While peers have struggled with increased competition and less work, Costain (COST) delivered a resilient set of financial results for 2012 that saw adjusted pre-tax profits rise 16 per cent despite a slight decline in revenues. This enabled management to sanction a 7.5 per cent increase in the full-year dividend, the sixth yearly dividend increase on the trot.
The performance reflects Costain’s commitment over the past few years to shift its business to focus more towards civil engineering and support services rather than being a pure construction company. And this is starting to pay off handsomely for the group and shareholders. Underlying profits at Costain’s main infrastructure division rose by over 150 per cent year-on-year, while the company's share price has soared 60 per cent since its summer lows.
Granted, the growth in the infrastructure division was offset by disappointing performances at the energy and process divisions. But by focusing on a smaller list of customers (30 to 40) typically in the civil infrastructure space such as utilities and rail - where barriers to entry are often higher and where funding is available - Costain should be able to continue to grow its market share.
Broker Investec forecasts normalised EPS of 26.4p in 2013 (2012: 39.9).
COSTAIN (COST) | ||||
|---|---|---|---|---|
| ORD PRICE: | 299p | MARKET VALUE: | £196m | |
| TOUCH: | 295-302p | 12-MONTH HIGH: | 302p | LOW: 187p |
| DIVIDEND YIELD: | 3.6% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 48.5p* | NET CASH: | £106m | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 0.90 | 23.1 | 29.0 | 7.5 |
| 2009 | 0.99 | 18.1 | 23.0 | 8.3 |
| 2010 | 0.92 | 27.9 | 36.4 | 9.3 |
| 2011 | 0.99 | 23.9 | 29.2 | 10.0 |
| 2012 | 0.93 | 26.1 | 37.1 | 10.75 |
| % change | -6 | +9 | +27 | +8 |
Ex-div: 17 Apr Payment: 24 May *Includes intangible assets of £18.7m, or 29p a share | ||||
