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

Aaron Morby 3 weeks ago

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

Boris urged to save UK construction industry

Industry leaders demand tax breaks, retentions returned and quick payment from clients
10 hours ago

Laing O’Rourke cuts pay for 8,000 workers

Contractors confirms cuts of up to 30% as part of "war effort" during coronavirus crisis
9 hours ago

Free training cash offer extended to larger companies

CITB grants of up to £25,000 now available to bigger contractors
4 hours ago

Kier closes Reading office with over 40 job losses

Lack of pipeline work and cost-saving plan cited as reason for closure
15 hours ago

Amey pledges full pay for sick and self isolating workers

U-turn on statutory sick pay after claim workers faced wealth or health choice
15 hours ago

Taylor Wimpey cuts exec pay and bonuses

Board takes 30% pay cut and cancels today's 2% annual pay increase
14 hours ago

Secretary of State pays tribute to construction industry

Letter from Alok Sharma spells out current official government guidance on keeping sites open
1 day ago

Amey/McAlpine told to start M6 junction 19 job

Enabling works get underway on £50m Cheshire motorway junction
14 hours ago

Clugston and Covid 19 sink Leeds civils firm

Coronavirus contract termination with zero payment notice proves final straw for Oaklands
15 hours ago

Boost your online presence – join the Enquirer Directory

Site for suppliers and buyers showcases products, services and latest stories
2 years ago

Giant Battersea Power Station site shut until end of April

Client decides to extend work pause after discussions with Mace and McAlpine
15 hours ago

Coronavirus update for construction: Wednesday April 1

The latest advice and information from industry trade bodies
14 hours ago

Network Rail calls for fresh engineering ideas for tunnel upgrades

Hunt on for less disruptive solutions to upgrading ageing railway tunnels
15 hours ago

Police stops create more confusion for contractors

Sites can stay open but officers are trying to stop builders getting to work
2 days ago

William Hare chief executive dies after contracting coronavirus

David Hodgkiss was the grandson of steel company founder William Hare
2 days ago

Costain banks on critical projects to save 50% of revenue

Directors join ranks of firms taking 30% pay cut
2 days ago

Plans go in for £258m Birmingham resi tower

Moda submits 722 homes for rent plan as it looks beyond coronavirus epidemic
2 days ago

Coronavirus update for construction: Tuesday 31

The latest advice and information from industry trade bodies
2 days ago

BAM Construct restarts work on sites

Mace pauses all work for another week under "rolling suspension"
2 days ago

Hard hat cameras help sites keep working remotely

Technology helping contractors cope during coronavirus crisis
2 days ago

Laing O’Rourke top bosses take 30% pay cut

Around 90 senior directors will see salaries reduced
2 days ago

Kier cuts staff salaries by up to 20%

Salary cuts among 6,500 staff as core sites remain open, but Kier Living jobs closed
3 days ago

Police threaten to fine contractors on way to work

Willmott Dixon asks subcontractors and staff to carry letters to avoid fines
5 days ago

Taylor Woodrow return to profit lifts Vinci UK

Civils arm saw 13 of 17 projects it bid delayed or cancelled
2 days ago

JCB reopens factory to start building ventilators

Plant giant will fabricate steel control panel housings for Dyson designed ventilators
3 days ago

Steel and brickwork trade bodies take stand on Covid 19 safety

Trade bodies lead fight back against bullying main contractors and clients
3 days ago

£300m London new-build housing deal winners

Ardmore, Bouygues, Kier and Midgard win places for first time for £10m-plus schemes
3 days ago

Builders in cross-fire as some clients in Scotland fail to halt work

Contractors blame clients for not instructing work to stop
3 days ago

Unsafe cladding replacement work a priority to continue

Latest government coronavirus construction policy update
4 days ago

Live webinar for contractors interested in £600m power plant

Virtual procurement event for major north London project: Register now
3 days ago

Contractor services