Costain calls time on waste sector
The contractor said it is consulting its insurers over costly design faults at four facilities delivered under the Greater Manchester Waste Disposal Authority private finance initiative, and will not pursue further work in the waste sector.
In its interim results published today, Costain said: "The [natural resources] division is completing a legacy PFI contract awarded in 2007 for the Greater Manchester Waste Disposal Authority, which utilises a range of sophisticated waste management technologies. Of the forty-six waste facilities under the contract, thirty-six have reached final acceptance, three are seeking to obtain final acceptance, six are currently in the post-completion (warranty) period and one remains to be completed. Design faults have been identified at four sites, including the site that remains to be completed and remedial work and testing is on-going in respect of that site which is expected to be completed in the second half of 2014. Costain is in discussions with relevant contract counterparties and the Group's insurers regarding the issues that have arisen. Whilst the Board expects a successful outcome to these discussions it believes it is prudent to take a provision for additional costs to complete the project. It has been the Group's policy since 2009 not to pursue fixed price contracts of this nature."
Excluding the impact of the provision, the division saw a return to profit. Including the provision the division reported a £2.6m loss, compared to last year's £100,000 loss.
Costain is currently delivering infrastructure work for Manchester Airports Group, contracts for Centrica on the Barrow gas terminal, as well as waste water treatment facilities in Liverpool and nuclear decommissioning plant at Sellafield.
The group produced a £5.8m pre-tax profit on turnover of £529.1m in the six months to the end of July. Costain had a £133.8m cash balance at the end of the period. A dividend of 3.25p was recommended.
Shares in Costain slipped 1p to 271p.
