Costain to raise £75m for bidding drive

Grant Prior 8 years ago

Costain is planning to raise £75m via a share placing to help fund an increase in bid activity in its core infrastructure, energy and water markets.

The news came as Costain reported a rise in adjusted pre-tax profit for the year to December 31 2013 to £31m from £28.1m last time on turnover up to £960m from £934.5m.

Costain is placing an increasing focus  on major customers who utilise target cost, cost reimbursable contracts.

This has seen the firm’s net cash position drop at 31 December 2013 to £57.7m from £105.7m last time.

Costain said the fall in net cash was also down to “an increase in support service related activities, a reduction in advanced payments and a delayed contract.”

Chief Executive Andrew Wyllie said: “Our major customers are consolidating their supply chains as they seek to derive business benefits by working in a more strategic and collaborative manner with a reduced number of preferred Tier One engineering solutions providers.

“The complex nature of the customers’ requirements also dictates that a target cost, cost reimbursable form of contract is the most appropriate to be utilised.

“Consequently, over 90% of our order book is now comprised of this form of contract.

“Contracts of this form benefit from generally being lower-risk than lump sum contracts, but they do tend to be associated with higher bid costs and working capital requirements.

“The speed of the move to this form of contract is reflected in the cash flow movement in the year.”

Costain said the £75m capital raising will help finance bid costs for a greater number of major projects and “demonstrate to customers the Group’s financial capacity to support the anticipated further increases in contract size and duration.”

Chairman David Allvey said: “Costain has delivered another strong performance in 2013, with a forward order book up 25% to £3.0 billion, and the Board is recommending an increase in the final dividend for the seventh successive year.

“The Group has been transformed, and is now one of the UK’s leading Tier One engineering solutions providers.

“Costain is established in a developing market of a limited number of providers who can deliver the innovative integrated consulting, project delivery and operations and maintenance services increasingly demanded by major customers.

“The proposed capital raising announced today alongside these good results provides us with the opportunity to accelerate our growth in the medium and long-term in rapidly evolving markets in which it is expected that over £400 billion will be spent in the next 10 years.”

Costain also revelaed that its failed bid for May Gurney cost the company £3.7m.




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