Chief executive John Armitt said the group was well on the road to recovery after recording pre-tax profit of £200 000 for the six months to 30 June 1999, compared with a £1m loss last year.
The group’s outgoings included £2.9m of reorganisation costs. Turnover fell to £197.3m from £200.8m last year, reflecting the company’s push for higher quality business. “Our focus has been on quality projects,” said Armitt. “I would rather have a solid £450m than a frisky £600m.”
Armitt has also reduced the group’s presence overseas. Work abroad now accounts for only about 20% of Costain’s business – and most of that is in technical support and construction management.
“We can control risks better in the UK than overseas, and the market there is increasingly difficult because of the expertise of local contractors,” he said.
Armitt, who joined Costain in 1997 with a brief to rescue it from losses, has streamlined the group to focus on its core contracting and civils activities, but would not rule out a future move into the higher margin facilities management sector.
“Moving into FM is an option for us in the medium to long term, but that is not to say I have got a plan to make a bid for someone next week,” he said.
The revamp, which Armitt has dubbed “One Costain”, has seen 100 redundancies and the merger of the building and civils arms.
Armitt said the cost of the shake-up had now been absorbed, although he admitted that the exercise would take two years to complete.
The group’s joint venture with 7.6% shareholder Skanska has delivered up to £140m of contracts in the past nine months. This will increase to £180m, following the impending announcement of a “prestigious” west London contract.
But Armitt refused to speculate on the intentions of Skanska, which has a three-year option to increase its stake to 40%.
“At the moment, we don’t see any activity on that front but I would imagine Skanska are satisfied and are happy with the way we are picking up projects,” he said.
The market responded favourably to the results, with shares rising 4.5p to 24.5p on the day of the announcement.
- Skanska recorded a 64% rise in pre-tax profit for the six months to 30 June 1999 and forecast further increases in the second half of the year. Pre-tax profit hit £372m on turnover up 41% to £2.8bn.