THIS
ANNOUNCEMENT CONTAINS INFORMATION WITHIN THE MEANING OF ARTICLE 7
OF THE MARKET ABUSE REGULATION (EU) 596/2014 AS IT FORMS PART
OF UK LAW BY VIRTUE
OF
THE
EUROPEAN UNION (WITHDRAWAL) ACT 2018
21 AUGUST 2024
COSTAIN GROUP
PLC
("Costain", the "Group", or
the "Company")
RESULTS FOR THE SIX MONTHS
ENDED 30 JUNE 2024 ("H1 24")
|
Continued strong financial performance,
with a £4.3bn forward work position.
|
·
Revenue of £639.3m (H1 23:
£664.4m) reflecting growth in Natural
Resources, and as expected, a small reduction in
Transportation.
·
Adjusted operating
profit1 up 8.7% to £16.3m (H1 23: £15.0m)
reflecting an increased operating margin in Transportation
and increasing volumes and margin in Natural Resources. Reported
operating profit was £13.9m (H1 23: £7.6m).
·
On course to meet margin
targets of 3.5% and 4.5% during FY 24 and FY 25
respectively. Adjusted operating
margin1 increase of 20bps to 2.5% (H1 23: 2.3%), with
margin growth in both divisions.
·
Adjusted EPS up 27.3%
to 5.6p (H1
23: 4.4p) driven by interest earned on stronger
net cash position and adjusted operating profit increase. Reported
EPS was 5.0p (H1 23: 1.9p).
·
Increased high quality
forward work2 position of £4.3bn of more than three times FY 23
revenue (FY 23: £3.9bn; H1 23: £4.0bn), with
contract wins across all sectors and significant growth in Water.
At least a further £500m of Water contracts won post half
year.
·
Interim dividend payment
of 0.4p (H1
23: 0.4p), in line with H1 23.
·
Strong balance sheet and as
separately announced today, a £10m on-market share buyback
launched.
Financial
summary
|
(£m unless
otherwise stated)
|
H1 24
|
H1 23
|
Change
|
|
Revenue
|
639.3
|
664.4
|
(3.8)%
|
|
Adjusted operating
profit1
|
16.3
|
15.0
|
8.7%
|
|
Adjusted operating
margin1
|
2.5%
|
2.3%
|
20bps
|
|
Adjusted profit before
tax1
|
19.4
|
15.9
|
22.0%
|
|
Adjusted EPS1
|
5.6p
|
4.4p
|
27.3%
|
|
|
|
|
|
|
Reported operating profit
|
13.9
|
7.6
|
82.9%
|
|
Reported profit before tax
|
17.0
|
8.5
|
100.0%
|
|
Reported EPS
|
5.0p
|
1.9p
|
163.2%
|
|
Dividend per share
|
0.4p
|
0.4p
|
-
|
|
Net cash balance
|
166.0
|
132.1
|
£33.9m
|
|
Forward work position2
|
£4.3bn
|
£4.0bn
|
£0.3bn
|
1.
See notes 1 to 4 of the financial statements for
adjusted metric details and definitions, and reconciliation to
reported metrics.
2.
Forward work is the total of order book and
preferred bidder book which includes revenue from contracts which
are partially or fully unsatisfied and probable revenue from Water
and other frameworks included at allocated volume.
|
Alex Vaughan,
Chief Executive Officer, commented:
|
"We are performing strongly and are
progressing with our strategic priorities in our chosen growth
markets, including broadening our customer and service mix. In the
first half we have delivered a further significant increase in
operating profit together with a sharp growth in earnings per
share. The net cash balance grew to £166m,
adjusted operating margin increased as expected, and
due to the quality of our earnings, we remain on track to deliver
our margin targets during FY 24 and FY 25.
"As a result of our strong performance and
valued long-term relationships with our customers, we have
increased our forward work position to a very healthy £4.3bn at the
half year, with contract wins across all our sectors. Our focus on
industry-leading solutions, predictable performance and long-term
established customer relations has seen us win further significant
Water contracts post period end and we expect further wins for the
Group in the second half of the year. The quality and
customer balance of our forward work position across our two
divisions, together with strong highly visible market investment,
gives us good visibility on future revenue and margin. We continue
to deliver improvements in the business and remain confident in the
Group's prospects.
"As a result of our confidence in our
long-term prospects, and our strong cash position, we have today
announced a £10m share buyback which will commence with immediate
effect."
Having secured a significant volume of work in
H1 24, our high-quality forward work position stood at £4.3 billion
at the end of the first half, with at least a further £500 million
of new work with Southern Water secured post period end and further
wins expected in the second half. The quality and volume of our
forward work gives us good visibility on future revenue and
margin.
We operate in growth markets meeting
critical national needs, providing essential national
infrastructure through delivering services that shape, create and
deliver our customers' needs. Our confidence is based on multiple
factors including our clear strategic priorities, our alignment
with an increasingly broad and high-quality customer base which is
investing in critical infrastructure, and our opportunities for
further operational and margin
improvements.
While we remain mindful of the macro-economic
and geopolitical conditions and their importance for near-term
government priorities and the timing of spending, we are well
positioned for further cash generation and growth in
profits.
We remain on track to deliver an adjusted
operating margin run-rate of 3.5% during the course of FY 24 and
4.5% during the course of FY 25, in line with our
ambition to deliver margins in excess of 5.0%.
Our expectations for FY 24 remain
unchanged.
|
Analyst &
investor presentation
|
A live webcast of our results by
Alex Vaughan (CEO) and Helen Willis (CFO) will be at 9am on 21
August 2024. Please go to https://stream.brrmedia.co.uk/broadcast/66a7577827d380a9b7f0b4e7
to register for the event.
We will also host a live
presentation relating to results via Investor Meet Company at
10am on 22 August 2024. Investors can sign up to Investor Meet
Company for free and register to meet Costain Group
PLC via:
https://www.investormeetcompany.com/costain-group-plc/register-investor
As announced on 12 March 2024, Mr
Bishoy Azmy stepped down from the Board with effect from 31 March
2024.
|
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 notes 1 to 4.
This announcement contains inside
information. The person responsible for this announcement at
Costain is Helen Willis, Chief Financial Officer.
ELIMINATING HARM
We have started 2024 with a strong positive
safety, health and environmental performance, having continued our
focus as a learning organisation in driving improvements through
our leading indicators for performance. These include workforce
engagement and targeted assurance activities, which are
contributing to our aim of eliminating harm across all our
activities. We measure our safety performance through our lost time
injury rate (LTIR) which for H1 24 was 0.09 (H1 23: 0.11).
Costain's LTIR is calculated as a ratio of the total number of lost
time incidents (defined by the Health & Safety Executive) per
every 100,000 hours worked.
GROUP TRADING PERFORMANCE
Another
strong financial performance
We report both our statutory results,
'reported', and results excluding adjusting items, 'adjusted'. Key
adjusting items for H1 24 include the impact of this final year of
our Transformation programme.
Reported and adjusted revenue was £639.3m in
H1 24 (H1 23: £664.4m), a small reduction on the prior period. We
saw increased Natural Resources revenue in Water, and in Defence
and Nuclear Energy. In Transportation, as expected, we saw
reductions in Road volumes, due to the completion of certain
projects, and in Rail due to the completion of our main works at
Gatwick Station. We had increased revenue in Integrated Transport
including the Heathrow H7 contract and new contracts with
TfL.
Adjusted operating profit grew by 8.7% to
£16.3m (H1 23: £15.0m) and the adjusted operating margin increased
to 2.5% (H1 23: 2.3%), driven mainly by the improved performance in
Transportation resulting from a better margin mix derived from
newer contracts and increased volumes, and margin in Natural
Resources, which has a greater mix of consultancy
services.
Reported operating profit increased from £7.6m
in H1 23 to £13.9m in H1 24, with the prior period impacted by an
£5.3m non-recurring impairment of an intangible asset. We also had
a £2.4m cost in H1 24 (H1 23: £2.1m) in respect of our
Transformation programme.
Net finance income was £3.1m
(H1 23: £0.9m), driven by higher interest income from increased
bank deposits and lower bank charges.
Adjusted profit before tax increased 22.0% to
£19.4m (H1 23: £15.9m), with adjusted basic earnings per share
(EPS) up by 27.3% at 5.6p (H1 23: 4.4p), in part reflecting higher
net finance income. Reported profit before tax was up 100.0% at
£17.0m (H1 23: £8.5m), while reported basic earnings per share
(EPS) was up 163.2% at 5.0p (H1 23: 1.9p).
Adjustments to reported items
We incurred £2.4m (H1 23: £2.1m) in respect of
this final year of our Transformation programme, and £nil (H1 23:
£5.3m) of restructuring costs. The restructuring costs in H1 23
related to an impairment of an intangible asset following the
repositioning of digital services. We expect Transformation
programme costs of around £5.0m in FY 24, and thereafter such costs
to be minimal and not to be separately disclosed as adjusting
items.
Cashflow and liquidity
Cash from operations
in H1 24 was £15.2m (H1 23: £16.9m), resulting from increased
adjusted operating profits and timings of certain cash
receipts around the period end.
Free cash flow in H1 24 of £14.2m (H1 23:
£26.5m) reflected the timing of working capital around the period
end, as well as higher tax and capital expenditure payments as we
invest in new systems, partially offset by lower cash flows on
adjusting items.
Our net cash position at the end of H1 24 was
£166.0m (FY 23: £164.4m, H1 23: £132.1m). We expect
our full year end net cash position to be at least similar to H1
24, excluding the impact of our £10m share buyback, as the
underlying net free cash flow from the business is expected to be
offset by the unwinding of positive working capital timing benefits
accumulated since the end of FY 22, as previously announced in our
FY 23 results.
During H1 24 we paid more than 97% of invoices
within 60 days (H1 23: 98%). In January 2024 Costain was
re-confirmed as one of the fastest-paying lead contractors in
construction on an average days-to-pay basis following the
submissions to the Government's Duty to Report on Payment
Practices and Performance.
Strength of
business model
Critical national needs and the
resultant demand for essential infrastructure ensure that the
Transport, Water, Energy and Defence markets continue to offer
significant long-term opportunities for the Group.
As a result of our clear strategy, the Group
has continued to make good progress in building a stronger
business. We are:
·
Focused on growth markets meeting critical national needs,
ensuring the UK has its essential infrastructure, as set out in the
second National Infrastructure Assessment, and the National
Infrastructure and Construction Pipeline 2023, with more than
£700bn of investment expected during the next ten years, as well as
supporting the new Government's critical growth
missions.
