The civil engineering group Costain shrugged off the fall-out from the credit crunch on financial markets yesterday with news of a £60m cash call on shareholders.
The company said the rights issue was fully underwritten and had the backing of its two main shareholders. "We are pleased with the confidence investors have shown in the business," Andrew Wyllie, chief executive, said. Costain is offering three new shares for every four existing shares at 24p; a hefty discount to yesterday's market price of 36p. The £60m will be net of expenses of £4m.
The investment funds Daedalus and Kharafi, which are Costain's two biggest shareholders with 57% of its shares, have agreed to vote in favour of the cash call at the forthcoming extraordinary general meeting. Kharafi will take up all its rights issue entitlement. Daedalus is selling part of its entitlement to the issue's underwriters. Costain said that after the rights issue Kharafi and Daedalus' combined holding would be just over 44%.
News of the cash call came alongside first-half results from the group, which showed a pre-tax profit of £8m compared with a £20.7m loss in the same period last year. The company said the figures showed the business was performing in line with expectations and it was planning a return to the dividend list after an absence of 15 years.
Costain said the additional financial fire power provided by the rights issue cash would strengthen its ability to bid for bigger and longer-running contracts.
The company said its civil engineering business had continued to perform strongly; it had established a "solid presence" in the clean-up operations at Sellafield and was targeting higher margin business in the building division. The oil and gas division is back in the black with Costain saying it was keeping its options for the business "under regular review".
Costain said it had put forward proposals to the pensions regulator about tackling its pension fund deficit, which it hopes will allow it to resume dividend payments. David Jefferies, the chairman, said: "The first-half results confirm the board's expectations that the group should see significant recovery in performance this year and, following the rights issue and with the consent of the pensions regulator, a return to the dividend list."