Costain, one of the UK's leading engineering solutions providers, has announced another strong performance with profit before tax up 23%, with the publication of its interim results for the half-year ended 30 June 2011.

 

 

The company said its performance reflected the ongoing transformation of the business through the implementation of its “Choosing Costain‟ strategy, while a drop in revenue to £468.5m from £533.4m compared to the same period in 2010 followed its strategic decision to withdraw from lower margin activities.

Costain secured a number of further major new contracts in the period, resulting in an order book of £2.3 billion (June 2010: £2.5 billion), with over £900 million of revenue secured for 2011 at the half-year stage and additional preferred bidder positions of over £400 million. Repeat order customers now account for in excess of 80% of Costain’s order book.

The company said it continued to successfully implement the ‘Choosing Costain’ strategy to further broaden Costain’s Tier One capability across engineering consultancy, construction and operations & maintenance in order to meet the changing service and procurement requirements of its major customers.

Following the recent acquisitions of ClerkMaxwell and Promanex, 25% of Group revenues now arise from consultancy and operations and maintenance activities. Costain said the Promanex acquisition significantly enhanced its capabilities in care and maintenance in key growth areas where there is significant national need, particularly in power, nuclear process, hydrocarbons and chemicals and water.

Strong results and robust order book

Commenting on the results, the Chairman, David Allvey, said:

“We are delighted with another strong set of results, with a significant increase in profit before tax, an enhanced cash balance, and a robust order book including further new contract awards from our major customers.

“The implementation of our „Choosing Costain‟ strategy is  transforming the Group, as we continue to develop or acquire the skills and capabilities to reinforce our position as one of the UK‟s leading Tier One engineering solutions providers.

“Looking ahead, despite continuing challenging market conditions, we see significant opportunity for the continued successful implementation of our strategy and the delivery of the Board‟s ambition of doubling profit over the medium term. The Board expects to report continued progress at the year-end in line with its expectations.”

Focus remains on blue-chip customers

Costain’s focus remains on working with blue chip customers in chosen sectors whose major spending plans are underpinned by strategic national needs, regulatory commitments or essential maintenance requirements.

Costain said that customers were increasingly expecting Tier One providers to meet their specific requirements by delivering an innovative service across engineering consultancy, construction and operations and maintenance, through larger and longer-term bundled contracts.

The Group’s three  core  divisions  - Environment, Infrastructure and Energy & Process  - represent the focus for the strategic development of the Group’s operations.

Environment revenue, including share of joint ventures and associates, during the period was £159.8 million (2010: £246.7 million), with profit from operations of £6.7 million (2010: £1.2 million). The divisional order book at the period end stands at £1.1bn, a similar level to the start of the year, with water and waste key target markets in the Environment division. Costain said the expected reduction in revenue had resulted from the strategic decision to withdraw from lower margin activities, and a slower than anticipated start to the AMP5 programme of work.  However, the profitability of the division had increased significantly in the period compared to the first-half of 2010.

“Exceptionally strong platform” in water

 In water, Costain has AMP5 framework contracts with Severn Trent, Southern Water, United Utilities and Welsh Water. During the period, Costain was also appointed to the Northumbrian Water AMP5 framework and was awarded further work with Severn Trent and United Utilities. Good progress has been made on the Brighton and Hove project for Southern Water.

The Group said its leading position provided “an exceptionally strong platform” to secure future opportunities in the sector as it begins to look ahead to the next regulatory review period, which is expected to require a more integrated service offering, and the extension or award of new contracts.

The Group  is also growing its Geotechnical Services consulting business which  offers surveying, monitoring, testing and analytical services to the highways, rail, water and waste sectors.