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Costain the consultant

Jack Simpson

“So, farewell then […] it would be surprising if the company was still around in a year’s time,” The Independent wrote of Costain in its business pages back in 1995.

Costain was in dire straits during the mid-90s.

Misplaced ventures, including a decision to enter the US coal mining industry, saw the company post a loss of £180m in 1995 – a fourth loss in five years.

Fast forward 30 years and the Costain presented today is almost unrecognisable from the one all those decades ago. It is now nurturing a reputation for discipline, as well as an ability to deliver complex projects with largely consistent returns.

Today saw Costain publish its half-year results, which included a pre-tax profit of £19.5m – the latest in a series of positive financial reports for the company.

It represents a significant turnaround.

By focusing on regulated markets in road, rail and the water sectors, Costain appears to be thriving.

The only blot in recent years was an ill-judged Manchester PFI waste contract, which has now been consigned to the past.

But while today’s results underline just how far the company has come since the mid-90s, they also highlight another ongoing shift within the business.

The company, known for delivering projects for Crossrail, Highways England and Network Rail as a tier one contractor, is also making significant strides in the consultancy space.

Since the acquisition of Rhead Group for £36m in 2015, Costain has increased its consultancy and advisory work significantly. 

In fact, today’s results revealed that a third of its entire workforce are now working across technology and consultancy roles.

Costain has also started winning places alongside the usual suspects on major consultant frameworks, such as its spot on the £420m Crown Commercial Services infrastructure management deal next to Arcadis, Atkins, Jacobs and Mott MacDonald. 

This move is no doubt partly driven by the expected drop-off in major capital projects over the medium term. To cite just one example: the vast majority of Network Rail’s £48bn CP6 pot will be spent on renewals and maintenance.

Clients are also seemingly more enamoured with firms that can provide a fully integrated approach to projects.

What’s not in doubt is that Costain’s shift is paying dividends.

The rise in profit today came despite turnover at the firm dropping by £115m.

Chief executive Andrew Wyllie certainly believes things will only get better, stating that Costain’s order book is full of “higher-quality work” that will yield better margins.

For the wider industry, Costain’s recent history is intriguing.

Here is a contractor achieving profit consistently and growing its margins, while moving more of its work away from contracting.

The question is: will rivals follow suit?

Readers' comments (1)

  • Great to see real examples that the construction sector can trade ethically and profitably by recognising and offering value, rather than continually wielding the lowest price sledge hammer.
    Maybe the construction industry would be more appealing to women, achievers, innovators if we had a few more Costains and a few less Carillions.

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