Costain reports strong start

A strong start to the current year is being reported by UK contractor Costain, which claimed that it was performing in line with board expectations.

In an interim management statement covering the period from 1 January, 2013, to today, it said the strong start to the year had followed a good performance in 2012.

Costain said it was continuing to secure new work from major blue-chip customers “who are investing billions of pounds in capital, operations and maintenance contracts and who require increasingly innovative solutions to their complex requirements”.

It said its success in identifying, developing and implementing innovative solutions to meet those customer requirements was demonstrated by new work won since the start of the year.

In one example, it claimed that in anticipation of Network Rail’s £9.4 billion (€11.1 billion) investment in electrifying Britain’s railways, Costain had established a joint venture “to develop a range of innovative solutions that would directly meet the customer’s requirements”.

As a result, it said, the group had announced that it had won the West Coast Power Supply Upgrade contract – its first contract as part of an approximate £300 million (€354.3 million) investment by Network Rail in power upgrade.

Costain added that as a consequence of an intense focus on understanding the customer’s specific needs, it had secured, in joint venture, a further four contracts from Crossrail in London – currently the largest project in Europe.

The latest awards include the around £300 million (€354.3 million) contract to design, fit-out and commission the railway systems across Crossrail’s tunnel network.

Costain said that as a result of new contract awards and extensions, its quality forward order book had increased to £2.5 billion (€2.9 billion) – which stood at £2.4 billion (€2.8 billion) at 31 December, 2012 – of which over 90% represented repeat orders.

In addition, the group said it had increased its preferred bidder position to over £500 million (€590 million) – close to £400 million (€472 million) at 31 December, 2012.

It added that to date, over £800 million (€944.6 million) of revenue has been secured for 2013.

It recently dropped out of a proposed all-share merger with May Gurney Integrated Services. It said that May Gurney had announced that it had reached agreement on the terms of a recommended offer by Kier, which at the time represented a premium of approximately 35% to the then value of the proposed merger with Costain.

Costain said that, having undertaken several months of detailed due diligence, it did not believe that it would be in the best interests of Costain shareholders for Costain to amend the terms of the proposed merger.

The group said it had incurred pre-tax transaction costs of approximately £4 million (€4.7 million) associated with the May Gurney proposal and these would be treated as a one-off non trading item in the first half results.