REG - Costain Group PLC - Update on P&H contract and current trading

CostainAnnouncement

13/12/2021 07:00

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RNS Number : 3574V  Costain Group PLC  13 December 2021

 

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   +44 7813 210 809

 Financial media

 Tim Rowntree, MHP        +44 203 128 8771

 Peter Hewer, MHP         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.

 

 

 

 

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