TIDMCOST
RNS Number : 6654J
Costain Group PLC
25 August 2021
Costain Group PLC
('Costain' or 'the Group' or 'the Company')
INTERIM RESULTS
RESULTS FOR THE HALF YEARED 30 JUNE 2021
Costain, the smart infrastructure solutions company, announces
its results for the half-year ended 30 June 2021.
Highlights
-- Improving profitability. Operating profit(2) of GBP11.5m
(HY20: GBP5.7m), in line with the Board's expectations
-- Operating effectively with contracts delivering to plan
-- Continued momentum with GBP334.3m of new work secured and
clear bidding discipline and risk management in place
-- High level of tendering activity reflecting the significant market opportunity
-- Positive cash generation and strong cash position. Net cash
of GBP113.0m, up from GBP102.9m at year end
-- Broadening our decarbonisation expertise across Transportation, Water and Energy
-- On course to deliver full year results in line with our expectations
Financial Summary HY21 HY20 FY20
GBPm GBPm GBPm
--------------------------------- ------ -------- --------
Group revenue
-adjusted (1) 556.8 547.3 1,070.5
-statutory reported 556.8 459.9 978.4
Operating profit/(loss)
-adjusted(2) 11.5 5.7 18.0
-statutory reported 11.2 (90.4) (92.0)
Profit/(loss) before tax
-adjusted(2) 9.4 3.8 13.9
-statutory reported 9.1 (92.3) (96.1)
Net cash balance(3) 113.0 140.9 102.9
--------------------------------- ------ -------- --------
Basic earnings/(loss) per share
-adjusted(2) 2.8p 2.1p 5.8p
-statutory reported 3.5p (49.9)p (36.7)p
1. HY20 before revenue impact of significant contract provision
adjustments of GBP87.4m (FY20: GBP92.1m) (see financial statements
note 3).
2. Before net other items of GBP0.3m (HY20: GBP1.4m and
significant contract provision adjustments of GBP94.7m, FY20:
GBP10.3m and significant contract adjustments of GBP99.7m) (see
financial statements note 3).
3. Net cash balance is cash and cash equivalents less
interest-bearing loans and borrowings (before arrangement fees of
GBP1.0m in HY21).
Alex Vaughan, chief executive officer, commented:
"We are pleased to report an improved level of profitability and
a strong cash position, demonstrating the focus on trading
performance and cash generation across the business.
"We continue to be successful in winning new contracts, building
on last year's strong platform and making the most of the
significant market opportunities. Our clients across all our chosen
markets are continuing to progress their investment plans and to
prioritise investment to meet their needs for decarbonisation,
digitisation, levelling up and performance improvement.
"We are busy bidding for new work across all of our markets,
combining Costain's core strengths and our broader service offering
in line with our strategy. Importantly, we are being selective in
our approach to tendering, focussing on bidding discipline and risk
management.
"We have good visibility on the completion of contracts for the
remainder of this year which gives us confidence in delivering full
year results in line with our expectations."
Enquiries:
Costain Tel: 01628 842 444
Alex Vaughan, Chief executive officer
Helen Willis, Chief financial officer
MHP Communications Tel: 020 3128 8771
Tim Rowntree Costain@mhpc.com
Peter Hewer
Robert Collett-Creedy
There will be a live online presentation for analysts today at
09:45. To register your attendance please contact
costain@mhpc.com
An on-demand webcast will be available via
www.costain.com/investors from 11:30 today.
Notes to Editors
Costain helps to improve people's lives with integrated, leading
edge, smart infrastructure solutions across the UK's
transportation, water, energy and defence markets. We help our
clients improve their business performance by increasing capacity,
improving customer service, safeguarding security, enhancing
resilience, decarbonising and delivering increased efficiency. Our
vision is to be the UK's leading smart infrastructure solutions
company. We will achieve this by focusing on blue chip clients
whose major spending plans are underpinned by strategic national
needs, regulatory commitments, legislation or essential performance
requirements. We offer our clients leading edge solutions that are
digitally optimised through the following five services which cover
the whole lifecycle of their assets: future-shaping strategic
consultancy; consultancy and advisory; digital technology
solutions; asset optimisation and complex programme delivery. Our
culture and values underpin everything we do.
For more information visit www.costain.com
H1 2021 OVERVIEW
Summary
The financial and operating performance during the first half of
2021 was in line with our expectations, reflecting management's
focus on operating performance and cash generation. We have good
visibility on the completion of contracts for the remainder of this
year, which gives us confidence in delivering full year results in
line with our expectations.
On an adjusted basis, revenue was GBP556.8m and operating profit
was GBP11.5m, up from GBP5.7m in the first half of 2020 and in line
with our expectations. Adjusted earnings per share for the period
was 2.8p. We finished the period with a net cash balance of
GBP113.0m, up from GBP102.9m at the end of last year.
Our clients, across our markets, are continuing to progress with
the committed levels of investment set out in their five-year
investment plans. During the period, we were pleased to secure a
number of new contracts with a total value of GBP334.3m,
principally from our sizable long term framework agreements. This
takes the total order book to GBP4.0bn as at 30 June 2021, broadly
similar to 31 December 2020, and whilst securing good volumes of
new work we are continuing to maintain a disciplined approach to
contract selection. Importantly, all new contracts have been
secured on commercial terms which reflect our improved
profitability and risk management measures. We have also continued
to build positions on our client's major services frameworks which
offer further opportunity moving forwards.
We are seeing the benefits of our integrated offer, with an
increasing number of contracts combining our construction expertise
alongside our consultancy services and digital performance
improvement.
As an example, whilst securing the eight-year Managed Service
Partner contract for United Utilities which supports their
maintenance transformation programme, we have expanded our support
in delivering front end engineering consultancy services in the
development of both future programmes and operational optimisation.
For Network Rail, whilst delivering the new station at Gatwick
Airport, we have also under their Operational Programme Delivery
framework supported further optimisation studies across the wider
network.
Increasingly our focus on meeting the challenges of
decarbonising our environment and exploiting the opportunities of
enhancing performance through digital solutions are creating new
opportunities for us. In energy, we have built strong positions on
three of the UK's four industrial clusters, including leading the
South Wales cluster; and continue to deliver hydrogen and carbon
capture design services. In transportation, we are shaping future
electric roads for the Department of Transport and working with
Highways England on their future digital roads plan.
Our existing contracts are benefitting now from our enhanced
risk management and 'Operational Excellence Model' which is
providing us with greater project delivery assurance, contract
margin performance and cash generation.
Costain is in a strong position with a high volume of secured
long term programmes, robust operational practices, and a positive
market outlook, in particular the UK Government's commitment to
invest in infrastructure to support the levelling up of our
economic activity and decarbonisation of our environment.
Response to COVID-19
We have continued to maintain strong and effective safety
measures, ensuring the effective operation of our business across
every contract. With the government removing its social distancing
measures from 19 July 2021, the business will remain alert to the
continuing challenges and will ensure that we maintain the
necessary safety measures in place on all our contracts both to
keep our teams safe and to maintain our productivity.
People
Highly skilled and experienced people are fundamental to
everything that we do. Our overall employee population has
increased in the first half of the year to over 3,300, including
over 650 people holding professional accreditations at a chartered
or fellowship level (10% year-on-year increase).
We have continued to invest significantly in young people, with
plans to increase our 2021 graduate and apprentice intake to 129,
with 42 new graduates and 87 new apprentices. Additionally, we are
working in partnership with the Prince's Trust to deliver 30 DWP
Kickstart placements, which six young people are currently
benefitting from.
We continue to see our gender pay gap reduce year-on-year as a
direct result of our focus on increasing the diversity of our
workforce. Our efforts were recognised with Costain named as a top
50 employer for women by The Times for the fourth consecutive year
and attaining a Gold Armed Forces Covenant award by the Ministry of
Defence (MOD). Our effort to become more diverse is underpinned by
our inclusive culture and behaviors. We are pleased to have met our
target to train 50 senior leaders as inclusion allies and have
concluded the first cohort of our ethnicity focused reverse
mentoring programme.
Environment, social purpose and governance (ESG)
Climate change is a priority of every one of our clients and for
our government. The Intergovernmental Panel on Climate Change
(IPCC) report issued in August 2021 sets out the stark reality as
to the causes and impact of climate change and the urgency in
avoiding a climate disaster. Recently the Department for Transport
has issued its Transport decarbonisation plan, and Highways England
its Net Zero Plan. We have continued to drive the implementation of
our climate change action plan and are working towards becoming a
net zero carbon business by 2035. In addition, we are playing an
active role in shaping, creating, and developing the solutions for
a green energy future across the transportation, water, and energy
markets.
We intend to report against the four pillars of TCFD (Task Force
on Climate-related Financial Disclosures) in our 2021 annual
report. In preparation, we have commissioned a team to lead on TCFD
compliance and we are undertaking a detailed climate scenario
analysis to inform our performance and disclosure.
Costain is committed to leading on conducting business
responsibly and we have aligned our purpose of improving peoples'
lives to the United Nation's Sustainable Development Goals. Our
focus areas are creating a greener future, working towards being
net zero by 2035, ensuring Costain is a safe, inclusive and great
place to work where everyone can be at their best and enhancing the
value that Costain contributes to society.
