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Costain’s margin up as revenue drops £115m

Costain has revealed a rise in pre-tax margin to 2.6 per cent for the first half of 2018 as revenue dropped by £115m.

Revenue hit £758.7m for the six months to 30 June, down 13.2 per cent from £874.5m in the same period of 2017, according to interim results released this morning.

However, pre-tax profit rose from £15.7m to £19.5m, which drove up pre-tax margin from 1.8 per cent to 2.6 per cent.

The firm’s infrastructure business covering road, rail and nuclear accounted for much of the decline in revenue, which was attributed to less work being done on large capital projects in these sectors.

Operating profit for the infrastructure division consequently slipped to £20.4m for the six months, down from £23.7m in the first half of 2017.

Costain’s natural resources division, which covers water, power, oil and gas, reported a better half-year than 12 months earlier, with operating profit at £4.1m compared with a loss of £1.1m in 2017.

Revenue for the business was up slightly from £172.8m to £180.2m.

The group order book was broadly unchanged as of 30 June at £3.7bn.

Costain said it had been working to re-focus itself on high-tech infrastructure, which involved carrying out more consultancy service.

The firm said more than a third of its employees were now in consultancy or technology roles.

Chief executive Andrew Wyllie (pictured) said: “This performance is due to our differentiation as we evolve into the UK’s leading smart infrastructure solutions company.”

He added that the firm was targeting work with “blue-chip clients” and more than 90 per cent of its contracts were on a target-cost, cost-reimbursable basis, which he said lowered risk to the company.

Looking ahead, Costain said it wanted to position itself as a leading “smart infrastructure company” to take advantage of developments in areas such as connected and autonomous vehicles, a market Costain believes could be worth £11bn by 2030.

To achieve this, the firm said it was sponsoring 24 PhD students undertaking research at Cambridge, Imperial College and Edinburgh.

The group’s total borrowing was broadly flat at £80.4m, but a slight fall in cash reserves left the company with net cash at £77.7m, down from £87.5m a year earlier.

Costain has won significant contracts with Highways England this year to install new technology on UK motorways.

In June it was awarded a £150m contract to deliver a 16 km section of smart motorway on the M6 in the North-west.

The firm secured a deal in May to install 1,500 traffic monitoring stations across the motorway network.

The company is also working on HS2 in a joint venture with Skanska and Strabag to deliver tunnels at Euston and Northolt, worth a combined £1.74bn.

Readers' comments (1)

  • Good to see a well run business getting the rewards for their efforts, and investing in their future.

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