Costain on track for £920m turnover

Costain has dragged itself out of the danger zone and is roaring forwards at full speed towards its five-year target of a turnover of £920m.

The group's latest financial figures (six months to 30 June) show pre-tax profit up at £6.1m (£4.7m) while turnover, at £300m, was 17% higher than last year's £250m figure.

Announcing the group's results, chairman David Jefferies said: "The recovery phase is complete."

It has been a hard slog to get Costain back on an even keel. Stuart Doughty took over as chief executive two years ago from John Armitt and has stuck doggedly to his plan for restoring the group's reputation. Costain came within a whisker of going bust in the 1990s.

Doughty's formula for survival involves 15% year-on-year organic growth in turnover, a rise to 3% margins and a cash balance of more than £65m. In addition, Doughty wants to see 50% of Costain's turnover switched into asset management, a move designed to derisk the business.

Costain's operating margin has jumped ahead to 2.1% and is closing in on Doughty's target figure of 3%.

One area that Costain has no intention of expanding into is facilities management. "It's the bottom end of the market, it's labour intensive, and there is a question as to whether FM margins are sustainable," said Doughty.

"I've deliberately not gone down this route as Costain's skills are more in the area of asset management."

Costain is leading a consortium with Amec and Mowlem to compete for work when ProCure 21 is rolled out on a national basis.

"We needed Amec for the strength of its balance sheet," said Doughty.

"We've worked with Mowlem on roads and it has a good regional spread."