REG - Costain Group PLC - Costain FY 2024
11/03/2025 07:15
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RNS Number : 0889A Costain Group PLC 11 March 2025
11 MARCH
2025
COSTAIN GROUP PLC
("Costain", the "Group", or the "Company")
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2024 ("FY 24")
Another strong financial performance, with record growth in forward work
position to £5.4bn.
· Revenue of £1,251m (FY 23: £1,332m) reflecting the timing of
contract starts and completions in Transportation, with growth in all Natural
Resources sectors.
· Adjusted operating profit(1) up 7.5% to £43.1m (FY 23: £40.1m) at
the upper end of expectations with an increased operating margin in both
divisions. Reported operating profit up 16.0% to £31.1m (FY 23: £26.8m).
· A further year of margin improvement with an adjusted operating
margin(1) increase of 40bps to 3.4% (FY 23: 3.0%) and a 4.4% margin achieved
in H2 24.
· Adjusted EPS(1) up strongly by 19.7% to 14.6p (FY 23: 12.2p),
reflecting increased adjusted operating profits and financial income, together
with a reduced tax rate. Reported EPS increased by 39.5% to 11.3p (FY 23:
8.1p).
· Net cash in line with expectations at £158.5m (FY 23: £164.4m)
after £10m buyback completed in the year.
· Record increase of £1.5bn in high-quality forward work(2) position
to £5.4bn, more than four times FY 24 revenue (FY 23: £3.9bn).
· Contract wins across all sectors with significant growth in Water
AMP8 programmes and Rail.
· Doubling of full year dividend to 2.4p (FY 23: 1.2p) with proposed
final dividend per share of 2.0p (FY 23: 0.8p), as we move towards our target
three times dividend cover.
Financial summary
(£m unless otherwise stated) FY 24 FY 23 Change
Revenue 1,251 1,332 (6.1)%
Adjusted operating profit(1) 43.1 40.1 7.5%
Adjusted operating margin(1) 3.4% 3.0% 40bps
Adjusted profit before tax(1) 48.5 44.2 9.7%
Adjusted EPS(1) 14.6p 12.2p 19.7%
Reported operating profit 31.1 26.8 16.0%
Reported profit before tax 36.5 30.9 18.1%
Reported EPS 11.3p 8.1p 39.5%
Dividend per share 2.4p 1.2p 100%
Net cash balance(1) 158.5 164.4 (5.9)
Forward work position(2) £5.4bn £3.9bn £1.5bn
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:
"I am pleased that we had another good year with adjusted operating profit at
the upper end of expectations. We delivered a further increase in operating
profit and earnings per share, building on our strong financial performance
track record of the past three years. Adjusted operating margin increased
significantly, exceeding our target for FY 24, and we remain on track to
deliver our margin target for FY 25.
"The record growth in forward work position is expected to deliver further
progress in FY 25 and FY 26, followed by a step change in FY 27 performance.
The quality, balance and better risk profile of our forward work position of
£5.4bn across our two divisions, together with continued investment in our
chosen markets, gives us increasing visibility on future revenue and margin.
We continue to deliver improvements and invest in the business, and are
increasingly confident in the Group's growth prospects, with our strong cash
position and cash generation enabling the Group to enhance returns to
shareholders."
Outlook
The successful execution of our strategy has delivered a record increase in
our forward work position of £1.5bn to £5.4bn. This, together with growth on
existing frameworks, gives us increasing visibility and confidence on
delivering further progress in FY 25 and FY 26, with a step change in
performance in FY 27 and beyond. We have already secured approximately 80% of
our forecast revenue for FY 25 and our current levels of bidding activity
remain high.
Having successfully completed our Transformation programme and delivered a
robust 4.4% adjusted operating margin in H2 24, we remain on track to deliver
an adjusted operating margin run-rate of 4.5% during the course of FY 25, in
line with our ambition to deliver margins in excess of 5.0%.
While we remain mindful of the near term macro-economic and geopolitical
conditions, and their importance to Government priorities and the timing of
spending, we are well positioned for further cash generation and progress. We
are therefore increasingly confident in the Group's prospects, as reflected in
the Board's proposal to double the FY 24 dividend.
Enquiries
Investors and analysts paul.sharma@costain.com (mailto:paul.sharma@costain.com)
Paul Sharma, Costain +44 (0) 7867 501188
Financial media - Headland costain@headlandconsultancy.com (mailto:costain@headlandconsultancy.com)
Andy Rivett-Carnac +44 (0) 7968 997 365
Charlie Twigg +44 (0) 7946 494 568 (tel:+44%20(0)79%204649%204568)
Analyst & investor presentation
A live webcast of our results by Alex Vaughan (CEO) and Helen Willis (CFO)
will be at 10am on 11 March 2025. Please go to
https://stream.brrmedia.co.uk/broadcast/679266b2f6f7a6723285cabe to register
for the event.
We will also host a live presentation relating to results via Investor Meet
Company at 9am on 12 March 2025. 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
(https://www.investormeetcompany.com/costain-group-plc/register-investor)
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.
GROUP TRADING PERFORMANCE
Further strong financial performance from both divisions
Reported revenue was £1,251.1m in FY 24 (FY 23: £1,332.0m). There was an
increase in Natural Resources revenue in all three sectors, Water, Defence and
Nuclear Energy, and Energy. In Transportation, as expected, we saw reductions
in Road volumes, due to the completion and delays of certain projects, and in
Rail due to the successful completion of our main works at Gatwick Station. We
had increased revenue in Integrated Transport including growth in our Heathrow
H7 contract and new contracts with TfL.
Adjusted operating profit grew by 7.5% to £43.1m (FY 23: £40.1m) and the
adjusted operating margin increased to 3.4% (FY 23: 3.0%), driven mainly by
the improved performance in both divisions, with Transportation having a
better margin mix derived from newer contracts, and increased margin in
Natural Resources, which benefitted from a greater mix of consultancy
services.
Reported operating profit increased to £31.1m (FY 23: £26.8m).
Net finance income was £5.4m (FY 23: £4.1m), driven by higher interest
income from bank deposits and lower bank charges.
Adjusted profit before tax increased 9.7% to £48.5m (FY 23: £44.2m), with
adjusted basic earnings per share (EPS) up by 19.7% at 14.6p (FY 23: 12.2p).
Reported profit before tax was up 18.1% at £36.5m (FY 23: £30.9m), while
reported basic earnings per share (EPS) was up 39.5% at 11.3p (FY 23: 8.1p).
Adjustments to reported items
Total adjustments to reported items in the year were £12.0m (FY 23: £13.3m).
We incurred £5.4m (FY 23: £6.2m) in respect of the final year of our
Transformation programme, and £nil (FY 23: £7.1m) of restructuring costs,
with £0.1m of other credits in year. The restructuring costs in FY 23
included £5.3m related to an impairment of an intangible asset following the
repositioning of digital services. In H2 24 we settled a claim for fire safety
compliance related to the design and build of a development which was
completed in 2001, and we have identified one other fire safety liability for
a building completed in 2013 with a provision created in respect of this.
Cashflow and liquidity
Our net cash position at the end of FY 24 was £158.5m (FY 23: £164.4m) which
included the costs of our £10m share buyback programme which concluded in
November 2024.
We expect our FY 25 year end net cash position to be in line with current
market expectations of around £180m, as the underlying net free cash flow
from the business is expected to benefit from positive working capital timings
during the year, offset by the unwinding of £25m of positive working capital
timing benefits accumulated since the end of FY 22, as previously reported.
Cash from operations in FY 24 was £41.7m (FY 23: £69.6m), resulting from
increased adjusted operating profits offset by year-end timings of certain
cash receipts at the end of year FY 23 and FY 24, together with some end of
contract cash outflows in FY 24.
Adjusted free cash flow in FY 24 of £27.1m (FY 23: £72.0m) was lower than in
the same period last year largely due to the timing of year-end working
capital and higher tax and capital expenditure payments as we invest in new
systems and higher cash flows on adjusting items, partially offset by lower
pension deficit contributions.
During FY 24 we paid 98% of invoices within 60 days (FY 23: 98%). In January
2025 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.
Strong operational 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. During FY 24 we saw strong
growth in our forward work position from Water and Rail, and we see a good
pipeline of opportunities in all our sectors as the UK continues to invest in
infrastructure. We continue to be busy bidding new work opportunities across
all of our sectors.
