Costain Regulatory News (COST)

31 Aug 2005 07:01

Costain Group PLC31 August 2005 Costain Group PLC ("Costain" or the "Group") Interim results for the six months ended 30 June 2005 Costain, the international engineering and construction group, announcessignificant contract successes across all its divisions and a record forwardorder book of £1.6bn. Financial highlights • Total turnover of £345.4 million (2004: £337.7* million) • Operating profit of £7.8 million (2004: £4.7* million) • Profit before tax of £7.5 million (2004: £5.4* million) • Earnings per share of 1.8p (2004: 1.3*p) • Forward order book at 30 June in excess of £1.6 billion; over 50% is repeat business • £700m of turnover secured for 2006 * includes the impact of IFRS Operational highlights • Market leading position in water sector cemented with major AMP4 contracts for Southern Water and United Utilities • $1.67bn Iranian gas contract award • £190m of major road projects secured and preferred bidder on additional projects • Building turnover up 55% on same period last year • Success in new market sectors including nuclear Commenting, the Chairman, David Jefferies, said: "Operationally, the Group made steady progress in the first half of 2005 andwill benefit from significant contract wins across all divisions. Equallysignificant is the profile of this work, which has resulted in £700m of turnoverfor 2006 and £340m for 2007 having been secured. Costain has now firmlyre-established its reputation in the industry and is gaining a high level ofrepeat business from key clients in strong market sectors." 31 August 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 AND CHIEF EXECUTIVE'S STATEMENT The first six months saw significant contract wins across the Group, producing astrong forward order book which stood at a record £1.6bn at 30 June 2005. Sincethen it has increased by £300m, securing £700m of turnover for 2006 and afurther £340m turnover for 2007. Moreover, a number of the Group's five yearframework contracts in the water sector, have the option of being extended by afurther five years; this is not reflected in the order book value. This longterm sustainable earnings stream gives the Group greater visibility and betterquality of earnings going forward. Costain has firmly established market leading positions, and its strategic goalsof establishing partnering relationships with key selected clients anddeveloping long-term framework agreements have been achieved. This approach hasalso led to early success in other sectors, which was demonstrated by the recentaward of a £50m framework agreement in the nuclear sector. RESULTS With effect from 1 January 2005 European Union listed companies are required toprepare consolidated financial statements in accordance with InternationalFinancial Reporting Standards ("IFRS"). The Group issued a report to the LondonStock Exchange on 17 August 2005 (the "Announcement"), which provided financialinformation showing the impact of the Group's transition from a UK GenerallyAccepted Accounting Principles ("UK GAAP") basis to an IFRS basis. The adoptionof IFRS will have no impact upon the underlying cash flows or trading activitiesof the Group but it will impact on the timing of both revenue and profitrecognition from its property development in Southern Spain. Under IFRS, revenue can now only be recognised when risk associated withownership of the land is transferred and all significant acts (such asinfrastructure works) are complete. The impact of this change is to defer salesrecognised by the joint venture. As we explained in the Announcement, this hasreduced the Group's earnings for the year ended 31 December 2004 by £6.4m andfor the six months ended 30 June 2004 by £1.9m. It is anticipated that themajority of these infrastructure works will be completed in 2005 and thecorresponding profit recognised accordingly. This is the first set of results that the Group is reporting under IFRS. Theresults for the six months ended 30 June 2005 show a profit before tax of £7.5m(2004: £5.4m*). Turnover for the first six months was £345.4m (2004: £337.7m*).Earnings per share were 1.8p (2004: 1.3p*). Profit from operations was £7.8m (2004: £4.7m*). At the half-year, the forward order book was £1.6bn (2004: £845m) up 90%. Worksecured since the half-year together with projects at preferred bidder statustakes the Group's potential forward order book to £2.3bn. The Group has no significant borrowings and net cash balances at the half-yeartotalled £44.4m (2004: £65.7m), including the Group's share of cash held byjoint arrangements (construction joint ventures) of £18.7m (2004: £25.1m). Thecontinuing changing profile of the business into framework/partnered clientrelationships will result in a more evenly balanced cash flow profile goingforward. * includes the impact of IFRS RESTRUCTURING At the Extraordinary General Meeting held on 28 April 2005, shareholdersapproved the reduction of share capital and cancellation of the share premiumaccount. The reduction of share capital