Shares fall 20% as building division continues to under-perform

Costain shares fell 20% this morning as it announced a £50m hit for the second half of the year.

The construction group said its building division had continued to under-perform in the second half of the year.

In a trading statement it said that cost overruns would impact year-end results by a further £5m and that a £36m provision would be made for contract disputes.

Costain’s also suffered a £3m hit in Mexico, where its COGAP division is working as a subcontractor on a nitrogen rejection plant project. In additional the firm disclosed a further £6m loss following the closure of the International Division.

Earlier this year Costain announced it had made a £21m loss in the first half of the year to 30 June, after writedowns on building contracts.

Shares fell 11.5p to 51.5p during trading this morning. Costain said it would not be providing a dividend for the year ending 31 December 2006.

The group has already substantially restructured the building management team. Group chief executive Andrew Wyllie said: “These decisions underline our commitment to take robust management action to de-risk the business and provide the necessary transparency going forward.”

The board said it expected a "significant recovering" in underlying performance next year.