Meeting national needs through people and innovation

Supply Chain Conference 2016

9th June 2016

Growing Our Businesses Together

Meeting national needs through people and innovation

• INSERT SUSTAINABILTIY MOVIE HERE

Growing Our Businesses Together

David Taylor

Group Commercial Director

Meeting national needs through people and innovation

Growing Our Businesses Together

SHE

Confrontation Collaboration

Efficiency & Innovation

Today’s Agenda

Welcome to event David Taylor

Business / Strategy update Andrew Wyllie

Breadth of Costain's offering Nigel Curry

A Customer's insight Gary Wright

Joining the Costain journey Aidan Franks

Growing together - Showcase 1 : Bridges and Costain Alex Olley & James McGee

Growing together - Showcase 2 : 4way Technology and Costain Chris Ellison

Networking /Coffee

Growing together - Showcase 3 : Bryden Wood and Costain Jim Mitchell & Renii Onadipe

Growing together - Showcase 4 : Prater and Costain Hazel Beecroft

Collaborative behaviours to enable value creation Alan Cheung

Recognition Richard Howell &

Dan Rennison

Panel Q & A Richard Howell

Official close David Taylor

Growing Our Businesses Together

Andrew Wyllie CBE Chief Executive Officer

Meeting national needs through people and innovation

Another strong trading performance

Notes:

1. Including share of joint ventures and associates

2. Before other items; amortisation of acquired intangible assets and employment related and other deferred consideration

• Revenue1 increased to £1,316.5m

• Underlying2 operating profit up 16% to £33.2m

• £108.2m year-end net cash balance

• Total dividend for 2015 up 16% to 11.0p

Unique customer-focused strategy

Infrastructure

Natural Resources

Securing a future energy

supply…

…maintaining a safe and

reliable water supply

…upgrading the

transport infrastructure

Why our major blue chip customers

choose Costain:

Positioning the business through innovation

and technology

32” LCD flat screen,

built in DVD,

built in Freeview box,

Cinema surround sound,

5 year guarantee

.. and all for less than

£1,000!

Stop Press: May 2016

Linsar LED HD 3000 John Lewis

£149.95!!

Staff Roadshow 2006

Customers will pay for innovative

product and service enhancement

Sony Bravia 75XD8505 HDR 4K Ultra HD Android TV 75" Youview/Freeview

HD/ Playstation Now

£3,999.00

Developing the best team in the industry

• 16% growth in headcount to over 4,100

• Broadening range of skills and capabilities

• Now have 1,000+ people in consulting, advisory and design service roles

• 218 graduates on award winning programme, a 69% increase over last 3 years

• 107 apprentices, up from 80 in prior year

• Rhead Group acquired in August 2015

• professional services consultancy providing a range of solutions across the lifecycle of

infrastructure, construction and asset management programmes

Costain’s PhD students: leading-edge thinking

Current Current PhDs understanding challenges & developing new services

Katie McCausland Oliver Teall Ibrahim Al-Ghraify Ioanna Papanikolaou Harrison O’Hara

Readin

g

Card

iff

Sheffie

ld

Cam

bridge

Loughboro

ugh

Advanced materials Welsh Gov. / N. Grid

Asset Maintenance Highways England

Future Infrastructure Thames Tideway / EDF / National Grid

Field BIM Crossrail / Thames Water

GIS: Biodiversity EDF / HE

New Technology enabled insights changing the industry business model

tbc Chris Mower Henrietta Winsor Adam Golden James Heaton

Readin

g

Edin

burg

h

UC

L

Cam

bridge

Robotics and Automation / TfL

Forensic Engineering COSHH

Engineering Business Models

Energy Systems Future Infrastructure

Edin

burg

h

Engineering Business Models

Driving innovation in our services

• Ability to develop and offer innovative solutions is essential and is a competitive advantage

• Numerous innovations in 2015 including:

• deployment of robotic drilling machinery and automated equipment: accelerating delivery at

