REG - Costain Group PLC - Final Results <Origin Href="QuoteRef">COSG.L</Origin> - Part 3
02/03/2016 07:10
- Part 3: For the preceding part double click ID:nRSB7093Qb
operating activities 15.7 40.6
Cash flows from/(used by) investing activities
Dividends received from joint ventures and associates - 0.1
Additions to property, plant and equipment (2.0) (5.3)
Additions to intangible assets (0.2) (0.8)
Proceeds of disposal of property, plant and equipment 0.1 0.6
Additions to cost of investments (1.0) (1.7)
Repayment of loans to joint ventures and associates - 0.1
Acquisition related deferred consideration (5.4) (3.3)
Acquisition of interest in joint operation - (2.4)
Acquisition of subsidiary (net of acquired cash and cash equivalents and overdrafts) (30.0) -
Net cash used by investing activities (38.5) (12.7)
Cash flows from/(used by) financing activities
Issue of ordinary share capital - 70.6
Ordinary dividends paid (9.4) (7.7)
Drawdown/(repayment) of revolving credit facility 38.5 (25.0)
Repayment of loans (8.1) -
Net cash from financing activities 21.0 37.9
Net (decrease)/increase in cash, cash equivalents and overdrafts (1.8) 65.8
Cash, cash equivalents and overdrafts at beginning of the year 10 148.5 82.7
Cash, cash equivalents and overdrafts at end of the year 10 146.7 148.5
Notes to the financial statements
1 Basis of preparation
Costain Group PLC ("the Company") is a public limited company incorporated in
the United Kingdom. The consolidated financial statements of the Company for
the year ended 31 December 2015 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 International Financial Reporting
Standards as adopted for use in the EU in accordance with EU law (IAS
Regulation EC 1606/2002).
The financial information set out herein (which was authorised for issue by
the directors on 2 March 2016) does not constitute the Company's statutory
accounts for the years ended 31 December 2015 or 2014 but is derived from
those accounts. Statutory accounts for 2014 have been delivered to the
Registrar of Companies, and those for 2015 will be delivered in advance of the
Company's Annual General Meeting. The auditors have reported on those
accounts; their reports were unqualified and did not include reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their reports and did not contain statements under section 498(2)
or (3) of the Companies Act 2006.
Whilst the financial information included in this preliminary announcement has
been prepared in accordance with International Financial Reporting Standards
(IFRS), this announcement does not itself contain sufficient information to
fully comply with IFRS.
Accounting policies have been consistently applied in 2015 and the comparative
period.
The directors have acknowledged the guidance "Going Concern and Liquidity
Risk: Guidance for Directors of UK Companies 2009" published by the Financial
Reporting Council in October 2009. The directors have considered these
requirements, the Group's current order book and future opportunities and its
available bonding facilities. Having reviewed the latest projections,
including the application of reasonable downside sensitivities, the directors
believe that the Group is well placed to manage its business risks
successfully despite the current uncertain economic outlook.
Accordingly, they continue to adopt the going concern basis in preparing these
financial statements.
Significant areas of judgment 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 judgment and
estimation arise from the accounting for long-term contracts under IAS 11
Construction contracts, assessments of the carrying value of the Alcaidesa
assets and the carrying value of goodwill and acquired intangible assets and
the assumptions used in the accounting for defined benefit pension schemes
under IAS 19 Employee benefits.
The majority of the Group's activities are undertaken via long-term contracts
and these contracts are accounted for in accordance with IAS 11, which
requires estimates to be made for contract costs and revenues. In many cases,
these contractual obligations span more than one financial period. Also, the
costs and revenues 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.
Management bases its judgments 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 and
forecasts of the costs to complete and, in certain limited cases, assessments
of recoveries from insurers. The estimates of the contract position 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 is then reflected in the financial
statements.
The Group acquired its joint venture partner's 50% interest in Alcaidesa
Holdings SA, which is now a wholly owned subsidiary, during the year. Under
IFRS 3, the Group has estimated the fair value of the assets which have been
retained by the company, being: the marina which it developed and operates
under a long-term concession agreement, two golf courses which it developed
and operates and an element of land for future development. The fair values of
the marina and golf courses have been undertaken using a discounted cash flow
model, the valuation of the land is based on market comparators. The land
development market conditions in Spain remain challenging, with only a limited
number of transactions for such assets on which to base the fair value.
