Last checked at 13 Dec 2021 07:00
Costain Group PLC
13 December 2021
Update on Peterborough & Huntingdon contract and current trading
Costain is providing an update on the adjudication process regarding the legacy Peterborough and Huntingdon contract dispute. In addition, we are providing an update to guidance and re-confirm that full year adjusted operating profit is expected to be in line with market expectations. Year end net cash, before any period end timing benefits, will now be ahead of market expectations at around £100m.
We have now received several adjudication decisions, the most recent and material of which was received on 10 December 2021. In this claim, the adjudicator found in our favour on principle in respect of three out of the four compensation events.
However, he has chosen not to determine the financial amounts in respect of these compensation events. We will pursue a financial settlement with National Grid in respect of these compensation events. As not all compensation events have been decided in our favour, we now expect there to be an overall cash outflow in respect of the contract.
Under the terms of the termination agreement with National Grid, there is an expected requirement to make a payment of £53.5m in January 2022, which now represents the maximum cash outflow under the contract. Given the recent adjudication decision, we have an entitlement to recover a proportion of this payment and will be discussing the timing and amount with National Grid. The payment, if made, will not affect our banking arrangements and we will continue to have a strong balance sheet that enables us to deliver our business plan. There will be an associated charge to the income statement for the current financial year reflecting such payment.
We are making good progress on our journey to transform the business, reduce risk and improve returns. This, combined with the considerable government investment in infrastructure, allows us to look forward with confidence.
Our next scheduled update will be the 2021 full year results, which are due to be announced on 9 March 2022.
Enquiries
Investors and analysts Louise Bryant, Costain
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+44 7813 210 809 |
Financial media Tim Rowntree, MHP Peter Hewer, MHP |
+44 203 128 8771 Costain@mhpc.com |
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014. The person responsible for this announcement on behalf of Costain is Louise Bryant, Group Director of Communications & Investor Relations.
Background to the Peterborough & Huntingdon contract
On 29 June 2020, we announced that a termination and settlement agreement had been reached with National Grid to cease work on the Peterborough & Huntingdon gas compressor project following a significant change in scope. The agreement included a legal process, through adjudications, to agree up to £80.0m of identified compensation events, recover costs to date and eliminate a potential liability to National Grid for completing the works.
To date, we have recorded a charge to the income statement of £49.3m reflecting the cash position at termination. As outlined at our interim results in August, under the terms of the agreement, the cumulative outcome for us of these adjudications ranged from an additional cash receipt of up to a maximum of £50.0m to a cash payment of up to a maximum of £57.3m.