Costain Regulatory News (COST)

16 Mar 2005 07:01

Costain Group PLC16 March 2005 Costain Group PLC("Costain" or the "Group") Audited results for the year ended 31 December 2004 Costain, the international engineering and construction group, which hasrecently secured major AMP4 contract wins, announces increased turnover andprofits for the year ended 31 December 2004. Financial highlights • Total turnover of £702.9 million (2003: £650.2 million) +8% • Operating profit of £18.9 million (2003: £15.5 million) +22% • Profit before tax of £19.5 million (2003: £16.1 million) +21% • Earnings per share of 4.3p (2003: 3.8p) +13% • Forward order book at 31 December in excess of £1.1 billion +37% Operational highlights • AMP4 contracts from Thames Water, Welsh Water and Yorkshire Water and at preferred bidder status for Southern Water and United Utilities • Return to profitability in Building • First major win for China Harbour joint venture: breakwater project in Mexico Corporate developments • Proposals to restructure balance sheet and facilitate resumption of dividends • Company well positioned to adopt International Financial Reporting Standards • Search underway for right candidate to succeed Stuart Doughty, due to retire by September 2006 The Chairman, David Jefferies, commented: "I am delighted to report that we have made excellent progress and this isreflected in an outstanding result for the year. We have made a strong start to2005 with a forward order book currently standing at some £1.1 billion. Costaincan be proud of its achievements over the last few years. With a restoredpride, a strong brand and highly skilled teams led by outstanding management, weare looking forward to the future with confidence." 16 March 2005 ENQUIRIES:Costain Group PLC Tel: 01628 842 444Stuart Doughty, Chief ExecutiveCharles McCole, Finance DirectorGraham Read, Public Relations College Hill Tel: 020 7457 2020Mark GarrawayMatthew Gregorowski CHAIRMAN'S STATEMENT Overview I am delighted to report that we continue to make excellent progress and this isreflected in an outstanding result for the year. Through a constant focus on our plan for growth, we have enhanced Costain'sreputation both with existing and new clients. The level of repeat businessthat we are winning is particularly pleasing and confirms the high regard inwhich the Group is now held. This is particularly demonstrated by the major contract wins during the year inthe water sector where long-term contracts have been awarded in connection withthe latest Asset Management Programme ("AMP4"). During the year we won AMP4contracts from Thames Water, Yorkshire Water and Welsh Water. We also securedthe country's first water industry Public Private Partnerships (PPP) contract, a25-year project, in conjunction with Severn Trent, to deliver water services tothe Ministry of Defence's 1,500 sites throughout the UK. As Stuart Doughty, in his Chief Executive's Review, reports our success in thissector has continued in 2005. This provides an extremely robust forward orderbook for the next five years, with secure margin levels. On the international front, our key shareholders remain very supportive and wecontinue to develop opportunities where we can utilise our joint skills. Forexample, the opportunities which arise from rationalisation of the Malaysianwater industry. The joint venture with China Harbour Engineering has also madean excellent start with a major contract for Sempra Energy in Mexico. Our policy of being selective in the work for which we tender, had a marginalaffect on turnover in 2004 but has undoubtedly increased significantly thequality of the Group's earnings. As the results testify, this policy willremain central to the Group's approach to securing new business. Results Total turnover of £702.9 million (2003: £650.2m) was up 8% on the previous yearwith profit on ordinary activities before taxation of £19.5 million (2003:£16.1m), an increase of 21%. Earnings per share were 4.3p (2003: 3.8p), up 13%on last year. The Group has no significant borrowings and the net cash balances at the end ofthe year totalled £62.6 million (2003: £70.6m) including the Group's share ofcash held by joint arrangements (construction joint ventures) of £18.9 million(2003: £29.3m). As forecast, cash levels have reduced in line with theincreased level of framework contracts undertaken by the Group with the resultthat there was a cash outflow during the year of £8.0 million (2003: £0.7moutflow). Balance Sheet Restructuring Following the Group's much improved financial performance over the past threeyears, we will be bringing forward proposals at an Extraordinary General Meetingto be held immediately before our Annual General Meeting to restructure theCompany's balance sheet to remove the historical losses shown in the profit andloss account. A positive decision by shareholders at the Extraordinary GeneralMeeting and