TIDMCOST
RNS Number : 1098E
Costain Group PLC
09 March 2022
COSTAIN GROUP PLC
RESULTS FOR THE TWELVE MONTHS
ED 31 DECEMBER 2021
9 MARCH 2022
Strong performance in 2021; well positioned to deliver further
progress this year
Alex Vaughan, chief executive officer, commented:
"We have delivered an improved operating performance and results
in line with market expectations, including significant growth in
adjusted operating profit and margin, and good free cash flow
generation.
"Infrastructure is facing enormous change, underpinned by
significant committed investment and generating huge opportunities
for us and, in my mind, addressing these changes requires a
different approach. We have aligned our services to meet the
changing needs of our clients, allowing us to shape, create and
deliver pioneering solutions that transform the performance of the
infrastructure ecosystem.
"Looking ahead, while we are mindful of the macro-economic
backdrop, we have already secured more than GBP1bn of Group revenue
for 2022 and have entered the new year with good momentum. We
expect to deliver further progress in 2022 and remain confident in
the Group's strategy and longer-term prospects."
Financial summary
GBPm FY21 adjusted(1) FY21 FY21 reported FY20 FY20 reported Adjusted(1)
adjustments(1) adjusted(1) change
Group revenue 1,178.6 (43.4) 1,135.2 1,070.5 978.4 10.1%
Operating profit
/ (loss) 30.1 (39.6) (9.5) 18.0 (92.0) 67.2%
Operating margin 2.6% (3.4)% (0.8)% 1.7% (9.4)% 0.9pp
Profit/(loss)
before tax 26.3 (39.6) (13.3) 13.9 (96.1) 189.2%
Basic
earnings/(loss)
per share 9.6p (11.7)p (2.1)p 5.8p (36.7)p 65.5%
Dividend per - -
share
Free cash flow(2) 38.9 31.6 23.1%
Net cash
balance(3) 119.4 102.9
------------------ ----------------- ------------------ -------------- ------------- -------------- ------------
1. Before impact of significant contract provisions and other
items of GBP39.6m (FY20: GBP110.0m) (see note 3).
2. Free cash flow is defined as cash flow from operating
activities, excluding adjusting items, less capital
expenditure.
3. Net cash balance is cash and cash equivalents less
interest-bearing loans and borrowings (before arrangement fees of
GBP0.6m in FY21 (GBP1.2m in FY20)).
Highlights
Financial performance
-- Adjusted(1) Group revenue up 10% reflecting strong growth in
Transportation from National Highways and HS2.
-- Improved profitability with adjusted operating profit(1) up
67% to GBP30.1m and an adjusted operating margin of 2.6%. Reported
operating loss of GBP9.5m (FY20: GBP92.0m), the difference to FY21
adjusted profits reflecting GBP39.6m of adjusting items mainly
related to legacy contract issues.
-- Strong cash generation with a year end net cash position of
GBP119.4m and GBP38.9m free cash flow, driven by strong cash
collection.
-- The Board does not consider it appropriate to recommend a final dividend this year.
Operating performance
-- Strong safety performance with LTIR of 0.15 in line with pre-COVID levels.
-- Transportation building good momentum with a strong pipeline
and GBP764m of revenue secured for FY22.
-- Natural Resources impacted by slower than expected investment
in water and energy in H1. Trading improved in H2 and we expect
this momentum to continue into FY22.
-- Good visibility for FY22 with more than GBP1bn of Group
revenue already secured(2) for 2022 at year end, incorporating our
broadening mix of construction, consulting and digital
services.
-- Solid order book(2) position :
-- GBP3.4bn at end of FY21 (FY20: GBP4.3bn), reflecting the market cycles.
-- Preferred bidder book of GBP0.9bn (FY20: GBP1.2bn).
-- Around 50 further frameworks for higher margin consulting and
digital services that will yield meaningful revenues in the
year.
-- Pipeline remains strong driven by significant committed
infrastructure investment and structural growth drivers from
Levelling Up, net zero, climate resilience and customer service
needs and underpinned by our secured framework positions.
-- Peterborough & Huntington (P&H) contract settlement
concluded post year end, impacting reported operating profitability
in FY21, with cash payment made in FY22.
1. Before impact of significant contract provisions and other
items of GBP39.6m (FY20: GBP110.0m) (see financial statements note
3).
2. Order book and secured revenue includes revenue from
contracts which are partially or fully unsatisfied and probable
revenue from water frameworks included at allocated volume.
Additional business information
FY21 FY20 Change
Transportation adjusted(1) revenue
(GBPm) 864.2 724.2 19.3%
Road 408.9 315.2 29.7%
Rail 356.4 306.3 16.3%
Integrated transport 99.0 102.6 -3.6%
Natural Resources adjusted(1)
revenue (GBPm) 314.4 345.1 -8.9%
Water 200.0 223.0 -10.3%
Energy 72.0 87.5 -17.7%
Defence 42.4 34.6 22.3%
Non-financial
Order book(2) at 31 December (GBPbn) 3.4 4.3 -20.9%
Revenue secured(2) for following
year (GBPm) 1,034 1,039 -0.5%
Lost time injury rate (LTIR) 0.15 0.09 0.06
Community investment (GBPk) 200 211 -5.2%
Absolute GHG emissions (scope
1-3) tCO(2) e 49,000 32,165 52%
(1) Before impact of significant contract provisions and other
items of GBP39.6m (FY20: GBP110.0m) (see financial statements note
3). (2) Order book and secured revenue includes revenue from
contracts which are partially or fully unsatisfied and probable
revenue from water frameworks included at allocated volume.
Enquiries
Investors and analysts
Louise Bryant, Costain +44 7813 210 809
Financial media - MHP Costain@mhpc.com
Tim Rowntree +44 203 128 8147
Peter Hewer +44 7709 326 261
Analyst & investor presentation
A presentation of our results by Alex Vaughan (CEO) and Helen
Willis (CFO) will be at 10.00am.
Please go to
https://webcasting.brrmedia.co.uk/broadcast/6203df0c636d105baf47a75d
to register for the event.
To register a question please call 0800 279 6877 or +44 (0)330
336 9601 with confirmation code: 7995124.
Board changes
Tony Quinlan joined the Board as a non-executive director on 1
February 2021. Jane Lodge, who was senior independent director and
chair of the audit committee, stepped down from the Board after
nine years' service on 6 May 2021. Alison Wood became senior
independent director and Tony Quinlan was appointed chair of the
audit committee on 6 May 2021. Neil Crockett joined the Board as a
non-executive director on 6 October 2021.
On 12 January 2022, Tony Quinlan also became the Company's
senior independent director and Jacqueline de Rojas became
remuneration committee chair on an interim basis, following the
announcement that Alison Wood would step down as a non-executive
director. A search for an additional non-executive director to
become Remuneration Committee chair on appointment is well advanced
and we will update the market in due course.
As announced separately today, Paul Golby has indicated his
intention to step down as chair and from the Board within the next
12 months. Paul joined the Board as chair and non-executive
director in 2016. The Nomination Committee, led by Tony Quinlan as
senior independent director, will begin a search for Paul's
successor.
Use of alternative performance measures
Throughout this release we use a number of 'adjusted' measures
to provide users with a clearer picture of the underlying
performance of the business. To aid understanding of the underlying
and overall performance of the Group, certain amounts that the
Board considers to be material or non-recurring in size or nature,
or related to the accounting treatment of acquisitions, are
adjusted because they are not long term in nature and will not
reflect the long-term performance of the Group. This is in line
with how management monitors and manages the business on a
day-to-day basis. These adjustments are discussed in further detail
in Note 1 on page 24.
GROUP TRADING PERFORMANCE
We report both our statutory results, 'reported', and results
excluding adjusting items, 'adjusted'. Key adjusting items for FY21
include the Peterborough & Huntingdon settlement payment,
partially offset by a provision release relating to the A465
contract. Reported Group revenue was up 16.0%, while the reported
operating loss reduced significantly from GBP92.0m to GBP9.5m.
Adjusted group revenue was up 10.1% to GBP1,178.6m (FY20:
GBP1,070.5m). This was driven by Transportation where additional
work from National Highways and HS2 resulted in divisional revenue
growth of 19.3%. This more than offset an 8.9% decline in Natural
Resources revenue, reflecting delays in AMP7 water investment and
slower than anticipated investment in the energy market,
particularly in H1.
Group adjusted operating profit grew strongly, up 67.2% to
GBP30.1m (FY20: GBP18.0m), in line with market expectations. The
adjusted operating margin was 2.6% (FY20: 1.7%), driven by
improvements across Transportation, partly offset by the weaker
performance in Natural Resources. The improvement reflects the
conclusion of lower margin work and an increased proportion of
consulting and digital services.
Adjusted profit before tax was up 189.2% to GBP26.3m (FY20:
GBP13.9m), while adjusted basic earnings per share (EPS) was up
65.5% to 9.6p (FY20: 5.8p), due to improved profitability,
partially offset by the annualised impact on the weighted average
number of shares due to the equity raise in FY20. Reported loss
before tax was GBP13.3m (FY20: GBP96.1m loss) and diluted basic
loss per share (EPS) was 2.1p (FY20: 36.7p loss).
Our secured revenue for FY22 at year-end is more than GBP1bn.
Our order book stood at GBP3.4bn at the year-end (FY20: GBP4.3bn),
reflecting our clients five year investment programmes, greater
discipline in contract selection and the shorter lead time of
consulting and digital work. The order book evolves as contracts
wind down and new contracts are added, therefore it does not
provide a complete picture of potential future revenue. In addition
to the contracted order book, we have a further GBP0.9bn of
contracts where we are preferred bidder and around 50 further
secured frameworks for higher margin consulting and digital
services that will yield meaningful revenue each year.
Adjustments to reported items
A significant contract provision was made in the year, with the
net charge to the income statement amounting to GBP39.2m. Within
this, GBP43.4m was taken in relation to the settlement of the
Peterborough & Huntingdon contract, which was offset by other
movements including a provision release in relation to the A465
contract. Payment of GBP43.4m in settlement of the Peterborough
& Huntingdon contract was made after the financial year-end,
please see below for more details.
Cashflow and liquidity
Cash generated from operations was GBP29.5m (FY20: GBP47.0m
outflow) driven by an improvement in operating profit and efficient
working capital management. This has resulted in a GBP38.9m free
cash inflow for the year (FY20: GBP31.6m). Net cash at the year-end
was GBP119.4m (FY20: GBP102.9m).