The safety of our people and our stakeholders is our number one
priority, and we are pleased to report, in over 15 million hours
worked, there have been only two reportable accidents. Our accident
frequency rate (AFR) of 0.01 represents our best ever safety
performance and is industry leading.
Demonstrating our social value continues to grow in relevance to
our clients, we have worked hard to invest in the communities where
we operate, support the Prince's Trust in coaching and mentoring
disadvantaged young people into employment outcomes, volunteering
over 1,000 working hours to good causes and spending over GBP270m
with SMEs, equating to 39% of our total spend in the first half of
the year.
Board
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.
Outlook
Our clients across all our chosen markets are continuing to
progress their investment plans and to prioritise investment to
meet their needs for decarbonisation, digitisation, levelling up
and performance improvement. We were pleased to secure a number of
new contracts during the first half, with a total value of
GBP334.3m, principally from our sizable long term framework
agreements and to secure further positions on long term investment
frameworks. We have good visibility on the completion of contracts
for the remainder of this year which gives us confidence in
delivering full year results in line with our expectations.
Costain is in a strong position with a high volume of secured
long term programmes and a positive market outlook, in particular
the UK Government's commitment to invest in infrastructure to
support the levelling up of our economic activity and
decarbonisation of our environment.
DIVISIONAL REVIEW
Our strategy has positioned Costain to benefit from our clients'
key investment priorities, with an increasing proportion of new
business being from higher margin services in both consultancy and
digital activities. Our margin improvement strategy also balances
the continuing opportunity to grow our capital delivery activities
where we have a strong competitive advantage.
Transportation
GBPm HY21 Adjusted(1) HY21 Statutory HY20 Adjusted(1) HY20 Statutory FY20 Adjusted(1) FY20 Statutory
Revenue 403.9 403.9 353.1 307.7 724.2 674.1
---------------- ---------------- -------------- ---------------- -------------- ---------------- --------------
Operating
profit/(loss) 15.5 15.5 5.1 (40.4) 20.1 (30.6)
---------------- ---------------- -------------- ---------------- -------------- ---------------- --------------
(13.1)
Margin 3.8% 3.8% 1.4% % 2.8% (4.5) %
---------------- ---------------- -------------- ---------------- -------------- ---------------- --------------
(1) Refer to financial statements notes 3 and 4
The division delivered a strong improvement in margins in the
period, in line with our plans.
The division has a forward order book of GBP3.0bn (FY20:
GBP3.1bn), which includes our High Speed 2 (HS2) S1 and S2
contracts, Highways England Regional Delivery Partnership (RDP) and
also a preferred bidder position on the SMP Alliance.
Pushing the pace on digitisation and innovation to drive better,
faster and greener delivery of infrastructure, we are working
together with key partner SAP and a consortium of industry leading
enterprises (such as Transport for London (TfL), Highways England,
HS2 and Network Rail) called the 'Transport Infrastructure
Efficiency Strategy Living Lab' (TIES Living Lab) to create a
demonstrator for a new cloud-based data platform called the
Intelligent Infrastructure Control Centre (IICC).
Highways
As a strategic partner for Highways England, we opened the A19
Testos scheme to traffic early and within budget in the period. The
A19 project has removed a congestion bottle neck, improved road
user safety and has unlocked the potential for significant regional
growth with better connectivity and capacity. The A19 is one of a
number of schemes in the North East of England that we are
operating from a central Programme Management Office (PMO) and
logistics hub for improved efficiency and reduced carbon footprint.
As part of the regional development partnership (RDP) for the
North, Costain is acting as a delivery integration partner
providing safer, smoother and more reliable journeys through the
following improvement schemes: A1 Birtley to Coal House, A1 Morpeth
to Ellingham, A1 Scotswood to North Brunton and the M60 Simister
Island scheme, all of which are in contract and on programme. We
have also mobilised the A30 RDP scheme in Cornwall and have just
started the statutory consultation phase as delivery integration
partner on the A12 RDP East scheme.
With the A14 scheme successfully opened eight months ahead of
schedule, we are now in the final stages of removing the old
Huntingdon viaduct that was life expired. We have had an extension
to our Area 12 ASC contract into 2022 and continue to maintain and
upgrade the network in Area 14. Working with Highways England
through the SPaTS2 framework, we are supporting the shaping of the
future roads network including programme management of all of
Highways England's route strategy development.
The Smart Motorways Alliance has completed its first year,
successfully achieving annual KPIs. As an alliance member, Costain
holds several key roles across the enterprise including design
surveys. Costain is also responsible to the alliance for delivery
of the M1 J21A-26 upgrade, two schemes on the M62 and the provision
of safety critical operational technology equipment and software.
Costain has recently set up a mock motorway upgrade at RAF
Moreton-in-Marsh in partnership with Highways England to test new
net-zero techniques, materials, and operating technology. Costain's
innovation team has also secured over GBP15m of European and UK
Government funding to sponsor more than fifty Cambridge University
researchers under a future digital roads partnership (Highways
England, Cambridge University and Costain) to accelerate
modularisation, net-zero construction, and fully digital roads to
market.
Rail
In the period, Crossrail Paddington Station has been
successfully handed over to the operator, whilst work continues on
the systems wide delivery to support the successful opening of the
Elizabeth Line in early 2022.
Our activity on HS2, Britain's low carbon, high-capacity
railway, has progressed well through the first half of 2021. Our
Enabling Works contract is nearing completion with successful
handover of the route from Euston out to West Ruislip and the Colne
valley along with the transfer of the future station sites at both
Euston and Old Oak Common. The Phase 1 Main Civils Contract has
completed its mobilisation and is now focused on constructing
shafts and portals in advance of introducing tunnel boring machines
(TBMs) in 2022. Our consulting team remains at the heart of the
employers reference design for Phase 2a Birmingham to Crewe and are
providing expertise on Phase 2b West - Crewe to Manchester - in
preparation for the Hybrid Bill submission to Parliament next
year.
We continue to explore opportunities to grow our account with
Network Rail, with the continued successful delivery of Gatwick
Station Project, work to upgrade the Brighton mainline, as well as
providing a range of consultancy services into the client. We
continue to work with Network Rail on our reliable, solar powered,
wireless, radar-based warning system (Meerkat) and this will be
deployed across the majority of Network Rail's remote level
crossings.
Integrated Transport
With Transport for London (TfL), we have secured an extension to
our work to revitalise the A40 Westway and are currently exploring
a range of opportunities with this client, including digital and
telecommunications. We are also supporting TfL with the review the
condition and potential interventions needed across their highways
asset base.
Costain continue to provide strategic advisory services to the
City of Bradford Metropolitan District Council to assist in the
delivery of their major infrastructure and transportation
programmes. This work is associated with business case assurance,
commercial, cost, programme, and project management.
On Preston Western Distributor Road this complex major scheme is
currently being delivered ahead of schedule, despite the challenges
following Cleveland Bridge going into administration. Fabrication
of the steel element has recommenced and works on the structures
and new highways are progressing with the new bridges over the M55
motorway and Blackpool to Preston railway installed.
The COVID-19 pandemic is having an enormous impact on the global
aviation industry. However, we have continued to engage with our
clients from frameworks and contracts that we won last year
(Manchester Airports Group, Heathrow Airport Limited and British
Airways) and we have secured further work with Gatwick Airport
Storage and Hydrant Company (GASHCo). We have also widened our
focus and offering and have been successful in securing a position
on a new work with the Civil Aviation Authority framework and other
work with Newquay Airport for the G7 Summit and Customer Experience
training at Teesside International. Using our leading-edge hydrogen
capability, we have also secured our first contract looking at
alternative fuels within aviation.
Central government
Costain has continued its growth with a new portfolio of work
with central government and continues to win and deliver important
and influential services to key Government departments that impact
the industry and our markets at the highest level. Working closely
with other departments we continue to identify solutions that can
achieve the net-zero ambitions, deliver on the Build Back Better
commitments, and make infrastructure a more digitally integrated
network that delivers benefits for the UK economy and society. We
are playing a critical role within the infrastructure programme of
the Cabinet Office's Border and Protocol Delivery Group (BPDG) to
ensure UK borders are fully operational in time for the
introduction of customs and biosecurity controls now that the UK
has left the European Union. We continue as a strategic partner to
the Department for Transport to provide technical and commercial
support on highly complex time sensitive and critical projects.
Natural Resources
GBPm HY21 Adjusted(1) HY21 Statutory HY20 Adjusted(1) HY20 Statutory FY20 Adjusted(1) FY20 Statutory
Revenue 152.9 152.9 193.2 151.2 345.1 303.1
---------------- ---------------- -------------- ---------------- -------------- ---------------- --------------
Operating
profit/(loss) 0.4 0.1 4.5 (45.8) 5.7 (51.7)
---------------- ---------------- -------------- ---------------- -------------- ---------------- --------------
(30.3) (17.1)
Margin 0.3% 0.1% 2.3% % 1.7% %
---------------- ---------------- -------------- ---------------- -------------- ---------------- --------------
(1) Refer to financial statements notes 3 and 4
During the first half of the year, we continued to experience
lower volumes of activity in the AMP 7 water programmes as part of
the clients' year 1 adjustments made to counteract the impact of
Covid-19. From April/May this year we have seen these levels
significantly increase as we progress year 2 of our programmes. In
energy we have seen a deferment in the award of new contracts, with
these now having been awarded during the summer period. This had
some impact on our first half people utilisation levels, however in
the second half we are seeing high levels of demand for our
engineering teams. We are therefore confident of material margin
improvement in the second half.
