Increased work in the water, defence and nuclear sectors compensated for the “rephasing and rescoping” of roads contracts, the company reports.
In the six months to 30th June 2023, Costain made a pre-tax profit of £8.5m (2022 H1: £11.2m) on revenue of £664.4m (2022 H1: £665.2m).
Costain operates through two divisions – Natural Resources and Transport. Transport brings in three-quarters of the business and last year made more than six times the profit that Natural Resources made (in the first half of the year). This year, Natural Resources’ operating profit of £7.5m was bigger than the £6.9m made from Transport.
Most of Costain’s transport work is either on HS2, as part of the Skanska Costain Strabag joint venture, or for National Highways. With cancellation of the smart motorways programme and completion of the Preston Western road, Costain’s road revenue declined by 16% in the first half of the year. Rail revenue, by contrast, increased by 18% thanks to HS2.
Despite inflation pushing up contract values over the past couple of years, Costain has seen no growth in the past year and little prospect of any ahead. Its order book of £2.5bn is £200m lighter than a year ago and preferred bidder book of £1.5bn is £100m down on the year.
Chief executive Alex Vaughan was optimistic, however. “There remains a positive outlook across our markets, while recognising the short-term rephasing of the government’s transport spending,” he said. “We expect that the sectoral growth we have seen in Natural Resources, together with the rephasing and rescoping of some infrastructure projects in Rail and Road to continue for the remainder of the year and into 2024.
“While we are mindful of the macro-economic backdrop, recognising the timing of customer procurement cycles, the quality of our secured and preferred bidder work gives us good visibility on future revenue, with more than 90% of revenue secured for the remainder of 2023. Our expectations for 2023 remain unchanged and we continue to be confident in the group’s long-term prospects.”