Costain Group PLC Update on the A465 contract and trading (5962W)
December 12 2019 - 1:01AM
UK Regulatory
TIDMCOST
RNS Number : 5962W
Costain Group PLC
12 December 2019
12 December 2019
Costain Group PLC
("Costain" or "the Group")
Update on the A465 contract and trading
Costain, the smart infrastructure solutions company, today
issues an update on the Group's contract with the Welsh Government
for the construction of the A465 Heads of the Valleys road (the
"A465 Contract") and the Group's trading for the year ending 31
December 2019 ("FY19").
In our half-year results statement in August, we reported that
the Welsh Government had escalated a specific matter under the
dispute resolution mechanism in the A465 Contract which we entered
into in 2015. That matter, which related to the responsibility for
design information, had been decided in Costain's favour in the
initial adjudication proceedings.
The specific matter has now been determined at arbitration. The
arbitration award effectively splits the responsibility for the
design information between both parties. This partially reverses
the decision of the initial adjudication and is contrary to the
legal advice received by the Group concerning the relevant
provisions of the A465 Contract.
Costain has assessed the implications of this determination and
is engaged in discussions with the Welsh Government to reach
agreement on a financial settlement.
As a result, the Group now expects FY19 underlying operating
profit to be in the range of GBP17 million - GBP19 million and the
year-end net cash position to be cGBP20 million, with the net cash
position being impacted by cGBP40 million of cash currently
withheld on the A465 Contract.
We continue to fulfil our obligations under the A465 Contract,
with completion scheduled in H1 2021.
Elsewhere in the business, Costain has performed in line with
expectations in the second half of the year. We are making good
progress with our 'Leading Edge' strategy securing an increasing
number of higher margin contracts from across our blue-chip client
base. The Group has secured cGBP600 million of new work during the
second half, including contract awards and extensions to existing
contracts.
The Group expects to finish the year with an order book of
GBP4.2 billion (31 December 2018: GBP4.2 billion). As previously
advised, HS2 represents an important contract for the Group and our
order book includes GBP1.1 billion in respect of it. We continue to
undertake contracted work for the client and await the outcome of
the independent review commissioned by the Government.
Alex Vaughan, Chief Executive Officer, commented:
"Clearly the situation regarding the A465 contract is
disappointing. Elsewhere, the business is performing in line with
expectations. 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. We are confident this
strategy will enhance our offer to clients, deliver higher margins
and generate long term shareholder value."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No. 596/2014 (MAR).
The person who arranged for the release of this announcement on
behalf of Costain was Tracey Wood, General Counsel and Company
Secretary.
Enquiries:
Costain Tel: 01628 842 444
Alex Vaughan, Chief Executive Officer
Tony Bickerstaff, Chief Financial Officer
Carolyn Rich, Investor Relations Director
Sara Lipscombe, Group Communications Director
MHP Communications Tel: 020 3128 8100
Tim Rowntree, Peter Hewer, Ollie Hoare Costain@mhpc.com
Notes to Editors
Costain helps to improve people's lives with integrated, leading
edge, smart infrastructure solutions across the UK's energy, water,
transportation and defence markets. We help our clients improve
their business performance by increasing capacity, improving
customer service, safeguarding security, enhancing resilience,
decarbonising and delivering increased efficiency. Our vision is to
be the UK's leading smart infrastructure solutions company. We will
achieve this by focusing on blue chip clients whose major spending
plans are underpinned by strategic national needs, regulatory
commitments, legislation or essential performance requirements. We
offer our clients leading edge solutions that are digitally
optimised through the following five services which cover the whole
lifecycle of their assets: future-shaping strategic consultancy;
consultancy and advisory; digital technology solutions; asset
optimisation and complex programme delivery. Our culture and values
underpin everything we do.
For more information visit www.costain.com
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END
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