Payment in respect of the settlement of the Peterborough &
Huntingdon contract was made after the FY21 year-end and amounted
to GBP43.4m.
The Group continues to maintain sufficient committed facilities
to meet its funding requirements over the medium term and, as at 31
December 2021, these committed facilities totalled GBP310m in
contract bonding and bank bonding facilities.
Capital structure and dividends
The objective of our strategy is to deliver long-term value to
shareholders while maintaining a strong balance sheet that
underpins our financial position. Costain has targeted a dividend
cover of around three times adjusted earnings, taking into account
the free cash flow generated in the period.
It is important that we maintain a strong balance sheet that
will support investment in the business to drive growth. Given the
final settlement payment made after the close of the financial year
in respect of the Peterborough & Huntingdon contract, the Board
does not consider it appropriate to recommend a final dividend this
year, despite the Group's improved operating and adjusted cash
performance.
We recognise the importance of dividends to shareholders and
will continue to review the timing of the reinstatement of future
dividends in the light of the Group's performance, cash flow
requirements and the importance of maintaining a strong balance
sheet.
Outlook
Looking ahead, we have already secured more than GBP1bn of Group
revenue for 2022 and have entered the new year with good momentum.
We are mindful of the macro-economic and geopolitical backdrop, and
we continue to monitor and work to mitigate headwinds in commodity
and energy costs, as well as challenges in the supply chain. We
expect to deliver further progress in 2022 and remain confident in
the Group's strategy and longer-term prospects.
STRATEGY UPDATE
Infrastructure is facing enormous change with challenges such as
climate change, resource scarcity, increasing performance
obligations and our economic and environmental resilience are more
urgent than ever. At the start of 2021, we completed a
comprehensive strategy update that tested the size and scale of our
addressable markets in Transport, Water, Energy and Defence, and
which confirmed the significant growth opportunity for the Group.
There is GBP650bn of infrastructure investment planned over the
next 10 years, underpinned by legislative and regulatory
commitments, as the government addresses issues such as inequality
and decarbonisation.
We believe that our strategic positioning in our four chosen
markets, combined with our differentiated offering, is well aligned
with these long-term investment plans, giving us significant
opportunities for growth. Our core strengths are in transport,
water, defence, and energy, all of which have major planned
investment programmes, with investment cycles of between four to
fifteen years. These programmes include:
Transport Water Energy Defence
* GBP27bn RIS2 investment in strategic road network * GBP51bn AMP7 Ofwat approved investment * GBP30bn RIIO-2 investment in clean energy * GBP42bn defence budget
* GBP72bn+ for HS2 * GBP12bn 10-point plan for a green industrial * GBP17bn increase in defence spending
revolution
* GBP96bn Integrated Rail Plan
* GBP42bn private investment stimulated by the green
industrial revolution
* GBP20bn Devolved and local authority investment
* GBP53bn CP6 rail investment
--------------------------------------------- --------------------------------------------------------- -------------------------------------------
Clients are looking for partners to help them deliver their
investment programmes and navigate the challenges to doing so, and
we believe that our differentiated and unique approach positions us
strongly to support them. Our expertise and focus on key sectors
allows us to understand the broad needs of our clients across their
strategy, and operational and capital expenditure requirements, and
by broadening our offer, we will be able to address more of the
market going forwards. We work as construction, consulting and
digital partners, solving problems and delivering engineered
solutions across the full client ecosystem. Our vision is to create
connected, sustainable infrastructure to help people and the planet
thrive.
We are focused on three strategic priorities that will drive our
strategic ambition.
People
In delivering our vision, we are increasingly building
high-performing, diverse teams and are continually focused on
upskilling our people and enhancing our leadership capability. In
the year, to deliver on our ambitions and take advantage of the
market opportunities, we have further strengthened our Executive
leadership team with Sam White joining from Babcock as Managing
Director for Natural Resources, Matthew Higham joining from
Microsoft UK as Chief Digital Officer, and Louise Bryant joining as
Group Communications and Investor Relations Director. These
additions have now enhanced the expertise and diversity of our
executive management team, supporting the delivery of our
strategy.
The safety of our people and our stakeholders is a core value
for Costain and it has been our long-term strategy to improve our
performance. In FY21, our Lost Time Injury Rate (LTIR) was 0.15, in
line with the pre-COVID level, the best comparator given the
reduced number of people on site and strict control measures in
place during the pandemic. The long-term strategies we have been
implementing since 2016 have seen LTIR halve and we expect to
deliver further improvements and maintain our industry leading
performance in FY22.
We have continued to operate effectively throughout 2021,
despite the challenges to our business operations from the
pandemic. We continue to listen to the views of our people
regarding our COVID-19 safety measures, which we kept in place on
all our sites and offices throughout the year. This approach has
enabled us to maintain effective operations in all parts of our
business, as well as prioritise the safety of our people.
Planet
Protecting nature and the environment to safeguard our planet
for future generations is fundamental. While we have made some
progress, there is much more to do, and we have recently committed
to achieve Science Based Target accreditation in climate and
nature. We are also undertaking a wider review of our
sustainability strategy to see what more we can do.
We continue to implement our Climate Change Action Plan, with a
20% reduction in plant idling achieved and continued
decarbonisation of our vehicle fleet. This includes mandating
hydrotreated vegetable oil (HVO) fuels and the transition to fully
electric and hydrogen construction plant, with performance
monitored using digital technology including telematics. We are
already making substantial progress to transition the whole car
fleet (more than 3,000 vehicles) to a 100% zero emission fleet,
comprising 100% electric and hydrogen vehicles by 2030. Progress of
all targets is measured and monitored on every relevant contract
and reported monthly through the Group and divisional SHE
dashboards.
Since 2020 we have been accredited PAS2080 compliant and in 2021
we joined the COP26 Race to Zero campaign and the signed 'The
Climate Pledge' , an initiative with the ambition to beat the Paris
Agreement 2050 target by achieving net zero by 2035 at the
latest.
Performance
Infrastructure increasingly needs to deliver more and cost less,
both economically and environmentally. We are investing in our
digital and consulting capabilities to help our clients with a
broadened offering, to optimise existing networks and future proof
new ones.
As a result of the significant commercial issues faced on the
legacy Peterborough & Huntingdon and A465 contracts, a key
focus area has been a root cause review and upgrade of the Group's
contract risk management and delivery assurance processes.
Based on the findings and conclusions of the root cause review,
we have implemented a programme of significant improvements during
the past two years including:
Work winning
-- Contract selection - an updated contract bidding process to
ensure contracts will not be pursued where the risk apportionment
is considered inappropriate.
-- Independent risk review - comprehensive expert risk review of
all potential new material contracts by specialist teams outside
the contract bidding team.
-- Enhanced legal process - the legal team has been restructured
and strengthened to ensure that contracts being entered into are
rigorously assessed and assumptions and terms documented to the
highest standards and clarity in the event of future legal
challenge.
Operational contract delivery
-- Operational Excellence Model (OEM) - developed a root and
branch OEM, which is implemented across the whole construction
contract portfolio. The OEM ensures rigorous process management and
consistent practices are applied across the Group, including
sharing of best practice and lessons learned. Compliance with the
OEM is assessed and reviewed monthly.
Financial performance
-- Financial Oversight - the financial performance of every
contract is comprehensively reviewed monthly, including a holistic
assessment of the risks and range of potential outcomes, to ensure
timely action is taken where financial performance is potentially
deviating from that assumed in the bidding process.
Senior management ownership
-- Review process - rigorous and clear process guidelines are in
place to ensure timely, proactive and appropriate communication of
on the ground delivery issues to the executive management team and,
if necessary, to the Board.
-- Review process - rigorous and clear process guidelines are in
place to ensure timely, proactive and appropriate communication of
on the ground delivery issues to the executive management team and,
if necessary, to the Board.
Operating profit growth
The strategy will deliver a transformation in the business over
the next few years, with a step change in business performance in
four key areas which will support the ambition to deliver a future
group operating margin of 5-6%. These key margin enhancement levers
are:
1. Improving margins on complex programme delivery (CPD)
contracts - our OEM programme is delivering CPD contracts in line
with our target margin range of 3-5% and we are trading out the
proportion of revenue from historic lower margin contracts.
2. Growing our consulting services - this is developing well,
with contract margins growing to more than 5% as we increasingly
build our reputation and expertise, together with continuing to
secure consultancy frameworks with our clients.
3. Growing digital services - building on our digital expertise,
we are helping our clients shape and develop their plans and we see
a considerable opportunity as infrastructure markets move to
greater digital infrastructure to enhance business performance. We
expect contract margins in this area of more than 5%. We have new
leadership in this area and are investing in a clear and focused
plan.
While our complex programme delivery services include the
benefits of our consulting and digital expertise, and will
therefore increase margins, we are also growing our standalone
consulting and digital services. Taken together, we expect to
deliver a progressive increase in operating profit and operating
margin as we implement our strategy.
At present our work within Energy and Defence, for example, is
purely consulting with no construction contracts for our clients.
We expect consulting and digital as a standalone service to be an
increasing proportion of Group profits in the future.
To support our investment in transforming the business we remain
focused on increased business efficiency - this commenced in 2020
with the strategic update, and continues to develop as we look at
data, systems and process improvements.
Corporate positioning
Following the strategy update in early 2021 we have introduced a
vision, 'To create connected, sustainable infrastructure enabling
people and the planet to thrive'. We are rolling this out
externally and across the Group to ensure that our people
understand how it relates to them in their everyday roles. We have
also introduced our mission, which is the shorter-term articulation
of our vision: 'We shape, create and deliver pioneering solutions
that transform the performance of the infrastructure ecosystem'.
This reflects the new positioning and feedback so far has been very
positive.
DIVISIONAL REVIEW
TRANSPORTATION
GBPm FY21 adjusted(1) FY21 reported FY20 adjusted(1) FY20 reported Adjusted(1)
change
Road 408.9 408.9 315.2 265.1 29.7%
Rail 356.4 356.4 306.3 306.3 16.3%
Integrated transport 99.0 99.0 102.6 102.6 -3.6%
Total revenue 864.2 864.2 724.2 674.1 19.3%
Operating profit/(loss) 41.4 49.8 20.1 (30.6) 106.0%
Operating margin 4.8% 5.8% 2.8% -4.5% 2.0pp
------------------------- ----------------- -------------- ----------------- -------------- ------------
1. Please see notes 3 and 4.
-- Adjusted revenue up 19.3% driven by National Highways and HS2.