Crossrail

• live-trialling ‘self-healing’ road materials: extending the life of strategic road infrastructure

• combining advanced analytics and manufacturing principles: halving the cost of critical water

infrastructure

• Collaboration between customers, supply chain and partners including researchers and universities

• R&D initiatives with eleven leading universities including progressing a number of patent applications

People and innovation delivering leading

market positions

• As an example, we are a leading supplier of services in

Highways across England and Wales

• Comprehensive capability to meet all customer

requirements

• Examples of current contracts across the asset life-cycle

include:

• Advisory and concept development: A14, M4

Newport, Preston Distributor

• Specialist design: ESDAL

• Complex delivery: A556, M1, Heysham M6 link

• Technology integration: All Wales Framework,

Smart Motorways

• Programme management: Smart Motorways

• Asset optimisation: ASCs, East Sussex, MACs

Record order book and increased visibility

0 500 1,000 1,500 2,000

2016 (Dec ‘15)

2015 (Dec ‘14)

2017 (Dec ‘15)

2016 (Dec ‘14)

2018+ (Dec ‘15)

2017+ (Dec ‘14)

Dec ‘15

Dec ‘14

Preferred bidder

£m

Group Order Book Dec 2015

Group Order Book Dec 2014

• Forward order book up 11% to £3.9bn (December

2014: £3.5bn)

• Over 90% repeat orders

• Over £1.1bn of work already secured for 2016

Record, high quality order book

£3.5bn

December 2014 December 2015

£3.9bn

Great opportunity for supply chain partners

Orders of c. £3.0bn!

Summary and outlook

• Strong trading performance

• Unique customer-focused strategy

• Record forward order book

• Continuing to accelerate growth

• Great opportunity for supply chain partners

Growing Our Businesses Together

Nigel Curry Consultancy & Advisory Services Director

Meeting national needs through people and innovation

Introduction

• Introduction to Rhead Group (now rebranded Costain).

• Successful integration creating additional bandwidth to our six

service lines.

• How we are using the acquisition as a catalyst for promoting and

growing high value Consultancy services providing opportunities for

Costain and its supply chain.

Introduction to Rhead Group

Established business with 30 years experience

becoming one of the largest private Programme

Management Consultancies

Sectors – High growth, capital intensive sectors

with government sponsored, non discretionary

programmes benefitting from long-term investment

cycles.

Services – Supported our customer needs across

the entire asset lifecycle including strategic

programme advisory, managed services and

professional services.

Revenue model – Vast majority of contracts are

fully reimbursable (95% of revenue) with a strong

cash conversion.

Customer focus in four Sectors

Defence Infrastructure

Power Energy

Electricity Transmission &

Distribution

Nuclear

Renewables

Ministry of Defence

Naval assets

Rail

Underground

Gas transmission /

distribution

Oil pipelines

Liquefied Natural Gas

Carbon Capture Storage

Integration with Costain

Programme Advisory

Engineering Services

Technology

Wate

r

Oil &

Gas

Po

wer

Hig

hw

ays

Rail

Nu

cle

ar

Consultancy Services • Successful integration of Rhead

• Established an integrated consultancy offering via

three main capabilities:

• Programme Advisory: Cameron Tonkin

• Engineering Services: Fiona Ware

• Technology: Phil White

• Consultancy Operating Model maintains the

successful single customer interface via the

established sectors.

• Increasing our addressable market by offering new

services across a broader range of the asset

lifecycle.

Catalyst for growth for Costain and supply

chain

• Consultancy & Advisory seeded into

each Sector.

• Working with our customers to

improve the assurance,

predictability and efficiency of their

projects earlier in the life cycle.

• Already secured £20m of high margin

consultancy sales in Q1 for 2016FY.

• Recent Programme Management wins

include:

• Feeder 9 PMO

• Submarine OC

• Eager to work with our supply chain to

extend these opportunities

collaboratively.

