Costain ready for £1.2bn job

Costain plans to win a place in the anticipated joint venture between three leading roads contractors for the £1.2bn M25 upgrade between the M4 junction and Dartford.
Chief executive Stuart Doughty said: "We have the resources and we'll be going hell for leather for it. Our shareholders will back us financially on whatever structure the scheme turns out to be. This is a big hurdle and Costain wants to clear it."
Doughty was speaking as Costain unveiled its latest interim results. Figures for the six months to 30 June show turnover 15% higher at £340m (£300m). Pre-tax profit rose to £8.1m (£6.1m).
Costain believes it is back among the big boys. When Doughty arrived in the hot seat his priority was to establish a strong balance sheet. Not only has that been achieved but his second challenge, to build Costain's credibility, has also been realised.
"We're recognised by the Highways Authority as a major player in the highways programme," Doughty said. "Our big roads schemes have all come in on time and budget."
Costain is proud of a CAT score that puts it into the top five roads contractors. The scoring has put pressure on lesser performing competitors to the point where the national roads workload is starting to be shared by fewer of the suitable players.
"It has eliminated some," Doughty said. "It's caused all contractors to reflect on their compliance and softer issues, resulting in clearer management lines."
On the M25 upgrade, Doughty said: "Probably you'll be looking at a joint venture between three contractors and an investor." There is a possibility of a PFI approach, but it is thought more likely to be a design, build, finance and operate scheme. That would see the scheme paid for out of government funds.
Costain has a net cash balance of £66m, including £25m held by its construction joint ventures. The total represents a cash outflow during the first half of the year of £5m.
The joint venture agreement made in April between Costain and China Harbour has made progress. Five pre-qualifications for major marine work have been submitted and four have progressed to full tendering. These are in Morocco, Mexico, Qatar and Nigeria.
During the period, Costain's building division achieved preferred bidder status on £230m worth of new work with £350m-worth of work under negotiation. "This is further evidence of our success in pursuing a strategy of negotiating contracts to avoid the risks inherent in lump sum contracts," Doughty said.