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Costain hoping to pay dividend despite dip

FINANCE Bad jobs and withdrawal from international market cost contractor £31.1 million

COSTAIN still hopes to declare its first dividend in 15 years despite taking a £31.1 million hit from bad jobs and winding up its international operation.

Chief executive Andrew Wyllie said: 'That would be our intention if we can, but only if it's financially sensible.

'It will only be a nominal amount and we'll have to look at the second half performance and the pension deficit first. But we're very aware of the importance of gett ing back to the dividend list.'

Costain last paid a dividend in November 1992 and, if the firm declares a full-year dividend for 2006, it would pay the same amount off its pension deficit.

This has reduced by a third to £48.7 million due to an improvement in the group's holdings in the corporate bond market.

Costain's net cash position also improved with shareholders funds, excluding the pension deficit, up £2.1 million to £29.6 million.

The hit Costain is taking is partly the result of new monthly reviews of all the group's 200-odd contracts.

This was introduced earlier this year and problems were identified in the past two months on fewer than 10 building jobs for a variety of reasons including time extensions and contracts variations.

Costain's new finance director, Tony Bickerstaff, said: 'Where there's uncertainty we'll take the write-down and that's what we've done here.'

Costain has written off £11.9 million on these jobs but has not given up hope of claim ing some of this amount back.

The firm has also taken a £20.9 million hit from the closure of its international operation, with foreign projects being run by other parts of the business.

The bulk of this is from write-downs on contracts where cash recovery is unlikely but Costain has also had to take hits for office closures and written off inter-company loans made to fund new divisions.

The company's offices in Dubai and Pretoria have been closed and Costain has withdrawn from Iraq, having completed - and been paid for - work in the country's Kurdish region.