·
Continuing to build and expand our broader Tier 1 customer
base and be recognised for our long-term established relationships
with both new and existing customers, who are increasing their
scale of activities with us:
o In line with Ofwat's draft determination, we expect water
investment to at least double during the next regulatory period to
its highest level for decades and through recent contract awards we
are well placed to capitalise on these opportunities.
o We expect
long-term growth in the Energy sector due to the expected changes
in energy mix for the UK. We will continue to build our leading
expertise as a solution provider to address the growing energy
transition investment plans.
o We are well
positioned for the significant public and private sector
Transportation, Defence and Nuclear Energy investment.
o In addition, our Integrated Transport business has seen us
expand our work with Heathrow and with TfL in order to progress
refurbishment of their critical transport
infrastructure.
·
Providing an increasingly broader expert-led service mix of
construction and consultancy services to meet our customers'
ecosystem requirements, helping them by shaping, creating, and
delivering pioneering infrastructure solutions to meet their needs,
leveraging our core contracting expertise in managing major
infrastructure programmes.
·
Maintaining a strong balance sheet with good levels of
positive cash generation, a strong risk management culture,
financing capacity and minimal pension costs.
Costain enjoys good forward visibility with a
strong forward work position. Our forward work position, which is
our combined order book and preferred bidder book, stood at £4.3bn
at period end (FY 23: £3.9bn; H1 23: £4.0bn), representing more
than three times our FY 23 annual revenue. Post the period end we
have won at least a further £500m of new work in Water.
We have more than £538m of secured
Group revenue for H2 24 at the end of H1 24, representing around
90% of forecast revenue for the period. Awards have yet to be made on a number of bids undertaken
since 2022 and we currently expect further awards to be made during
H2 24 and FY 25.
Our Transformation programme,
which simplifies and increases efficiencies within the business and
is expected to be largely complete during FY 24 is progressing
well, having delivered profit and adjusted operating margin uplift
during H1 24, as well as enabling disciplined investment in
business improvement activities.
The accurate assessment and management of risk
and uncertainty is central to our strategy. This is achieved
through rigorous risk management and commercial control throughout
our operations in three key areas:
· A
disciplined approach to contract selection, which includes robust
commercial and legal reviews, proactive shaping of procurement
approaches with our customers, and a rigorous multi-stage gating
process.
·
Commercial and operational assurance, which includes project
level controls, management oversight of forecasts, and
cross-disciplinary contract review meetings.
·
Strategic supply chain partners, with application of robust
supply chain management processes.
As a result of the implementation of our
strategy and risk management processes, at the end of H1 24, our
order book does not include any single stage design and build
fixed-price construction contracts.
We continue to effectively manage
the impact of inflationary pressures on revenue and
costs.
Actuarial pension review
On 30 June 2023, we announced that
agreement had been reached with the Trustee of the Group's defined
benefit pension scheme on the 31 March
2022 triennial actuarial funding valuation and ongoing
contributions to the Scheme. The contribution plan from the Group
to the Costain Pension Scheme runs from 1 July 2023 to 31 March
2027 and is for a payment of £3.3m per year, payable in monthly
instalments, scheduled to increase in line with inflation (CPI)
each 1 April.
An assessment of the Scheme
funding position was carried out on 31 March 2024 and, as the
funding level (on a Technical Provisions basis) was more than 101%,
contributions will stop from 1 July 2024 to 30 June 2025. These
contributions would have amounted to £3.4m for the period if the
Scheme funding level had been less than 101%.
In addition to contributions being stopped for
a year, as the funding level is above 101%, "dividend parity" will
be suspended for a year. Under the dividend parity arrangement, an
additional matching contribution (the excess of the total dividend
above the Scheme contribution) is paid to the Costain Pension
Scheme when the total of the interim and final
dividends (or other return of capital such as a buyback)
is greater than the contributions paid into the Scheme in the
previous Scheme financial year, which runs from 1 April to 31
March.
Capital allocation
Costain continues to perform well against its
strategic targets and expects to deliver long-term sustainable
value for its stakeholders. The Group's capital allocation
priorities are; investing for growth,
progressive dividend, selective M&A and returning
surplus capital.
· Investing for
growth. Costain will continue disciplined
investment in key areas such as systems and digitisation that will
accelerate its business transformation. The Group's Transformation
programme, which simplifies and increases efficiencies within the
business and is expected to be largely complete during FY 24, is
progressing well. In addition, the Group will invest around £5.0m
in FY 24 in upgrading its HR system to increase efficiencies within
the business.
· Progressive dividend.
The Board recognises the importance of dividends for
shareholders and expects to target dividend cover of around three
times adjusted earnings. Dividend payments take into account the
cash flow generated in the period, and the potential impact of the
"dividend parity" arrangement relating to the defined benefit
pension scheme, which continues until 31 March 2027.
Dividend payments were resumed in FY 23 with a
full year dividend of 1.2p per share for the year, in line with the
pension payments level under the dividend parity arrangements. In
line with the dividend policy adopted in H1 23, the Board has
declared an interim dividend of 0.4p per share for the six months
ended 30 June 2024.
· Selective M&A.
The Board retains optionality to pursue strategic investments in
technology, skills and capabilities to enhance our ability to
support customers.
· Returning surplus
capital. After ensuring a strong balance sheet
and cash position, identified surplus capital will be returned to
shareholders through share buybacks or special dividends. The
current outlook and trading across Costain's markets is encouraging
and is supportive of our strategy.
Having reviewed the Group's strong cash
performance and ongoing capital requirements, the Board has
concluded that an on-market share buyback programme
for up to a maximum aggregate consideration of £10m
(excluding stamp duty and expenses) is appropriate and
a value-enhancing use of cash, while maintaining the
Group's financial flexibility to invest in its strategy to deliver
sustainable growth and attractive returns.
Dividend
Dividend payments were resumed in H1 23 with
an interim dividend of 0.4p per share for the six months ended 30
June 2023, and a final dividend of 0.8p per share. In line with the
H1 23 payment, the Board has declared an interim
dividend of 0.4p per ordinary share for the six months ended 30
June 2024.
The interim dividend will be paid on 18
October 2024 to shareholders on the register at the close of
business on 13 September 2024.
Payment of the interim dividend will be both
as a cash dividend and scrip dividend alternative. Shareholders
wishing to join the scrip dividend scheme should return a completed
mandate form to the Registrar, Equiniti, by 27 September 2024. The
scrip reference price will be announced on 19 September
2024.
DIVISIONAL REVIEW
TRANSPORTATION
|
£m
|
H1 24
adjusted1
|
H1 24
reported
|
H1 23
adjusted1
|
H1 23
reported
|
Change
(adjusted)1
|
|
Road
|
171.5
|
171.5
|
201.8
|
201.8
|
-15.0%
|
|
Rail
|
240.6
|
240.6
|
259.3
|
259.3
|
-7.2%
|
|
Integrated
transport
|
32.2
|
32.2
|
26.0
|
26.0
|
23.8%
|
|
Total revenue
|
444.3
|
444.3
|
487.1
|
487.1
|
-8.8%
|
|
Divisional operating profit
|
13.8
|
13.8
|
12.2
|
6.9
|
13.1%
|
|
Divisional operating margin
|
3.1%
|
3.1%
|
2.5%
|
1.4%
|
0.6pt
|
1. See notes 1 to 4 of the
financial statements for adjusted metric details and definitions,
and reconciliation to reported metrics.
·
As expected, revenue of £444.3m was down 8.8%, reflecting
lower volumes in Road due to the completion of some contracts, and
in Rail due to the completion of our main works for Gatwick
Station.
·
Increased revenue in Integrated Transport due to our
expanding work at Heathrow and with TfL.
·
Adjusted operating margin increased by 0.6pt to 3.1%, due to
improved operating performance and margins in newer
contracts.
·
Revenue secured for H2 24 is £358.4m for Transportation as at
30 June 2024.
Our revenue in H1 24 was mainly
from a number of complex project delivery schemes for
HS2 and National Highways. We are transitioning towards a
better-balanced portfolio, benefitting from activities in Rail,
Aviation, Ports and Local Government, together with continuing
activities with HS2 and National Highways.
Road revenue
declined by 15.0% in H1 24 compared with the prior year, as
expected, driven by a reduction in schemes revenue as they near
completion. As a strategic partner for National Highways, we
support their key investment programmes through the Regional
Delivery Partnerships (RDP) major projects frameworks, the Smart
Motorways Programme (SMP) Alliance, the SPaTs2 consultancy
framework, and Area 14 highway maintenance.
On RDP, in Cornwall we opened to traffic the
widened A30 dual carriageway between Chiverton and Carland Cross on
schedule. Our work to upgrade the A1 around Newcastle continues to
progress well with the widening of the Birtley to Coal House
section. We have completed the work on the A12 with the successful
granting of the Development Consent Order application for the
Chelmsford to A120 widening project. We have also agreed the scheme
budget for the M60 Simister Island scheme, and have progressed to
the detailed design phase, and are continuing to deliver highway
maintenance activities on our Area 14 contract.
Within the SMP Alliance, our
delivery of the M6 Junction 21a-26 smart motorway upgrade is
nearing completion, and we are supporting the National Emergency
Area Retrofit programme on the M1 for smart motorways through
design and delivery of additional stopping areas.
We have a growing pipeline of
opportunities in Road for local government bodies, as well as
National Highways, and see good long-term prospects in this
market.
Rail revenue decreased by
7.2% in H1 24, principally because of the completion of our work at
Gatwick Station in the period. The
Skanska Costain STRABAG JV contract to construct
the southern section of route for HS2, which has a twin bore
tunnel, now has four tunnel boring machines (TBMs) fully in
operation. We are working closely with HS2 Ltd to optimise our
delivery schedule to best progress the project delivery within its
current budget.
We continue to expand our
portfolio of work for Network Rail and DfT through our framework
contracts, where we are providing professional consulting services.
The main works to upgrade Gatwick Station concourse for Network
Rail completed in H1 24 following the opening of the station in Q4
23.
We also have several live tenders being progressed in
Rail.
Integrated
Transport provides a mix of consulting and
complex project delivery to sub-national transport bodies, Central
Government, and to Aviation customers. Revenue
increased by 23.8% in H1 24 on the prior year, reflecting
growing work volumes at Heathrow and with TfL.
During H1 24, we continued work for TfL. We
were awarded the Gallows Corner Flyover Detailed
Design & Build contract and the design phase for Brent Cross,
with work for both projects underway. We have commenced our next
stage of works on the A40 Westway and continue to
support TfL's CCTV service.
