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Costain profit up in 2016 but waste PFI continues to bite

Strong performance in infrastructure has helped Costain increase profit but the company continues to be plagued by losses on its PFI waste contract in Manchester.

The company saw pre-tax reported profit jump to £30.9m for the year ending 31 December 2016, up from £26m for the previous 12 months.

Underlying profit before tax hit £37.5m, up from £29.9m, while revenue grew to £1.6bn from £1.3bn.

Costain’s infrastructure arm was the primary factor behind this improved performance, with pre-tax reported profit in the division rising to £54.6m in 2016 from £49.9m in 2015, while revenue hit £1.28bn.

This was driven by a number of high-profile contract awards from HS2, Highways England and National Grid.

The company’s order book at the year-end was unchanged on last year’s record figure at £3.9bn, with more than £1.2bn of work already secured for 2017.

However, Costain continued to be plagued by losses in its natural resources division due to its PFI contract with the Greater Manchester Waste Disposal Authority. 

The company revealed that it had set aside £15.1m in costs and provisions due to the troubled contract.

In 2007 Costain was awarded a contract with the GMWDA to design, construct and commission 46 waste facilities across Greater Manchester – but the work has been beset with difficulties.

Last month Construction News reported that the client had raised concerns over progress of rectification works Costain was carrying out due to significant rusting issues in mechanical and biological treatment facility tanks and in-vessel composting facilities.

Costain chief executive Andrew Wyllie said today: “These facilities are all either fully completed or in the warranty period under the terms of the contract during which further work and plant modifications are to be completed.

“In the period, the group has incurred further costs and has taken additional provisions to reach final acceptance on the contract, which is now targeted this year; and to complete the remaining works when access is available in accordance with the operational running of the plants under an agreed schedule to 2019.”

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