Figures are in line with expectations
Costain continues to build confidence with first half results
- Despite a 12% drop in first half revenue, the group’s pre-tax profits rose 17% as group shifts toward technology
- The shares dropped back 1.5% in early trading but the 8% dividend rise should keep investors content
- We continue to recommend Costain as a long-term ‘buy’ for a medium risk balanced portfolio
Construction group Costain reported a 12% drop in first half revenue today, but underlying pre-tax profits rose 17% to £21.4m. That was due to an improvement in profit margins as the company is turning more to technology to deliver its services. A third of its staff are now in technology or consultancy roles and the company plans to open an enlarged technology centre. Costain says that’s in response to an increasing demand for integrated technology-related services from its customers. The order book stands at £3.7bn, of which 90% is repeat business, and the interim dividend was raised 8%.
Some in the market were possibly hoping for better news today judging by the fact that the shares dropped back 1.5% in early trading, but these are solid figures and the rise in profit margins is positive for investors. The company says it is on track to deliver full year figures in line with expectations and has already secured £1.4bn of full-year revenue, which provides some reassurance for investors in uncertain times. There is a general consensus across both main political parties that the UK’s infrastructure requires improvement and Costain looks set to be a beneficiary of this in future years. We continue to recommend the shares as a long-term buy for a medium risk balanced portfolio.
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