The new Government's consultation on its 10-year Infrastructure strategy, and
its focus on five missions, highlights the importance of infrastructure in
these markets. Together with our customers, suppliers and partners we are
helping to create a sustainable future, for a more prosperous, resilient and
decarbonised UK. As a result of our clear strategy, the Group continues to
make good progress in building a stronger and growing business. We are:
· Focused on growing markets meeting critical national needs, ensuring
the UK has its essential infrastructure, with increasing 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 who
are increasing their scale of activities with us:
o Investment in Transport infrastructure is key to unlocking economic
growth, and we hold strong positions across this market and long-term
relationships with critical customers.
o In line with Ofwat's final determinations, water investment will 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 strengthen our leading
expertise as a solution provider to address the growing energy transition
investment plans, building on positions we have established in the industrial
clusters and in targeting opportunities in working on upgrades to the national
grid.
o We are well positioned for the significant growing public and private
sector 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 the upgrade of their critical
transport infrastructure.
· Providing an increasingly broad 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 continuing cash generation, a
strong risk management culture, financing capacity and reduced pension costs.
Costain enjoys good revenue visibility with a strong high quality forward work
position, from which we expect to see a step change in progress in FY 27. Our
forward work position, which is our combined order book and preferred bidder
book, stood at £5.4bn at period end (H1 24: £4.3bn; FY 23: £3.9bn),
representing more than four times our FY 24 revenue.
The quality of this forward work reflects long term programmes, with no single
stage lump sum contracts, and predominated by target cost contracts where the
scope of work, design and cost are developed and agreed with the client.
We have around £950m of secured Group revenue for FY 25 at the end of the
year, representing approximately 80% of our forecast revenue for the period.
Our Transformation programme, which simplifies and increases efficiencies
within the business, was completed during FY 24, having delivered profit and
operating margin uplift during the year, as well as enabling disciplined
investment in business improvement activities.
During FY 24 we generated around 12% of Group revenue from our three areas of
consultancy services: delivery partner, engineering & design services and
advisory & digital solutions, with the majority of revenue within
consultancy arising from delivery partnerships. Consultancy services are
included within our two divisional revenue streams and have higher than
average adjusted Group operating margins.
Risk management
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.
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 were not required from 1 July 2024 to 30 June 2025.
In addition to contributions not being required, as the funding level was
above 101%, 'dividend parity' was 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.
A further assessment of the Scheme funding position will be carried out on 31
March 2025 which is expected to conclude in July 2025, enabling the Board to
review future capital allocations. We continue to review options for
restructuring the defined pension scheme with the new sole Trustee of the
Scheme.
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, a progressive dividend,
selective M&A and returning surplus capital.
· Investing for growth. The Group's Transformation programme, which
simplifies and increases efficiencies within the business, was completed
during FY 24. In FY 24, we invested around £5.0m in upgrading our HR system
to increase efficiencies within the business and have also invested in office
moves. Costain will continue to make disciplined investment in the coming
years in key areas such as systems and digitisation that will accelerate its
business improvement.
· Progressive dividend. The Board recognises the importance of dividends
for shareholders. 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. The Board has a target dividend cover of around three times adjusted
earnings, which provides headroom for further dividend growth to achieve the
target cover level as and when the dividend parity arrangement is no longer in
place.
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. The Board has proposed a final dividend of 2.0p per share
(H2 23: 0.8p) for the six months ended 31 December 2024, an increase of 150%
for the final FY 24 dividend, and an increase of 100% for the year.
· 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. In
August 2024, having reviewed the Group's strong cash performance and ongoing
capital requirements, we announced an on-market share buyback programme for up
to £10m. This programme was completed in November 2024 and the Group
purchased 9,718,950 Ordinary Shares in aggregate for cancellation.
Dividend
An interim dividend of 0.4 pence per ordinary share was paid on 18 October
2024 (2023: 0.4 pence). The Board is proposing a final dividend of 2.0 pence
for the year ended 31 December 2024 (2023: 0.8 pence) which, if approved, will
be paid on 29 May 2025 to shareholders on the register of members at close of
business on 22 April 2025. The total dividend paid for the year will therefore
be 2.4 pence per ordinary share (2023: 1.2 pence).
Payment of the final dividend will be both as a cash dividend and scrip
dividend alternative (to be renewed at the 2025 AGM). Shareholders wishing to
join the scrip dividend scheme should return a completed mandate form to the
Registrar, Equiniti, by 7 May 2025. The scrip dividend reference price will be
announced on 28 April 2025.
DIVISIONAL REVIEW
TRANSPORTATION
£m FY 24 adjusted(1) FY 24 reported FY 23 adjusted(1) FY 23 reported Change (adjusted)(1)
Road 307.3 307.3 399.5 399.5 (23.1%)
Rail 454.9 454.9 500.2 500.2 (9.1%)
Integrated transport 83.6 83.6 43.4 43.4 92.6%
Total revenue 845.8 845.8 943.1 943.1 (10.4)%
Divisional operating profit 29.9 29.9 28.0 20.9 6.8%
Divisional operating margin 3.5% 3.5% 3.0% 2.2%(2) 0.5%pt
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 £845.8m was down 10.4%, reflecting lower
volumes in Road due to the completion of some contracts and delays to the
start of a new contract, and in Rail due to the successful completion of our
main works for Gatwick Station.
· Increased revenue in Integrated Transport was due to our expanding
work at Heathrow and with TfL.
· Adjusted operating margin increased by 0.5pt to 3.5%, due to
improved operating performance and margins in newer contracts.
· Revenue secured for FY 25 is £606m for Transportation as at 31
December 2024.
Our revenue in FY 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, Roads,
Aviation and Local Government.
Road revenue declined by 23.1% in FY 24 compared with the prior year, as
expected, as a result of the completion of a number of schemes. 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. The upgrade to the A1 around Newcastle
progressed well with opening to traffic of the new Birtley to Coal House
section in December 2024. As previously indicated, during 2024 we 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 opened to traffic in December 2024, 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 provides a mixture of complex programme delivery and consultancy to key
clients, mainly HS2 and Network Rail. Revenue decreased by 9.1% in FY 24,
principally because of the successful completion of our main works at Gatwick
Station in the period. The Skanska Costain STRABAG (SCS) JV contract to
construct the southern section of HS2, which has a twin bore tunnel, has seen
the first of the four tunnel boring machines (TBM) complete its drive with the
other three TBMs making good progress and due to complete their drives during
2025. The HS2 programme is currently navigating a change in its programme
delivery strategy with an integrated programme being developed and work is
expected to commence on a revised programme with the supply chain, including
the SCS JV.
We continue to expand our portfolio of work for Network Rail and DfT through
our framework contracts, where we are providing professional consulting
services. These include being a key partner to protect the rail network from
extreme weather, supporting Bradford Metropolitan District Council in the
development of their local infrastructure plan, and working with Network Rail
to improve train safety and performance.
In December 2024, we announced that Costain had won two major system contracts
with HS2. The first was as a sole supplier to deliver tunnel and lineside
mechanical and electrical systems for HS2, with a total contract value worth a
minimum of £400m to Costain. The second was with a Siemens Mobility and
Costain Limited 50/50 Joint Venture which will deliver high-voltage power
supply systems for the HS2 project valued of around £300m to the joint
venture. The delivery schedule for these contracts is being assessed in line
with the developing HS2 integrated programme.
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 92.6% in FY 24 on the prior year, reflecting
growing work volumes at Heathrow and with TfL.
During FY 24, we continued to work on the Gallows Corner Flyover Detailed
Design & Build contract and on the design phase for Brent Cross for TfL.
We also commenced the next phase of delivery work on the A40 Westway and
continue to support TfL's CCTV service.
We also 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 continue to work with a number of local and regional
government organisations to deliver engineering and professional services.
We expect that Aviation, Ports, local and devolved transport bodies will offer
strong growth opportunities for the business.
NATURAL RESOURCES
£m FY 24 adjusted(1) FY 24 reported FY 23 adjusted(1) FY 23 reported Change adjusted(1)
Water 251.5 251.5 245.3 245.3 2.5%
Energy 46.2 46.2 45.6 45.6 1.3%
Defence and Nuclear Energy(2) 107.6 107.6 98.0 98.0 9.8%
Total revenue 405.3 405.3 388.9 388.9 4.2%
Divisional operating profit 23.8 23.8 21.8 21.7 9.2%
Divisional operating margin 5.9% 5.9% 5.6% 5.6% 0.3%pt
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 Energy includes nuclear-related revenue previously
included in Energy, following the Natural Resources reorganisation.
· Revenue increased by 4.2% to £405.3m, reflecting growth in Defence
and Nuclear Energy and in Water with stable revenues in Energy.
· Divisional adjusted operating profit increased to £23.8m (FY 23:
£21.8m), and adjusted operating margin increased by 0.3pt to 5.9% due to a
higher mix of consultancy revenue.
