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Costain's turnover crashes
00:00 03 Sep 1998
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Costain's turnover plunged to £200 million in the first six
months of 1998, compared with a figure of over £300 million in
the comparable period last year, a result of blue chip clients and
public utilities having thrown the troubled contractor off their
lists during its period of suspension by the Stock Exchange last
year.
Announcing Costain's interim results last week, chief executive John Armitt said that Costain had suffered "a slower than anticipated recognition by clients of the group's improved financial position". Costain's profitability - or lack of it - is still a problem. In the six months to 30 June it made a pre-tax loss of £1 million (£5.4 million).
Armitt described Costain's latest financial figures as "satisfactory". Asked if the group would break even in the full year, he said: "I can't say so."
Looking further ahead, Armitt "hopes to be profitable" at the end of 1999. He added that turnover in the full year would show a 50 per cent drop on 1997.
"The Highways Agency is straight forward," said Armitt. "It told us when we were off its list and when we were back on. Other blue chip clients and public utilities are less precise, you end up trying to read smoke signals.
"In the first quarter of this year our winning rate was very low. Costain was re-listed on the Stock Exchange last November, but it takes time for them to accept that all is well." Armitt said the recovery phase was now over.
Asked about bidding margins, Armitt said: "No way are we pursuing zero margins. The good client recognises that 7-8 per cent gross is not excessive. We're getting that from some clients. With overheads at 4-5 per cent, that's 3 per cent net.
"The average margin in the construction industry is 1-2 per cent net and that's post-interest. Currently, margins are static, with a slight tightening in the competitively bid market."
Costain's Newbury bypass project is going well, said Armitt. "We expect it to be profitable," he said. "It is a good project and should be opened by the end of the year."
BOXTEXT: Costain interim results
6 months to 30 June 1998
1998 1997
Pre-tax loss £1m £5.4m
Turnover £201m £317m
Announcing Costain's interim results last week, chief executive John Armitt said that Costain had suffered "a slower than anticipated recognition by clients of the group's improved financial position". Costain's profitability - or lack of it - is still a problem. In the six months to 30 June it made a pre-tax loss of £1 million (£5.4 million).
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Armitt described Costain's latest financial figures as "satisfactory". Asked if the group would break even in the full year, he said: "I can't say so."
Looking further ahead, Armitt "hopes to be profitable" at the end of 1999. He added that turnover in the full year would show a 50 per cent drop on 1997.
"The Highways Agency is straight forward," said Armitt. "It told us when we were off its list and when we were back on. Other blue chip clients and public utilities are less precise, you end up trying to read smoke signals.
"In the first quarter of this year our winning rate was very low. Costain was re-listed on the Stock Exchange last November, but it takes time for them to accept that all is well." Armitt said the recovery phase was now over.
Asked about bidding margins, Armitt said: "No way are we pursuing zero margins. The good client recognises that 7-8 per cent gross is not excessive. We're getting that from some clients. With overheads at 4-5 per cent, that's 3 per cent net.
"The average margin in the construction industry is 1-2 per cent net and that's post-interest. Currently, margins are static, with a slight tightening in the competitively bid market."
Costain's Newbury bypass project is going well, said Armitt. "We expect it to be profitable," he said. "It is a good project and should be opened by the end of the year."
BOXTEXT: Costain interim results
6 months to 30 June 1998
1998 1997
Pre-tax loss £1m £5.4m
Turnover £201m £317m
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