TIDMCOST
RNS Number : 3226Z
Costain Group PLC
06 March 2013
Costain Group PLC
("Costain" or "the Group" or "the Company")
Results for the year ended 31 December 2012
Costain, one of the UK's leading engineering solutions
providers, delivering integrated consulting, project delivery and
operations and maintenance services, announces another strong
performance with a 16% increase in adjusted profit before tax(3)
and a recommended 7.5% increase in the total dividend for the
year.
Year ended 31 December 2012 2011
Revenue(1) GBP934.5m GBP986.3m
Operating Profit
* Underlying(2) GBP25.1m GBP24.1m
Profit from Operations
* Adjusted(3) GBP31.4m GBP23.6m
GBP28.0m GBP22.0m
* Reported
Profit before tax
* Adjusted(3) GBP29.5m GBP25.5m
GBP26.1m GBP23.9m
* Reported
Basic earnings per share
* Adjusted(3) 41.4p 31.1p
* Reported 37.1p 29.2p
Net cash
Year-end cash balance GBP105.7m GBP140.1m
Average month-end cash balance GBP103.4m GBP130.4m
Dividend per share 10.75p 10.0p
1. Including share of joint ventures & associates
2. Underlying operating profit (before amortisation of acquired
intangible assets and employment related acquisition consideration
of GBP3.4m) in 2012 excludes the GBP2.8m one-off costs resulting
from pension scheme liability actions.
3. Results stated before amortisation of acquired intangible
assets & employment related acquisition consideration and after
GBP10.5m profit arising from transfer of PFI assets into the
Group's pension scheme and GBP2.8m one-off costs resulting from
pension scheme liability actions.
Highlights
-- Underlying operating profit(2) up 4% to GBP25.1 million (2011: GBP24.1 million)
-- Increase of 16% in adjusted profit before tax(3) to GBP29.5 million (2011: GBP25.5 million)
-- Adjusted basic earnings per share(3) up 33% to 41.4 pence
(2011: 31.1 pence), reflecting increased profits and a
non-recurring tax timing benefit
-- GBP105.7 million year-end net cash balance (2011: GBP140.1
million) and average month-end cash balance of GBP103.4 million
(2011: GBP130.4 million)
-- High quality forward order book of GBP2.4 billion, in excess
of 90% from repeat orders including new awards and extensions to
existing contracts (2011: GBP2.5 billion)
-- Increase to over GBP700 million of revenue secured for 2013
as at 31 December 2012 (2011: over GBP650 million secured for
2012)
-- Recommended increase in final dividend for the sixth
successive year, taking the total for the year to 10.75 pence, a
7.5% increase on the prior year
David Allvey, Chairman, commented:
"Costain has delivered another strong performance in 2012, and
our confidence in the Group's future is reflected in the Board's
recommendation to increase the final dividend for the sixth
successive year.
"Our progress in recent years, despite challenging economic
conditions, is a reflection of the Group's strategic focus on
meeting the complex needs of customers by ensuring that Costain
provides integrated consulting, project delivery and operations and
maintenance capability.
"The Group believes that, driven by innovation, the strategic
development of the business will be accelerated as we work with
customers on their future programmes.
"With a robust balance sheet, positive net cash position and
banking and bonding facilities in place, we have the resources to
continue to grow the business organically and by acquisition."
6 March 2013
A video interview with Andrew Wyllie, Chief Executive, and Tony
Bickerstaff, Finance Director, in which they discuss the highlights
of the results, is available at www.costain.com
Enquiries:
Costain Tel: 01628 842 444
Andrew Wyllie, Chief Executive
Tony Bickerstaff, Finance Director
Graham Read, Communications Director
College Hill Tel: 020 7457 2020
Mark Garraway
Helen Tarbet
Notes to Editors (for further information please visit the
company website: www.costain.com)
Costain is one of the UK's leading engineering solutions
providers, delivering integrated consulting, project delivery and
operations and maintenance services, with a portfolio spanning
almost 150 years of innovation and technical excellence. The
Group's core business segments are in Infrastructure (Highways,
Rail, Power and Airports) and Natural Resources (Water,
Hydrocarbons & Chemicals, Nuclear Process and Waste).
The Group's 'Choosing Costain' strategy involves focusing on
blue chip customers in chosen sectors whose major spending plans
are underpinned by strategic national needs, regulatory commitments
or essential maintenance requirements.
Costain has worked on a number of high profile infrastructure
projects in the UK, including the St Pancras railway station and
the Channel Tunnel Rail Link. The Group's current major projects
include the municipal waste treatment infrastructure for the
Greater Manchester Waste Disposal Authority, EVAP D at Sellafield,
one of the largest decommissioning nuclear projects in the UK, and
the Network Rail contract for the redevelopment of London Bridge
Station.
CHAIRMAN'S STATEMENT
Overview & Strategic Update
Costain has delivered another strong performance.
As a result of the implementation of our 'Choosing Costain'
strategy, the Group is one of the UK's leading engineering
solutions providers, delivering integrated consulting, project
delivery and operations and maintenance services to major blue-chip
customers in targeted market sectors.
Our success is the direct result of our focus on major customers
who are continuing to invest billions of pounds in capital,
operations and maintenance contracts to address essential national
infrastructure requirements across the transport, energy, water and
waste sectors.
During 2012, we increased the proportion of revenues from
support service related activities to 29%. To meet the demands of
major customers for an increasingly integrated service, we must
continue to enhance and broaden the range of services we offer. The
ongoing drive to develop our services particularly across
engineering consultancy, and operations and maintenance will remain
a key priority in 2013.
The spending plans of our customers provide a major opportunity
to grow the business further. With a strong cash position, robust
balance sheet and banking and bonding facilities in place, we have
the resources to continue to grow the business organically and by
acquisition.
Performance
Revenue, including the Group's share of joint ventures and
associates, for the year was GBP934.5 million (2011: GBP986.3
million). Our focus on higher margin activities led to an increase
of 4% in Group underlying operating profit of GBP25.1 million
(2011: GBP24.1 million). Adjusted profit before tax increased by
16% to GBP29.5 million (2011: GBP25.5 million). Adjusted basic
earnings per share were up 33% to 41.4 pence (2011: 31.1 pence),
reflecting increased profits and a non-recurring tax timing
benefit.
As a result of the Group's ongoing strategic focus on major blue
chip customers who increasingly utilise a target cost based form of
contract, our net cash position includes a lower level of advanced
payments typically paid on lump sum contracts. Additionally, our
increasing emphasis on support service related activities and
changing industry cash flow trends, together with the cash flow
timing implication of a delayed contract completion, accounted for
the reduction in net cash to GBP105.7 million (2011: GBP140.1
million). We expect these trends will continue to be reflected in a
lower average net cash position.
The Group has flexible financing in place with total banking and
bonding facilities of GBP465 million with a maturity date of 30
September 2015.
We were successful in securing a number of major new contract
awards and extensions to existing contracts. Consequently, the
order book, as at 31 December 2012, was GBP2.4 billion (2011:
GBP2.5 billion). We have increased to over GBP700 million the
revenue secured for 2013 (2011: over GBP650 million secured for
2012) and it is encouraging to have started the new financial year
with such long-term visibility.
Dividend
Reflecting another successful year and our continuing confidence
in the long-term prospects for the Group, the Board is recommending
a 7.4% increase in the final dividend, the sixth successive year of
increase. If approved, the 7.25 pence per share (2011: 6.75 pence)
final dividend will be paid on 24 May 2013 to shareholders on the
register as at the close of business on 19 April 2013. This would
bring the total dividend for the full year to 10.75 pence per share
(2011: 10.00 pence), an increase of 7.5% over the prior year.
