Interim Management Statement


 

TIDMCOST 
 
RNS Number : 7655V 
Costain Group PLC 
08 November 2010 
 

Costain Group PLC 
("Costain" or "the Group") 
 
Interim Management Statement and PFI Asset Transfer to the Costain Pension 
Scheme ('CPS') 
 
Costain, one of the UK's leading construction and engineering solutions 
providers, is issuing its Interim Management Statement covering the period from 
1 July 2010 to the current date. 
 
Overview 
 
On 25 August, the Group reported a strong performance for the first half of 2010 
and that it had entered the second half of the year with a good order book, 
robust finances and a net cash balance in excess of GBP100 million. 
 
Since then, the Group has delivered a strong operational and financial 
performance in line with the Board's expectations. 
 
Costain continues to benefit from its 'Choosing Costain' strategy of focussing 
on targeted blue chip customers in chosen sectors whose major spending plans are 
underpinned by strategic national needs, regulatory commitments or essential 
maintenance requirements. 
 
The Group has a proven scale and capability to deliver successfully complex 
solutions in markets with significant potential including power, waste, rail and 
nuclear and will continue to broaden its capability in providing a range of 
lifecycle solutions to its customers. 
 
Order book 
 
Since the half year, the Group has secured a number of additional major contract 
awards and has a forward order book of GBP2.4 billion. 
 
The major contract awards since 30 June include: 
 
-     Bond Street station upgrade, in joint venture, for London Underground 
-     Severn Trent facility at Frankley in addition to the AMP5 contract 
-     A 10-year nuclear framework contract for Magnox South 
-     A cable tunnel contract for National Grid 
 
As a consequence, the Group already has secured revenue of circa GBP700 million 
for 2011. 
 
In addition, the Group is currently preferred bidder on contracts with an 
aggregate value of more than GBP400 million and the level of tendering activity 
for the Group's target customers remains very high. 
 
The Group welcome the commitment by the Government in its recent Comprehensive 
Spending Review, and endorsed in the National Infrastructure Plan, to prioritise 
GBP200 billion of investment over the next five years in key energy and 
infrastructure projects, such as Crossrail. 
 
Pension 
 
The Board has agreed with the Trustee of the Costain Pension Scheme ('CPS') a 
transaction to reduce significantly the Group's pension deficit by GBP22.0 
million. 
 
This has been achieved by the transfer of the Group's interest in a portfolio of 
six PFI investments into the CPS at an agreed valuation of GBP22.0 million. This 
is higher than the estimated value for these equity positions as at 30 June 
2010, and represents an effective discount rate below 7%. 
 
The transaction also brings forward and realises the profit from the sale of the 
six PFI investments. 
 
As a result of the transaction, the accounting profit realised on the transfer 
of the assets is GBP10.5 million.  After discounting for expected profit from 
PFI equity sales that would ordinarily have taken place in 2010 and a 
consequential additional accrual for potential share-based payments, it is 
expected that Group profit before tax for the year will be increased by GBP7.5 
million. 
 
Furthermore, an agreement has now been finalised with the Trustee of the CPS 
regarding the actuarial valuation as at 31 March 2010, and the associated 
deficit recovery plan. This agreement, which incorporates the GBP22.0 million 
transfer of the PFI investments, will result in a corresponding reduction in the 
Group's future annual cash contributions into the CPS over a thirty-nine month 
period starting with effect from 1 January 2011. 
 
Financial position 
 
Costain has a strong cash position in excess of GBP100 million and no 
significant borrowings. The further improvement of the Group's future cash flows 
as a result of the PFI transfer will also strengthen the Group's financial 
position going forward. 
 
Outlook 
 
Following the transaction to significantly reduce the pension deficit, the 
Group's profit before tax for the year ended 31 December 2010 will benefit from 
an additional GBP7.5 million, as indicated above. 
 
Whilst challenging market conditions are set to continue for the foreseeable 
future, the Board expects to report continued progress at the year-end in line 
with its expectations. 
 
Notes: 
 
1.   The six PFI assets transferred into the CPS are: 
 
Prime Care Solutions (Kingston) Holdings Limited 
Arden Partnership (Derby) Holdings Limited 
Arden Partnership (Leicester) Holdings Limited 
Arden Partnership (Lincolnshire) Holdings Limited 
Integrated Bradford Holdco One Limited 
Lewisham Schools For The Future Holdings Limited 
 
2.   The gross asset value of the six PFI investments transferred as at 30 June 
2010 was GBP0.3 million (31 December 2009: GBP1.5 million) after the IAS 39 
mark-to-market swap adjustment and GBP9.9 million (31 December 2009: GBP9.6 
million) excluding this adjustment. 
 
3.   The profits attributable to the six PFI assets for the six months to 30 
June 2010 were GBP0.2 million (for the twelve months to 31 December 2009: GBP0.7 
million). 
 
4.   The IAS19 deficit in the 'CPS' as at 30th June 2010 was GBP56.3 million net 
of deferred tax. 
 
 
   NOTE: THERE WILL BE A CONFERENCE CALL FOR ANALYSTS AT 08.30 THIS MORNING. 
       PLEASE CALL ADAM ALJEWICZ ON +44 20 7457 2020 FOR DIAL-IN DETAILS 
 
ENDS 
 
8th November 2010 
 
Enquiries: 
 
+----------------------------------+--------------------------+ 
| Costain Group PLC                |                          | 
|                                  |                          | 
+----------------------------------+--------------------------+ 
| Andrew Wyllie, Chief Executive   | Tel: 01628 842 444       | 
+----------------------------------+--------------------------+ 
| Tony Bickerstaff, Finance        |                          | 
| Director                         |                          | 
+----------------------------------+--------------------------+ 
| Graham Read, Communications      |                          | 
| Director                         |                          | 
+----------------------------------+--------------------------+ 
| College Hill                     | Tel: 020 7457 2020       | 
|                                  |                          | 
+----------------------------------+--------------------------+ 
| Mark Garraway                    |                          | 
+----------------------------------+--------------------------+ 
| Adam Aljewicz                    |                          | 
+----------------------------------+--------------------------+ 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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