Headlines on Costain (COST) this year have inevitably focused on its merger plan with May Gurney, which was knocked off course by Kier Group's (KIE) rival offer in April. But the infrastructure group has seemingly had no trouble picking up contracts even without its chosen bride. The order book was up 20 per cent to a record £2.9bn at the half-year mark, thanks in part to big contract wins with Thames Water and Crossrail.
Chief executive Andrew Wyllie, who has been trying to turn Costain from an engineering consultant into a one-stop shop for essential infrastructure projects, cites the £300m deal to supply London's new east-west rail link with so-called railway systems (tracks and electricity gantries) as evidence that his plan is working. The transformation will not only win the company bigger contracts, he says, but also reduce its financial risk profile. Costain used to earn big dollops of cash on contracts; now 90 per cent of the order book is on a cost-reimbursable, pay-monthly basis. That also explains why its net cash pile has fallen from £132m a year ago to £64.3m.
The infrastructure division remains the motor of the group, with adjusted profits of £14.4m, up from £9.6m. Meanwhile, the recently created natural resources division moved marginally into the red, so that group underlying operating profits were up just 3 per cent to £10.7m.
Broker Liberum Capital expects full-year adjusted pre-tax profits of £22.3m and EPS of 25p (from £21.8m and 28p in 2012).
COSTAIN (COST) | ||||
|---|---|---|---|---|
| ORD PRICE: | 287p | MARKET VALUE: | £191m | |
| TOUCH: | 286.8-287p | 12-MONTH HIGH: | 307p | 215p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 53p* | NET CASH: | £64.3m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 478 | 14.7 | 20.4 | 3.50 |
| 2013 | 463 | 3.1 | 4.3 | 3.75 |
| % change | -3 | -79 | -79 | +7 |
Ex-div: 18 Sep Payment: 25 Oct *Including intangibles of £18.5m, or 27.8p a share | ||||
