1 | | 996.0 |
| ventures and associates) | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Share of joint ventures and associates | 7 | (67.7) | | (93.4) |
+----------------------------------------+-------+---------+----------+---------+
| Group revenue | | 993.4 | | 902.6 |
+----------------------------------------+-------+---------+----------+---------+
| | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Cost of sales | | (949.2) | | (861.3) |
+----------------------------------------+-------+---------+----------+---------+
| Gross profit | | 44.2 | | 41.3 |
+----------------------------------------+-------+---------+----------+---------+
| | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Administrative expenses | | (22.2) | | (21.8) |
+----------------------------------------+-------+---------+----------+---------+
| | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Group operating profit | | 22.0 | | 19.5 |
+----------------------------------------+-------+---------+----------+---------+
| | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Profit on sales of interests in joint | | 2.0 | | 2.7 |
| ventures and associates | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Share of results of equity accounted | 7 | (3.2) | | (3.9) |
| joint ventures and associates | | | | |
+----------------------------------------+-------+---------+----------+---------+
| | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Profit from operations | 2 | 20.8 | | 18.3 |
+----------------------------------------+-------+---------+----------+---------+
| | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Finance income | 3 | 26.0 | | 34.8 |
+----------------------------------------+-------+---------+----------+---------+
| Finance costs | 3 | (28.7) | | (30.0) |
+----------------------------------------+-------+---------+----------+---------+
| Net finance (expense)/income | | (2.7) | | 4.8 |
+----------------------------------------+-------+---------+----------+---------+
| | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Profit before tax | | 18.1 | | 23.1 |
+----------------------------------------+-------+---------+----------+---------+
| | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Income tax expense | 4 | (3.5) | | (4.9) |
+----------------------------------------+-------+---------+----------+---------+
| | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Profit for the year attributable to | | 14.6 | | 18.2 |
| equity holders of the parent | | | | |
+----------------------------------------+-------+---------+----------+---------+
| | | | | |
+----------------------------------------+-------+---------+----------+---------+
| Earnings per share - basic | 5 | 2.3p | | 2.9p |
+----------------------------------------+-------+---------+----------+---------+
| Earnings per share - diluted | 5 | 2.3p | | 2.9p |
+----------------------------------------+-------+---------+----------+---------+
During the year and the previous year, no businesses were acquired. The impact
of business disposals in either year was not material and, therefore, all
results are classified as arising from continuing operations.
Consolidated statement of comprehensive (expense) / income
Year ended 31 December
+--+---------------------------------+-------+--------+----------+--------+
| |Notes | 2009 | | 2008 |
+------------------------------------+-------+--------+----------+--------+
| | | GBPm | | GBPm |
+------------------------------------+-------+--------+----------+--------+
| | | | | |
+------------------------------------+-------+--------+----------+--------+
| Profit for the year | 2 | 14.6 | | 18.2 |
+------------------------------------+-------+--------+----------+--------+
| | | | | |
+------------------------------------+-------+--------+----------+--------+
| Exchange differences on | | (3.6) | | 9.7 |
| translation of foreign operations | | | | |
+------------------------------------+-------+--------+----------+--------+
| Cash flow hedges: | | | | |
+------------------------------------+-------+--------+----------+--------+
| Group | | | | |
+------------------------------------+-------+--------+----------+--------+
| Effective portion of changes in | | (0.4) | | 0.9 |
| fair value during year | | | | |
+------------------------------------+-------+--------+----------+--------+
| | Net change in fair value of | | (0.9) | | 0.1 |
| | cash flow hedges transferred to | | | | |
| | retained earnings | | | | |
+--+---------------------------------+-------+--------+----------+--------+
| | Tax recognised on changes in | | 0.4 | | (0.3) |
| | fair value | | | | |
+--+---------------------------------+-------+--------+----------+--------+
| Joint ventures and associates | | | | |
+------------------------------------+-------+--------+----------+--------+
| | Effective portion of changes in | | 2.7 | | (10.9) |
| | fair value (net of tax) during | | | | |
| | year | | | | |
+--+---------------------------------+-------+--------+----------+--------+
| | Disposed during year (net of | | 1.9 | | (0.7) |
| | tax) | | | | |
+--+---------------------------------+-------+--------+----------+--------+
| Actuarial losses on defined | | (67.4) | | (10.5) |
| benefit pension scheme | | | | |
+------------------------------------+-------+--------+----------+--------+
| Tax recognised on actuarial losses | | 18.9 | | 3.0 |
| recognised directly in equity | | | | |
+------------------------------------+-------+--------+----------+--------+
| Other comprehensive expense for | | (48.4) | | (8.7) |
| the year | | | | |
+------------------------------------+-------+--------+----------+--------+
| | | | | |
+------------------------------------+-------+--------+----------+--------+
| Total comprehensive (expense) / | | (33.8) | | 9.5 |
| income for the year attributable | | | | |
| to equity holders of the parent | | | | |
+--+---------------------------------+-------+--------+----------+--------+
Consolidated statement of changes in equity
As at 31 December
+----------------+---------+---------+-------------+---------+----------+--------+
| | Share | Share | Translation | Hedging | Retained | Total |
| | capital | premium | reserve | reserve | earnings | Equity |
+----------------+---------+---------+-------------+---------+----------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+----------------+---------+---------+-------------+---------+----------+--------+
| | | | | | | |
+----------------+---------+---------+-------------+---------+----------+--------+
| At 1 January | 31.4 | 1.1 | 0.9 | (1.8) | (4.2) | 27.4 |
| 2008 | | | | | | |
+----------------+---------+---------+-------------+---------+----------+--------+
| Comprehensive | - | - | 9.7 | (10.9) | 10.7 | 9.5 |
