Costain shares plunge after Welsh arbitration leaves it £20m out of pocket
Costain shares plummeted 16 per cent today after it warned profit will be about £20m lower than expected after an arbitration case over a Welsh motorway project.
The announcement follows a ruling that found the firm shared responsibility for design information on the A465 road project with the Welsh government, a partial reversal of a previous decision.
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In its second profit warning of the year, Costain said full-year underlying profit will now be between £17m and £19m. It had previously forecast profit between £38m and £42m.
The company also faces about £40m due from the A465 being held back, giving it a net cash figure of about £20m at the end of the year.
In April, the Welsh government said the road would miss its forecast December 2019 opening day, and cost an extra £54m, blaming complex work on one section of road.
Costain boss Alex Vaughan said the result was “disappointing” but remained upbeat on the rest of the business.
He said: “We have secured a number of new contracts to maintain our healthy order book.
“We have also made good progress with our Leading Edge strategy, accelerating the deployment of higher margin services to our blue chip client base.”
Costain’s year-end order book will be about £4.2bn, with the company winning around £600m of new work in the second half of the year.
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However, that includes more than £1bn worth of work that has been won on the HS2 high speed rail project, which is still not certain to go ahead.
Balfour Beatty, which also reported this morning, did not include HS2 work in its order book.