During H1 24, we increased the
volume of our work at Heathrow to shape, create and deliver asset
renewal and construction projects through the H7
Terminal Asset Renewal Partner and Major Project Partner
frameworks. We also continue to support other aviation customers at
East Midlands, Gatwick, Manchester and Stansted
airports.
We expect that Aviation, Ports, local and
devolved transport bodies will offer strong growth opportunities
for the business.
NATURAL
RESOURCES
|
£m
|
H1 24
adjusted1
|
H1 24
reported
|
H1 23
adjusted1
|
H1 23
reported
|
Change
reported
|
|
Water
|
119.8
|
119.8
|
107.2
|
107.2
|
11.8%
|
|
Energy
|
21.7
|
21.7
|
24.0
|
24.0
|
-9.6%
|
|
Defence and
Nuclear Energy2
|
53.5
|
53.5
|
46.1
|
46.1
|
16.1%
|
|
Total revenue
|
195.0
|
195.0
|
177.3
|
177.3
|
10.0%
|
|
Divisional operating profit
|
8.4
|
8.4
|
7.5
|
7.5
|
12.0%
|
|
Divisional operating margin
|
4.3%
|
4.3%
|
4.2%
|
4.2%
|
0.1pt
|
1. See notes 1 to 4 of the
financial statements for adjusted metric details and definitions,
and reconciliation to reported metrics.
2..
Defence and Nuclear includes nuclear-related
revenue previously included in Energy, following the Natural
Resources reorganisation.
·
Revenue increased by 10.0% to £195.0m, reflecting growth in
Water, and in Defence and Nuclear
Energy.
·
Divisional operating profit increased to £8.4m (H1 23:
£7.5m), and adjusted operating margin increased by
0.1pt to 4.3%.
·
Revenue secured for H2 24 is £180.3m for Natural Resources as
at 30 June 2024.
Water delivers a
broad range of services to improve asset and operational resilience
across the Water sector, together with decarbonisation
capabilities. Revenue increased by 11.8% on H1 23 with good
visibility across our five-year AMP7 programmes through to 2025,
and our recently announced AMP8 projects with Northumbrian Water
and United Utilities for the period 2025-2030. We are moving to the
commissioning phase for Tideway, where in a joint venture, we are
responsible for the eastern section.
The breadth of our service offering continues to
grow with work including wastewater to gas, water quality assurance
and water treatment, as well as design, maintenance, capital
delivery and strategic resource options. We continue to work on
capital delivery programmes for Anglian Water, Severn Trent Water,
Southern Water, and Thames Water in AMP7.
We have strongly increased our presence in the
Water sector in the period, with the combination of the rollover of
current contracts, contract extensions and new customer wins.
During H1 24 these include: major AMP8 contract wins with
Northumbrian Water and United Utilities; contract extensions with
Severn Trent Water and Thames Water; and an AMP7 maintenance
service provider contract for United Utilities. Our CMDP+ joint
venture with MWH Treatment was awarded contracts by Southern Water
as part its AMP7 investment programme. Post period end, our
CMDP+ joint venture with MWH Treatment won
work with Southern Water on their AMP8 programme valued at least at
£500m to Costain. This contract will extend our long-term
continuous relationship with Southern Water to more than twenty
years.
Energy revenue
decreased by 9.6% in H1 24 on the prior year, due to delays to our
programmes as we await Final Investment Decisions this year.
We expect significant long-term growth in this
sector given the requirement for energy infrastructure investment
to support economic growth, tackle climate change and enhance the
natural environment, as outlined in the National Infrastructure
Commission's recent SNIA. We
provide our customers in this sector with a range of
services including engineering design, managed services and
programme management, solving our customers' complex energy
challenges through excellence in engineering and
delivery.
Our strategic focus areas are energy
transition (hydrogen and carbon capture), energy resilience
(brownfield modifications for enhanced longevity and performance,
energy storage and carbon reduction) and energy connectivity (gas
and electricity networks). In energy transition, in addition to
continuing to support bp's Net Zero Teesside Power and Northern
Endurance Partnership joint ventures with the design of the
interconnecting CO2 pipeline and associated utilities, we have
commenced the design of the H2Teesside new hydrogen pipeline, as an
augmentation of our scope for the East Coast Cluster. In energy
resilience, we have been supporting a number of clients including
INEOS FPS and Dana Petroleum with studies and design activities to
progress their sustainability initiatives. In energy connectivity,
we continue to manage the safety-critical gas mains replacement
programme for Cadent in the East of England.
During H1 24, as a continuation of
our work in the area, we have been selected to oversee and manage
the engineering, procurement and construction of the onshore
CO2 gathering systems for the £4bn East Coast Cluster
investment. We continue to support bp as it progresses
the wider de-carbonisation of the local energy supply and pursues
innovative carbon capture and storage solutions, with this contract
expected to commence at the end of 2024. We were selected by Wales
and West Utilities to lead a series of studies to develop their
hydrogen vision.
We have seen growth in project
delivery and opportunities in supporting our long-standing
petrochemical customers in decarbonising their midstream operations
through large scale energy switching engineering projects,
including hydrogen generation and transportation.
Defence and
Nuclear Energy supports several public and
private sector organisations in a variety of customer-side,
delivery partnership roles, across the UK Defence Nuclear
Enterprise. Revenue increased by £7.4m, 16.1% on the prior year,
driven by a growth in demand for support within our current
delivery partnership roles with Atomic Weapons Establishment (AWE)
and Babcock, and in our EDF and Sellafield framework contracts.
With AWE and Babcock we work as a construction delivery partner in
a consultancy contract, delivering major infrastructure projects
and providing expertise in design and construction
management.
During H1 24, we were
awarded two new framework
contracts in the nuclear energy
sector and continue to see opportunities for further
growth in this area.
We are currently well positioned across the
Defence Nuclear Enterprise, supporting the UK's Continuous At Sea
Deterrent (CASD), and our ambition is to be the delivery partner of
choice for the Ministry of Defence's (MoD) and its prime
contractors, for its future strategic infrastructure
needs.
STRATEGY
The Group operates in the UK infrastructure
market, focused on providing solutions that safeguard the future of
our planet and transform the performance of the UK's infrastructure
ecosystem, aligned to our purpose of 'Improving People's
Lives'.
Markets
In line with the priorities of the National
Infrastructure Commission's Second National Infrastructure
Assessment, we are strategically well positioned in our four chosen
markets of Transport, Water, Energy and Defence. These markets are
essential to ensuring the UK has the infrastructure to meet our
critical national needs of economic growth and social change,
climate resilience, energy transition to net zero, environmental
resilience and national security. Our leading service expertise,
strong long term customer relationships, and differentiated broader
offering positions the business to benefit from a greater share of
our customers' long-term investment plans, providing significant
opportunities for growth. While the National Infrastructure and
Construction Pipeline 2023 sets out more than £700bn of investment
in the next ten years, we recognise the immediate-term constraints
on government funding.
Customers
Within our chosen markets we work with a
growing number of Tier 1 customers who choose to work with their
partners through long-term strategic five-to-ten-year programmes of
work, aligned to us meeting their five-year business plan outcomes.
The strategic nature of these contracts allows us to build strong
long-lasting valued relationships, and for us to maintain
consistency and continuity of workflows over the business plan
period. Both ensure a good quality of work, service and an optimal
risk profile.
Services
In working with our customers, our business is
differentiated in seeking to meet their broader business needs, and
not merely their new capital infrastructure needs. This includes
asset maintenance, extending the life of and optimising the
performance of existing assets, advising on long term asset
planning and overseeing development programmes. We achieve this by
working with our customers as construction, consulting and digital
infrastructure partners.
PERFORMANCE
Key measures of our performance
are:
o Financial performance on growth and margins.
o New
customer wins and expansions of existing customer relationships,
further diversifying our revenue base.
Our risk management processes on
contracts continues to ensure a robust operational performance. In
addition, we have secured further opportunities with our customers.
Our strategy provides for assured delivery, lower risk contracts in
our orderbook, together with a broader business mix, and our
ambition remains to deliver improving long-term operating
margins.
We remain on track to deliver on
our operational milestones, outlined in March 2023:
·
An adjusted operating margin run-rate of 3.5%
during the course of FY 24, as we increase effectiveness within the
business through the implementation of our Transformation
programme, the growth of our consultancy services, the increased
effectiveness in procurement and ongoing control of operating
costs.
·
An adjusted operating margin run-rate of 4.5%
during the course of FY 25 to be reached by improving margins
within complex programme delivery (construction contracts), further
efficiencies from our Transformation programme and an increasing
mix of higher-margin contracts.
·
We continue to have an ambition for an adjusted operating margin in excess of
5.0%.
·
We expect that central costs will be held around 0.8% to 0.9%
of revenue during FY 24 to FY 25 and we expect
divisional margins to increase during the period to achieve our
Group target. We continue to monitor and manage the impact of
inflationary pressures on FY 24 revenue and
costs.
Customer
growth
During H1 24, we:
·
Expanded our presence in Water, winning a series
of major contracts including significant AMP8 agreements
with:
o Northumbrian Water, where we will shape and deliver its
strategic infrastructure upgrade programme over a potential 12-year
period.
o Severn Trent Water, which will see us improve water and
wastewater treatment infrastructure across the Company's
portfolio.
o United Utilities, where we will work with other partners to
deliver a £3bn programme to upgrade assets including water and
wastewater treatment sites, pumping stations and
reservoirs.
o And, post period end, a major AMP8 contract with Southern
Water in our joint venture.
·
Won additional contracts with Southern Water and
Thames Water to support new strategic assets, water supply
resilience and improved wastewater treatment.
·
Were confirmed as National Highways' partner for
the next stage of the M60 Simister Island upgrade.
·
Have been selected by bp's Net Zero Teesside
Power and Northern Endurance Partnership joint ventures to oversee
the construction of a CO2 gathering systems for carbon
capture and storage, and by bp's H2Teesside to design a new
hydrogen pipeline, both for the East Coast Cluster.
·
Grew our rail consultancy with work on critical national
programmes such as Northern Powerhouse Rail, Weather Resilience and
R&D programmes.
·
Were appointed by TfL to progress refurbishment
of critical pieces of transport infrastructure, and expanded our
work with Heathrow. Have been chosen by Wales and West Utilities to
examine the integration of hydrogen refuelling stations into the
UK's gas network.
·
Won additional project management commissions for
significant defence customers and new nuclear energy
contracts.
PEOPLE
Our people strategy is focused on six key
themes:
·
Excellent leadership and line management role modelling of
our values and behaviours, to motivate and engage
our people.
