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Costain has vowed to learn from two problem contracts that generated a combined charge of £94.7m and dragged down its 2020 profit.
Costain made an adjusted pre-tax profit of £13.9m for the year to 31 December 2020, down from £34.6m in 2019. It made a statutory pre-tax loss of £96.1m, down from a loss of £6.6m the year before.
Adjusted group revenue in 2020 was £1.1bn, down from £1.2bn the year before.
The charges related to Costain’s upgrade of the National Grid’s Peterborough and Huntingdon gas compressor stations. It withdrew from the contract last year and announced in August that it was trying to cover up to £49.3m it claims it is owned by the National Grid.
Costain has also faced well-publicised problems with the A465 Heads of the Valleys project in Wales. It announced that it had reached a settlement with the Welsh government over the job in February this year.
The £94.7m charge also included a one-off £5m to close out a legacy highways contract, ASF South.
Costain said it had learned “clear lessons” from the contracts and that it was taking “decisive action” to ensure that such issues did not reoccur.
In a statement accompanying its financial results, Costain said: “We have strengthened the senior leadership team, introduced greater accountability from top to bottom, improved our governance and controls and completed a root and branch exercise to identify and manage potential contract risk. As a result, Costain is a more resilient business and one which we are convinced will move forward with confidence to capitalise on the many opportunities ahead of us.”
Costain made several leadership changes during the year, including appointing Helen Willis as chief financial officer in November 2020. Sue Kershaw was appointed managing director of the transportation division in March 2020, and Sharon Harris was made general counsel and company secretary in October 2020. Nathan Marsh has been appointed chief digital officer, Maxine Mayhew is managing director of the natural resources division, and Catherine Warbrick is human resources director.
Commenting on the results, Alex Vaughan, chief executive officer, said: “Last year was a challenging year, but I am proud of how well everyone at Costain responded and the resilience shown across our business, which enabled us to continue to operate effectively with strict covid-19 safety measures in place.
“We are pleased to report an adjusted operating profit of £18.0m, despite the financial impact from covid-19. The significant charges reported at the half-year relating to two contracts are clearly disappointing, and importantly we have taken robust steps to prevent such issues from reoccurring.
“Last year, we continued to be successful in winning new contracts and preferred bidder positions worth over £2.3bn with an increasing proportion of this work incorporating our broader service offering in line with our strategy.
“The UK government has provided a clear strategic framework for UK infrastructure investment, underpinned by long-term underwritten investment programmes to support the UK government’s drive to level-up economic growth and to meet decarbonisation commitments. I am confident that Costain is in a good position to capitalise on the opportunities in front of us and to grow our profits in 2021.”