Costain profits rise despite waste contract woe

Aaron Morby 9 years ago
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Costain has shrugged off losses at its natural resources division to deliver a 72% rise in pre-tax profit to £10m during the first half of the year.

Group turnover was also ahead 17% to £621m as revenue from its highways, rail and power market contracts surged ahead a third to £475m.

The infrastructure division proved the star performer with operating profit swelling to £23.6m from £16.9m last time.

But further costs from the completion of the legacy Greater Manchester Waste Disposal Authority PFI contract awarded in 2007 saw the natural resources division suffer a £7.4m loss.

Andrew Wyllie, chief executive, said that all 46 facilities on the waste contract were either fully completed or in the warranty period under the terms of the contract during which further work and plant modifications will be completed.

“During the course of that further work a number of issues have been identified and are being addressed.

“The group has taken an additional provision in respect of the costs to reach final acceptance on the project, which is expected in the second half of 2016,” he added.

Also Wyllie said the division’s performance had been impacted by the decline in energy prices which resulted in several projects in the North Sea being delayed.

Commenting on the group as a whole, he said: “We have delivered another strong performance in the first half of the year. In addition to growth in revenue and profit, our order book now stands at a record £3.7bn.

“Costain is accelerating its growth and following the 17% increase in underlying operating profit in the first half of the year is on course to deliver a result for the year at the upper-end of the board’s expectations.

“Our confidence for the future is reflected in the 15% increase in dividend.”

Costain has also now combined all of its nuclear activities across the group into one unit which will report into the infrastructure division.

Wyllie said that this action would enable a more concentrated focus on the opportunities in the nuclear sector, driven by investment in new energy solutions and the pressing need to deal with the UK’s legacy nuclear infrastructure.

Major contract awards in 2015

  • Development of the M4 corridor around Newport for the Welsh Government
  • Underground link between the Crossrail and Bakerloo Line platforms at Paddington station
  • Two sections of the A14 improvement scheme for Highways England

Costain’s net cash position slipped to £127m from £134m last year as it took on more lower-risk target cost, cost reimbursable contracts.

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