Visit www.costain.com Costain Group PLC Costain Group PLC ‘ Choosing Costain’ Costain House Vanwall Business Park Maidenhead Berkshire Annual Report 2010 to meet national needs SL6 4UB By printing this document on revive 100 white gloss & offset, both 100% recycled papers, the environmental impact was reduced by:* 2,912kg of landfill 73,758 litres of water 6,813kWh of electricity 636kg CO2 of greenhouse gases 4,735kg of wood Source: European BREF (data on virgin fibre paper). Carbon footprint data audited by the CarbonNeutral Company. *compared to a non-recycled paper Results are obtained according to technical information and are subject to modification. Costain Group PLC Annual Report 2010 Shareview service Unsolicited mail The Shareview service from our registrar, Equiniti, gives The Company is legally obliged to make its share register shareholders: available to the general public. Consequently, some » direct access to data held on their behalf on the share shareholders may receive unsolicited mail, including register including recent share movements and dividend correspondence from unauthorised investment firms. details; and Shareholders who wish to limit the amount of unsolicited mail they receive can contact: » the ability to change their address or dividend payment instructions online. The Mailing Preference Service Freepost (LON20771) To sign up for Shareview, you need the ‘shareholder reference’ London W1E 0ZT printed on your proxy form or dividend stationery. There is no charge to register. ShareGift When you register with the site, you can register your preferred The Orr Macintosh Foundation (ShareGift) operates a charity format (post or e-mail) for shareholder communications. share donation scheme for shareholders with small parcels If you select ‘e-mail’ as your mailing preference, you will of shares whose value makes it uneconomic to sell them. be sent shareholder communications, such as proxy forms Details of the scheme are available on the ShareGift website and annual results, by e-mail instead of post, as long as this www.sharegift.org. Equiniti can provide stock transfer forms option is available. on request. Donating shares to charity in this way gives rise neither to a gain nor a loss for Capital Gains Tax purposes. If you have your dividends paid straight to your bank account, This service is completely free of charge. and you have selected ‘e-mail’ as your mailing preference, you can also collect your tax voucher electronically. Instead of receiving the paper tax voucher, you will be notified by e-mail with details of how to download your electronic version. However, if you choose ‘post’ as your preference, you will be sent paper documents as usual. Visit the website at www.shareview.co.uk for more details. Details of software and equipment requirements are given on the website. Designed and produced by The College www.thecollege.uk.com This Report has been printed on revive 100 White Gloss and revive 100 White Offset – both are recycled papers. They contain 100 Contractor Costain photographers: Mike Doherty, page 09 (Construction and recycled waste, are FSC certified and produced at a mill with ISO 14001 Care); page 15 (Costain Innovation Evening); page 29 (Sussex Waste certification. Recycled fibres used are Process Chlorine Free (PCF). Water Treatment and Lewisham, Building Schools for the Future); page 33 (Trawsfynydd Strategic Integrated Framework); page 34; and page 35 (Association of Graduate Recruiters award). Gustavo Ferrari, Pro Light Studio: page 47 (Samer G. Younis). Ian Routledge: on pages 16, 18, 43, 46, 47 (Costain Board Directors) and page 35 (Credit cards). Additional photography: www.aerial-images.co.uk, page 10; Bourne If you have finished reading the Annual Report and no longer of the Decade Steel Limited, page 31; Costain/Rhondda Cynon Taf County Borough wish to retain it, please pass it on to other interested readers Council, page 38; Fluid Moves Productions Ltd, page 37; Network Rail, or return it to Costain Group PLC or dispose of it in your page 31: © NDA, page 11; Philip Lane Photography (Waste), page 29; recycled paper waste. Thank you. and www.webbaviation.co.uk (Hydrocarbons), page 33. This Annual Report is available at: www.costain.com The Annual Report is printed by an FSC (Forest Stewardship Council), ISO 14001 and Carbon Neutral certified printer using vegetable based inks. (ISO 14001 is a pattern of control for an environmental management system against which an organisation can be credited by a third party. FSC ensures there is an audited chain of custody from the tree in the well-managed forest through to the finished document in the printing factory.) 