Join our community of smart investors

Costain cements position as infrastructure leader

The engineering solutions provider continued to prove its credentials in the big spending infrastructure market
March 6, 2017

The government's determination to invest heavily in revamping the UK's ageing motorways, railway lines and nuclear power stations is an obvious boon for Costain (COST). The engineering solutions provider has emerged as one of the go-to companies for developing the nation's urgent and complex energy, water and transportation needs.

IC TIP: Buy at 416p

Thanks to its close working relationship with the companies responsible for delivering the latest infrastructure projects, Costain maintained preferred bidder status on orders worth more than £500m, and that's on top of an impressive forward order book of £3.9bn.

Around 90 per cent of pipeline contracts consisted of repeat business, indicating that the nation's biggest developers think highly enough of Costain to return with further requests. Management credited this success to is 'Engineering Tomorrow' strategy, targeting blue-chip customers in sectors where spending is necessitated by maintenance, regulatory or national expediencies. That helped underlying operating profit to increase by 24 per cent to £41m during the period.

Analysts at Peel Hunt forecast pre-tax profit of £42m for 2017, giving EPS of 32.9p, compared with £37.5m and 30.7p.

COSTAIN (COST)
ORD PRICE:416pMARKET VALUE:£434m
TOUCH:414-416p12-MONTH HIGH:416pLOW: 267p
DIVIDEND YIELD:3.1%PE RATIO:16
NET ASSET VALUE:95p*NET CASH:£140m

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20120.9024.735.410.8
20131.0012.917.611.5
20141.0722.622.29.5
20151.2626.021.811.0
20161.5730.925.712.7
% change+25+19+18+15

Ex-div: 6 Apr

Payment: 19 May

*Includes intangible assets of £66m, or 63p a share