was subsequently approved by the Courton 18 May 2005 and became effective on 20 May 2005. From this date thedistributable reserves were re-set at nil and therefore on this basis the Boarddoes not feel able to consider paying a dividend at this time. BANKING The Group recently negotiated increased borrowing and bonding facilities withits relationship banks and increased bonding facilities with the suretycompanies. These facilities subsist until 30 June 2007. BOARD On 25 April 2005, the Company announced that Andrew Wyllie, the former ManagingDirector of Taylor Woodrow Construction Limited, would succeed Stuart Doughty asChief Executive of the Company. Andrew joined the Company on 22 August 2005 andwill formally join the Board and take over the role of CEO on 12 September.Stuart will stand down from the Board on the same date. Stuart Doughty became Chief Executive on 1 July 2001 and has presided over aperiod of significant growth in turnover and profit, seeing a share price risefrom 9.5p to over 50p, all of which was driven by achieving the strategicobjectives Stuart set upon his arrival. The Company has an extremely strongforward order book stretching over some five years, which will providesustainable profits for the future - a key element of that strategy. The Boardis indebted to Stuart for his dedicated effort to improve the fortunes of theCompany and feels extremely fortunate to have had him at the helm of the Companyfor the last four years. TRADING AND PROSPECTS CIVIL ENGINEERING Water During the first six months of 2005, Costain secured yet further and indeedenhanced contracts with existing clients United Utilities and Yorkshire Water toadd to those contracts already secured with Thames Water and Welsh Water at theend of last year. The Group was also awarded the £60m five year frameworkcontract to provide clean water process and distribution for Bristol Water. The £700m five year contract award from Southern Water to Costain and itspartners, United Utilities and Montgomery Watson Harza is the largest individualframework secured in the water sector to date. To meet stringent regulatory andenvironmental demands in the most efficient and effective manner, Southern Waterhas outsourced full scheme creation and operational delivery to Costain and itspartners. This also demonstrates the confidence the client has in Costain tomeet their requirements and provide operational certainty. Aquatrine C, in joint venture with Severn Trent to provide water services forthe MoD in the whole of the east of England, also commenced this year with asmall level of capital works. The Group's success in the Water sector during the first half gave Costain inexcess of 20% of the UK's addressable AMP4 capital expenditure programme overthe next five to ten years. In addition, it gives us the opportunity to carryout further major schemes falling outside the current programme. As an example,Costain was awarded a contract in joint venture for the £66m major coastalsewerage upgrade at Margate and Broadstairs, Kent for Southern Water. Nuclear Decommissioning Costain has also been highly successful in entering the Nuclear Decommissioningmarket by applying a similar philosophy to that used by the Company in Water.During the first six months, the Group has delivered a series of smalldecommissioning projects at AWE Aldermaston, Burghfield and Harwell facilitiesin addition to ongoing work at Hunterston, and has been awarded preferred bidderposition on a long term framework for the AWE at Aldermaston. Costain was also awarded the first-phase contract to dismantle and remove plantand equipment from the Dragon Reactor at Winfrith, Dorset which builds on otherprojects for UKAEA and BNG. In North Wales, we have secured a five year majorcivils works framework for decommissioning work at the Trawsfynydd Power Stationestimated at £50m over the five year contract. Regional Infrastructure In addition to our projects at Stratford, Kings Cross and St Pancras, Costain isdelivering the major rail infrastructure to allow the full retail development atWhite City to proceed. Costain is constructing viaducts and retaining walls onthe LUL Hammersmith and City Line and demolishing redundant infrastructure. TheCompany sees good strategic growth in this market, especially with the recentaward to London of the 2012 Olympics. In March 2005, Costain delivered the new £17m harbour and arm at West Bay,Dorset on some of the most exposed coastline in the South West, and in the Northcompleted an arduous coastal defence scheme for DEFRA at Withensea on Spurn HeadHumberside, both receiving considerable commendation from local inhabitants andDEFRA alike. As a leading contractor in container ports, we have recently completed theFelixstowe Stage Two development, the final settlement of which is in part thesubject of an insurance claim, as a result of ground movement in the earlystages of the contract. The Group is also in the final stages of bidding forthe next major contract at Felixstowe for Hutchison Whampoa (value