·
Having a diverse, inclusive, and thriving
workforce.
·
Creating high-performing, agile teams with a one
Costain ethos.
·
Developing skills, capabilities, and talent now and for the
future giving our people the opportunity to grow their careers
at Costain.
·
Ensuring our people feel valued, respected, recognised and
appropriately rewarded.
·
Valuing the health and wellbeing of our people and the safety
of everyone working with us and around us, which is one of our core
values.
Costain has invested in a new HR system to
improve employee experience, enhance cybersecurity, and enable
greater digital integration. The system has been through the design
and build phases and will be launched to the business at the end of
Q4 24 following testing.
In April 2024, we held a dedicated leadership
impact day where all Costain offices and project teams collectively
took time to create a safe space to talk about wellbeing. The day
was focused on the wellbeing tools and resources available to our
people and discussing areas for improvement to ensure everyone can
be at their best.
One of our priorities is to develop our people
and give them opportunities to grow their careers at Costain. We
have a leadership framework that provides the blueprint for
leadership at Costain and is being embedded into our people
processes and development offer.
In recognition of the positive
action Costain has taken over recent years on gender equality, in
June, we were listed as one of The Times Top 50 Employers for
Gender Equality 2024. Compared to industry benchmarks, Costain's
overall gender and ethnic diversity can be considered
industry-leading. At the close of H1 24, 28.8% of colleagues were
female (FY 23: 27.5%) and 15.7% were of an ethnic minority (FY 23:
14.5%).
Costain's gender pay gap continues
to reduce, underpinned by targeted action on female development and
increasing the diversity of our talent pipeline to address
underrepresentation in the upper-middle and upper-pay quartiles.
Following the successful pilot of a women's empowerment programme
in 2023, we have commissioned and commenced further intakes in
2024.
For the second year, we
voluntarily disclosed Costain's ethnicity pay gaps, forming part of
an integrated pay report alongside the statutory gender pay gap
disclosure. We recognise that employees from different
ethnic backgrounds have different experiences of pay and reward,
which is why we report separate pay gaps for different ethnic
groups. We have held and will
be holding further listening circles with our employees for the
ethnic groups represented in our pay gaps to better understand
employee experiences and how best to tackle our ethnicity pay
gaps.
In April 2024, we announced increased support
for colleagues who are parents and carers, enhancing our maternity
and adoption leave offerings to 26 weeks at full pay, paternity
leave to 8 weeks at full pay and introducing paid carers' leave.
We continue to improve workplace accessibility, with direct
input from our employee networks in the design of our new offices
and site setup standards. In H2 24, Costain will be assessed
against the Disability Confident level 3 standard, and if
successful will be awarded the accolade of being a Disability
Confident Leader under the conditions of the scheme.
Applying sustainable procurement principles is
optimising the value we provide for our customers and enhancing the
social and environmental outcomes achieved. In H1 24, our contracts
(including joint ventures) spent £320m with SMEs, representing 40%
of their total spend, exceeding the UK Government target of 33%,
and exceeding our FY 23 performance of 38%.
PLANET
Carbon and climate
change
Through the delivery of low-carbon design,
best-in-class delivery and creating climate-resilient
infrastructure, Costain is well placed to support our customers in
their transition to net zero emissions.
Pioneering solutions to address the
challenges
Costain has recently secured nationally
significant contracts with Net Zero Teesside Power and the Northern
Endurance Partnership for a landmark carbon capture scheme (as one
of nine specialist partners) and with Thames Water to design a
new reservoir in Oxfordshire that could supply up to 15 million
people across the South East of the UK. We continue to support
OFWAT with constructability advice on infrastructure investment
options. In August, we were awarded a multimillion-pound front-end
engineering and design (FEED) contract by bp for a new hydrogen
pipeline network in the Teesside area.
Driving our services towards Net
Zero
In February 2024, Costain received approval
from the Science Based Target initiative for its
near and long-term net zero targets which are now forming the basis
of our climate transition plan and nature positive plan which is in
development. The plans will see Costain aligned with the
Transition Plan Taskforce Disclosure Framework, Taskforce for
Nature-related Financial Disclosures (TNFD) respectively and build
on the good progress of Costain's climate change
action plan.
The recent focus of Costain's climate change
action plan has been to improve data through a new carbon data
tool. Costain's new tool which is currently being implemented will
enable enhanced data analytics, integration with technical
baselines and the ability to track performance with greater
frequency. The tool will fundamentally improve how data is
collected across all scopes, including supplier-sourced Scope 3
emissions.
In 2022, Costain issued a hydrotreated
vegetable oil (HVO) fuel mandate which contributed to a 24%
reduction in scope 1 emissions in 2023, with HVO making up 88% of
all fuel purchased. Increasing the proportion of projects using
mains-supplied electricity rather than generators has been a recent
priority, contributing to a combined Scope 1 and 2 emissions
reduction of 16% in 2023.
In 2024, we have taken action to eliminate the
use of natural gas to heat our Manchester office, by installing an
energy-efficient variable refrigerant flow (VRF) heat recovery
system. As previously announced, Costain is moving to a new London
headquarters which will further our emissions reduction and energy
efficiency from H2 24.
Costain engineers play a proactive role in
supporting our customers to optimise solutions and creating
opportunities for carbon reduction through our collaborative
approach to applying the principles of PAS2080.
On the TfL Gallows Corner project, Costain and
design consultant Pell Frishman identified over 440tCO2e
of carbon savings through effective and efficient design solutions.
Working in accordance with PAS2080 the team developed opportunities
such as optimised steelwork geometries and sizing and the use of
pre-cast concrete.
For National Highways M60 Simister Island
Interchange, Costain, in partnership with Jacobs and AECOM, has
prioritised reusing existing assets within the design, achieving a
5% reduction in emissions from the baseline design. This approach
will also reduce land take, reduce impact on biodiversity and be
most cost-efficient for the customer.
Nature
To safeguard our planets future, action on
restoring nature and becoming nature positive is critically linked
to the transition to net zero emissions. Costain has committed to
delivering biodiversity net gain on all construction contracts
(where relevant) and contributing to a wider restoration of nature,
aligning with the increased priority of our customers. Costain is
taking a leading role on biodiversity and nature through various
industry groups and has been at the forefront of the sector by
voluntarily disclosing against the Task Force for Nature Related
Financial Disclosure (TNFD) recommendations in our 2023 ESG
report.
The recently opened A30 Chiverton to Charland
Cross scheme, which Costain delivered on behalf of National
Highways is benefitting local wildlife with 33 multi-species
crossing points added along the route, 150,000 trees planted, and
the creation of an additional 4.5 hectares of new
woodland.
Costain through the CMDP+ joint venture with
MWH Treatment delivered a pioneering scheme for Southern Water at
the Hailsham South Wastewater Treatment Works (WTW). The scheme
created an ecosystem from redundant assets and reused materials,
going beyond normal industry practice to enhance the natural
environment. Upgrading the WTW was necessary to comply with an
enhanced Environment Agency discharge consent for phosphorous. The
innovative solution provided by the CMDP+ joint venture reduced 324
lorry movements, eliminated 16.9tCO2e through the reuse
of excavated spoil and achieved biodiversity net gain by retaining
wetland. The project met its objectives and achieved the lowest
phosphorus limits in the UK.
Social value
In H1 24 we launched our new social value
plan, which is underpinned by our comprehensive social value
framework. The social value plan demonstrates our commitment and
enabling actions to achieve our goal of improving one million lives
by 2030. As part of this initiative, we are implementing a new
social value tool which will enhance our ability to forecast,
measure, monitor and evaluate our social value, ensuring greater
transparency and accountability.
We continue to prioritise our community
relationships, ensuring we are a good neighbour and present a
positive image of the construction industry. In H1 24, the
Considerate Constructor Scheme rated Costain contracts on average
47/50 (FY23: 45/50) exceeding the industry average of 41/50. This
third-party industry assessment highlights the high standards
expected of Costain contracts, confirming Costain's position as an
industry leader in responsible business.
FINANCIAL REVIEW
Divisional adjusted to reported
reconciliation
|
|
Transportation
|
Natural Resources
|
Group
|
|
|
H1 24
|
H1 23
|
Change
|
H1 24
|
H1 23
|
Change
|
H1 24
|
H1 23
|
Change
|
|
Revenue £m
|
|
|
|
|
|
|
|
|
|
|
Reported
|
444.3
|
487.1
|
-8.8%
|
195.0
|
177.3
|
10.0%
|
639.3
|
664.4
|
-3.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit £m
|
|
|
|
|
|
|
|
|
|
|
Adjusted
|
13.8
|
12.2
|
13.1%
|
8.4
|
7.5
|
12.0%
|
16.3
|
15.0
|
8.7%
|
|
Adjusting items
|
-
|
(5.3)
|
|
-
|
-
|
|
(2.4)
|
(7.4)
|
|
|
Reported
|
13.8
|
6.9
|
100.0%
|
8.4
|
7.5
|
12.0%
|
13.9
|
7.6
|
82.9%
|
Adjusting
items
We incurred £2.4m (H1 23: £2.1m) on
transformation and £nil (H1 23: £5.3m) on restructuring costs.
Restructuring costs in H1 23 included intangible asset impairment
charges relating to development costs incurred as we repositioned
our digital services towards growth. We expect
transformation costs of around £5.0m in FY 24 and thereafter such
costs to be minimal and not to be separately disclosed as adjusting
items.
Net
financial income/(expense)
Net finance income amounted to
£3.1m (H1 23: £0.9m). Interest income from bank deposits amounted
to £3.5m (H1 23: £1.6m). The charges on banking facilities and
other similar charges was £0.7m (H1 23: £1.6m). In addition, the
net financial income for H1 24 includes the interest income on the
net assets of the pension scheme of £1.3m (H1 23: £1.6m) and the
interest expense on lease liabilities of £1.0m (H1 23: £0.7m) under
IFRS16.
Tax
The Group has a tax charge of
£3.5m (H1 23: £3.4m) giving an effective tax rate of 20.8% (H1 23:
40.0%). The adjusted effective tax rate was 21.3% (H1 23: 24.5%).
We expect the effective tax rate in 2024 to remain marginally below
the blended statutory tax rate of 25%.