-- Adjusted operating margin was 4.8%, up 2.0 percentage points
due to more effective contract management and outperformance.
-- Contract wins of GBP248m in the year, with FY22 secured revenue of GBP764m.
-- Conclusion reached on the A465 contract.
Adjusted revenue was up 19.3% driven by work for National
Highways, High Speed 2 (HS2) Main Works and Network Rail, which
represent the majority of our divisional revenue. This also drove a
significant improvement in operating margin, together with better
contract management, outperformance and a change in mix as lower
margin contracts come to an end. Reported operating profit of
GBP49.8m includes a provision release of GBP8.4m following
settlement of the A465 contract.
Adjusted revenue for Road increased by 29.7% in FY21 on the
prior year. As a strategic partner for National Highways, we are
working with our client on two of their ten-year key investment
programmes; the Regional Delivery Partnerships (RDP) major projects
framework and the SMP Alliance, delivering smart motorway upgrades.
We work on a number of projects across our capabilities of complex
programme delivery, consulting and digital services. We
successfully delivered the A19 Testo's scheme in Tyneside and the
adjacent A19 Down Hill Lane Junction improvement scheme, providing
a safer, more accessible and fluid road network with extra capacity
to support economic growth. We have also been upgrading parts of
the A1 around Newcastle under the RDP framework and during the year
we commenced construction on the A30 in Cornwall. Pre-construction
and design activities have been progressing well on the A12
Chelmsford to A120 scheme. While the response to the Transport
Select Committee Report into the rollout and safety of smart
motorways has paused elements of the smart motorways programme, our
work delivering the upgrade to the M6 Junctions 21a/26 continues,
and we have been supporting National Highways to upgrade stopped
vehicle detection and deliver more emergency areas.
Adjusted revenue for Rail increased by 16.3% in FY21 on the
prior year, principally as a result of HS2 which increased in the
year as a substantial completion of the enabling works was achieved
and the full year impact of the construction phase of the main
works programme. We will commence the main tunnel bores this
summer, and in total we will operate seven tunnel boring machines
providing HS2 with 26 miles of running tunnel between Euston and
West Ruislip with scheduled contract completion in 2027. We have
been providing consulting services to support the Hybrid Bill for
the route from Birmingham to Crewe and Manchester, connecting the
HS2 network with the North, which are a key part of the Rebalancing
Britain initiative. Our work on the Gatwick Airport Station Project
for Network Rail was augmented by the client in the year, and being
on site also enabled us to unlock a significant consulting
opportunity to upgrade the Brighton mainline, improving travel
times. During the year we also completed the handover of the
Paddington Elizabeth line station.
Adjusted revenue for Integrated Transport declined by 3.6% in
FY21 on the prior year, due to a reduction in a maintenance
contract and plant hire revenue more than offsetting increases
elsewhere. Integrated Transport includes work for devolved and
local governments, and aviation. Work we undertook in the year
includes Newquay Airport for the G7 Summit and commencing the
revitalisation of the A40 Westway for Transport for London (TfL).
We have continued to grow our consulting services to central and
local government in support of accelerating progress to net zero
carbon, green economic recovery and levelling up the UK and have
secured places on all our targeted frameworks. In February 2021 we
reached a settlement agreement with the Welsh Government in
relation to the A465 contract and completed the works in November
2021.
Looking ahead, we continue to see multi-year revenue growth in
our work for HS2 and Network Rail, alongside further local
government and integrated transport opportunities.
During the year we secured GBP248m of new work. Revenue secured
for FY22 for Transportation is GBP764m (Prior year: GBP762m).
NATURAL RESOURCES
GBPm FY21 adjusted(1) FY21 reported FY20 adjusted(1) FY20 reported Adjusted(1)
change
Water 200.0 200.0 223.0 223.0 -10.3%
Energy 72.0 28.6 87.5 45.5 -17.7%
Defence 42.4 42.4 34.6 34.6 22.3%
Total revenue 314.4 271.0 345.1 303.1 -8.9%
Operating profit/(loss) (2.6) (50.6) 5.7 (51.7) -145.6%
Operating margin -0.8% -18.7% 1.7% -17.1% -2.5pp
------------------------- ----------------- -------------- ----------------- -------------- ------------
1. Please see notes 3 and 4.
-- Adjusted revenue was down 8.9% and operating profit was down
145.6% driven by lower activity levels in Water and Energy.
-- Adjusted operating margin was -0.8%, down 2.5 percentage points on an adjusted basis.
-- Contract wins of GBP185m in the year, with 2022 secured revenue of GBP271m.
-- Full and final settlement on legacy Peterborough &
Huntingdon contract of GBP43.4m see adjustments to reported items
on page 3 for further details.
-- Sam White appointed as Managing Director for Natural Resources.
Adjusted revenue for the year was down 8.9% driven by lower
activity levels across AMP7 water programmes and slower than
anticipated investment in the energy market. The operating margin
for Natural Resources on an adjusted basis was down 2.1 percentage
points, reflecting the lower revenue and increased costs,
particularly in the water sector. Included within the adjusted
results, and in line with IFRS 15 requirements, we have recognised
a GBP6.2m provision in respect of a defect in a subcontractor's
works for a contract in the water sector. We expect the majority of
the rectification costs will be recoverable.
Adjusted revenue for Water declined by 10.3% on the prior year.
This was driven by lower volumes of activity in the AMP7 water
programmes as clients adjusted their year-one projects due to
COVID-19. As the year progressed, volumes improved as the year-two
programmes commenced, and we are now undertaking work with key
clients including Severn Trent Water, Southern Water, Thames Water
and United Utilities under their five-year programmes through to
2025. We have made good progress on the Thames Tideway project,
where in a joint venture, we are responsible for the eastern
section. We are also working with Anglian Water on its eight-year
Strategic Pipeline Alliance to develop an enterprise-ready digital
twin, which will replicate all activity and interactions across the
operational system allowing Anglian Water to create predictive
"what-if" scenarios and their impact on operations. In addition, we
are providing bespoke consulting services to Yorkshire Water, South
Staffs Water and Welsh Water.
Adjusted revenue for Energy declined by 17.7% on the prior year.
In H1, we saw a number of contract awards deferred into H2 which
had a high demand for our engineering and consultancy services. We
are one year into a 10-year consultancy project for Cadent,
managing the mains replacement programme across the East of
England. We have also been successful in gaining a further two-year
extension to our EDF Project Controls framework contract where we
are supporting them in the safe, efficient operation and
decommissioning of their eight UK nuclear power stations.
We continue to build a portfolio of project and consultancy
assignments in key areas of the energy transition agenda. We have
established positions in a number of projects to enable the wide
scale deployment of hydrogen and carbon capture, utilisation and
storage (CCUS) technologies, including as deployment lead on the
GBP38m South Wales Industrial Cluster deployment project; the Front
End Engineering Design (FEED) for the Acorn carbon capture and
storage scheme in St Fergus, Scotland; and a first-of-a-kind
hydrogen storage facility in Cheshire.
Adjusted revenue for Defence increased by 22.3% on the prior
year. We saw good growth in the year, albeit from a small base, as
we grow our footprint in this area. We are well positioned in the
Ministry of Defence Continuous and Sea Defence programme, and our
ambition is to be the delivery partner of choice across the
Ministry of Defence's (MoD) strategic infrastructure needs. Revenue
in the year was driven by our contract with AWE on a major
infrastructure project, where we are providing expertise in design
and construction management, and coordinating the work of several
subcontractors. We have been awarded a place on a number of Crown
Commercial Service Frameworks and through these we secured two
contracts with the Defence Nuclear Organisation, one of which is
the provision of a Programme Management Office to support the
infrastructure division. In addition, we are pleased to have won a
significant consultancy contract for the rebuilding of facilities
at Devonport Dockyard, which will mobilise in 2022.
Looking ahead, we see further opportunities for growth across
Energy, supporting decarbonisation, and in Defence where we are
broadening our market position to cover all strategic defence and
security infrastructure.
During the year we secured GBP185m of new work. Revenue secured
for FY22 for Natural Resources is GBP271m (Prior year:
GBP278m).
FINANCIAL REVIEW
Adjusted to reported reconciliation
Transportation Natural Resources Group
2021 2020 Change 2021 2020 Change 2021 2020 Change
Revenue GBPm
Adjusted 864.2 724.2 19.3% 314.4 345.1 -8.9% 1,178.6 1.070.5 10.9%
Adjusting
items - (50.1) (43.4) (42.0) (43.4) (92.1)
Reported 864.2 674.1 28.2% 271.0 303.1 -10.6% 1,135.2 978.4 16.0%
Operating
profit GBPm
Adjusted 41.4 20.1 106.0% (2.6) 5.7 n/m 30.1 18.0 67.2%
Adjusting
items 8.4 (50.7) (48.0) (57.4) (39.6) (110.0)
Reported 49.8 (30.6) n/m (50.6) (51.7) 2.1% (9.5) (92.0) 89.7%
-------------- ------ ------- ------- ------- ------- ------- -------- -------- -------
Adjusting items
Significant contract provisions were taken in the year,
amounting to GBP39.2m. A provision of GBP43.4m was taken in
relation to the settlement of the Peterborough & Huntingdon
contract, along with GBP4.2m of other costs associated with the
dispute. We also released a provision of GBP8.4m on lower than
provided final costs relating to the A465, and incurred GBP0.4m on
amortisation of acquired intangible assets.
Net financial expense
Net finance expense amounted to GBP3.8m (FY20: GBP4.3m). The
interest payable on bank overdrafts, loans and other similar
charges was GBP3.0m (FY20: GBP4.1m) and the interest income from
bank deposits and other loans and receivables amounted to GBP0.1m
(FY20: GBP0.6m). In addition, the net finance expense includes the
interest income on the net assets/liabilities of the pension scheme
of GBPnil (FY20: GBP0.2m income) and the interest expense on lease
liabilities of GBP0.9m (FY20: GBP1.0m) under IFRS16.
