Costain looks to shore up balance sheet after tough year
Costain Group is to shore up its balance sheet through a £100m share placing, after the infrastructure specialist slid into the red.
The company reported total revenues of £1.16bn for the year to 31 December, compared to £1.49bn a year earlier, while its pre-tax loss was £6.6m, against a pre-tax profit of £40.2m in 2018.
Underlying operating profits were £17.9m, down on the previous year’s figure of £52.5m but in line with revised expectations following a profit warning in December.
There were £1.7bn new contract wins during the year, which along with extensions to existing contracts, helped take the order book to £4.2bn as at 31 December.
Paul Golby, chairman, said: “From a profit perspective, 2019 was disappointing for the group, and while much positive progress has been made, our financial performance by impacted by certain contract delays, a contract cancellation and the loss resulting from the outcome of the A465 arbitration.”
Costain has been in dispute with the Welsh government over the A465 Heads of the Valleys contract, and a court ruled against the company late last year, prompting it to take a £20m hit.
Alex Vaughan, who was appointed chief executive in May last year, said: “The UK infrastructure markets are growing and developing rapidly, with increasing demand for innovative solutions to upgrade, enhance and decarbonise the nation’s strategic infrastructure. This is a significant opportunity for our business.
“Strengthening our balance sheet will enable us to capitalise on these opportunities and further enhance our capabilities.”
The placing has been fully underwritten by HSBC, Investec and Liberum on a standby basis. Costain also said an agreement had been struck with lenders to extend existing bank facilities from June 2022 to September 2023, conditional on the completion of the capital rising.
As well as looking to strengthen the balance sheet, Costain said the Prompt Payment Code had resulted in higher working capital requirements, with the average time taken to pay invoices reduced to 34 days from 58 days.
As at 1230 GMT, shares in Costain had tumbled 28% to 113.80p.