Cashflow
The Group generated an adjusted £14.2m free
cash inflow in H1 24 (H1 23: £26.5m), lower than in the same period
last year largely due to the timing of working capital and higher
tax and capital expenditure payments as we invest in new systems,
partially offset by lower pension deficit contributions and cash
flows on adjusting items.
|
£m
|
H1 24
|
H1 23
|
|
|
|
|
|
Cash from operations
|
15.2
|
16.9
|
|
Add back adjusting
items
|
3.3
|
4.0
|
|
Add back pension deficit
contributions
|
1.7
|
5.7
|
|
Less taxation
|
(1.9)
|
-
|
|
Less capital
expenditure
|
(4.1)
|
(0.1)
|
|
Free cash flow
|
14.2
|
26.5
|
The Group had a positive net cash
balance of £166.0m as of 30 June 2024 (FY 23: £164.4m; H1 23:
£132.1m) comprising Costain cash balances of £96.2m (FY 23:
£105.2m; H1 23: £77.6m), cash held by joint operations of £69.8m
(FY 23: £59.2m; H1 23: £54.5m) and borrowings of £nil (FY 23: £nil;
H1 23: £nil). During H1 24, the Group's average month-end net cash
balance was £173.9m (FY 23: £141.4m; H1 23: £127.9m) and the
Group's average week-end net cash balance was £168.2m (FY 23:
£141.0m; H1 23: £126.5m). Utilisation of the total
bonding facilities as of 30 June 2024 was £65.3m (FY 23: £69.9m, H1
23: £78.9m).
|
£m
|
H1 24
|
H1 23
|
FY 23
|
|
|
|
|
|
|
Cash and cash equivalents at the
beginning of year
|
164.4
|
123.8
|
123.8
|
|
Net cash flow
|
1.6
|
8.3
|
40.6
|
|
Cash and cash equivalents at the
end of year
|
166.0
|
132.1
|
164.4
|
|
Borrowings
|
-
|
-
|
-
|
|
Net cash
|
166.0
|
132.1
|
164.4
|
Pensions
Cash contributions made to the
scheme during H1 24 amounted to £1.7m (H1 23: £5.7m) and the charge
to operating profit in respect of the administration cost of the UK
Pension Scheme in H1 24 was £0.1m (H1 23: £0.1m).
As at 30 June 2024, the Group's
pension scheme was in surplus in accordance with IAS 19 at £55.1m
(FY 23: £53.5m surplus; H1 23: £58.7m surplus). The movement in the
IAS 19 valuation, being a slight increase in surplus from 31
December 2023 to 30 June 2024 was due to a change in discount rate
assumptions resulting in a decrease in benefit
obligations.
Forward work
position
Our forward work position is the combination
of our order book and preferred bidder book and stood at £4.3bn at
period end.
Our order book stood at £1.8bn at period end
(FY 23: £2.1bn; H1 23: £2.5bn). The order book evolves as
contracts progress and as new contracts
are added at periods aligned to our customers' strategic
procurement windows which are typically every five years. The order
book does not therefore provide a complete picture of the Group's
potential future revenue expectations.
We have a continuing shift towards the
preferred bidder book away from the order book as we continue to
secure long-term (five-to-ten-year) framework positions with our
customers, especially in the water sector, providing a reliable and
long-term stream of future work.
The preferred bidder book increased to £2.5bn
at period end (FY 23: £1.8bn; H1 23: £1.5bn) and includes contracts
in Water, Energy, Defence and Nuclear Energy, Road and Integrated
Transport, including Heathrow. The preferred bidder book comprises
contracts for which we have been selected on frameworks where a
further works order is required prior to the works
commencing.
We note that some of our framework
and consulting revenue is not recorded in our order book, or
preferred bidder book, as it is undefined and is expected to
represent an increasing proportion of our future
revenue.
DIRECTORS REPORT
Going concern
In determining the appropriate
basis of preparation of the financial statements for the six months
ended 30 June 2024, 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 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.
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 45 to 49 of the Group's Annual
Report for the year ended 31 December 2023 which can be found
at www.costain.com.
There we define and describe the principal
risks that are most relevant to the Group including controls and
key mitigating actions assigned to them. In summary, the Group's
principal risks and uncertainties are as follows: 1) Safety,
health, or environmental incidents 2) Securing work and responding
to changes in customer spending plans 3) Managing our contracts and
economic factors 4) Setting up, mobilising and delivering our
Projects 5) Procurement and supply chain performance 6) Attracting,
developing and retaining talent 7) Financial resilience 8)
Information security 9) Climate Change and sustainability and 10)
Delivering the benefits of our Transformation programme.
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 carries 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 manageable levels.
Separately, the Audit and Risk Committee carries out a review of
the risk assurance framework and the effectiveness of risk
management and internal controls.
Statement of
Directors' Responsibilities
The Directors confirm that these condensed
consolidated half year financial statements 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 and that the interim management report includes a
fair review of the information required by DTR 4.2.7 and DTR 4.2.8,
namely:
• an indication of important events that
have occurred during the first six months 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 financial year; and
• material related-party transactions in
the first six months and any material changes in the related party
transactions described in the last Annual Report.
The current Directors of Costain
Group PLC are listed in the Annual Report for the year ended 31
December 2023. As announced on 12 March 2024, Mr Bishoy Azmy
stepped down from the Board with effect from 31 March
2024.
For and on behalf of the Board
Alex Vaughan
Helen Willis
Chief Executive
Officer
Chief Financial Officer
21 August 2024
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.
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.
GROUP INCOME STATEMENT
For the six months ended 30 June
2024
|
£m
|
Note
|
H1 24
unaudited
|
H1 23
unaudited
|
|
Revenue
|
4
|
639.3
|
664.4
|
|
Cost of Sales
|
|
(594.7)
|
(618.0)
|
|
Gross profit
|
|
44.6
|
46.4
|
|
Impairment of intangible asset
|
9
|
-
|
(5.3)
|
|
Other
administrative expenses
|
|
(30.7)
|
(33.5)
|
|
Administrative expenses
|
|
(30.7)
|
(38.8)
|
|
Operating profit
|
|
13.9
|
7.6
|
|
Profit from operations
|
4
|
13.9
|
7.6
|
|
Finance income
|
5
|
4.8
|
3.2
|
|
Finance expense
|
5
|
(1.7)
|
(2.3)
|
|
Net finance income
|
|
3.1
|
0.9
|
|
Profit before tax
|
|
17.0
|
8.5
|
|
Taxation
|
6
|
(3.5)
|
(3.4)
|
|
Profit for the period attributable to equity holders of the
parent
|
|
13.5
|
5.1
|
|
Earnings per share
|
|
|
|
|
Basic
|
7
|
5.0p
|
1.9p
|
|
Diluted
|
7
|
4.9p
|
1.8p
|
GROUP STATEMENT OF COMPREHENSIVE INCOME AND
EXPENSE
For the six months ended 30 June
2024
|
£m
|
|
H1 24
unaudited
|
|
H1 23
unaudited
|
|
Profit for the period
|
|
13.5
|
|
5.1
|
|
|
|
|
|
|
|
|
Total items that may be reclassified subsequently to profit
or loss
|
-
|
|
-
|
|
Items that will not be reclassified to profit or
loss:
|
|
|
|
|
|
Remeasurement of retirement
benefit asset
|
|
(1.3)
|
|
(8.7)
|
|
Tax recognised on remeasurement of
retirement benefit asset
|
0.1
|
|
2.0
|
|
Total items that will not be reclassified to profit or
loss
|
(1.2)
|
|
(6.7)
|
|
Other comprehensive expense for the period
|
(1.2)
|
|
(6.7)
|
|
Total comprehensive income/(expense) for the period
attributable to equity holders of the parent
|
|
12.3
|
|
(1.6)
|
|
|
|
|
|
| |
GROUP BALANCE SHEET
|
£m
|
|
Note
|
|
30 June 2024
unaudited
|
|
31 December 2023
audited
|
|
Assets
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
Intangible assets
|
|
9
|
|
48.3
|
|
45.7
|
|
Property, plant and
equipment
|
|
10
|
|
26.8
|
|
26.8
|
|
Equity accounted
investments
|
|
|
|
0.4
|
|
0.4
|
|
Retirement benefit
asset
|
|
12
|
|
55.1
|
|
53.5
|
|
Trade and other
receivables
|
|
|
|
4.5
|
|
4.2
|
|
Insurance recovery
asset
|
|
|
|
0.5
|
|
1.7
|
|
Deferred tax
|
|
|
|
9.3
|
|
11.8
|
|
Total non-current assets
|
|
|
|
144.9
|
|
144.1
|
|
Current assets
|
|
|
|
|
|
|
|
Trade and other
receivables
|
|
|
|
168.7
|
|
149.1
|
|
Insurance recovery
asset
|
|
|
|
13.3
|
|
11.0
|
|
Taxation
|
|
|
|
0.4
|
|
-
|
|
Cash and cash
equivalents
|
|
11
|
|
166.0
|
|
164.4
|
|
Total current assets
|
|
|
|
348.4
|
|
324.5
|
|
Total assets
|
|
|
|
493.3
|
|
468.6
|
|
Liabilities
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
Other payables
|
|
|
|
2.1
|
|
2.2
|
|
Lease liabilities
|
|
|
12.8
|
|
14.0
|
|
Total non-current liabilities
|
|
|
|
14.9
|
|
16.2
|
|
Current liabilities
|
|
|
|
|
|
|
|
Trade and other
payables
|
|
|
|
225.1
|
|
207.8
|
|
Taxation
|
|
|
|
-
|
|
0.6
|
|
Lease liabilities
|
|
|
9.9
|
|
10.3
|
|
Provisions for other liabilities
and charges
|
|
|
13.1
|
|
14.3
|
|
Total current liabilities
|
|
|
|
248.1
|
|
233.0
|
|
Total liabilities
|
|
|
|
263.0
|
|
249.2
|
|
Net assets
|
|
|
|
230.3
|
|
219.4
|
|
Equity
|
|
|
|
|
|
|
|
Share capital
|
|
13
|
|
2.8
|
|
138.3
|
|
Share premium
|
|
|
|
16.5
|
|
16.4
|
|
Translation reserve
|
|
|
|
0.6
|
|
0.6
|
|
Capital redemption
reserve
|
|
13
|
|
136.4
|
|
-
|
|
Treasury shares
|
|
|
|
(1.0)
|
|
(1.9)
|
|
Retained earnings
|
|
|
|
75.0
|
|
66.0
|
|
Total equity
|
|
|
|
230.3
|
|
219.4
|
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June
2024
|
£m
|
|
|
|
|
|
|
|
|
|
Share capital
|
Share premium
|
Translation reserve
|
Capital redemption reserve
|
Treasury shares
|
Retained earnings
|
Total equity
|
|
At 1 January 2023
audited
|
137.5
|
16.4
|
0.6
|
-
|
-
|
56.7
|
211.2
|
|
Profit for the period
|
-
|
-
|
-
|
-
|
-
|
5.1
|
5.1
|
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
-
|
