LONDON (ShareCast) - (Sharecast News) - Costain has more than halved its guidance for annual profit after being ordered to pay to settle a dispute over a Welsh motorway project.


The infrastructure solutions group's shares fell 17% after it said arbitration had partly reversed a decision in its favour over responsibility for design information for the A465 Heads of Valleys road. Costain will now have to share the costs with the Welsh government and is in talks to reach a final settlement.

Costain said it expected underlying profit for the year to 31 December to be between £17m and £19m. It had previously guided investors to expect profit of £38m-£42m. Last year's equivalent profit was £52.5m.

The profit warning is Costain's second this year. In June it said delays to contracts would hit revenue and profit. In its latest update Costain said £40m of cash due from the A465 would be withheld, leaving it with about £20m of cash at the year end.

Alex Vaughan, chief executive, said: "Clearly the situation regarding the A465 contract is disappointing. Elsewhere, the business is performing in line with expectations. We have secured a number of new contracts to maintain our healthy order book."

In April the Welsh government said the road would miss its December 2019 opening date and cost an extra £54m. It blamed the delay on "complex" work on an 8km section.

Costain shares, which have halved in 2019, fell 17% to 159.6p at 1040 GMT.

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