subsequent approval by the Court of these arrangements will allowthe Board to consider, subject to prevailing trading conditions, a resumption ofdividend payments from 2006. Any future dividend policy will in turn have to take account of the Group'spension fund liabilities. We are, therefore, separately reviewing the pensionscheme with the objective of finding an optimal balance between the scheme'srequirements and the Group's obligations. Corporate Governance and the Board The Board continues to take steps to ensure compliance with the Combined Codewherever possible and where it is in the Company's best interests. In accordancewith the Combined Code the Board established a formal process, led by myself,for the evaluation of the performance of the Board and its principal Committees.This review process was carried out with the assistance of external consultantsand their report was considered and acted upon by the Board. The Company has invested a great deal of time in preparation for theintroduction of International Financial Reporting Standards and is wellpositioned to handle the introduction of the new requirements. Membership of the Board has seen a number of changes during the year. - Dato' Wahid Omar, the Managing Director and Chief Executive of UnitedEngineers (Malaysia) Berhad ("UEM") left the company and the Board to take upthe post of Chief Executive of Telekom Malaysia Berhad. He has been replaced byDato' Ahmad Pardas Senin who is now the Managing Director and Chief Executive ofUEM. - Mr Amin Lana has retired and has been replaced by Mr Mohd AzmanSulaiman. - Mrs Leslie Rogers a nominee of Raymond International WLL resigned fromthe Board to spend more time with her family in the USA. We thank Dato' Wahid Omar, Mr Amin Lana and Mrs Leslie Rogers for theircontributions to the Board. The number of major shareholder nominated directorshas reduced to three. During the year Raymond International WLL took the decision to sell down itsshareholding. We are indebted to Raymond International WLL for the support thatthey gave Costain over the difficult period that the Company faced in the mid1990s. The share disposal has improved the Group's liquidity. Mr Doughty has been responsible for leading the management of Costain through asignificant period of recovery. Mr Doughty is due to retire by September 2006and the Board has commenced the process of looking for a successor to take theCompany forward. We are confident that succession will be handled in an orderlyand efficient manner. The Board was delighted with Stuart Doughty's appointmentas a Companion of the Order of St Michael and St George (CMG) in the New YearsHonours. The award recognised Mr Doughty's services to international trade andinvestment. People Our management teams and staff have focused on high quality work, improvedprofitability and a safe and sustainable working environment, all of which havebeen reflected in the excellent performance for the year. As the business growswe continue to focus on succession planning including developing the skills ofour existing staff and seeking to recruit new people who have the aptitude andexperience to add value to our business. We thank all of our staff for theircontributions during the year. Outlook Costain made excellent progress during 2004 with a forward order book as at 31December 2004 of £1.1 billion and with a further £1 billion under negotiation. The industry as a whole has commented on the slowing in central Governmentinvestment in road and healthcare infrastructure, we believe that we will seegreater clarity on spending levels following the impending General Election.The success achieved during 2004, particularly in the water sector, has greatlyincreased the proportion of business derived from the private sector. This,combined with our policy of reducing and managing risk whilst focusing on theneeds of our key customers, will continue to deliver enhanced turnover andprofitability. Costain can be proud of its achievements over the last few years. With arestored pride, a strong brand and highly skilled teams led by outstandingmanagement, we are looking forward to the future with confidence. David G Jefferies 15 March 2005 CHIEF EXECUTIVE'S REVIEW 2004 has been an eventful year and rewarding for the business with many of theactions taken in earlier years now providing a long-term secure future for theGroup. Our patience in pursuing the water utility market has shown considerableresults, despite earlier concerns regarding slow negotiations, coupled withcommensurably high tender costs. However, we have gained a very strong positionin securing a significant proportion of the utilities' capital asset programmesfor the next five years, many renewable to ten. These contracts will giveCostain a highly significant long-term workflow which will not be susceptible torisks associated with normal contracting and to external factors