· Revenue secured for FY 25 is £340m for Natural Resources as at 31
December 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 2.5% as the industry moves from AMP7 to
AMP8 projects. We have good visibility across our ongoing five-year AMP7
programmes through to 2025, and our AMP8 projects for the period 2025-2030,
where we expect to see strong growth in this area. Our work for Tideway, where
in a joint venture we are responsible for the eastern section, moved into the
final stage of the programme commissioning and the tunnel become operational.
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 also started
clay compaction trials and the provision of constructability advice to support
the design of a new reservoir in Oxfordshire for Thames Water. We have a
managed service provider contract with United Utilities and a professional
service contract with Yorkshire Water.
We have strongly increased our presence in the Water sector in the year, with
the combination of the rollover of current contracts, contract extensions and
new customer wins. During FY 24 these include: major AMP8 contract wins with
Northumbrian Water, United Utilities and Southern Water; finalising contract
extensions with Severn Trent Water and Thames Water; and the provision of
programme management services through to 2032 as part of a major framework for
Thames Water. Our CMDP+ joint venture with MWH Treatment was awarded contracts
by Southern Water as part of its AMP7 investment programme.
Energy revenue increased by 1.3% in FY 24 on the prior 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. 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).
We have been awarded the contract to oversee and manage the engineering,
procurement and construction of the onshore CO(2) gathering systems for the
£4bn East Coast Cluster investment. We have commenced work on the detailed
design and delivery phase of bp's Net Zero Teesside Power and Northern
Endurance Partnership joint ventures of the interconnecting CO(2) pipeline and
associated utilities, and 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, the contract for
which has been extended by three years. We are also providing pre-feed
assessment for a green hydrogen project which we expect to increase in volume
during 2025.
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 and were selected by Wales and West Utilities to lead a series of
studies to develop their hydrogen vision.
We see 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. In addition, we expect to
see growth in the energy transmission market.
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 £9.6m, 9.8% on
the prior year, driven by a growth in demand within our current delivery
partnership roles for executive non-departmental public and Government bodies,
and with other Tier 1 companies.
During FY 24, we were awarded two new framework contracts in the nuclear
energy sector as previously reported and expect further growth in this area.
We are currently well positioned across the Defence Nuclear Enterprise and our
ambition is to be the delivery partner of choice for the Ministry of Defence
(MoD), and its prime contractors, for its future strategic infrastructure
needs.
STRATEGY
The Group provides solutions which transform the performance of the UK's
infrastructure ecosystem, creating a sustainable future for a more prosperous,
resilient and decarbonised UK. We are focused on predictable, best in class
delivery for our customers, a growing and more resilient customer mix,
building a meaningful consultancy service, and growing in strong markets, as
we carry out our purpose of 'Improving People's Lives'.
Markets
In line with the priorities of the National Infrastructure Commission's Second
National Infrastructure Assessment, the Government's five Missions and outline
10-year Infrastructure Strategy, 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 for increased prosperity, national resilience and a
decarbonised UK. 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.
Customers
Within our chosen markets we work with a growing number of Tier 1 customers
who choose to work with their partners on 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; to broaden our service value and for us to
maintain consistency and continuity of workflows over the business plan
period. Both ensure a good quality of work and 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 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, and consulting 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.
o Our infrastructure legacy in creating a sustainable future, delivering a
more prosperous, resilient and decarbonised UK.
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, together with a broader business mix, and our ambition remains to
deliver improving long-term operating margins.
We have performed well against our operational milestones, outlined in March
2023:
· We delivered an adjusted operating margin of 4.4% in H2 24, exceeding
our target of an adjusted operating margin run-rate of 3.5% during the course
of FY 24, as we increased 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.
· We remain on track to deliver 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 around 1.0% of revenue during FY
25 and we expect divisional margins to increase during the period to achieve
our Group target.
Customer growth
During FY 24, we:
· Expanded our customer portfolio adding East West Rail, Northumbrian
Water, Sizewell C, and Wales and West Utilities.
· Deepened and broadened our presence through our frameworks with
Anglian Water, bp, Babcock, Heathrow, Thames Water and TfL.
· Extended 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 Southern Water, with our joint venture.
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.
· 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 CO(2)
gathering systems for carbon capture and storage, and by bp's H2Teesside to
design a new hydrogen pipeline, both for the East Coast Cluster.
· We have secured a place on a National Grid zero value framework to
support their grid upgrade.
· 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.
· And significantly, at the end of the year, Costain won two HS2 major
systems contracts, one as a sole provider and one as a joint venture with
Siemens Mobility, with a total value of at least £550m to the Group.
Enhancing existing infrastructure
In addition to new work outlined above, we continue to improve the quality of
infrastructure through the projects we deliver, including:
· Road Capacity, Safety, Resilience:
o Upgrading A30/B2CH/M6 road capacity and safety.
o During FY 24, Costain, with client National Highways, completed a 10-mile
upgrade of the M6 along the Warrington to Wigan corridor
o On the A30, the widening of a nine-mile stretch of road is significantly
reducing congestion and providing improvements to journey reliability for
motorists, cutting journey times along the route.
o M6 scheme created two additional lanes, one in each direction and is now
providing extra capacity, reducing congestion, improving travel times and
making journeys more reliable for the estimated 120,000 vehicles that use the
route each day.
· Working with Cadent to ensure the resilience and safety of existing gas
networks across the East of England, whilst also improving productivity.
· Ensuring for our Water customers that they met their key regulatory
dates.
PEOPLE
Safety
The safety of our people is a core value, and we are working to eliminate all
harm. In FY 24 we 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 delivered another
year of strong performance against our three key safety performance measures:
· Accident Frequency Rate - 0.03 our equal lowest ever.
· Lost Time Injury Rate - 0.11 reduced from 2023 and our second
lowest.
· High Potential Event Frequency Rate - 0.16 reduced from 2023 and
our second lowest.
This performance was delivered with over 30 million hours worked by an average
daily workforce of 14,500 across more than 170 project sites. We believe that
an engaged workforce works safely, and since 2016, we have increased our
engagement measure and during the same period halved incidents.
Developing skills, capabilities, and talent
Costain has made good progress in People in 2024. The most significant
achievement has been launching a brand new human capital management system
which improves ways of working and marks a significant moment in Costain's
transformation. The design and implementation of the new system allowed the
organisation to streamline and automate processes, bringing improved employee
experience, enhanced cybersecurity, and enabling greater digital integration.
A diverse, inclusive and thriving workforce
Costain is delighted to have retained its one-star "A Very Good Company to
Work for" accreditation with Best Companies following its annual engagement
survey in Q4 24 with 75% of Costain's colleagues completing the survey.
Costain has seen a year-on-year increase in its response rate and Best
Companies Index (BCI) score, with an increase of 20 BCI points achieved in
2024. Engagement factors Leadership, Giving Something back and My Company saw
the biggest increase in engagement compared to 2023.
Ensuring appropriate rewards
In 2024, Costain enhanced its maternity and adoption leave offerings to 26
weeks at full pay, paternity leave to eight weeks at full pay and introduced
five days paid carers' leave.
Costain continues to improve workplace accessibility, with direct input from
employee networks to the design of the new offices and site setup standards.
In 2024, Costain attained the Disability Confident level 3 standard, and is
awarded the accolade of being a Disability Confident Leader under the
conditions of the scheme.
Community engagement and initiatives
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 rolled out a new social value
tool to 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 2024,
the Considerate Constructor Scheme rated Costain contracts on average 46/50
(FY 23: 45/50) considerably exceeding the industry average of 41/50 for the
eleventh consecutive year. This third-party industry assessment highlights the
high standards expected of Costain contracts, confirming Costain's position as
an industry leader in responsible business.
Applying sustainable procurement principles is optimising the value we provide
for our customers and enhancing the social and environmental outcomes
achieved. In 2024, our contracts (including joint ventures) spent £650m with
SMEs, representing 41% of total spend, exceeding the UK Government target of
33%, and exceeding our FY 23 performance of 40%.
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.
In October 2024 the Costain Board approved Costain's climate transition plan
which sets out an accelerated ambition to achieve operational decarbonisation
(Scopes 1 & 2) by 2035, and to decarbonise our supply chain (Scope 3) by
2045. We will do this through accelerated actions and industry-wide
commitments that focus on the urgent challenge of decarbonising the
construction industry, while providing the UK with infrastructure solutions
needed for people and planet to thrive.
In 2024 Costain obtained the London Stock Exchange's Green Economy Mark
(https://www.costain.com/media/press-releases/2024/costain-obtains-london-stock-exchange-s-green-economy-mark/)
, which highlights listed companies or funds that derive 50% or more of total
annual revenues from products and services that contribute to the global green
economy.
