Costain's (COST) shareholders will take heart from the construction group's reported half-year figures: even extra costs of a legacy PFI contract couldn't dampen the mood. Underlying operating profit rose 21 per cent to £15.8m after a strong performance at the infrastructure division. However, additional costs and provisions of £11.4m incurred on its Greater Manchester Waste PFI contract meant the natural resources division deliver an £8.4m loss, following on from the £7.4m hit in the past comparable period.
The group has been vexed with this issue for some time, and remains in discussions with relevant contract counterparties, although final acceptance on the project is now expected in 2017. Conversely, the infrastructure division, which taps into road, rail and nuclear markets, enjoyed a strong first half with revenues up 29 per cent to £613m, giving rise to a 16 per cent rise in operating profits to £27m.
And despite the nationwide soul-searching following June's EU referendum, Costain has maintained its record year-end order book. And pipeline opportunities could potentially expand as Theresa May's new Conservative administration has already signalled that infrastructure spending will be used as a catalyst to drive the UK economy in the wake of the vote.
Peel Hunt sees respective cash profits and adjusted EPS of £42.9m and 27p for the December year-end, rising to £48.9m and 30.6p in 2017 (2015: £36m/24.4p).
| COSTAIN (COST) | ||||
|---|---|---|---|---|
| ORD PRICE: | 365p | MARKET VALUE: | £375m | |
| TOUCH: | 364p-368p | 12-MONTH HIGH: | 403p | LOW: 267p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 98p* | NET CASH: | £69m | |
| Half-year to 30 June | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 621 | 10.0 | 8.4 | 3.75 |
| 2016 | 791 | 11.3 | 9.5 | 4.30 |
| % change | +27 | +13 | +13 | +15 |
Ex-div: 15 Sep Payment: 21 Oct *Includes intangible assets of £50m, or 49p a share | ||||