such asdownturn in Government expenditure. We have seen a slowing down in hospital investment under the Procure 21 approachas the various trusts find ways of accommodating this new method of procurement.However, this has been complemented by considerable expenditure in educationwhere we are seeking to secure a dominant position. The Government's commitmentto the transport programme has continued, but has been translated into long terminvestment producing later starts for the capital programme. Our position onmajor rail infrastructure schemes has allowed us to weather this slow down. Despite concerns in the housing market, we continue to provide infrastructurefor a large number of house builders and, whilst the commercial market isslowing down, retail is continuing at a strong level with inner city and townrefurbishment programmes being rolled out, as well as investment on mega-storesand out-of-town shopping. Our investment in Spain, being close to Gibraltar, is divorced from the main andvery susceptible tourist areas and has not suffered any effect from the downturnin house sales experienced in the more populated areas. We have also managed,through our joint venture with Banco Santander, to secure other tracts of land,given us an ongoing portfolio of land for development. Inflation in the UK has remained stable, as have interest rates throughout theperiod, giving rise to considerable confidence in the market, especially ininvestment in both public and private infrastructure. I believe our strongperformance and strict adherence to a low risk strategy is now producing asustainable and robust profit stream, whilst adhering entirely to the coreactivity of contracting. A key part of moving the Company forward was the development and recruitment ofindividuals who understood the Costain culture and would play a key role inproviding a quality service. They have added strength to our core skills andgiven us additional knowledge in sectors such as education and nuclear, where wehope to repeat the success we have enjoyed in the water and health sectors. We have made significant progress in 2004, particularly in highways andtransportation. We were subject to a further third party briefing assessmentregarding our overall capability - the Highway Agency's Capability AssessmentToolkit. The Company's commitment was reflected in a score of 70, out of apossible 72, which was the highest of all UK contractors. It was alsoconfirmation that we have preserved the brand strength and added much to stayahead of the competition and keep the Costain name to the fore. With the increase in the nuclear market we have now pre-qualified for a numberof schemes for AWE, BNFL and UKAEA. This is demonstrated with contracts forproject management, design and build treatment plants and short listing for thedesign of a major cementitious plant for nuclear waste. Further, we havesuccessfully pre-qualified for the first substantial decommissioning project(£150 million plus) under the newly formed Nuclear Decommissioning Authority,now responsible for decommissioning the majority of the UK's nuclear civilianasset base. Similarly, the Department for Education and Skills capital programme forBuilding Schools for the Future (BSF), is valued at £2.5 billion per annum inaddition to existing education construction spending. Our recently recruitedDirector for Education has an excellent platform via our Ealing Schools andStockley Academy projects from which to capture a significant share of the "Local Education Partnerships" that are programmed over the next decade withinthe BSF programme. A further reflection on the Company's performance was that the Group achievedthe highest number of awards at the 2004 Royal Society for the Prevention ofAccidents' (ROSPA) Occupational Health and Safety Awards. Nearly 400 businessesand organisations from the UK's construction and engineering industry werehonoured by RoSPA for their safety records over the year with Costain in numberone position. Costain Oil, Gas & Process received the President's award for 13years' of exceptional performance and eleven gold medals went to Costainoperations. This fully underlined our commitment to safety and showed we havecontinued our focus on health and safety throughout the Group. We started with 'Be Safe', an initiative to improve safety awareness in theCompany some three years ago which has halved our accident frequency ratio overthe period. Now we face a new challenge of sustainability. Governments,communities and clients are just some of the external audiences which areincreasingly challenging companies to account for their environmental andsustainable performances. We have responded to this and launched an initiativeentitled 'Save It' to generate a culture of conservation within the workingenvironment. We have a commitment to a prudent use of natural resources, protecting theenvironment and reducing