approximately£250m). Costain is also a member of the consortium bidding for P&O's LondonGateway Major Port Development and approach channel dredging work, which will beof similar overall value. The Road and Bridge market has been the backbone of the regional contractingbusiness and in 2005, despite the slow down in Regional Government procurementdue to the General Election, we have been successful in winning the new WaltonBridge over the Thames for Surrey County Council and an upgrade of Junction 9Interchange on the M62 at Rochdale, together with an adjoining major landremediation and infrastructure to a business park for Wilson Bowden PLC and theHighways Agency. Costain handed over aircraft stands and taxiways built in less than six monthsat the new Robin Hood Airport at Doncaster, its fifth consecutive successfulproject delivery for Peel Holdings. The Company was also awarded a three yearaircraft pavement framework by MAN-AIR for all their airports with a valueupwards of £50m. It is halfway through the delivery of the new charter stands atManchester Airport and taxiway widening at East Midlands Airport. Capital Projects Current work on major civil engineering projects has continued as forecast.Very few new schemes were awarded throughout last year, however, we have nowbeen successful in securing a number of major prestigious schemes, all enjoyingthe benefit of contract mechanisms giving long-term sustainability and securityof margin. The awards announced to date were in the South East, the A2/A282Junction Improvement and M25 Junction 1b-3 widening, together worth £138m, andthe M25 Holmesdale Tunnel Refurbishment valued at £57m. In South Wales, Costain has commenced work on the £60m project at Porth where itsuccessfully engineered the value of the scheme to save some 20% of the initialtarget price, and expects to complete the PFI project at Sirhowy Way within thebudgeted £34m before Christmas, ahead of programme. In Rail, CTRL St Pancras achieved another major milestone with the successfulcompletion of the new Thameslink Station Box on programme and achieved in excessof 2.7 million man-hours with no time lost due to accidents. Work at KingsCross Underground Station has also progressed satisfactorily. Costain has alsobeen awarded the Stage 1 contract for Battersea Park Station with a total valueof approximately £25m. BUILDING The first half of 2005 has seen continued growth in this segment with turnoverrising to £152m compared to £91m in 2004. A small profit has been posted aftersignificant expenditure on business development in the Healthcare and Educationsectors. New orders for the first half-year totalled £176 million with afurther £80m in July. The Group is now in a position to benefit from its focuson selected market sectors, where it is building strong relationships with lowrisk contracting. In Healthcare, Costain has been selected as preferred contractor on the ThreeShires PFI (£180m capital value) and is also participating in the Government'sIndependent Sector Treatment Centre programme working for Nations Healthcare onthe Queens Medical Centre, Nottingham Project. In the early part of the year,Kent Care Homes PFI reached completion as well as £21m of ProCure21 schemes.Kings College Hospital continues to perform well. At Kingston Hospital,construction and infrastructure services are underway. In Education, the Company was selected as preferred contractor for the MadejskiAcademy in Reading, (value £20m), preferred bidder on Kent Schools PFI (value£46m) which we anticipate closing in September, and in July reached financialclose with Ealing Schools worth £51m. The Government's Building Schools For theFuture initiative is now well under way and we have submitted our first bid forBradford on the basis of a 10 to 15 year contracting relationship with the localEducation Authority. In Retail, work continues successfully with Tesco. A new retail scheme forStreetlands Limited at Stroud was successfully completed in June and ING'sPalaceXchange development at Enfield is progressing well, and , construction hasalso started well on the Shropshire Quality in the Community project. In April, Costain received Building Magazine's Major Contractor of the YearAward in recognition of the significant progress the business has made. PROPERTY DEVELOPMENT With regard to our development at Alcaidesa in Southern Spain, the year hasprogressed well with the sale of further development land. Infrastructure worksto the third development phase are on schedule and will be completed before theyear-end. The completion of the infrastructure work will enable AlcaidesaHolding to complete the sale of several large enclaves of land which werecontracted for sale in 2003 and 2004. Works on Alcaidesa's second golf courseare also proceeding well and due for completion next year. With the help of our joint venture partner, Banesto, further efforts have beenmade to increase the land holdings of the company to ensure a good supply ofdevelopment opportunities for the years ahead. The company has acquired