Shares in Costain Group PLC (LON:COST) went into a spin on Thursday after the outcome of a dispute with the Welsh government over a road building contract didn’t go its way.
The infrastructure firm said that a decision made in arbitration regarding its contract with the government to build the A465 road had split responsibility for design information, partially reversing a previous decision that had been more favourable to the group.
READ: Infrastructure group Costain sees profits plunge in first half
The ruling will result in a £20mln hit to Costain’s full-year earnings as well as £40mln cut to its expected year-end cash balance.
"Clearly the situation regarding the A465 contract is disappointing”, said Costain chief executive Alex Vaughan, although he stressed that other parts of the business were performing in line with expectations.
In a note following the ruling, analysts at the company’s house broker Liberum cut their target price to 220p from 350p to reflect the loss of earnings, although they retained their ‘buy’ rating.
The shares tumbled 16.2% to 161.3p in early deals.