Costain is poised to pay out its first shareholder dividend for 16 years after the construction firm confirmed plans today for a £60 million rights issue and insisted that it was on the road to recovery.

The group, which breached its banking covenants twice last year, is issuing nearly 268 million shares at 24p in an effort to strengthen the balance sheet.

It said that both of its big shareholders, the Kuwaiti-based Khafari and UEM, the Malaysian construction firm, were supporting the move, although UEM is not taking up its full entitlement.

Details of the right issue came as Costain revealed that it had bounced back into the black with pre-tax profits of £8 million in the first half to the end of June.

It made a £20.7 million loss in the same period last year.

While revenue slipped by £6 million to £430 million, the group said that it planned to declare a 0.5p dividend with its full-year results in March — the first since 1992.

David Jeffries, the chairman, said: “The first-half results confirm the board’s expectations that the group should see a significant recovery in performance this year.

“A platform for the next phase of growth has been established.”

Despite the confidence, shares in the group fell 1p to 36.25p.

They have plunged more than 40 per cent in the past year to their lowest levels since 2004.

Costain counts the redevelopment of St Pancras for the high-speed Channel Tunnel link among its recent big projects.

Andrew Wyllie, the chief executive who joined from Taylor Woodrow at the start of last year, has been refocusing the business on winning contracts with larger clients.

The group said today that its current order book was at £1.6 billion, with more than 80 per cent of the work in the civil engineering sector.

It was at the preferred bidder stage on £500 million of contracts.

Repeat business with existing clients accounts for 78 per cent of the order book, up from 67 per cent a year ago.

A new £200 million banking and bonding facility has been agreed with lenders, which will replace a £125 million facility that was in place the end of December.

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