waste, which will help to ensure good commercialpractice. Our strategy is to involve all employees, suppliers andsub-contractors in an environmentally responsible approach. As with all otherparts of the Costain operation, we have set ourselves challenging targets and wemust now ensure they are achieved. Current Trading and Prospects Asset Management Despite the inevitable slow down as the programmes for Asset ManagementProgramme 4 (AMP4) were being agreed between the regulator and the utilities,2004 was a year of considerable achievement for our Asset Management business.We were awarded a five-year contract under AMP4 for Thames Water with potentialfor extension to 10 years. This is a contractual agreement to build all of thecapital works within the M25. In addition, we have also been selected for alist of preferred suppliers for major process and network contracts, similar tothe scheme worth £103 million completed at Perry Oaks and Iver South. We have also been awarded two further frameworks for Yorkshire Water for theprovision of a significant proportion of their capital works of the order of£180 - £200 million with again the possibility to extend to 10 years. Following on from the good news concerning Thames and Yorkshire, Costain wasthen able to announce, just weeks later, that the Company had been selected byDwr Cymru Welsh Water as Preferred Partner for their programme, amounting to£20 million per year which could run over 15 years, beginning on 1 April, 2005.Costain will be primarily responsible for civil construction projects in thenorth Wales region. After considerable tender activity during the latter part of the year, we are atpreferred bidder status on two major schemes: • United Utilities' five-year water framework contract, value ofapproximately £70m per year, in joint venture with Galliford Try; • The major part of Southern Water's £1.5 billion five-year capitalinvestment programme, in joint venture with United Utilities and MontgomeryWatson Harza. We have developed specialist skills focusing not only on this sector but alsothe manner in which we have worked with these clients. The regulator OFWAT hascommitted the water utilities to a major programme of expenditure and as aconsequence of our ability to produce high quality service over a prolongedperiod we have secured a major portion of this work. The successful framework formula which we have developed in the water sector isnow being transferred to other markets. Costain has secured a five-yearpartnering agreement with Manchester Airport Group, worth a potential £50million, to upgrade the infrastructure at Manchester, East Midlands, Bournemouthand Humberside Airports. There is a growing demand in most customer-focussedmarkets for the provision of infrastructure to be conducted in an expeditiousand efficient way. Frameworks provide clients with this facility. Civil Engineering We have secured a number of major road schemes in south Wales during the period,including Porth and Lower Rhondda Fach Relief Road, now valued at approximately£60 million, and Sirhowy Way, a PFI contract value approximately £34 million,which will then be maintained over a period of 30 years. The project for the improvements to the intersection with the A34/M4 Junction 14at Chieveley was completed ahead of programme and has generated considerablepraise from road users for the efficient way in which the contract wasadministered. The project has received a Gold award in the ConsiderateContractors Scheme. The A303 project at Stonehenge, value in excess of £200 million, havingsuccessfully obtained route consent is now awaiting regional approval beforecommencing. Whilst the Government remains committed to the need for investmentin transport and specifically the roads infrastructure programme, a number ofalternative financial mechanisms are being reviewed to speed up the process. The Channel Tunnel Rail Link (CTRL) contract at Stratford was completed ahead ofprogramme and we completed the relining of Network Rail's tunnels at Strood andHigham in Kent. At the CTRL St Pancras contract we opened the interim station ontime which allowed Midland Mainline to continue to operate. Despite thecomplexity of the scheme, one million man-hours were completed with zerolost-time accidents. In West London, Costain secured a contract for the replacement of the LondonUnderground bridgeworks at White City as part of the major retail developmentundertaken by Chelsfield/Multiplex, which was valued at £23 million. Thecontract is a major continuation of our other railworks in London - CTRL andKings Cross. Costain has also embarked on two five-year framework contracts forinfrastructure and drainage for Tube Lines. Building The Costain Building Division is continuing its philosophy of de-risking and, asa result, the Division has established a stronger client base and turnover hasrisen from £142 million in 2003 to £225 