| income / | | | | | | |
| (expense) | | | | | | |
+----------------+---------+---------+-------------+---------+----------+--------+
| Share-based | - | - | - | - | 0.5 | 0.5 |
| payments | | | | | | |
+----------------+---------+---------+-------------+---------+----------+--------+
| Shares issued | 0.2 | 0.5 | - | - | - | 0.7 |
+----------------+---------+---------+-------------+---------+----------+--------+
| Dividend paid | 0.1 | 0.1 | - | - | (4.7) | (4.5) |
+----------------+---------+---------+-------------+---------+----------+--------+
| At 31 December | 31.7 | 1.7 | 10.6 | (12.7) | 2.3 | 33.6 |
| 2008 | | | | | | |
+----------------+---------+---------+-------------+---------+----------+--------+
| | | | | | | |
+----------------+---------+---------+-------------+---------+----------+--------+
| At 1 January | 31.7 | 1.7 | 10.6 | (12.7) | 2.3 | 33.6 |
| 2009 | | | | | | |
+----------------+---------+---------+-------------+---------+----------+--------+
| Comprehensive | - | - | (3.6) | 3.7 | (33.9) | (33.8) |
| income / | | | | | | |
| (expense) | | | | | | |
+----------------+---------+---------+-------------+---------+----------+--------+
| Share-based | - | - | - | - | 1.1 | 1.1 |
| payments | | | | | | |
+----------------+---------+---------+-------------+---------+----------+--------+
| Dividend paid | - | 0.2 | - | - | (4.9) | (4.7) |
+----------------+---------+---------+-------------+---------+----------+--------+
| At 31 December | 31.7 | 1.9 | 7.0 | (9.0) | (35.4) | (3.8) |
| 2009 | | | | | | |
+----------------+---------+---------+-------------+---------+----------+--------+
Consolidated statement of financial position
As at 31 December
+----------------------------------------+-------+--------+----------+--------+
| |Notes | 2009 | | 2008 |
+----------------------------------------+-------+--------+----------+--------+
| | | GBPm | | GBPm |
+----------------------------------------+-------+--------+----------+--------+
| ASSETS | | | | |
+----------------------------------------+-------+--------+----------+--------+
| Non-current assets | | | | |
+----------------------------------------+-------+--------+----------+--------+
| Property, plant & equipment | | 11.5 | | 7.7 |
+----------------------------------------+-------+--------+----------+--------+
| Intangible assets | | 1.0 | | 1.8 |
+----------------------------------------+-------+--------+----------+--------+
| Investments in joint ventures | | 27.2 | | 32.2 |
+----------------------------------------+-------+--------+----------+--------+
| Investments in associates | | 1.6 | | 0.1 |
+----------------------------------------+-------+--------+----------+--------+
| Loans to joint ventures | | 12.8 | | 9.5 |
+----------------------------------------+-------+--------+----------+--------+
| Loans to associates | | 2.5 | | 0.9 |
+----------------------------------------+-------+--------+----------+--------+
| Other receivables | | 12.7 | | 6.0 |
+----------------------------------------+-------+--------+----------+--------+
| Deferred income tax assets | | 34.6 | | 18.9 |
+----------------------------------------+-------+--------+----------+--------+
| Total non-current assets | | 103.9 | | 77.1 |
+----------------------------------------+-------+--------+----------+--------+
| | | | | |
+----------------------------------------+-------+--------+----------+--------+
| Current assets | | | | |
+----------------------------------------+-------+--------+----------+--------+
| Inventories | | 2.4 | | 1.6 |
+----------------------------------------+-------+--------+----------+--------+
| Trade and other receivables | | 201.9 | | 180.3 |
+----------------------------------------+-------+--------+----------+--------+
| Cash and cash equivalents | 8 | 120.8 | | 147.3 |
+----------------------------------------+-------+--------+----------+--------+
| Total current assets | | 325.1 | | 329.2 |
+----------------------------------------+-------+--------+----------+--------+
| Total assets | | 429.0 | | 406.3 |
+----------------------------------------+-------+--------+----------+--------+
| | | | | |
+----------------------------------------+-------+--------+----------+--------+
| EQUITY | | | | |
+----------------------------------------+-------+--------+----------+--------+
| Share capital | | 31.7 | | 31.7 |
+----------------------------------------+-------+--------+----------+--------+
| Share premium | | 1.9 | | 1.7 |
+----------------------------------------+-------+--------+----------+--------+
| Foreign currency translation reserve | | 7.0 | | 10.6 |
+----------------------------------------+-------+--------+----------+--------+
| Hedging reserve | | (9.0) | | (12.7) |
+----------------------------------------+-------+--------+----------+--------+
| Retained earnings | | (35.4) | | 2.3 |
+----------------------------------------+-------+--------+----------+--------+
| Total equity attributable to equity | | (3.8) | | 33.6 |
| holders of the parent | | | | |
+----------------------------------------+-------+--------+----------+--------+
| | | | | |
+----------------------------------------+-------+--------+----------+--------+
| LIABILITIES | | | | |
+----------------------------------------+-------+--------+----------+--------+
| Non-current liabilities | | | | |
+----------------------------------------+-------+--------+----------+--------+
| Retirement benefit obligations | 9 | 104.7 | | 50.2 |
+----------------------------------------+-------+--------+----------+--------+
| Other payables | | 4.5 | | 2.4 |
+----------------------------------------+-------+--------+----------+--------+
| Provisions for other liabilities and | | 3.1 | | 8.0 |
| charges | | | | |
+----------------------------------------+-------+--------+----------+--------+
| Total non-current liabilities | | 112.3 | | 60.6 |
+----------------------------------------+-------+--------+----------+--------+
| | | | | |
+----------------------------------------+-------+--------+----------+--------+
| Current liabilities | | | | |
+----------------------------------------+-------+--------+----------+--------+
| Trade and other payables | | 313.3 | | 305.0 |
+----------------------------------------+-------+--------+----------+--------+
| Income tax liabilities | | 1.7 | | 1.7 |
+----------------------------------------+-------+--------+----------+--------+
| Overdrafts | 8 | 0.3 | | 0.4 |
+----------------------------------------+-------+--------+----------+--------+
| Interest bearing loans and borrowings | | - | | 0.3 |
+----------------------------------------+-------+--------+----------+--------+
| Provisions for other liabilities and | | 5.2 | | 4.7 |
| charges | | | | |
+----------------------------------------+-------+--------+----------+--------+