As at 30 June 2021, the division had a forward order book of
GBP1.04bn (FY20: GBP1.09bn), reflecting YTD wins of GBP0.1bn in
2021.
Notable contract wins across the range of our broader services
include direct awards from the MOD as Defence Nuclear Organisation
Portfolio Management Office Partner, whilst continuing to secure
significant volumes through our frameworks including Strategic
Pipeline Alliance for Anglian Water, AMP 7 Southern Water and the
follow-on framework for EDF Generation.
Water
We are focused on delivering a broad range of services to our
clients enabling them to provide outstanding customer service,
protect the environment and respond to Ofwat regulatory performance
targets and efficiency challenges in the period to 2025. We are
delivering some of the largest complex capital delivery projects in
the UK water sector and are delighted to have secured positions
with our broadest ever number of clients in AMP 7.
We are part of the Thames Tideway 'super sewer' project, on
which we are in a joint venture to deliver the east section, which
will clean up the River Thames providing significant environmental
benefits for both the wildlife and residents of London. The project
is now in an exciting phase, with both TBMs progressing well. We
remain on course for overall completion of the project in late
2024. We are embedding digital innovation to drive delivery
efficiencies with a relentless decarbonisation focus underpinning
all aspects of our project execution.
We continue our AMP 7 complex capital delivery programme with
Severn Trent Water, Southern Water and Thames Water, driving
efficient and innovative solutions such as asset optimisation. We
have been appointed as sole maintenance service provider for United
Utilities. Costain will provide overall management and delivery of
United Utilities' larger-scale water and wastewater asset
maintenance activities across its entire network on a responsive
basis throughout the whole day, every day of the year.
We are continuing to deliver alongside Anglian Water in its
Strategic Pipeline Alliance on one of the largest strategic water
infrastructure projects the UK has ever seen, which will provide
long term water resource security for customers while protecting
the environment. Our pivotal role on this transformational 'Project
13' covers complex capital delivery and the provision of integrated
consultancy and digital services such as the development of a
digital twin to optimise the delivery, carbon footprint and
management of this strategic water network.
More broadly, we are continuing to grow our consultancy and
digital services provided across the UK water sector in areas such
as Yorkshire Water's Technical Services Framework and our
client-side project management consultancy support in many of our
contracts including Thames Water and South Staffordshire Water.
Also, in alignment with the UK water sector's focus to achieve
net-zero carbon by 2030, we continue to drive decarbonisation
innovation such as our Hy-Value project collaboration with Welsh
Water and other partners to convert sewage-derived biogas into
hydrogen to provide clean energy to South Wales.
Energy
We continue to drive transformational change in the energy
sector. Our focus on expanding our consultancy services in
decarbonisation, and maximising existing asset performance, has
enabled us to take market leading positions expanding our client
base and securing our reputation as a leading partner in the drive
to net zero. With the pace of the UK energy transition accelerating
and the launch of the government's Hydrogen Strategy fast
approaching, we expect this area to provide significant growth
opportunities in the near term.
We have great talent across the business that has enabled us to
achieve some significant milestones in the first half of 2021,
including the securing of the lead role in the GBP38m South Wales
Industrial Cluster Deployment Project with 13 industrial partners.
As deployment lead, we will work with our partners and clients
including Shell, BP Lightsource and Tata to support investment
decisions that will advance regional hydrogen deployment and
develop carbon capture usage and storage to deliver optimal
solutions for significant carbon reduction.
We are progressing with the Front End Engineering Design (FEED)
of the Acorn Project in St Fergus, Scotland, with the first planned
deployment of carbon capture and storage at scale for our client
Storegga. In the North West for HyNet Industrial Cluster we have
completed a FEED working with Progressive Energy and Essar to
develop a first of a kind hydrogen fuelled CHP plant at the Stanlow
site and have recently secured a first of a kind FEED for the
development of underground hydrogen storage in salt caverns for
Inovyn.
We have also secured a number of FEED contracts to support asset
life extension and optimisation focused on compression and
electrification of critical assets and we have a number of
preferred bidder positions that will move into both detail design
and FEED in the second half of the year.
In April 2021, we mobilised our Cadent Construction Management
Organisation contract taking on 210 new team members to manage the
completion of the Cadent iron mains replacement programme across
the East of England and East Midlands through a 10-year consultancy
contract.
We are performing well on our Sellafield nuclear decommissioning
framework, with a significant number of recent contracts secured in
the first half of 2021. We have also been successful in gaining a
further two year extension to our EDF Project Controls framework
contract where we supply over 110 project controls professionals
across the EDF nuclear fleet on an exclusive basis while also
delivering on other diversified services.
We continue to expand our tendering activity to exploit the many
new opportunities, particularly in supporting our existing and new
clients in developing solutions to the energy transition and
decarbonisation challenges they face, which remain extremely high
and has continued to accelerate into the second half of 2021.
Defence
We have continued to strengthen our market position as a valued
consultant with further key client wins across the defence sector,
to the extent that we are now a key provider at several levels into
the Continuous at Sea Deterrent programme (CASD), working with
defence primes including AWE, Rolls Royce, Cavendish and directly
for the Ministry of Defence via the Crown Commercial Services
framework.
We continue to deliver excellent capability through the
provision of P3M consultancy services across the Babcock fleet as
well as through our delivery partner role at Devonport Royal
Dockyard in partnership with Mott Macdonald. Our programme
management contract for AWE continues to meet performance
expectations, allowing us to secure further opportunities to
support AWE on several other key projects.
OTHER FINANCIAL INFORMATION
Peterborough & Huntingdon Contract
The position as presented at the time of our full year results
remains unchanged. 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 gas compressor project (the "Contract") following a
significant change in scope. The Agreement includes a legal
process, through adjudications, to agree up to GBP80.0m of
identified compensation events, recover costs to date and eliminate
a potential liability to National Grid for completing the
works.
In our 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. The legal process is
ongoing, and all adjudications are expected to be filed by December
2021. Supported by external advice, Costain believes it has a
strong entitlement to retain, as a minimum, the reported position,
with no further cash outflow.
As previously indicated, under the terms of the Agreement, the
cumulative outcome for Costain of these adjudications could range
from an additional cash receipt of up to a maximum of GBP50.0m to a
cash payment (which would not affect Costain's banking
arrangements) of up to a maximum of GBP57.3m. Any such cash
adjustments would be made in the first quarter of 2022.
Net financial expense
Net finance expense amounted to GBP2.1m (HY20: GBP2.0m, FY20:
GBP4.3m). The interest payable on bank overdrafts, loans and other
similar charges was GBP1.8m (HY20: GBP2.0m, FY20: GBP4.1m) and the
interest income from bank deposits and other loans and receivables
amounted to GBPNil (HY20: GBP0.2m, FY20: GBP0.6m). In addition, the
net finance expense includes the interest income on the net
assets/liabilities of the pension scheme of GBPNil (HY20: GBP0.1m
income, FY20: GBP0.2m income) and the interest expense on lease
liabilities of GBP0.3m (HY20: GBP0.3m, FY20: GBP1.0m) under
IFRS16.
Tax
The Group has a tax credit of GBP 0.4m (HY20: GBP17.6m credit,
FY20: GBP18.1m credit) giving an effective tax rate of (3.8) %. The
2021 net tax credit arose primarily from the GBP2.1m 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 underlying effective tax rate was 19.6%
and we expect the effective tax rate to remain close to the
statutory tax rate of 19% until 2023.
Dividend
No interim dividend has been declared. The Board recognises 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.
Debt, cash conversion
The Group had a positive net cash balance of GBP113.0m as at 30
June 2021 (HY20: GBP140.9m, FY20: GBP102.9m) comprising Costain
cash balances of GBP100.0m (HY20: GBP117.8m, FY20: GBP89.8m), cash
held by joint operations of GBP57.0m (HY20: GBP85.1m, FY20:
GBP61.1m) and borrowings of GBP44.0m (before arrangement fees of
GBP1.0m) (HY20: GBP62.0m, FY20: GBP48.0m). During the year, the
Group's average month-end net cash balance was GBP102.9m (HY20:
GBP56.3m, FY20: GBP73.8m).
Contract bonding and banking facilities
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 GBP175.0m 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 GBP44.0m term loan.
In addition, the Group has in place committed and uncommitted
bonding facilities of GBP310.0m. Utilisation of the total bonding
facilities on 30 June 2021 was GBP103.2m (HY20: GBP117.9m, FY20:
GBP112.3m).
Pensions
As at 30 June 2021, the Group's pension scheme surplus in
accordance with IAS 19, was GBP29.0m (HY20: GBP14.9m surplus, FY20:
GBP5.6m liability).
DIRECTORS REPORT
Going concern
In determining the appropriate basis of preparation of the
condensed consolidated interim financial statements for the six
months ended 30 June 2021, the directors are required to consider
whether the Group can continue in operational existence for the
foreseeable future, being a period of at least twelve months from
the date of approval of the interim results. Having undertaken a
rigorous assessment of the financial forecasts, the Board considers
that the Group has adequate resources to remain in operation for
the foreseeable future and, therefore, has adopted the going
concern basis for the preparation of the interim financial
statements.
