Engineering solutions provider Costain has reported a 13 per cent increase in pre-tax profits despite legacy problem contracts in the waste sector.

Half-year pre-tax profits rose to £11.3 million and underlying operating profit jumped 21 per cent to £15.8m after a strong performance at the infrastructure division.

Group revenue surged ahead 27 per cent to £794m in the first six months.

But further costs and provisions of £11.4m over the completion of its legacy Greater Manchester Waste PFI contract awarded back in 2007 saw the natural resources division deliver an £8.4m loss on top of the £7.4m loss reported the year before.

All 46 projects under the £400m contract for Viridor Laing are now either fully completed or in the contract warranty period during which further work and plant modifications are to be completed. Final acceptance on the project is now expected in early 2017.

On the back of these problems, Costain decided back in 2009 not to pursue fixed price contracts of this nature and in 2014 announced that it was quitting the waste sector.

Chief executive Andrew Wyllie said: “The group has incurred further costs and has taken additional provisions to reach final acceptance on the project, which is now expected in early 2017, and to complete the remaining works in a time appropriate to the operational running of the plants.

“Costain remains in discussions with relevant contract counter parties and the group’s insurers regarding the issues that have arisen on this contract. It has been the Group’s policy since 2009 not to pursue fixed price contracts of this nature.”

He added: “We have delivered another strong performance in the first half of the year, with a 21 per cent increase in underlying operating profit, and our order book is at a record level. The dividend has been increased 15 per cent in line with our progressive policy.

“These are exciting times as billions of pounds are being spent upgrading and renewing the country’s energy, water and transportation infrastructure.

“There is a revolution in the deployment of technology-led innovative solutions to meet the increasingly complex requirements of our national infrastructure needs, and we are continuing to rapidly transform the Costain business to be at the heart of the opportunity this presents.

“Costain remains on course to deliver a result for the year in line with the board’s expectations.”