afurther 15 hectares of developable land in the Province of Granada to add to theholdings purchased last year and value will be added by improving the planningstatus and building densities permitted, for which proposals have so far beenwell received. The company has secured a number of options to purchase in excessof 200 hectares of land also in Granada Province. These options will beexercised once we are satisfied that appropriate planning consents can besecured which will add to the value of the land holdings. The joint venture is also pursuing a number of other opportunities at anothersite near Gibraltar which includes marina facilities. INTERNATIONAL In Mexico, we are underway with the contract to build one of the world's largestbreakwaters as advanced works for new jetties to feed the Sempra petro-chemterminal at Baja California. This project is being undertaken in joint venturewith China Harbour and despite initial delays is now proceeding well withdredging and reclamation underway. In Iraq, work continues with developing the Master Plan with the KurdistanAuthorities, in parallel to overseeing refurbishment of Erbil Airport and aselection of building infrastructure. The award of the Kano Water Treatment project in Nigeria saw Costain capitaliseon its strong UK water business relationships. The Group was also invited byboth the Malaysian Government and Defra to attend and speak at the Bilateraltalks on Water Privatisation in Malaysia in March 2005. We have agreed aMemorandum of Understanding with our Malaysian major shareholder, UEM, to pursuea long term asset management programme, which is based largely on the UK WaterPrivatisation model. Enabling legislation in Malaysia for privatisation isproceeding with the final remaining two statutes awaiting Government approval. Programme delays in Mexico, Nigeria and on the drainage works in Hong Kong haveadversely affected results in the period; however, it is anticipated thisposition will ultimately be recovered. COSTAIN OIL, GAS & PROCESS LIMITED (COGAP) In the UK, Costain was awarded a £30m contract by ConocoPhillips for theengineering, procurement and construction of a recovery facility to be installedat the North Sea Petroleum Terminal, Seal Sands, Middlesbrough, and was awardedthe Front End Engineering Design of an underground gas storage facility byWINGAS that will be located in the east of England. In the Middle East, COGAP executed the shutdown and overhaul of the ADGAS LNGTrain II located on Das Island, Abu Dhabi. The project was completed, withinbudget and ahead of schedule with over 600,000 man hours with no accidents. In Iran, Costain led a consortium of four companies in the bidding and ultimateaward by the National Iranian Gas Company of the Bid Boland II Gas TreatmentPlant Project, valued at $1.67bn and financial negotiations are continuing. In cryogenics and gas processing, COGAP is executing a project for theengineering, procurement and construction of the world's largest nitrogenrejection plant for Pemex in Mexico. In addition, COGAP has bid for a number ofother similar projects located in other countries and award decisions areexpected in the short-term. Each of these facilities will use Costainproprietary technology. OUTLOOK As a consequence of the slow down in the release of capital works brought on bythe General Election, coupled with the protracted nature of negotiations withwater utilities moving from AMP 3 to AMP4, the balance of earnings for the yearwill be more weighted towards the second half. The continuing success of ourpartnering philosophy and framework agreements provide an excellent platform forgrowth in the future. Operationally the Group has made steady progress in the first half of 2005 andwill start to enjoy the benefits of significant contract wins across all of theGroup's divisions giving rise to a secure order book of £1.6bn at the half yearand with subsequent awards and projects already in preferred bidder statustaking this to £2.3bn. Equally significant is the profile of this work, whichhas resulted in £700m of turnover for 2006 and £340m for 2007 having beensecured. Costain has now firmly re-established its reputation in the industryand is gaining a high level of repeat business from key clients in strong marketsectors. David G Jefferies Chairman Stuart J Doughty Chief Executive 30 August 2005 Consolidated Income Statement Half-year ended 30 June, Notes 2005 2004 2004year ended 31 December Half-year Half-year Year £m £m £m Revenue (Group and share of joint ventures 2 345.4 337.7 695.2and associates)Share of joint ventures and associates 5 (21.9) (13.5) (22.0)Group revenue 323.5 324.2 673.2 Group operating profit 4.5 4.5 10.2Share of profit of joint ventures and associates 5 3.3 0.2 (0.9) Profit from operations 2 7.8 4.7 9.3 Finance income 3 12.0 11.9 22.9Finance costs 3 (12.3) (11.2) (21.7) Profit before tax 7.5 5.4 10.5 Taxation (1.1) (0.9) (1.7) Profit for the period 6.4 4.5 8.8 Attributable to:Equity holders of the parent 6.4 4.5 8.8Minority interests - - - Earnings per share - basic 4 1.8p 1.3p 2.5pEarnings per share - diluted 4 1.8p 1.3p 2.5p All results derive from continuing operations Consolidated Statement of Recognised Income and Expense Half-year ended 30 June, 2005 2004 2004year ended 31 December Half-year Half-year Year £m £m £m Exchange differences on translation offoreign operations (0.8) (1.2) (0.4)Losses on cash flow hedges (1.9) - -Actuarial losses on defined benefitpension schemes (7.5) - (22.8)Tax on items taken directly to equity 2.4 - 6.8Net expense recognised directly in equity (7.8) (1.2) (16.4) Profit for the period 6.4 4.5 8.8 Total recognised income and expense inthe period (1.4) 3.3 (7.6) Consolidated Statement of Changes in Equity Half-year ended 30 June, 2005 2004 2004year ended 31 December Half-year Half-year Year £m £m £m Total recognised income and expense in theperiod attributable to equity shareholders (1.4) 3.3 (7.6)Issue of ordinary shares - 0.9 0.9Share based payments 0.1 - - (1.3) 4.2 (6.7) Equity at beginning of period (44.5) (37.8) (37.8)Implementation of IAS 39 * (1.7) - - Equity at end of period (47.5) (33.6) (44.5) * The impact of implementing IAS 32 and IAS 39 at 1 January 2005 is to increasenet liabilities by £1.7m. The adjustment relates to interest rate swaps in theGroup's PFI investments and to forward sales contracts of foreign currency. Consolidated Balance Sheet Half-year ended 30 June, Notes 2005 2004 2004 year ended 31 December Half-year Half-year Year £m £m £mASSETSNon-current assetsProperty, plant & equipment 4.6 4.3 4.9Intangible assets 2.1 0.2 0.5Other debtors 9.8 5.9 5.7Deferred tax assets 33.4 25.5 31.6Investments in associates 5 0.2 - -Investments in joint ventures 5 16.1 16.4 11.6Loans to joint ventures 0.4 2.5 2.6Loans to associates 3.0 - 2.7Other investments 1.0 1.0 1.0Total non-current assets 70.6 55.8 60.6 Current assetsInventories 1.9 4.4 1.0Trade and other receivables 179.9 138.1 152.3Cash and short term deposits 45.3 66.8 64.1Total current assets 227.1 209.3 217.4Total assets 297.7 265.1 278.0 EQUITYShare capital 4 17.7 35.3 35.3Share premium 4 - 119.5 119.5Special reserve 4 13.6 - -Foreign currency translation reserve (1.1) (1.2) (0.4)Retained earnings (77.8) (187.3) (199.0) (47.6) (33.7) (44.6)Minority interest 0.1 0.1 0.1Total equity (47.5) (33.6) (44.5) LIABILITIESNon-current liabilitiesInterest bearing loans and borrowings 0.3 0.7 0.5Retirement benefit obligations 107.2 78.0 99.5Other payables 2.0 1.6 3.0Long term provisions 3.1 2.6 3.1Total non-current liabilities 112.6 82.9 106.1 Current liabilitiesTrade and other payables 226.4 208.4 212.1Current tax liabilities 2.8 3.4 2.2Interest bearing loans and borrowings 0.6 0.4 1.0Provisions and other liabilities 2.8 3.6 1.1Total current liabilities 232.6 215.8 216.4Total liabilities 345.2 298.7 322.5Total equity and liabilities 297.7 265.1 278.0 Consolidated Cash Flow Statement Half-year ended 30 June, 2005 2004 2004year ended 31 December Half-year Half-year Year £m £m £mCash flows from operating activities Profit from operations 7.8 4.7 9.3 Adjustments for:Depreciation 0.5 0.3 1.1Share based payments expense 0.1 - -Share of profit of joint ventures and associates (3.3) (0.2) 0.9Operating profit before changes in working capital and 5.1 4.8 11.3provisions (Increase)/decrease in inventories (0.9) (4.4) 0.6Increase in receivables (33.0) (22.3) (38.3)Increase in payables 13.0 15.3 18.8Decrease in provisions (0.2) (0.8) (2.9)Cash generated from operations (16.0) (7.4) (10.5) Interest paid (0.2) - (0.3)Net cash from operating activities (16.2) (7.4) (10.8) Cash flows from investing activitiesInterest received 1.3 1.2 2.6Additions to plant and intangible assets (1.8) 0.1 (1.7)Additions to investments (0.2) - (0.4)Capital repayments by investments - 0.2 0.2Dividends received - - 4.4Loans to joint ventures and associates (net) (1.2) - (2.8)Net cash from investing activities (1.9) 1.5 2.3 Cash flows from financing activitiesIssue of ordinary share capital - 0.9 0.9Payment of loans and finance lease liabilities (0.5) (0.1) (0.2)Net cash from financing activities (0.5) 0.8 0.7 Net decrease in cash and cash equivalents (18.6) (5.1) (7.8) Cash and cash equivalents at beginning of period 62.6 70.6 70.6Cash outflow from loan payments and finance lease 0.5 0.1 0.2capital paymentsEffect of foreign exchange rate changes (0.1) 0.1 (0.4)Cash and cash equivalents at end of period 44.4 65.7 62.6 Notes to the Accounts These interim financial statements do not constitute statutory accounts withinthe meaning of the Companies Act 1985 and are unaudited. The Board approved theunaudited interim financial statements on 30 August 2005. The figures for thehalf-year ended 30 June 2004 and the year ended 31 December 2004 have beenextracted from the unaudited restatement of the Group's results announced on 17August 2005 prepared under International Financial Reporting Standards (IFRSs). 