Problem jobs cause £92.3m loss at Costain

Grant Prior 1 year ago
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Two problem contracts saw Costain slump to a pre-tax loss of £92.3m during the first half of this year from an £8.4m profit last time.

The impact of Covid-19 also saw turnover dip to £548.7m from £599.2m for the half year.

But Costain bosses are confident about future prospects after securing £2bn of future orders during the period and shaking-up management systems in a bid to avoid future problem contracts.

Results were hit by a £45.4m charge on the A465 Heads of the Valleys road contract and £49.3m on the Peterborough & Huntingdon gas station job.

Alex Vaughan, chief executive officer said: “We are clearly disappointed with the recent arbitration outcome in relation to the A465 contract which, together with 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.”

Costain has pulled out of the Energy EPC market and has introduced a raft of new contract risk management measures in a bit to avoid problem jobs.

Vaughan said construction would make up a smaller percentage of future work “with a future ambition for 45% of our profits to be derived from complex programme delivery (currently c67%) and 55% from our consultancy and digital services (currently c33%).”

He added: “The strategy will support improved profitability as we seek to deliver our divisional margin of 6% to 7% over the medium term.”

 

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