| Total current liabilities | | 320.5 | | 312.1 |
+----------------------------------------+-------+--------+----------+--------+
| Total liabilities | | 432.8 | | 372.7 |
+----------------------------------------+-------+--------+----------+--------+
| Total equity and liabilities | | 429.0 | | 406.3 |
+----------------------------------------+-------+--------+----------+--------+
Consolidated cash flow statement
Year ended 31 December
+-------------------------------------------------+-------+--------+----------+--------+
| |Notes | 2009 | | 2008 |
+-------------------------------------------------+-------+--------+----------+--------+
| | | GBPm | | GBPm |
+-------------------------------------------------+-------+--------+----------+--------+
| Cash flows from operating activities | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Profit for the year | | 14.6 | | 18.2 |
+-------------------------------------------------+-------+--------+----------+--------+
| Adjustments for: | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Depreciation of property, plant & equipment | | 2.7 | | 2.1 |
+-------------------------------------------------+-------+--------+----------+--------+
| Amortisation of intangible assets | | 0.9 | | 1.0 |
+-------------------------------------------------+-------+--------+----------+--------+
| Finance income | 3 | (26.0) | | (34.8) |
+-------------------------------------------------+-------+--------+----------+--------+
| Finance costs | 3 | 28.7 | | 30.0 |
+-------------------------------------------------+-------+--------+----------+--------+
| Share-based payments expense | | 1.1 | | 0.6 |
+-------------------------------------------------+-------+--------+----------+--------+
| Income tax | 4 | 3.5 | | 4.9 |
+-------------------------------------------------+-------+--------+----------+--------+
| Profit on sales of interests in joint ventures | | (2.0) | | (2.7) |
| and associates | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Share of results of joint ventures and | 7 | 3.2 | | 3.9 |
| associates | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Amounts written off equity and loan to | 7 | - | | 0.4 |
| associates | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Cash from operations before changes in working | | 26.7 | | 23.6 |
| capital and provisions | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| (Increase) / decrease in inventories | | (0.8) | | 0.4 |
+-------------------------------------------------+-------+--------+----------+--------+
| Increase in receivables | | (32.7) | | (24.7) |
+-------------------------------------------------+-------+--------+----------+--------+
| Increase in payables | | 9.1 | | 35.5 |
+-------------------------------------------------+-------+--------+----------+--------+
| Movement in provisions and employee benefits | | (18.4) | | (11.5) |
+-------------------------------------------------+-------+--------+----------+--------+
| Cash from operations | | (16.1) | | 23.3 |
+-------------------------------------------------+-------+--------+----------+--------+
| | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Interest paid | | (0.5) | | (0.7) |
+-------------------------------------------------+-------+--------+----------+--------+
| Income tax received | | 0.1 | | - |
+-------------------------------------------------+-------+--------+----------+--------+
| Net cash from operating activities | | (16.5) | | 22.6 |
+-------------------------------------------------+-------+--------+----------+--------+
| | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Cash flows used by investing activities | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Interest received | | 2.6 | | 6.5 |
+-------------------------------------------------+-------+--------+----------+--------+
| Dividends received from joint ventures and | | 0.6 | | 0.7 |
| associates | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Additions to property, plant & equipment | | (7.2) | | (5.8) |
+-------------------------------------------------+-------+--------+----------+--------+
| Additions to intangible assets | | (0.1) | | (0.1) |
+-------------------------------------------------+-------+--------+----------+--------+
| Proceeds of disposal of property, plant & | | 0.4 | | - |
| equipment | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Proceeds from sales of interests in joint | | 8.7 | | 5.0 |
| ventures and associates | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Additions to investment in joint ventures and | | (0.2) | | - |
| associates | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Loan repayments by joint ventures and | | 0.7 | | - |
| associates | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Additions to loans to joint ventures and | | (9.7) | | (11.7) |
| associates | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Net cash used by investing activities | | (4.2) | | (5.4) |
+-------------------------------------------------+-------+--------+----------+--------+
| | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Cash flows used by financing activities | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Issue of ordinary share capital | | - | | 0.7 |
+-------------------------------------------------+-------+--------+----------+--------+
| Ordinary dividends paid | | (4.7) | | (4.5) |
+-------------------------------------------------+-------+--------+----------+--------+
| Repayment of borrowings | | (0.3) | | (0.3) |
+-------------------------------------------------+-------+--------+----------+--------+
| Net cash used by financing activities | | (5.0) | | (4.1) |
+-------------------------------------------------+-------+--------+----------+--------+
| | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Net (decrease) / increase in cash, cash | | (25.7) | | 13.1 |
| equivalents and overdrafts | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Cash, cash equivalents and overdrafts at | 8 | 146.9 | | 133.4 |
| beginning of the year | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
| Effect of foreign exchange rate changes | | (0.7) | | 0.4 |
+-------------------------------------------------+-------+--------+----------+--------+
| Cash, cash equivalents and overdrafts at end of | 8 | 120.5 | | 146.9 |
| the year | | | | |
+-------------------------------------------------+-------+--------+----------+--------+
Notes to the financial statements
1 Basis 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 2009 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 9 March 2010) does not constitute the Company's statutory accounts
for the years ended 31 December 2009 or 2008 but is derived from those accounts.
