Profits fall but Costain has plenty in pipeline

Costain chairman David Allvey was 'encouraged' by position
Costain chairman David Allvey was 'encouraged' by position
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Infrastructure contractor Costain put its failed bid for rival May Gurney behind it yesterday with news of a 20 per cent increase to its order book.

The engineering group said it had a healthy £2.9 billion worth of work in the pipeline.

Costain, which saw its £178 million merger with Turiff parent May Gurney trumped by Kier earlier this year, saw first-half revenues rise by 7 per cent, to £462.9m.

But the company reported pre-tax profits of just £3.1m in the six months to the end of June, down from £14.7m a year earlier.

The group said that on an underlying basis, profits were up 3 per cent at £10.7m, and it hiked its interim dividend from 3.5p to 3.75p.

Chairman David Allvey said: “This was an encouraging start to the year with a 20 per cent increase in our order book to £2.9bn and an increase in underlying operating profit, against a backdrop of market conditions which continue to be challenging.”

Analyst Andrew Gibb, at Investec, said Costain was benefiting from a strategy of focusing on repeat-order clients and a growing services revenue base.

“Whilst this clearly has an impact on the cash profile, it certainly improves the risk profile on contracts,” he said.

Costain’s figures came as construction firm Carillion reported that first-half orders and probable orders had jumped 32 per cent, signalling a return to growth for the construction sector. However, the earlier cutbacks to the firm’s UK construction arm meant revenues were lower than last year.