Driving our services towards Net Zero
In 2024 we implemented a new carbon tool to 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 Q4 24 Costain achieved verification to PAS2080:2023 Carbon Management in
Infrastructure and Built Environment with the British Standards Institution
(BSI). The verification demonstrates Costain's commitment to the future of
sustainable infrastructure, and to managing and reducing carbon emissions from
its projects.
The culmination of our active approach to reducing emissions for Costain and
our customers means that in 2024 our absolute emissions reduced by 1%
year-on-year and when normalised by turnover (tCO(2)e/£M) emissions reduced
by 9% compared to Costain's 2021 baseline.
Nature
To safeguard our planet's 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 2024 Sustainability Report.
FINANCIAL REVIEW
Divisional adjusted to reported reconciliation
Transportation Natural Resources Group
FY 24 FY 23 Change FY 24 FY 23 Change FY 24 FY 23 Change
Revenue £m
Reported 845.8 943.1 (10.3%) 405.3 388.9 4.2% 1,251.1 1,332.0 (6.1%)
Operating profit £m
Adjusted 29.9 28.0 6.9% 23.8 21.8 9.2% 43.1 40.1 7.5%
Adjusting items - (7.1) - (0.1) (12.0) (13.3)
Reported 29.9 20.9 43.1% 23.8 21.7 9.7% 31.1 26.8 16.0%
Central costs
We incurred central costs of £10.6m in FY 24 (FY 23: £9.7m) on an adjusted
basis with the increase on FY 24 being driven mainly by inflation. On a
reported basis we incurred central costs of £22.6m (FY 23: £15.8m), with the
increase on FY 23 being driven by the one-off costs related to legacy business
detailed below.
Administrative expenses
The Group incurred administrative expenses of £72.2m in FY 24, a decrease of
£5.8m on the same period last year (FY 23: £78.0m). £4.5m of the decrease
has been driven by benefits from our Transformation programme, net of cost and
wage inflation and incremental investment. £1.3m of the decrease relates to
lower adjusting items as discussed below.
Adjusting items
We incurred £5.4m (FY 23: £6.2m) in respect of this final year of our
Transformation programme, and £nil (FY 23: £7.1m) of restructuring costs.
The restructuring costs in FY 23 included £5.3m related to an impairment of
an intangible asset following the repositioning of digital services. In H2 24
we settled a claim for fire safety compliance related to the design and build
of a development which was completed in 2001, and we have identified one other
fire safety liability for a building completed in 2013 with a provision
created in respect of this.
Net financial income
Net finance income amounted to £5.4m (FY 23: £4.1m). The interest payable on
loans and other similar charges was £1.4m (FY 23: £2.3m) and the interest
income from bank deposits amounted to £6.7m (FY 23: £4.8m). In addition, the
net finance income includes the interest income on the net assets of the
pension scheme of £2.6m (FY 23: £3.2m), the interest expense on lease
liabilities of £2.5m (FY 23: £1.5m) under IFRS 16, and other interest
expense of £nil (FY 23: £0.1m).
Tax
The Group has a tax charge of £5.9m (FY 23: £8.8m) giving an effective tax
rate of 16.2% (FY 23: 28.5%). The adjusted effective tax rate was 18.3% (FY
23: 24.2%). The lower than expected tax rate was due to the ongoing tax relief
on the exercise of share-based payments, together with a revised treatment of
the 2023 impairment. We expect the effective tax rate in 2025 to remain
marginally below the blended statutory tax rate of 25%.
Cashflow
The Group generated adjusted free cash flow of £27.1m in FY 24 (FY 23:
£72.0m), lower than last year largely due to the timing of year-end working
capital and higher tax and capital expenditure payments as we invest in new
systems, partially offset by lower pension deficit contributions.
£m FY 24 FY 23
Cash from operations 41.7 69.6
Add back adjusting items 8.6 9.2
Add back pension deficit contributions 2.0 8.1
Less cash flows on cash and cash equivalents - with restrictions (14.0) (14.1)
Less taxation (2.2) (0.7)
Less capital expenditure (9.0) (0.1)
Free cash flow 27.1 72.0
The Group had a positive net cash balance, excluding cash with restrictions,
of £158.5m as of 31 December 2024 (FY 23: £164.4m,; H1 24: £166.0m)
comprising Costain cash balances of £95.8m (FY 23: £105.2m; H1 24: £96.2m),
cash held by joint operations of £62.7m (FY 23: £59.2m; H1 24: £69.8m) and
borrowings of £nil (FY 23: £nil; H1 24: £nil). During FY 24, the Group's
average month-end net cash balance was £169.8m (FY 23: £141.4m; H1 24:
£173.9m) and the Group's average week-end net cash balance was £164.3m (FY
23: £141.0m; H1 24: £168.2m). Utilisation of the total bonding facilities as
of 31 December 2024 was £65.3m (FY 23: £69.9m, H1 24: £65.3m).
£m FY 24 FY 23
Cash and cash equivalents at the beginning of year 164.4 123.8
Net cash flow (5.9) 40.6
Cash and cash equivalents at the end of year 158.5 164.4
Borrowings - -
Net cash 158.5 164.4
Pensions
Cash contributions made to the scheme during FY 24 amounted to £2.0m (FY 23:
£8.1m) and the charge to operating profit in respect of the administration
cost of the UK Pension Scheme in FY 24 was £0.2m (FY 23: £0.2m).
As at 31 December 2024, the Group's pension scheme was in surplus in
accordance with IAS 19 at £54.9m (FY 23: £53.5m surplus; H1 24: £55.1m
surplus). The movement in the IAS 19 valuation, being a slight increase in
surplus from 31 December 2023 to 31 December 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 £5.4bn at period end (FY 23: £3.9bn).
Our order book stood at £2.5bn at period end (FY 23: £2.1bn; H1 24:
£1.8bn). 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 seen 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 £2.9bn at period end (FY 23: £1.8bn;
H1 24: £2.5bn) and includes contracts in Water, Rail, 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 year ended 31 December 2024, the directors are required to
consider whether the Group and the Company can continue in operational
existence for the foreseeable future, being a period of at least twelve months
from the date of approval of the accounts. Having undertaken a rigorous
assessment of the financial forecasts, including its liquidity and compliance
with covenants, the Board considers that the Group has adequate resources to
remain in operation for the foreseeable future and, therefore, have adopted
the going concern basis for the preparation of the financial statements.
Please see note 1 for more details.
For and on behalf of the Board
Alex Vaughan
Helen Willis
Chief Executive
Officer
Chief Financial Officer
10 March 2025
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 (http://www.costain.com) . This includes copies of recent
investor presentations as well as London Stock Exchange announcements.
GROUP INCOME STATEMENT
For the year ended 31 December 2024
£m Note 2024 2023
Revenue 4 1,251.1 1,332.0
Cost of Sales (1,147.8) (1,227.2)
Gross profit 103.3 104.8
Administrative expenses (72.2) (78.0)
Operating profit 31.1 26.8
Finance income 5 9.3 8.0
Finance expense 5 (3.9) (3.9)
Net finance income 5.4 4.1
Profit before tax 36.5 30.9
Taxation 6 (5.9) (8.8)
Profit for the year attributable to equity holders of the parent 30.6 22.1
Earnings per share
Basic 7 11.3p 8.1p
Diluted 7 11.1p 7.8p
GROUP STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
For the year ended 31 December 2024
£m 2024 2023
Profit for the year 30.6 22.1
Items that will not be reclassified to profit or loss:
Remeasurement of retirement benefit asset (3.1) (17.9)
Tax recognised on remeasurement of retirement benefit asset 0.8 4.3
Total items that will not be reclassified to profit or loss (2.3) (13.6)
Other comprehensive expense for the year (2.3) (13.6)
Total comprehensive income for the year attributable to equity holders of the 28.3 8.5
parent
GROUP BALANCE SHEET
As at 31 December 2024
£m Note 2024 2023
(as restated)*
Assets
Non-current assets
Intangible assets 9 51.2 45.7
Property, plant and equipment 10 35.3 26.8
Equity accounted investments 0.4 0.4
Retirement benefit asset 54.9 53.5
Trade and other receivables 4.3 4.2
Insurance recovery asset - 1.7
Deferred tax 8.6 11.8
Total non-current assets 154.7 144.1
Current assets
Trade and other receivables 185.3 198.3
Insurance recovery asset 8.8 11.0
Income tax 6 1.5 -
Cash and cash equivalents - with restrictions 38.4 24.4
Cash and cash equivalents 11 158.5 164.4
Total current assets 392.5 398.1
Total assets 547.2 542.2
Liabilities
Non-current liabilities
Other payables 1.8 2.2
Lease liabilities 12.8 14.0
Total non-current liabilities 14.6 16.2
Current liabilities
Trade and other payables 271.0 281.4
Income tax - 0.6
Lease liabilities 13.0 10.3
Provisions for other liabilities and charges 12.9 14.3
Total current liabilities 296.9 306.6
Total liabilities 311.5 322.8
Net assets 235.7 219.4
Equity
Share capital 13 2.7 138.3
Share premium 16.5 16.4
Translation reserve 0.6 0.6
Treasury shares (0.7) (1.9)
Capital redemption reserve 136.5 -
Retained earnings 80.1 66.0
Total equity 235.7 219.4
*See note 14 for more information on restatements.