Statutory accounts for 2008 have been delivered to the Registrar of Companies,
and those for 2009 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 498(2) or (3) of the Companies Act 2006.
Whilst the financial information included in this preliminary announcement has
been prepared in accordance with International Financial Reporting Standards
(IFRS), this announcement does not itself contain sufficient information to
fully comply with IFRS.
The directors have acknowledged the guidance "Going Concern and Liquidity Risk:
Guidance for Directors of UK Companies 2009" published by the Financial
Reporting Council in October 2009. The Group has negative shareholders' equity
at 31 December 2009 arising from market movements on the Group's defined benefit
pension scheme. This is a long-term liability and does not adversely impact the
short-term financial requirements of the Group. The directors have considered
these requirements, the Group's current order book and future opportunities and
its available bonding facilities. Having reviewed the latest projections,
including the application of reasonable downside sensitivities, the directors
believe that the Group is well placed to manage its business risks successfully
despite the current uncertain economic outlook. Accordingly, they continue to
adopt the going concern basis in preparing these financial statements.
(i) Changes in accounting policy
· IFRS 8 'Operating Segments' - as of 1 January 2009, the Group determines
and presents segments based on the information that internally is provided to
the Chief Executive, who is the Group's chief operating decision maker. The
segment information is presented in note 2. Previously, operating segments were
determined and presented in accordance with IAS 14 'Segment Reporting'.
Comparative segment information has been re-presented in conformity with the
transitional requirements of IFRS 8. Since the change in accounting policy only
impacts presentation and disclosure aspects, there is no impact on earnings per
share.
· IAS 1 'Presentation of Financial Statements (revised 2007)' has been
applied in the preparation of these condensed Group financial statements. The
revised standard requires the presentation of a statement of changes in equity
in the primary statements with the information previously disclosed in a Capital
and reserves note in the financial statements. In addition, the Group has
elected to present a separate income statement and statement of comprehensive
income. The revised standard also suggests certain changes in terminology which
have been adopted in these condensed Group financial statements. The balance
sheet has been renamed statement of financial position and the statement of
recognised income and expense has been renamed statement of comprehensive
income.
Notes to the financial statements - continued
2 Business and geographical segment information by origin
From 1 January 2009, segment information is based on the information provided to
the Chief Executive who is the chief operating decision maker. The segments are
strategic business units with separate management and have different core
customers or offer different services.
.
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Year ended | Environment | Infrastructure | Community | Energy | Land | Central | Total |
| 31 December | | | | & | Development | | |
| 2009 | | | | Process | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Group | 376.2 | 364.8 | 155.7 | 96.7 | - | - | 993.4 |
| revenue | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Share of | 49.9 | - | 12.1 | 4.5 | 1.2 | - | 67.7 |
| revenue of | | | | | | | |
| JVs and | | | | | | | |
| associates | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Total | 426.1 | 364.8 | 167.8 | 101.2 | 1.2 | - | 1,061.1 |
| segment | | | | | | | |
| revenue | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Group | 13.1 | 16.9 | (11.0) | 9.1 | - | (6.1) | 22.0 |
| operating | | | | | | | |
| profit/(loss) | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Profit on | - | - | 2.0 | - | - | - | 2.0 |
| sales of JVs | | | | | | | |
| and | | | | | | | |
| associates | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Share of | (1.4) | - | 0.6 | 0.2 | (2.6) | - | (3.2) |
| results of | | | | | | | |
| JVs and | | | | | | | |
| associates | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Segment | 11.7 | 16.9 | (8.4) | 9.3 | (2.6) | (6.1) | 20.8 |
| result | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Net finance | | | | | | | (2.7) |
| cost | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Profit | | | | | | | 18.1 |
| before tax | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Reportable | 99.6 | 76.7 | 19.1 | 42.3 | 35.6 | 0.3 | 273.6 |
| segment | | | | | | | |
| assets | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Unallocated | | | | | | | |
| assets: | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Deferred | | | | | | | 34.6 |
| taxation | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Cash | | | | | | | 120.8 |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Total assets | | | | | | | 429.0 |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Reportable | 125.7 | 92.8 | 61.1 | 46.0 | - | 0.5 | 326.1 |
| segment | | | | | | | |
| liabilities | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Unallocated | | | | | | | |
| liabilities: | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Retirement benefit | | | | | | 104.7 |
| obligations | | | | | | |
+------------------------------+----------------+-----------+---------+-------------+---------+---------+
| Overdraft | | | | | | | 0.3 |
| and loans | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Income tax | | | | | | | 1.7 |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
| Total | | | | | | | 432.8 |
| liabilities | | | | | | | |
+---------------+--------------+----------------+-----------+---------+-------------+---------+---------+