million in 2004. Due to an inevitablelonger period of negotiation, new orders in 2004 totalled £203 million, with afurther £232 million under negotiation as preferred contractor which alreadygives us 60% of the 2005 forward order book. These figures show improvement andpoint the way to a more promising future. The Healthcare sector remains a key market and the final phase of the KingsCollege Hospital PFI scheme was completed, in addition to schemes at Ormskirkand Shrewsbury. A total of ten ProCure 21 schemes were in design orconstruction phase during the course of the year with a total value of £70million. In 2004, we completed the majority of the Diamond Synchrotron building atHarwell, Oxfordshire, the UK's largest scientific research project for 30 years.Progress has been good and our performance on the project paved the way forthe award of the ISIS contract (value £22 million), another high-tech scientificfacility at Harwell. In the retail sector, Costain's partnership with Tesco continues and thedivision also won development contracts in Enfield, Birmingham, Hemel Hempsteadand London. The residential market remained buoyant during the year andproduced a number of major new contracts. Costain has also been awarded the high-profile construction contract (£23million) to restore and redevelop St Martin-in-the-Fields in Trafalgar Square.In addition, as construction partner to Serco Group plc, Costain will beresponsible for the design and build of the MoD's centre of excellence (£80million) at Shrivenham in Wiltshire. PFI The Government continues to promote PFI as a mechanism to enable infrastructureschemes to be delivered more quickly than would otherwise be the case undertheir own capital expenditure plans. Three projects were negotiated in joint venture to financial close in 2004 and afurther three achieved Preferred Bidder status. As mentioned earlier, the Sirhowy Enterprise Way in south Wales, the Aquatrine 'C' asset management contract for the MoD for the provision of water resources onMoD sites and the Kingston Hospital were negotiated to final close. We reached preferred bidder status on Ealing Schools, Kent Schools andShropshire Community Services, the last being with the same partners with whomwe won Kent Integrated Care Services. We are in discussions regarding joining aconsortium that is at preferred bidder status on the Northampton Schools PFI andin the last two of the 3 Shires batched mental services PFI, with the selectionof preferred bidder to be announced in May. The potential capital value ofthese projects is approximately £700 million and with Special Purpose Vehiclerevenues of over £2.5 billion over the life of the schemes. King's College Hospital continues well with both the Ruskin and Golden JubileeWing being handed over three months early. The project won the 2004 Award forBest Design for an operational PFI project across all sectors at the 2004 PFIAwards. Costain Oil, Gas & Process (COGAP) The new management team in this division has brought renewed focus to ouroperations in this fast growing market and we are beginning to see the benefitsof their efforts. We completed the Burlington Rivers Field terminal at Barrow and the Clean FuelsProject for TotalFinaElf (Milford Haven). Our joint venture company, CostainPetrofac Limited successfully completed the first year of a seven-year contractfor Hydrocarbon Resources Limited (Centrica). New work included the award ofthe front-end design of a processing facility for an oil major with thepossibility of continuing the implementation phase in 2005. We continue to recruit staff necessary to expand the existing shutdown andmaintenance operation in Abu Dhabi and to seek new opportunities in thesurrounding region, particularly in the area of gas processing. We have beeninvolved in submitting several major proposals for new gas plants in Iran thatshould come to fruition in 2005. In November, Pemex (Mexico) awarded a US$150 million, lump sum EPC contract toTechint and to COGAP as technology supplier. The facility at Tabasco, Mexicowill be the world's largest nitrogen rejection plant and will use Costain'sproprietary cryogenic process technology. We will be pursuing other similarprojects in 2005. Finally, our decision to develop a position within the UK nucleardecommissioning market led to work for UKAEA at Dounreay and at Harwell and forBritish Nuclear Group at Hunterston. These projects are part of the overall £2billion per annum spend in the sector in the UK over the coming twenty years. International Our principal shareholders remain very supportive and as Malaysia continues topromote privatisation we expect opportunities will arise in the future tocombine our expertise in the whole process of water privatisation, and themanagement of assets. Our joint venture with China Harbour is allowing us to access a significantproportion of the global ports and harbours market