(6.7)
|
(6.7)
|
|
Issue of shares under employee
share schemes
|
0.8
|
-
|
-
|
-
|
-
|
(0.8)
|
-
|
|
Shares purchased to satisfy
employee share schemes
|
-
|
-
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
|
Equity-settled share-based
payments
|
-
|
-
|
-
|
-
|
-
|
0.8
|
0.8
|
|
At 30 June 2023
unaudited
|
138.3
|
16.4
|
0.6
|
-
|
-
|
55.0
|
210.3
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2024
audited
|
138.3
|
16.4
|
0.6
|
-
|
(1.9)
|
66.0
|
219.4
|
|
Profit for the period
|
-
|
-
|
-
|
-
|
-
|
13.5
|
13.5
|
|
Other comprehensive
expense
|
-
|
-
|
-
|
-
|
-
|
(1.2)
|
(1.2)
|
|
Issue of ordinary shares under
employee share schemes (see note 13)
|
0.9
|
-
|
-
|
-
|
(0.6)
|
(0.2)
|
0.1
|
|
Shares purchased to satisfy
employee share schemes
|
-
|
-
|
-
|
-
|
0.8
|
(0.8)
|
-
|
|
Acquisition of treasury
shares
|
-
|
-
|
-
|
-
|
(0.5)
|
-
|
(0.5)
|
|
|
Nominal value reduction (see note
13)
|
(136.4)
|
-
|
-
|
136.4
|
1.2
|
(1.2)
|
-
|
|
|
Equity-settled share-based
payments
|
-
|
-
|
-
|
-
|
-
|
1.1
|
1.1
|
|
|
Dividends paid
|
-
|
0.1
|
-
|
-
|
-
|
(2.2)
|
(2.1)
|
|
|
At 30 June 2024
unaudited
|
2.8
|
16.5
|
0.6
|
136.4
|
(1.0)
|
75.0
|
230.3
|
|
|
|
|
|
|
|
|
|
|
| |
GROUP CASH FLOW STATEMENT
For the six months ended 30 June
2024
|
|
|
|
|
|
|
£m
|
Note
|
|
H1 24
unaudited
|
H1 23
unaudited
|
|
|
|
|
|
|
|
Cash flows from/ (used by) operating
activities
|
|
|
|
|
|
Profit for the year
|
|
|
13.5
|
5.1
|
|
Adjustments for:
|
|
|
|
|
|
Finance income
|
5
|
|
(4.8)
|
(3.2)
|
|
Finance expense
|
5
|
|
1.7
|
2.3
|
|
Taxation
|
6
|
|
3.5
|
3.4
|
|
Loss on disposal of property,
plant and equipment
|
|
|
0.5
|
-
|
|
Impairment of intangible
asset
|
|
|
-
|
5.3
|
|
Depreciation of property, plant
and equipment
|
10
|
|
5.8
|
6.9
|
|
Amortisation of intangible
assets
|
9
|
|
0.1
|
0.4
|
|
Shares purchased to satisfy
employee share schemes
|
|
|
-
|
(0.1)
|
|
Share-based payments
expense
|
|
|
1.1
|
0.8
|
|
Cash from operations before
changes in working capital and provisions
|
|
|
21.4
|
20.9
|
|
Increase in trade and other
receivables
|
|
|
(20.6)
|
(4.8)
|
|
Increase in trade and other
payables
|
|
|
17.2
|
9.7
|
|
Movement in other provisions and
employee benefits
|
|
|
(2.8)
|
(8.9)
|
|
Cash from operations
|
|
|
15.2
|
16.9
|
|
Interest received
|
|
|
2.5
|
1.6
|
|
Interest paid
|
|
|
(1.5)
|
(0.7)
|
|
Taxation paid
|
|
|
(1.9)
|
-
|
|
Net cash from operating activities
|
|
|
14.3
|
17.8
|
|
Cash flows from/ (used by) investing
activities
|
|
|
|
|
|
Additions to property, plant and
equipment
|
|
|
(1.8)
|
-
|
|
Additions to intangible
assets
|
|
|
(2.3)
|
(0.1)
|
|
Net cash used by investing activities
|
|
|
(4.1)
|
(0.1)
|
|
Cash flows from/ (used by) financing
activities
|
|
|
|
|
|
Ordinary dividends paid
|
|
|
(2.1)
|
-
|
|
Issue of ordinary share
capital
|
|
|
0.1
|
-
|
|
Acquisition of treasury
shares
|
|
|
(0.5)
|
-
|
|
Repayments of lease
liabilities
|
|
|
(6.1)
|
(9.4)
|
|
Net cash used by financing activities
|
|
|
(8.6)
|
(9.4)
|
|
Net increase in cash and cash equivalents
|
|
|
1.6
|
8.3
|
|
Cash and cash equivalents at
beginning of the period
|
11
|
|
164.4
|
123.8
|
|
Cash and cash equivalents at end of the
period
|
11
|
|
166.0
|
132.1
|
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.
This condensed consolidated interim financial
report for the half year reporting period ended 30 June 2024 has
been prepared in accordance with the 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. The interim report does not
include all of the notes normally included in an annual financial
report. Accordingly, this report is to be read in conjunction with
the annual audited financial statements within the Annual Report
and Accounts for the year ended 31 December 2023, which has been
prepared in accordance with the UK-adopted International Accounting
Standards and with the requirements of the Companies Act
2006. Those accounts have been reported on
by the Group's auditors and delivered to the Registrar of
Companies. The audit report for 2023 was (i) unqualified and (ii)
did not contain a statement under section 498(2) or (3) of the
Companies Act 2006.
The Group has applied the
following standards and amendments for the first time for the
period commencing 1 January 2024:
•
Classification of Liabilities as Current or
Non-current and Non-current liabilities with covenants - Amendments
to IAS 1;
• Lease
liability in sale and leaseback - Amendments to IFRS 16;
and
• Supplier
Finance Arrangements - Amendments to IAS 7 and IFRS 7.
The amendments listed above did
not have any impact on the amounts recognised in prior periods and
are not expected to significantly affect the current or 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. 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 £85m sustainability-linked revolving credit facility
(RCF) and surety and bank bonding facilities totalling £270m.
These facilities have a leverage covenant of net debt/EBITDA
≤1.5 times, an interest covenant of
EBITA/net interest payable covenant of ≥4.0 times and a liquidity covenant whereby the
aggregate of, without double counting, any cash and cash equivalent
investments and the available commitment under the facility does
not fall below £50.0m. These financial covenants are tested
quarterly. As at 30 June 2024, the Group had a leverage covenant
ratio of below zero (the Group had no net debt) and an interest
covenant ratio of 13.3 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 £20m
bank bonding and £250m surety company bonding
facilities.
In determining the appropriate basis of
preparation of the financial statements for the six months ended 30
June 2024, 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 financial statements.
In assessing the going concern assumption, the
Board reviewed the Group's base case plans for the period to 30
September 2025, being the first covenant deadline more than 12
months after the approval of the financial statements. The
directors have assumed that the current RCF remains in place with
the same covenant requirements through to its current expiry date,
which is beyond the end of the period reviewed for Going Concern
purposes. The base case assumes delivery of the Board approved
strategic and financial plans. As part of the assessment, the Board
also identified severe but plausible downsides affecting future
profitability, working capital requirements and cash flow. The
severe but plausible downsides include applying the aggregated
impact of lower revenue, lower margins, higher working capital
requirements and adverse contract settlements.
Both the base case and severe but plausible
forecasts show significant headroom and indicate that the Group
will be able to operate within its available banking facilities and
covenants throughout this period.
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, the directors have adopted the going concern basis in
the preparation of the financial statements.
Alternative
performance measures
Income statement presentation -
Alternative performance measures
The Group discloses alternative performance
measures, in addition to statutory disclosures, to provide
investors with supplementary information which may be relevant to
the Group's future performance. 'Adjusted profit' excludes
'adjusting items', which are significant items of income and
expenditure that the Board considers are incremental to business
operations and do not reflect the long-term performance of the
Group. These adjusted measures are reconciled to statutory
disclosures, with the tax impact given, in note 3. Presenting
results on this basis is consistent with internal reporting to the
Board. Alternative performance measures do not have standardised
meanings and, therefore, they may not be comparable between
companies.
The directors exercise judgement in
determining classification as an 'adjusting item' using
quantitative and qualitative factors. Consideration is given, both
individually and collectively, to the circumstances giving rise to
the item, its materiality and whether it is expected to
recur.
'Adjusted profit' may exclude income and
expenditure related to acquisitions, discontinued operations,
transformation costs, restructuring costs, litigation, and
impairments, where the impairment is the result of an isolated,
non-recurring event. 'Adjusted earnings per share' is calculated
using 'Adjusted profit'.
The Group also presents net cash/bank debt and
adjusted free cash flow as alternative performance measures in the
front of the annual report. Net cash/bank debt is defined as cash
and cash equivalents less interest-bearing borrowings (excluding
leases under IFRS 16 and net of unamortised arrangement fees).
Adjusted free cash flow is defined as cash generated from
operations, excluding cash flows relating to 'adjusting items' and
pension deficit contributions, less taxation and capital
expenditure. The directors consider that these measures provide
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 directors consider that the significant
areas of judgement made by management that have a significant
effect on the Group's performance as well as those estimates with a
significant risk of material adjustment during the second half of
the year are unchanged from those identified on pages 150 to 153 of
the Annual Report for the year ended 31 December 2023.
3.
RECONCILIATION OF REPORTED
OPERATING PROFIT TO ADJUSTED OPERATING PROFIT
Adjusted operating profit and adjusted
earnings per share are presented as non-GAAP alternative
performance measures. The Board considers the adjusted measures
better reflect the underlying trading performance of the Group for
the reasons described in note 1.
