- Revenue down on contract phasing
- Shares had rallied hard this year
- Firm sees ‘step change’ in 2027
Considering its shares were up more than 60% year-to-date at one stage last week, it was only going to need the slightest of slips from construction and infrastructure group Costain (COST) to see the shares sold off, and today’s half-year trading update has provided the impetus.
The stock fell as much as 28p or 17% to 135p before recovering to the 140p level for a loss of around 15%, while volume soared with nearly three million shares traded by 9am compared with average daily volume of more like one million shares.
DELAYS DRAG DOWN REVENUE
For the six months to the end of June, the firm reported an 18% drop in revenue to £525 million as turnover at its Transportation division fell due to fewer road project completions and a ‘rephased schedule’ from HS2 which has pushed some short-term rail work into future years.
Against this, revenue in the Energy and Defence and Nuclear divisions rose, while Water was stable, and Integrated Transport benefitted from an expansion of framework agreements with Heathrow airport.
Cashflow from operations was negative by £13 million against an inflow of £21 million last year as an increase in operating profit was offset by delays in cash receipts towards the end of the half and an unwind of working capital.
On the plus side, 90% of forecast revenue for the full year has been secured and the forward work position – which is the combined order book and preferred bidder book – was £5.6 billion against £4.3 billion a year earlier, representing more than four times 2024’s turnover.
Longer term, the firm said government commitments in its recent 10-year infrastructure plan together with significantly higher spending on water, energy and aviation, meant there was ‘real momentum’ in its end markets.
It also predicted that despite a change in the phasing of government spending, it was confident of delivering on its forecasts for this year and next year, ‘with a step change in performance expected in FY27 and beyond’.