Asset Lifecycle

Development Build O&M

Growing Our Businesses Together

Gary Wright

Rowsell Wright

Meeting national needs through people and innovation

Agenda

• Background to Rowsell Wright Ltd

• Major UK Infrastructure Clients:

• The Challenge

• Approach to Procurement

• How are Clients changing?

• How can Suppliers respond?

Background to Rowsell Wright Ltd

• Established in 2006, services focus on:

• Procurement Strategies (over £40 billion of investment)

• Operational Procurement (over 50 major contracts)

• Procurement Assurance (all HS2 procurement, LUL procurement)

• Our customers:

• Crossrail Ltd

• High Speed 2 Ltd

• Highways England

• London Underground Ltd

• Department for Transport

• Crossrail 2

The Client Challenge

• National Infrastructure Delivery Plan 2016-2021

• Public capital investment of over £100 billion to 2020-21

• £483 billion project pipeline

• Strongly focused on economic growth

• Five key elements of procurement all major clients will be considering:

Packaging Strategies

Route to Market

Market Engagement

Contracting Strategies

Requirements Definition

Approach to Procurement

Benefits and Outcome

• Scheme benefits

• road, rail, power generation, etc.

• sustained growth of the economy

• Project outcome:

• Safe

• Within budget

• On time

• High quality

Requirements Definition

Packaging Strategies

Route to Market

Market Engagement

Contracting Strategies

Approach to Procurement

Supplier’s Approach

• Alignment with Client vision and values – understand their business

• Skills and Employment – jobs, apprenticeships, SME growth

• Innovation

• Collaboration

• ‘Next generation methods’ – increased use of technology such as BIM

• Off-site fabrication and standardisation

Requirements Definition

Packaging Strategies

Route to Market

Market Engagement

Contracting Strategies

Approach to Procurement

Requirements Definition

Packaging Strategies

Route to Market

Market Engagement

Contracting Strategies

Aims Supporting Activities

INFORM - Create a market place

that can effectively plan and compete

for opportunities at all levels of the

supply chain.

LISTEN - Develop a clear

understanding of the supply chain

to effectively plan procurement and

manage supply chain risks and

opportunities.

• Develop strong links with industry

• Supply chain mapping

• Active supply chain monitoring

• Regular consultation / soundings with the market

• Improved websites

• Clearer pipelines of opportunities

• More conferences

• Greater access to senior staff

Approach to Procurement

• Contract packages that the market can deliver

• Attractive to the market – Clients want the best suppliers

• Maintains healthy competition

• Capable of being managed by the client’s available resources

• Interface risks between packages are minimised

• = LARGE CONTRACT PACKAGES

Requirements Definition

Packaging Strategies

Route to Market

Market Engagement

Contracting Strategies

Approach to Procurement

• NEC3

• Integration of design and construction

• Design and build (Traditional)

• Two stage design and build (or Early Contractor Involvement)

• Fair payment

• Incentives – contract and programme

Requirements Definition

Packaging Strategies

Route to Market

Market Engagement

Contracting Strategies

Approach to Procurement

Tier-1 Direct Contracts

• Procurement is regulated

• Give opportunities to the most capable, aligned suppliers

• Award contracts on the basis of quality and price

• Significant and growing emphasis on behaviours

Requirements Definition

Packaging Strategies

Route to Market

Market Engagement

Contracting Strategies

Approach to Procurement

Supply Chain Contracts (Tier-2, 3, etc.)

• Transparency of supply chain opportunities

• Maximise opportunities for SMEs

• Use of CompeteFor

• Meet the Contractor events

• Cascade NEC3 terms

• Fair payment

Requirements Definition

Packaging Strategies

Route to Market

Market Engagement

Contracting Strategies

How are Clients Changing?

Direction of travel:

• Early creation of the delivery team

• Long-term relationships

• Integrated design and construction

• Selection of suppliers with emphasis on behaviours

• Incentives

• Performance management

How can Suppliers respond?