Tax
The Group has a tax credit of GBP7.5m (FY20: GBP18.1m credit)
giving an effective tax rate of 56.4%. The 2021 net tax credit
arose primarily from the GBP7.8m impact of the rate change (from
19% to 25% in 2023, which has now been substantively enacted) on
deferred tax recognised in respect of losses and pensions. The
adjusted effective tax rate was -5.7% (FY20: 10.8%) and we expect
the effective tax rate to remain close to the statutory tax rate of
19% until 2023.
Cashflow
The Group generated a GBP38.9m free cash inflow for the year
(FY20: GBP32.4m).
GBPm FY21 FY20
Cash flow from operating activities 29.5 (47.0)
Add back adjusting items 11.6 82.7
Less capital expenditure (2.2) (4.1)
------ -------
Free cash flow 38.9 31.6
------------------------------------- ------ -------
The Group had a positive net cash balance of GBP119.4m as of 31
December 2021 (HY21: GBP113.0m, FY20: GBP102.9m) comprising Costain
cash balances of GBP101.3m (HY21: GBP100.0m, FY20: GBP89.8m), cash
held by joint operations of GBP58.1m (HY21: GBP57.0m, FY20:
GBP61.1m) and borrowings of GBP40.0m (before arrangement fees of
GBP0.6m (FY20: GBP1.2m)) (HY21: GBP44.0m, FY20: GBP48.0m). During
the year, the Group's average month-end net cash balance was
GBP106.5m (HY20: GBP102.9m, FY20: GBP73.8m).
GBPm FY21 FY20
Cash and cash equivalents at the
beginning of period 150.9 180.9
Net cash flow 8.5 (29.4)
FX 0.0 (0.6)
------- -------
Cash and cash equivalents at the
end of period 159.4 150.9
Borrowings (40.0) (48.0)
------- -------
Net cash 119.4 102.9
---------------------------------- ------- -------
Note: Borrowings are stated excluding associated arrangement
fees of GBP0.6m (2020: GBP1.2m), which are being amortised over the
period of the facility.
We remain in a positive net cash position, with positive Costain
cash balances, following the final settlement payment made after
the end of the financial year in respect of the Peterborough &
Huntingdon contract.
Financial resources
The Group has in place banking and bonding facilities from banks
and surety bond providers to meet the current and projected usage
requirements. The Group has banking facilities of GBP171.0m with
its relationship banks with a maturity date of 24 September 2023.
These facilities are made up of a GBP131.0m revolving credit
facility and a GBP40.0m term loan.
In addition, the Group has in place committed and uncommitted
bonding facilities of GBP310m. Utilisation of the total bonding
facilities as at 31 December 2021 was GBP100.7m (HY20: GBP103.2m,
FY20: GBP112.3m).
Capital allocation
We understand the importance of delivering long-term sustainable
value for shareholders and are committed to maintaining a balanced
approach between investment in the business, maintaining a strong
balance sheet and returns to shareholders. We look to prioritise
investment as follows:
1. Investing for growth - disciplined investment in key areas
such as digital to help accelerate our business transformation
2. Progressive dividend - committed to reinstating the dividend
and we target divided cover of around three times underlying
earnings taking into account the free cash flow generated in the
period
3. Selective M&A - retaining optionality to pursue strategic
investments in technology, skills and capabilities to enhance our
ability to support clients in the face of significant change
4. Returning surplus capital - ensuring surplus capital is
identified and returned to shareholders through share buy backs of
additional dividends.
The Board have discussed the appropriate time to reinstate the
payment of a dividend. Despite the Group's improved cash
performance, given the GBP43.4m payment to National Grid and the
need to retain a strong balance sheet, the Board does not consider
it appropriate to recommend a final dividend this year.
Pensions
As at 31 December 2021, the Group's pension scheme surplus in
accordance with IAS 19, was GBP67.1m (HY21: GBP29.0m surplus, FY20:
GBP5.6m liability).
The movement in the IAS 19 valuation from a deficit at 31
December 2020 to a surplus at 31 December 2021 was due to the
impact of growth in scheme assets and a reduction in scheme
liabilities, primarily driven by a higher discount rate of 1.80%
used in the IAS 19 valuation as at 31 December 2021 compared to the
discount rate at 31 December 2020 of 1.35%.
Cash contributions were made to the scheme during the year
amounting to GBP10.4m (FY20: GBP10.6m) and the charge to operating
profit in respect of the administration cost of the UK Pension
Scheme in the period was GBP0.3m (FY20: GBP0.3m).
DIRECTORS REPORT
Going concern
In determining the appropriate basis of preparation of the
financial statements for the year ended 31 December 2021, the
Directors are required to consider whether the Group and the
Company can continue in operational existence for the foreseeable
future, being a period of at least twelve months from the date of
approval of the accounts. Having undertaken a rigorous assessment
of the financial forecasts, including its liquidity and compliance
with covenants, the Board considers that the Group has adequate
resources to remain in operation for the foreseeable future and,
therefore, have adopted the going concern basis for the preparation
of the financial statements. Please see note 1 for more
details.
Cau tionary statement
This report contains forward-looking statements. These have been
made by the Directors in good faith based on the information
available to them up to the time of their approval of this report.
The Directors can give no assurance that these expectations will
prove to have been correct. Due to the inherent uncertainties,
including both economic and business risk factors underlying such
forward-looking information, actual results may differ materially
from those expressed or implied by these forward-looking
statements. The Directors undertake no obligation to update any
forward-looking statements whether as a result of new information,
future events or otherwise.
Shareholder information
There is a large amount of information about our business on our
website, www.costain.com . This includes copies of recent investor
presentations as well as London Stock Exchange announcements.
For and on behalf of the Board
Alex Vaughan Helen Willis
Chief Executive Officer Chief Financial Officer
9 March 2022
GROUP INCOME STATEMENT
For the year ended 31 December 2021
GBPm Notes 2021 2020
Group revenue 4 1,135.2 978.4
Cost of Sales (1,095.0) (1,027.0)
---------- ----------
Gross profit/(loss) 40.2 (48.6)
Administrative expenses (49.7) (43.4)
---------- ----------
Group operating loss (9.5) (92.0)
Share of results of joint ventures
and associates - 0.2
---------- ----------
Loss from operations 4 (9.5) (91.8)
Finance income 5 0.1 0.8
Finance expense 5 (3.9) (5.1)
---------- ----------
Net finance expense (3.8) (4.3)
---------- ----------
Loss before tax (13.3) (96.1)
Taxation 6 7.5 18.1
---------- ----------
Loss for the year attributable to
equity holders of the parent (5.8) (78.0)
---------- ----------
Earnings/(loss) per share
Basic 7 (2.1)p (36.7)p
Diluted 7 (2.1)p (36.7)p
------------------------------------ ------ ---------- ----------
GROUP STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
For the year ended 31 December 2021
GBPm 2021 2020
Loss for the year (5.8) (78.0)
------- -------
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of
foreign operations - 0.2
Exchange differences on translation transferred
to the income statement - (1.2)
Net investment hedge:
Effective portion of changes in fair value
during year - 0.1
Net changes in fair value transferred
to the income statement - 0.4
Cash flow hedges :
Effective portion of changes in fair
value during year 0.3 (0.3)
Net changes in fair value transferred
to the income statement - 0.5
------- -------
Total items that may be reclassified subsequently
to profit or loss 0.3 (0.3)
Items that will not be reclassified to
profit or loss:
Remeasurement of retirement benefit asset/(obligations) 62.7 (19.9)
Tax recognised on remeasurement of retirement
benefit asset/(obligations) (15.6) 3.8
------- -------
Total items that will not be reclassified
to profit or loss 47.1 (16.1)
------- -------
Other comprehensive income/(expense) for
the year 47.4 (16.4)
------- -------
Total comprehensive income/(expense) for
the year attributable to equity holders
of the parent 41.6 (94.4)
---------------------------------------------------------- ------- -------
GROUP BALANCE SHEET
As at 31 December 2021
GBPm Notes 2021 2020
Assets
Non-current assets
Intangible assets 9 52.5 52.1
Property, plant and
equipment 10 32.0 39.9
Equity accounted investments 0.4 0.4
Retirement benefit 67.1 -
asset
Trade and other receivables 5.5 3.5
Deferred tax 15.4 23.6
------ ------
Total non-current
assets 172.9 119.5
Current assets
Inventories 0.3 0.6
Trade and other receivables 199.6 218.7
Taxation 0.2 0.2
Cash and cash equivalents 11 159.4 150.9
------ ------
Total current assets 359.5 370.4
------ ------
Total assets 532.4 489.9
------ ------
Liabilities
Non-current liabilities
Retirement benefit
obligations 12 - 5.6
Other payables 1.8 1.1
Interest bearing loans
and borrowings 32.0 39.6
Lease liabilities 18.2 20.8
------ ------
Total non-current
liabilities 52.0 67.1
Current liabilities
Trade and other payables 215.1 246.0
Interest bearing loans
and borrowings 7.4 7.2
Lease liabilities 8.6 12.5
Provisions for other
liabilities and charges 50.3 0.6
------ ------
Total current liabilities 281.4 266.3
------ ------
Total liabilities 333.4 333.4
------ ------
Net assets 199.0 156.5
------ ------
Equity
Share capital 13 137.5 137.5
Share premium 16.4 16.4
Translation reserve 0.6 0.6
Hedging reserve - (0.3)
Retained earnings 44.5 2.3
------ ------
Total equity 199.0 156.5
------------------------------- ------ ------ ------
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
GBPm
Share Share Translation Hedging Merger Retained Total
capital premium reserve reserve reserve earnings equity
At 1 January 2020 54.1 16.4 1.1 (0.5) - 86.6 157.7
Loss for the year - - - - - (78.0) (78.0)
Other comprehensive
(expense)/ income - - (0.5) 0.2 - (16.1) (16.4)
Shares purchased
to satisfy employee
share schemes - - - - - (0.2) (0.2)
Equity-settled
share-based payments - - - - - 0.9 0.9
Capital raise (note
13) 83.4 - - - 9.1 - 92.5
Transfer - - - - (9.1) 9.1 -
At 31 December
2020 137.5 16.4 0.6 (0.3) - 2.3 156.5
--------- --------- ------------ --------- --------- ----------
At 1 January 2021 137.5 16.4 0.6 (0.3) - 2.3 156.5
Loss for the year - - - - - (5.8) (5.8)
Other comprehensive
income - - - 0.3 - 47.1 47.4
Shares purchased
to satisfy employee
share schemes - - - - - (0.2) (0.2)
Equity-settled
share-based payments - - - - - 1.1 1.1
At 31 December
2021 137.5 16.4 0.6 - - 44.5 199.0
----------------------- --------- --------- ------------ --------- --------- ---------- --------
GROUP CASH FLOW STATEMENT
For the year ended 31 December 2021
GBPm Notes 2021 2020
Cash flows from/(used by) operating activities
Loss for the year (5.8) (78.0)
Adjustments for:
Share of results of joint ventures and associates - (0.2)
Finance income 5 (0.1) (0.8)
Finance expense 5 3.9 5.1
Taxation 6 (7.5) (18.1)
Impairment of Alcaidesa marina - 0.6
Impairment of other investment - 0.6
Profit on sales of interests in joint ventures
and associates - (1.6)
Profit on disposal of subsidiary undertakings - (1.4)