The profit adjustments represent amounts
included in the income statement. The Group incurred £2.4m
(H1 23: £2.1m) on transformation. There were no intangible
assets impaired in H1 24 (H1 23: £5.3m).
|
Six months ended 30 June 2024
|
Adjusted
|
Intangible impairment
|
Adjusting items
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
Revenue
|
639.3
|
-
|
-
|
639.3
|
|
Cost of sales
|
(594.7)
|
-
|
-
|
(594.7)
|
|
Gross profit
|
44.6
|
-
|
-
|
44.6
|
|
Administrative expenses
before other items
|
(28.3)
|
-
|
-
|
(28.3)
|
|
Transformation
costs
|
-
|
-
|
(2.4)
|
(2.4)
|
|
Administrative expenses
|
(28.3)
|
-
|
(2.4)
|
(30.7)
|
|
Operating profit/loss
|
16.3
|
|
(2.4)
|
13.9
|
|
Profit/ (loss) from operations
|
16.3
|
-
|
(2.4)
|
13.9
|
|
Net finance income
|
3.1
|
-
|
-
|
3.1
|
|
Profit/ (loss) before tax
|
19.4
|
-
|
(2.4)
|
17.0
|
|
Taxation
|
(4.1)
|
-
|
0.6
|
(3.5)
|
|
Profit/ (loss) for the period
|
15.3
|
-
|
(1.8)
|
13.5
|
|
Basic earnings per
share
|
5.6p
|
|
|
5.0p
|
|
|
|
|
|
|
|
| |
|
Six months ended 30 June 2023
|
Adjusted
|
Intangible impairment
|
Other adjusting items
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
Revenue
|
664.4
|
-
|
-
|
664.4
|
|
Cost of sales
|
(618.0)
|
-
|
-
|
(618.0)
|
|
Gross profit
|
46.4
|
-
|
-
|
46.4
|
|
Administrative expenses
before other items
|
(31.4)
|
-
|
-
|
(31.4)
|
|
Impairment of intangible
asset
|
-
|
(5.3)
|
-
|
(5.3)
|
|
Transformation
costs
|
-
|
-
|
(2.1)
|
(2.1)
|
|
Administrative expenses
|
(31.4)
|
(5.3)
|
(2.1)
|
(38.8)
|
|
Operating profit/ (loss)
|
15.0
|
(5.3)
|
(2.1)
|
7.6
|
|
Profit/ (loss) from operations
|
15.0
|
(5.3)
|
(2.1)
|
7.6
|
|
Net finance income
|
0.9
|
-
|
-
|
0.9
|
|
Profit/ (loss) before tax
|
15.9
|
(5.3)
|
(2.1)
|
8.5
|
|
Taxation
|
(3.9)
|
-
|
0.5
|
(3.4)
|
|
Profit/ (loss) for the period
|
12.0
|
(5.3)
|
(1.6)
|
5.1
|
|
Basic earnings per share
|
4.4p
|
|
|
1.9p
|
4. OPERATING
SEGMENTS
The Group has two business segments: Natural
Resources and Transportation. These segments are strategic business
units with separate management and have different 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 and before 'adjusting items'. 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
costs.
|
Six months ended 30 June 2024
|
Natural
Resources
|
Transportation
|
Central
costs
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
Segment revenue
|
|
|
|
|
|
Total revenue
|
195.0
|
444.3
|
-
|
639.3
|
|
Segment profit/ (loss)
|
|
|
|
|
|
Adjusted operating profit/
(loss)
|
8.4
|
13.8
|
(5.9)
|
16.3
|
|
Profit/ (loss) from operations before
adjusting items
|
8.4
|
13.8
|
(5.9)
|
16.3
|
|
Adjusting items:
|
|
|
|
|
|
Transformation costs
|
-
|
-
|
(2.4)
|
(2.4)
|
|
Profit/ (loss) from operations
|
8.4
|
13.8
|
(8.3)
|
13.9
|
|
Net finance income
|
|
|
|
3.1
|
|
Profit before tax
|
|
|
|
17.0
|
|
Six months ended 30 June 2023
|
Natural
Resources
|
Transportation
|
Central
costs
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
Segment revenue
|
|
|
|
|
|
Total revenue
|
177.3
|
487.1
|
-
|
664.4
|
|
Segment profit/ (loss)
|
|
|
|
|
|
Adjusted operating profit/
(loss)
|
7.5
|
12.2
|
(4.7)
|
15.0
|
|
Profit/ (loss) from operations before adjusting
items
|
7.5
|
12.2
|
(4.7)
|
15.0
|
|
Adjusting items:
|
|
|
|
|
|
Intangible impairment
|
-
|
(5.3)
|
-
|
(5.3)
|
|
Transformation costs
|
-
|
-
|
(2.1)
|
(2.1)
|
|
Profit/ (loss) from operations
|
7.5
|
6.9
|
(6.8)
|
7.6
|
|
Net finance income
|
|
|
|
0.9
|
|
Profit before tax
|
|
|
|
8.5
|
5.
NET FINANCE INCOME/ (EXPENSE)
|
£m
|
H1 24
|
H1 23
|
|
|
|
|
|
Interest income from bank
deposits
|
3.5
|
1.6
|
|
Interest income on the net assets
of the defined benefit pension scheme
|
1.3
|
1.6
|
|
Finance income
|
4.8
|
3.2
|
|
|
|
|
|
Interest payable on banking
facilities and other similar charges*
|
(0.7)
|
(1.6)
|
|
Interest expense on lease
liabilities
|
(1.0)
|
(0.7)
|
|
Finance expense
|
(1.7)
|
(2.3)
|
|
|
|
|
|
Net finance income
|
3.1
|
0.9
|
*Other similar charges include
arrangement and commitment fees payable.
6.
TAXATION
|
£m
|
H1 24
|
H1 23
|
|
On profit for the period
|
|
|
|
Current tax charge for the
period
|
(0.9)
|
(0.7)
|
|
|
|
|
|
Deferred tax charge for the
period
|
(2.6)
|
(2.7)
|
|
|
|
|
|
Tax charge in the consolidated income
statement
|
(3.5)
|
(3.4)
|
|
£m
|
H1 24
|
H1 23
|
|
Tax reconciliation
|
|
|
|
Profit before tax
|
17.0
|
8.5
|
|
|
|
|
|
Taxation at 25.0% (H1 23:
23.5%)
|
(4.2)
|
(2.0)
|
|
Adjustments in respect of prior
years
|
0.7
|
-
|
|
Disallowed expenses
|
-
|
(1.3)
|
|
Rate adjustment relating to
deferred taxation
|
-
|
(0.1)
|
|
|
|
|
|
Tax charge in the consolidated income
statement
|
(3.5)
|
(3.4)
|
7.
EARNINGS PER
SHARE
The calculation of earnings per share is based
on profit of £13.5m (H1 23: £5.1m) and the number of shares set out
below.
|
|
H1 24
|
H1 23
|
|
|
Number
|
Number
|
|
|
(millions)
|
(millions)
|
|
|
|
|
|
Weighted average number of
ordinary shares in issue for basic earnings per share
calculation
|
273.2
|
275.8
|
|
Dilutive potential ordinary shares
arising from employee share schemes
|
2.9
|
4.6
|
|
Weighted average number of
ordinary shares in issue for diluted earnings per share
calculation
|
276.1
|
280.4
|
8.
DIVIDENDS
£2.2m dividends were paid or provided for in
respect of the six months ended 30 June 2024 (H1 23:
none).
9.
INTANGIBLE
ASSETS
|
|
Goodwill
|
Customer relationships
|
Other acquired intangibles
|
Other intangibles
|
Assets under development*
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Cost
|
|
|
|
|
|
|
|
At 1 January 2023
|
54.1
|
15.4
|
9.7
|
16.2
|
-
|
95.4
|
|
Additions
|
-
|
-
|
-
|
0.1
|
-
|
0.1
|
|
Disposals
|
-
|
-
|
-
|
(0.1)
|
-
|
(0.1)
|
|
At 31 December 2023
|
54.1
|
15.4
|
9.7
|
16.2
|
-
|
95.4
|
|
|
|
|
|
|
|
|
|
At 1 January 2024
|
54.1
|
15.4
|
9.7
|
16.2
|
-
|
95.4
|
|
Additions
|
-
|
-
|
-
|
-
|
2.7
|
2.7
|
|
Disposals
|
-
|
-
|
-
|
-
|
-
|
-
|
|
At 30 June 2024
|
54.1
|
15.4
|
9.7
|
16.2
|
2.7
|
98.1
|
|
|
|
|
|
|
|
|
|
Accumulated amortisation/ impairment
|
|
|
|
|
|
|
|
At 1 January 2023
|
9.0
|
15.4
|
9.7
|
9.1
|
-
|
43.2
|
|
Charge in year
|
-
|
-
|
-
|
1.3
|
-
|
1.3
|
|
Impairment in year
|
-
|
-
|
-
|
5.3
|
-
|
5.3
|
|
Disposals
|
-
|
-
|
-
|
(0.1)
|
-
|
(0.1)
|
|
At 31 December 2023
|
9.0
|
15.4
|
9.7
|
15.6
|
-
|
49.7
|
|
|
|
|
|
|
|
|
|
At 1 January 2024
|
9.0
|
15.4
|
9.7
|
15.6
|
-
|
49.7
|
|
Charge in period
|
-
|
-
|
-
|
0.1
|
-
|
0.1
|
|
At 30 June 2024
|
9.0
|
15.4
|
9.7
|
15.7
|
-
|
49.8
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
|
At 30 June 2024
|
45.1
|
-
|
-
|
0.5
|
2.7
|
48.3
|
|
At 31 December 2023
|
45.1
|
-
|
-
|
0.6
|
-
|
45.7
|
*Assets under development relate
to the investment in a new HR system.
Goodwill has been allocated to the applicable
cash generating units of the Transportation segment (£15.5m (H1 23:
£15.5m)) and the Natural Resources segment (£29.6m (H1 23:
£29.6m)).
The Group reviews the value of goodwill and in
the absence of any identified triggering events, 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.
At 30 June 2024, the Group carried out a
review of potential goodwill impairment indicators or triggers in
order to determine if a full impairment review is required. No
triggers were identified. As such, a full impairment review of each
CGU will be carried out at 31 December 2024.
10.