1. Basis of preparation EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidatedfinancial statements of the Company, for the year ending 31 December 2005, beprepared in accordance with IFRSs adopted for use in the EU (adopted IFRSs). This interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRSs in issue that either areendorsed by the EU and effective (or available for early adoption) at 31December 2005 or are expected to be endorsed and effective (or available forearly adoption) at 31 December 2005, the Group's first annual reporting date atwhich it is required to use adopted IFRSs. Based on these adopted and unadoptedIFRSs, the directors have made assumptions about the accounting policiesexpected to be applied when the first annual IFRS financial statements areprepared for the year ending 31 December 2005. These are as set out in Section2 of the Transition to International Financial Reporting Standards Reportpublished by the Company on 17 August 2005 and available on its website(www.costain.com) or from the Company Secretary at the Registered Office. In particular, the Board has assumed that the International Accounting StandardsBoard's amendment to IAS 19: Employee Benefits will be adopted by the EU insufficient time that it will be available for use in the annual IFRS financialstatements for the year ending 31 December 2005. The adopted IFRSs that will be effective (or available for early adoption) inthe annual financial statements for the year ending 31 December 2005 are stillsubject to change and to additional interpretations and therefore cannot bedetermined with certainty. Accordingly, the accounting policies for that annualperiod will be determined finally only when the annual financial statements areprepared for the year ending 31 December 2005. As permitted by IFRS 1: First time adoption of IFRS, the Group has adopted IAS32 and IAS 39: Financial Instruments with effect from 1 January 2005;comparative figures have not been restated. 2. Business and geographical segment information by origin In the opinion of the Directors, the business segments are Civil Engineering,Building, Oil Gas & Process and International, which undertake engineering andconstruction projects, the Group's property development operation in Spain andcentral costs. These represent the Group's primary segments. Secondarysegments are presented geographically. * Revenue in the tables below includes the Group share of joint ventures andassociates. For the half-year Civil Building Oil, Gas & International Property Central Totalended Engineering Process Development costs30 June 2005 £m £m £m £m £m £m £m Revenue* 145.7 155.6 25.3 8.4 10.4 - 345.4 Group operating profit 6.8 0.4 0.2 (0.8) - (2.1) 4.5Share of results of joint ventures andassociates - - 0.1 (0.4) 3.6 - 3.3Profit from operations 6.8 0.4 0.3 (1.2) 3.6 (2.1) 7.8 Net financing costs (0.3)Profit before tax 7.5 For the half-year Civil Building Oil, Gas & International Property Central Totalended Engineering Process Development costs30 June 2004 £m £m £m £m £m £m £m Revenue* 197.5 100.5 29.7 7.1 2.9 - 337.7 Group operating profit 8.6 (0.8) (0.6) (0.5) - (2.2) 4.5Share of results of joint venturesand associates - (0.3) 0.1 - 0.4 - 0.2Profit from operations 8.6 (1.1) (0.5) (0.5) 0.4 (2.2) 4.7 Net financing costs 0.7Profit before tax 5.4 For the year Civil Building Oil, Gas & International Property Central Totalended Engineering Process Development costs31 December 2004 £m £m £m £m £m £m £m Revenue* 392.1 236.0 46.0 16.0 5.1 - 695.2 Group operating profit 18.4 0.2 (3.9) (0.4) - (4.1) 10.2Share of results of joint ventures and associates - (0.3) 0.1 (0.2) (0.5) - (0.9)Profit from operations 18.4 (0.1) (3.8) (0.6) (0.5) (4.1) 9.3 Net financing costs 1.2Profit before tax 10.5 Revenue Profit from operations 2005 2004 2004 2005 2004 2004 Half-year Half-year Year Half-year Half-year Year £m £m £m £m £m £m United Kingdom 310.9 317.2 661.4 5.7 4.7 9.8Spain 10.4 2.9 5.1 3.6 0.4 (0.5)Rest of the world 24.1 17.6 28.7 (1.5) (0.4) - 345.4 337.7 695.2 7.8 4.7 9.3 3. Finance income and costs Finance income includes the expected return on the assets of the pension schemeof £10.7m (2004 half-year £10.7m, 2004 year £20.3m) and finance costs includethe expected increase in the present value of the scheme liabilities of £12.1m(2004 half-year £11.2m, 2004 year £21.4m). The expected return and the increasein present value are based on the value of assets and liabilities of the pensionscheme at the start of the period. 4. Earnings per share The calculation of earnings per share is based on profit for theperiod of £6.4m (2004 half-year £4.5m, 2004 year £8.8m) and the number of sharesset out below: 2005 2004 2004 Half-year Half-year Year Weighted average number of shares for basic earnings per share calculation 353,136,352 349,224,269 351,190,999Dilutive potential ordinary shares:SAYE Scheme 8,578,793 6,698,821 6,417,591Weighted average number of shares for fully diluted earnings per share calculation 361,715,145 355,923,090 357,608,590 The nominal value of share capital was reduced and the share premium accountwritten off during the period following the shareholder and subsequent courtapproval of the capital reduction. The excess after eliminating the accumulateddeficit of the Company was transferred to a special reserve. 