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(Alliance News) - Costain Group PLC on Monday said its revenue fell during a first half of 2020 hit by Covid-19 and issues with two of its long-standing contracts.
In the six months to June 30, the infrastructure construction firm swung to a pretax loss of GBP92.3 million from profit of GBP8.4 million a year earlier. Revenue dropped 23% annually to GBP461.3 million from GBP599.2 million.
"The first half of 2020 has been a challenging period due to the impact of Covid-19 and working to resolve issues with two long-standing contracts," Costain explained.
Back in June, Costain said both it and National Grid PLC agreed to exit a contract to upgrade the utility company's Peterborough and Huntingdon compressor stations. Costain was released from its contractual obligations to complete the works.
The second contract the company was for the A465 road in Wales. Earlier in September, an arbitrator reversed an initial decision which favoured Costain, so now the company must take responsibility for costs associated with building a retaining wall on the road.
"As a result of the arbitration award and on the basis of the uncertainty of recovery of such costs, and subject to reaching a final settlement, the group's half year results include a charge to the income statement of GBP45.4 million to adjust the revenue recognised based on the level of cash received to date under the contract. Costain will continue to fulfil its obligations under the contract, with completion scheduled in 2021," the company said.
Costain decided against an interim payout, following a 3.8 pence per share dividend a year earlier.
Chief Executive Officer Alex Vaughan said: "We are clearly disappointed with the recent arbitration outcome in relation to the A465 contract which, together with the mutual termination of the Peterborough & Huntingdon contract, has resulted in significant revenue adjustments for these long-standing projects.
"Looking ahead, assuming no further sustained Covid-19 lockdowns, we are confident of delivering growth in profits and margins next year."
Shares in Costain were 6.4% lower at 44.20p each in London on Monday morning.
By Eric Cunha; ericcunha@alliancenews.com
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