Costain pushed to a loss by Welsh contract blow
Costain has fallen into the red after taking nearly £100m of charges relating to two long-standing contracts, the infrastructure construction specialist said on Monday.
Reported revenues for the six months to 30 June fell 23% to £459.9m, while the operating loss was £90.4m, against a reported profit of £10.2m a year previously.
Pre-tax losses were £92.3m against 2019’s interim pre-tax profits of £8.4m on a reported basis. Adjusted pre-tax profits slumped 81% to £3.8m.
Costain attributed the loss to charges - of £49.3m and £45.4m respectively - relating to the termination of the Peterborough & Huntingdon contract with National Grid, and to a dispute over with the A465 Heads of the Valleys road contract with the Welsh government.
The firm has been in dispute with the Welsh government for two years over design information relating to the contract, but a recent arbitration ruling went against Costain, causing the write-down.
Chief executive Alex Vaughan said: "We are clearly disappointed with the arbitration outcome which, together 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."
Looking ahead, Vaughan added: "Assuming no further sustained Covid-19 lockdowns, we are confident of delivery 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."
In May, Costain completed a £100m (gross) capital raising, which Vaughan said had improved its financial position and allowed it to secure more than £2bn of work in the first half. The order book currently stands at £4.2bn, including £0.9bn of secured revenue for 2021.
As at 1030 BST, shares in Costain were off 6.6% at 44.10p.