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2024
£m
Share capital Share premium Translation reserve Treasury shares Capital redemption reserve Retained earnings Total equity
At 1 January 2023 137.5 16.4 0.6 - - 56.7 211.2
Profit for the year - - - - - 22.1 22.1
Other comprehensive expense - - - - - (13.6) (13.6)
Issue of ordinary shares under employee share option plans 0.8 - - (0.6) - (0.2) -
Shares purchased to satisfy employee share schemes - - - - - (0.1) (0.1)
Equity-settled share-based payments - - - - - 2.2 2.2
Acquisition of treasury shares - - - (1.3) - - (1.3)
Dividends paid - - - - - (1.1) (1.1)
At 31 December 2023 138.3 16.4 0.6 (1.9) - 66.0 219.4
At 1 January 2024 138.3 16.4 0.6 (1.9) - 66.0 219.4
Profit for the year - - - - - 30.6 30.6
Other comprehensive expense - - - - - (2.3) (2.3)
Issue of ordinary shares under employee share option plans 0.9 - - (0.6) - (0.3) -
Shares awarded to satisfy employee share schemes - - - 1.7 - (1.7) -
Equity-settled share-based payments - - - - - 2.3 2.3
Acquisition of treasury shares - - - (1.1) - - (1.1)
Nominal value reduction (136.4) - - 1.2 136.4 (1.2) -
Share buy back (0.1) - - - 0.1 (10.0) (10.0)
Dividends paid - 0.1 - - - (3.3) (3.2)
At 31 December 2024 2.7 16.5 0.6 (0.7) 136.5 80.1 235.7
GROUP CASH FLOW STATEMENT
For the year ended 31 December 2024
£m Note 2024 2023
(as restated)*
Cash flows generated from/(used by) operating activities
Profit for the year 30.6 22.1
Adjustments for:
Finance income 5 (9.3) (8.0)
Finance expense 5 3.9 3.9
Taxation 6 5.9 8.8
Loss/(profit) on disposals of property, plant and equipment 0.6 (2.2)
Depreciation of property, plant and equipment 10 11.9 14.8
Impairment of intangible assets 9 - 5.3
Amortisation of intangible assets 9 0.3 1.3
Shares purchased to satisfy employee share schemes - (0.1)
Share-based payments expense 2.3 2.2
Cash generated from operations before changes in working capital and 46.2 48.1
provisions
Decrease in inventories - 0.2
Decrease/(increase) in receivables 15.0 (21.9)
(Decrease)/increase in payables (13.4) 50.0
(Decrease)/increase in provisions (4.2) 1.2
Movement in employee benefits (1.9) (8.0)
Cash generated from operations 41.7 69.6
Interest received 6.7 4.0
Interest paid (3.5) (3.1)
Taxation paid (2.2) (0.7)
Net cash generated from operating activities 42.7 69.8
Cash flows generated from/(used by) investing activities
Additions to owned property, plant and equipment and leasehold improvements (5.5) -
Additions to intangible assets (3.6) (0.1)
Proceeds on disposals of property, plant and equipment 0.1 -
Net cash used by investing activities (9.0) (0.1)
Cash flows generated from/(used by) financing activities
Ordinary dividends paid (3.2) (1.1)
Share buyback (10.0) -
Acquisition of treasury shares (1.1) (1.3)
Repayments of lease liabilities - principal (11.3) (12.6)
Net cash used by financing activities (25.6) (15.0)
Net increase in cash and cash equivalents - with restrictions 14.0 14.1
Net (decrease)/increase in cash and cash equivalents (5.9) 40.6
Net increase in cash and cash equivalents (including cash with restrictions) 8.1 54.7
Cash and cash equivalents at beginning of the year (including cash with 11 188.8 134.1
restrictions)
Cash and cash equivalents at end of the year (including cash with 11 196.9 188.8
restrictions)
Cash and cash equivalents at beginning of the year (excluding cash with 164.4 123.8
restrictions)
Net (decrease)/increase in cash and cash equivalents (5.9) 40.6
Cash and cash equivalents at end of the year (excluding cash with 158.5 164.4
restrictions)
*See note 14 for more information on restatements.
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
Costain Group PLC ("the Company") is a public limited company domiciled in
England and incorporated in England and Wales. The consolidated financial
statements of the Company for the year ended 31 December 2024 comprise the
Group and the Group's interests in associates, joint ventures and joint
operations and have been prepared and approved by the directors in accordance
with UK-adopted international accounting standards and with the requirements
of the Companies Act 2006 as applicable to companies reporting under those
standards. A duly appointed and authorised committee of the Board of directors
approved the preliminary announcement on 10 March 2025. The financial
information set out above does not constitute the Company's statutory
consolidated financial statements for the years ended 31 December 2024 and
2023 but is derived from those financial statements. Statutory financial
statements for 2023 have been delivered to the Registrar of Companies and
those for 2024 will be delivered in due course.
The auditor has reported on these financial statements. Their report for 2024
was (i) unqualified and (ii) did not contain a statement under section 498(2)
or (3) of the Companies Act 2006. Their report for the financial statements of
2023 was (i) unqualified, and (ii) did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
While the financial information included in this preliminary announcement has
been prepared in accordance with UK-adopted international accounting
standards, this announcement does not itself contain sufficient information to
fully comply with UK-adopted international accounting standards.
The accounting policies have been applied consistently by the Group to each
period presented in these financial statements.
Going concern
The Group's principal business activity involves work on the UK's
infrastructure, mostly delivering long-term contracts with a number of
customers. To meet its day-to-day working capital requirements, it uses cash
balances provided from shareholders' capital and retained earnings and its
borrowing facilities.
The Group's bank and bonding facilities, which expire in September 2026,
comprise an £85m sustainability-linked revolving credit facility (RCF) and
surety and bank bonding facilities totalling £270m. The RCF facility is
currently undrawn.
These facilities have a leverage covenant of net debt/adjusted EBITDA ≤1.5
times, an interest covenant of adjusted EBITA/net interest payable 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 £50m. These financial
covenants are tested quarterly. As at 31 December 2024, the Group had a
leverage covenant ratio of below zero (the Group had no net debt) and an
interest covenant ratio of 11.1 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 year ended 31 December 2024, the directors are required to
consider whether the Group and the Company can continue in operational
existence for the foreseeable future, being a period of at least twelve months
from the date of approval of the financial statements.
In assessing the going concern assumption, the Board reviewed the Group's base
case plans for the 15 month period to 30 June 2026, being a period of more
than 12 months from the date of approval of these 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 and the Company will be able to operate
within 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 and the Company have 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 - adjusting items
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, and disclosed
in the segmental reporting in note 4. 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, claims and
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) and excluding 'cash and cash equivalents - with restrictions'. '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 and excluding cash flows related to 'cash and
cash equivalents - with restrictions'. 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 most critical accounting policies and significant areas of estimation and
judgement arise from the accounting for long-term contracts under IFRS 15,
'Revenue from Contracts with Customers', specific provisions, the carrying
value of goodwill, the assumptions used in the accounting for defined benefit
pension schemes under IAS 19, 'Employee benefits', the recognition of deferred
tax assets in relation to tax losses and the items classified as 'adjusting
items'.
Long-term contracts
The majority of the Group's activities are undertaken via long-term contracts
and IFRS 15 requires the identification and separation of individual, distinct
performance obligations, which are then accounted for individually. The most
common type of contracts undertaken by the Group with multiple performance
obligations are framework contracts. In most cases, the obligations are
satisfied over time and estimates are made of the total contract costs and
revenues. In many cases, these obligations span more than one financial year.
Both cost and revenue forecasts may be affected by a number of uncertainties
that depend on the outcome of future events and may need to be revised as
events unfold and uncertainties are resolved. Cost forecasts take into account
the expectations of work to be undertaken on the contract. Revenue forecasts
take into account compensation events, variations and claims and assessments
of, for example, the impact of pain/gain arrangements and disallowed or
withheld costs, to the extent that the amounts the Group expects to recover
can be reliably estimated and are highly probable not to reverse.
