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Costain chief hails contracts strategy

Costain’s strategy of targeting revenue from regulated sectors has helped it to a strong performance so far in 2010, chief executive Andrew Wylie said this week.

The contractor has boosted pre-tax profit by almost a fifth, with £8.2 million in the six months to 30 June, compared with £6.9m in the same period last year. Costain’s revenue in the first half of 2010 - including its share in joint ventures - stood at £533.4m, up from £508.2m a year earlier.

Much of the strong financial performance was put down to its exposure to regulated sectors, such as water and power.

Mr Wylie said: “Three to four years ago we decided to focus on blue-chip clients that control most of the spending in the construction market.

“These include large power and water utilities, where spending is regulated and controlled. By targeting these types of customer we are focusing on spending that has to take place.”

Costain recently formed a joint venture with Hochtief and Arup to seek design and build work in the offshore windfarm sector over the next 10 years.

Among other contract wins this year it retained its position as a delivery partner for Dwr Cymru Welsh Water’s AMP 5 framework, which could be worth up to £60 million.

Mr Wylie said: “The government will still spend money on big essential infrastructure projects. Our strategy for the past three to four years has positioned us to take advantage of this essential spending on large specialist projects.

“There are a limited number of competitors who can offer the scale benefits and expertise we can deliver.”

The firm said it had secured more than £400m of new work in the first six months of 2010, which helped keep its order book at £2.5bn - the same level as this time last year.

It also pointed to contracts won since 30 June, including the recent £300m Bond Street Tube station upgrade.

Highlighting changes in the way contractors deal with clients and the way contracts are packaged, Mr Wylie said: “Customers are looking for an enhanced service at a lower price and we have to offer this to them.

“They are looking to bundle contracts together and they want a full service, often including maintenance. As a result of these changes, 14 per cent of our order book is now entirely from maintenance contracts.”