5. Joint ventures and associates The analysis of the Group's share of joint ventures (JVs) and associates is setout below: 2005 Half-year Alcaidesa Other JVs Associates Total £m £m £m £mRevenue 10.4 8.5 3.0 21.9 Profit before taxation 5.7 0.3 (0.6) 5.4Taxation (2.1) - - (2.1)Profit for the period 3.6 0.3 (0.6) 3.3 Non-current assets 9.6 0.2 5.4 15.2Current assets 42.6 68.1 9.1 119.8Current liabilities (32.2) (10.4) (5.1) (47.7)Non-current liabilities (4.0) (61.1) (10.9) (76.0)Investments in joint ventures andassociates 16.0 (3.2) (1.5) 11.3 Presentation in the balance sheet in respect of investments in joint venturesand associates restricts the minimum carrying value of investments of "otherjoint ventures" and "associates" (above) to £nil. Where the carrying value isnegative, the corresponding loan value to those investments has been reduced or,where future funding obligations exist, a provision made. 2004 Half-year Alcaidesa Other JVs Associates Total £m £m £m £m Revenue 2.9 10.6 - 13.5 Profit before taxation 0.6 (0.2) - 0.4Taxation (0.2) - - (0.2)Profit for the period 0.4 (0.2) - 0.2 Non-current assets 11.6 0.3 - 11.9Current assets 25.8 52.0 - 77.8Current liabilities (19.7) (4.3) - (24.0)Non-current liabilities - (49.3) - (49.3)Investments in joint ventures 17.7 (1.3) - 16.4 2004 Year Alcaidesa Other JVs Associates Total £m £m £m £mRevenue 4.5 14.8 2.7 22.0 Profit before taxation (0.8) (0.1) (0.2) (1.1)Taxation 0.3 (0.1) - 0.2Profit for the period (0.5) (0.2) (0.2) (0.9) Non-current assets 11.3 0.2 1.5 13.0Current assets 27.2 60.4 1.9 89.5Current liabilities (21.7) (7.3) (2.0) (31.0)Non-current liabilities (3.9) (54.6) (1.4) (59.9)Investments in joint ventures and 12.9 (1.3) - 11.6associates 2005 2004 2004 Half-year Half-year Year £m £m £m Financial commitments 5.4 3.0 4.3 Capital commitments 20.6 21.9 20.7 The commitments relate to joint ventures involved in Private Finance Initiativeschemes and the capital commitments to construction work being undertaken by theCostain Group. All figures are the Group's share. 6. Explanation of transition to IFRS The Group issued a document setting out the impact of the Transition toInternational Financial Reporting Standards on 17 August 2005 (see note 1). Asummary of the impact on the primary statements is set out below. Theadjustments and the resulting IFRS numbers are unaudited. CONSOLIDATED INCOME STATEMENT Half-year ended 30 June 2004 Year ended 31 December 2004 UK Adjustments IFRS UK GAAP Adjustments IFRS GAAP £m £m £m £m £m £m Group revenue 324.2 324.2 673.2 673.2 Group operating profit 4.5 4.5 10.2 10.2 Share of profit of joint ventures 3.4 (3.2) 0.2 8.7 (9.6) (0.9)and associates Profit from operations 7.9 (3.2) 4.7 18.9 (9.6) 9.3 Other finance charges (0.5) 0.5 (1.1) 1.1Net interest 0.7 (0.7) 1.7 (1.7) Finance income 11.9 11.9 22.9 22.9Finance costs (11.2) (11.2) (21.7) (21.7) Profit before tax 8.1 (2.7) 5.4 19.5 (9.0) 10.5 Taxation (1.7) 0.8 (0.9) (4.3) 2.6 (1.7) Profit for the period 6.4 (1.9) 4.5 15.2 (6.4) 8.8 Attributable to:Equity holders of the parent 6.4 (1.9) 4.5 15.2 (6.4) 8.8Minority interests - - - - - - Earnings per share - basic 1.8p (0.5p) 1.3p 4.3p (1.8p) 2.5pEarnings per share - diluted 1.8p (0.5p) 1.3p 4.3p (1.8p) 2.5p Explanatory notes on the impact of IFRS adjustments to the consolidated incomestatement IAS 18 Revenue Recognition Alcaidesa, the Group's Spanish property development interest, has sold parcelsof land that were subject to the completion of certain infrastructure. Salesand profits in respect of such developments were recognised on exchange ofcontract with costs to complete on the infrastructure element recognisedaccordingly. Under IFRS, these developments fall within the scope of IAS 18, where referenceis specifically made to situations where the seller is obliged to performsubstantial acts to complete under the contract. Revenue and thus profit inrespect of such acts should be recognised only when the act is performed. Given the specific circumstances existing within these developments we considerthat the appropriate treatment under IFRS is to view these arrangements, whereseparable, as two transactions, firstly the sale of the land and secondly theprovision of the infrastructure. In such circumstances, revenue and profit arerecognised on the land sale element of each transaction on exchange of legaltitle and when all conditions for revenue recognition under IAS 18 are met. Inrespect of the infrastructure, the proportion of revenue and profit related tothe provision of these facilities is deferred until such works are complete. The impact of IAS 18 has been to defer the amount of profit shown within theGroup's share of profits from joint ventures and associates. Profit after taxfor the half-year to 30 June 2004 and year to 31 December 2004 has reduced by£1.9m and £6.4m respectively. IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures