Andrew Wyllie said there had not yet been any apparent impact on Costain from June’s Leave vote and it was still too early to predict longer-term outcomes but said “can see as much significant potential opportunity as any downside in the new environment”.
Mr Wyllie’s comments came as he unveiled Costain’s interim results for the first half of 2016. These showed revenue increased by 27% to £791.4m (2015 H1: £621.1m) and pre-tax profit up 13% to £11.3m (2015 H1: £10.0m).
These results include costs and provisions totalling £11.4m in relation to the completion of the legacy Greater Manchester Waste Disposal Authority PFI contract awarded way back in 2007.
All 46 projects under the £400m contract for Viridor Laing are now either fully completed or in the contract warranty period during which further work and plant modifications are to be completed. Final acceptance on the project is now expected in early 2017.
On the back of these problems, Costain decided back in 2009 not to pursue fixed price contracts of this nature and in 2014 announced that it was quitting the waste sector. [See previous report here.]
Costain is not the only major contractor to come a cropper on Viridor waste projects. Interserve has also taken a £70m exceptional provision in its 2016 first-half accounts on a £146m Viridor waste-to-energy incinerator in Glasgow.
Costain’s Manchester provisions meant that its Natural Resources Division made an operating loss of £8.4m (2015 H1: £7.4m loss) on revenue of £175.7m (2015 H1: £145.0m).
The Infrastructure Division, by contrast, made an operating profit of £27.4m (2015 H1: £23.6m) on revenue of £613.2m (2015 H1: £475.2m).
Andrew Wyllie commented: “We have delivered another strong performance in the first half of the year, with a 21% increase in underlying operating profit, and our order book is at a record level. The dividend has been increased 15% in line with our progressive policy.
“These are exciting times as billions of pounds are being spent upgrading and renewing the country’s energy, water and transportation infrastructure.
“There is a revolution in the deployment of technology-led innovative solutions to meet the increasingly complex requirements of our national infrastructure needs, and we are continuing to rapidly transform the Costain business to be at the heart of the opportunity this presents.
“Costain remains on course to deliver a result for the year in line with the board’s expectations.”