Costain’s revenue in the first six months of 2019 dropped by 22% to £599.2m (2018: £772.9m).
Pre-tax profit was £8.4m, which is less than half the £19.9m it made in 2018 H1, due in part to a £9.7m pay-out after a legal dispute over a long-completed contract.
Underlying profit before tax was down 10.6% to £19.5m (2018 H1: £21.8m). The natural resources and transportation divisions were the best performers.
That £9.7m charge was an arbitration award in favour of Diamond Light Source Limited for the cost of remedial works needed to the roof of the National Synchrotron facility on the Harwell campus in Oxfordshire. Costain built it in 2004-06. The subcontractor who installed the roof – and would have been contractually liable for the remedial works, Costain argues – went into administration in November 2017.
The board remains confident of its net cash position, which at 30th June 2019 was £40.8m (2018: £77.7m). The average month-end net cash was £63.7m in the first half (2018 H1: £90.8m) and is expected to be around £40m or £50m for the full year, with an anticipated increase in 2020 to £50-60m.
Underlying operating profit for the full year is expected to be in the range of £38m to £42m, compared to £52.5m in 2018.
Chief executive Alex Vaughan said: “While, as previously announced, delays to certain contract start dates and new awards, together with a contract cancellation [M4 extension in South Wales] will impact our full year performance, we are pleased that the group has continued to secure significant new work during the first half. We therefore remain on track to deliver our revised expectations for the current year and growth in 2020.
“We recently launched our Leading Edge strategy for the development of the business which aims to accelerate the deployment of higher margin activities and deliver a blended divisional margin range of 6%-7% over the medium term. The group's structure has also been reorganised to better align it to our clients and the markets in which we operate.
“With this enhanced strategy and strong market backdrop, underpinned by a robust balance sheet, we are focused on significantly enhancing the value of Costain.”