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Costain operating profits up 16pc

Costain’s operating profits increased by 16 per cent in the first half of 2012 as infrastructure profits doubled.

Posting results for the six months to 30 June 2012, the contractor said revenue was up 2 per cent to £477.9 million.

Operating profit was up 16 per cent to £10.7m (June 2011: £9.2m), with infrastructure profits from operations up 91 per cent from £5.7m to £10.9m. Infrastructure includes highways, rail and airports, and represents 80 per cent of Costain’s business. Rail had a particularly strong start to the year, driven by Crossrail and London Bridge work.

Operating profit was down 80 per cent in environment (water and waste), but up 41 per cent in energy and process (hydrocarbons & chemicals, nuclear process and power).

Pre tax profits rose from £10.2m to £17m. It includes £10.5m profit on the transfer of PFI equity investments into the Costain Pension Scheme and a one-off pension cost of £2.7m.

Costain has also increased its support services, now representing 28 per cent of the £850m of revenue secured for 2012.

The firm said success is a direct result of a “focus on major customers who are continuing to invest in capital, operations and maintenance contracts to address essential national infrastructure requirements across the transport, energy, water and waste sectors”.

Chairman David Allvey said: “We now meet the integrated service requirements of major customers, whose repeat orders account for over 90 per cent of the order book and who are continuing to invest in essential infrastructure projects.

“Despite the ongoing challenging economic conditions, we remain on course to deliver a result for the year in line with the board’s expectations.”

Its forward order book rose from £2.3bn to £2.4bn, with over 90 per cent repeat orders, including new awards and extensions to existing contracts. It is preferred bidder on over £400m of work.

Net cash fell from £140m at the year end to £131.5m, and there was a £9m working capital outflow as it changed its mix of work from public sector to regulated utilities. It also followed £17.9 million of acquisition spend in August 2011.

The firm said:  “We will continue to grow the business both organically and by targeted acquisition. Our acquisition strategy will be the key driver of the addition of further high-quality support service related activities to the group’s portfolio. The two businesses which we acquired last year have been fully integrated and are performing well.”

Dividend was increased to 3.5 pence per share (2011: 3.25 pence per share).  The company continues to tackle its legacy pension deficit, now at £29.6 million.

Breakdown:

Infrastructure revenue was up 27 per cent to £279.5m (2011: £219.4m), with adjusted profit from operations of £10.9m (2011: £5.7m), and an order book of £1.5bn (June 2011: £1.1bn)   Contracts in highways include new contract awards include the £102m joint venture upgrade of the A8 Belfast to Larne carriageway in Northern Ireland, and it has also secured five Crossrail contracts.

Environment division revenue, including share of joint ventures and associates, was £127.1m (2011: £159.8m), with profit from operations, excluding the profit on PFI transfers, of £1.6m (2011: £6.7m).

Energy & Process revenue, including share of joint ventures and associates, was £70.5m (2011: £88.6m), with an adjusted profit from operations of £2.4m (2011: £1.8m). Order book at £0.2bn (June 2011: £0.1bn).

Land Development revenue for the period was £0.8 million (2011: £0.7 million) with a loss after tax of £1.0 million (2011: loss after tax of £0.7 million).

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