In assessing the going concern assumptions, the Board reviewed
the base case plans and identified severe but plausible downsides
affecting future profitability, working capital requirements and
cash flow. These include considering the aggregated impact of lower
revenue, lower margins, future contractual issues, higher working
capital requirements and adverse contract settlements. After
applying these downside scenarios, the Board concluded that there
is liquidity headroom in a reasonable worst-case scenario, headroom
on the committed facilities and that there is adequate headroom on
the associated financial covenants.
Principal risks and uncertainties
The Directors consider that the principal risks facing the
Group, including those that would threaten the successful and
timely delivery of its strategic priorities, future performance,
solvency and liquidity, remain substantially unchanged from those
identified on pages 40 to 43 of the Annual Report for the year
ended 31 December 2020 which can be found on the Company's website
at www.costain.com.
On pages 40 and 41 of the Annual Report 2020, we set out the
Group's approach to risk management and on pages 42 and 43, we
define and describe the principal risks that are most relevant to
the Group including controls and key mitigating actions assigned to
each of them. In summary, the Group's principal risks and
uncertainties are as follows: (i) Prevent and effectively manage a
major accident, hazard or incident, (ii) accelerate the deployment
of our higher margin services, (iii) maintain a strong balance
sheet, (iv) secure new work, (v) culture and people, (vi) deliver
projects effectively, (vii) manage the legacy defined benefit
pension scheme, (viii) ensure that our technology is robust, our
systems are secure and our data protected and (ix) anticipate and
respond to changes in client circumstances.
The Board reviews the status of all principal and emerging risks
with a notable potential impact at Group level throughout the year.
Additionally, the Board and Audit Committee carry out focused risk
reviews. These reviews include an analysis of principal risks,
together with the controls, monitoring and assurance processes
established to mitigate those risks to acceptable levels.
Responsibility statement
Each of the Directors of Costain Group PLC confirms, to the best
of his or her knowledge, that:
-- the condensed set of financial statements has been prepared
in accordance with UK adopted International Accounting Standard 34
'Interim Financial Reporting;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the Group during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The Directors of Costain Group PLC are listed in the Annual
Report and Accounts for the year ended 31 December 2020, with the
exception of the changes in the period which are listed [above].
Information on the current directors responsible for providing this
statement is also maintained on the Company's website at
www.costain.com.
On behalf of the Board
Dr Paul Golby CBE - Chairman
Alex Vaughan - Chief Executive
25 August 2021
25 August 2021
Cautionary 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.
INTERIM RESULTS
Results for the half year ended 30 June 2021
Condensed consolidated income statement
Half-year ended 2021 2020 2020
30 June, Half-year Half-year Year
year ended 31 December unaudited unaudited audited
--------------------------- --------------------------- --------------------------- -------------------------------
Before Before Before
other Other other Other other Other
items items Total items items Total items items Total
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------- ------- -------- -------- ------- -------- ---------- ------- ----------
Continuing
operations
Group revenue 556.8 - 556.8 459.9 - 459.9 978.4 - 978.4
-------------------- ----- -------- ------- -------- -------- ------- -------- ---------- ------- ----------
Cost of sales (525.8) - (525.8) (531.0) - (531.0) (1,027.0) - (1,027.0)
Gross profit/(loss) 3 31.0 - 31.0 (71.1) - (71.1) (48.6) - (48.6)
Administrative
expenses before
other items (19.5) - (19.5) (17.9) - (17.9) (33.1) - (33.1)
Impairment
of Alcaidesa
marina 11 - - - - (0.6) (0.6) - (0.6) (0.6)
Impairment
of other
investment - - - - (0.6) (0.6) - (0.6) (0.6)
Profit on sales
of interests
in joint ventures
and associates - - - - - - - 1.6 1.6
Profit/(loss)
on disposal
of subsidiary
undertakings - - - - 1.0 1.0 - 1.4 1.4
Refinancing
advisory fees - - - - (0.7) (0.7) - (1.2) (1.2)
Pension GMP
equalisation
charge - - - - - - - (0.9) (0.9)
Amortisation
of acquired
intangible
assets 9 - (0.3) (0.3) - (0.5) (0.5) - (1.0) (1.0)
Impairment
of goodwill - - - - - - - (9.0) (9.0)
-------------------- ----- -------- ------- -------- -------- ------- -------- ---------- ------- ----------
Administrative
expenses (19.5) (0.3) (19.8) (17.9) (1.4) (19.3) (33.1) (10.3) (43.4)
-------------------- ----- -------- ------- -------- -------- ------- -------- ---------- ------- ----------
Group operating
profit/(loss) 3 11.5 (0.3) 11.2 (89.0) (1.4) (90.4) (81.7) (10.3) (92.0)
Share of results
of joint ventures
and associates - - - 0.1 - 0.1 0.2 - 0.2
-------------------- ----- -------- ------- -------- -------- ------- -------- ---------- ------- ----------
Profit/(loss)
from operations 4 11.5 (0.3) 11.2 (88.9) (1.4) (90.3) (81.5) (10.3) (91.8)
Finance income - - - 0.3 - 0.3 0.8 - 0.8
Finance expense (2.1) - (2.1) (2.3) - (2.3) (5.1) - (5.1)
-------------------- ----- -------- ------- -------- -------- ------- -------- ---------- ------- ----------
Net finance
expense 5 (2.1) - (2.1) (2.0) - (2.0) (4.3) - (4.3)
-------------------- ----- -------- ------- -------- -------- ------- -------- ---------- ------- ----------
Profit/(loss)
before tax 9.4 (0.3) 9.1 (90.9) (1.4) (92.3) (85.8) (10.3) (96.1)
Taxation 6 (1.7) 2.1 0.4 17.4 0.2 17.6 17.5 0.6 18.1
-------------------- ----- -------- ------- -------- -------- ------- -------- ---------- ------- ----------
Profit/(loss)
for the period
attributable
to equity holders
of the parent 7.7 1.8 9.5 (73.5) (1.2) (74.7) (68.3) (9.7) (78.0)
-------------------- ----- -------- ------- -------- -------- ------- -------- ---------- ------- ----------
Earnings/(loss)
per share
Basic 7 3.5p (49.9)p (36.7)p
Diluted 7 3.4p (49.9)p (36.7)p
During the period, previous period and previous year the impact
of business disposals was not material and, therefore, all results
are classified as arising from continuing operations.