Management bases its estimates of costs and revenues and its assessment of the
expected outcome of each long-term contractual obligation on the latest
available information. This includes detailed contract valuations, progress on
discussions over compensation events, variations and claims with customers,
progress against the latest programme for completing the works, forecasts of
the costs to complete and, in certain cases, assessments of recoveries from
insurers, suppliers and contractors, where these are considered virtually
certain. Revenue is recognised to the extent that amounts forecast from
compensation events, variations and claims are agreed or considered in
management's judgement highly probable to be agreed.
There are a small number of material contracts where management has been
required to make significant accounting estimates and, which result in
estimation uncertainty, as at 31 December 2024. In relation to these
contracts, the Group has included estimated recoveries with a combined value
of £8.6m (2023: £11.9m), on the basis that these are considered highly
probable not to reverse. However, there are a range of factors which will
affect the ultimate outcome once these contracts are finalised. Management
considers that the estimation uncertainty in relation to these contracts
ranges from a potential upside of £11.2m to a downside of £8.6m (2023: a
potential upside of £29.7m to a downside of £11.9m.
The ultimate financial impact of this estimation uncertainty will depend,
inter alia, on the terms of the contract and the interaction with incentive
arrangements, such as pain/gain mechanisms and bonus or KPI arrangements, as
well as final conclusions regarding claims and compensation events and
assessments of, for example, costs disallowed under the contract.
In addition, the HS2 programme is currently navigating a change in its
programme delivery strategy with an integrated programme being developed and
work is expected to commence on a revised programme with the supply chain,
including the Skanska-Costain-Strabag Joint Venture. Our 2024 financial result
reflects the current contractual position.
The estimates of the forecast contract outcome and the profit or loss earned
to date are updated regularly and significant changes are highlighted through
established internal review procedures. The impact of any change in the
accounting estimates both positive and negative is then reflected in the
financial statements.
While management believes it has recorded positions that are highly probable
not to reverse on the basis of existing facts and circumstances, there are
uncertain factors which will impact the final contract outcome and could give
rise to material adjustments within the next financial year. Given the
inherent complexity and pervasive impact of the various judgements and
estimates impacting revenue, cost of sales and related balance sheet amounts,
it is not considered plausible to quantify the impact of taking alternative
assessments on each of these judgements.
Rectification provision: Contract in the Water sector
In 2021, the Group recognised a provision in respect of the estimated future
costs of expected rectification works required at a customer's water treatment
facility where the Group had been prime contractor.
As at 31 December 2022, after working with designers, insurers and the
customer, there was greater clarity as to the scope and cost of rectification
work required and the Group's best estimate of the cost of the single most
likely rectification solution at this time was £17.0m. Costs of £4.8m had
been incurred at the end of 2022, and accordingly, a provision of £12.2m was
included in the statement of financial position. A number of assumptions were
made in arriving at the cost estimate and management considered that the
ultimate cost would fall within a range of ±30% of the estimated total.
As at 31 December 2023, progress in design and procurement had enabled
management to validate the assessed programme and narrow estimation
uncertainty to a range of -8%/+13% with the revised estimated total cost being
£19.3m. Costs of £7.7m had been incurred to date and therefore the provision
disclosed in the statement of financial position was £11.6m.
During 2024, the detailed design of the solution has been completed and works
have commenced on site. Costs of £16.1m have been incurred to date against a
revised total estimated cost of £21.9m, with this increase predominantly as a
result of civils costs and delays in the supply chain. The provision disclosed
in the statement of financial position is therefore £5.8m. Work is now due to
be completed in 2025.
As first reported in 2022, Costain has engaged with its insurers and received
confirmation that insurance cover is available and that all reasonable costs
of rectification work that are validly incurred will be met by insurers.
Consistent with this, insurers continued to make interim payments on account
during 2024. On this basis, management has made a judgement that the costs of
rectification, after deduction of insurers' excess and amounts already
received from insurers, will be recovered. Accordingly, an insurance
receivable of £8.8m is recognised in the statement of financial position as a
current asset at 31 December 2024 in accordance with IAS 37 on the basis that
recovery is considered virtually certain and is expected in 2025. There is a
cap on insurance but the cap is significantly in excess of the cost estimate.
As at 31 December 2023 and 2022 respectively, £12.7m and £13.4m had been
recognised as an insurance receivable.
Carrying value of goodwill
Assessing the recoverability of the carrying value of goodwill recognised on
acquisition requires an estimation of the value in use of the cash generating
units to which the goodwill has been allocated. These assessments involve
estimation and judgement, principally in respect of the levels of operating
margins, growth rates and future cash flows of the cash generating units and
also include consideration of the impact of potential sensitivities in respect
of those assumptions. The discount rates used to calculate present values and,
where a reasonable possible change in assumptions may give rise to an
impairment, related sensitivities are set out in note 9.
Defined benefit pension schemes
Defined benefit pension schemes require significant estimates in relation to
the assumptions for the discount rate, inflation and member longevity that
underpin the valuation. Each year in selecting the appropriate assumptions,
the directors take advice from an independent qualified actuary. The
assumptions and resultant sensitivities are set out in note 12.
Deferred tax
Included in deferred tax assets is an asset for tax losses recorded in current
and prior years. The asset is recognised on the basis that the losses will be
used against future taxable profits of the Group over an estimated period of
three years (2023: four years). The significant judgement in assessing the
recoverability relates to the ability of the Group to achieve its taxable
profit forecasts and the ability of these estimated numbers to withstand the
application of what the Board considers appropriate sensitivities.
Adjusting items
As described in note 1, management has used judgement to determine the items
classified as 'adjusting items' as set out in note 3.
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 2.
The profit adjustments represent amounts included in the income statement.
In 2024, Costain settled a fire safety compliance claim in relation to the
design and build of a development which completed in 2001. The settlement
closes out all known and unknown future claims on the building. The settlement
is partially offset by a related insurance credit. A detailed review has
identified one other obligation on a building completed in 2013; a provision
has been created for this liability in year. Both the net settlement and the
provision have been treated as adjusting items totalling £6.7m, reflecting
that the costs are not related to Costain's normal course of business.
£5.4m was incurred on the Group's Transformation programme in 2024, the final
year of the programme (2023: £6.2m) and £nil (2023: £1.8m) of restructuring
costs.
A £0.1m credit has been recognised as a result of the sale of assets in 2024,
which were written down to £nil as part of the restructure of the Group's
digital hardware activities in 2023.
In 2023, the Group restructured its digital hardware activities to focus on
service capabilities. As a result, the capitalised development costs of
products being developed under the Group's manufacturing capabilities were
impaired by £5.3m to £nil as the Group had exited this manufacturing.
Year ended 31 December 2024 Adjusted Other items Total
£m £m £m
Revenue 1,251.1 - 1,251.1
Cost of sales (1,147.8) - (1,147.8)
Gross profit 103.3 - 103.3
Administrative expenses before adjusting items (60.2) - (60.2)
Adjusting items:
Restructuring credit - 0.1 0.1
Transformation costs - (5.4) (5.4)
Fire safety claims - (6.7) (6.7)
Administrative expenses (60.2) (12.0) (72.2)
Operating profit/(loss) 43.1 (12.0) 31.1
Net finance income 5.4 - 5.4
Profit/(loss) before tax 48.5 (12.0) 36.5
Taxation (8.9) 3.0 (5.9)
Profit/(loss) for the year attributable to equity holders of the parent 39.6 (9.0) 30.6
Basic earnings per share 14.6p 11.3p
Year ended 31 December 2023 Adjusted Intangible impairment Other items Total
£m £m £m £m
Revenue 1,332.0 - - 1,332.0
Cost of sales (1,227.2) - - (1,227.2)
Gross profit 104.8 - - 104.8
Administrative expenses before adjusting items (64.7) - - (64.7)
Adjusting items:
Restructuring costs - - (1.8) (1.8)
Transformation costs - - (6.2) (6.2)
Impairment of intangible asset - (5.3) - (5.3)
Administrative expenses (64.7) (5.3) (8.0) (78.0)
Operating profit/(loss) 40.1 (5.3) (8.0) 26.8
Net finance income 4.1 - - 4.1
Profit/(loss) before tax 44.2 (5.3) (8.0) 30.9
Taxation (10.7) - 1.9 (8.8)
Profit/(loss) for the year attributable to equity holders of the parent 33.5 (5.3) (6.1) 22.1
Basic earnings per share 12.2p 8.1p
4. OPERATING SEGMENTS
The Group has two business segments: Transportation and Natural Resources.
