Problem contracts continue to hamper Costain
Costain slumped to a pre-tax loss of £92.3 million during the first half of this year following problems with a National Grid project in the East Midlands and a road building job in Wales.
The firm said the loss, which follows an £8.4m profit last time, reflects the previously announced charges in relation to the Peterborough & Huntingdon contract (£49.3m) and the A465 Heads of the Valleys road contract (£45.4m).
Despite this, Costain pointed to a “continued positive infrastructure market outlook” with “good levels” of activity and opportunities. It reported a strengthened balance sheet following £100m equity raise resulting in net cash of £141m, enabling the group to further capitalise on the growing infrastructure market opportunities.
Over £2 billion of contracts and frameworks were secured in the first half comprising a greater proportion of integrated services, in line with a strategic focus, while the order book of £4.2bn included £0.9bn of secured revenue for 2021.
Chief executive Alex Vaughan said: “We are now back on site across all of our operations with strict safety measures in place to protect our teams and the communities we work in. I would like to pay tribute to our people who have done everything they can to look after one another and to do the right thing by our clients, communities, society and to protect our business during this pandemic.
“We are clearly disappointed with the recent arbitration outcome in relation to the A465 contract which, together with the mutual termination of the Peterborough & Huntingdon contract, has resulted in significant revenue adjustments for these long-standing projects. We have in place clear actions to resolve the financial position on these contracts and importantly we have taken decisive action to prevent such issues from reoccurring.
“The equity raise in May has already helped us to capitalise on the immediate opportunities in our infrastructure markets as we successfully secured over £2bn of contracts in the first half, many of which incorporate our consultancy and digital capabilities in line with our strategic focus. There remains a strong pipeline of further opportunities which we are actively targeting.
“Looking ahead, assuming no further sustained COVID-19 lockdowns, we are confident of delivering growth in profits and margins next year. Although we are mindful of the macro-economic uncertainties ahead, Costain is in a strong position with secured long-term programmes and a positive market backdrop, in particular the UK Government’s drive to progress investment in infrastructure so that it is better, greener and faster in support of the nation’s economic recovery.”