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Thu September 23 2021

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Costain returns to profit

25 Aug After making a £96m pre-tax loss in 2020, Costain is back in the black for the first half of 2021.

Chief executive Alex Vaughan
Chief executive Alex Vaughan

In the six months to 30th June Costain made a pre-tax profit of £9.1m on revenue of £556.8m.

It ended the period with a net cash balance of £113.0m, up from £102.9m six months earlier.

During the half-year Costain booked new contracts with a total value of £334.3m, mainly from long-term framework agreements, taking the total order book to £4.0bn as at 30th June 2021, broadly similar to the beginning of the year.

“Importantly, all new contracts have been secured on commercial terms which reflect our improved profitability and risk management measures,” chief executive Alex Vaughan said. “We have also continued to build positions on our client's major services frameworks which offer further opportunity moving forwards.”

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He added: “We have good visibility on the completion of contracts for the remainder of this year which gives us confidence in delivering full year results in line with our expectations."

Current projects include the £200m Preston Western Distributor Road. “This complex major scheme is currently being delivered ahead of schedule, despite the challenges following Cleveland Bridge going into administration,” Alex Vaughan said. “Fabrication of the steel element has recommenced and works on the structures and new highways are progressing with the new bridges over the M55 motorway and Blackpool to Preston railway installed.”

An element of uncertainty is the ongoing legal dispute with National Grid. In June 2020, Costain announced that a termination and settlement agreement had been reached with National Grid to stop work on the Peterborough & Huntingdon gas compressor project following a significant change in scope. The agreement includes a legal process, through adjudications, to agree up to £80.0m of identified compensation events, recover costs to date and eliminate a potential liability to National Grid for completing the works.

Costain’s 2020 interim results showed a charge to the income statement of £49.3m reflecting the cash position at termination. The legal process is ongoing, and all adjudications are expected to be filed by December 2021. However, the final outcome could be anything between Costain receiving £50m or having to pay out  £57.3m. Any necessary cash adjustments will be made in the first quarter of 2022, the company said.

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