Board & Staff
The Board was pleased to announce the appointment of Jane Lodge
as a Non-Executive Director with effect from 1 August 2012. Jane
has also been appointed Chair of the Audit Committee, succeeding
James Morley who became Senior Independent Director. James
succeeded John Bryant who retired from the Board at the end of 2012
after nearly 11 years as a Board member. We would like to thank
John for his considerable contribution over that time.
There were a number of operational management changes and these
are covered in the Chief Executive's Review.
On behalf of the whole Board, I would like to place on record
our recognition and appreciation of the excellent colleagues we
have at Costain who continue to play a major role in our
success.
Group Pension Scheme
The deficit on the Group's legacy Costain Pension Scheme ('CPS')
at 31 December 2012 was GBP40.0 million net of deferred tax (2011:
GBP39.7 million). The assumptions and sensitivities used in the
valuation of the pension scheme are set out in the notes to the
financial statements.
Costain has in place a deficit recovery plan based on the latest
actuarial position as at 31 March 2010, agreed with the Pension
Scheme Trustee, expected to eliminate the deficit over a period of
less than ten years and continues to take various decisive actions
in that regard. Additionally, in February 2012, the Group announced
two further actions being taken to manage the obligations in the
CPS (further detail is provided within the Financial Review). In
accordance with the requirement for a tri-ennial review, another
full actuarial valuation of the CPS will be carried out as at 31
March 2013.
Summary & Outlook
Costain has delivered another strong performance in 2012, and
our confidence in the Group's future is reflected in the Board's
recommendation to increase the final dividend for the sixth
successive year.
Our progress in recent years, despite challenging economic
conditions, is a reflection of the Group's strategic focus on
meeting the complex needs of customers by ensuring that Costain
provides integrated consulting, project delivery and operations and
maintenance capability.
The Group believes that, driven by innovation, the strategic
development of the business will be accelerated as we work with
customers on their future programmes.
With a robust balance sheet, positive net cash position and
banking and bonding facilities in place, we have the resources to
continue to grow the business organically and by acquisition.
David Allvey
Chairman
CHIEF EXECUTIVE'S REVIEW
Against a backdrop of changing industry dynamics and ongoing
challenging economic conditions, 2012 was another year of progress
at Costain.
Our focus on providing innovative and cost effective solutions
to increasingly complex and large-scale national needs, along with
our partnership approach, is enabling Costain to build new and
extend existing long-term relationships with a range of major
customers. As a result, during the year we secured new contracts
and extensions of some GBP900 million and our year-end total order
book stood at GBP2.4 billion.
Reflecting the increasing quality of our customer relationships,
over 90% of that order book now comprises repeat orders. The order
book also provides good long-term visibility with over GBP700
million of revenue secured for 2013, and in excess of a further
GBP1.7 billion of revenue secured for 2014 and beyond. In addition,
the Group has maintained a strong preferred bidder position of over
GBP400 million.
Trends & Developments
During the year we saw a continuing trend amongst our major
customers to consolidate their supply chains, as they seek to
derive business benefits by working in a much more strategic and
collaborative manner with a reduced number of preferred Tier One
service providers who have the ability to deliver the entirety of
their service needs.
As a consequence, our customers are rapidly changing their
procurement approach, consolidating a broader range of services
across consulting, project delivery and operations activities into
larger, longer-term contracts. As examples of this trend, in 2012
we were appointed by Magnox as one of two service providers under a
10-year framework contract that now covers all ten of their UK
nuclear sites, and we were appointed by the Oil & Pipelines
Agency on a 3-year operations and maintenance contract that now
covers the whole of their estate.
In this changing and competitive environment, it is essential
that Costain is able to demonstrate that it has the scale, skills,
experience and financial strength necessary to secure, and then
deliver, a strong performance on these increasingly large and
complex contracts. The Costain Group has been transformed in recent
times to meet our customers' evolving requirements. We now deliver
Engineering services across the full asset life-cycle, from
advisory and design to operations and maintenance. Developed both
organically and by acquisition, 29% of our revenue in 2012 was
derived from support service activities.
The provision of an increasing range of skills and services,
along with the recognised capability of our team, our acknowledged
engineering expertise and reputation for reliable safe delivery has
enabled us to secure large, integrated and complex projects: the
contract from Network Rail for the London Bridge Redevelopment, a
key part of the Thameslink programme; the Evaporator D project, one
of the largest nuclear decommissioning projects in the UK, where we
are utilising innovative modularisation techniques used in our oil
and gas operations to deliver units to site; the Greater Manchester
Waste project, one of Western Europe's largest waste PFI contracts;
and with the Highways Agency, whose own assessment rates Costain as
a leading supply chain partner.
During the year, we secured our first highways technology
framework contract for the Welsh Government, an important contract
given the increased levels of investment in technology expected in
the highways sector. We also recently secured, in joint venture,
our first rail electrification contract for Network Rail, with
electrification forming a key part of their GBP37 billion
investment programme.
Costain's growing in-house ability to design, procure and
deliver projects is being utilised by Centrica for the delivery of
its gas plant at Easington to serve the York field in the North
Sea. As a result of successful delivery on the new plant, we have
just been appointed by Centrica to develop the Front End
Engineering design ('FEED') for a similar project at Barrow. The
Aberdeen based ClerkMaxwell specialist oil and gas FEED
consultancy, acquired by Costain in 2011, has almost doubled in
size since acquisition.
'Engineering Tomorrow'
Engineering excellence runs through our DNA and 'Engineering
Tomorrow' is the Costain commitment to identifying, developing and
implementing innovative solutions to major national needs.
Our customers are increasingly looking to their preferred supply
chain partners such as Costain for innovative products and services
that will shorten lead times, enhance the quality of project
delivery and, above all, provide cost-effective solutions. To
remain a preferred Tier One supplier, we need to stay one step
ahead of our peer group.
We have increased our investment in Research and Development,
and have introduced the Costain Start-Up initiative to encourage
and support entrepreneurial members of staff to develop their ideas
into business opportunities. The 'Mario' asset management tool was
one such idea, which is now being sold commercially to rail and
highways customers as an addition to Costain's range of
services.
We are currently undertaking consulting projects to develop
Plasma Vitrification and Graphite Gasification technologies as
potential solutions for addressing the treatment and storage of
intermediate level nuclear waste. We are also undertaking work on
behalf of the Energy Technology Institute to develop a prototype
process for carbon capture.
Over the last two years, Costain has been investigating
innovative ways of exploiting its broadening range of skills and
market leading positions. This resulted in the announcement in June
of the formation of a joint venture with Severn Trent (Severn Trent
Costain) to provide complete business water and wastewater
management services to high volume commercial and industrial water
users.
'Costain Cares'
One of our competitive advantages is the recognition some time
ago of the increasing importance customers were placing on the
"good citizen" credentials of their supply-chain partners. Failure
to embrace and deliver on what our customers regard as vital
components of corporate and social responsibility means non
qualification for tender lists. We passionately share these values
and Costain believes that investment in corporate social
responsibility capital is a vital investment in the Group's future
success.
Core to our transformation and our value proposition to
customers is our 'Costain Cares' programme which places
responsible, effective and collaborative stakeholder relationships
at the core of everything we do.
We received a Platinum award from Business in the Community,
recognising our proactive commitment to mitigating the
environmental and social aspects of our operations.
Costain places the highest priority on the effective management
of Safety, Health and Environment. Further progress was made in the
year and we again recorded an improved Group Accident Frequency
Rate (AFR) reducing from 0.11 to a new record low of 0.09, which
continues to compare favourably with our major Tier One peer group.
We also received 19 Gold Awards from RoSPA and two prestigious
Orders of Distinction.
Teamwork
The results generated by Costain in 2012 were delivered by an
outstanding team. During the year, we increased our training and
development programmes across the organisation so that we have the
requisite skills and resources. There was a further increase in the
number of apprentices across the Group.
