Costain's 'outstanding' performance yields £10m profit

Costain has lifted its pre-tax profit to £10m, a performance which, given the current economic climate, chief executive Andrew Wyllie described as “outstanding”.

The latest figures cover the six months to 30 June 2008.

Costain has a record orderbook running to £2bn which is an increase of 25% over the position 12 months ago.

“We are cautious on what we put on this list,” said Wyllie, “so it includes only projects where we have a piece of paper stating that we have the go-ahead. Costain has another £1bn-worth of projects where it is at the preferred bidder stage and where one-to-one discussions are still taking place.

“We are targeting blue-chip clients, recognising that the top 20% of clients procure 80% of all construction work. In roads and in schools, projects are getting larger and longer.”

Costain’s £60m rights issue last October has raised its ability to provide the bonds needed to tender for larger schemes.

The group’s current cash position of £130m is well ahead of the figure of £40m at the same time last year.

“There are fewer contractors out there and those still about need more horsepower to tackle the big projects,” said Wyllie. “We have ambitious management and the plan, over the next three to five year is to position Costain as a Top 5 contractor – I’d currently put us in the Top 10.”

The latest interim turnover was ahead at £470m (comparable figure last year: £430m)

Segmental analysis of Costain’s four divisions shows that turnover (other than the £45m in joint ventures) was split between:

• £240m – civil engineering
• £140m – building
• £35m – oil, gas and process
• £1m – international

The operating profit/loss from these was:

• £12m – civils
• £2m – oil, gas and process
• no profit at all – international
• loss of £4m – building

The result in civils represents a margin of 5.1%.

The building division would have made a small profit if it had not been for the provision on one non-core residential project. The £4m loss would have been greater had it not been helped by a £1.6m profit resulting from the sale of the group’s equity stake in the Kent Education Partnership concession.

Twelve months ago the deficit in Costain’s pension scheme stood at £38m. This has grown to a latest figure of £67m.

Despite this, Costain felt a strong urge to start repaying a dividend to its shareholders and last year, having persuaded the Stock Exchange that this was an appropriate move, it offered a final dividend.

That has now been followed up by the re-introduction of an interim dividend. “That’s the first in 17 years,” said Wyllie.

He said that there is a recovery plan for the pension scheme which should see it back on an even keel over a 10-year period.