Costain profit up 17% but building division £5m in the red

Costain has announced group profit up 17% in its full-year results for 2008, although losses were recorded in the building and development divisions.

Group profit before tax rose to £23.1m, compared with £19.8m in 2007, while revenue increased 12% to £996m from £887.9m in 2007.

However, the building sector recorded an operating loss of £5.2m, on turnover of £285.6m. Meanwhile, revenue in property development fell to £1.1m, compared with £3.6m in 2007.

The group's year-end forward order book was up 25%, at £2.0bn, with repeat order customers reportedly accounting for 87% of orders.

The group said it had also disposed of its equity stakes in two PFIs during the year.

Chief executive Andrew Wyllie said that “decisive action” to improve the “disappointing divisional performance” had been taken, reducing overheads, and focusing on relationships with the supply chain.

Chairman David Allvey said: “We remain focused on markets where there are significant spend commitments and, with a net cash balance approaching £150m, we have the resources to continue to develop the business.”

He added that the board had recommended increasing the total dividend for the year. It has proposed payment of a final dividend for the year of 0.5p per share. If approved, the dividend would take the full payment to 0.75p, up by 50% from the previous year.

At 31 December 2008, the deficit in the UK pension scheme recorded in the group's balance sheet was £36.1m, net of deferred tax.

Chief executive Wyllie said: “Our increasing momentum is underlined by over £500m of new contract wins secured in 2009.”

Banking and contract bonding facilities were increased by 42% to £285m during 2008, and extended to September 2011.

However, the group admitted that difficult market conditions had affected its international operations. It said its strategic land development operation Alcaidesa, a joint venture with Santander Bank, did not complete any land sales in the year.

Costain said it would continue to build its presence in the nuclear sector.

In a separate announcement, Costain revealed it had won a contract to build a new dual carriageway in Port Talbot.

The group was awarded an early contract involvement by Neath Port Talbot county borough council for the Port Talbot Peripheral Distributor Road Stage 2 project.

The total construction budget for the scheme is £84m. Design work will begin in March and last for 13 months, with construction due to begin in spring 2010 and last around 36 months.

The scheme includes the construction of 5km of new dual carriageway, with 5km of new side roads. There are four main bridges on the scheme.