Pension GMP equalisation charge - 0.9
Depreciation of property, plant and equipment 10 12.9 15.0
Amortisation and impairment of intangible
assets 9 1.1 10.5
Shares purchased to satisfy employee share
schemes (0.2) (0.2)
Share-based payments expense 1.1 0.9
------- --------
Cash from/(used by) operations before changes
in working capital and provisions 5.4 (66.7)
Decrease in inventories 0.3 0.7
Decrease in receivables 17.7 25.5
Decrease in payables (29.9) (0.1)
Movement in provisions and employee benefits 39.7 (10.4)
------- --------
Cash from/(used by) operations 33.2 (51.0)
Interest received 0.1 0.8
Interest paid (3.9) (5.1)
Taxation received 0.1 8.3
------- --------
Net cash from/(used by) operating activities 29.5 (47.0)
------- --------
Cash flows from/(used by) investing activities
Dividends received from joint ventures and
associates - 0.2
Additions to property, plant and equipment (0.7) (0.5)
Additions to intangible assets (1.5) (3.6)
Proceeds of disposals of property, plant
and equipment and intangible assets - 0.3
Proceeds of sales of interests in joint
ventures and associates - 3.7
Proceeds of sales of subsidiary undertakings - 4.6
------- --------
Net cash (used by)/from investing activities (2.2) 4.7
------- --------
Cash flows from/(used by) financing activities
Issue of ordinary share capital - 92.5
Repayments of lease liabilities (10.8) (12.1)
Drawdown of loans - 71.5
Repayment of loans (8.0) (139.0)
------- --------
Net cash (used by)/from financing activities (18.8) 12.9
------- --------
Net increase/(decrease) in cash and cash
equivalents 8.5 (29.4)
Cash and cash equivalents at beginning of
the year 11 150.9 180.9
Effect of foreign exchange rate changes - (0.6)
------- --------
Cash and cash equivalents at end of the
year 11 159.4 150.9
--------------------------------------------------- ------ ------- --------
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
Costain Group PLC ("the Company") is a public limited company
domiciled in England and incorporated in England and Wales. The
consolidated financial statements of the Company for the year ended
31 December 2021 comprise the Group and the Group's interests in
associates, joint ventures and joint operations and have been
prepared and approved by the directors in accordance with
UK-adopted international accounting standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards. In preparing the financial
statements of the Group we performed an assessment of the impact of
climate change, with reference to the disclosures made in the
Strategic report. There has been no material impact on the
financial statements for the current year from the Group's
assessment of the impact of climate change, including estimates and
judgements made, specifically in relation to long-term contract
accounting.
A duly appointed and authorised committee of the Board of
Directors approved the preliminary announcement on 8 March 2022.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2021
and 2020 but is derived from those accounts. Statutory accounts for
2020 have been delivered to the Registrar of Companies and those
for 2021 will be delivered in due course.
The auditor has reported on these accounts. Their report for
2021 was (i) unqualified and (ii) did not contain a statement under
section 498(2) or (3) of the Companies Act 2006. Their report for
the accounts of 2020 was (i) unqualified, and (ii) did not contain
a statement under section 498(2) or (3) of the Companies Act
2006.
While 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 accounting policies have been applied consistently by the
Group to each period presented in these financial statements.
Going concern
The Group's principal business activity involves work on the
UK's infrastructure, mostly delivering long-term contracts with a
number of customers. To meet its day-to-day working capital
requirements, it uses cash balances provided from shareholders'
capital and retained earnings and its borrowing facilities. These
borrowing facilities give the Group access to an RCF cash drawdown
component of GBP131m and a GBP40m five-year Term Loan, which
reduces by GBP4m every six months on 30 June and 31 December.
These facilities have a liquidity covenant of net debt / EBITDA
<= 1.5 times and an interest covenant of EBITA / net interest
payable covenant of >= 4.0 times and these financial covenants
are tested quarterly. As at 31 December 2021, the Group had a
leverage covenant ratio of below zero (the Group had no net debt)
and an interest covenant ratio of 11.0 times. As part of its
contracting operations, the Group may be required to provide
performance and other bonds. It satisfies these requirements by
utilising its GBP35m bank bonding and GBP275m surety company
bonding facilities.
In determining the appropriate basis of preparation of the
financial statements for the year ended 31 December 2021, the
Directors are required to consider whether the Group and the
Company can continue in operational existence for the foreseeable
future, being a period of at least twelve months from the date of
approval of the accounts. Having undertaken a rigorous assessment
of the financial forecasts, including its liquidity and compliance
with covenants, the Board considers that the Group and the Company
have adequate resources to remain in operation for the foreseeable
future and, therefore, have adopted the going concern basis in the
preparation of the financial statements.
In assessing the going concern assumption, the Board reviewed
the base case plans and also identified severe but plausible
downsides affecting future profitability, working capital
requirements and cash flow. The base case assumes delivery of the
Board approved strategic and financial plans. The severe but
plausible downsides include applying the aggregated impact of lower
revenue, lower margins, future contractual issues, higher working
capital requirements and adverse contract settlements.
These forecasts show significant headroom and support that the
Group will be able to operate within its available banking
facilities and covenants throughout this period. Covenants are
calculated on a rolling 12-month basis each quarter and therefore
for all quarters until Q4 of FY22, and Q1 and Q2 of FY23, a portion
of the EBITDA/EBITA has already been earned, reducing the risk of a
potential breach. Taking this into account along with the forecasts
reviewed, it is considered that the EBITA/net interest covenant for
the rolling 12 months to Q4 of FY22 and Q1 of FY23 is the limiting
factor, given the Group's net cash position. The Board concluded
that there is liquidity headroom in severe but plausible downside
scenarios, as well as headroom on the committed facilities and on
the associated financial covenants.
Alternative performance measures
Income statement presentation - Adjusting items
To aid understanding of the underlying and overall performance
of the Group, certain amounts that the Board considers to be
material or non-recurring in size or nature or related to the
accounting treatment of acquisitions are adjusted because they are
not long term in nature and will not reflect the long-term
performance of the Group. Presenting results on this adjusted basis
is consistent with the internal reporting presented to the
Board.
The Directors exercise judgement in determining the
classification of certain items as adjusting using quantitative and
qualitative factors. In assessing whether an item is an adjusting
item, the Directors give consideration, both individually and
collectively, as to an item's size, the specific circumstances
which have led to the item arising and if the item is likely to
recur, or whether the matter forms part of a group of similar
items.
The separate presentation of these items is intended to enhance
understanding of the financial performance of the Group in the
particular year under review and the extent to which results are
influenced by material unusual and/or non-recurring items. The tax
impact of the above is shown in note 3 to the financial statements
on the taxation line.
Consequently, the Group is disclosing as supplementary
information 'Adjusted revenue, Adjusted profit and Adjusted
earnings per share' alternative performance measurements. These are
reconciled to statutory numbers in note 3 to the financial
statements and reported in the presentation of segmental reporting
in note 4.
The Group also presents net cash/ bank debt as an alternative
performance measure. The Directors consider that this provides
useful information about the Group's liquidity position.
2. SIGNIFICANT AREAS OF JUDGEMENT 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
estimation and judgement arise from the accounting for long-term
contracts under IFRS 15 'Revenue from Contracts with Customers',
the carrying value of goodwill and acquired intangible assets, the
assumptions used in the accounting for defined benefit pension
schemes under IAS 19 'Employee benefits', the recognition of
deferred tax assets in relation to tax losses and the items
classified as other items and contract adjustments.
Long-term contracts
The majority of the Group's activities are undertaken via
long-term contracts and IFRS 15 requires the identification and
separation of individual, distinct performance obligations, which
are then accounted individually. The most common type of contracts
undertaken by the Group with multiple performance obligations are
framework contracts. In most cases, the obligations are satisfied
over time and estimates are made of the total contract costs and
revenues. In many cases, these obligations span more than one
financial period. Both cost and revenue forecasts 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. Cost forecasts take into account the
expectations of work to be undertaken on the contract. Revenue
forecasts take into account compensation events, variations and
claims and assessments of the impact of pain/gain arrangements to
the extent that the amounts the Group expects to recover or incur
can be reliably estimated and are highly probable not to
reverse.
Management bases its estimates 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, progress on discussions over
compensation events, variations and claims with customers, progress
against the latest programme for completing the works, forecasts of
the costs to complete and, in certain limited cases, assessments of
recoveries from insurers where virtually certain. Revenue is
recognised to the extent that amounts forecast from compensation
events, variations and claims are agreed or considered in
management's judgement highly probable to be agreed.
During the course of the contract, there is often significant
change to the scope of the works and this has an impact on the
programme and costs on the contract. The amount of resulting
compensation events can be substantial and at any time these are
often not fully agreed with the customer due to the timing and
requirements of the contractual process. Also many will relate to
work yet to be undertaken or completed. Therefore, assessments are
based on an estimate of the potential cost impact of the
compensation events.
The Group's five largest compensation events positions included
in contract assets at the year-end are summarised in aggregate
below. The Peterborough & Huntingdon contract is not included
in the table and is discussed separately below.
