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Costain confident of 2017 waste contract completion but more work needs to be done, says Costain CFO

Costain is confident that its Manchester waste legacy contract will be completed early next year despite not yet knowing the full extent of the work that needs to be done, its chief financial officer has said.

Tony Bickerstaff told Construction News that “based on what the firm knew today” he was confident of hitting the final acceptance date of early 2017 on the Manchester waste PFI, but added that “there was still work to do”.

His comments came as analyst Liberum estimated that it would take until at least 2018 for the contract to be fully completed.

The £400m contract, signed in 2007 with the Greater Manchester Authority, has so far incurred losses of £11.4m for Costain as of H1 2016 – up £1m on last year’s H1 figure.

The contract involved the design, construction and commissioning of 46 waste facilities across the Greater Manchester area.

All plants are now fully operational and have been handed back to the authority, but rectification work still needs to be done on previously and newly identified issues.

As the plants are fully operational, work can only be carried out when they are closed for maintenance.

Costain half-year results:

Mr Bickerstaff was speaking after Costain posted a profit increase of 21 per cent for the first half of 2016.

The contractor saw its underlying operating profit rise to £15.8m for the six months to 30 June, up from the £13.1m for the same period the year before.

This growth was backed by an increase in revenue, which hit £791.4m for H1 2016, up from £621.1m for H1 2015.

This leaves Costain with a small window of time to assess what needs rectifying and for carrying out the required work.

Mr Bickerstaff said: “The plants are operating and we are only allowed in when the plants are shut down for maintenance purposes.

“Going in and doing that work, we found that there are more issues than originally thought, meaning the costs and times associated with those works is greater and incur additional costs.

“Based on what we know today – and obviously we have still got work to do as that date [early 2017] suggests – but based on what we know today, we are confident we will hit that date.”

Earlier this year chief executive Andrew Wyllie said the firm expected to have final acceptance on these contracts by the end of 2016 but this has now slipped into the first half of 2017.

 

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