Results for the half-year ended 30 June 2019 From L-R: Gemma Small, Civil & Structural Engineer, Kuldip Khella, Senior Estimator and Jan Bullock, Quality Coordinator 1 Results for the half-year ended 30 June 2019 1
From L-R: Sibin Paul, Principal Engineer Mubin Khan, Software Engineer Summary and outlook On course to deliver full year in line with revised expectations Improved H1 margins • Underlying operating profit of £21.2 million and divisional operating margin of 4.0% Strong momentum in securing new work • £1.1 billion of new contract awards and extensions to existing contracts secured in the period, with c £900m of revenue secured for 2020 Robust balance sheet • Underpinning renewed strategic focus and strong market backdrop New ‘Leading Edge’ strategy in place • Accelerating the deployment of higher margin services Results for the half-year ended 30 June 2019 2
Financial Review Tony Bickerstaff Chief Financial Officer Paul Burns, Senior Electronic Technician Results for the half-year ended 30 June 2019 3
H1 2019 underlying performance Underlying 1 divisional Underlying 1 profit Underlying 1 operating profit profit margin before tax £21.2 m 4.0 % £19.5 m (H1 2018: £23.2m 3 ) (H1 2018: 3.5% 3 ) (H1 2018: £21.8m 3 ) Revenue – including share of joint Underlying 1 basic earnings Order book ventures and associates of per share of £599.2 m £4.2 bn 15.4 p (H1 2018: £772.9m) (H1 2018: £3.7bn) (H1 2018: 16.6p) Average month-end Interim dividend Net cash position 2 net cash 2 of of £40.8 m £63.7 m 3.8 p (H1 2018: £77.7m) (H1 2018: £90.8m) (H1 2018: 5.15p) Please see appendix for all notes Results for the half-year ended 30 June 2019 4
Increasing margins Group underlying 1 operating profit (£m) and margin 2 (%) 60.0 4.0% 3.5% 50.0 3.5% 3.0% 3.0% 40.0 2.5% % margin £m profit 2.4% 30.0 2.0% H1 profit H1 margin 2.0% H2 profit FY margin 1.5% 20.0 1.0% 23.2 21.2 21.2 10.0 15.8 0.5% 0.0 0.0% 2016 2017 2018 2019 Please see appendix for all notes Results for the half-year ended 30 June 2019 5
Divisional margin profile TRANSPORTATION Transportation margin of H1 2018 margin 3.5% 3.8% Rail margin increase 0.7% (H1 2018: 3.5%) Highways margin increase 0.2% Reduction in overheads 0.1% Natural Resources margin of Investment in technology capability (0.7%) 4.3% H1 2019 margin 3.8% (H1 2018: 3.3%) NATURAL RESOURCES TRANSPORTATION H1 2018 margin 3.3% Water margin increase 2.6% Incremental H1 2019 investment of Energy margin decrease (1.3%) over £3.0m Defence margin increase 0.6% Increase in overhead/work winning investment (0.5%) in technology capability Investment in technology capability (0.4%) H1 2019 margin 4.3% Results for the half-year ended 30 June 2019 6
Revenue includes higher margin mix of services Revenue 1 split by market (£m) Total H1 2019 revenue 1 of £599.2m H1 2019 (H1 2018: £772.9m) H1 2018 Decrease due to lower level 0 100 200 300 400 500 600 700 800 of large capital projects Rail Highways Water Energy Defence Secured revenue for 2019 (H1 Group – movement in revenue 1 (£m) + H2 secured) of over £1.0bn 773 599 Secured revenue for 2020 of C £900m (H1 2018: c £850m for 2019) Results for the half-year ended 30 June 2019 7 Please see appendix for all notes
Segmental income statement H1 2019 H1 2018 FY 2018 Underlying 2 Underlying 2 Underlying 2 operating operating operating Revenue 1 profit Margin Revenue 1 profit Margin Revenue 1 profit Margin £m £m £m £m £m £m £m £m £m Transportation 380.2 14.6 3.8% 531.2 18.8 3.5% 1,004.1 41.4 4.1% Natural Resources 216.0 9.2 4.3% 238.9 7.8 3.3% 479.8 18.7 3.9% Alcaidesa (Spain) 3.0 (0.1) 2.8 - 5.4 (0.7) Central costs (2.5) (3.4) (6.9) Underlying 2 operating profit 599.2 21.2 3.5% 772.9 23.2 3.0% 1,489.3 52.5 3.5% Other joint ventures 0.1 0.1 0.3 Underlying 2 profit from operations 21.3 23.3 52.8 Net interest expense (1.8) (1.5) (3.1) Underlying 2 profit before tax 19.5 21.8 49.7 Statutory reported profit before tax 8.4 19.9 40.2 Underlying 2 basic earnings per share 15.4p 16.6p 38.2p Statutory reported basic earnings per share 7.0p 15.1p 30.9p Please see appendix for all notes Results for the half-year ended 30 June 2019 8
