Costain delivered a robust first-half performance, pushing profits ahead and maintaining the forward order book at £2.5bn. And while trading conditions look set to become even more challenging as a result of cuts in infrastructure spending, management is pushing ahead with its 'Choosing Costain' strategy.
The focus here is on major customers with spending plans that are underpinned by strategic needs, regulatory commitments or essential maintenance requirements. It appears to be paying off, with £400m of new work secured in the first half, much of which covers contracts of up to five years, thereby adding greater earnings visibility. Since the period end a further three contracts have been secured.
Still, Costain is under no illusions about how tough trading conditions have become. In the environment division, revenues fell from £301m to £246m, and operating profits more than halved to £1.2m, although this was after costs relating to the amalgamation of environmental and community activities into one unit. Trading was more robust on the infrastructure side, with operating profits rising 8 per cent to £8m, and the group's much smaller energy and process division increased profits 15 per cent to £3.1m helped by continued nuclear power station decommissioning work.
Broker Panmure Gordon expects full-year EPS of 21.8p, rising to 24.6p in 2011.
| COSTAIN (COST) | ||||
|---|---|---|---|---|
| ORD PRICE: | 195p | MARKET VALUE: | £124m | |
| TOUCH: | 194-196p | 12-MONTH HIGH: | 360p | LOW: 185p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 9p | NET CASH: | £134m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p)** | Net div per share (p)** |
|---|---|---|---|---|
| 2009 | 476 | 6.9 | 8.7 | 2.75 |
| 2010 | 490 | 8.2 | 10.0 | 3.00 |
| % change | +3 | +19 | +15 | +9 |
Ex-div: 22 Sep Payment: 29 Oct ** restated for 10-for-one share consolidation | ||||