There were also a number of adjustments to the senior executive
team. Mark Rogerson MBE, who joined the Group in June from Serco in
the new role of Chief Development Officer, has since been appointed
Managing Director of the new Natural Resources division. Mark has a
track record of successfully managing and growing support service
businesses. The Infrastructure division will continue to be led by
Managing Director Darren James.
Alan Kay, previously Managing Director of the Environment
Division, and who recently completed the Advanced Management
Programme at Harvard Business School, was appointed in November to
the new role of Group Technical & Operations Director on the
Executive Board to drive innovation, operational and engineering
excellence across the Group.
Tim Bowen, previously Highways Sector Director, was appointed to
the Executive Board to develop our consulting and operations
activities for major customers in the Middle East. The senior
management team was further strengthened by the appointment of
Fiona Ware as Human Resources Director.
A New Structure
One of the strengths of Costain is the ability to focus
group-wide resources to meet specific customer requirements,
address opportunities and optimise returns for the Company as a
whole irrespective of divisional structure.
In November, the Group announced the formation of the new
Natural Resources operating division, encompassing the Water,
Hydrocarbons & Chemicals, Nuclear Process and Waste sectors,
combining most of the existing Energy & Process and Environment
Divisions and some support service activities previously in
Infrastructure. This new divisional structure will enable the Group
to align itself more closely with its customers' evolving
requirements and to combine further its front end process
engineering, project delivery, and operations capability into an
integrated service for customers.
The Natural Resources division will operate alongside the
Infrastructure division which will now also include all power
activities as well as the Group's activities in the highways, rail,
and airports sectors. The new divisional structure took effect from
1 January 2013.
The Future
Costain has delivered another strong performance and
demonstrated again that it has the right strategy to drive
profitable growth even through the most challenging of economic
conditions.
We entered 2013, having already secured over GBP700 million of
work for the year and we continue to benefit from a strong pipeline
and high levels of tendering activity.
Looking forward, we expect the rate of change in Costain to
accelerate as we take further steps to broaden our services and
enhance our product range. We believe that we will continue to be
successful by further increasing the agility of the business to
react to customer's changing requirements and by driving innovation
and new technology across all of our operations in line with our
commitment to 'Engineering Tomorrow'.
I look forward to reporting on further progress during the
year.
ANDREW WYLLIE
Chief Executive
OPERATIONAL REVIEW
We continue to focus and prioritise our group-wide resources on
new business opportunities with those major customers who are
committing significant expenditure on addressing pressing national
needs. During last year, the most attractive opportunities have
been in the rail and highways sectors within the infrastructure
division.
Infrastructure
The Infrastructure division, which incorporated activities in
the highways, rail, and airports sectors, had a very successful
year in which revenue (including share of joint ventures and
associates) increased to GBP562.3 million (2011: GBP466.0 million)
as investment in business development enabled the Group to take
advantage of a number of major opportunities in the market. As a
result, adjusted profit from operations rose to GBP26.1 million
(2011: GBP10.2 million). The significantly improved profit
performance reflects strong operating returns and additional gains
on successfully completed and final accounted projects. The order
book for the division has grown to GBP1.6 billion (2011: GBP1.5
billion) and the level of tendering activity remains high.
In Rail, during the period, the Group, in joint venture, secured
its fifth contract with Crossrail for the construction and fit out
of the intermediate shafts and headhouses at Eleanor Street and
Mile End Park in London, along with the connecting adits to the
main running tunnels. Work is also progressing well on the major
London Bridge Station redevelopment project for Network Rail, in
which Costain is providing integrated services including design,
construction, logistical and environmental operations whilst
ensuring the station remains open throughout.
Costain continues to be a leading supplier to the Highways
Agency and significant progress is being made with the large
portfolio of professional services, construction and maintenance
contracts in which it is engaged for this customer. New contract
awards during the period under review include the upgrade of the A8
Belfast to Larne carriageway for the Northern Ireland Roads
Service, appointment to both lots of the Highways Agency Asset
Support Framework and a four-year technology contract awarded by
the Welsh Government for the maintenance of Road Network
Communications and Tunnel Systems across Wales, involving the
maintenance and fault repair of complex technology systems such as
CCTV cameras, variable messaging signs (VMS), emergency telephones
and traffic signals along major strategic routes.
The Riverside Resource Recovery Energy from Waste facility at
Belvedere is now fully operational and the final account has been
agreed.
Environment
The Environment division focused on the water and waste markets
as well as the specific requirements of a number of long term
customers. Customer spend in this market is underpinned by
regulatory and legislative requirements and we expect this to grow
over the medium and long term as the market in the UK undergoes
major change.
Revenue (including share of joint ventures and associates) in
the division for the year was GBP232.6 million (2011: GBP375.4
million), with profit from operations, including the profit on PFI
transfers, of GBP15.0 million (2011: GBP17.5 million). The
reduction in revenue has been influenced by our strategic priority
on other activities in the Group. Operating profits in this
division declined significantly in the period following the one-off
margin benefits from successful close-out of a number of legacy
issues well within our allowances in the comparative period and as
a result of additional costs to complete a project. The division
finished the year with a forward order book of GBP0.6 billion (2011
GBP0.8 billion), with the reduction again reflecting the Group's
strategic focus on other opportunities.
In the water sector, the Group is making good progress on the
AMP5 framework contracts with Northumbrian Water, Severn Trent,
Southern Water, United Utilities and Welsh Water. During the period
the Group was also awarded a contract by Severn Trent Water to
replace its largest covered service reservoir sited near Ambergate
in Derbyshire.
In anticipation of the significant changes taking place in the
water sector since the Department for Environment Food and Rural
Affairs (DEFRA) altered the regulations to allow more businesses to
be able to choose their water supplier, Costain entered into a
joint venture with Severn Trent, called Severn Trent Costain (STC),
to provide complete business water and wastewater management
services to high volume commercial and industrial water users.
Costain's position in the water sector gives the Group a strong
platform to win new contracts and extensions as the water sector
prepares for the next regulatory review period, commencing in
2014.
In the waste sector, the Group is completing the PFI contract
for the Greater Manchester Waste Disposal Authority. The majority
of the facilities on the scheme, which utilises a range of
sophisticated waste management technologies, have been handed over
with the remainder in an extended commissioning phase and
commercial discussion regarding completion continuing.
Energy & Process
The Energy & Process division undertook work in the
hydrocarbons and chemicals, nuclear process and power sectors.
Revenue (including share of joint ventures and associates) in
the division for the year was GBP137.7 million (2011: GBP143.4
million) with adjusted profit from operations of GBP2.5 million
(2011: GBP4.7 million). During the year, the profits in the
division have been impacted by the reduced revenue, higher business
development costs, restructuring costs and additional costs to
complete on two projects. The division finished the year with a
forward order book of GBP178 million (2011: GBP215 million).
In Hydrocarbons & Chemicals, the Group is continuing to
carry out projects for a number of customers both in the UK and
overseas. We have benefitted greatly from ClerkMaxwell, acquired in
2011, which is enabling us to take advantage of a number of
exciting opportunities in the high growth upstream oil and gas
service sector.
During the period the Group also secured a three-year GBP60
million asset support contract, awarded by the Oil and Pipelines
Agency for the operation and maintenance of the Government Pipeline
and Storage System. The additional support services capabilities
afforded the Group by the acquisition of Promanex in August 2011,
were instrumental in securing this contract and demonstrates the
value in enhancing existing capabilities through targeted
acquisition.
In Nuclear Process, we continued to make good progress during
the course of the year in our various projects across the UK,
including Evaporator D at Sellafield, one of the UK's largest
nuclear decommissioning projects, which has seen the delivery of
further modules to site during the period. The Group was also
appointed, as one of two suppliers, to the Magnox framework
contract, for the delivery of construction, infrastructure and
maintenance projects across all ten sites which are operated by
Magnox on behalf of the Nuclear Decommissioning Authority. The
project work which Costain will deliver includes: the design,
construction and maintenance of permanent buildings and structures,
infrastructure maintenance and extension works incorporating
construction, civil engineering structures and ground works
projects.
