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Consultants could be Costain takeover targets

Contractor Costain has unveiled an ambitious strategy to expand significantly in consultancy and engineering design in order to offer clients the “full life cycle” of services.

Chief executive Andrew Wyllie said the expansion would be fuelled by acquistional and organic growth.

The firm currently regularly works in alliance or network with Capita Symonds, Halcrow, Land Bridge Associates, Shepherd Gilmour. It also works regularly with Scott Wilson.

Wyllie unveiled the strategy, dubbed “Choosing Costain” as he announced preliminary results for the year ended 31 December 2009 showing a record turnover of £1.1bn, a record order book of £2.6bn and a net cash balance of £121M. In 2008 the firm turned over £996M and had an order book of £2.0bn.

The firm’s order book includes £900M of work secured for 2010. Repeat order customers account for 84% of all future work, and it is a bid to satisfy these customers that Costain has decided to expand into consultancy.

“Our ‘Choosing Costain’ strategy provides a blueprint for the Group’s next stage of development in line with the significant changes in the industry that Costain expects to take place over the next decade.

“The way we work shows our commitment to increasingly deliver a full-service offering, from front-end consultancy to maintenance.”

Andrew Wyllie

“The way in which we work shows our commitment to increasingly deliver a full-service offering, from front-end engineering consultancy and design, through construction to maintenance. This will reinforce Costain as the number one choice.

“It will help to ensure that customers, partners, staff, suppliers and investors will continue to make the informed choice to work successfully with Costain.

“‘Choosing Costain’, whilst evolutionary in nature, is a strategy based on established success and provides an ambitious vision for the further development of the Costain Group,” said Wyllie.

Wyllie said the firm would continue to focus on repeat order customers with major multi-billion pound strategic investment programmes which, he said, irrespective of economic environments, are core to the UK’s sustainable “life support systems” and are therefore deemed essential.

Over the next decade, he said programmes will be primarily in three growth markets:

  • Infrastructure - particularly highways, rail and airports
  • Environment - particularly water and waste
  • Energy & Process - particularly nuclear, power, and hydrocarbons & chemicals

“In these markets we will place emphasis on those large blue-chip customers with repeat order commitments who are looking for solutions for each phase of the “life-cycle” of their assets,” stressed Wylie.

“These large customers are imposing increasingly strict criteria in selecting their preferred contractors. In particular, customers are looking for contractors capable of providing the full “life-cycle” of services. This process is in turn creating significant barriers to entry. In order to succeed, it is essential that Costain has the scale and ability to deploy the resources required by such customers.

“Consequently, Costain will look to build on its current strengths – and broaden and improve the quality of earnings streams – by accelerating the development of an integrated front-end engineering consultancy and back-end care and maintenance operations to sit either side of our proven strength in construction:

  • Consulting – one of the fastest growing areas of the Costain business
  • Construction – strong market position with world class expertise in delivering major complex projects
  • Care – operations and maintenance, already 13% of its order book

Wyllie added that the firm can also deliver an over-arching solution through a concession or private finance approach.

Wyllie said the primary geographic focus of the business in the medium term will be the UK although international opportunities will be pursued in line with this customer focused strategy, particularly in the energy sector.

Readers' comments (2)

  • the ability to design/install/maintain is the best allround solution for clients and makes everyone more aware of their final responsibilities in a real sense

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  • S G H Sinclair

    Costain re-inventing their own wheel! Remember the E J Cook partnership, incorporated in 1949?

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