Costain sales reverse pounds 200m loss

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The Independent Online
THE embattled construction group Costain turned a pounds 204.6m loss into a pounds 68.7m profit before tax in 1993 after selling off its house-building and Australian coal-mining businesses.

Only pounds 200,000 of the profits came from continuing operations. But Peter Costain, chief executive, said: 'We are in a good position to expand our overseas operations and develop our engineering and construction business.'

The group was severely hit by the recession, which pushed it into losses in both 1991 and 1992 and left it with debts of pounds 331m at the end of 1992, almost 4.5 times its net assets. That forced it to sell its Australian coal-mining business to Hanson for pounds 157m, and its housing business to Redrow for pounds 23m. It also had a pounds 84m rights issue.

That cut its debt to pounds 83m at the end of 1993, equal to 37 per cent of net assets. Mr Costain said the cost of an investment programme in US mining and the need to pay sub- contractors on the Channel tunnel meant gearing was likely to approach 50 per cent of net assets this year, but would fall sharply in 1995 as the benefits of the investment came through.

The group is spending dollars 130m ( pounds 87m) building a new slope in its Kentucky mine and buying new machinery to improve efficiency. It expects the mine to produce 'substantially increased profitability and cashflow from 1995 onwards'.

In 1993, the coal business made pounds 8.3m, up from pounds 6.1m, on sales of pounds 295m. But Mr Costain expects it to achieve a return on the pounds 200m capital of between 10 and 12.5 per cent, giving profits of pounds 20m to pounds 25m.

The engineering and construction business reversed a pounds 5.3m loss in 1992 to produce a pounds 14.7m profit on sales of pounds 808m. Margins on overseas contracts were about 4 per cent, but in Britain they were just 1 per cent, giving an average of 1.8 per cent. The order book at the end of February was pounds 516m, down from pounds 564m at the end of 1992, of which about 37 per cent is overseas.

Earnings per share were 18.8p, compared with an 84.6p loss. There is again no dividend and none is likely until 1995. The shares rose 2.25p to 35.5p.