Condensed consolidated statement of comprehensive income and
expense
Half-year ended 30 June, 2021 2020 2020
year ended 31 December Half-year Half-year Year
unaudited unaudited audited
GBPm GBPm GBPm
--------------------------------------------- ----------- ----------- ---------
Profit/(loss) for the period 9.5 (74.7) (78.0)
--------------------------------------------- ----------- ----------- ---------
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation
of foreign operations 0.2 0.4 0.2
Exchange differences on translation
transferred to the income statement - (1.4) (1.2)
Net investment hedge
-- Effective portion of changes
in fair value during period - (0.3) 0.1
-- Net changes in fair value transferred
to the income statement - 0.9 0.4
Cash flow hedges:
-- Effective portion of changes
in fair value during period - (0.1) (0.3)
-- Net changes in fair value transferred
to the income statement 0.3 0.4 0.5
Total items that may be reclassified
subsequently to profit or loss 0.5 (0.1) (0.3)
--------------------------------------------- ----------- ----------- ---------
Items that will not be reclassified
to profit or loss:
Remeasurement of retirement benefit
asset/(obligations) 29.5 4.6 (19.9)
Tax recognised on remeasurement
of retirement benefit (asset)/obligations (5.5) (0.9) 3.8
Total items that will not be reclassified
to profit or loss 24.0 3.7 (16.1)
--------------------------------------------- ----------- ----------- ---------
Other comprehensive income/(expense)
for the period 24.5 3.6 (16.4)
--------------------------------------------- ----------- ----------- ---------
Total comprehensive income/(expense)
for the period attributable to equity
holders of the parent 34.0 (71.1) (94.4)
--------------------------------------------- ----------- ----------- ---------
Condensed consolidated statement of changes in equity
Share Share Translation Hedging Merger Retained Total
capital premium reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- ------------ --------- --------- ---------- --------
At 1 January 2020 -
audited 54.1 16.4 1.1 (0.5) - 86.6 157.7
Loss for the period - - - - - (74.7) (74.7)
Other comprehensive
(expense)/income - - (0.4) 0.3 - 3.7 3.6
Shares purchased to
satisfy employee share
schemes - - - - - (0.2) (0.2)
Equity-settled share-based
payments - - - - - 0.6 0.6
Capital raise (note
13) 83.4 - - - 9.1 - 92.5
Transfer - - - - (9.1) 9.1 -
------------------------------ --------- --------- ------------ --------- --------- ---------- --------
At 30 June 2020 - unaudited 137.5 16.4 0.7 (0.2) - 25.1 179.5
Loss for the period - - - - - (3.3) (3.3)
Other comprehensive
expense - - (0.1) (0.1) - (19.8) (20.0)
Equity-settled share-based
payments - - - - - 0.3 0.3
At 31 December 2020
- audited 137.5 16.4 0.6 (0.3) - 2.3 156.5
Profit for the period - - - - - 9.5 9.5
Other comprehensive
income - - 0.2 0.3 - 24.0 24.5
Shares purchased to
satisfy employee share
schemes - - - - - (0.1) (0.1)
Equity-settled share-based
payments - - - - - 0.4 0.4
At 30 June 2021 - unaudited 137.5 16.4 0.8 - - 36.1 190.8
----------------------------- --------- --------- ------------ --------- --------- ---------- ----------
Condensed consolidated statement of financial position
Half-year as at 30 June, 2021 2020 2020
year as at 31 December Half-year Half-year Year
unaudited unaudited audited
GBPm GBPm GBPm
--------------------------------------- --- ----------- ----------- ---------
Assets
Non-current assets
Intangible assets 9 52.2 59.4 52.1
Property, plant and equipment 9 44.0 40.3 39.9
Equity accounted investments 0.4 2.4 0.4
Retirement benefit asset 10 29.0 14.9 -
Trade and other receivables 4.8 2.8 3.5
Deferred tax 18.2 21.1 23.6
--------------------------------------- --- ----------- ----------- ---------
Total non-current assets 148.6 140.9 119.5
--------------------------------------- --- ----------- ----------- ---------
Current assets
Inventories 0.4 1.2 0.6
Trade and other receivables 221.7 228.7 218.7
Assets held for sale 11 - 4.1 -
Taxation - 0.8 0.2
Cash and cash equivalents 157.0 202.9 150.9
--------------------------------------- --- ----------- ----------- ---------
Total current assets 379.1 437.7 370.4
--------------------------------------- --- ----------- ----------- ---------
Total assets 527.7 578.6 489.9
--------------------------------------- --- ----------- ----------- ---------
Liabilities
Non-current liabilities
Retirement benefit obligations - - 5.6
Other payables 1.4 0.7 1.1
Interest-bearing loans and borrowings 35.8 44.0 39.6
Lease liabilities 26.3 19.7 20.8
Total non-current liabilities 63.5 64.4 67.1
--------------------------------------- --- ----------- ----------- ---------
Current liabilities
Trade and other payables 252.5 303.4 246.0
Current tax liabilities 1.0 - -
Interest-bearing loans and borrowings 7.2 18.0 7.2
Lease liabilities 12.0 12.6 12.5
Provisions for other liabilities
and charges 0.7 0.7 0.6
--------------------------------------- --- ----------- ----------- ---------
Total current liabilities 273.4 334.7 266.3
--------------------------------------- --- ----------- ----------- ---------
Total liabilities 336.9 399.1 333.4
--------------------------------------- --- ----------- ----------- ---------
Net assets 190.8 179.5 156.5
--------------------------------------- --- ----------- ----------- ---------
Equity
Share capital 13 137.5 137.5 137.5
Share premium 16.4 16.4 16.4
Translation reserve 0.8 0.7 0.6
Hedging reserve - (0.2) (0.3)
Retained earnings 36.1 25.1 2.3
--------------------------------------- --- ----------- ----------- ---------
Total equity 190.8 179.5 156.5
--------------------------------------- --- ----------- ----------- ---------
Condensed consolidated cash flow statement
Half-year ended 30 June, 2021 2020 2020
year ended 31 December Half-year Half-year Year
unaudited unaudited audited
GBPm GBPm GBPm
-------------------------------------- ----------- ----------- ---------
Cash flows from operating activities
Profit/(loss) for the period 9.5 (74.7) (78.0)
Adjustments for:
Share of results of joint ventures
and associates - (0.1) (0.2)
Finance income - (0.3) (0.8)
Finance expense 2.1 2.3 5.1
Taxation (0.4) (17.6) (18.1)
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)
Profit on disposal of subsidiary
undertakings - (1.0) (1.4)
Pension GMP equalisation charge - - 0.9
Depreciation of property, plant
and equipment 7.8 8.0 15.0
Amortisation and impairment of
intangible assets 0.5 0.5 10.5
Shares purchased to satisfy employee
share schemes (0.1) (0.2) (0.2)
Share-based payments expense 0.4 0.6 0.9
Cash from/(used by) operations
before changes in working capital
and provisions 19.8 (81.3) (66.7)
Decrease/(increase) in inventories 0.2 (0.2) 0.7
(Increase)/decrease in receivables (4.0) 18.0 25.5
Increase/(decrease) in payables 7.6 56.5 (0.1)
Movement in provisions and employee
benefits (5.0) (5.3) (10.4)
--------------------------------------- ----------- ----------- ---------
Cash from/(used by) operations 18.6 (12.3) (51.0)
Interest received - 0.1 0.8
Interest paid (1.5) (2.3) (5.1)
Taxation received/(paid) 0.1 4.7 8.3
--------------------------------------- ----------- ----------- ---------
Net cash from/(used by) operating
activities 17.2 (9.8) (47.0)
Cash flows from investing activities
Dividends received from joint
ventures and associates - 0.2 0.2
Additions to property, plant
and equipment (0.1) (0.3) (0.5)
Additions to intangible assets (0.6) (0.9) (3.6)
Proceeds of disposals of property,
plant and equipment and intangible
assets - 0.1 0.3
Proceeds of sales of interests
in joint ventures and associates - - 3.7
Proceeds of sales of subsidiary
undertakings - 1.0 4.6
Net cash (used by)/from investing
activities (0.7) 0.1 4.7
Cash flows from financing activities
Issue of ordinary share capital - 92.5 92.5
Repayments of lease liabilities (6.7) (6.5) (12.1)
Drawdown of loans - 91.0 71.5
Repayment of loans (3.8) (145.0) (139.0)
--------------------------------------- ----------- ----------- ---------
Net cash (used by)/from financing
activities (10.5) 32.0 12.9
Net increase/(decrease) in cash
and cash equivalents 6.0 22.3 (29.4)
Cash and cash equivalents at
beginning of the period 150.9 180.9 180.9
Effect of foreign exchange rate
changes 0.1 (0.3) (0.6)
Cash and cash equivalents at
end of the period 157.0 202.9 150.9
--------------------------------------- ----------- ----------- ---------
Notes to the interim financial statements
1. General information
Costain Group PLC (the Company) is a public limited company
incorporated in the United Kingdom. The address of its registered
office and principal place of business is Costain House, Vanwall
Business Park, Maidenhead, Berkshire SL6 4UB.
The condensed consolidated interim financial statements are
presented in pounds sterling, rounded to the nearest hundred
thousand. The comparative figures for the financial year ended 31
December 2020 are not the Company's full statutory accounts for
that financial year. Those accounts have been reported on by the
Company's auditors and delivered to the Registrar of Companies. The
report of the auditors was unqualified and did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
2. Statement of compliance
These condensed consolidated financial statements for the half
year ended 30 June 2021 have been prepared in accordance with UK
adopted International Accounting Standard 34 'Interim financial
reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the UK's Financial Conduct Authority (FCA).
The accounting policies, presentation and methods of computation
adopted in the preparation of these condensed consolidated interim
financial statements are consistent with those followed in the
preparation of the Group's Annual Financial Statements for the year
ended 31 December 2020, which were prepared in accordance with
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
They do not include all the information required for full annual
financial statements and should be read in conjunction with the
Consolidated Financial Statements of the Group as at and for the
year ended 31 December 2020.
Impact of standards issued but not yet effective, and therefore
not applied in these financial statements
The directors do not currently anticipate that the adoption of
any standard or interpretation that has been issued but is not yet
effective will have a material impact on the financial statements
of the Group in future periods.
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. Its business activities and the factors likely
to affect its future development, performance and position are set
out in the Chief executive officer's review. To meet its day-to-day
working capital requirements, it uses cash balances provided from
shareholders' capital and retained earnings and its borrowing
facilities. As part of its contracting operations, the Group may be
required to provide performance and other bonds. It satisfies these
requirements by utilising its bonding facilities from banks and
surety companies. These facilities have financial covenants that
are tested quarterly.
In determining the appropriate basis of preparation of the
condensed consolidated interim financial statements for the six
months ended 30 June 2021, the directors are required to consider
whether the Group can continue in operational existence for the
foreseeable future, being a period of at least twelve months from
the date of approval of the interim results. Having undertaken a
rigorous assessment of the financial forecasts, the Board considers
that the Group has adequate resources to remain in operation for
the foreseeable future and, therefore, has adopted the going
concern basis for the preparation of the interim financial
statements.
In assessing the going concern assumptions, the Board reviewed
the base case plans and identified severe but plausible downsides
affecting future profitability, working capital requirements and
cash flow. These include considering the aggregated impact of lower
revenue, lower margins, future contractual issues, higher working
capital requirements and adverse contract settlements. After
applying these downside scenarios, the Board concluded that there
is liquidity headroom in a reasonable worst-case scenario, headroom
on the committed facilities and that there is adequate headroom on
the associated financial covenants.
Alternative performance measures
Income statement presentation - Other items
In order to aid understanding of the performance of the Group,
certain amounts are shown in the consolidated income statement in a
separate column headed "Other items". Items are included under this
heading where the Board considers them to be of a one-off unusual
nature or related to the accounting treatment of acquisitions. The
results present profit before other items, which is a non-GAAP
measure.
