Costain returns to profit following Heads of Valley project debacle

Costain has recovered from the financial hit it took from the troubled A465 Heads of the Valley road project to post a profit of £9.1M, the contractor’s latest results show.

The firm posted pre-tax profits of £9.1M for the first six months of 2021 compared to a £92.3M loss for the same period a year ago. Costain posted a full-year loss of £96.1M in 2020.

Group revenue stood at £556.8M for the half-year 2021, compared to £547.3M the year before. The contractor’s pipeline of work was boosted by £334.3M of project wins during the six month period, with the total order book now standing at £4bn as of 30 June 2021.

The contractor is sizing up work with Network Rail after its successful delivery of the Gatwick Airport station and upgrades to the main line. Costain noted: "We continue to explore opportunities to grow our account with Network Rail.

"We continue to work with Network Rail on our reliable, solar powered, wireless, radar-based warning system (Meerkat) and this will be deployed across the majority of Network Rail's remote level crossings."

On HS2 Costain said that enabling works were nearing completion for the route from Euston to West Ruislip and the Colne Valley. In its results Costain said: "The Phase 1 main civils contract has completed its mobilisation and is now focused on constructing shafts and portals in advance of introducing tunnel boring machines (TBMs) in 2022.

“Our consulting team remains at the heart of the employers reference design for Phase 2a Birmingham to Crewe and are providing expertise on Phase 2b West - Crewe to Manchester - in preparation for the Hybrid Bill submission to Parliament next year.

Costain’s 2020's results were impacted by a £45.4M charge on the A465 Heads of the Valleys road contract - which has run more than £100M over budget and over two years late - and a £49.3M charge on the Peterborough & Huntingdon (P&H) gas station job.

The A465 Heads of the Valley road contract was entered into in 2015 for the Welsh Government. In 2020, an arbitration panel decided that Costain was responsible for design information for a specific retaining wall and that the additional building cost associated with the wall was not a compensation event under the contract.

In its latest results Costain said: “As a consequence of the decision, the Group adjusted the revenue recognised based on the level of cash received to date and reflected a write down of the £45.4m contract asset at 30 June 2020. The Group continues to fulfil its obligations under the