• Be visible - engage with Clients

• Be aligned - understand major Clients and align with them

• Be the first - continue to innovate, particularly with technology

• Be enthusiastic - how can you help? They need you!

• Be collaborative - commit to collaborating and be able to demonstrate it

• Be able to evidence success – key driver in client confidence

Growing Our Businesses Together

Aidan Franks

Supply Chain Manager

Meeting national needs through people and innovation

Why is our supply chain important?

“Not only have business leaders come to understand that their supply chain is the backbone of their business, it is also considered as an enabler for their business strategy”

Deloittes, Supply Chain & Operations (2014)

Where do we award work?

• Our supply chain partners are the backbone of our

business

• We categorise our partners into 3 levels

Strategic

Preferred

Verified

The Statistics The Statistics

Strategic Partner selection

Data Source Questions 1 2 3 4

Achilles 1 Are they Achilles accredited? No Yes

E1 2 Are they a core or business critical trade / service No Yes

E1 3 Current PR Score (if applicable) 0-249 250-499 500-799 800-1000

E1 4 Order values placed in last 36 months <500k 500k-999k 1m-2m >£2m

E1 5 Orders placed in last 36 months 0 1-3 4-6 >6

Top Service 6 Finanacial status of company 0-15 16-35 36-75 76-100

SCM 7 Probability of work award in next 12 months 0%-24% 25%-49% 50%-74% 75%-100%

SCM 8 Tender support / Work Winning No Yes

Innovation Portal 9 Innovation / Value Creation submitted 0 1-2 3-4 >4

HSE Web* 10 Risk- Prosecutions in last 2 years 0 1-2 3-4 >4

Achilles BC 11 AFR Score <0.1 0.1 - 0.19 0.2 - 0.3 >0.3

Scoring Criteria

Safety performance

Capturing Innovations

160 Trials in live testing

571 Innovations

Demonstrating value

• Why is it important?

• Standardised process

Measuring performance

- Mature performance review process

- Costain Blue is the highest standard

- Room for improvement?

Question

How do you view Costain’s performance reporting system?

1. Above industry standard

2. Industry standard

3. Below industry standard

Supply chain academy

Supply chain development

Summary

• Increasing spend with our Strategic Partners including

SME’s

• A scientific selection process:

