Costain revamps risk control after problem jobs cause £96.1m loss

Grant Prior 3 years ago

Costain has completely overhauled its approach to contract risk monitoring after problem jobs caused a £96.1m loss for the year to December 31 2020.

Results were hit by £94.7m of charges from two long-standing contracts in relation to the Peterborough & Huntingdon gas station job and and the A465 Heads of the Valleys road road scheme.

Costain also confirmed a one-off charge of £5m in relation to closing out the ASF south highways legacy contract.

The charges led to a pre-tax loss for the year of £96.1m from a £6.6m loss last time on turnover down to £1,070m from £1,175m.

Costain said: “The Group’s contract selection, tender and contract management processes and behaviours have been enhanced over the past 18 months, resulting in lower contract risk and better cost management throughout the lifecycle of our projects.

“To enhance tender governance the Group has updated its policies for commercial expectations and risk appetite for all new contracts, including reducing the acceptable level of downside risk and increasing the minimum level of acceptable profit for all new contracts.

“The Group has also implemented a five-gated approval process prior to signing any contract, including independent risk and assurance review prior to target cost and contract conditions approval.

“In addition, the Group has implemented its ‘Operational Excellence Model’ on all new contracts and existing long-term frameworks.

“The monitoring and administration of scope of works changes to identify and escalate potential cost increases at an early stage have been enhanced, including the rigour of monthly reviews of all contracts in a standard and mandatory format, and detailed measurement of work in progress and cash collection.”

Costain put the cost of Covid to the company at £9.2m and received £2m from the government furlough scheme.

The company has set a medium-term target of 6-7% divisional margins with 55% of profits derived from our higher margin services like consultancy and digital services as it “broadens its offer from purely complex construction.”

Costain added: “Everyone at Costain is focused on ensuring all projects are delivered to plan and project risks are managed effectively. This absolute focus alongside the delivery of our strategic plan is the bedrock to delivering the improved performance we expect next year and over the years ahead.”

The company had a £4.2bn order book at year end and net cash of £102.9m.

Alex Vaughan, chief executive officer, said: “Last year was a challenging year but I am proud of how well everyone at Costain responded and the resilience shown across our business which enabled us to continue to operate effectively with strict Covid-19 safety measures in place.

“The significant charges reported at the half-year relating to two contracts are clearly disappointing, and importantly we have taken robust steps to prevent such issues from reoccurring.

“Last year, we continued to be successful in winning new contracts and preferred bidder positions worth over £2.3bn with an increasing proportion of this work incorporating our broader service offering in line with our strategy.

“The UK Government has provided a clear strategic framework for UK infrastructure investment, underpinned by long-term underwritten investment programmes to support the UK Government’s drive to level-up economic growth and to meet decarbonisation commitments.

“I am confident that Costain is in a good position to capitalise on the opportunities in front of us and to grow our profits in 2021.”

Latest news

Lendlease puts construction arm up for sale

After two decades of global expansion Lendlease retreats to Australia
10 hours ago

Former Crossrail boss Mark Wild to lead HS2

Wild to bear down on spiralling costs and bring rejigged scheme in on time
1 day ago

Receivers in at £125m Manchester tower developer

Domis Construction walked away from scheme following doubts over funding
2 days ago

Costain A1 £260m dualling job finally gets go-ahead

Ministers sat on planning inspectors report for nearly three years
15 hours ago

Election delays decision on Lower Thames Crossing

Planning decision on £1.2bn Luton airport expansion also pushed back six months
15 hours ago

Caddick steps-in at former Lane End housing job

Contractor to restart phase of £262m scheme hit by administration
15 hours ago

Plans in for Leeds iconic Tetley building revamp

Former brewing giant's HQ to become indoor market and offices
15 hours ago

BAM wins first phase of North Devon hospital revamp

New staff accommodation to kick-off hospital redevelopment
15 hours ago

McAlpine pulls out of £55m Carlisle Citadels project

University of Cumbria starts hunt for replacement contractor
5 days ago

Strabag UK suffers further big trading loss

Austrian contractor is gearing up for major presence in the UK market
5 days ago

Durham Uni picks UPP for £130m student scheme

Firm will deliver 1,000 self-catered bed spaces
5 days ago

Architects now upbeat after 10-months of work gloom

Larger practices see rising workloads in next three months
5 days ago

Motorist dies after collision with road paver

Police Scotland investigating fatal crash
5 days ago

McLaren Living appoints HG Construction for £69m scheme

Build to Rent scheme will transform former vacant car park site in Leeds city centre
5 days ago

Squibb liquidator probes £2m of “missing” plant

Machinery, cars and scrap metal have disappeared at demolition specialist
6 days ago

Galliford Try to re-enter affordable homes market

Contractor sets out new five-year plan to build margin to 4%
6 days ago

Former Sellar chief to lead civils contractor Kilnbridge

Owen Dannatt joins as new CEO as founder Dermot McDermott becomes Chairman
6 days ago

Hunt starts for nuclear fusion plant construction partner

Fusion energy plant to be built at West Burton coal power station site.
6 days ago

National Grid raises £7bn for big infrastructure upgrade

Rights issue to fund a major round of capital investment in energy infrastructure
6 days ago

Grenfell police probe to last at least until end of 2025

19 companies and 58 individuals could eventually face charges
6 days ago

Mace confirmed on £100m London office retrofit

Work underway on Helical's 100 New Bridge Street job near Ludgate Circus
6 days ago

Wylfa chosen for next big nuclear power station build

Government names Anglesey site for a large-scale gigawatt nuclear power plant.
7 days ago

Bowmer & Kirkland trading profit halves

Contractor buys HVAC specialist Adcock despite challenging market
7 days ago

Piling specialist Van Elle plans further job cuts

Piling specialist plans further cost savings in face of lower demand
7 days ago

Civils contractor A Catlow files administration notice

High voltage cable specialist lodges court notice
7 days ago

Green light for ARC Oxford lab campus

Work to start later this year on £40m Ascent building job
7 days ago

Stonehenge tunnel hit by another legal delay

Court upholds latest appeal against £1.7bn scheme by campaigners
1 week ago

Plans go in for huge Olympic Park construction hub

Bow Goods Yard could deliver 3.5m tonnes of materials a year to sites across London
1 week ago

40% affordable homes target for Labour’s new towns

Labour pledges to select new town sites by end of first year
1 week ago

Plan for £100m Liverpool Baltic station

Construction work could begin next year
1 week ago

Contractor services