In Power, the Group continues its work with the Energy
Technologies Institute, developing carbon dioxide reduction
technology for use in coal fired power stations, a critical factor
in the UK's ability to meet its stated climate change targets.
Land Development
Our non-core Land Development activity in Spain continued to be
subject to challenging market conditions. Revenue was GBP1.9
million (2011: GBP1.5 million) and the loss after tax was GBP2.3
million (2011 GBP2.0 million). As anticipated, no significant land
sales were completed in the year and we continue our moratorium on
development activity on our land-bank until the market improves and
maximum shareholder value can be secured for the assets. Our
activities during the year have been focused on our leisure
businesses of golf courses and our 600-berth yacht marina adjacent
to Gibraltar which has reported increased levels of activity during
the year.
FINANCE DIRECTOR'S REVIEW
Costain delivered another year of good financial
performance.
The Group generated a 4% increase in underlying operating profit
for the year to GBP25.1 million (2011: GBP24.1 million). Profit
from operations, before other items, for the year was GBP31.4
million (2011: GBP23.6 million).
Group revenue, including share of joint ventures and associates,
was GBP934.5 million for the twelve months to 31 December 2012
(2011: GBP986.3 million). The increased profitability, on reduced
revenue, reflects the Group's focus on higher margin work.
During the year the Group transferred two PFI investments into
The Costain Pension Scheme ('CPS') at an agreed value of GBP20.3
million which resulted in a profit on the transfer of GBP10.5
million. In addition the Group implemented an Enhanced Transfer
Value and Pension Increase Exchange offers to the members of the
CPS which resulted in a one-off accounting cost of GBP2.8 million
in the year.
Profit before tax, before other items(2) , for the year ended 31
December 2012 increased to GBP29.5 million (2011: GBP25.5 million).
Basic earnings per share, before other items(2) , amounted to 41.4
pence (2011: 31.1 pence per share), reflecting increased profits
and a non-recurring tax timing benefit. Reported basic earnings per
share were 37.1 pence (2011: 29.2 pence).
During the year the Group secured a number of new contracts and
extensions and the Group's order book stood at GBP 2.4 billion (31
December 2011: GBP2.5 billion).
As a result of the Group's ongoing strategic focus on major blue
chip customers who increasingly utilise a target cost based form of
contract, our net cash position includes a lower level of advanced
payments typically paid on lump sum contracts. Additionally, our
increasing emphasis on support service related activities, changing
industry cash flow trends, together with the cash flow timing
implication of a delayed contract completion, accounted for the
reduction in net cash to GBP105.7 million (2011: GBP140.1 million).
We expect these trends will continue to be reflected in a lower
average net cash position.
The results of the Group's operating divisions are considered in
the operational review section and are shown in the segmental
analysis in the financial statements.
Interest
Net finance expense amounted to GBP1.9 million (2011: GBP1.9
million income). The interest payable on bank overdrafts and other
similar charges was GBP1.8 million (2011: GBP1.7 million) and the
interest income from bank deposits and other loans and receivables
amounted to GBP1.0 million (2011: GBP1.8 million). In addition, the
net finance expense included the difference between the expected
return on the pension scheme's assets of GBP26.3 million (2011:
GBP32.3 million) and the interest cost on the present value of the
pension scheme's liabilities of GBP27.4 million (2010: GBP30.5
million) being a net expense of GBP1.1 million (2011: GBP1.8
million income).
In accordance with IAS 19, the pension scheme deficit position
was reassessed as at 31 December 2012. As a consequence of the new
requirements of IAS 19, requiring a change in the method of
calculation, the net pension interest expense will increase in 2013
to GBP2.1 million.
Tax
The Group's effective rate of tax was 7.3% of the profit before
tax (2011: 21.8%). The lower than normal rate of tax arose owing to
tax relief on the transfer of PFI assets to The Costain Pension
Scheme, Research and Development tax relief claims, the utilisation
of brought forward tax losses, timing differences and capital
allowances, not previously recognised as deferred tax assets, and
the effect on the brought forward deferred tax balances of the
reduced rate of corporation tax of 23% from 1 April 2013.
Dividend
The Board has recommended a final dividend for the year of 7.25
pence per share (2011: 6.75 pence per share) to bring the total for
the year to 10.75 pence per share (2011: 10.0 pence per share), an
increase of 7.5%.
As in previous years, the Group will make an additional cash
contribution to the pension scheme equal to the amount of dividend
paid to shareholders.
Shareholders' Equity
Shareholders' equity increased in the year to GBP31.8 million
(2011: GBP30.8 million). The profit for the year amounted to
GBP24.2 million and other comprehensive expenses to GBP19.1
million. The movements are detailed in the consolidated statements
of comprehensive income and expense and changes in equity in the
financial statements. The most significant element was the
actuarial loss on the Group's defined benefit pension scheme.
Pensions
As at 31 December 2012, the Group's pension scheme deficit in
accordance with IAS 19, net of deferred tax, was GBP40.0 million
(2011: GBP39.7 million). The scheme deficit position has increased
primarily as a result of a reduction in the discount rate, based on
corporate bond yields, used to calculate the liabilities.
In February 2012, the Group announced two further actions being
taken to manage the obligations in the CPS. The first of these was
the transfer of the Group's interest in two PFI investments into
the CPS at an agreed value of GBP20.3 million which was completed
on 22 February 2012 and resulted in an accounting profit on the
transfer of GBP10.5 million. The second action was the
implementation of Enhanced Transfer Value ('ETV') and Pension
Increase Exchange ('PIE') offers to the members of the CPS. The ETV
and PIE exercises have resulted in a reduction in the scheme
liabilities and assets of approximately GBP35 million and have
resulted in a one-off accounting cost of GBP2.8 million expensed in
2012.
A full actuarial valuation of the CPS was last performed by the
Scheme Actuary as at 31 March 2010 and a recovery plan agreed with
the Trustee of the Scheme. In accordance with the requirement for a
tri-ennial review, another full actuarial valuation of the CPS will
be carried out as at 31 March 2013.
Cash Flow and Borrowings
The Group has a positive net cash balance, which was GBP105.7
million as at 31 December 2012 (2011: GBP140.1 million) and
included GBP1.7 million of borrowings (2011: GBP1.6 million) and
cash held by jointly controlled operations of GBP29.6 million
(2011: GBP33.6 million).
As set out in the consolidated cash flow statement, during the
year, the Group had an operating cash outflow, together with
outflows for payment of dividends and matching pension deficit
contributions. The average month-end cash balance during 2012 was
GBP103.4 million (2010: GBP130.4 million).
The cash position is affected by monthly and contract specific
cycles and in order to accommodate these cyclical flows, the Group
seeks to maintain a base cash balance.
Key Risks and Uncertainties
The principal risks and uncertainties of the business, and the
factors which mitigate these risks, are set out in the Group's
Annual Report and include the economic outlook, change of
government policy on spending, competition, pension liabilities,
acquisition integration, operational delivery, loss of IT systems,
supply chain and customer failure and people retention. The Board
continuously assesses and monitors these risks and the Chairman's
Statement, Chief Executive's Review and business and operations
review in these financial statements include consideration of
uncertainties affecting the Group.
Accounting policies and significant areas of judgment and
estimation
A summary of the significant accounting policies of the Group is
set out in the Notes to the financial statements. There has been no
significant change to the accounting policies in the year and there
is no material effect on the Financial statements of new accounting
standards adopted in the period.
The Notes to the financial statements also include the
significant areas of judgment and estimation used in preparation of
the financial statements.
The most critical accounting policies and significant areas of
judgment and estimation arise from the accounting for defined
benefit pension schemes under IAS 19 Employee benefits, the
accounting for long-term contracts under IAS 11 and assessments of
the carrying value of land, property, goodwill and intangible
assets.