where there is considerableinvestment projected by the major port operators. The second half of 2004 saw us achieve the contract award for Costa Azul Gasproject in Mexico at the year-end valued at US$170 million. This is the firstproject resulting from the Costain China Harbour alliance. There is also anopportunity to build on this success and we are also awaiting the result of anumber of bids submitted in the latter part of 2004. The Group increased its shareholding in Costain (West Africa) Plc to 37% andcompleted a debt restructuring of that company. A new management team is now inplace and the prospects for 2005 are promising. Work in Iraq, as expected, has been slow due to security issues and the focuson the election. However, we expect further awards in the first half of 2005,which would consolidate our position in this region Alcaidesa Holding S. A. the Spanish registered company in which Costain holds a50% interest has enjoyed another highly successful year. The main thrust forthe company through 2004 was to advance the substantial infrastructure works onland forming part of the company's estate on the Costa del Sol near Gibraltar.Excellent progress has been achieved enabling us to complete significant landsales to Spanish development companies. Further infrastructure work will becompleted in 2005. Our second golf course is now under construction supervised by theinternationally renowned golf course designer Dave Thomas and should be readyfor play before the end of 2006. This new course will complement the adjoiningestablished Alcaidesa links course and both will be served by new clubhousefacilities, work on which will start on site in Spring 2005. Working with our joint venture partner, Santander, we have agreed to expandAlcaidesa's activities in the area and to build upon the company's reputation asmasterplanners and infrastructure providers. As a result, strategic landacquisitions have been made in Granada province and options over furthersubstantial tracts of land secured. Alcaidesa will now formulate masterplanproposals for this land bank, which when approved will be infrastructured andsold on to national developers. Further land purchase opportunities are being negotiated to ensure Alcaidesa hasa long-term flow of profitable development land to secure its future in theyears ahead. Safety, Health and the Environment Our track record in safety has been excellent during the year: • For the fifth year running Costain has managed to reduce its AccidentFrequency Ratio to a level where it currently stands at 0.26 which represents areduction of 21% on the figure for 2003. • We gained accreditation to OHSAS 18001 on 14 December 2004. OHSAS18001 is an international health & safety management standard which sitsalongside our existing registrations to ISO 9001 and 14001. • During the year the concept of Sustainable Construction has beenintroduced to the business by professional organisations such as the CITB andthe Environment Agency, both of whom are working with us to promote continuousimprovement in our drive towards sustainable construction. In this role threekey areas have been identified, namely the Environmental, Social and Economicalaspects relating to our operations. In each of these disciplines keyperformance indicators are measured and best practices distributed throughoutthe Group. • To verify that our Environmental Management and Health & Safetysystems are functioning efficiently, we were audited throughout the year byvarious external bodies. All of these produced favourable reports thatcontributed to the report produced by the Highways Agency's CapabilityAssessment Toolkit which stated that: "Costain's approach and deployment ofHealth and Safety appears exemplary and as a role model level in all areas.Environmental, social and economic sustainability are increasingly becoming acultural aspect of the company". • A new initiative has been developed branded 'Save It' in an effort tolimit waste in both the business and on our sites Business Systems Costain continues to invest capital and energy in continuously updating ourbusiness systems. Having completed the development of operational Best Practice,our skills transfer and awareness programme has seen approximately 1,400man-days of training completed. The Company launched an Internet Business Portal, named iCosnet, in January2004, which now supports over employees, clients and members of the Supply Chainin the delivery of knowledge, best practice and contract documentationthroughout our UK and international operations. This has been of significantvalue when successfully securing framework contracts. The system is in use onmost of our projects across the world and has received over two million accesshits in the last month. The Commercial Systems Replacement Programme is progressing well with therenewal of our back office systems with a modern integrated set of