GBPm 2021 2020
Overall contract value 1,501.9 1,135.6
Revenue in year 146.3 176.9
Total estimated end of contract compensation
events 135.4 83.1
Total estimated unagreed end of contract
compensation events (included in the above) 96.1 51.3
Total unagreed compensation events valued
at year-end and included in contract assets 22.9 22.5
---------------------------------------------- -------- --------
The financial impact of changes to the value of compensation
events finally agreed will depend on the precise terms of the
contract and the interaction with incentive arrangements, such
pain/gain mechanisms and bonus or KPI arrangements, and any
assessments made about costs disallowed under the contract. If the
estimated value of the unagreed end of contract compensation events
in relation to the currently estimated change in these contracts
was increased or decreased by 10%, the impact on the financial
results over the life of the contract could be an increase or
decrease of up to GBP9.6m (2020: up to GBP7.0m). Additional
compensation events for further change may also arise over the
remaining contract period.
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 both positive and
negative is then reflected in the financial statements.
While management believes it has recorded positions that are
highly probable not to reverse on the basis of existing knowledge,
there are a number of factors affecting the positions and some
possible outcomes could require material adjustment within the next
financial year. Given the pervasive impact of judgements and
estimates on revenue, cost of sales and related balance sheet
amounts, it is difficult to quantify the impact of taking
alternative assessments on each of the judgements above. However, a
sensitivity analysis of the potential impact is included above.
Peterborough & Huntingdon
On 24 February 2022, Costain announced that it had reached a
final settlement with National Grid regarding the Peterborough
& Huntingdon contract. The settlement agreement brings an end
to the dispute after the contract was mutually terminated in June
2020 and prevents any further claims under the contract. Costain
made a full and final payment of GBP43.4m to National Grid, after
the end of the financial year 2021. See note 3 for further
details.
Carrying value of goodwill and intangible assets
Reviewing the carrying value of goodwill and intangible assets
recognised on acquisition requires an estimation of the value in
use of cash generating unit to which the goodwill has been
allocated. These valuations involve estimation and judgement,
principally, in respect of the levels of operating margins, growth
rates and future cash flows of the cash generating units and also
include a consideration of potential sensitivities around those
figures. The useful lives of intangible assets and the selection of
discount rates used to calculate present values are set out in note
9.
Defined benefit pension schemes
Defined benefit pension schemes require significant estimates in
relation to the assumptions for the discount rate, inflation 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 12.
Deferred tax
Included in deferred tax assets is an asset for tax losses
recorded in current and prior years. The asset is recognised on the
basis that the losses will be used against future taxable profits
of the Group over the next six years. The critical judgements in
assessing the recoverability relate to the ability of the Group to
achieve its taxable profit forecasts and the ability of these
estimated numbers to withstand the application of what the Board
considers appropriate sensitivities.
Adjusting items
Management has used judgement to determine the items classified
as adjusting items and set out in note 3.
3. RECONCILIATION OF REPORTED REVENUE AND OPERATING
(LOSS)/PROFIT TO ADJUSTED REVENUE AND OPERATING PROFIT
Adjusted revenue, operating profit and earnings per share are
being used as non-GAAP alternative performance measurements. These
measurements were introduced in 2020 and exclude the impact of
significant one-off re-measurements of three contracts,
Peterborough & Huntingdon (P&H), the A465 Heads of the
Valley road (A465) and the ASF South contracts, as described below,
as well as the other items that the Board considers to be of a
one-off and unusual nature or related to the accounting treatment
of acquisitions. The Board considers the adjusted measures better
reflect the underlying trading performance of the Group.
The profit adjustments represent the amounts included in the
income statement. The revenue adjustments represent the reversal of
the contract asset recorded in the statement of financial position
immediately prior to the initial write down and any subsequent
adjustment to overall contract revenue.
On 29 June 2020, Costain announced that a termination and
settlement agreement (the "Agreement") had been reached with
National Grid to cease work on the Peterborough & Huntingdon
("P&H") gas compressor project (the "Contract") following a
significant change in scope. The Agreement included the parties
entering into a legal process, through adjudications, to agree up
to GBP80.0m of identified compensation events, recover costs
incurred and eliminate potential liability to National Grid for
completing the works.
Under the terms of the Agreement, the aggregate potential
outcome for Costain of these adjudications ranged from an
additional cash receipt of up to a maximum of GBP50.0m to a cash
payment (which would not affect the Group's banking arrangements)
of up to a maximum of GBP57.3m. As outlined in the Agreement,
Costain and National Grid had until 28 December 2021, to agree the
quantum of these compensation events. After this, in accordance
with the contractual mechanism, any remaining unagreed change items
would require a cash payment to be paid to National Grid in the
interim. Should such a cash payment be required, this would be
required to be made in the first quarter of 2022.
Subsequent to reaching this agreement, in its interim results
for the six months ended 30 June 2020, Costain recorded a charge to
the income statement of GBP49.3m, reflecting the cash position at
termination. See below for further details.
At 31 December 2020, the Group, supported by extensive input
from third party quantum, delay and disruption experts and
independent legal advice, determined that it had a strong
entitlement to retain, at a minimum, the reported position. No
asset or liability was recorded on the balance sheet at this
time.
On 10 December 2021, Costain received the outcome of a material
combined adjudication where the adjudicator found in Costain's
favour on principle in respect of three out of four compensation
events under consideration. However, the adjudicator unexpectedly
declined to make a quantum assessment and noted that had he been
able to determine quantum, this would only be in respect of
non-productive time-related costs. In doing so the adjudicator
therefore indicated that he would have sought to apply a
methodology that was not envisaged nor widely used within the
construction industry, nor was it in accordance with or defined
within the contract. The impact of this would have been to allow
recovery of only a small proportion of the additional costs
incurred and claimed. This left the matter undecided and, in
respect of certain matters, the subject of further
adjudication.
Accordingly, in the absence of a quantified resolution via
adjudication by 28 December 2021, Costain would have been required
to make a payment to National Grid of GBP53.5m in January 2022.
This payment was required notwithstanding any potential subsequent
recoveries from National Grid which might become due as a result of
further actions to recover costs, including in respect of those
compensation events that had been ruled in Costain's favour.
In assessing and determining the most appropriate steps to
conclude this matter, Costain considered the risks associated with
pursuing further recoveries via a potentially protracted process of
further adjudication and litigation, the residual future latent
defect risks and the opportunity for the release of retention bonds
and parent company guarantees held by National Grid, in addition to
the ongoing and significant management time this would require. On
balance, Costain concluded in light of these changes in events,
that it was appropriate to enter into discussions with National
Grid with a view to reaching a settlement.
On 24 February 2022, Costain announced that it had reached a
full and final settlement with National Grid. The settlement
agreement brings an end to the dispute and prevents any further
claims under the contract. Costain made a full and final payment of
GBP43.4m to National Grid in the first quarter of 2022. Related
legal and other costs of GBP4.2m were also incurred and expensed
during the period ending 31 December 2021.
After careful consideration including obtaining legal advice, it
is the Board's clear view that there have been specific and
unexpected changes in circumstance that have occurred during 2021.
These were not envisaged by the Board or its external advisors nor
could they reasonably have been foreseen when reaching the
conclusion in the December 2020 financial statements that it was
highly probable that Costain would be awarded compensation events
consistent with the cash neutral balance sheet position adopted.
That position had been the subject of detailed focus by independent
experts and legal advisors who had confirmed and supported the
position taken.
After due consideration of the unexpected outcome of the
adjudication process during 2021, the Board concluded that it was
appropriate to record the GBP43.4m adjustment in the period ending
31 December 2021 as a charge to the income statement. As disclosed
in Note 3 this charge has been treated as an adjusting item,
consistent with the treatment adopted in respect of the P&H
contract in the prior year.
The A465 Heads of the Valley road contract was entered into in
2015 for the Welsh Government. In 2020, an arbitration decided that
Costain was responsible for design information for a specific
retaining wall and that the additional building cost associated
with the wall was not a compensation event under the contract. As a
consequence of the decision, at 30 June 2020, the Group adjusted
the revenue recognised based on the level of cash received to that
date and reflected a write down of the GBP45.4m contract asset. The
Group continued to fulfil its obligations under the contract, which
was completed during the current year. The final costs to complete
were lower than forecast at the end of 2020 and a profit of GBP8.4m
is recognised in the year. 2020 adjusted Group revenue includes
GBP18.0m of revenue on the A465 contract.
The ASF South contract was in respect of works undertaken for
Highways England that were completed in 2016. Following an
extensive contract review in 2020, the Group took a one-off charge
of GBP5.0m to close out this legacy contract in the 2020
results.