The Group also has non-GAAP adjusted performance measures to
report adjusted profit and earnings per share measures, which
exclude other items and in 2020 the significant contract
adjustments, and an adjusted revenue measure, that excludes the
revenue element of the contract adjustments (all as shown in note
3).
Principal risks, uncertainties and significant areas of
judgement and estimation
The Directors consider that the significant areas of judgement
made by management that have significant effect on the Group's
performance and estimates with a significant risk of material
adjustment in the second half of the year are unchanged from those
identified on pages 137 to 138 of the Annual Report for the year
ended 31 December 2020. The only exception is the estimation of
income tax liabilities which is determined in the Interim Financial
Statements using the estimated average annual effective income tax
rate applied to the pre-tax income of the interim period.
On pages 40 to 41 of the Annual Report 2020, we set out the
Group's approach to risk management and on pages 42 to 43, we
define the principal risks that are most relevant to the Group.
These risks are described in detail and have controls and
mitigating actions assigned to each of them.
In our view the principal risks remain substantially unchanged
from those indicated in the Annual Report 2020.
The Board approved the unaudited interim financial statements on
25 August 2021.
3. Reconciliation of reported Group operating (loss)/profit to
Adjusted Group operating profit
Adjusted revenue, operating profit and earnings per share are
being used as non-GAAP performance measurements. These measurements
were introduced in 2020 and exclude the impact of significant
one-off changes in the accounting treatments 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 of GBP0.3m (2020: half year GBP1.4m,
full year GBP10.3m). The revenue adjustment represents the reversal
of the contract asset recorded in the statement of financial
position immediately prior to the write down. The Board considers
the adjusted measures better reflect the underlying trading
performance of the Group.
The Peterborough & Huntingdon contract charge followed the
agreement with National Grid to mutually terminate the contract in
June 2020. At the date of termination, the Group had a contract
asset of GBP42.0m associated with this contract and this was
forecast to increase to GBP49.3m at the end of the works.
Reflecting the commercial resolution process incorporated in the
termination agreement and in accordance with IFRS 15, a one-off
charge to the income statement of GBP49.3m was reflected to adjust
the revenue recognised to the level of cash received and to cover
the cost of remaining works. 2020 adjusted revenue includes
GBP32.3m of revenue on Peterborough & Huntingdon up to the
termination date.
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, the Group adjusted the revenue
recognised based on the level of cash received to date and
reflected a write down of the GBP45.4m contract asset at 30 June
2020. The Group continues to fulfil its obligations under the
contract, which will be completed during the current year. 2020
adjusted 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 in December 2020 to close out this legacy contract.
Half-year ended 30 June Before Other
2021 Adjusted P&H A465 ASF other items items Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- --------- ----- ------- ------ ------------- ------- --------
Revenue before contract
adjustments 556.8 - - - 556.8 - 556.8
Contract adjustments - - - - - - -
------------------------------- --------- ----- ------- ------ ------------- ------- --------
Group revenue 556.8 - - - 556.8 - 556.8
------------------------------- --------- ----- ------- ------ ------------- ------- --------
Cost of sales (525.8) - - - (525.8) - (525.8)
------------------------------- --------- ----- ------- ------ ------------- ------- --------
Gross profit 31.0 - - - 31.0 - 31.0
Administrative expenses
before other items (19.5) - - - (19.5) - (19.5)
Other items - - - - - (0.3) (0.3)
------------------------------- --------- ----- ------- ------ ------------- ------- --------
Administrative expenses (19.5) - - - (19.5) (0.3) (19.8)
Group operating profit/(loss) 11.5 - - - 11.5 (0.3) 11.2
------------------------------- --------- ----- ------- ------ ------------- ------- --------
Share of results of joint
ventures and associates - - - - - - -
------------------------------- --------- ----- ------- ------ ------------- ------- --------
Profit/(loss) from operations 11.5 - - - 11.5 (0.3) 11.2
------------------------------- --------- ----- ------- ------ ------------- ------- --------
Net finance expense (2.1) - - - (2.1) - (2.1)
------------------------------- --------- ----- ------- ------ ------------- ------- --------
Profit/(loss) before tax 9.4 - - - 9.4 (0.3) 9.1
------------------------------- --------- ----- ------- ------ ------------- ------- --------
Taxation (1.7) - - - (1.7) 2.1 0.4
------------------------------- --------- ----- ------- ------ ------------- ------- --------
Profit/(loss) for the
period attributable to
equity holders of the
parent 7.7 - - - 7.7 1.8 9.5
------------------------------- --------- ----- ------- ------ ------------- ------- --------
Basic earnings per share 2.8p 3.5p
Half-year ended 30 June A465 ASF Before Other
2020 Adjusted P&H other items items Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- --------- ------- --------- ------ ------------- ------- --------
Revenue before contract
adjustments 547.3 - - - 547.3 - 547.3
Contract adjustments - (42.0) (45.4) - (87.4) - (87.4)
------------------------------- --------- ------- --------- ------ ------------- ------- --------
Group revenue 547.3 (42.0) (45.4) - 459.9 - 459.9
------------------------------- --------- ------- --------- ------ ------------- ------- --------
Cost of sales (523.7) (7.3) - - (531.0) - (531.0)
------------------------------- --------- ------- --------- ------ ------------- ------- --------
Gross profit/(loss) 23.6 (49.3) (45.4) - (71.1) - (71.1)
Administrative expenses
before other items (17.9) - - - (17.9) - (17.9)
Other items - - - - - (1.4) (1.4)
------------------------------- --------- ------- --------- ------ ------------- ------- --------
Administrative expenses (17.9) - - - (17.9) (1.4) (19.3)
Group operating profit/(loss) 5.7 (49.3) (45.4) - (89.0) (1.4) (90.4)
------------------------------- --------- ------- --------- ------ ------------- ------- --------
Share of results of joint
ventures and associates 0.1 - - - 0.1 - 0.1
------------------------------- --------- ------- --------- ------ ------------- ------- --------
Profit/(loss) from operations 5.8 (49.3) (45.4) - (88.9) (1.4) (90.3)
------------------------------- --------- ------- --------- ------ ------------- ------- --------
Net finance expense (2.0) - - - (2.0) - (2.0)
------------------------------- --------- ------- --------- ------ ------------- ------- --------
Profit/(loss) before tax 3.8 (49.3) (45.4) - (90.9) (1.4) (92.3)
------------------------------- --------- ------- --------- ------ ------------- ------- --------
Taxation (0.7) 9.4 8.7 - 17.4 0.2 17.6
------------------------------- --------- ------- --------- ------ ------------- ------- --------
Profit/(loss) for the
period attributable to
equity holders of the
parent 3.1 (39.9) (36.7) - (73.5) (1.2) (74.7)
------------------------------- --------- ------- --------- ------ ------------- ------- --------
Basic earnings/(loss)
per share 2.1p (49.9)p
Year ended 31 December Before Other
2020 Adjusted P&H A465 ASF other items items Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ---------- ------- ------- ------ ------------- ------- ----------
Revenue before contract
adjustments 1,070.5 - - - 1,070.5 - 1,070.5
Contract adjustments - (42.0) (45.4) (4.7) (92.1) - (92.1)
------------------------------- ---------- ------- ------- ------ ------------- ------- ----------
Group revenue 1,070.5 (42.0) (45.4) (4.7) 978.4 - 978.4
------------------------------- ---------- ------- ------- ------ ------------- ------- ----------
Cost of sales (1,019.5) (7.3) - (0.3) (1,027.0) - (1,027.0)
------------------------------- ---------- ------- ------- ------ ------------- ------- ----------
Gross profit/(loss) 51.1 (49.3) (45.4) (5.0) (48.6) - (48.6)
Administrative expenses
before other items (33.1) - - - (33.1) - (33.1)
Other items - - - - - (10.3) (10.3)
------------------------------- ---------- ------- ------- ------ ------------- ------- ----------
Administrative expenses (33.1) - - - (33.1) (10.3) (43.4)
Group operating profit
/(loss) 18.0 (49.3) (45.4) (5.0) (81.7) (10.3) (92.0)
------------------------------- ---------- ------- ------- ------ ------------- ------- ----------
Share of results of joint
ventures and associates 0.2 - - - 0.2 - 0.2
------------------------------- ---------- ------- ------- ------ ------------- ------- ----------
Profit/(loss) from operations 18.2 (49.3) (45.4) (5.0) (81.5) (10.3) (91.8)
------------------------------- ---------- ------- ------- ------ ------------- ------- ----------
Net finance expense (4.3) - - - (4.3) - (4.3)
------------------------------- ---------- ------- ------- ------ ------------- ------- ----------
Profit/(loss) before tax 13.9 (49.3) (45.4) (5.0) (85.8) (10.3) (96.1)
------------------------------- ---------- ------- ------- ------ ------------- ------- ----------
Taxation (1.5) 9.4 8.6 1.0 17.5 0.6 18.1
------------------------------- ---------- ------- ------- ------ ------------- ------- ----------
Profit/(loss) for the
period attributable to
equity holders of the
parent 12.4 (39.9) (36.8) (4.0) (68.3) (9.7) (78.0)
------------------------------- ---------- ------- ------- ------ ------------- ------- ----------
Basic earnings/(loss)
per share 5.8p (36.7)p
4. Business segment information
The Group has two core business segments: Natural Resources and
Transportation (plus in 2020 up to the date of disposal, Alcaidesa
in Spain). 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.