commercialand financial systems, streamlining the business and laying foundations for thedelivery of e-procurement and trading capability for the future. The programmeis due to complete on a phased basis during 2005 and 2006. Staff During the course of the year we strengthened our management structure byappointing heads of nuclear and education, to ensure a focused approach inthose emerging markets. Additional managers have also been appointed tostrengthen our Middle East position in the oil and gas business and similarlyin the building regions in the UK. I believe over the year we have promoted anenvironment for staff to deliver to their full potential and that has beenendorsed by our considerable contractual awards and recognition from Investorsin People. Furthermore, we have continued to promote our Building Awareness initiativehelping a chosen number of schools better understand the opportunities for youngstudents in our industry. This will produce considerable resource in comingyears, committed to both the Costain brand and the industry. Conclusion The year not only saw significant progress in performance, but also demonstratedthe success of our focus on building long-term partnership relationships. Themajority of contracts won during the year and of our forward order bookcomprises 5-10 year projects. A significant amount of this work is repeatbusiness reflecting the high levels of satisfaction amongst our client base.The long-term visibility of future earnings combined with a significantreduction in the churn rate of our client base is testimony to the progress theGroup has made. As the Chairman has reported, on the back of the Group's robust performance, weare in the process of restructuring the balance sheet to allow for the futurepayment of dividends. A resumption of dividend payments would be the ultimaterecognition of the outstanding achievements at Costain over the last threeyears. The recovery of the business is complete. Costain can look forward to astrong future including further progress in 2005. Stuart J Doughty 15 March 2005 COSTAIN GROUP PLC Preliminary Results for the year ended 31 December 2004 CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended 31 December 2004 2003 Notes Continuing £m Continuing £m TurnoverGroup undertakings and Group share of joint 1 702.9 650.2ventures and associates Less: Group share of joint ventures and associates (29.7) (26.7)turnover Group turnover 673.2 623.5 Cost of sales (645.0) (600.9) Gross profit 28.2 22.6 Administration expenses (18.0) (17.2) Operating profit from Group undertakings 10.2 5.4 Group share of joint ventures operating results 8.9 10.1 Group share of associates operating results (0.2) - Operating profit - Group and Group share of joint 18.9 15.5ventures and associates Net interest receivable/(payable) and similarincome/(charges)Group undertakings 2.3 1.7Joint ventures (0.6) (0.3)Other finance charges - Group undertakings (1.1) (0.8) Profit on ordinary activities before taxation 1 19.5 16.1 Taxation (4.3) (2.9) Profit for the financial year 15.2 13.2 Earnings per share - basic 2 4.3p 3.8pEarnings per share - diluted 2 4.3p 3.7p During the year and the previous year, no businesses were acquired and thereforeall continuing results arise from existing operations. COSTAIN GROUP PLC Preliminary Results for the year ended 31 December 2004 CONSOLIDATED CASH FLOW STATEMENT Year ended 31 December 2004 2003 Notes £m £m £m £m Net cash outflow from operating activities 4 (10.5) (5.8) Dividends from joint ventures 4.4 - Returns on investments and servicing of financeInterest received 2.6 2.2Interest paid (0.3) (0.5) Net cash inflow from returns on investmentsand servicing of finance 2.3 1.7 TaxationUK tax paid - -Overseas tax paid - (0.2) Capital expenditure and financial investmentPurchases of tangible fixed assets (1.7) (1.8)Sales of tangible fixed assets - -Capital repayments by investments 0.2 6.2Loans to joint ventures and associates (2.8) -Additions to investments (0.4) (0.1)Net cash (outflow)/inflow from capital expenditure andfinancial investment (4.7) 4.3 Net cash outflow before financing (8.5) - FinancingFinance lease capital payments (0.2) -New loans - 0.3Issue of ordinary shares 0.9 0.9Net cash inflow from financing 0.7 1.2(Decrease)/increase in cash in the year (7.8) 1.2 Reconciliation of net cash flow to movement in net cash 2004 2003 £m £m(Decrease)/increase in cash in the year (7.8) 1.2Cash outflow/(inflow) from finance lease capital payments/(loan financing) 0.2 (0.3) (7.6) 0.9Currency realignment (0.4) (0.8)Movement in net cash (8.0) 0.1New finance leases - (0.8) (8.0) (0.7)Net cash at 1 January 70.6 71.3Net cash at 31 December 62.6 70.6 COSTAIN GROUP PLC Preliminary Results for the year ended 31 December 2004 CONSOLIDATED BALANCE SHEET As at 31 December 2004 2003 Notes £m £m £m £mFixed assetsTangible assets 5.4 4.9Investments in joint ventures and