Year ended 31 Other
December 2021 Adjusted P&H A465 ASF South items Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue before
contract adjustments 1,178.6 - - - - 1,178.6
Contract adjustments - (43.4) - - - (43.4)
----------------------- ----------- -------- -------- ----------- -------- -----------
Group revenue 1,178.6 (43.4) - - - 1,135.2
----------------------- ----------- -------- -------- ----------- -------- -----------
Cost of sales (1,099.2) (4.2) 8.4 - - (1,095.0)
----------------------- ----------- -------- -------- ----------- -------- -----------
Gross profit/(loss) 79.4 (47.6) 8.4 - - 40.2
Administrative
expenses before
other items (49.3) - - - - (49.3)
Other items - - - - (0.4) (0.4)
----------------------- ----------- -------- -------- ----------- -------- -----------
Administrative
expenses (49.3) - - - (0.4) (49.7)
Group operating
profit/(loss) 30.1 (47.6) 8.4 - (0.4) (9.5)
----------- -------- -------- ----------- --------
Share of results - - - - - -
of
joint ventures
and
associates
----------------------- ----------- -------- -------- ----------- -------- -----------
Profit/(loss)
from
operations 30.1 (47.6) 8.4 - (0.4) (9.5)
----------------------- ----------- -------- -------- ----------- -------- -----------
Net finance expense (3.8) - - - - (3.8)
----------------------- ----------- -------- -------- ----------- -------- -----------
Profit/(loss)
before
tax 26.3 (47.6) 8.4 - (0.4) (13.3)
----------------------- ----------- -------- -------- ----------- -------- -----------
Taxation 0.1 9.0 (1.6) - - 7.5
----------------------- ----------- -------- -------- ----------- -------- -----------
Profit/(loss)
for the
period attributable
to
equity holders
of the
parent 26.4 (38.6) 6.8 - (0.4) (5.8)
----------------------- ----------- -------- -------- ----------- -------- -----------
Basic earnings/(loss)
per share 9.6p (2.1)p
----------------------- ----------- -------- -------- ----------- -------- -----------
Year ended 31 Other
December 2020 Adjusted P&H A465 ASF South items Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue before
contract adjustments 1,070.5 - - - - 1,070.5
Contract adjustments - (42.0) (45.4) (4.7) - (92.1)
----------------------- ----------- -------- -------- ----------- -------- -----------
Group revenue 1,070.5 (42.0) (45.4) (4.7) - 978.4
----------------------- ----------- -------- -------- ----------- -------- -----------
Cost of sales (1,019.4) (7.3) - (0.3) - (1,027.0)
----------------------- ----------- -------- -------- ----------- -------- -----------
Gross profit/(loss) 51.1 (49.3) (45.4) (5.0) - (48.6)
Administrative
expenses before
other items (33.1) - - - - (33.1)
Other items - - - - (10.3) (10.3)
----------------------- ----------- -------- -------- ----------- -------- -----------
Administrative
expenses (33.1) - - - (10.3) (43.4)
Group operating
profit/(loss) 18.0 (49.3) (45.4) (5.0) (10.3) (92.0)
----------- -------- -------- ----------- --------
Share of results
of
joint ventures
and
associates 0.2 - - - - 0.2
----------------------- ----------- -------- -------- ----------- -------- -----------
Profit/(loss)
from
operations 18.2 (49.3) (45.4) (5.0) (10.3) (91.8)
----------------------- ----------- -------- -------- ----------- -------- -----------
Net finance expense (4.3) - - - - (4.3)
----------------------- ----------- -------- -------- ----------- -------- -----------
Profit/(loss)
before
tax 13.9 (49.3) (45.4) (5.0) (10.3) (96.1)
----------------------- ----------- -------- -------- ----------- -------- -----------
Taxation (1.5) 9.4 8.6 1.0 0.6 18.1
----------------------- ----------- -------- -------- ----------- -------- -----------
Profit/(loss)
for the
period attributable
to
equity holders
of the
parent 12.4 (39.9) (36.8) (4.0) (9.7) (78.0)
----------------------- ----------- -------- -------- ----------- -------- -----------
Basic earnings/(loss)
per share 5.8p (36.7)p
----------------------- ----------- -------- -------- ----------- -------- -----------
4. OPERATING SEGMENTS
The Group has two core business segments: Transportation and
Natural Resources. The core segments are strategic business units
with separate management and have different core customers or offer
different services. This information is provided to the Chief
Executive who is the chief operating decision maker. The segments
are discussed in the Strategic Report section of these financial
statements.
The Group evaluates segment performance on the basis of profit
or loss from operations before interest and tax expense before and
after other items and contract adjustments. The segment results
that are reported to the Chief Executive include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis. Other items are allocated to the operating
segments where appropriate, but otherwise are viewed as Central
items.
2021 Natural Central
Resources Transportation costs Total
GBPm GBPm GBPm GBPm
Segment revenue
Adjusted revenue 314.4 864.2 - 1,178.6
Contract adjustments (43.4) - - (43.4)
----------- ----------------- -------- --------
Group revenue 271.0 864.2 - 1,135.2
----------- ----------------- -------- --------
Segment profit/(loss)
Adjusted operating profit (2.6) 41.4 (8.7) 30.1
Contract adjustments (47.6) 8.4 - (39.2)
----------- ----------------- -------- --------
Operating loss before other
items (50.2) 49.8 (8.7) (9.1)
Share of results of joint - - - -
ventures and associates
----------- ----------------- -------- --------
Profit/(loss) from operations
before other items (50.2) 49.8 (8.7) (9.1)
Other items:
Amortisation of acquired intangible
assets (0.4) - - (0.4)
Profit/(loss) from operations (50.6) 49.8 (8.7) (9.5)
----------- ----------------- -------- --------
Net finance expense (3.8)
----------- ----------------- -------- --------
Loss before tax (13.3)
-------------------------------------- ----------- ----------------- -------- --------
2020 Natural Central
Resources Transportation Alcaidesa costs Total
GBPm GBPm GBPm GBPm GBPm
Segment revenue
Adjusted revenue 345.1 724.2 1.2 - 1,070.5
Contract adjustments (42.0) (50.1) - - (92.1)
----------- ----------------- ------------ -------- --------
Group revenue 303.1 674.1 1.2 - 978.4
----------- ----------------- ------------ -------- --------
Segment profit/(loss)
Adjusted operating profit 5.7 20.1 (0.1) (7.7) 18.0
Contract adjustments (49.3) (50.4) - - (99.7)
----------- ----------------- ------------ -------- --------
Operating loss before
other items (43.6) (30.3) (0.1) (7.7) (81.7)
Share of results of
joint ventures and associates 0.2 - - - 0.2
----------- ----------------- ------------ -------- --------
Loss from operations
before other items (43.4) (30.3) (0.1) (7.7) (81.5)
Other items:
Impairment of Alcaidesa
marina - - (0.6) - (0.6)
Impairment of other
investment - - - (0.6) (0.6)
Profit on sales of interests
in joint ventures and
associates 1.6 - - - 1.6
Profit on disposal of
subsidiary undertakings - - 0.4 1.0 1.4
Refinancing advisory
fees - - - (1.2) (1.2)
Pension GMP equalisation
charge - - - (0.9) (0.9)
Amortisation of acquired
intangible assets (0.7) (0.3) - - (1.0)
Impairment of goodwill (9.0) - - - (9.0)
Loss from operations (51.5) (30.6) (0.3) (9.4) (91.8)
----------- ----------------- ------------ -------- --------
Net finance expense (4.3)
----------- ----------------- ------------ -------- --------
Loss before tax (96.1)
-------------------------------- ----------- ----------------- ------------ -------- --------
5. NET FINANCE EXPENSE
GBPm 2021 2020
Interest income from bank deposits 0.1 0.5
Interest income on loans to related parties - 0.1
Interest income on the net assets of the
defined benefit pension scheme - 0.2
------ ------
Finance income 0.1 0.8
------ ------
Interest payable on interest bearing bank
loans, borrowings and other similar charges (3.0) (4.1)
Interest expense on lease liabilities (0.9) (1.0)
Finance expense (3.9) (5.1)
------
Net finance expense (3.8) (4.3)
---------------------------------------------- ------ ------
Other similar charges includes arrangement and commitment fees
payable. Interest income on loans to related parties relates to
shareholder loan interest receivable from investments in equity
accounted joint ventures and associates.
6. TAXATION
GBPm 2021 2020
On loss for the year
UK corporation tax at 19.0% (2020: 19.0%) - (1.9)
Adjustment in respect of prior years 0.1 3.0
------ ------
Current tax credit for the year 0.1 1.1
------ ------
Deferred tax credit for the current year 8.4 19.7
Adjustment in respect of prior years (1.0) (2.7)
Deferred tax credit for the year 7.4 17.0
------
Tax credit in the consolidated income statement 7.5 18.1
------------------------------------------------- ------ ------
GBPm
2021 2020
Tax reconciliation
Loss before tax (13.3) (96.1)
------- -------
Taxation at 19.0% (2020: 19.0%) 2.5 18.3
Amounts qualifying for tax relief and disallowed
expenses (0.3) (1.3)
Tax decrease from other tax effects - 0.6
Rate adjustment relating to deferred taxation
and overseas profits and losses 6.2 0.2
Adjustments in respect of prior years (0.9) 0.3
------- -------
Tax credit in the consolidated income statement 7.5 18.1
-------------------------------------------------- ------- -------
7. LOSS PER SHARE
The calculation of earnings per share is based on a loss of
GBP5.8m (2020: loss GBP78.0m) and the number of shares set out
below.
2021 2020
Number Number
(millions) (millions)
Weighted average number of ordinary shares
in issue for basic earnings per share calculation 274.9 212.8
Dilutive potential ordinary shares arising
from employee share schemes 5.1 2.9
----------- -----------
Weighted average number of ordinary shares
in issue for diluted earnings per share
calculation 280.0 215.7
---------------------------------------------------- ----------- -----------
8. DIVIDS
No dividends were paid or proposed in respect of the year ended
31 December 2021.
9. INTANGIBLE ASSETS
Customer Other acquired
Goodwill relationships intangibles Other intangibles Total
GBPm GBPm GBPm GBPm GBPm
Cost
At 1 January 2020 54.1 15.4 9.7 10.8 90.0
Additions - - - 3.6 3.6
-------------------------- --------- --------------- --------------- ------------------ ------
At 31 December
2020 54.1 15.4 9.7 14.4 93.6
-------------------------- --------- --------------- --------------- ------------------ ------
At 1 January 2021 54.1 15.4 9.7 14.4 93.6
Additions - - - 1.5 1.5
-------------------------- --------- --------------- --------------- ------------------ ------
At 31 December
2021 54.1 15.4 9.7 15.9 95.1
-------------------------- --------- --------------- --------------- ------------------ ------
Accumulated amortisation
At 1 January 2020 - 14.3 9.4 7.3 31.0
Charge in year - 0.7 0.3 0.5 1.5
Impairment 9.0 - - - 9.0
-------------------------- --------- --------------- --------------- ------------------ ------
At 31 December
2020 9.0 15.0 9.7 7.8 41.5
-------------------------- --------- --------------- --------------- ------------------ ------
At 1 January 2021 9.0 15.0 9.7 7.8 41.5
Charge in year - 0.4 - 0.7 1.1
At 31 December
2021 9.0 15.4 9.7 8.5 42.6
--------- --------------- --------------- ------------------
Net book value
At 31 December
2021 45.1 - - 7.4 52.5
-------------------------- --------- --------------- --------------- ------------------ ------
At 31 December
2020 45.1 0.4 - 6.6 52.1
-------------------------- --------- --------------- --------------- ------------------ ------
At 1 January 2020 54.1 1.1 0.3 3.5 59.0
-------------------------- --------- --------------- --------------- ------------------ ------
Goodwill has been allocated to the applicable cash generating
units of the transportation segment (GBP15.5 million (2020: GBP15.5
million)) and the natural resources segment (GBP29.6 million (2020:
GBP29.6 million)).
As described in note 2, the Group reviews the value of goodwill
and in the absence of any identified impairment risks, tests are
based on internal value in use calculations of the cash generating
unit (CGU). The key assumptions for these calculations are:
operating margins, discount rates and growth rates.