Reviewing the carrying value of goodwill and intangible assets recognised on
acquisition requires judgments, principally, in respect of growth rates and
future cash flows of cash generating units, the useful lives of intangible
assets and the selection of discount rates used to calculate present values.
Defined benefit pension schemes require significant judgments in relation to
the assumptions for inflation, future pension increases, investment returns
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 11.
2 Operating segments
The Group has two core business segments: Natural Resources and Infrastructure
plus the Alcaidesa operations in Spain. The core segments are strategic
business units with separate management and have different core customers or
offer different services. This information is provided to the Chief Executive
who is the chief operating decision maker.
Following the acquisition of Rhead Group Holdings Limited (Note 12), the Group
integrated all its power activities into the Natural Resources segment and at
the same time combined its nuclear activities into one unit within the
Infrastructure segment. The segment results for the year report the results
under this revised organisation and the results for the previous year have
been restated for consistency.
As a consequence of the reorganisation of Alcaidesa Holding SA (Notes 9 and
12), the land development segment has been renamed Alcaidesa.
2015 Natural Resources Infrastructure Alcaidesa Central Total
costs
£m £m £m £m £m
Segment revenue
External revenue 298.8 962.9 1.9 - 1,263.6
Share of revenue of joint ventures and associates 18.8 33.2 0.9 - 52.9
Total segment revenue 317.6 996.1 2.8 - 1,316.5
Segment profit/(loss)
Operating profit/(loss) (11.1) 50.9 (0.5) (6.1) 33.2
Share of results of joint ventures and associates 0.3 - (0.4) - (0.1)
Profit/(loss) from operations before other items (10.8) 50.9 (0.9) (6.1) 33.1
Other items:
Amortisation of acquired intangible assets (2.2) (1.0) - - (3.2)
Employment related and other deferred consideration (0.4) - - - (0.4)
Profit/(loss) from operations (13.4) 49.9 (0.9) (6.1) 29.5
Net finance expense (3.5)
Profit before tax 26.0
2014 (restated) Natural Resources Infrastructure Alcaidesa Central Total
costs
£m £m £m £m £m
Segment revenue
External revenue 320.9 750.9 - - 1,071.8
Share of revenue of joint ventures and associates 33.5 14.9 2.3 - 50.7
Total segment revenue 354.4 765.8 2.3 - 1,122.5
Segment profit/(loss)
Operating profit/(loss) 0.4 34.4 - (6.1) 28.7
Profit on sale of interest in associates 4.0 - - - 4.0
Share of results of joint ventures and associates - - (1.3) - (1.3)
Profit/(loss) from operations before other items 4.4 34.4 (1.3) (6.1) 31.4
Other items:
Amortisation of acquired intangible assets (1.9) (1.1) - - (3.0)
Employment related and other deferred consideration (2.2) - - - (2.2)
Profit/(loss) from operations 0.3 33.3 (1.3) (6.1) 26.2
Net finance expense (3.6)
Profit before tax 22.6
3 Profit on sales of interests in joint ventures and associates
In December 2014, the Group transferred two PFI investments, Lewisham Schools
for the Future Holdings 3 Limited and Lewisham Schools for the Future Holdings
4 Limited to The Costain Pension Scheme for £7.4 million. The transfer amount
was included as a contribution received by the Scheme.
4 Net finance expense
2015 2014
£m £m
Interest income from bank deposits 0.5 0.2
Interest income on loans to related parties 0.3 0.5
Finance income 0.8 0.7
Interest payable on bank overdrafts, interest bearing loans, borrowings and other similar charges (2.7) (2.2)
Unwind of discount on deferred consideration (0.3) (0.7)
Interest cost on the net liabilities of the defined benefit pension scheme (1.3) (1.4)
Finance expense (4.3) (4.3)
Net finance expense (3.5) (3.6)
Interest income on loans to related parties relates to shareholder loan
interest receivable from investments in equity accounted joint ventures and
associates.
