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Costain cuts back to refocus

News - International division to close and building supply chain shaken up as contractor stops bidding for one-off projects abroad

COSTAIN is closing its international division and dramatically pruning its building supply chain to give the business a sharper focus.

In a trading statement last week, Costain said it would make a provision of up to £14 million to cover the closure when interim results are released next month. The contractor also revealed it had lost £3 million on a number of oneoff international projects.

Andrew Wyllie, who joined as chief executive last autumn, said that despite problems overseas the firm boasted a solid order book at a record £1.9 billion. This was fuelled by work from specially targeted sectors like nuclear decommissioning.

He said: 'To be profitable you have to have strong market positions. What we're doing is implementing a new strategy and I do not believe one-off projects are a route to success.'

He added: 'What we don't want to do is scratch around with local contractors over the pouring of concrete.'

Costain will continue to work overseas, but management of projects will now come under the control of its core sector divisions.

Several overseas offices, including Pretoria in South Africa, will be closed as contracts finish.

The oil and gas division also struggled and Mr Wyllie warned further action would be taken if improvements were not delivered.

The restructuring exercise is designed to create a leaner, focused business and will see Costain cut the number of subcontractors it uses.

The building division is leading the supply chain shake-up, known as the Partners for Progress plan.

On the M&E side Shepherd Engineering Services, NG Bailey and Lorne Stewart are favoured specialists.

Building division boss Mark Gordon is in talks with concrete and steel frame contractors to whittle down the supplier list further.

He said: 'We are still in discussions with suppliers but will probably select about five firms and then we will start talking to building envelope firms.'

All selected suppliers will be expected to sign up to a company-wide 'Save It' campaign launched last week to cut waste across all sites.

This will be spearheaded by a new sustainable development advisory group made up of senior Costain staff and representatives from CITB ConstructionSkills and the Environment Agency.