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Costain results show signs of recovery

Contractor Costain today reported a pre-tax profit of £8M for the first six months of 2007, compared to a £20.7M loss during the same period last year.

After two years of expensive restructuring and write-offs, today's results are seen as vindication of Costain's new approach of focusing on markets where it can be a key player.

Costain's streamline "Being Number One" strategy is also reflected in its half year revenue of £430M, down from £436.2M for the first half of 2006.

“Following a number of decisive management actions, Costain has been refocused," said Costain chairman David Jeffries.

"We believe we are seeing significant benefits accruing from the ongoing implementation of our ‘Being
Number One’ strategy. A platform for the next phase of growth has been established and the directors believe that the group will be well placed to capitalise on the opportunities available in its
chosen market sectors."

As a result of Costain's focus on quality rather than quantity of work, the firm's order book is also down on last year: £1.6bn down from £1.9bn at the same time in 2006.

With the vast expense of restructuring and write-offs now appearing to be behind it, Costain today announced some cash-generating initiatives to help it move forward: it has issued 268M new shares at 24p per share to raise £60M; it has also negotiated an increased borrowing facility of £200M, compared with approximately £125M in loans available to it last year.

In contrast to the firm's overall results, Costain's civils division actually saw its turnover go up for the first six months compared to the same period last, with a £280M revenue in the first half of 2007 up from £217M in the first half of 2006. Civils operating profit during this period was £10.1M, up £7.9M during the same period last year.

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