Construction company Costain is pulling out of the waste sector after being hit by problems with Manchester’s waste PFI project which was awarded in 2007.
Overall, the group posted an 8% increase in its pre-tax profit for the six months to 30 June but its natural resources division was down to £169.4m from £199.2m in 2013, with a loss from operations of £2.6m, compared with £0.1m the year before.
Finance director Tony Bickerstaff said extra costs in Manchester incurred meant the group would be pulling out of the waste sector, allowing the contractor to “focus on the other areas” (see box below).
He said: “It fits our strategy of focusing on the big spending customers and improving the services for them.”
But he agreed that the company would keep an open mind on its future involvement in the waste sector and added: “Of course we are looking all the time at what is the best place for us in terms in opportunities.”
Costain’s report says:
“The division is completing a legacy PFI contract awarded in 2007 for the Greater Manchester Waste Disposal Authority, which utilises a range of sophisticated waste management technologies. 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 is in discussions with relevant 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. It has been the group’s policy since 2009 not to pursue fixed price contracts of this nature.”
In 2013, Costain lost a battle with Kier to take over May Gurney, a civil engineering firm which branched into waste and facilities management.
- A version of this article appeared first in our sister title Construction News.