Costain has unveiled plans to raise cash by issuing £100m worth of new shares, as it revealed a pre-tax loss of £6.6m in 2019, down from a £40.2m profit in the previous year.
Costain blamed the decline in profit on a series of issues, including contract delays, a contract cancellation, and the impact of the arbitration outcome on the A465 Heads of the Valleys road project.
The contractor has also agreed a deal with its lenders to extend its existing banking facilities from June 2022 to September 2023, condition on completion of its capital raising.
Costain said the cost of project delays and cancellations knocked around £16m off its bottom line, while there was a £37m “cash outflow” on the Heads of the Valleys scheme, and a cash cost of £9.7m in relation to another arbitration case in favour of Diamond Light Source for the cost of remedial works at the National Synchrotron facility in Oxfordshire.
Meanwhile, revenue for the year to 31 December 2019 excluding joint ventures fell to £1.16bn, down from £1.46bn the year before.
Nonetheless, Costain pointed to “strong momentum” in securing new work, with £1.7bn of new contract awards and extensions to existing contracts secured during the year, with the order book as at 31 December 2019 standing at £4.2bn.
Commenting on the results and plans to raise capital, chief executive Alex Vaughan said: “2019 has been a year of transition for Costain as we began the implementation of our Leading Edge strategy to reshape and focus our business. Our underlying financial performance was impacted by delays to certain contract start dates and new awards, together with a contract cancellation and the loss resulting from the A465 arbitration. However, we are pleased that the group has continued to secure significant new work during the year.
“Our Leading Edge strategy aligns our activities to meet our clients’ changing needs, supporting a step change in our programme delivery performance and an acceleration in the deployment of our higher margin activities.
“The UK infrastructure markets are growing and developing rapidly, with increasing demand for innovative solutions to upgrade, enhance and decarbonise the nation’s strategic infrastructure. This is a significant opportunity for our business and we are well placed, with our breadth of integrated services, to benefit from these market dynamics.
“Strengthening our balance sheet will enable us to capitalise on these opportunities and further enhance our capabilities.”