Positive net cash position H1 working capital outflow from: H1 2019 H1 2018 FY 2018 • Net reversal of year end £m £m £m positive timing Net cash 1 at beginning of period • Growth in consultancy activities 118.8 177.7 177.7 and investment in technology Cash from operations 29.0 25.6 60.3 • Acceleration in timing of Impact of arbitration award (9.0) - - supplier payments • Reduction in monthly cashflows Changes in working capital (66.0) (103.6) (82.5) (excluding pension deficit contributions) due to fall in revenue • Timing of contract receipts and Cash flow from operating activities (46.0) (78.0) (22.2) commercial settlements (10.9) (9.9) (15.7) Pension deficit contributions H1 2019 average month end net (10.0) (8.7) (13.7) Dividends cash 1 balance of Share capital, interest, tax, fixed assets, £63.7m (11.1) (3.4) (7.3) investments and currency (H1 2018: £90.8m) Net cash 1 at end of period 40.8 77.7 118.8 Expected average month end net cash 1 balance for FY 2019 of Net cash reconciliation: £40m-£50m Cash and cash equivalents at end of period 130.5 158.1 189.3 with an anticipated increase in Less bank overdrafts/borrowings (89.7) (80.4) (70.5) FY 2020 to Net cash 1 at end of period 40.8 77.7 118.8 £50m-£60m Results for the half-year ended 30 June 2019 9 9
Robust balance sheet 30 June 2019 30 June 2018 31 December 2018 x Net assets £m £m £m c £180m Assets £120m net tangible assets Non current assets 136.5 116.9 106.5 (excluding pension net surplus) Current asset ratio >1 Trade and other receivables 312.9 346.3 278.0 Cash and cash equivalents 130.5 158.1 189.3 Current assets 443.4 504.4 467.3 Net cash position Total assets 579.9 621.3 573.8 Dividend policy: Current liabilities (328.6) (389.8) (326.7) Total assets less current liabilities 251.3 231.5 247.1 Ongoing dividend cover of 2.5x Non current liabilities (76.6) (64.0) (61.4) (excluding pension net liability) Interim dividend of Pension surplus/(liability) net of 3.7 13.9 (3.4) 3.8p per share deferred tax (2018: 5.15p) 181.4 182.3 Total equity 178.4 Consistent with revised full year expectations Maturity date of Banking facilities of Bonding facilities of £191m £320m 30 June 2022 Results for the half-year ended 30 June 2019 10 10
£1.1bn of new work secured in H1 Significant contract awards include: 0.5 4.2 (0.6) 4.2 • United Utilities 0.6 3.7 (0.5) maintenance provider 4.2 • Severn Trent AMP7 0.6 3.7 framework • Highways England A19 Testos scheme • >100 consultancy commissions Order book Order book Cancellation New Growth on Order book H1 2019 as at 30 as at 31 of M4 CAN contract existing as at 30 turnover June 2018 Dec 2018 awards contracts June 2019 Results for the half-year ended 30 June 2019 11
Order book breadth c £900m of revenue secured for 2020 2019 2018 Order book includes: Integrated service delivery: 2020 • HS2 enabling works (to 2020) 2019 • Severn Trent AMP7 (to 2025) • United Utilities Maintenance Services 2021 (to 2024) 2020 • Sellafield DDP framework (to 2025) • Area 14 M&R (to 2026+) 2022 • AWE programme management (to 2022) 2021 • ASC 4 & 12 (to 2021) • East Sussex highways services (to 2023) 2023 2022 Complex programme delivery: • HS2 Southern section main works 2024+ (to 2025) • 2023+ HE roads investment programme framework (to 2026+) - 100 200 300 400 500 600 700 800 900 • Thames Tideway (to 2023) £m • M6 Smart Motorway (to 2022) June 2019 June 2018 June 2018 M4 CAN element Results for the half-year ended 30 June 2019 12
Our Leading Edge strategy Our Leading Edge strategy Our Leading Edge strategy Alex Vaughan Alex Vaughan Alex Vaughan Chief Executive Officer Chief Executive Officer Chief Executive Officer Results for the half-year ended 30 June 2019 Melissa Lock, Apprentice Electrician Results for the half-year ended 30 June 2019 Results for the half-year ended 30 June 2019 13 13
Strong position for future growth Solid underlying Strong positions in profits with continued growth markets increase in margins ````` ` ` Robust balance A clear strategy to sheet with enhance the value ` positive net cash of Costain Secured £1.1bn of new Enhancing the A broad range of work in H1 2019, with value of Costain integrated c £900m secured services for 2020 Good progress A clear purpose ````` ` ` implementing and vision strategy Results for the half-year ended 30 June 2019 14
Clear purpose and vision Our vision is to Our ‘Leading Edge’ be the Our purpose is strategy enables us to UK’s leading smart to improve people’s achieve our purpose infrastructure lives and vision solutions company Results for the half-year ended 30 June 2019 15
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