Half-year ended 30 June Central
2021 Natural Resources Transportation costs Total
GBPm GBPm GBPm GBPm
---------------------------------- ------------------ --------------- -------- ------
Segment revenue
Revenue before contract
adjustments 152.9 403.9 - 556.8
Contract adjustments - - - -
---------------------------------- ------------------ --------------- -------- ------
Group revenue 152.9 403.9 - 556.8
---------------------------------- ------------------ --------------- -------- ------
Segment profit
Adjusted operating profit/(loss) 0.4 15.5 (4.4) 11.5
Contract adjustments - - - -
---------------------------------- ------------------ --------------- -------- ------
Operating profit/(loss)
before other items 0.4 15.5 (4.4) 11.5
Other items:
Amortisation of acquired
intangible assets (0.3) - - (0.3)
---------------------------------- ------------------ --------------- -------- ------
Operating profit/(loss) 0.1 15.5 (4.4) 11.2
---------------------------------- ------------------ --------------- -------- ------
Share of results of JVs
and associates - - - -
------
Loss from operations 0.1 15.5 (4.4) 11.2
------
Net finance expense (2.1)
---------------------------------- ------------------ --------------- -------- ------
Profit before tax 9.1
---------------------------------- ------------------ --------------- -------- ------
Half-year ended 30 June Natural Central
2020 Resources Transportation Alcaidesa costs Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----------- --------------- ---------- -------- -------
Segment revenue
Revenue before contract
adjustments 193.2 353.1 1.0 - 547.3
Contract adjustments (42.0) (45.4) - - (87.4)
-------------------------------- ----------- --------------- ---------- -------- -------
Group revenue 151.2 307.7 1.0 - 459.9
Segment profit/(loss)
Adjusted operating profit 4.5 5.1 (0.1) (3.8) 5.7
Contract adjustments (49.3) (45.4) - - (94.7)
-------------------------------- ----------- --------------- ---------- -------- -------
Operating loss before
other items (44.8) (40.3) (0.1) (3.8) (89.0)
Other items:
Impairment of Alcaidesa
marina - - (0.6) - (0.6)
Impairment of other investment (0.6) - - - (0.6)
Profit on disposal of
subsidiary undertaking - - - 1.0 1.0
Refinancing advisory
fees - - - (0.7) (0.7)
Amortisation of acquired
intangible assets (0.4) (0.1) - - (0.5)
-------------------------------- ----------- --------------- ---------- -------- -------
Operating loss (45.8) (40.4) (0.7) (3.5) (90.4)
Share of results of JVs
and associates 0.1 - - - 0.1
-------------------------------- ----------- --------------- ---------- -------- -------
Loss from operations (45.7) (40.4) (0.7) (3.5) (90.3)
-------
Net finance expense (2.0)
-------------------------------- ----------- --------------- ---------- -------- -------
Loss before tax (92.3)
-------------------------------- ----------- --------------- ---------- -------- -------
Year ended 31 December Natural Central
2020 Resources Transportation Alcaidesa costs Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----------- --------------- ---------- -------- --------
Segment revenue
Revenue before contract
adjustments 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)
Other items:
Impairment of Alcaidesa
marina - - (0.6) - (0.6)
Impairment of other investment - - - (0.6) (0.6)
Profit on sales of interests
in JVs 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)
-------------------------------- ----------- --------------- ---------- -------- --------
Operating loss (51.7) (30.6) (0.3) (9.4) (92.0)
Share of results of JVs
and associates 0.2 - - - 0.2
-------------------------------- ----------- --------------- ---------- -------- --------
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
Half-year ended 30 June, 2021 2020 2020
year ended 31 December Half-year Half-year Year
GBPm GBPm GBPm
---------------------------------------- ----------- ----------- ------
Interest income from bank deposits - 0.1 0.5
Interest income from loans to related
parties - 0.1 0.1
Interest income on the net assets
of the defined benefit pension scheme - 0.1 0.2
---------------------------------------- ----------- ----------- ------
Finance income - 0.3 0.8
---------------------------------------- ----------- ----------- ------
Interest payable on interest bearing
bank loans, borrowings and other
similar charges (1.8) (2.0) (4.1)
Interest expense on lease liabilities (0.3) (0.3) (1.0)
---------------------------------------- ----------- ----------- ------
Finance expense (2.1) (2.3) (5.1)
---------------------------------------- ----------- ----------- ------
Net finance expense (2.1) (2.0) (4.3)
---------------------------------------- ----------- ----------- ------
6. Taxation
Half-year ended 30 June, 2021 2020 2020
year ended 31 December Half-year Half-year Year
GBPm GBPm GBPm
--------------------------------------- ----------- ----------- ------
Current tax - - 1.1
Deferred tax 0.4 17.6 17.0
--------------------------------------- ----------- ----------- ------
Tax (expense)/credit in the condensed
consolidated income statement 0.4 17.6 18.1
--------------------------------------- ----------- ----------- ------
Effective tax rate (3.8%) 19.0% 18.8%
The Group has a tax credit of GBP0.4m (2020 half-year: GBP17.6m
credit, 2020 year: GBP18.1m credit) giving an effective tax rate
after other Items of (3.8)%. The 2021 net tax credit arose
primarily from the GBP2.1m 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, included in other
items.
The tax charged before other items in the period has been
calculated by applying the effective rate of tax of 19.6%, which is
expected to apply to the Group for the period ending 31 December
2021, as required by IAS 34 Interim financial reporting. We expect
to remain close to the statutory tax rate of 19% until 2023.
Provisions are held on the balance sheet in respect of uncertain
tax positions where management believes it is probable that future
payments of tax will be required. At the balance sheet date, these
provisions were not material for the Group.
7. Earnings/(loss) per share
The calculation of earnings/(loss) per share is based on profit
for the period of GBP9.5m (2020 half-year: loss GBP74.7mm, 2020
year: loss GBP78.0m) and the number of shares set out below:
2021 2020 2020
Half-year Half-year Year
Number Number Number
(millions) (millions) (millions)
------------------------------------------- ----------- ----------- -----------
Weighted average number of ordinary
shares in issue
for basic earnings per share calculation 274.9 150.0 212.8
Dilutive potential ordinary shares
arising from employee share schemes 5.4 0.2 2.9
------------------------------------------- ----------- ----------- -----------
Weighted average number of ordinary
shares in issue for fully diluted
earnings per share calculation 280.3 150.2 215.7
------------------------------------------- ----------- ----------- -----------
8. Dividends
The Company has declared and paid no dividends in the period
(2020 half-year GBPNil, 2020 year GBPNil).
