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Costain results: Profit hits 21% despite continued losses on Manchester Waste PFI contract

Costain has posted a 21 per cent increase in profit despite continued losses from its problematic Manchester waste PFI contract.

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.

The firm also maintained its order book of £3.9bn, up 5 per cent on last year’s figure of £3.7bn.

This strong performance was delivered as Costain dealt with its problematic PFI deal with the Greater Manchester Waste Disposal Authority.

The contract has now incurred costs totalling £11.4m, contributing to a £8.4m loss in its natural resources arm in H1 2016 – £1m higher than the losses the division incurred in H1 2015.

Costain had to carry out work on 46 facilities as part of the PFI contract, which are now either fully complete or in the warranty period, although further plant modifications still need to be finished.

Costain chief executive Andrew Wyllie said earlier this year that final acceptance on the contract would be fully resolved in the second half of 2016 but this has been pushed back to early 2017.

Costain’s infrastructure arm continued to grow with profit rising to £27.4m, up from £23.6m in H1 2015, while turnover increased to £613m, up from £475m in the first half of last year.

This was boosted by big wins across the roads, rail and water sectors.

In roads, the firm scooped one of Highways England’s Area 4 Asset Suport contracts. Costain also won its first integrated highways services contract in East Sussex.

Its major water contracts included Scotland’s Shieldhall wastewater tunnel and the Thames Tideway Tunnel, where its joint venture with Vinci will construct the eastern section.

It was also awarded Crossrail’s last major contract, taking Costain’s tally of Crossrail wins to 13.

Costain has maintained its record year-end order book of £3.9bn, with 90 per cent of this coming from repeat business.

More than £1bn of work has been secured for 2017, while £2.2bn of work is expected for 2018 and beyond.

Costain, which bought Rhead Group in August 2015 and Simulation Systems in July, said Rhead was now “fully integrated”, while SS was expected to “enhance earnings” by 2017.

The group has also seen its headcount grow to 4,200 – 14 per cent up on last year’s figure.

Mr Wyllie said: “These are exciting times as billions of pounds are being spent upgrading and renewing the country’s energy, water and transportation infrastructure.

“There is a revolution in the deployment of technology-led innovative solutions to meet the increasingly complex requirements of our national infrastructure needs, and we are continuing to rapidly transform the Costain business to be at the heart of the opportunity this presents.

“Costain remains on course to deliver a result for the year in line with the Board’s expectations.”

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