Notes to the financial statements - continued
2 Business and geographical segment information by origin - continued
+-----------------+--------------+----------------+-----+-----+----+-------+-------------+--+------+-------+----------+
| Year ended | Environment | Infrastructure | Community | Energy & | Land | Central | Total | |
| 31 December | | | | Process | Development | | | |
| 2008 | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Group revenue | 346.5 | 208.7 | 267.7 | 79.7 | - | - | 902.6 | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Share of | 70.5 | - | 17.9 | 3.9 | 1.1 | - | 93.4 | |
| revenue of JVs | | | | | | | | |
| and associates | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Total segment | 417.0 | 208.7 | 285.6 | 83.6 | 1.1 | - | 996.0 | |
| revenue | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Group operating | 13.8 | 14.4 | (8.5) | 5.5 | - | (5.7) | 19.5 | |
| profit/(loss) | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Profit on sales | - | - | 2.7 | - | - | - | 2.7 | |
| of JVs and | | | | | | | | |
| associates | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Share of | (2.2) | - | 0.6 | - | (2.3) | - | (3.9) | |
| results of JVs | | | | | | | | |
| and associates | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Segment result | 11.6 | 14.4 | (5.2) | 5.5 | (2.3) | (5.7) | 18.3 | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Net financing | | | | | | | 4.8 | |
| income | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Profit before | | | | | | | 23.1 | |
| tax | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Reportable | 101.7 | 48.1 | 28.8 | 26.3 | 35.2 | - | 240.1 | |
| segment assets | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Unallocated | | | | | | | | |
| assets: | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Deferred | | | | | | | 18.9 | |
| taxation | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Cash | | | | | | | 147.3 | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Total assets | | | | | | | 406.3 | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Reportable | 142.4 | 70.8 | 71.4 | 35.0 | - | 0.5 | 320.1 | |
| segment | | | | | | | | |
| liabilities | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Unallocated | | | | | | | | |
| liabilities: | | | | | | | | |
+-----------------+--------------+----------------+-----------+------------+-------------+---------+-------+----------+
| Retirement benefit | | | | | | 50.2 |
| obligations | | | | | | |
+--------------------------------+----------------------+----------+-------+----------------+------+------------------+
| Overdraft and | | | | | | | 0.7 |
| loans | | | | | | | |
+-----------------+--------------+----------------------+----------+-------+----------------+------+------------------+
| Income tax | | | | | | | 1.7 |
+-----------------+--------------+----------------------+----------+-------+----------------+------+------------------+
| Total | | | | | | | 372.7 |
| liabilities | | | | | | | |
+-----------------+--------------+----------------------+----------+-------+----------------+------+------------------+
| | | | | | | | | | | | |
+-----------------+--------------+----------------+-----+-----+----+-------+-------------+--+------+-------+----------+
+--------------------------------------------------+---------+--------+
| Geographical Segments | |
+--------------------------------------------------+------------------+
| | Revenue |
+--------------------------------------------------+------------------+
| | 2009 | 2008 |
+--------------------------------------------------+---------+--------+
| | GBPm | GBPm |
+--------------------------------------------------+---------+--------+
| United Kingdom | 1,025.8 | 969.6 |
+--------------------------------------------------+---------+--------+
| Spain | 1.2 | 1.1 |
+--------------------------------------------------+---------+--------+
| Rest of the world | 34.1 | 25.3 |
+--------------------------------------------------+---------+--------+
| | 1,061.1 | 996.0 |
+--------------------------------------------------+---------+--------+
| | | |
+--------------------------------------------------+---------+--------+
Notes to the financial statements - continued
3 Net finance (expense) / income
+--------------------------------------------------+--------+--+--------+
| | 2009 | | 2008 |
+--------------------------------------------------+--------+--+--------+
| | GBPm | | GBPm |
+--------------------------------------------------+--------+--+--------+
| Interest income from bank deposits | 1.2 | | 5.6 |
+--------------------------------------------------+--------+--+--------+
| Interest income on loans to related parties | 1.4 | | 0.9 |
+--------------------------------------------------+--------+--+--------+
| Expected return on defined benefit pension | 23.4 | | 28.3 |
| scheme assets | | | |
+--------------------------------------------------+--------+--+--------+
| Finance income | 26.0 | | 34.8 |
+--------------------------------------------------+--------+--+--------+
| | | | |
+--------------------------------------------------+--------+--+--------+
| Interest payable on bank overdrafts and loans | (0.5) | | (0.7) |
+--------------------------------------------------+--------+--+--------+
| Interest cost on the present value of the | | | |
| defined benefit obligations for pension scheme | (28.2) | | (29.3) |
| liabilities | | | |
+--------------------------------------------------+--------+--+--------+
| Finance expense | (28.7) | | (30.0) |
+--------------------------------------------------+--------+--+--------+
| | | | |
+--------------------------------------------------+--------+--+--------+
| Net finance (expense) / income | (2.7) | | 4.8 |
+--------------------------------------------------+--------+--+--------+
Interest income on loans to related parties relates to shareholder loan interest
receivable from investments in equity accounted joint ventures and associates.
