Costain, the engineering solutions provider, has posted a record forward order book of £3. 5 billion with the publication today of its annual results for the year ended 31 December 2014.

The group  attributed its strong performance, which also included increases in revenue and underlying operating profit to the “rigorous implementation” of its “Engineering Tomorrow” strategy.

The strategy involves focusing on target blue chip customers in energy, water and transportation whose major spending plans are underpinned by strategic national needs, regulatory commitments or essential maintenance requirements .

Revenues rose to £1,122.5 million in 2014, compared to £960 million in 2013 with underlying operating profit up to £28.7 million (2013: £27.4 million). Over 90% of the order book comprises repeat business -  the Group also has a strong preferred bidder position which currently stands at over £500 million.

Referring to the UK Government’s 2014 National Infrastructure Plan which sets out an overall investment of over £320 billion to 2020-21 in an identified pipeline of projects in the UK, Costain described the opportunities in its target markets as substantial. It also said the changing nature and increasing complexity of the requirements of the major customers in these markets was continuing to change fundamentally the way in which they procure services and work with their supplier partners.

Contracts in the Group’s water sector activities, which sits in the Natural Resources division alongside Oil & Gas and Nuclear,  included awards for Thames Water, Severn Trent Water and Southern Water five year AMP 6 programmes, which start in April 2015,.

Costain also continued to deliver AMP 5 frameworks for United Utilities, Southern Water, Severn Trent Water, Welsh Water and Northumbrian Water – including the large waste water treatment plants at Liverpool and Woolston, and completed the award winning Brighton & Hove scheme. In addition, work commenced on the Shieldhall contract with Scottish Water.

Commenting on its tender success rate, Costain said this is now better than one in three of all opportunities pursued, a win-rate that has “improved significantly” as a consequence of the implementation of its strategy to focus on the needs of major customers who are increasingly procuring contracts on a larger and longer-term basis. This is reflected in the fact that over 70% of the Group’s order book is for contracts or frameworks with a remaining value in excess of £100m. The average life of a contract in the Group has increased considerably in the last few years and is now over four years in duration.

In March 2014 the Group also successfully completed a capital raise of £70.3 million which is being utilised for a number of purposes including:

• ensuring the requisite financial capacity to support anticipated further increases in contract size and duration;
• investing in innovation and technology;
• financing bid costs;
• and providing flexibility to make selected in-fill acquisitions to complement Costain’s existing capabilities as opportunities arise.

 Costain commented:

“Our major customers, who are spending and will continue to spend billions of pounds in meeting national infrastructure needs, are consolidating their supply chains as they seek to derive business benefits by working in a more strategic and collaborative manner with a reduced number of preferred Tier One providers through larger longer-term contracts.”

“To be successful in the future we must continue to grow the business, both organically and by targeted acquisition, to ensure that we have the scale and capability to satisfy the full range of their service needs for increasingly complex and large scale projects.”