These segments are strategic business units with separate management and have
different customers or offer different services. Segmental information is
provided to the chief executive who is the chief operating decision maker. The
segments are discussed in the Strategic Report section of the 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.
2024 Natural Central costs
Resources Transportation Total
£m £m £m £m
Segment revenue
Revenue 405.3 845.8 - 1,251.1
Segment profit/(loss)
Operating profit/(loss) before adjusting items 23.8 29.9 (10.6) 43.1
Adjusting items:
Restructuring credit - - 0.1 0.1
Transformation costs - - (5.4) (5.4)
Remedial costs - - (6.7) (6.7)
Profit/(loss) from operations 23.8 29.9 (22.6) 31.1
Net finance income 5.4
Profit before tax 36.5
2023 Natural Central costs
Resources Transportation Total
£m £m £m £m
Segment revenue
Revenue 388.9 943.1 - 1,332.0
Segment profit/(loss)
Operating profit/(loss) before adjusting items 21.8 28.0 (9.7) 40.1
Adjusting items:
Restructuring costs - (1.8) - (1.8)
Transformation costs (0.1) - (6.1) (6.2)
Impairment of intangible asset - (5.3) - (5.3)
Profit/(loss) from operations 21.7 20.9 (15.8) 26.8
Net finance income 4.1
Profit before tax 30.9
5. FINANCE INCOME/(EXPENSE)
£m 2024 2023
Interest income from bank deposits 6.7 4.8
Interest income on the net assets of the defined benefit pension scheme 2.6 3.2
Finance income 9.3 8.0
Interest payable on interest bearing bank loans, borrowings and other similar (1.4) (2.3)
charges
Interest expense on lease liabilities (2.5) (1.5)
Other interest - (0.1)
Finance expense (3.9) (3.9)
Net finance income 5.4 4.1
Other similar charges includes arrangement and commitment fees payable.
6. TAXATION
£m 2024 2023
On profit for the year
UK corporation tax at statutory rate of 25.0% (2023: blended rate of 23.5%) (4.1) (5.4)
Adjustment in respect of prior years 1.0 1.0
Current tax charge for the year (3.1) (4.4)
Deferred tax charge for the current year (4.0) (3.2)
Adjustment in respect of prior years 1.2 (1.2)
Deferred tax charge for the year (2.8) (4.4)
Tax charge in the consolidated income statement (5.9) (8.8)
£m 2024 2023
Tax reconciliation
Profit before tax 36.5 30.9
Taxation at 25.0% (2023: 23.5%) (9.1) (7.2)
Amounts qualifying for tax relief and disallowed expenses 1.0 (1.4)
Adjustments in respect of prior years 2.2 (0.2)
Tax charge in the consolidated income statement (5.9) (8.8)
7. EARNINGS PER SHARE
The calculation of earnings per share is based on profit of £30.6m (2023:
£22.1m) and the number of shares set out below.
2024 2023
Number Number
(millions) (millions)
Weighted average number of ordinary shares in issue for basic earnings per 271.3 273.6
share calculation
Dilutive potential ordinary shares arising from employee share schemes 3.3 8.5
Weighted average number of ordinary shares in issue for diluted earnings per 274.6 282.1
share calculation
8. DIVIDENDS
An interim dividend of 0.4p per share was paid for the six months ended 30
June 2024. The Board is proposing a final dividend of 2.0p per share.
9. INTANGIBLE ASSETS
Goodwill Customer relationships Other acquired intangibles Other intangibles Total
£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 - - - 5.8 5.8
Disposal - - - (7.6) (7.6)
At 31 December 2024 54.1 15.4 9.7 14.4 93.6
Accumulated amortisation and 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 year - - - 0.3 0.3
Disposals - - - (7.6) (7.6)
At 31 December 2024 9.0 15.4 9.7 8.3 42.4
Net book value
At 31 December 2024 45.1 - - 6.1 51.2
At 31 December 2023 45.1 - - 0.6 45.7
At 1 January 2023 45.1 - - 7.1 52.2
Goodwill has been allocated to the applicable cash generating units of the
Transportation segment (£15.5m (2023: £15.5m)) and the Natural Resources
segment (£29.6m (2023: £29.6m)).
The Group reviews the value of goodwill and in the absence of any identified
impairment risks, tests are based on internal value in use calculations of the
cash generating unit (CGU). The key assumptions for these calculations are:
operating margins, discount rates and growth rates.
Discount rates have been estimated based on pre-tax rates that reflect current
market assessments of the time value of money and the risks specific to the
CGU. The rate used to discount the forecast cash flows for both the
Transportation and Natural Resources CGUs was 15.9%. In 2023, the rates used
to discount the forecast cash flows for the Transportation and Natural
Resources CGUs were 15.8% and 15.7% respectively.
The value in use calculations use the Group's four-year cash flow forecasts,
which are based on the expected revenues and profitability of each CGU, taking
into account the current level of secured and anticipated orders, extrapolated
for future years by the expected growth rate applicable to each CGU, 2.0% for
both Transportation and Natural Resources (2023: 2.0% for both Transportation
and Natural Resources).
At 31 December 2024, based on the internal value in use calculations,
management concluded that the recoverable value of both the Natural Resources
and the Transportation cash generating units exceeded their respective
carrying amounts with substantial headroom.
The directors consider that there is no reasonable possible change in
assumptions that would give rise to an impairment, for example, a 30.0%
reduction in absolute business unit operating profit, a 1.0% decrease in
growth rate and a 1.0% increase in discount rate in combination would not
result in an impairment.
10. PROPERTY, PLANT AND EQUIPMENT
Right-of-use assets
Leasehold improvements Plant & Equipment Land & Buildings Vehicles, plant & equipment Total
£m £m £m £m £m
Cost
At 1 January 2023 - 24.6 21.8 28.3 74.7
Additions - - 0.5 9.7 10.2
Disposals - (9.6) (2.8) (5.3) (17.7)
At 31 December 2023 - 15.0 19.5 32.7 67.2
At 1 January 2024 - 15.0 19.5 32.7 67.2
Additions 8.2 0.1 7.3 11.2 26.8
Disposals - (7.1) (10.9) (15.5) (33.5)
At 31 December 2024 8.2 8.0 15.9 28.4 60.5
Accumulated depreciation
and impairment
At 1 January 2023 - 23.3 7.6 11.8 42.7
Charge in year - 0.9 4.8 9.1 14.8
Disposals - (9.6) (2.6) (4.9) (17.1)
At 31 December 2023 - 14.6 9.8 16.0 40.4
At 1 January 2024 - 14.6 9.8 16.0 40.4
Charge in year 0.2 0.2 2.8 8.7 11.9
Disposals - (7.1) (8.3) (11.7) (27.1)
At 31 December 2024 0.2 7.7 4.3 13.0 25.2
Net book value
At 31 December 2024 8.0 0.3 11.6 15.4 35.3
At 31 December 2023 - 0.4 9.7 16.7 26.8
At 1 January 2023 - 1.3 14.2 16.5 32.0
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 £62.7m (2023: £59.2m).
2024 2023
£m £m
Cash and cash equivalents 158.5 164.4
Net cash 158.5 164.4
Cash and cash equivalents - with restrictions
'Cash and cash equivalents - with restrictions' comprise amounts held in trust
accounts on behalf of certain customers and designated for future payment to
suppliers (see note 14).
2024 2023
(as restated)*
£m £m
Cash and cash equivalents - with restrictions 38.4 24.4
Cash and cash equivalents - with restrictions in the cash flow statement 38.4 24.4
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, to which contributions are made by both
subsidiary undertakings and employees. The total pension charge in the income
statement is £12.2m, comprising £14.8m included in operating costs less
£2.6m interest income included in net finance income (2023: £11.4m,
comprising £14.6m included in operating costs less £3.2m interest income
included in net finance income).
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 31 December 2024 by a qualified
independent actuary. At 31 December 2024, there were 2,886 retirees and 2,601
deferred members (2023 (restated): 2,886 retirees and 2,601 deferred members).
In previous annual reports, Costain has reported the actual number of retirees
and deferred members as provided by its administrator; however, as per IAS 19,
the number of retirees and deferred members used in the IAS 19 calculation
should be reported and therefore Costain has restated the 2023 comparatives.
The number now reported represents membership data taken from the March 2022
triennial valuation; it is not rolled forward in the IAS 19 calculations. The
weighted average duration of the obligations is 11.0 years (2023: 11.9 years).
