Costain plans £100m rights issue after £6.6m loss

Aaron Morby 4 years ago
Share

Costain is planning a rights issue to raise £100m blaming growing demands on cash from the Government prompt payment code and project bank accounts.

Alex Vaughan says Costain needs extra £100m to manage switch to earlier supply chain payment and growth of project bank accounts
Alex Vaughan says Costain needs extra £100m to manage switch to earlier supply chain payment and growth of project bank accounts

The move will strengthen Costain’s balance sheet and improve its average month-end net cash, which fell to £41m last year from £77m in 2018.

Today Costain also announced it suffered a £6.6m pre-tax loss last year down from a £40m profit in 2018.

The contractor said it had been hit by contract delays and cancellations, which dented expected profitability by £16m.

Costain’s profit was reduced by a further £20m as a result of an arbitration ruling on its Heads of the Valleys A465 road project in Wales.

This scheme is now expected to come in more than £100m over budget and more than two years late.

Revenue fell by 21% to £1.16bn as Costain pursued its Leading Edge strategy to target higher-margin complex work and services contracts.

In the medium term, chief executive officer Alex Vaughan, believes the group can deliver a blended divisional margin of 6-7%.

He said: “Our underlying financial performance was impacted by delays to certain contract start dates and new awards, together with a contract cancellation and the loss resulting from the A465 arbitration.

“Our Leading Edge strategy aligns our activities to meet our clients’ changing needs, supporting a step change in our programme delivery performance and an acceleration in the deployment of our higher margin activities. 

“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 and we are well placed, with our breadth of integrated services, to benefit from these market dynamics.

“Strengthening our balance sheet will enable us to capitalise on these opportunities and further enhance our capabilities.”

Vaughan added that fresh measures to ensure suppliers are paid promptly had taken the average payment time to 34 days from 58 days in the same period in 2018, reducing cash held by £15m.

He added that the cash-raising was also needed to respond to pressure on working capital from cash held in joint operations and project bank accounts.

Latest news

Mount Anvil wins £275m Westminster estate renewal

First phase of Church Street area regeneration will deliver 400 new homes and a library
4 hours ago

Trio of A47 road upgrades to go-ahead as legal challenge fails

20-month delay adds tens of millions to dualling costs
2 hours ago

Stewart Milne went down owing supply chain £153m

So far 1,375 firms have come forward with unpaid bills
10 hours ago

Skanska and Morgan Sindall win £277m duo of Cambridge jobs

Railpen awards £200m Botanic Place and £77m Devonshire Gardens office jobs
14 hours ago

Morgan Sindall delivers another record year of profit

Revenue tops £4bn as pre-tax profit soars 70% to £144m
17 hours ago

HS2 viaduct blunder over wonky concrete segments

Align JV now drilling out concrete joint as part of week-long remedial work
1 day ago

City of London hots up as 9m sq ft under construction

Investors return to City as "10 Cheesgraters" of floorspace under construction
1 day ago

Four arrested in £140m property fraud probe

Serious Fraud Office investigating collapse of property developer Signature Group
1 day ago

McLaren gets green light for 31-storey student tower

Revamp of historic Birmingham site will provide 759 student beds and 189 apartments
17 hours ago

BT Tower to become hotel

New owner MCR Hotels to transform iconic building
17 hours ago

Plans in for first phase of £1.7bn ID Manchester

Plan to reinvent 1960s Renold Building as a new innovation hub
18 hours ago

London £3bn housing framework out to tender

SMEs allocated slots on London Construction Programme housing framework refresh
2 days ago

BAM wins first major RAAC school rebuild

Contractor seals £46m deal for St Leonards school in Durham
2 days ago

Failed strip out specialist owes £1.5m to supply chain

More than 100 subcontractors and suppliers left with unpaid bills by Type Ten Limited
2 days ago

Councils to turn screw on building owners over fire safety upgrades

Government tells councils to step up legal action against rogue building owners
2 days ago

Green light for £300m Fenland energy from waste scheme

Wisbech incinerator will generate 50MW from half a million tonnes of waste
2 days ago

Multiplex starts on 50-storey Thames tower

Developer green lights construction of latest phase of £3bn Bankside Yards scheme
3 days ago

McLaren lodges fresh Reading Broad Street Mall plan

Town centre scheme will deliver 600 homes in four towers
3 days ago

Beard bags £24.5m Bristol office revamp

Construction to start in April
2 days ago

SMEs star in £3.2bn social housing upkeep deal

Around 85% of Efficiency North's framework winners are local firms
3 days ago

Scottish NHS new building projects delayed for two years

Spending clampdown hits over a dozen planned projects
3 days ago

Balfour M25 workers hold strike ballot

Motorway maintenance crews unhappy with 3.4% pay rise offer
3 days ago

Rainsford Contracts acquires M&E specialist

Expanded contractor will have turnover of £45m
3 days ago

Statom expands with launch of Northern HQ

RC frames specialist now targeting jobs in Scotland and north of England
3 days ago

High Court dismisses Stonehenge tunnel challenge

Judge quashes legal challenge against Government consent for £1.7bn job
3 days ago

£1.5bn Teesside carbon capture scheme consented

Final investment decision expected this year for construction start
4 days ago

First viaduct steel section installed at HS2’s complex junction job

Victor Buyck Steel Construction install first 300t viaduct section
4 days ago

Sister scaffold firms file administration notices

BCM Scaffolding Services and Scaffteq West employ 100 people between them
4 days ago

McLaughlin & Harvey suffers £8.6m loss

Cost inflation and Scottish landfill tax legislation hit Antrim-based group
4 days ago

Regulator opens probe into National Highways delivery

ORR concerned about 'dip in performance' on capital projects
4 days ago

Contractor services