• Safety

• Innovation

• Value Capture

• Overall performance ratings

• Supply chain development

Growing Our Businesses Together

Alex Olley Process Design Engineer

Meeting national needs through people and innovation

James McGee Site Manager

Bridges & Costain

Growing Our Businesses Together

• Standard components & products

• Collaborative Planning

• Production Control

• Maximised off site fabrication

• Factory Thinking

• Reduced time on site

Haslemere UV

• 18 months not in operation

• Fed by 2 shallow spring

sources susceptible to

bacteria - Cryptosporidium

• Back into supply to hit Peak

Summer Demand Period

• Costain trusted Bridges

• We work better as a team

Collaborative working

• Bridges engaged - collaboratively developed 3D model

• Off Site Build & Standard products

• Removed hazard, reduced risk & time

• Site Install complete on time by July

Design – 6 Weeks Off Site Fabrication - 6 Weeks Install - 4 Weeks

Build quality guaranteed

• Quality assured

• FAT completed before delivery

• Inspection and test plans in place

• Minimised installation programme

• Right first time

Haslemere efficiencies

UV kiosk Plinth Available

FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN

KG

/co

2

Project Life

Carbon Footprint of Vehicle Movements

Factory Thinking

FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN

Factory Thinking 'v' Conventional

Factory Thinking

Man

We

eks

Factory Thinking Actual Install Date Conventional Thinking Install Date

Key benefits delivered

• No lost time accidents

• Water quality improved

• Reduced on site time

• Reduced impact on

neighbouring Water Works

• £3,000,000 saving

Growing Our Businesses Together

4Way Consulting

Chris Ellison

Technical Director

Meeting national needs through people and innovation

Growing Our Businesses Together

Background

Development

• New technology role for MAC

• Potential knowledge gap

• Renewals e.g. VMS replacements

• Improvements e.g. CCTV infill

Benefits realisation

£1,298,143.50

£11,722,998.35

£1,744,382.30

£1,000,000.00

• £1m Consultancy / Studies

• £1.7m Design

• £1.3m Renewal Schemes

• £11.7m Improvement Schemes

• Improved operational capability

• Safer, more reliable journeys

• Asset Led Delivery Model

Delivering value

• BS11000 relationship

• Single business approach

• Collaboration throughout delivery team

• Innovation in scheme identification

• Driving efficiency

• Operational performance

• Roads Investment Strategy

• Business growth

Growing together

• Continued growth in highways

• New sectors

Growing Our Businesses Together

Jim Mitchell Associate

Meeting national needs through people and innovation

Renii Onadipe Graduate Design Manager

Brydenwood & Costain

• visualisation

visualisation

How do you grow from being an SME designer

to a technology led professional services

provider?

• Data and Technology

• Projects

• Highways

Growing Our Businesses Together

Technology enabled growth

Deliver safely and more efficiently through

innovation

Be more profitable

Growing Our Businesses Together

Growing Our Businesses Together

Prater

Hazel Beecroft Quantity Surveyor

Meeting national needs through people and innovation

Introduction

Project Brief – London Bridge

• Victorian station built in 1836

• Complex & Iconic Design Concept

• Challenging Programme

• Remains Fully Operational

One project team

• Collaborative Enterprise

• One Goal & Shared Vision

• ECI Procurement Strategy

• Innovative Design

Off site solution

• Sections of Complete Canopy Modules constructed off site

• Incorporating Steelwork & Containment into Roof & Soffit system

• Collaborative Solution

• Cost, Time & Quality Benefits

Constructability prototype

• Investment in a Full Scale Section of Canopy constructed off site

• Critical Testing Mechanism

• Ensured all Client Needs Met

• Instilled Confidence in Team

The journey so far……….

• Project is nearing Completion

• Original Team remains Intact

• Prater awarded BS11000

• Improved Business Culture

Thank you

Growing Our Businesses Together

Collaborative Behaviours to enable value creation

Alan Cheung Director Of Behavioural Management

Meeting national needs through people and innovation

I have heard of

Costain Behavioural Safety (CBS)

Yes

No

55%45%

1. Yes

2. No

Have you ever…

Thawing the permafrost

Collaboration is a behaviour

Agr

ee

Disa

gree

27%

73%

1. Agree

2. Disagree

Collaboration – what do we really mean?

Barriers

Are we asking for the right things?

I know what my

critical collaborative behaviours are

Yes

No

64%

36%

1. Yes

2. No

Critical collaborative behaviours

1. Do what you said you were going to do

2. Tell them you’ve done it

3. Pinpoint the problem / need / objective

4. Demonstrate you have listened to other viewpoints /

objectives / feedback

5. Develop solutions which incorporate the best combination of

suggestions & viewpoints to achieve the objective

6. Let people finish before you start talking

7. Speak up when you see a problem

Collaboration

Collaborative relationships

Collaborative relationships

Next steps

Growing Our Businesses Together

Richard Howell Group Head of

Supply Chain

Meeting national needs through people and innovation

Dan Rennison Head of Design

Management

Recognition

Recognition

• Design Services

• Value Creation

• Innovation Portal

• Collaboration

• Supplier Performance

Recognition

• Design Services

Recognition

• Value Creation

Recognition

• Innovation Portal

Recognition

• Collaboration

Recognition

• Supplier performance

Growing Our Businesses Together

Growing Our Businesses Together

The Vital Ingredients

• SHE

• Collaboration

• Innovation & Efficiency

Growing Our Businesses Together

Those that embrace them will succeed with us as partners

Growing Our Businesses Together