5 Taxation
2015 2014
£m £m
On profit for the year
United Kingdom corporation tax at 20.25% (2014: 21.5%) Adjustment in respect of prior years (2.4)- --
Current tax charge for the year (2.4) -
Deferred tax charge for current year (1.7) (2.2)
Adjustment in respect of prior years 0.3 0.6
Deferred tax charge for the year (1.4) (1.6)
Tax expense in the consolidated income statement (3.8) (1.6)
2015 2014
£m £m
Tax reconciliation
Profit before tax 26.0 22.6
Taxation at 20.25% (2014: 21.5%) (5.3) (4.9)
Share of results of joint ventures and associates at 20.25% (2014: 21.5%) - (0.3)
Disallowed expenses and amounts qualifying for tax relief 0.1 0.2
Non-taxable gains - 0.9
Utilisation of previously unrecognised temporary differences 0.3 0.3
Research and Development tax relief for the current year 0.7 0.7
Rate adjustment relating to deferred taxation and overseas profits and losses 0.1 0.9
Adjustments in respect of prior years, mainly Research and Development tax relief 0.3 0.6
Tax expense in the consolidated income statement (3.8) (1.6)
6 Earnings per share
The calculation of earnings per share is based on profit of £22.2 million
(2014: £21.0 million) and the number of shares set out below.
2015 2014
Number Number
(millions) (millions)
Weighted average number of ordinary shares in issue for basic earnings per share calculation 101.7 94.6
Dilutive potential ordinary shares arising from employee share schemes 2.8 2.1
Weighted average number of ordinary shares in issue for diluted earnings per share calculation 104.5 96.7
7 Dividends
Dividend 2015 2014
per share
pence £m £m
Final dividend for the year ended 31 December 2013 7.75 - 5.2
Interim dividend for the year ended 31 December 2014 3.25 - 3.2
Final dividend for the year ended 31 December 2014 6.25 5.9 -
Interim dividend for the year ended 31 December 2015 3.75 4.3 -
Amount recognised as distributions to equity holders in the year 10.2 8.4
Dividends settled in shares (0.8) (0.7)
Dividends settled in cash 9.4 7.7
8 Intangible assets
Goodwill Customer relationships Other acquired intangibles Other intangibles Total
£m £m £m £m £m
Cost
At 1 January 2014 22.3 8.6 5.5 6.5 42.9
Reclassifications from property, plant and equipment - - - 0.6 0.6
Additions - - - 0.8 0.8
Disposals - - - (0.2) (0.2)
At 31 December 2014 22.3 8.6 5.5 7.7 44.1
At 1 January 2015 22.3 8.6 5.5 7.7 44.1
Acquired through business combinations 18.5 4.0 1.7 0.8 25.0
Additions - - - 0.2 0.2
Disposals - - - (0.1) (0.1)
At 31 December 2015 40.8 12.6 7.2 8.6 69.2
Amortisation
At 1 January 2014 - 2.6 1.8 5.5 9.9
Provided in year - 1.5 1.5 0.4 3.4
Disposals - - - (0.2) (0.2)
At 31 December 2014 - 4.1 3.3 5.7 13.1
At 1 January 2015 - 4.1 3.3 5.7 13.1
Provided in year - 1.5 1.7 0.7 3.9
Disposals - - - (0.1) (0.1)
At 31 December 2015 - 5.6 5.0 6.3 16.9
Net book value
At 31 December 2015 40.8 7.0 2.2 2.3 52.3
At 31 December 2014 22.3 4.5 2.2 2.0 31.0
At 1 January 2014 22.3 6.0 3.7 1.0 33.0
9 Investments
The analysis of Group share of joint ventures and associates is set out
below:
2015 2014
Alcaidesa Holding SA Other joint ventures Associates Total Alcaidesa Holding SA Other joint ventures Associates Total
£m £m £m £m £m £m £m £m
Revenue 0.9 48.9 3.1 52.9 2.3 41.7 6.7 50.7
(Loss)/profit before tax (0.4) 0.1 0.2 (0.1) (0.8) (0.2) 0.2 (0.8)
Income tax - - - - (0.5) - - (0.5)
(Loss)/profit for the year (0.4) 0.1 0.2 (0.1) (1.3) (0.2) 0.2 (1.3)
Non-current assets - 0.1 - 0.1 16.1 - - 16.1
Current assets - 13.0 2.7 15.7 18.6 12.0 3.5 34.1
Current liabilities - (12.7) (0.9) (13.6) (1.8) (11.7) (1.8) (15.3)
Non-current liabilities - - (1.3) (1.3) (7.7) - (1.4) (9.1)
Investments in joint ventures and associates - 0.4 0.5 0.9 25.2 0.3 0.3 25.8
Alcaidesa Holding SA was reorganised during the year with the assets being
split equally between the partners. Under the transaction, which generated no
profit or loss to the Group, the Group took ownership of its share of the
assets by a purchase of the partner's interest in the restructured company,
which then became a wholly owned subsidiary (Note 12).