1 Meeting national needs “Extraordinary renaissance” “ the reputation of Costain has been rebuilt to the point that last summer it was named by the industry as “Contractor of the Decade”... in making the award New Civil Engineer magazine was elevating Costain above the likes of Balfour Beatty, Carillion, the McAlpines and the Laings. It also recognised an extraordinary renaissance.” Robert Lea, Industrial Editor The Times, 8 January 2011 Costain Group PLC Annual Report 2010 01 Welcome to the 2010 Costain Group PLC Annual Report. Costain is an international engineering and construction group with a reputation for technical excellence founded on more than 140 years of experience. The Costain name has been at the forefront of many world-famous projects including the Thames Barrier, the Dubai Dry Dock and the Channel Tunnel. In this Annual Report, we feature the 2010 operational performance. We also show how our strategy – ‘Choosing Costain’ – is based on meeting national needs in terms of Infrastructure, Environment and Energy & Process. In addition, we demonstrate how innovation is key to Costain’s success both now and in the future. Visit us online www.costain.com Our Annual Report 2010 is available in both printed form and on the Investors section of the Costain website at www.costain.com/ investors. Effective communication with our shareholders is vital to our wellbeing and we would welcome feedback on either or both versions of this Annual Report – contact us at [email protected] 02 Costain Group PLC Annual Report 2010 1 This section explains the challenges facing society and how investment in Meeting national needs 1 Meeting national needs upgrading and maintaining the UK’s infrastructure will aid economic recovery 04 The priorities and growth. It also outlines how Costain is positioned to provide solutions to 06 The investment many of the challenges. 08 Our strategy 10 Delivering innovation This section provides greater focus on our strategy and our sustainable 2 Business & Responsibility review investment proposition. We explain how our strategy is underpinned by our 14 2010 highlights commitment to Corporate Responsibility, how our business is organised and 16 Chairman’s statement how it has developed over the year, 18 Chief Executive’s review and we provide details of our financial 22 Our vision and values performance. We also review our strategic objectives, Key performance 24 Our sustainable investment proposition indicators, Principal risks and priorities 26 Our performance for 2011. 28 Divisional performance 28 Environment 30 Infrastructure 32 Energy & Process 33 Land Development 34 Performing responsibly 34 Health and Safety 35 Our People 37 Environmental Impacts 38 Relationships 40 Principal risks 42 Key performance indicators 43 Finance Director’s review 46 Board of Directors This section explains our Corporate Governance and decision-making 3 Governance processes. We detail the Board of Directors and its committees, and our 50 Corporate Governance statement (including Internal controls accountability and audit procedures. and Risk management) 57 Directors’ report 62 Directors’ remuneration report 70 Statement of Directors’ responsibilities 71 Independent Auditor’s Report to the members of Costain Group PLC This section contains the detailed financial statements and other 4 Financial statements information that our stakeholders find useful, including detailed notes, 74 Consolidated income statement the financial calendar and shareholder services. 75 Consolidated and Company statements of comprehensive income and expense 76 Consolidated statement of financial position 77 Company statement of financial position 78 Consolidated and Company statements of changes in equity 79 Consolidated cash flow statement 80 Company cash flow statement 81 Notes to the financial statements 115 Five-year financial summary 116 Financial calendar and other shareholder information Costain Group PLC Annual Report 2010 03 Meeting national needs Meeting national needs The priorities Energy commitment » European utility owners are committed to investing in a diverse portfolio of solutions to close the UK’s 55GW energy gap across a diverse portfolio of solutions. Major initiatives are under way to deliver energy Waste solutions » solutions based on renewable, new Over 300 landfill sites are scheduled nuclear and clean coal technology. to close in the UK by 2020 due to European Union (‘EU’) and Department for Environment, Food and Rural Affairs (‘Defra’) legislative waste recycling targets. EU waste exemplar schemes such as our Greater Manchester Waste contract (5% of the UK’s municipal waste) are providing valuable solutions to waste resource recovery. 04 Costain Group PLC Annual Report 2010 1 Go online to see this in action www.costain.com/investors Meeting national needs Reducing congestion » Vehicle kilometres driven have risen