Contract Bonding and Banking Facilities
The Group's long-term contracting business is dependent on it
being able to supply performance and other bonds as necessary. This
means maintaining adequate facilities from banks and surety bond
providers to meet the current and projected usage requirements. The
Group has contract bonding and banking facilities of GBP465 million
with a maturity date of 30 September 2015 with its relationship
banks and surety companies.
Going Concern
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
Directors have considered the Group's financial requirements, its
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, the Group continues to adopt the going
concern basis in preparing these financial statements.
Treasury
The Group's treasury and funding activities are undertaken by a
centralised treasury function. Its primary activities are to manage
the Group's liquidity, funding and financial risk, principally
arising from movements in interest rates and foreign currency
exchange rates.
The Group's policy is to ensure that adequate liquidity and
financial resources are available to support the
Group's growth development, while managing these risks. The
Group's policy is not to engage in speculative transactions. Group
Treasury operates as a service centre within clearly defined
objectives and controls and is subject to periodic review by
internal audit.
Liquidity Risk
The Group finances its operations primarily by a mixture of
working capital, funds from shareholders and retained profits. The
Directors regularly monitor cash usage and forecast usage to ensure
that projected financing needs are supported by adequate cash
reserves or bank facilities.
Foreign Currency Exposure
Translation exposure: the results of the Group's overseas
activities are translated into sterling at rates approximating to
the foreign exchange rates ruling at the dates of the transactions.
The balance sheets of overseas subsidiaries and investments are
translated at foreign exchange rates ruling at the balance sheet
date.
Transaction exposure: the Group has a small transactional
currency exposure arising from subsidiaries' commercial activities
overseas and, where appropriate, the Group requires its
subsidiaries to use forward currency contracts to minimise any
currency exposure unless a natural hedge exists elsewhere within
the Group.
Interest Rate Risks and Exposure
The Group holds relatively minor financial instruments for two
main purposes: to finance its operations and, currently only within
its PFI investments, to manage the interest rate risks arising from
its operations and its sources of finance. Various financial
instruments (for example, trade receivables and trade payables)
arise directly from the Group's operations.
With the Group's cash balances and low level of borrowings, the
main exposure to interest rate fluctuations within the Group's
operations arises from surplus cash, which is generally deposited
with the Group's relationship banks. Within the investments in
joint ventures and associates, interest rate movements will affect
the value of swaps classified as cash flow hedges and this will
impact the Group's equity.
Tony Bickerstaff,
Finance Director
Consolidated income statement
Year ended 31 December 2012 2011
Before Before
other Other other Other
Notes items items Total items items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ ------ -------- ------- -------- -------- ------- --------
Continuing operations
Revenue 2 934.5 - 934.5 986.3 - 986.3
Less: Share of revenue
of joint ventures and associates 9 (86.1) - (86.1) (117.8) - (117.8)
------------------------------------ ------ -------- ------- -------- -------- ------- --------
Group revenue 848.4 - 848.4 868.5 - 868.5
Cost of sales (794.2) - (794.2) (818.8) - (818.8)
------------------------------------ ------ -------- ------- -------- -------- ------- --------
Gross profit 54.2 - 54.2 49.7 - 49.7
Administrative expenses (29.1) - (29.1) (25.6) - (25.6)
Pension liability management (2.8) - (2.8) - - -
Amortisation of acquired
intangible assets - (1.7) (1.7) - (0.9) (0.9)
Employment related deferred
consideration - (1.7) (1.7) - (0.7) (0.7)
------------------------------------ ------ -------- ------- -------- -------- ------- --------
Group operating profit 22.3 (3.4) 18.9 24.1 (1.6) 22.5
Profit on sale of non-consolidated
subsidiary - - - 0.5 - 0.5
Profit on sales of interests
in joint ventures and associates 10.5 - 10.5 0.3 - 0.3
Share of results of joint
ventures and associates 9 (1.4) - (1.4) (1.3) - (1.3)
------------------------------------ ------ -------- ------- -------- -------- ------- --------
Profit from operations 2 31.4 (3.4) 28.0 23.6 (1.6) 22.0
Finance income 4 27.3 - 27.3 34.1 - 34.1
Finance expense 4 (29.2) - (29.2) (32.2) - (32.2)
------------------------------------ ------ -------- ------- -------- -------- ------- --------
Net finance (expense)/income (1.9) - (1.9) 1.9 - 1.9
------------------------------------ ------ -------- ------- -------- -------- ------- --------
Profit before tax 29.5 (3.4) 26.1 25.5 (1.6) 23.9
Income tax 5 (2.5) 0.6 (1.9) (5.6) 0.4 (5.2)
------------------------------------ ------ -------- ------- -------- -------- ------- --------
Profit for the year attributable
to equity holders of the
parent 27.0 (2.8) 24.2 19.9 (1.2) 18.7
------------------------------------ ------ -------- ------- -------- -------- ------- --------
Earnings per share
Basic 6 41.4p (4.3)p 37.1p 31.1p (1.9)p 29.2p
Diluted 6 40.0p (4.1)p 35.8p 30.0p (1.8)p 28.2p
------------------------------------ ------ -------- ------- -------- -------- ------- --------
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 income and expense
Year ended 31 December
2012 2011
GBPm GBPm
---- -------------------------------------------- ------- -------
Profit for the year 24.2 18.7
-------------------------------------------------- ------- -------
Exchange differences on translation of
foreign operations (1.1) (0.8)
Cash flow hedges
Group:
Effective portion of changes in fair
* value during year - (0.1)
Net changes in fair value transferred
* to the income statement 0.1 0.2
Joint ventures and associates:
Effective portion of changes in fair
* value (net of tax) during year (0.4) (2.8)
* Net changes in fair value (net of tax) 4.0 -
transferred to the income statement
Actuarial losses on defined benefit pension
scheme (24.4) (22.1)
Tax recognised on actuarial losses recognised
directly in equity 2.7 3.0
-------------------------------------------------- ------- -------
Other comprehensive expense for the year (19.1) (22.6)
-------------------------------------------------- ------- -------
Total comprehensive income/(expense)
for the year attributable to equity holders
of the parent 5.1 (3.9)
-------------------------------------------------- ------- -------
Consolidated statement of changes in equity
Share Share Translation Hedging Retained Total
capital premium reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- --------- --------- ------------ --------- ---------- --------
At 1 January 2011 31.7 2.0 6.8 (2.2) (0.7) 37.6
Profit for the year - - - - 18.7 18.7
Other comprehensive income/(expense) - - (0.8) (2.7) (19.1) (22.6)
Transfer between reserves - - 0.1 - (0.1) -
Issue of ordinary shares
under employee share option
plans 0.6 1.1 - - (0.2) 1.5
Equity-settled share-based
payments - - - - 1.4 1.4
Dividends paid 0.1 0.2 - - (6.1) (5.8)
--------------------------------------
At 31 December 2011 32.4 3.3 6.1 (4.9) (6.1) 30.8
-------------------------------------- --------- --------- ------------ --------- ---------- --------
At 1 January 2012 32.4 3.3 6.1 (4.9) (6.1) 30.8
Profit for the year - - - - 24.2 24.2
Other comprehensive income/(expense) - - (1.1) 3.7 (21.7) (19.1)
Issue of ordinary shares
under employee share option
plans 0.3 - - - (0.3) -
Equity-settled share-based
payments - - - - 2.1 2.1
Dividends paid 0.1 0.4 - - (6.7) (6.2)
-------------------------------------- --------- --------- ------------ --------- ---------- --------
At 31 December 2012 32.8 3.7 5.0 (1.2) (8.5) 31.8
-------------------------------------- --------- --------- ------------ --------- ---------- --------
Consolidated statement of financial position
As at 31 December
2012 2011
Notes GBPm GBPm
-------------------------------------- ------ ------ ------
Assets
Non-current assets
Intangible assets 8 18.7 20.3
Property, plant and equipment 9.1 11.4
Investments in equity accounted
joint ventures 9 36.1 21.4
Investments in equity accounted
associates 9 1.6 1.4
