Contractor sees first half profit rise as it delves into high-tech markets
A shift towards providing technology-driven services is literally paying dividends for Costain鈥檚 shareholders, as the contractor announced an 8% hike in its interim payout on the back of a hefty first half profit rise.
The contractor said re-jigging its activities to exploit the development of technology among its client base had helped push its underlying operating profit up 8% to 拢23m in the six months to 30 June 2018, an overall margin of 2.95% on turnover of 拢773m, down 11.6%.
The firm said despite the fall in its top line, the work it had secured in the first half had been higher margin activity, and its target margin range was still between 4% and 5%.
Pre-tax profit rose 17% to 拢21.4m, while the interim dividend payout to investors was increased by 8% to 5.15p.
Costain鈥檚 order book remained flat at 拢3.7bn, although the group said the contracts it was winning were the sort of higher margin technology-focused deals it was looking for.
The group recently won a deal to design and fit one of the UK鈥檚 first pilot-connected vehicle corridors for client Highways England, where traffic information will be beamed directly into cars using the road.
Describing the first half as 鈥渁nother good performance鈥�, Costain鈥檚 chief executive Andrew Wyllie said it was largely the result of the group鈥檚 decision to move into more smart infrastructure work.
鈥淭he shape and nature of our activities continues to develop, reflecting our clients鈥� changing needs and their demand for integrated solutions to improve the performance and capacity of their assets.鈥�
Wyllie highlighted one area, Connected and Autonomous Vehicles and their enabling infrastructure, as representing business expected to be worth 拢11bn a year in the UK by 2030.
And he said that some clients, such as Network Rail, were set on spending their budgets on improving existing assets instead of large capital projects.
Costain said it has won a deal from the network operator to develop new warning technology at level crossings to cut the number of deaths and accidents at level crossings.
Wyllie said: 鈥淭his common client trend is having a direct impact on the nature and scope of contracts within our order book.鈥�
Wyllie also said the firm was not unduly concerned about Brexit, since customer spending was being driven by regulatory considerations.
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