Lovell takes over helm at Costain

Moves at the top of struggling construction group Costain - still making a loss - have resulted in the finance director, Alan Lovell, taking over from Peter Costain as chief executive.

The firm, founded by the Costain family 130 years ago, has lost œ450 million since 1990. And its woes continue, the latest interim results having revealed a further œ5 million loss.

Peter Costain steps down from the œ170,000-a-year post he has held for 15 years and becomes non-executive deputy chairman on a much reduced salary.

On taking over at the helm, Lovell said: 'It's a challenge.' Before joining Costain in 1993, Lovell was chief executive of Conder.

Lovell says Costain's biggest recent achievement has been the turnaround in the fortunes of its US coal business, moving from a loss of œ17 million in the first half of 1994 to a profit of œ700,000 in the latest six month period.

Productivity has soared by 58%, the result of a substantial investment programme and cuts in staffing levels - down from 1,260 to 650.

'We are not committed to selling US coal,' said Lovell this week. 'We are still doing more to improve performance. Remember that there was a œ20 million allowance for depreciation, so the coal division will actually make much more cash than the profit figure shows. US coal is on an even keel.'

Costain has a total workforce of 12,000. Apart from job losses in US coal, 50 posts have gone from Costain's contracting division. Lovell points to a little further trimming, with the accent on 'little'.

Costain's UK building division has already been rationalised, said Lovell, with jobs falling from 1,200 when turnover stood at œ460 million to a figure of 500 who service a current workload worth œ170 million.

The re-organisation of Costain's construction division last year has led to a growing emphasis on overseas work, now up from 34% to 39% of turnover. 'We aim to steadily increase this,' said Lovell.

'The Far East and South East Asia are the most important areas. We have won three contracts in Hong Kong in the last three months worth a total of œ70 million. Malaysia and Indonesia are also attractive regions.'

In the UK, Lovell reports little improvement in margins from construction work. 'I don't believe 1996 will be any better,' he said. 'It will be 1997 before things improve.'

Three senior Costain managers have been promoted to the board: George May, director of UK civil engineering; Michael Quirke, director of UK building; and William Sperry, managing director for South East Asia.

Wob Gerretsen has quit his post as chairman of Costain construction and engineering to become business development director at the National Grid.

Lovell claims Costain has always treated its sub-contractors fairly. 'Look in any table of credit-days outstanding and you'll find we've never been at the harsh end.'