PROPERTY, PLANT AND
EQUIPMENT
|
|
|
|
Right-of-use assets
|
|
|
|
Plant & equipment
|
Assets under construction*
|
Land & buildings
|
Vehicles, plant & equipment
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
At 31 December 2023
|
|
|
|
|
|
|
Cost
|
15.0
|
-
|
19.5
|
32.7
|
67.2
|
|
Accumulated depreciation and
impairment
|
(14.6)
|
-
|
(9.8)
|
(16.0)
|
(40.4)
|
|
Net book value
|
0.4
|
-
|
9.7
|
16.7
|
26.8
|
|
|
|
|
|
|
|
|
At 30 June 2024
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
At 1 January 2024
|
15.0
|
-
|
19.5
|
32.7
|
67.2
|
|
Additions
|
-
|
1.8
|
3.7
|
4.4
|
9.9
|
|
Disposals
|
-
|
-
|
(4.1)
|
(6.3)
|
(10.4)
|
|
At 30 June 2024
|
15.0
|
1.8
|
19.1
|
30.8
|
66.7
|
|
|
|
|
|
|
|
|
Accumulated depreciation
and impairment
|
|
|
|
|
|
|
At 1 January 2024
|
14.6
|
-
|
9.8
|
16.0
|
40.4
|
|
Charge in period
|
0.1
|
-
|
1.4
|
4.3
|
5.8
|
|
Disposals
|
-
|
-
|
(2.2)
|
(4.1)
|
(6.3)
|
|
At 30 June 2024
|
14.7
|
-
|
9.0
|
16.2
|
39.9
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
At 30 June 2024
|
0.3
|
1.8
|
10.1
|
14.6
|
26.8
|
|
|
|
|
|
|
|
*Assets under construction relate
to leasehold improvements under way at the new London head
office.
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
£69.8m (FY 23: £59.2m).
|
|
30 June 2024
|
31 December 2023
|
|
|
£m
|
£m
|
|
Cash and cash
equivalents
|
166.0
|
164.4
|
|
Net cash
|
166.0
|
164.4
|
|
|
|
|
12.
PENSIONS
The Group operates a defined benefit pension
scheme in the UK; contributions are paid by subsidiary
undertakings. There are also two defined contribution pension
schemes in place in the UK and contributions are made both by
subsidiary undertakings and employees. The total pension charge in
the income statement is defined benefit scheme net income of £0.4m,
and defined contribution scheme operating costs of £6.1m (H1 23:
defined benefit scheme net income of £0.2m, and defined
contribution scheme operating costs of £6.1m).
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 2022 and this was updated to 30 June 2024 by a
qualified independent actuary. At 30 June 2024, there were 2,886
retirees and 2,601 deferred members (2023: 2,885 retirees and 2,412
deferred members). The weighted average duration of the obligations
is 11.4 years (2023: 11.9 years).
|
|
At 30 June
2024
|
At 31 December
2023
|
At 31 December
2022
|
|
|
£m
|
£m
|
£m
|
|
Present value of defined benefit
obligations
|
(522.4)
|
(542.6)
|
(527.1)
|
|
Fair value of scheme
assets
|
577.5
|
596.1
|
587.3
|
|
|
|
|
|
|
Recognised asset for defined benefit
obligations
|
55.1
|
53.5
|
60.2
|
Movements in
present value of defined benefit obligations
|
|
At 30 June
2024
|
At 31 December
2023
|
|
|
£m
|
£m
|
|
|
|
|
|
At 1 January
|
542.6
|
527.1
|
|
Interest cost
|
12.7
|
25.5
|
|
Remeasurements - demographic
assumptions
|
1.4
|
(1.0)
|
|
Remeasurements - financial
assumptions
|
(22.3)
|
14.8
|
|
Remeasurements - experience
adjustments
|
4.1
|
10.5
|
|
Benefits paid
|
(16.1)
|
(34.3)
|
|
At end of period
|
522.4
|
542.6
|
Movements in
fair value of scheme assets
|
|
At 30 June
2024
|
At 31 December
2023
|
|
|
£m
|
£m
|
|
|
|
|
|
At 1 January
|
596.1
|
587.3
|
|
Interest income
|
14.0
|
28.7
|
|
Remeasurements - return on
assets
|
(18.1)
|
6.5
|
|
Contributions by
employer
|
1.7
|
8.1
|
|
Administrative expenses
|
(0.1)
|
(0.2)
|
|
Benefits paid
|
(16.1)
|
(34.3)
|
|
At end of period
|
577.5
|
596.1
|
Expense
recognised in the income statement
|
|
H1 24
|
H1 23
|
|
|
£m
|
£m
|
|
|
|
|
|
Administrative expenses paid by
the pension scheme
|
(0.1)
|
(0.1)
|
|
Administrative expenses paid
directly by the Group
|
(0.8)
|
(1.3)
|
|
Interest income on the net assets
of the defined benefit pension scheme
|
1.3
|
1.6
|
|
|
0.4
|
0.2
|
Fair value of
scheme assets
|
|
At 30 June
2024
|
At 31 December
2023
|
|
|
£m
|
£m
|
|
Global equities
|
95.3
|
99.5
|
|
Multi-asset growth
funds
|
46.9
|
65.9
|
|
Multi-credit fund
|
85.1
|
96.6
|
|
LDI plus collateral
|
330.6
|
323.8
|
|
Cash
|
19.6
|
10.3
|
|
|
577.5
|
596.1
|
Principal
actuarial assumption (expressed as weighted
averages)
|
|
At 30 June
2024
|
At 31 December
2023
|
|
|
%
|
%
|
|
Discount rate
|
5.15
|
4.75
|
|
Future pension
increases
|
2.95
|
2.90
|
|
Inflation assumption
|
3.10
|
3.05
|
Weighted average life expectancies from age 65
as per mortality tables used to determine benefits at 30 June 2024
and 31 December 2023 are:
|
|
At 30 June
2024
|
At 31 December
2023
|
|
|
Male
|
Female
|
Male
|
Female
|
|
|
(years)
|
(years)
|
(years)
|
(years)
|
|
Currently aged 65
|
22.0
|
23.9
|
22.0
|
23.8
|
|
Non-retirees currently aged
45
|
23.0
|
25.2
|
22.9
|
25.1
|
In accordance with the pension
regulations, a triennial actuarial review of the Costain defined
benefit pension scheme was carried out as at 31 March 2022. In June
2023, the valuation and updated deficit recovery plan were agreed
with the Scheme Trustee resulting in cash contributions of £3.3m
for each year commencing 1 July 2023 (increasing annually with
inflation) until the deficit is cleared, and an additional
contribution so that the total deficit contributions match the
total dividend amount paid by the Company each year.
As part of the agreement, the Scheme funding
position is assessed each 31 March and, if the funding level (on a
Technical Provisions basis) is more than 101%, contributions will
stop for the following 1 July to 30 June. If the funding level
falls below 101% at the following 31 March, contributions will
resume for the next year starting 1 July to 30 June at the agreed
new level.
An assessment of the Scheme
funding position was carried out on the 31 March 2024 position, and
as the funding level (on a Technical Provisions basis) was more
than 101%, contributions will stop from 1 July 2024 to 30 June
2025. These contributions would have amounted to £3.4m for the
period, should the Scheme funding level have been less than
101%.
In addition to contributions being
stopped for a year, as the funding level is above 101%, "dividend
parity" will be suspended for a year. Under the dividend parity
arrangement, an additional matching contribution (the excess of the
total dividend above the Scheme contribution) is paid to the
Costain Pension Scheme, should the total of the interim and final
dividends for a financial year paid to the shareholders of Costain
be greater than the contributions paid into the Scheme in the
previous Scheme financial year, which runs from 1 April to 31
March.
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 additional
contributions arising from this agreement in future financial
statements.
Defined
contribution schemes
Two defined contribution pensions are
operated. The total expense relating to these plans was £6.1m (H1
23: £6.1m).
13.
SHARE
CAPITAL
|
|
H1 24
|
|
H1 23
|
|
|
Number (millions)
|
Nominal value £m
|
|
Number (millions)
|
Nominal value £m
|
|
Issued share capital
|
|
|
|
|
|
|
Shares in issue at beginning of
period - ordinary shares of 50p each, fully paid
|
276.7
|
138.3
|
|
275.1
|
137.5
|
|
Issued in year
|
1.8
|
0.9
|
|
1.6
|
0.8
|
|
Reduction in nominal value
(transfer to capital redemption reserve)
|
-
|
(136.4)
|
|
-
|
-
|
|
Shares in issue at end of period -
ordinary shares of 1p each, fully paid
|
278.5
|
2.8
|
|
276.7
|
138.3
|
The 2021 LTIP vested in the half
year and 1,630,000 shares were issued in April
2024.
A total of 117,144 shares were
issued under the Scrip Dividend Scheme during H1
2024.
On 17 May 2024, the Company reduced the nominal value of its
278,348,885 ordinary shares in issue at that date
from £0.50 to £0.01. The reduction was completed by subdividing
each £0.50 ordinary share in issue into one ordinary share of £0.01
and one deferred share of £0.49. All deferred shares were
then bought back for total aggregate consideration of £0.01 and
cancelled on 20 May 2024. The Company's
issued ordinary share capital
remained unchanged immediately
after the transaction and each shareholder's
proportionate interest in the share capital of the Company
remained unchanged. Aside from the change
in nominal value, the rights attaching to the ordinary shares
(including voting and dividend rights and rights on a return of
capital) remained unchanged.
The Company's issued share capital comprised
278,466,029 ordinary shares of £0.01 each as at 30 June
2024.
All shares rank pari passu regarding
entitlement to capital and dividends.
14. EVENTS
AFTER THE REPORTING DATE
Dividend
As reported above, an interim dividend of 0.4p
per share has been declared for the six months ended 30 June
2024.
Share
buyback
As reported above, a £10m share buyback has
been announced on 21 August 2024.
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 Results for the six months ended 30 June 2024
("H1 24") of Costain Group PLC for the 6 month period ended
30 June 2024 (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.
The interim financial statements comprise:
·
the Group Balance Sheet as at 30 June 2024;
·
the Group Income Statement and the Group Statement of Comprehensive
Income and Expense for the period then ended;
·
the Group Cash Flow Statement for the period then ended;
·
the Group 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 six months ended 30 June 2024 ("H1 24") 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.
Basis for conclusion
We conducted our review in accordance with
International Standard on Review Engagements (UK) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Financial Reporting Council for use in
the United Kingdom ("ISRE (UK) 2410"). 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 six months ended 30 June 2024 ("H1 24") and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the interim
financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less
extensive than those performed in an audit as described in the
Basis for conclusion section of this report, nothing has come to
our attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements
and the review
Our responsibilities and those of the directors
The Results for the six months ended 30 June 2024
("H1 24"), 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 six
months ended 30 June 2024 ("H1 24") in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority. In preparing the Results for
the six months ended 30 June 2024 ("H1 24"), including the interim
financial statements, the directors are responsible for assessing
the group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the group or to cease operations, or have no realistic
alternative but to do so.
Our responsibility is to express a conclusion on the
interim financial statements in the Results for the six months
ended 30 June 2024 ("H1 24") based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on
procedures that are less extensive than audit procedures, as
described in the Basis for conclusion paragraph of this report.
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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
20 August 2024