4 Income tax
+------------------------------------------------------+-------+---+----------+-+-----+
| | 2009 | | 2008 |
+------------------------------------------------------+-------+--------------+-------+
| | GBPm | | GBPm |
+------------------------------------------------------+-------+--------------+-------+
| On profit for the year: | | | |
+------------------------------------------------------+-------+--------------+-------+
| United Kingdom corporation tax at 28.0% (2008: | - | | - |
| 28.5%) | | | |
+------------------------------------------------------+-------+--------------+-------+
| Adjustments in respect of prior years | 0.1 | | 0.1 |
+------------------------------------------------------+-------+----------------+-----+
| Current tax credit for the year | 0.1 | | 0.1 |
+------------------------------------------------------+-------+--------------+-------+
| | | | |
+------------------------------------------------------+-------+--------------+-------+
| Deferred taxation charge for the current year | (3.4) | | (5.0) |
+------------------------------------------------------+-------+--------------+-------+
| Adjustments in respect of prior years | (0.2) | | - |
+------------------------------------------------------+-------+----------------+-----+
| Deferred taxation charge for the year | (3.6) | | (5.0) |
+------------------------------------------------------+-------+--------------+-------+
| | | | |
+------------------------------------------------------+-------+--------------+-------+
| Income tax expense in the consolidated income | (3.5) | | (4.9) |
| statement | | | |
+------------------------------------------------------+-------+--------------+-------+
| | | | |
+------------------------------------------------------+-------+---+------------------+
| | | | | | |
+------------------------------------------------------+-------+---+----------+-+-----+
+--------------------------------------------------+-------+--+-------+
| | 2009 | | 2008 |
+--------------------------------------------------+-------+--+-------+
| | GBPm | | GBPm |
+--------------------------------------------------+-------+--+-------+
| Tax reconciliation: | | | |
+--------------------------------------------------+-------+--+-------+
| Profit before tax | 18.1 | | 23.1 |
+--------------------------------------------------+-------+--+-------+
| | | | |
+--------------------------------------------------+-------+--+-------+
| Income tax at 28.0% (2008: 28.5%) | (5.1) | | (6.6) |
+--------------------------------------------------+-------+--+-------+
| Rate adjustments relating to overseas profits | 0.2 | | 0.5 |
+--------------------------------------------------+-------+--+-------+
| Share of results of joint ventures and | (0.9) | | (1.1) |
| associates at 28.0% (2008: 28.5%) | | | |
+--------------------------------------------------+-------+--+-------+
| Disallowed provisions and expenses | (0.5) | | (0.8) |
+--------------------------------------------------+-------+--+-------+
| Non-taxable gains and profits relieved by | 0.6 | | 0.8 |
| capital losses | | | |
+--------------------------------------------------+-------+--+-------+
| Utilisation of previously unrecognised temporary | 2.3 | | 2.1 |
| differences | | | |
+--------------------------------------------------+-------+--+-------+
| Rate adjustment relating to deferred tax | - | | 0.1 |
+--------------------------------------------------+-------+--+-------+
| Adjustments in respect of prior years | (0.1) | | 0.1 |
+--------------------------------------------------+-------+--+-------+
| | | | |
+--------------------------------------------------+-------+--+-------+
| Income tax expense in the consolidated income | (3.5) | | (4.9) |
| statement | | | |
+--------------------------------------------------+-------+--+-------+
The income tax above does not include any amounts for equity accounted joint
ventures and associates, whose results are disclosed in the consolidated income
statement net of tax.
Notes to the financial statements - continued
5 Earnings per share
The calculation of earnings per share is based on profit of GBP14.6 million
(2008: GBP18.2 million) and the number of shares set out below:
+-------------------------------------------------+-------------+----------+------------+
| | 2009 | | 2008 |
| | (millions) | | (millions) |
+-------------------------------------------------+-------------+----------+------------+
| Weighted average number of ordinary shares in | 633.7 | | 631.9 |
| issue for basic earnings per share calculation | | | |
+-------------------------------------------------+-------------+----------+------------+
| Dilutive potential ordinary shares arising from | | | |
| employee share schemes | 12.7 | | 2.1 |
+-------------------------------------------------+-------------+----------+------------+
| Weighted average number of ordinary shares in | 646.4 | | 634.0 |
| issue for diluted earnings per share | | | |
| calculation | | | |
+-------------------------------------------------+-------------+----------+------------+
6 Dividends per share
During the year, the 2008 final dividend of 0.5 pence (2008: 0.5 pence) per
share was paid to shareholders (GBP3.1 million in cash and GBP0.1 million via
scrip alternative (2008: GBP3.0 million in cash and GBP0.1 million via scrip
alternative)). An interim 2009 dividend of 0.275 pence (2008: 0.25 pence) per
share (GBP1.7 million in cash and GBP0.1million via scrip alternative (2008:
GBP1.5 million in cash and GBP0.1 million via scrip alternative)) was also paid.
A final dividend in respect of the year ended 31 December 2009 of 0.55 pence per
share, amounting to a dividend of GBP3.5 million, is to be proposed at the
Annual General Meeting. If approved, the dividend is expected to be paid on 21
May 2010 to shareholders registered at close of business on 23 April 2010 and a
scrip dividend alternative will be offered. These financial statements do not
reflect this dividend payable.