associates Share of gross assets 109.9 75.7 Share of gross liabilities (90.9) (58.1) 19.0 17.6Loans to joint ventures 2.6 2.5Loans to associates 2.7 -Other investments 1.0 1.0Investments 25.3 21.1 30.7 26.0Current assetsStocks 1.0 1.6Debtors 159.7 122.4Cash at bank and in hand 64.1 72.0 224.8 196.0Creditors: amounts falling due within one yearBorrowings (1.0) (0.5)Other creditors (214.3) (193.9) (215.3) (194.4)Net current assets/(liabilities)Due within one year 2.1 (4.2)Due after more than one year 7.4 5.8 9.5 1.6Total assets less current liabilities 40.2 27.6 Creditors: amounts falling due after more than oneyearBorrowings (0.5) (0.9)Other creditors (3.0) (1.7) (3.5) (2.6) Provisions for liabilities and charges (4.2) (7.1) Net assets excluding pension liability 32.5 17.9Net pension liability (69.2) (54.5)Net liabilities (36.7) (36.6) Share capital and reservesCalled up ordinary share capital 35.3 34.5Share premium account 119.5 119.4Profit and loss account (191.6) (190.6)Equity shareholders' deficit 3 (36.8) (36.7)Equity minority interests 0.1 0.1 (36.7) (36.6) COSTAIN GROUP PLC Preliminary Results for the year ended 31 December 2004 STATEMENT OF TOTAL CONSOLIDATED RECOGNISED GAINS AND LOSSES 2004 2003 £m £mProfit for the financial year from Group undertakings 14.1 5.7Profit for the financial year from joint ventures 1.1 7.5 15.2 13.2Currency translation differences (0.2) 1.2Actuarial loss recognised in the pension scheme (22.8) (44.0)Deferred tax arising thereon 6.8 13.2Total recognised losses relating to the year (1.0) (16.4) NOTES TO THE ACCOUNTS 1 Business and geographical segment information Business segment informationIn the opinion of the directors, the only material classes of business are the administering of theengineering and construction (E&C) projects and property development in Spain. All items below are E&Cprojects unless stated otherwise. Geographical segment Turnover Profit/(loss) Net assets/(liabilities)information by origin 2004 2003 2004 2003 2004 2003 £m £m £m £m £m £mContinuing operationsGroup undertakingsUnited Kingdom 647.4 583.9 10.2 7.8 (126.4) (125.6)Rest of the world 25.8 39.6 - (1.7) 2.8 (1.7)Reorganisation costs - UK - - - (0.7) - -Turnover, operating profit and 673.2 623.5 10.2 5.4 (123.6) (127.3)netliabilities of Groupundertakings Joint ventures United Kingdom 10.1 3.8 0.3 (0.2) 1.4 1.4Rest of the world - property 12.2 21.0 8.4 9.5 20.3 18.5developmentRest of the world 6.8 1.9 0.2 0.8 (0.1) 0.2 Associates Rest of the world 0.6 - (0.2) - 2.7 - 702.9 650.2 18.9 15.5 (99.3) (107.2) Net interest receivableand similar income 1.7 1.4Other finance charges (1.1) (0.8)Net cash 62.6 70.6Profit on ordinary activitiesbefore taxation and netliabilities 19.5 16.1 (36.7) (36.6) Turnover by destination is not materially different to turnover by origin. COSTAIN GROUP PLC Preliminary Results for the year ended 31 December 2004 2 Earnings per share The calculation of earnings per share is based on profit after taxation andminority interests of £15.2m (2003: £13.2m) and the number of shares set outbelow: 2004 2003Weighted average number of shares for basic earnings per share 351,190,999 344,300,294calculationDilutive potential ordinary shares:Warrants - 5,161,400SAYE Scheme 6,417,591 4,710,920Total dilutive potential ordinary shares 6,417,591 9,872,320Weighted average number of shares for fully diluted earnings per share 357,608,590 354,172,614calculation The number of shares has been adjusted for the issue of 7,999,990 ordinaryshares following the exercise of warrants, which raised £0.9m. 3 Reconciliations of movements in shareholders' funds 2004 2003 £m £m Profit for the financial year 15.2 13.2Other recognised losses in the year (16.2) (29.6)Total recognised losses relating to the year (1.0) (16.4)Share issue in year 0.9 0.9Net reduction in shareholders' funds (0.1) (15.5)Shareholders' deficit at 1 January (36.7) (21.2) Shareholders' deficit at 31 December (36.8) (36.7) 4 Notes to the cash flow statement Reconciliation of operating profit from Group undertakings to net cash outflowfrom operating activities 2004 2003 £m £m Operating profit from Group undertakings 10.2 5.4Depreciation 1.1 0.9Decrease in stocks 0.6 -Increase in debtors (38.3) (14.2)Increase in creditors 18.8 4.9Decrease in provisions (2.9) (2.8) Net cash outflow from operating activities (10.5) (5.8) The accounts and notes set out above do not constitute the Company's statutoryaccounts for the years ended 31 December 2004 and 2003 but are derived fromthose accounts. Statutory accounts for 2003 have been delivered to theRegistrar of the Companies and those for 2004 will be delivered in due course. The auditors have reported on these accounts; their reports were unqualified anddid not contain a statement under section 237 (2) or (3) of the Companies Act1985. This information is provided by RNS The company news service from the London Stock Exchange