Costain (COST) produced a turnaround at its natural resources arm in the first six months of 2017. The unit centres on the power, water and oil & gas sectors – no prizes for guessing which has proved the laggard in recent times, and low oil prices have constricted industry capital spending, indirectly dragging on group profits. Costain has retained its capabilities in anticipation of an improvement in risk appetite in the oil & gas sector, but it’s still challenging. Nonetheless, the group turned in a small profit at the division against a loss of £8.4m at the 2016 half-year. Combined with a strengthening performance at the infrastructure division, the group posted a 34 per cent increase in underlying operating profit to £21.2m.
At £3.7bn, the order book contracted slightly on the first half of 2016, but management put this down to timing. The group won £600m in new contracts and extensions during the period. It also won two contracts on the HS2 rail line with a combined value of around £600m and has struck a deal to exit its troublesome Greater Manchester waste PFI contract with operator Viridor Laing.
Analysts at Peel Hunt are forecasting adjusted pre tax profit of £44m, giving EPS of 34.5p for 2017 (from £37.5m and 30.7p in 2016).
| COSTAIN (COST) | ||||
| ORD PRICE: | 446p | MARKET VALUE: | £467.4m | |
| TOUCH: | 445-446p | 12-MONTH HIGH: | 495p | LOW: 322p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 119p* | NET CASH: | £87.5m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 760 | 11.3 | 9.5 | 4.30 |
| 2017 | 848 | 15.7 | 12.2 | 4.75 |
| % change | +12 | +39 | +28 | +10 |
| Ex-div: | 14 Sep | |||
| Payment: | 20 Oct | |||
| *Includes intangible assets of £64.2m, or 61p a share | ||||
