21st Aug 2014 06:58
LONDON (Alliance News) - Costain Group PLC Thursday reported an increase in profit and revenue for the first half, despite being beset by a number of problems within its natural resources division.
The engineering solutions provider posted pretax profit of GBP5.8 million for the six months ended June 30, up from GBP3.1 million a year earlier, as revenue rose to GBP529.1 million from GBP462.9 million.
Costain said its infrastructure division, which incorporates the group's activities in the highways, rail and power sectors, had a strong first half, with an increase in revenue, operating profit and order book. Revenue for the infrastructure division rose to GBP358.7 million from GBP262.8 million, while operating profit crept up to GBP16.9 million from GBP14.4 million a year earlier.
One notable contract award for the division was for rail work on behalf of National Rail. In February, the company's joint venture with Babcock International Group PLC was appointed by Network Rail as one of four suppliers to the GBP2 billion National Electrification programme, delivering electrification to more than two thousand miles of the UK's rail system.
However, the natural resources division which is focused on the oil and gas and utilities sector, did not do as well, with revenue falling to GBP169.4 million from GBP199.2 million. The unit also made a GBP2.6 million loss from operations, compared with a GBP100,000 loss a year earlier.
The loss for the period included additional costs for the completion of a waste private finance initiative contract awarded in 2007 for the Greater Manchester Waste Disposal Authority.
Of the 46 waste facilities under the contract, 36 have reached final acceptance, three are seeking to obtain final acceptance, six are currently in the post-completion (warranty) period, and one remains to be completed. Design faults have been identified at four sites, including the site that remains to be completed, and remedial work and testing is on-going in respect of that site which is expected to be completed in the second half of 2014.
Costain said it is in discussions with contract counterparties and the group's insurers regarding the issues that have arisen.
"Whilst the board expects a successful outcome to these discussions, it believes it is prudent to take a provision for additional costs to complete the project," the company said.
Overall, Costain said the group order book remains strong after securing a number of major new contract awards and extensions to existing contracts.
Consequently, the order book at the period-end was up 10% to GBP3.2 billion from GBP2.9 billion a year earlier.
During the period the company conducted a capital raise of GBP70.3 million in an effort to take greater advantage of the "opportunities in its chosen markets and thereby accelerate the group's medium and long term growth prospects."
At the time of the capital raise, the group also said it intended to implement a "progressive" dividend policy, targeting an ongoing dividend cover of around two times underlying earnings.
In light of this, Costain declared Thursday an interim dividend of 3.25 pence per share, down from 3.75p.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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