黑洞社区

Analysts have reacted positively to the announcement by Costain that it has bought 550-strong professional consultancy Rhead Group, fulfilling a long-held desire by the group to add a large professional services arm to its business.

Costain announced this week it had acquired 拢63m-turnover Rhead Group for a cash consideration of 拢36尘, with the announcement pushing the firm鈥檚 shares up 3% on the day.

Stephen Rawlinson, an analyst at Whitman Howard, said the acquisition of Rhead Group was a 鈥済ood deal鈥� for Costain that was 鈥渂ang in line with the strategy of offering an integrated service to large, blue chip customers on large-scale projects鈥�.

Rhead Group lists BAE systems, National Grid and Wales & West Utilities among its clients, and made a loss before tax of 拢1.2m in the year to July 2014 on the back of 鈥渄ifficult market conditions, which together with various investments impacted upon profitability鈥�, according to its annual report.

However, Rawlinson said he expected the acquisition to boost the earnings of Costain 鈥渂y 3-5p [per share] next year and more thereafter if the business can regain margins鈥�. Costain said Rhead鈥檚 profit before tax, debt and amortisation was 拢5.2m in 2014.

Rhead also has operations in the UAE, Australia and Singapore, and itself acquired an Australian consultant last year. Rawlinson said this international focus could be 鈥渁 bit of a test鈥� for the UK-focused management at Costain.

黑洞社区 Values analyst Tony Williams said the acquisition was 鈥渁 tick in the box following a few false starts with acquisitions for Costain鈥�.

These 鈥渇alse starts鈥� included an agreed bid in 2013 for contractor May Gurney, which subsequently failed when rival contractor Kier swooped in and gazumped the engineering solutions provider with a bid 拢43m higher than Costain鈥檚 拢178m.

The firm also repeatedly tried to buy engineer Mouchel in 2011, tabling four bids of increasing value. Mouchel is also now part of Kier following a 拢265m merger in June this year.

Williams added that while the civil engineering business remained a 鈥渃ash cow鈥� for Costain it has 鈥渕oved more towards white-collar consulting and away from blue-collar civils under Wyllie鈥� and he believed it will 鈥渉ead further down this road,鈥� with the acquisition of Rhead.

Rhead Group works in infrastructure, construction and asset management programmes and is to be fully integrated into Costain, forming part of its natural resources division, but will retain its senior management team, including chief executive Nigel Curry.

Andrew Wyllie, chief executive of Costain (pictured), said the acquisition of Rhead 鈥渁ccelerates the development of Costain and further broadens our range of capabilities to meet the requirements of major blue chip customers, providing greater ability to deliver integrated solutions across the full lifecycle of a project.鈥�

Rhead鈥檚 2014 loss compared to a profit of 拢4.2m for 2013. Turnover in 2014 was up 19% to 拢63m from 拢52.9m for 2014.

The news came ahead of Costain reporting interim results for the first six months of 2015, which are expected on Thursday.