Costain profits dented by further losses on waste PFI

Aaron Morby 8 years ago
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Costain delivered a 13%  rise in half-year pre-tax profits to £11.3m  despite its natural resources division falling into the red again over long-running issues with its Manchester waste PFI contract.

Costain chief raises dividend as outlook improves
Costain chief raises dividend as outlook improves

Underlying operating profit rose 21% to £15.8m after a strong performance at the infrastructure division, while group revenue surged ahead 27% 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.

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.”

Revenue and underlying operating profit at the division both increased as a consequence of the expected cyclical increase in spend in the AMP 6 water programmes and the full benefit from the integration of the acquisition of the Rhead Group in August 2015.

Costain’s infrastructure division, which operates in the highways, rail and nuclear markets,  had a strong first half with an increase in revenue and operating profit. Revenue jumped 29% to £613m driving a 16% uplift in operating profit to £27m.

Investment in Costain’s strategic development and an increase in working capital needs saw net cash at 30 June 2016 fall to £69m from £127m a year before.

Costain maintained its record year-end order book at £3.9bn,  5% higher than the year before after securing a string of contracts.

These included East Sussex County Council highways maintenance, the Humber Estuary Crossing project for National Grid, and the Preston Western Distributor Road for Lancashire County Council.

The firm also secured a place on the decommissioning delivery partnership framework for Sellafield and a hydrochloric acid dosing plant design and construction contract for oil company Total.

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

 

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