9. Non-current assets
Intangible assets Acquired intangible Other intangible Total intangible
assets assets assets
GBPm GBPm GBPm
----------------------- -------------------- ----------------- -----------------
Cost
At 1 January 2020 79.2 10.8 90.0
Additions - 0.9 0.9
At 30 June 2020 79.2 11.7 90.9
----------------------- -------------------- ----------------- -----------------
At 1 July 2020 79.2 11.7 90.9
Additions - 2.7 2.7
At 31 December 2020 79.2 14.4 93.6
----------------------- -------------------- ----------------- -----------------
At 1 January 2021 79.2 14.4 93.6
Additions - 0.6 0.6
At 30 June 2021 79.2 15.0 94.2
----------------------- -------------------- ----------------- -----------------
Amortisation
At 1 January 2020 23.7 7.3 31.0
Charge for the period 0.5 - 0.5
At 30 June 2020 24.2 7.3 31.5
----------------------- -------------------- ----------------- -----------------
At 1 July 2020 24.2 7.3 31.5
Charge for the period 0.5 0.5 1.0
Impairment in year 9.0 - 9.0
At 31 December 2020 33.7 7.8 41.5
----------------------- -------------------- ----------------- -----------------
At 1 January 2021 33.7 7.8 41.5
Charge for the period 0.3 0.2 0.5
At 30 June 2021 34.0 8.0 42.0
----------------------- -------------------- ----------------- -----------------
Net book value
----------------------- -------------------- ----------------- -----------------
At 30 June 2021 45.2 7.0 52.2
----------------------- -------------------- ----------------- -----------------
At 31 December 2020 45.5 6.6 52.1
----------------------- -------------------- ----------------- -----------------
At 30 June 2020 55.0 4.4 59.4
----------------------- -------------------- ----------------- -----------------
At 1 January 2020 55.5 3.5 59.0
----------------------- -------------------- ----------------- -----------------
Right-of-use assets
Tangible assets Land and Plant and Land and Plant and Total tangible
buildings equipment buildings equipment fixed assets
GBPm GBPm GBPm GBPm GBPm
------------------------ ----------- ----------- ----------- ----------- ---------------
Cost
At 1 January 2020 12.5 32.3 19.5 21.2 85.5
Currency movements 0.9 0.3 - - 1.2
Additions - 0.3 0.3 11.7 12.3
Transfer to current
asset held for sale (11.8) (4.7) - - (16.5)
Disposals - (1.8) (0.2) (5.2) (7.2)
------------------------ ----------- ----------- ----------- ----------- ---------------
At 30 June 2020 1.6 26.4 19.6 27.7 75.3
------------------------ ----------- ----------- ----------- ----------- ---------------
At 1 July 2020 1.6 26.4 19.6 27.7 75.3
Currency movements (0.1) - - - (0.1)
Additions - 0.2 0.9 7.4 8.5
Disposal of subsidiary
undertakings (0.7) - - - (0.7)
Adjustments - 0.7 - - 0.7
Disposals (0.2) (0.3) - (4.8) (5.3)
------------------------ ----------- ----------- ----------- ----------- ---------------
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 - 0.1 1.2 16.1 17.4
Disposals - (0.2) (1.4) (7.3) (8.9)
------------------------ ----------- ----------- ----------- ----------- ---------------
At 30 June 2021 0.6 26.9 20.3 39.1 86.9
------------------------ ----------- ----------- ----------- ----------- ---------------
Depreciation
At 1 January 2020 9.5 20.8 4.3 6.8 41.4
Currency movements 0.6 0.2 - - 0.8
Charge for the period 0.1 1.4 2.4 4.1 8.0
Impairment 1.2 - - - 1.2
Transfer to current
asset held for sale (9.9) (2.6) - - (12.5)
Disposals - (1.7) (0.1) (2.1) (3.9)
------------------------ ----------- ----------- ----------- ----------- ---------------
At 30 June 2020 1.5 18.1 6.6 8.8 35.0
------------------------ ----------- ----------- ----------- ----------- ---------------
At 1 July 2020 1.5 18.1 6.6 8.8 35.0
Currency movements - (0.1) - - (0.1)
Charge for the period (0.1) 1.3 1.9 3.9 7.0
Impairment (0.6) - - - (0.6)
Disposal of subsidiary
undertakings (0.1) - - - (0.1)
Adjustments - 0.7 - - 0.7
Disposals (0.1) (0.2) (0.1) (3.0) (3.4)
------------------------ ----------- ----------- ----------- ----------- ---------------
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 for the period - 1.3 2.2 4.3 7.8
Disposals - (0.2) (0.7) (2.5) (3.4)
------------------------ ----------- ----------- ----------- ----------- ---------------
At 30 June 2021 0.6 20.9 9.9 11.5 42.9
------------------------ ----------- ----------- ----------- ----------- ---------------
Net book value
------------------------ ----------- ----------- ----------- ----------- ---------------
At 30 June 2021 - 6.0 10.4 27.6 44.0
------------------------ ----------- ----------- ----------- ----------- ---------------
At 31 December 2020 - 7.2 12.1 20.6 39.9
------------------------ ----------- ----------- ----------- ----------- ---------------
At 30 June 2020 0.1 8.3 13.0 18.9 40.3
------------------------ ----------- ----------- ----------- ----------- ---------------
At 1 January 2020 3.0 11.5 15.2 14.4 44.1
------------------------ ----------- ----------- ----------- ----------- ---------------
10. Retirement benefit obligations
2021 2020 2020
Half-year Half-year Year
GBPm GBPm GBPm
---------------------------------- ----------- ----------- --------
Present value of defined benefit
obligations (830.0) (845.3) (886.5)
Fair value of scheme assets 859.0 860.2 880.9
---------------------------------- ----------- ----------- --------
Recognised asset/(liability) for
defined benefit obligations 29.0 14.9 (5.6)
---------------------------------- ----------- ----------- --------
The Group has recognised an asset on the basis that 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.
Movement in present value of defined 2021 2020 2020
benefit obligations: Half-year Half-year Year
GBPm GBPm GBPm
------------------------------------------ ----------- ----------- -------
Opening balance 886.5 812.1 812.1
Past service cost - GMP equalisation
charge - - 0.9
Interest cost 5.9 8.2 16.3
Remeasurements - demographic assumptions (1.8) (10.9) (2.9)
Remeasurements - financial assumptions (44.8) 56.1 99.0
Remeasurements - experience assumptions - (2.4) (4.6)
Benefits paid (15.8) (17.8) (34.3)
------------------------------------------ ----------- ----------- -------
Closing balance 830.0 845.3 886.5
------------------------------------------ ----------- ----------- -------
Movement in fair value of scheme 2021 2020 2020
assets: Half-year Half-year Year
GBPm GBPm GBPm
----------------------------------- ----------- ----------- -------
Opening balance 880.9 817.0 817.0
Interest income 5.9 8.3 16.5
Remeasurements - return on assets (17.1) 47.4 71.5
Contributions by employer 5.2 5.4 10.6
Administrative expenses (0.1) (0.1) (0.4)
Benefits paid (15.8) (17.8) (34.3)
----------------------------------- ----------- ----------- -------
Closing balance 859.0 860.2 880.9
----------------------------------- ----------- ----------- -------
The following actuarial assumptions have been used in the IAS 19
valuations of the Group's defined benefit pension scheme, which was
closed to new members in May 2005 and to future accrual in
September 2009 (expressed as weighted averages):
2021 2020 2020
Half-year Half-year Year
% % %
-------------------------- ----------- ----------- ------
Discount rate 1.85 1.55 1.35
Future pension increases 3.05 2.75 2.85
Inflation assumption 3.20 2.85 2.95
-------------------------- ----------- ----------- ------
The discount rate, inflation and pension increase and the
mortality assumptions have a significant effect on the amounts
reported. Changes in these assumptions would have the following
effects on the Group's defined benefit scheme:
Pension
liability
GBPm
------------------------------------------------- -----------
Increase discount rate by 0.25%, decreases
pension liability by 34.0
Decrease inflation (and pension increases)
by 0.25%, decreases pension liability by 29.0
Increase life expectancy by one year, increases
pension liability by 36.8
------------------------------------------------- -----------
11. Assets classified as held for sale
The amount presented in the condensed consolidation statement of
financial position as Assets held for sale in 2020 related to the
subsidiary undertaking, Alcaidesa Servicios S.A.U., which held the
Spanish marina concession. The company was sold on 6 August 2020.
The net proceeds of sale in 2020 were GBP0.6m below the carrying
value, which resulted in an impairment charge in the 2020 income
statement.
12. Financial instruments
The Group's centralised function manages financial risk,
principally arising from liquidity and funding risks and movements
in foreign currency rates, in accordance with policies agreed by
the Directors. At 30 June 2021, the Group had foreign currency
contracts designated as cash flow hedges of future transactions
over a period of up to 3 years as summarised below. In the prior
periods, the Group also had interest rate swaps that fixed the
effective LIBOR rate of GBP60.0m of borrowings to June 2021. The
carrying value represents the fair value of the contract; the cash
flows represent the pounds sterling commitments. There were no
ineffective hedges at the reporting date.
2021 2020 2020
Half-year Half-year Year
Carrying Cash Carrying Cash Carrying Cash
amount flows amount flows amount flows
Foreign exchange GBPm GBPm GBPm GBPm GBPm GBPm
contracts
------------------ --------- ------- --------- ------- --------- -------
Purchases 0.1 0.8 0.2 (8.9) - (4.5)
Sales - - - (1.4) - 1.1
------------------ --------- ------- --------- ------- --------- -------
0.1 0.8 0.2 (10.3) - (3.4)
Interest rate
swaps - - (0.4) (0.6) (0.4) (0.2)
------------------ --------- ------- --------- ------- --------- -------
0.1 0.8 (0.2) (10.9) (0.4) (3.6)
------------------ --------- ------- --------- ------- --------- -------
13. Share capital
Issued capital as at 30 June 2021 amounted to GBP137.5m (2020
half-year: GBP137.5m, 2020 year: GBP137.5m) and comprised
274,949,741 ordinary shares of 50 pence each.
14. Related party transactions
Details of transactions between the Group and The Costain
Pension Scheme are included in note 10. There have been no other
changes in the nature of related party transactions since the last
annual financial statements as at and for the year ended 31
December 2020.
15. Contingent liabilities
Group bank borrowing facilities and bank and surety bond
facilities are supported by cross guarantees given by the Company
and participating companies in the Group.
There are contingent liabilities in respect of performance bonds
and other undertakings entered into and legal claims arising, all
in the ordinary course of business. None are anticipated to result
in material liabilities except as already provided.
Independent review report to Costain Group PLC
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Costain Group PLC's condensed consolidated
interim financial statements (the "interim financial statements")
in the Interim Results of Costain Group PLC for the 6 month period
ended 30 June 2021 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed consolidated statement of financial position as at 30 June 2021;
-- the Condensed consolidated income statement and Condensed
consolidated statement of comprehensive income and expense for the
period then ended;
-- the Condensed consolidated cash flow statement for the period then ended;
-- the Condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Results for the
half-year ended 30 June 2021 of Costain Group PLC have been
prepared in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Results for the half-year ended 30 June 2021, including the
interim financial statements, is the responsibility of, and has
been approved by the directors. The directors are responsible for
preparing the Results for the half-year ended 30 June 2021 in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Results for the half-year ended 30 June
2021 based on our review. This report, including the conclusion,
has been prepared for and only for the company for the purpose of
complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and
for no other purpose. We do not, in giving this conclusion, accept
or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Results for
the half-year ended 30 June 2021 and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
25 August 2021
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END
IR DKQBQOBKDKFB
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August 25, 2021 02:00 ET (06:00 GMT)
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