Loans to equity accounted joint
ventures - 13.7
Loans to equity accounted associates 2.7 6.4
Other 17.5 16.4
Deferred tax 17.4 17.4
-------------------------------------- ------ ------ ------
Total non-current assets 103.1 108.4
-------------------------------------- ------ ------ ------
Current assets
Inventories 1.7 2.3
Trade and other receivables 181.5 188.0
Cash and cash equivalents 10 107.4 141.7
-------------------------------------- ------ ------ ------
Total current assets 290.6 332.0
-------------------------------------- ------ ------ ------
Total assets 393.7 440.4
-------------------------------------- ------ ------ ------
Equity
Share capital 32.8 32.4
Share premium 3.7 3.3
Foreign currency translation
reserve 5.0 6.1
Hedging reserve (1.2) (4.9)
Retained earnings (8.5) (6.1)
-------------------------------------- ------ ------ ------
Total equity attributable to
equity holders of the parent 31.8 30.8
-------------------------------------- ------ ------ ------
Liabilities
Non-current liabilities
Retirement benefit obligations 11 51.9 52.9
Other payables 5.0 6.1
Provisions for other liabilities
and charges 1.9 2.3
-------------------------------------- ------ ------ ------
Total non-current liabilities 58.8 61.3
-------------------------------------- ------ ------ ------
Current liabilities
Trade and other payables 297.6 342.9
Income tax liabilities 1.7 1.7
Bank overdrafts 10 1.7 1.6
Provisions for other liabilities
and charges 2.1 2.1
-------------------------------------- ------ ------ ------
Total current liabilities 303.1 348.3
-------------------------------------- ------ ------ ------
Total liabilities 361.9 409.6
-------------------------------------- ------ ------ ------
Total equity and liabilities 393.7 440.4
-------------------------------------- ------ ------ ------
Consolidated cash flow statement
Year ended 31 December
2012 2011
Notes GBPm GBPm
----------------------------------------------------- ------ ------- -------
Cash flows from operating activities
Profit for the year 24.2 18.7
Adjustments for:
Share of results of joint ventures and associates 9 1.4 1.3
Finance income 4 (27.3) (34.1)
Finance expense 4 29.2 32.2
Income tax 5 1.9 5.2
Profit on sales of interests in joint ventures
and associates 3 (10.5) (0.3)
Profit on sale of non-consolidated subsidiary - (0.5)
Depreciation of property, plant and equipment 2.3 1.9
Amortisation of intangible assets 1.8 0.9
Employment related deferred consideration 1.7 0.7
Share-based payments expense 2.9 1.9
Cash from operations before changes in working
capital and provisions 27.6 27.9
Decrease/(increase) in inventories 0.6 (1.0)
Decrease/(increase) in receivables 4.1 (10.1)
(Decrease)/increase in payables (48.1) 25.0
Movement in provisions and employee benefits (6.5) (7.1)
----------------------------------------------------- ------ ------- -------
Cash (used by)/from operations (22.3) 34.7
Interest received 1.0 1.8
Interest paid (1.8) (1.7)
----------------------------------------------------- ------ ------- -------
Net cash (used by)/from operating activities (23.1) 34.8
----------------------------------------------------- ------ ------- -------
Cash flows from/(used by) investing activities
Dividends received from joint ventures and
associates 0.6 1.4
Additions to property, plant and equipment (0.8) (2.9)
Additions to intangible assets (0.1) (0.1)
Proceeds of disposal of property, plant and
equipment 0.6 0.2
Additions to loans to joint ventures and associates (5.4) (13.5)
Loan repayments by joint ventures and associates - 0.4
Proceeds from sale of interest in joint venture - 0.3
Proceeds from sale of subsidiary - 0.5
Acquisitions of subsidiaries (net of acquired
cash and cash equivalents and overdrafts) - (21.1)
Net cash used by investing activities (5.1) (34.8)
----------------------------------------------------- ------ ------- -------
Cash flows from/(used by) financing activities
Issue of ordinary share capital - 1.5
Ordinary dividends paid (6.2) (5.8)
Net cash used by financing activities (6.2) (4.3)
----------------------------------------------------- ------ ------- -------
Net decrease in cash, cash equivalents and
overdrafts (34.4) (4.3)
Cash, cash equivalents and overdrafts at beginning
of the year 10 140.1 144.3
Effect of foreign exchange rate changes - 0.1
----------------------------------------------------- ------ ------- -------
Cash, cash equivalents and overdrafts at end
of the year 10 105.7 140.1
----------------------------------------------------- ------ ------- -------
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 2012
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 6 March 2013) does not constitute the
Company's statutory accounts for the years ended 31 December 2012
or 2011 but is derived from those accounts. Statutory accounts for
2011 have been delivered to the Registrar of Companies, and those
for 2012 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
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.
Notes to the financial statements - continued
Basis of preparation - continued
Significant areas of judgment and estimation
The estimates and underlying assumptions used in the preparation of
these financial statements are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate
is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current
and future periods.
The most critical accounting policies and significant areas of judgment
and estimation arise from the accounting for defined benefit pension
schemes under IAS 19 Employee benefits, the accounting for long-term
contracts under IAS 11 Construction contracts, assessments of the carrying
value of land and the carrying value of goodwill and acquired intangible
assets.
Defined benefit pension schemes require significant judgments in relation
to the assumptions for inflation, future pension increases, investment
returns and member longevity that underpin the valuation. Each year
in selecting the appropriate assumptions, the directors take advice
from an independent qualified actuary. The assumptions and resultant
sensitivities are set out in Note 11.
The majority of the Group's activities are undertaken via long-term
contracts and these contracts are accounted for in accordance with IAS
11, which requires estimates to be made for contract costs and revenues.
In many cases, these contractual obligations span more than one financial
period. Also, the costs and revenues may be affected by a number of
uncertainties that depend on the outcome of future events and may need
to be revised as events unfold and uncertainties are resolved.
Management bases its judgments of costs and revenues and its assessment
of the expected outcome of each long-term contractual obligation on
the latest available information, this includes detailed contract valuations
and forecasts of the costs to complete. The estimates of the contract
position and the profit or loss earned to date are updated regularly
and significant changes are highlighted through established internal
review procedures. The impact of any change in the accounting estimates
is then reflected in the financial statements.
Alcaidesa Holding SA, one of the Group's joint ventures, operates in
the Spanish real estate market and holds land and property within its
current and non-current assets. The company has also developed and operates
a marina under a long-term concession agreement. At 31 December 2012,
a review of the net realisable value of each of its land holdings and
the carrying value of the marina assets was undertaken, including the
use of external valuations, and provisions, if considered necessary,
have been reflected in these financial statements.
Reviewing the carrying value of goodwill and intangible assets recognised
on acquisition requires judgments, principally, in respect of growth
rates and future cash flows of cash generating units, the useful lives
of intangible assets and the selection of discount rates used to calculate
present values.
Notes to the financial statements - continued
2 Operating segments
Segment information is based on four business segments: Environment,
Infrastructure, Energy & Process and Land Development operations in Spain.
The segments are strategic business units with separate management reporting
to a segment managing director and have different core customers or offer
different services. This information is provided to the Chief Executive
who is the chief operating decision maker. The segments are discussed
in the Business review section of these financial statements.
