Costain chief executive Alex Vaughan
Costain has warned that its profit for its 2019 financial year will be lower than previously expected because of a number of delays to contract start dates and new awards.
The delayed projects in which Costain is involved include the M6 smart motorway, HS2 southern section main works, and the Preston distributor road. The M4 corridor around Newport was also cancelled by the Welsh government earlier this month.
Costain said in a trading update head of its results for the six months ended 30 June 2019 to 21 August 2019 that underlying operating profit for the year is now expected to be between £38m and £42m.
The results for the first half of the year will include a one-off charge of £9.8m in respect of a recent arbitration award in favour of Diamond Light Source for the cost of remedial works required to the roof at the National Synchrotron facility, which was completed in August 2006. Costain said the subcontractor who installed the roof would have been contractually liable for the remedial works but went into administration in November 2017.
Nonetheless, Costain indicated that trading on current contracts during the first half of the year has “overall been in line with expectations”.
Revenue secured to date for the 2019 financial year is £1.1bn with the group’s operating divisions expected to trade within the target margin range for the year. Revenue secured for 2020 is around £900 million, compared to £850m for 2019 at the same stage last year.
Meanwhile, the group’s order book is £4.2bn (compared to £3.7 billion on 30 June 2018).
Alex Vaughan, chief executive officer, said: “Despite delays to the timing of certain contract start dates and new awards, our markets are strong, as evidenced by the breadth of our new contract awards in the first half.
“We have a strong balance sheet, profitable operations and a broad range of capabilities to support the growth of the business. Costain is well placed to secure the opportunities ahead of us.”