2024 2023 2022
£m £m £m
Present value of defined benefit obligations (497.5) (542.6) (527.1)
Fair value of scheme assets 552.4 596.1 587.3
Recognised asset for defined benefit obligations 54.9 53.5 60.2
Movements in present value of defined benefit obligations
2024 2023
£m £m
At 1 January 542.6 527.1
Interest cost 25.0 25.5
Remeasurements - demographic assumptions 0.5 (1.0)
Remeasurements - financial assumptions (41.0) 14.8
Remeasurements - experience adjustments 3.7 10.5
Benefits paid (33.3) (34.3)
At 31 December 497.5 542.6
Movements in fair value of scheme assets
2024 2023
£m £m
At 1 January 596.1 587.3
Interest income 27.6 28.7
Remeasurements - return on assets (39.9) 6.5
Contributions by employer 2.0 8.1
Administrative expenses (0.1) (0.2)
Benefits paid (33.3) (34.3)
At 31 December 552.4 596.1
Expense recognised in the income statement
2024 2023
£m £m
Administrative expenses paid by the pension scheme (0.1) (0.2)
Administrative expenses paid directly by the Group (1.8) (1.8)
Interest income on the net assets of the defined benefit pension scheme 2.6 3.2
0.7 1.2
Fair value of scheme assets
2024 2023
£m £m
Global equities 90.0 99.5
Multi-asset growth funds 20.7 65.9
Multi-credit fund 83.8 96.6
LDI plus collateral 339.7 323.8
Cash 18.2 10.3
552.4 596.1
Principal actuarial assumptions (expressed as weighted averages)
2024 2023
% %
Discount rate 5.50 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 31 December 2024 and 31 December 2023 are:
2024 2023
Male Female Male Female
(years) (years) (years) (years)
Currently aged 65 21.9 23.8 22.0 23.8
Non-retirees currently aged 45 22.9 25.1 22.9 25.1
The discount rate, inflation and pension increase and mortality assumptions
have a significant effect on the amounts reported. Changes in these
assumptions would have the following effects on the defined benefit scheme:
Pension liability Pension cost
£m £m
Increasing the discount rate by 0.25%, decreases pension liability and 13.4 0.7
increases pension income/reduces pension cost by
Decreasing inflation by 0.25% (which reduces pensions increases), decreases 12.0 0.7
pension liability and increases pension income/reduces pension cost by
Increasing life expectancy by one year, increases pension liability and 16.9 0.9
reduces pension income/increases pension cost by
As highlighted in the table above, the defined benefit scheme exposes the
Group to actuarial risks such as longevity, interest rate, inflation and
investment risks. The LDI portfolio is designed to respond to changes in gilt
yields in a similar way to a fixed proportion of the liabilities. With the LDI
portfolio, if gilt yields fall, the value of the investments will rise to help
partially match the increase in the trustee valuation of the liabilities
arising from a fall in the gilt yield-based discount rate. Similarly, if gilt
yields rise, the value of the matching asset portfolio will fall, as will the
valuation of the liabilities because of an increase in the discount rate. The
leverage within the LDI portfolio means the equivalent of 95% of the value of
the assets is sensitive to changes in interest rates and inflation and this
mitigates the equivalent movement in the liabilities of the scheme as a whole.
In accordance with the pension regulations, a triennial actuarial review of
the Costain defined benefit pension scheme was carried out as at 31 March
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, which would be in 2027, on the basis of the
assumptions made in the 2022 valuation and agreed recovery plan. As at the
annual review on 1 April 2024, the pension scheme had a surplus of 101%, on
the technical provisions basis, resulting in the Company's contributions not
being required from 1 July 2024 in accordance with the recovery plan. The next
annual review will be on 1 April 2025.
The next triennial actuarial review will be carried out as at 31 March 2025
and completed by March 2026.
In addition, as previously implemented, the Group will continue to make an
additional contribution so that the total deficit contributions match the
total dividend amount paid by the Company each year, if required. As a result
of the surplus at the annual review on 1 April, 'dividend parity' was
suspended for a year also. Any additional payments in this regard would have
the effect of reducing the recovery period in the agreed plan. The Group will
also pay the expenses of administration in the next financial year.
Any surplus of deficit contributions to the Costain Pension Scheme would be
recoverable by way of a refund, as the Group has the unconditional right to
any surplus once all the obligations of the Scheme have been settled.
Accordingly, the Group does not expect to have to make provision for these
additional contributions arising from this agreement in future financial
statements.
In June 2023, the High Court judged in the Virgin Media vs NTL Pension Trustee
case that certain amendments made to the NTL Pension Plan were invalid because
the scheme's actuary had not provided the necessary confirmations ('Section 37
Certificates'). The High Court's decision has wider ranging implications,
affecting other schemes (such as the Costain Pension Scheme) that were
contracted-out on a salary-related basis, and made amendments between April
1997 and April 2016.
The ruling was appealed and the case was heard by the Court of Appeal in June
2024. In July 2024 the case was upheld and the original judgement stands.
There is still the potential for overriding government legislation to be
introduced. As a result the Company and the Trustee of the Costain Pension
Scheme cannot at this stage be certain of the potential implications (if any).
The Company and the Trustee of the Costain Pension Scheme will continue to
seek legal advice on the matter and act accordingly as the situation evolves.
Defined contribution schemes
Two defined contribution pensions schemes are operated. The total expense
relating to these plans was £12.9m (2023: £12.6m).
13. SHARE CAPITAL
2024 2023
Number (millions) Nominal value £m Number (millions) Nominal value £m
Issued share capital
Shares in issue at beginning of year - ordinary shares of 50p each, fully paid 276.7 138.3 275.1 137.5
Issued in year (see below) 1.8 0.9 1.6 0.8
Nominal value reduction - (136.4) - -
Share buyback (9.7) (0.1) - -
Shares in issue at end of year - ordinary shares of one pence each (2023: 50p 268.8 2.7 276.7 138.3
each), fully paid
The Company's issued share capital comprised 268,766,087 ordinary shares of
one pence each as at 31 December 2024 (2023: 276,718,885 ordinary shares of 50
pence each).
All shares rank pari passu regarding entitlement to capital and dividends.
The 2021 LTIP vested in the year and 1,630,000 shares were issued in April
2024 to satisfy this vesting.
A total of 136,152 shares were issued under the Scrip Dividend Scheme during
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.
In August 2024, Costain announced an on-market share buyback programme. This
programme was completed in November 2024 and resulted in the purchase of
9,718,950 Ordinary Shares in aggregate for cancellation.
14. PRIOR PERIOD RESTATEMENTS
Gross up to other receivables and accruals
During the year, it was identified that £15.7m of accrued expenses and other
receivables related to one of our joint operations, as reported as at 31
December 2023 and disclosed in the 2023 financial statements were incorrectly
netted off, resulting in no net impact on the statement of financial position.
There is no material impact on the profit and loss account or the statement of
cash flows; however, the movements in receivables and payables have been
restated in the statement of cash flows. The prior year statement of financial
position has been restated and the impact of the restatement is as shown in
the table below. At the opening balance sheet date of the earliest period
presented, being 1 January 2023, the gross up was £11.4m.
As reported As restated
2023 2023
£m £m
Other receivables 6.6 22.3
Accruals and deferred income 100.1 115.8
Gross up to contract assets and contract liabilities
During the year it was identified that contract assets and liabilities
totalling £57.9m had been understated in the prior year, resulting in no net
impact on the statement of financial position. There is no impact on the
profit and loss account or the statement of cash flows; however, the movements
in receivables and payables have been restated in the statement of cash flows.
The prior year statement of financial position has been restated and the
impact of the restatement is as shown in the table below. At the opening
balance sheet date of the earliest period presented, being 1 January 2023, the
gross up was £24.1m.
As reportedd2023 As restated
2023
£m £m
Contract assets 26.9 84.8
Contract liabilities (5.1) (63.0)
Cash and cash equivalents - with restrictions
For the year ended 31 December 2024, the Group has changed the presentation of
amounts held in trust bank accounts on behalf of certain customers and
designated for future payment to suppliers. These were previously recognised
in the Group's balance sheet as a trade receivable from the customer depicting
that the cash is held in trust for the customer and does not represent the
Group's cash. In 2024, the Group has re-presented these accounts as 'cash and
cash equivalents - with restrictions' and restated the comparative at 31
December 2023 resulting in no net impact on the statement of financial
position. There is no impact on the profit and loss account. The statement of
cash flows has been restated to include these amounts and the in year
movements thereon including a restatement to the movements in receivables. The
opening cash balance as at 1 January 2023 has also been restated in the
statement of cash flows. The impact of the restatement is as shown in the
table below.
As reported As restated
2023 2023
£m £m
Cash and cash equivalents - with restrictions at 1 January - 10.3
Cash and cash equivalents - with restrictions at 31 December - 24.4
Trade receivables 92.5 68.1
15. EVENTS AFTER THE REPORTING DATE
There are no events after the reporting date.
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