Costain hit with further costs from waste contract

Costain has said its “Engineering Tomorrow” strategy is paying dividends as it posts a 13% increase in pre-tax profit to £26m for 2015, up from £23m for 2014.

The firm, reporting full year results, has also seen it revenue jump 18% to £1.3bn for 2015, up from £1.1bn for 2014.

The strategy has seen Costain focus on blue chip customers in sectors where major spending plans are underpinned by strategic national needs, regulatory commitments or essential maintenance requirements. This has also resulted in the firm being able to report a record forward order book of £3.9bn.

But the strong performance was hit by the firm’s natural resources division being “significantly” impacted by costs from its legacy Greater Manchester Waste PFI contract, awarded back in 2007.

The group said that during 2015 “a number of additional issues” were identified and are being addressed.

It now expects to reach Final Acceptance in the second half of 2016 and to complete the remaining works in an appropriate time period.

The impact of the contract has seen the division post an adjusted loss from operations of £10.8m.

The division has also been affected by the decline in oil prices, which has resulted in delays in customer spending on North Sea projects, Costain said.

Meanwhile, the group’s infrastructure division has experienced strong growth and reported that the works for Network Rail at London Bridge Station are now over 50% complete and on schedule.

Major procurement tenders are also expected later this year for HS2 and the group said it continues to develop several contracts of work with EDF to advance the company’s plans to build Hinkley C New Nuclear Power Station in advance of a final investment decision. 

Chief executive Andrew Wyllie said Costain would continue to accelerate the place of its growth organically and through acquisitions in what is a “rapidly changing and dynamic market environment” where the group expects further consolidation.