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First half write offs plunge Costain into the red

News Business

CIVIL ENGINEERING was the only profitable business area for Costain in the first half of 2006 after it reported a £21.9M pretax loss last week.

Most of the losses came from the closure of its dedicated international arm as the contractor lost £20.1M, mainly on abandoned overseas contracts.

The firm's UK based building division also wrote off £11.9M on contracts where the firm predicts it will fail to recoup its costs.

These write-offs obliterated the £10.1M profits made by other areas of the business, including civil engineering, which made a £7.9M profits, up from £6.8M at the same time last year. This was on an increased turnover of £217M, up from £145.7M midway through 2005.

Turnover across the whole business was up from £345.4M this time last year to £436.2M.

Costain chief executive Andrew Wyllie said: 'This is not something that has happened to us, this is based on action we have purposely taken and as far as the underlying gures are concerned, we have had a good first half to the year.' At the start of the financial year, Costain set out its strategy of 'Being Number One', focusing its energy on being the top contractor in specic sectors, such as highways and water.

Part of this strategy included the contractor dismantling its lossmaking international unit and reassigning overseas projects to its dedicated sector teams.

The poor headline gures caused by these writeoffs disguise the fact that the firm's forward order book has risen by 19% to £1.9bn and its underlying profit had risen from £7.7M to £10.1M.

We don't anticipate any further write downs this year, but we are a contracting business so you can't be too complacent about these things, ' said Wyllie.

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