Costain drops the ‘smart’

Costain chief executive Alex Vaughan

Costain’s strapline has change from “smart infrastructure solutions” to simply “infrastructure solutions”.

The branding realignment follows the scaling back of its technology centre in Somerset last year and the “repositioning” of its digital services offering.

Costain’s accounts for 2023, filed today, show a £5.3m hit on the repositioning of digital services and £8m on transformation and restructuring costs.

With the impact of these one-off costs, Costain’s pre-tax profit was down 6% in the year to 31st December 2023 at £30.9m (2022: £32.8m) on revenue similarly down 6% at £1,332m (2022: £1,421m).

On an adjusted basis, pre-tax profit was shown to be up 29%

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Chief executive Alex Vaughan emphasised the positive, saying: “We had good momentum in the business in 2023, delivering strong growth in adjusted operating profit and a 23% increase in adjusted earnings per share, together with significant net cash flow, ending the year with a net cash balance of £164.4m. We saw growth and improved margins in Natural Resources and a consistent adjusted margin performance in Transportation. Adjusted operating margin increased as expected to 3.0%, and with a 3.8% operating margin in the second half, we are in line to deliver our margin targets for FY 24 and FY 25.”

The year-end order book was down at £2.1bn, compared to £2.8bn at the start of the year, reflecting the timing of certain major contract bids and the five-year investment programmes of the regulated industries. However, contract selection is also part of the story: Costain’s order book no longer contains any single-stage design and build fixed-price construction contracts.

“We have an excellent pipeline of opportunities and are driving high levels of tendering activity,” Alex Vaughan said. “Contract margins are in our target range and at the right risk level. We expect significant growth in Water and Energy over the next few years. Good progress has been made in rebalancing our customer base with a broader range of exclusively Tier 1 clients. This puts us in a positive position to take advantage of the medium and long-term growth opportunities in UK infrastructure. Our Transformation programme continues to improve our structure, operational procedures and skillsets.”

He concluded: “The quality and balance of our forward work across our two divisions gives us good visibility on future revenue and margin. We have more than 80% of expected revenue secured for 2024 and our forward work stands at around three times 2023 revenue. We see continuing momentum in the business and remain confident in the group’s growth prospects.”

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