Under UK GAAP, the Group share of operating profits of associates was presentedon the face of the income statement after Group operating profit. The Groupshare of interest and tax of associates was included within the relevant Grouptotals. Under IFRS, the Group share of profit after tax of associates ispresented on the face of the income statement after Group operating profit. IAS 1 Income Statement Reclassifications and IAS 19 Employee Benefits There are a number of reclassifications between income statement and balancesheet captions that arise from the application of various IFRS. Under IFRS theexpected return on assets of the pension scheme and interest income are shown asfinance income and the interest on pension scheme liabilities and interest andfinance charges payable are shown as finance costs. CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE Half-year ended 30 June 2004 Year ended 31 December 2004 UK GAAP Adjust Under UK GAAP Adjust Under -ments IFRS -ments IFRS £m £m £m £m £m £mExchange differences on translation of foreign operations (1.2) (1.2) (0.2) (0.2) (0.4)Actuarial losses on defined benefit pension schemes (net of tax) - - (16.0) (16.0)Net expense recognised directly in equity (1.2) (1.2) (16.2) (0.2) (16.4) Profit for the period 6.4 (1.9) 4.5 15.2 (6.4) 8.8 Total recognised income and expense in the period 5.2 (1.9) 3.3 (1.0) (6.6) (7.6) Attributable to:Equity holders of the company 5.2 (1.9) 3.3 (1.0) (6.6) (7.6)Equity minority interests - - - - - - CONSOLIDATED BALANCE SHEET As at 1 January 2004 UK GAAP Adjustments IFRS £m £m £mASSETS Non-current assetsProperty, plant & equipment 4.9 (0.2) 4.7Intangible assets 0.2 0.2Other debtors 3.2 3.2Deferred tax assets 26.1 26.1Investments in associatesInvestments in joint ventures 17.6 (0.8) 16.8Loans to joint ventures 2.5 2.5Loans to associatesOther investments 1.0 1.0Total non-current assets 26.0 28.5 54.5 Current assetsInventories 1.6 1.6Trade and other receivables 122.4 (5.8) 116.6Cash & short term deposits 72.0 72.0Total current assets 196.0 (5.8) 190.2Total assets 222.0 22.7 244.7 EQUITYShare capital 34.5 34.5Share premium 119.4 119.4Foreign currency translationreserveRetained earnings (190.6) (1.2) (191.8)Minority interest 0.1 0.1Total equity (36.6) (1.2) (37.8) LIABILITIESNon-current liabilitiesInterest bearing loans and 0.9 0.9borrowingsRetirement benefit 54.5 23.9 78.4obligationsOther payables 1.7 1.7Long term provisions 3.8 3.8Total non-current liabilities 57.1 27.7 84.8 Current liabilitiesTrade and other payables 191.8 191.8Current tax liabilities 2.1 2.1Interest bearing loans and 0.5 0.5borrowingsProvisions and other 7.1 (3.8) 3.3liabilitiesTotal current liabilities 201.5 (3.8) 197.7Total liabilities 258.6 23.9 282.5Total equity and liabilities 222.0 22.7 244.7 CONSOLIDATED BALANCE SHEET As at 30 June 2004 As at 31 December 2004 UK Adjustments IFRS UK GAAP Adjustments IFRS GAAP £m £m £m £m £m £mASSETS Non-current assetsProperty, plant & equipment 4.5 (0.2) 4.3 5.4 (0.5) 4.9Intangible assets 0.2 0.2 0.5 0.5Other debtors 5.9 5.9 5.7 5.7Deferred tax assets 25.5 25.5 31.6 31.6Investments in associatesInvestments in joint ventures 19.1 (2.7) 16.4 19.0 (7.4) 11.6Loans to joint ventures 2.5 2.5 2.6 2.6Loans to associates 2.7 2.7Other investments 1.0 1.0 1.0 1.0Total non-current assets 27.1 28.7 55.8 30.7 29.9 60.6 Current assetsInventories 4.4 4.4 1.0 1.0Trade and other receivables 146.0 (7.9) 138.1 159.7 (7.4) 152.3Cash and short term deposits 66.8 66.8 64.1 64.1Total current assets 217.2 (7.9) 209.3 224.8 (7.4) 217.4Total assets 244.3 20.8 265.1 255.5 22.5 278.0 EQUITYShare capital 35.3 35.3 35.3 35.3Share premium 119.5 119.5 119.5 119.5Foreign currency translation (1.2) (1.2) (0.4) (0.4)reserveRetained earnings (185.4) (1.9) (187.3) (191.6) (7.4) (199.0)Minority interest 0.1 0.1 0.1 0.1Total equity (30.5) (3.1) (33.6) (36.7) (7.8) (44.5) LIABILITIESNon-current liabilitiesInterest bearing loans and 0.7 0.7 0.5 0.5borrowingsRetirement benefit 54.1 23.9 78.0 69.2 30.3 99.5obligationsOther payables 1.6 1.6 3.0 3.0Long term provisions 2.6 2.6 3.1 3.1Total non-current liabilities 56.4 26.5 82.9 72.7 33.4 106.1 Current liabilitiesTrade and other payables 208.4 208.4 212.1 212.1Current tax liabilities 3.4 3.4 2.2 2.2Interest bearing loans and 0.4 0.4 1.0 1.0borrowingsProvisions and other 6.2 (2.6) 3.6 4.2 (3.1) 1.1liabilitiesTotal current liabilities 218.4 (2.6) 215.8 219.5 (3.1) 216.4Total liabilities 274.8 23.9 298.7 292.2 30.3 322.5Total equity and liabilities 244.3 20.8 265.1 255.5 22.5 278.0 Explanatory notes on the impact of IFRS adjustments to the consolidated balancesheet IAS 1 Current/Non-current Assets and Liabilities An entity must present current and non-current assets and current andnon-current liabilities as separate classifications on the face of the balancesheet in accordance with IAS 1. Non-current receivables have been reclassifiedon the face of the balance sheet as non-current assets and provisions have beenreallocated to non-current liabilities. IAS 19 Employee Benefits