Costain is set to enhance its profitability with a projected 4.5% operating margin in 2025, following significant financial gains in the first half of 2024.
- The company’s revenue for the first half of 2024 experienced a slight decline to £639.3 million, yet pre-tax profits surged, reflecting robust operational management.
- Costain is refining its strategic focus on transportation and natural resources, with notable growth in the latter due to increased demand in sectors like water and nuclear energy.
- A share buyback programme has been announced, aimed at increasing earnings per share while maintaining financial flexibility to invest in future growth.
- Costain has secured a solid forward work position of £4.3 billion, with expectations of further contract wins across various sectors.
In the first half of 2024, Costain’s revenue decreased by 4% to £639.3 million compared to the same period in 2023. Nevertheless, the company achieved a considerable increase in pre-tax profit, doubling it to £17 million. The operating profit also rose to £13.9 million from £7.6 million in the first half of 2023. Despite the revenue dip, these figures underscore Costain’s effective cost management and strategic realignment efforts.
The transportation division of Costain saw a revenue decline of nearly 9% to £444.3 million. This reduction was primarily due to the completion of significant road and rail projects. Conversely, the natural resources sector showed resilience, with a revenue increase of 10% to £195 million, driven by heightened activity in water management, defence, and nuclear energy sectors. Such diversification within its portfolio reflects Costain’s commitment to adapting and thriving in varying market conditions.
Chief Executive Alex Vaughan highlighted the company’s robust performance and strategic advancements in key growth markets. Vaughan noted the significant improvement in operating profits and the sharp rise in earnings per share, supported by a healthy net cash balance now standing at £166 million. This financial strength is complemented by an adjusted operating margin that has improved as anticipated.
Costain’s forward work position, valued at £4.3 billion, is reflective of its extensive contract wins across all sectors. The company remains optimistic about securing additional contracts, particularly in the water sector, within the year’s second half. Vaughan emphasized the significance of maintaining industry-leading solutions and fostering long-term customer relationships as central to achieving predictable performance and maintaining growth momentum.
Concurrently, Costain has initiated a £10 million share buyback programme. This strategic move aims to reduce share capital by cancelling purchased shares, thereby returning surplus capital to shareholders. This approach not only enhances earnings per share but also preserves the company’s capacity to reinvest in operational growth and strategic opportunities as they arise.
Costain’s strategic focus and financial acumen position it well for achieving its ambitious growth targets in 2024 and beyond.