Notes to the financial statements - continued
7 Investments
The analysis of the Group's share of joint ventures and associates is set out
below:
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| | 2009 | 2008 |
+---------------+---------------------------------------------+---------------------------------------------+
| | 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 | 1.2 | 49.0 | 17.5 | 67.7 | 1.1 | 71.8 | 20.5 | 93.4 |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| (Loss)/profit | (3.7) | (0.8) | 0.9 | (3.6) | (3.3) | (1.3) | (0.1) | (4.7) |
| before tax | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| Income tax | 1.1 | (0.2) | (0.5) | 0.4 | 1.0 | (0.1) | (0.1) | 0.8 |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| (Loss)/profit | (2.6) | (1.0) | 0.4 | (3.2) | (2.3) | (1.4) | (0.2) | (3.9) |
| for the year | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| Non-current | 21.7 | 36.8 | 114.5 | 173.0 | 13.3 | 73.9 | 71.8 | 159.0 |
| assets | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| Current | 35.3 | 16.4 | 17.0 | 68.7 | 40.6 | 21.1 | 15.2 | 76.9 |
| assets | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| Current | (2.9) | (14.6) | (13.8) | (31.3) | (2.9) | (41.5) | (7.8) | (52.2) |
| liabilities | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| Non-current | (27.5) | (38.0) | (116.1) | (181.6) | (19.2) | (53.1) | (79.1) | (151.4) |
| liabilities | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| Investments | 26.6 | 0.6 | 1.6 | 28.8 | 31.8 | 0.4 | 0.1 | 32.3 |
| in joint | | | | | | | | |
| ventures and | | | | | | | | |
| associates | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| Financial | 2.2 | 3.5 | 11.6 | 17.3 | 5.8 | 3.5 | 4.7 | 14.0 |
| commitments | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
| Capital | 2.2 | - | 28.3 | 30.5 | - | 0.2 | 10.5 | 10.7 |
| commitments | | | | | | | | |
+---------------+-----------+----------+------------+---------+-----------+----------+------------+---------+
Net interest payable by joint ventures and associates in 2009 was GBP1.6 million
(2008: GBP2.8 million payable). The financial commitments relate to Alcaidesa
and joint ventures involved in PFI schemes and the capital commitments relate to
ongoing construction work. All figures are the Group's share.
Notes to the financial statements - continued
8 Cash and cash equivalents
Cash and cash equivalents are analysed below, and include the Group's share of
cash held by jointly controlled operations of GBP36.0 million (2008: GBP34.2
million).
+-------------------------------------------+-------+----------+-------+
| | 2009 | | 2008 |
+-------------------------------------------+-------+----------+-------+
| | GBPm | | GBPm |
| | | | |
+-------------------------------------------+-------+----------+-------+
| Cash and cash equivalents | 120.8 | | 147.3 |
+-------------------------------------------+-------+----------+-------+
| Bank overdrafts | (0.3) | | (0.4) |
+-------------------------------------------+-------+----------+-------+
| Cash, cash equivalents and overdrafts in | 120.5 | | 146.9 |
| the cash flow statement | | | |
+-------------------------------------------+-------+----------+-------+
9 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
GBP11.5 million (2008: GBP8.4 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. The scheme was closed to future accrual of benefits to members
on 30 September 2009. A full actuarial valuation of the scheme was carried out
at 31 March 2007 and was updated to 31 December 2009 by a qualified independent
actuary.
+----------------------------------+---------+----------+---------+----------+---------+
| | 2009 | | 2008 | | 2007 |
+----------------------------------+---------+----------+---------+----------+---------+
| | GBPm | | GBPm | | GBPm |
| | | | | | |
+----------------------------------+---------+----------+---------+----------+---------+
| | | | | | |
+----------------------------------+---------+----------+---------+----------+---------+
| Present value of defined benefit | (560.5) | | (435.8) | | (511.1) |
| obligations | | | | | |
+----------------------------------+---------+----------+---------+----------+---------+
| Fair value of scheme assets | 455.8 | | 385.6 | | 460.5 |
+----------------------------------+---------+----------+---------+----------+---------+
| Recognised liability for defined | (104.7) | | (50.2) | | (50.6) |
| benefit obligations | | | | | |
+----------------------------------+---------+----------+---------+----------+---------+
Movements in present value of defined benefit obligations:
+-----------------------------------------+--------+----------+--------+
| | 2009 | | 2008 |
+-----------------------------------------+--------+----------+--------+
| | GBPm | | GBPm |
| | | | |
+-----------------------------------------+--------+----------+--------+
| | | | |
+-----------------------------------------+--------+----------+--------+
| At 1 January | 435.8 | | 511.1 |
+-----------------------------------------+--------+----------+--------+
| Current service cost | 1.7 | | 4.7 |
+-----------------------------------------+--------+----------+--------+
| Past service cost | 1.2 | | 1.2 |
+-----------------------------------------+--------+----------+--------+
| Interest cost | 28.2 | | 29.3 |
+-----------------------------------------+--------+----------+--------+
| Actuarial losses /(gains) | 113.7 | | (94.6) |
+-----------------------------------------+--------+----------+--------+
| Benefits paid | (23.1) | | (19.8) |
+-----------------------------------------+--------+----------+--------+
| Contributions by members | 3.0 | | 3.9 |
+-----------------------------------------+--------+----------+--------+
| At 31 December | 560.5 | | 435.8 |
+-----------------------------------------+--------+----------+--------+
Movements in fair value of scheme assets:
+-----------------------------------------+--------+----------+---------+
| | 2009 | | 2008 |
+-----------------------------------------+--------+----------+---------+
| | GBPm | | GBPm |
| | | | |
+-----------------------------------------+--------+----------+---------+
| | | | |