Discount rates have been estimated based on pre-tax rates that
reflect current market assessments of the Group's weighted average
cost of capital and the risks specific to the CGU. The rate used to
discount the forecast cash flows for the Transportation CGU was
13.2% and for the Natural Resources CGU was 14.3%. In 2020, the
discount rates used for the two CGUs were Transportation 12.4% and
Natural Resources 12.5%.
10. PROPERTY, PLANT AND EQUIPMENT
Right-of-use assets
------------------------
Vehicles,
Land & Plant & Land & plant &
Buildings Equipment Buildings equipment Total
GBPm GBPm GBPm GBPm GBPm
----------- ----------- ----------- ----------- -------
Cost
At 1 January 2020 12.5 32.3 19.5 21.2 85.5
Currency movements 0.8 0.3 - - 1.1
Additions - 0.5 1.2 19.1 20.8
Disposal of subsidiary
undertakings (12.5) (4.0) - - (16.5)
Disposals (0.2) (2.1) (0.2) (10.0) (12.5)
----------- ----------- ----------- ----------- -------
At 31 December 2020 0.6 27.0 20.5 30.3 78.4
----------- ----------- ----------- ----------- -------
At 1 January 2021 0.6 27.0 20.5 30.3 78.4
Additions - 0.7 1.0 17.0 18.7
Disposals - (0.7) (7.4) (17.9) (26.0)
----------- ----------- ----------- ----------- -------
At 31 December 2021 0.6 27.0 14.1 29.4 71.1
----------- ----------- ----------- ----------- -------
Accumulated depreciation
At 1 January 2020 9.5 20.8 4.3 6.8 41.4
Currency movements 0.6 0.1 - - 0.7
Charge in year - 2.7 4.3 8.0 15.0
Impairment 0.6 - - - 0.6
Disposal of subsidiary
undertakings (10.0) (1.9) - - (11.9)
Disposals (0.1) (1.9) (0.2) (5.1) (7.3)
----------- ----------- ----------- ----------- -------
At 31 December 2020 0.6 19.8 8.4 9.7 38.5
----------- ----------- ----------- ----------- -------
At 1 January 2021 0.6 19.8 8.4 9.7 38.5
Charge in year - 2.5 3.3 7.1 12.9
Disposals - (0.7) (5.6) (6.0) (12.3)
----------- ----------- ----------- ----------- -------
At 31 December 2021 0.6 21.6 6.1 10.8 39.1
----------- ----------- ----------- ----------- -------
Net book value
At 31 December 2021 - 5.4 8.0 18.6 32.0
----------- ----------- ----------- ----------- -------
At 31 December 2020 - 7.2 12.1 20.6 39.9
----------- ----------- ----------- ----------- -------
At 1 January 2020 3.0 11.5 15.2 14.4 44.1
-------------------------- ----------- ----------- ----------- ----------- -------
11. CASH AND CASH EQUIVALENTS
Cash and cash equivalents are analysed below and include the
Group's share of cash held by joint operations of GBP58.1m (2020:
GBP61.1m).
2021 2020
GBPm GBPm
Cash and cash equivalents 159.4 150.9
Borrowings - current (7.4) (7.2)
Borrowings - non-current (32.0) (39.6)
------- -------
Net cash 120.0 104.1
--------------------------- ------- -------
The borrowings of GBP39.4m are net of arrangement fees of
GBP0.6m.
12. PENSIONS
A defined benefit pension scheme is operated in the UK and a
number of defined contribution pension schemes are in place in the
UK. Contributions are paid by subsidiary undertakings and, to the
defined contribution schemes, by employees. The total pension
charge in the income statement was GBP11.7m comprising GBP11.7m
included in operating costs and GBPnil interest income included in
net finance expense (2020: GBP12.7m, comprising GBP12.9m in
operating costs less GBP0.2m interest income included in net
finance expense).
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 as at 31 March
2019 and this was updated to 31 December 2021 by a qualified
independent actuary. At 31 December 2021, there were 2,875 retirees
and 2,629 deferred members. The weighted average duration of the
obligations is 16.3 years.
2021 2020 2019
GBPm GBPm GBPm
-------- -------- --------
Present value of defined benefit
obligations (837.5) (886.5) (812.1)
Fair value of scheme assets 904.6 880.9 817.0
-------- -------- --------
Recognised asset/(liability) for
defined benefit obligations 67.1 (5.6) 4.9
---------------------------------- -------- -------- --------
Movements in present value of defined benefit obligations
2021 2020
GBPm GBPm
At 1 January 886.5 812.1
Past service cost - GMP equalisation charge - 0.9
Interest cost 11.7 16.3
Remeasurements - demographic assumptions (5.4) (2.9)
Remeasurements - financial assumptions (16.1) 99.0
Remeasurements - experience adjustments (6.5) (4.6)
Benefits paid (32.7) (34.3)
------- -------
At 31 December 837.5 886.5
--------------------------------------------- ------- -------
Movements in fair value of scheme assets
2021 2020
GBPm GBPm
At 1 January 880.9 817.0
Interest income 11.7 16.5
Remeasurements - return on assets 34.6 71.5
Contributions by employer 10.4 10.6
Administrative expenses (0.3) (0.4)
Benefits paid (32.7) (34.3)
------- -------
At 31 December 904.6 880.9
----------------------------------- ------- -------
Expense recognised in the income statement
2021 2020
GBPm GBPm
Administrative expenses paid by the pension
scheme (0.3) (0.4)
Administrative expenses paid directly by
the Group (1.0) (1.7)
GMP equalisation charge - (0.9)
Interest income on the net assets/liabilities
of the defined benefit pension scheme - 0.2
------ ------
(1.3) (2.8)
----------------------------------------------- ------ ------
Fair value of scheme assets
2021 2020
GBPm GBPm
Global equities 137.2 125.0
Multi-asset growth funds 133.7 118.4
Multi-credit fund 118.1 139.8
LDI plus collateral 494.6 421.4
PFI Investments - 44.7
Property 4.4 15.7
Cash 16.6 15.9
------ ------
904.6 880.9
-------------------------- ------ ------
Principal actuarial assumption (expressed as weighted
averages)
2021 2020
% %
Discount rate 1.80 1.35
Future pension increases 3.25 2.85
Inflation assumption 3.40 2.95
-------------------------- ----- -----
Weighted average life expectancy from age 65 as per mortality
tables used to determine benefits at 31 December 2021 and 31
December 2020 is:
2021 2020
Male Female Male Female
(years) (years) (years) (years)
------------------------ -------- -------- -------- --------
Currently aged 65 22.1 24.0 22.3 24.1
Non-retirees currently
aged 45 23.1 25.3 23.3 25.3
------------------------ -------- -------- -------- --------
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 liability Pension
cost
GBPm GBPm
Increase discount rate by 0.25%, decreases
pension liability and reduces
pension cost by 33.1 0.6
Decrease inflation, pension increases by
0.25%, decreases pension liability
and reduces pension cost by 28.6 0.5
Increase life expectancy by one year, increases
pension liability and
increases pension cost by 39.0 0.7
As highlighted in the table above, the defined benefit scheme
exposes the Group to actuarial risks such as longevity, interest
rate, inflation and investment risks. The LDI portfolio is designed
to respond to changes in gilt yields in a similar way to a fixed
proportion of the liabilities. With the LDI portfolio, if gilt
yields fall, the value of the investments will rise to help
partially match the increase in the trustee valuation of the
liabilities arising from a fall in the gilt yield based discount
rate. Similarly, if gilt yields rise, the value of the matching
asset portfolio will fall, as will the valuation of the liabilities
because of an increase in the discount rate. The leverage within
the LDI portfolio means the equivalent of 95 per cent of the value
of the assets is sensitive to changes in interest rates and
inflation and this mitigates the equivalent movement in the
liabilities on the scheme as a whole.
In accordance with the pension regulations, a triennial
actuarial review of the Costain defined benefit pension scheme was
carried out as at 31 March 2019. In March 2020, the valuation and
an updated deficit recovery plan were agreed with the scheme
Trustee resulting in cash contributions of GBP10.2m for each year
commencing 1 April 2020 (increasing annually with inflation) until
the deficit is cleared, which would be in 2029 on the basis of the
assumptions made in the valuation and agreed recovery plan.
In addition, as previously implemented, the Group will continue
to make an additional contribution so that the total deficit
contributions match the total dividend amount paid by the Company
each year. Any additional payments in this regard would have the
effect of reducing the recovery period in the agreed plan. The
Group will also pay the expenses of administration in the next
financial year.
Any surplus of deficit contributions to the Costain Pension
Scheme would be recoverable by way of a refund, as the Group has
the unconditional right to any surplus once all the obligations of
the Scheme have been settled. Accordingly, the Group does not
expect to have to make provision for these additional contributions
arising from this agreement in future accounts.
Defined contribution schemes
Several defined contribution pensions are operated. The total
expense relating to these plans was GBP10.4m (2020: GBP9.9m).
13. SHARE CAPITAL
2021 2020
------------------------------ -------------------------- ----------------------
Nominal
Number Nominal Number value
(millions) value GBPm (millions) GBPm
------------------------------ ------------ ------------ ------------ --------
Issued share capital
Shares in issue at beginning
of year - ordinary shares
of 50p each, fully paid 275.0 137.5 108.3 54.1
Issued in year (see below) - - 166.7 83.4
------------------------------ ------------ ------------ ------------ --------
Shares in issue at end of
year - ordinary shares of
50p each, fully paid 275.0 137.5 275.0 137.5
------------------------------ ------------ ------------ ------------ --------
The Company's issued share capital comprised 274,949,741
ordinary shares of 50 pence each as at 31 December 2021. The
increase in issued share capital in 2020 reflects the Firm Placing
and Placing and Open Offer undertaken by Costain in May 2020 and
described in Costain's results for FY20.
All shares rank pari passu regarding entitlement to capital and
dividends.
14. EVENTS AFTER THE REPORTING DATE
As per notes 2 and 3 we reached a full and final settlement
regarding the Peterborough & Huntingdon contract with a cash
payment of GBP43.4m after the year-end.
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END
FR SSSEEAEESESD
(END) Dow Jones Newswires
March 09, 2022 02:00 ET (07:00 GMT)
Costain (LSE:COST)
過去 株価チャート
から 6 2024 まで 7 2024
Costain (LSE:COST)
過去 株価チャート
から 7 2023 まで 7 2024
