Costain, the engineering solutions provider, has announced another strong performance with a 21% increase in underlying operating profit, a record order book and a 15% increase in the interim dividend for the first six months of 2016.
Revenue increased during the period to £791.4 million (2015: £621.1 million), while underlying operating profit2 up 21% to £15.8 million (2015: £13.1 million). The group is reporting a record order book of £3.9 billion, up 5% on June 2015, over 90% of which is repeat business.
Costain secured over £700 million of new contract awards and extensions to existing contracts during the first half of the year, including a Hydrochloric Acid Dosing Plant design and construction contract for Total.
In the water sector, Costain has now commenced the main tunnel drive for the Shieldhall Tunnel, one of the largest infrastructure investments in Scotland. Part of the biggest upgrade of Glasgow’s wastewater network in more than a century, the Tunnel will resolve water quality and reduce flooding issues.
Further south, another major infrastructure programme is now underway to upgrade London’s sewerage system. Costain’s joint venture for the east section of the Thames Tideway project has now successfully mobilised and activity will increase over the next twelve months.
The Group is now in year two of the AMP 6 five year programmes for Thames Water, Severn Trent and Southern Water. Costain said these programmes are utilising the full range of integrated capabilities available in the Group to deliver improved customer service and achieve significant total expenditure efficiency savings.
The Group said it is accelerating growth both organically and by acquisition – the Rhead Group acquired in August 2015 for £36 million is now fully integrated andperforming well, while the post period-end acquisition of Rhead Group and Simulation Systems Limited for £17 million is set to further enhanceCostain’s technology integration capability.
The nature of its service offering is also changing rapidly, with over 1,000 people now in consultancy and advisory roles, representing 25% of the total head count
Over £1.4 billion of revenue was secured for FY 2016 by 30 June (2015: over £1.2 billion secured for FY 2015).Costain has increased the interim dividend by 15% to 4.3 pence per share (2015: 3.75 pence).
Andrew Wyllie CBE, Chief Executive, commented:
“We have delivered another strong performance in the first half of the year, with a 21% increase in underlying operating profit, and our order book is at a record level. The dividend has been increased 15% in line with our progressive policy.
“These are exciting times as billions of pounds are being spent upgrading and renewing the country’s energy, water and transportation infrastructure.
“There is a revolution in the deployment of technology-led innovative solutions to meet the increasingly complex requirements of our national infrastructure needs, and we are continuing to rapidly transform the Costain business to be at the heart of the opportunity this presents.
“Costain remains on course to deliver a result for the year in line with the Board’s expectations.”
Commenting on Brexit, Andrew Wyllie said:
“Following the decision in June to leave the EU, and the resulting political and economic uncertainty, there has to date been no impact on Costain and it is still too early to predict longer-term outcomes. However, we believe that, as a consequence of our strategic focus on the major customers who are continuing to spend billions of pounds addressing critical UK infrastructure needs, we have a resilient business and can see as much significant potential opportunity as any downside in the new environment.”