+-----------------------------------------+--------+----------+---------+
| At 1 January | 385.6 | | 460.5 |
+-----------------------------------------+--------+----------+---------+
| Expected return on scheme assets | 23.4 | | 28.3 |
+-----------------------------------------+--------+----------+---------+
| Actuarial gains/ (losses) | 46.3 | | (105.1) |
+-----------------------------------------+--------+----------+---------+
| Contributions by employer | 20.6 | | 17.8 |
+-----------------------------------------+--------+----------+---------+
| Contributions by members | 3.0 | | 3.9 |
+-----------------------------------------+--------+----------+---------+
| Benefits paid | (23.1) | | (19.8) |
+-----------------------------------------+--------+----------+---------+
| At 31 December | 455.8 | | 385.6 |
+-----------------------------------------+--------+----------+---------+
Notes to the financial statements - continued
Pensions - continued
Expense recognised in the income statement:
+-----------------------------------------+--------+----------+--------+
| | 2009 | | 2008 |
+-----------------------------------------+--------+----------+--------+
| | GBPm | | GBPm |
| | | | |
+-----------------------------------------+--------+----------+--------+
| | | | |
+-----------------------------------------+--------+----------+--------+
| Current service cost | 1.7 | | 4.7 |
+-----------------------------------------+--------+----------+--------+
| Past service cost | 1.2 | | 1.2 |
+-----------------------------------------+--------+----------+--------+
| Interest cost on defined benefit | 28.2 | | 29.3 |
| obligations | | | |
+-----------------------------------------+--------+----------+--------+
| Expected return on scheme assets | (23.4) | | (28.3) |
+-----------------------------------------+--------+----------+--------+
| Total | 7.7 | | 6.9 |
+-----------------------------------------+--------+----------+--------+
The expense is recognised in the following line items in the income statement:
+-----------------------------------------+--------+----------+--------+
| | 2009 | | 2008 |
+-----------------------------------------+--------+----------+--------+
| | GBPm | | GBPm |
| | | | |
+-----------------------------------------+--------+----------+--------+
| | | | |
+-----------------------------------------+--------+----------+--------+
| Cost of sales | 2.6 | | 5.2 |
+-----------------------------------------+--------+----------+--------+
| Administrative expenses | 0.3 | | 0.7 |
+-----------------------------------------+--------+----------+--------+
| Financial income | (23.4) | | (28.3) |
+-----------------------------------------+--------+----------+--------+
| Finance costs | 28.2 | | 29.3 |
+-----------------------------------------+--------+----------+--------+
| Total | 7.7 | | 6.9 |
+-----------------------------------------+--------+----------+--------+
Principal actuarial assumptions (expressed as weighted averages):
+---------------------------------------------+------+----------+------+
| | 2009 | | 2008 |
+---------------------------------------------+------+----------+------+
| | % | | % |
+---------------------------------------------+------+----------+------+
| | | | |
+---------------------------------------------+------+----------+------+
| Discount rate | 5.70 | | 6.60 |
+---------------------------------------------+------+----------+------+
| Expected rate of return on scheme assets | 6.51 | | 6.07 |
+---------------------------------------------+------+----------+------+
| Future salary increases | 3.50 | | 2.85 |
+---------------------------------------------+------+----------+------+
| Future pension increases | 3.50 | | 2.85 |
+---------------------------------------------+------+----------+------+
| Inflation assumption | 3.50 | | 2.85 |
+---------------------------------------------+------+----------+------+
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 2009 and 31 December 2008 is:
+--------------+---------+----------+---------+-+---------+----------+---------+
| | 2009 | | 2008 |
+--------------+------------------------------+-+------------------------------+
| | Male | | Female | | Male | | Female |
| |(years) | |(years) | |(years) | |(years) |
+--------------+---------+----------+---------+-+---------+----------+---------+
| Currently | 20.3 | | 23.2 | | 20.3 | | 23.1 |
| aged 65 | | | | | | | |
+--------------+---------+----------+---------+-+---------+----------+---------+
| Non-retirees | 21.3 | | 24.1 | | 21.3 | | 24.0 |
+--------------+---------+----------+---------+-+---------+----------+---------+
Notes to the financial statements - continued
Pensions - continued
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 |
+--------------------------------------+-----------+----------+---------+
| | | | |
+--------------------------------------+-----------+----------+---------+
| Increase discount rate by 0.25%, | (21.2) | | 0.1 |
| decreases pension liability and | | | |
| increases pension cost by: | | | |
+--------------------------------------+-----------+----------+---------+
| Decrease inflation (and pension | (18.2) | | (1.0) |
| increases) by 0.25%, decreases | | | |
| pension liability and pension cost | | | |
| by: | | | |
+--------------------------------------+-----------+----------+---------+
| Increase life expectancy by one | 15.5 | | 0.9 |
| year, 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 GBP3.8 million (2008:
GBP1.5 million).
10 Related 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 2009 was GBP115.2
million (2008: GBP137.7 million).
11 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 2009 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.
12 Forward-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.
Notes to the financial statements - continued
13 Responsibility statements
The Company's statutory accounts for the year ended 31 December 2009 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 2009
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 & Operational 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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Costain (LSE:COST)
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