2012 Environment Infrastructure Energy Land Development Central Total
& Process costs
GBPm GBPm GBPm GBPm GBPm GBPm
Segment revenue
External revenue 148.5 562.3 137.6 - - 848.4
Share of revenue
of joint ventures
and associates 84.1 - 0.1 1.9 - 86.1
----------------------- ------------------- ----------------------- ----------------------- --------------------- ------------------------ ------------------------
Total segment revenue 232.6 562.3 137.7 .9 - 934.5
----------------------- ------------------- ----------------------- ----------------------- --------------------- ------------------------ ------------------------
Segment profit/(loss)
Operating
profit/(loss) 3.6 26.1 2.5 - (7.1) 25.1
Pension liability
management - - - - (2.8) (2.8)
Profit on sales
of interests in
joint ventures
and associates 10.5 - - - - 10.5
Share of results
of joint ventures
and associates 0.9 - - (2.3) - (1.4)
----------------------- ------------------- ----------------------- ----------------------- --------------------- ------------------------ ------------------------
Profit/(loss) from
operations before
other items 15.0 26.1 2.5 (2.3) (9.9) 31.4
Other items:
Amortisation of
acquired intangible
assets - (1.6) (0.1) - - (1.7)
Employment related
deferred
consideration - (0.9) (0.8) - - (1.7)
Profit/(loss) from
operations 15.0 23.6 1.6 (2.3) (9.9) 28.0
Net finance expense (1.9)
----------------------- ------------------- ----------------------- ----------------------- --------------------- ------------------------ ------------------------
Profit before tax 26.1
----------------------- ------------------- ----------------------- ----------------------- --------------------- ------------------------ ------------------------
Notes to the financial statements - continued
Operating segments - continued
2011 Environment Infrastructure Energy Land Development Central Total
& Process costs
GBPm GBPm GBPm GBPm GBPm GBPm
Segment revenue
External revenue 281.8 448.5 138.2 - - 868.5
Share of revenue
of joint ventures
and associates 93.6 17.5 5.2 1.5 - 117.8
-------------------- ------------------ ----------------------- ----------------------- --------------------- ------------------------ ------------------------
Total segment
revenue 375.4 466.0 143.4 1.5 - 986.3
-------------------- ------------------ ----------------------- ----------------------- --------------------- ------------------------ ------------------------
Segment
profit/(loss)
Operating
profit/(loss) 16.1 10.2 4.6 - (6.8) 24.1
Profit on sale of
non-consolidated
subsidiary 0.5 - - - - 0.5
Profit on sale of
interest in joint
venture 0.3 - - - - 0.3
Share of results
of joint ventures
and associates 0.6 - 0.1 (2.0) - (1.3)
-------------------- ------------------ ----------------------- ----------------------- --------------------- ------------------------ ------------------------
Profit/(loss) from
operations before
other items 17.5 10.2 4.7 (2.0) (6.8) 23.6
Other items:
Amortisation of
acquired
intangible
assets - (0.7) (0.2) - - (0.9)
Employment related
deferred
consideration - (0.3) (0.4) - - (0.7)
Profit/(loss) from
operations 17.5 9.2 4.1 (2.0) (6.8) 22.0
1.9
-------------------- ------------------ ----------------------- ----------------------- --------------------- ------------------------ ------------------------
Net finance income
-------------------- ------------------ ----------------------- ----------------------- --------------------- ------------------------ ------------------------
Profit before tax 23.9
-------------------- ------------------ ----------------------- ----------------------- --------------------- ------------------------ ------------------------
3 Profit on sale of interest in joint ventures and
associates
In February 2012, the Group transferred two PFI investments to
The Costain Pension Scheme for GBP20.3 million realising a profit
of GBP10.5 million. As a result of this transfer, GBP4.0 million of
fair value adjustments on the PFI financial assets relating to cash
flow hedges were recycled through the income statement, making up
part of the GBP10.5 million profit.
Notes to the financial statements - continued
4 Net finance (expense)/income
2012 2011
GBPm GBPm
Interest income from bank deposits 0.3 0.4
Interest income on loans to related parties 0.7 1.4
Expected return on defined benefit pension
scheme assets 26.3 32.3
----------------------------------------------------------------- --------- ------------ ------- -----------
Finance income 27.3 34.1
------------------------------------------------------------------------------------------ ------- -----------
Interest payable on bank overdrafts and other similar
charges (1.8) (1.7)
Interest cost on the present value of the defined benefit
obligations (27.4) (30.5)
------------------------------------------------------------------------------------------ ------- -----------
Finance expense (29.2) (32.2)
------------------------------------------------------------------------------------------ ------- -----------
Net finance (expense)/income (1.9) 1.9
---------------------------------------- --------- ------------ --------- ------------ ------- -----------
Interest income on loans to related parties relates to shareholder
loan interest receivable from investments in equity accounted joint
ventures and associates.
5 Income tax 2012 2011
GBPm GBPm
---------------------- ------ ------------- ---------- ---------- ---------- ------- ------- ------
On profit for the
year
United Kingdom corporation tax at 24.5% (2011: 26.5%)
- Adjustment in respect of prior years 0.1 0.1
Current tax credit for the year 0.1 0.1
--------------------------------------------------------------------------------- ------- ------- ------
Deferred tax charge for current year (2.2) (5.9)
Adjustment in respect of prior
years 0.2 0.6
--------------------------------------------- ---------- ---------- ---------- ------- ------- ------
Deferred tax charge for the year (2.0) (5.3)
--------------------------------------------------------------------------------- ------- ------- ------
Income tax expense in the consolidated
income statement (1.9) (5.2)
--------------------------------------------------------------------- ---------- ------- ------- ------
2012 2011
GBPm GBPm
---------------------- ------ ------------- ---------- ---------- ---------- ------- ------- ------
Tax reconciliation
Profit before tax 26.1 23.9
------------------------------------------------------------------------------------------ ------- ------
Income tax at 24.5% (2011: 26.5%) (6.4) (6.3)
Share of results of joint ventures and associates
at 24.5% (2011: 26.5%) (0.3) (0.3)
Disallowed provisions and expenses (0.2) (0.3)
Non-taxable gains and profits relieved by capital
losses 2.6 0.3
Utilisation of previously unrecognised temporary
differences 1.5 0.3
Rate adjustments relating to deferred taxation
and overseas profits and losses 0.6 0.4
Adjustments in respect of prior
years 0.3 0.7
--------------------------------------------- ---------- ---------- ---------- ------- ------- ------
Income tax expense in the consolidated income
statement (1.9) (5.2)
--------------------------------------------------------------------------------- ------- ------- ------
Notes to the financial statements - continued
6 Earnings per share
The calculation of earnings per share is based on profit of GBP24.2
million (2011: GBP18.7 million) and the number of shares set out below.