10 Cash and cash equivalents
Cash and cash equivalents are analysed below, and include the Group's share of
cash held by joint operations of £42.7 million (2014: £24.1 million).
2015 2014
£m £m
Cash and cash equivalents 146.7 148.5
Bank overdrafts - -
Cash, cash equivalents and overdrafts in the cash flow statement 146.7 148.5
11 Pensions
A defined benefit pension scheme is operated in the United Kingdom and a
number of defined contribution pension schemes are in place in the United
Kingdom and Overseas. Contributions are paid by subsidiary undertakings and
employees. The total pension charge in the income statement was £9.4 million
comprising £8.1 million included in operating costs plus £1.3 million included
in net finance expense (2014: £9.2 million, comprising £7.8 million in
operating costs plus £1.4 million in net finance expense).
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 2013 and this was updated to 31 December 2015 by a qualified
independent actuary.
2015 2014 2013
£m £m £m
Present value of defined benefit obligations (687.4) (701.0) (629.7)
Fair value of scheme assets 650.7 659.3 592.5
Recognised liability for defined benefit obligations (36.7) (41.7) (37.2)
Movements in present value of defined benefit obligations
2015 2014
£m £m
At 1 January 701.0 629.7
Interest cost 24.6 28.3
Remeasurements (6.0) 71.2
Benefits paid (32.2) (28.2)
At 31 December 687.4 701.0
Movements in fair value of scheme assets
2015 2014
£m £m
At 1 January 659.3 592.5
Interest income 23.3 26.9
Remeasurements (9.3) 55.5
Contributions by employer 9.6 12.6
Benefits paid (32.2) (28.2)
At 31 December 650.7 659.3
Expense recognised in the income statement
2015 2014
£m £m
Administrative expenses (0.4) (0.8)
Interest cost on the net liabilities of the defined benefit pension scheme (1.3) (1.4)
(1.7) (2.2)
Fair value of scheme assets
2015 2014
£m £m
Equities 162.5 146.1
Multi-credit 75.5 66.8
Government bonds 266.1 307.5
Infrastructure and property 74.2 73.6
Absolute return funds and cash 72.4 65.3
650.7 659.3
Principal actuarial assumption (expressed as weighted averages)
2015 2014
% %
Discount rate 3.80 3.60
Future pension increases 2.95 2.85
Inflation assumption 3.00 2.90
Weighted average life expectancy from age 65 as per mortality tables used to
determine benefits at 31 December 2015 and 31 December 2014 is:
2015 2014
Male Female Male Female
(years) (years) (years) (years)
Currently aged 65 22.2 24.7 22.1 24.6
Non-retirees 24.0 26.6 23.9 26.5
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
Increase discount rate by 0.25%, decreases pension liability and reduces pension cost by 26.6 0.9
Decrease inflation, pension increases by 0.25%, decreases pension liability and reduces pension cost by 23.4 0.9
Increase life expectancy by one year, increases pension liability and increases pension cost by 20.5 0.8
The Group expects to make contributions of approximately £7.2 million, plus an element of dividend matching and the expenses of administration to its defined benefit scheme in the next financial year.
