AGM & Interim Management Statement
6 May 2010
Costain is issuing, ahead of its AGM to be held later today, an Interim Management Statement covering the period from 1 January 2010 to the current date.
Following on from the excellent performance in 2009, the Group has continued to perform well and in line with the Board's expectations.
The Group's operations continue to benefit from its focus on targeted blue chip customers whose major spending plans are underpinned by strategic national priorities, regulatory commitments or essential maintenance requirements in chosen sectors.
The Group continues to demonstrate its resilience in a difficult economic environment.
Building on our success and as announced in March, we are now implementing the next stage of our strategy, 'Choosing Costain', which will ensure that the Group enhances its position as one of the leading players in the industry. This will expand further Costain's market position across the design and engineering, construction, and operations and maintenance spectrum. This is designed to enhance and broaden the spread of business and earnings profile over the medium-term.
As a result of a number of significant new contract awards since the beginning of the year, the Group has maintained its order book at the record year-end level of £2.6 billion. In addition, it has preferred bidder positions of over £600 million, ahead of the level at the end of 2009.
To date over £950 million of revenue has been secured for 2010.
Since we reported the Group's results in March, the level of tendering activity has remained high in our targeted growth markets of Infrastructure, Environment and Energy & Process.
Our Infrastructure division, which focuses on the Group's activities in the highways, rail and airports sectors, continues to perform well. Since the beginning of the year, Costain, in joint venture, has been awarded a five-year £115 million Managing Agent Contractor ('MAC') contract to carry out routine operational and maintenance services in Area 14, which covers the North-East of England. This fourth MAC contract has helped to establish Costain as a major player in the UK highways maintenance market.
The Group has also been appointed, in joint venture, as one of the Delivery Partners to the Highways Agency's National Framework Contract involving the delivery of up to £2 billion early schemes in the Managed Motorway Programme.
Costain, in joint venture, has also been appointed to construct the Royal Oak tunnel portal, part of the enabling works for the important Crossrail project
In Environment, which includes the Group's activities in the water, waste and marine sectors, Costain has secured a five-year contract with Welsh Water for the next Asset Management period, AMP5, which began in April 2010. This contract, in addition to other AMP5 contracts previously secured, reinforces the Group's position as one of the leading players in the UK water sector.
Work continues on a £397 million four-year contract to deliver part of the Greater Manchester Waste Disposal Authority's (GMWDA's) PFI Waste and Recycling Contract, the largest municipal waste contract in Western Europe. We are currently pursuing, in joint venture, a number of waste PFI opportunities.
The Energy and Process division, which focuses on the Group's activities in nuclear, power and hydrocarbons & energy, continues to perform as expected and offers significant opportunity for future growth. Work is progressing to programme on the major Evaporator D nuclear project at Sellafield.
In Spain, market conditions remain challenging. No land sales are anticipated in 2010 and actions have been taken to reduce costs. The 600-berth yacht marina, adjacent to the Spanish border with Gibraltar, is close to completion and will become operational in the summer.
The Community division, which includes the Group's activities in the health, education and retail sectors is, as previously reported, being scaled down as we focus on more attractive opportunities. The division is trading in line with our expectations.
There has been no material change in the financial status of the Group, which continues to have a strong cash position of in excess of £100 million, and has no significant borrowings.
With trading in line with our expectations and an order book maintained at the record year-end level, the Board is pleased with the start to the current year.
The economic environment remains challenging but, with a strong operational business and a strategy for the ongoing development of the Group, the Board remains confident that the outcome for 2010 will be in line with its expectations.