2012 2011
Number Number
(millions) (millions)
Weighted average number of ordinary shares in issue
for basic earnings per share calculation 65.3 64.1
Dilutive potential ordinary shares arising from employee
share schemes 2.3 2.2
------------------------------------------------------------------------------------------------- ------------------------ --------------------
Weighted average number of ordinary shares in issue
for diluted earnings per share calculation 67.6 66.3
------------------------------------------------------------------------------------------------- ------------------------ --------------------
7 Dividends
Dividend 2012 2011
per
share
pence GBPm GBPm
---------------- ------------ ----------------------------- ------------ --------- --------- ------------------------ --------------------
Final dividend for the year ended 31 December
2010 6.25 - 3.9
Interim dividend for the year ended 31 December
2011 3.25 - 2.2
Final dividend for the year ended 31 December
2011 6.75 4.4 -
Interim dividend for the year ended 31 December
2012 3.50 2.3 -
------------------------ --------------------
Amount recognised as distributions to equity holders
in the year 6.7 6.1
Dividends settled in shares (0.5) (0.3)
---------------------------------------------- ------------- ------------ --------- --------- ------------------------ --------------------
Dividends settled in cash 6.2 5.8
------------------------------------------------------------------------------------------------- ------------------------ --------------------
8 Intangible assets
Other
Customer acquired Software
Goodwill relationships intangibles & development Total
GBPm GBPm GBPm GBPm GBPm
-------------------- --------- --------------- ------------- --------------- ------
Cost
At 1 January 2011 - - - 5.0 5.0
Acquired through
business
combinations 15.2 4.1 1.7 - 21.0
Other additions - - - 0.1 0.1
--------------------
At 31 December 2011 15.2 4.1 1.7 5.1 26.1
-------------------- --------- --------------- ------------- --------------- ------
At 1 January 2012 15.2 4.1 1.7 5.1 26.1
Additions - - - 0.2 0.2
-------------------- ------------- --------------- ------
At 31 December 2012 15.2 4.1 1.7 5.3 26.3
-------------------- --------- --------------- ------------- --------------- ------
Amortisation -
At 1 January 2011 - - - 4.9 4.9
Provided in year - 0.7 0.2 - 0.9
--------------------
At 31 December 2011 - 0.7 0.2 4.9 5.8
-------------------- --------- --------------- ------------- --------------- ------
At 1 January 2012 - 0.7 0.2 4.9 5.8
Provided in year - 1.5 0.2 0.1 1.8
-------------------- --------- --------------- ------------- --------------- ------
At 31 December 2012 - 2.2 0.4 5.0 7.6
-------------------- --------- --------------- ------------- --------------- ------
Net book value
At 31 December 2012 15.2 1.9 1.3 0.3 18.7
-------------------- --------- --------------- ------------- --------------- ------
At 31 December 2011 15.2 3.4 1.5 0.2 20.3
-------------------- --------- --------------- ------------- --------------- ------
At 1 January 2011 - - - 0.1 0.1
-------------------- --------- --------------- ------------- --------------- ------
Notes to the financial statements - continued
9 Investments
The analysis of Group share of joint ventures and
associates is set out below:
2012 2011
-------------- ------------------------------------------------ ----------------------------------------------
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 1.9 52.9 31.3 86.1 1.5 80.4 35.9 117.8
-------------- ------------ ----------- ----------- -------- ---------- --------- -------------
(Loss)/profit
before tax (2.3) - 1.3 (1.0) (2.0) 0.2 0.8 (1.0)
Income tax - - (0.4) (0.4) - - (0.3) (0.3)
-------------- -------- --------- -------------
(Loss)/profit
for the
year (2.3) - 0.9 (1.4) (2.0) 0.2 0.5 (1.3)
Non-current
assets 20.0 - 0.9 20.9 20.9 - 1.0 21.9
Current
assets 29.5 15.3 58.9 103.7 31.2 30.3 113.6 175.1
Current
liabilities (3.4) (15.2) (10.3) (28.9) (5.3) (30.2) (11.3) (46.8)
Non-current
liabilities (10.1) - (47.9) (58.0) (25.5) - (101.9) (127.4)
-------------- ------------ ----------- ----------- -------- ---------- --------- ------------- --------
Investments
in joint
ventures
and
associates 36.0 0.1 1.6 37.7 21.3 0.1 1.4 22.8
10 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 GBP29.6 million
(2011: GBP33.6 million).
2012 2011
GBPm GBPm
Cash and cash equivalents 107.4 141.7
Bank overdrafts (1.7) (1.6)
Cash, cash equivalents and overdrafts in the cash
flow statement 105.7 140.1
Notes to the financial statements - continued
11 Pensions
A defined benefit pension scheme is operated in the United Kingdom
and a number of defined contribution pension schemes are in place
in the United Kingdom and Overseas. Contributions are paid by subsidiary
undertakings and employees. The total pension charge in the income
statement was GBP9.2 million comprising GBP8.1 million included in
operating costs plus GBP1.1 million included in net finance expense
(2011: GBP3.5 million, comprising GBP5.3 million in operating costs
less GBP1.8 million in net finance income).
Defined benefit scheme
The defined benefit scheme was closed to new members on 31 May 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 2010 and was updated to
31 December 2012 by a qualified independent actuary.
2012 2011 2010
GBPm GBPm GBPm
Present value of defined benefit obligations (610.7) (600.8) (576.7)
Fair value of scheme assets 558.8 547.9 537.1
Recognised liability for defined benefit
obligations (51.9) (52.9) (39.6)
Movements in present value of defined benefit
obligations: 2012 2011
GBPm GBPm
At 1 January 600.8 576.7
Interest cost 27.4 30.5
Amendments (Pension Increase Exchange (1.7) -
'PIE')
Plan Settlements (Enhanced Transfer (29.3) -
Value 'ETV')
Actuarial losses 40.7 18.2
Benefits paid (27.2) (24.6)
At 31 December 610.7 600.8
Movements in fair value of scheme assets: 2012 2011
GBPm GBPm
At 1 January 547.9 537.1
Expected return on scheme assets 26.3 32.3
Actuarial (losses)/gains 16.2 (3.9)
Contributions by employer 28.4 7.0
Plan Settlements (ETV) (32.8) -
Benefits paid (27.2) (24.6)
At 31 December 558.8 547.9
Notes to the financial statements
- continued
11 Pensions (continued)
(Expense)/income recognised in the
income statement:
2012 2011
GBPm GBPm
Pension liability management (ETV and PIE,
including costs of GBP0.9 million) (2.8) -
Interest cost on defined benefit obligations (27.4) (30.5)
Expected return on scheme assets 26.3 32.3
Total (3.9) 1.8
Fair value of scheme assets and the return
on scheme assets: 2012 2011
GBPm GBPm
Equities 184.2 173.9
High yield bonds 46.2 52.8
Government bonds 195.8 223.4
Infrastructure and property 63.8 43.7
Absolute return funds and cash 68.8 54.1
Total 558.8 547.9
Principal actuarial assumptions (expressed as weighted
averages):
2012 2011
%%
Discount rate 4.40 4.80
Expected rate of return on scheme assets 4.40 4.95
Future pension increases 2.85 2.90
Inflation assumption 2.95 3.00
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.
Notes to the financial
statements - continued
11 Pensions (continued)
Weighted average life expectancy from age 65 as per mortality tables used to determine benefits
at 31 December 2012 and 31 December 2011 is:
2012 2011
Male Female Male Female
(years) (years) (years) (years)
Currently aged 65 21.7 23.8 21.5 23.7
Non-retirees 24.5 25.6 24.4 25.6
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 defined benefit scheme:
Pension Pension
liability cost
GBPm GBPm
Increase discount rate by 0.25%, decreases pension
liability and increases pension cost by 28.2 1.1
Decrease inflation, pension increases by 0.25%,
decreases pension liability and reduces pension
cost by 25.4 1.1
Increase life expectancy by one year, increases
pension liability and increases pension cost
by 16.7 0.7
The expected pension cost for 2013 under IAS 19 (Revised), which becomes effective for 2013,
is a GBP0.6 million operating expense and a GBP2.1 million finance expense.
The Group expects to contribute an amount equal to dividends paid to shareholders and the
expenses of administration to its defined benefit scheme in the next financial year.
Defined contribution
schemes
Several defined contribution pensions are operated. The total expense relating to these plans
was GBP5.3 million (2011: GBP5.3 million).
Notes to the financial statements - continued
12 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 and
with The Costain pension scheme. The total value of these services
in 2012 was GBP126.7 million (2011: GBP133.1 million); transactions
with The Costain Pension scheme are included in Note 11.
13 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.
14 Responsibility statements
The Company's statutory accounts for the year ended 31 December
2012 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 2012 have been prepared in accordance with IFRS as adopted
by the EU, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
and
-- the Business Review which is incorporated into the Directors'
Report in those financial statements, includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties they face.
On behalf of the Board:
D P ALLVEY
Chairman
ANDREW WYLLIE
Chief Executive
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JAMLTMBAMBFJ
Costain (LSE:COST)
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Costain (LSE:COST)
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から 7 2023 まで 7 2024