Defined contribution schemes
Several defined contribution pensions are operated. The total expense relating to these plans was £7.7 million (2014: £7.0 million).
12 Acquisitions
On 14 August 2015, the Group purchased the share capital of Rhead Group
Holdings Limited. The business, which is based primarily in the United
Kingdom, provides professional services consultancy with a focus on programme
and commercial management.
The initial consideration was £32.8 million. Further payments of £1.6 million
are due on the first and second anniversaries. These are dependent on
continued future service and, in accordance with IFRS 3, will be expensed to
the income statement.
Costain's strategy is to focus on major customers spending billions of pounds
addressing national needs in energy, water and transportation. These customers
are consolidating their supply chains and seeking an increasingly integrated
service offering from their service providers through larger, longer-term
collaborative contracts. The Group believes the acquisition will broaden its
capabilities and further enhance Costain's programme management and advisory
capability across all the Group's operations as part of that integrated
service offering.
The contributions to revenue and operating profit before amortisation of
acquired intangibles and employment related consideration within the Group's
results of this acquisition was revenue £15.3 million, operating profit £1.6
million, including integration costs.
The acquisition had the following effect on the Group's assets and
liabilities:
£m
Cash consideration 32.8
Acquired intangible assets - Customer relationships 4.0
Acquired intangible assets - Other 1.7
Property, plant and equipment 1.2
Cash 2.4
Other current assets 13.3
Other current liabilities (7.1)
Deferred tax (1.2)
Fair value of assets acquired and liabilities recognised 14.3
Goodwill arising on acquisitions 18.5
Based on the provisional assessment of the recognised values of assets and
liabilities, the goodwill arising on the acquisitions is expected to be £18.5
million.
In July 2015, Alcaidesa Holding SA was reorganised with the assets being split
equally between the partners. The Group acquired its split of the assets by a
purchase of the outstanding 50% of the reorganised Alcaidesa Holding SA. The
acquisition had the following effect on the Group's assets and liabilities.
The basis of allocating fair values to the assets acquired is described in
Note 1.
£m
Carrying value of joint venture at disposal 23.5
Intangible assets 0.8
Property, plant and equipment 26.1
Deferred tax 3.6
Cash 0.4
Other current assets 2.4
Other current liabilities (9.8)
Fair value of assets acquired and liabilities recognised 23.5
The transaction resulted in no profit or loss to the Group.
13 Related party transactions
The Group has related party relationships with its major shareholders,
subsidiaries, joint ventures and associates and joint operations, in relation
to the sales of construction services and materials and the provision of
staff, with The Costain Pension Scheme and with two directors of a subsidiary
in relation to an office lease acquired. The total value of these services in
2015 was £133.2 million (2014: £127.5 million) and transactions with The
Costain Pension Scheme are included in Note 11.
14 Forward-looking statements
The announcement contains certain forward-looking statements. The
forward-looking statements are not intended to be guarantees of future
performance but are based on current views and assumptions and involve known
and unknown risks, uncertainties and other factors that may cause actual
results to differ from any future results or developments expressed or implied
from the forward-looking statements.
15 Responsibility statements
The responsibility statement set out below has been prepared in connection
with (and will be set out in) the Annual Report and Accounts for the year
ended 31 December 2015.
"Each of the directors of the Company confirms that, to the best of his or her
knowledge:
· The Group accounts, which have been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial position and
profits/losses of the Company (and of the Group taken as a whole); and
· The Strategic Report includes a fair review of the development and
performance of the business and the position of the Company (and of the Group
taken as a whole), together with a description of the principal risks and
uncertainties that they face."
The directors of the Company are David Allvey (Chairman), Andrew Wyllie (Chief
Executive), Tony Bickerstaff (Finance Director), James Morley (Senior
Independent Director), Jane Lodge (Independent Non-Executive Director), Alison
Wood (Independent Non-Executive Director) and David McManus (Independent
Non-Executive Director).
On behalf of the Board:
DAVID ALLVEY
Chairman
ANDREW WYLLIE
Chief Executive
519653503
This information is provided by RNS
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