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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Costain Group Plc | LSE:COST | London | Ordinary Share | GB00B64NSP76 | ORD 1P |
| Price Change | % Change | Share Price | Shares Traded | Last Trade
|
|
|---|---|---|---|---|---|
| -0.50 | -0.49% | 101.00 | 14,515 | 08:44:09 |
| Bid Price | Offer Price | High Price | Low Price | Open Price | |
|---|---|---|---|---|---|
| 100.50 | 101.50 | 101.00 | 97.40 | 97.40 | |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Hghwy,street Constr,ex Elvtd | 1.33B | 22.1M | 0.0794 | 12.78 | 282.45M |
| Last Trade Time | Trade Type | Trade Size | Trade Price | Currency |
|---|---|---|---|---|
| 08:42:31 | O | 59 | 100.50 | GBX |
| Date | Time | Source | Headline |
|---|---|---|---|
| 07/10/2024 | 07:00 | UK RNS | Costain Group PLC Transaction in Own Shares |
| 03/10/2024 | 07:00 | UK RNS | Costain Group PLC Transaction in Own Shares |
| 02/10/2024 | 07:00 | UK RNS | Costain Group PLC Transaction in Own Shares |
| 01/10/2024 | 13:01 | UK RNS | Costain Group PLC Total Voting Rights |
| 01/10/2024 | 07:00 | UK RNS | Costain Group PLC Transaction in Own Shares |
| 30/9/2024 | 07:00 | UK RNS | Costain Group PLC Transaction in Own Shares |
| 27/9/2024 | 07:00 | UK RNS | Costain Group PLC Transaction in Own Shares |
| 26/9/2024 | 07:00 | UK RNS | Costain Group PLC Transaction in Own Shares |
| 25/9/2024 | 07:00 | UK RNS | Costain Group PLC Transaction in Own Shares |
| 24/9/2024 | 07:00 | UK RNS | Costain Group PLC Transaction in Own Shares |
Costain (COST) Share Charts1 Year Costain Chart |
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1 Month Costain Chart |
Intraday Costain Chart |
| Date | Time | Title | Posts |
|---|---|---|---|
| 06/10/2024 | 14:52 | Costain | 3,837 |
| 21/8/2024 | 10:33 | Rishi Sunak's National Infrastructure Strategy for Ј100 billion of long-term inv | 7 |
| 10/1/2024 | 11:44 | UNDERVALUED GOOD recovery play.. COSTAIN | 6,509 |
| 17/4/2020 | 14:35 | COSTAIN - PE of 2 | 8 |
| 24/4/2013 | 08:47 | *** Costain *** | 13 |
| Trade Time | Trade Price | Trade Size | Trade Value | Trade Type |
|---|---|---|---|---|
| 07:42:31 | 100.50 | 59 | 59.30 | O |
| 07:42:31 | 101.00 | 2,000 | 2,020.00 | O |
| 07:42:31 | 101.00 | 81 | 81.81 | AT |
| 07:42:31 | 101.00 | 33 | 33.33 | AT |
| 07:42:31 | 101.00 | 6,420 | 6,484.20 | AT |
| Top Posts |
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Posted at 07/10/2024 09:20 by Costain Daily Update Costain Group Plc is listed in the Hghwy,street Constr,ex Elvtd sector of the London Stock Exchange with ticker COST. The last closing price for Costain was 101.50p.Costain currently has 278,274,103 shares in issue. The market capitalisation of Costain is £282,448,215. Costain has a price to earnings ratio (PE ratio) of 12.78. This morning COST shares opened at 97.40p |
Posted at 03/10/2024 08:16 by mrnumpty Galliford Try released full-year figures this morning , which were very good , as underlined by upward share price movement . Galliford Try operates in similar markets to Costain , so GT’s figures might imply a positive market for Costain . |
Posted at 23/8/2024 12:14 by mirabeau Stockwatch: serious upside potential at this small-capAnalyst Edmond Jackson examines a firm set to benefit from the UK’s strong infrastructure outlook. 23rd August 2024 11:41 by Edmond Jackson from interactive investor Share on Related Investments COST 0.10% KIE 0.13% Upside for this share 600 Can talk from the management of Costain Group COST 0.10% about doubling its operating margin to around 5% be taken seriously? It is the crux for the small-cap shares in this infrastructure group serving transportation and resources – especially water industries. Since I drew attention as a deep value “buy” at 50p in March 2023, following better-than-expected 2023 results, the stock has doubled to 105p. I re-iterated “buy” at 53p last August after interims and at 72p last January. The market appeared over-cautious – a 12-month forward price/earnings (PE) multiple as low as five, that has risen to about eight times – despite Costain being strategically well-positioned as Britain tries to improve infrastructure. Invest with ii: Top UK Shares | Share Tips & Ideas | What is a Managed ISA? This new Labour government is fiscally constrained yet infrastructure spending is going to be a key element in its electoral pledge to deliver growth. Today brings news that it is seeking to adjust the measure of national debt, so that investment spending is not included. The stock has climbed a wall of worry, how big infrastructure projects can end up in over-spend and acrimony. Over five years ago, Costain’s A465 road project in Wales ended up two years late amid engineering and contractual challenges. There was then the disruption of Covid. Costain’s CEO since May 2019 contends that there is nowadays a broader customer and service mix. Financially and also limiting downside risk, I note the 30 June balance sheet was absent of debt and had net tangible assets of 65p a share. Achieving this was helped by a May 2020 issue of 167 million shares at 60p, the current total being 278 million. In which case, the five-year chart suggests Costain has effectively just regained its February 2020 value: Five-year chart for Costain Source: interactive investor. Past performance is not a guide to future performance. In 2018 it traded over 400p hence 200p or so nowadays would mark recovery to the old high. Scope to re-rate margin is the crux issue going forward The table since 2017 shows the highest achieved – in terms of reported operating margin – has been 3.0% and for this score I have looked back to 2012 when it was 1.8%, rising to 2.5% in 2013. This is quite as you would expect in a competitive tendering industry. Peer group Kier Group KIE 0.13% , for example, similarly had its best operating margin in its June 2018 year at 3.1% and, since Covid, has managed to deliver only 2.4%. Costain Group - financial summary year end 31 Dec 2017 2018 2019 2020 2021 2022 2023 Turnover (£ million) 1,684 1,464 1,156 978 1,135 1,421 1,332 Operating margin (%) 2.8 3.0 -0.3 -9.4 -0.8 2.5 2.0 Operating profit (£m) 47.5 43.4 -2.9 -91.8 -9.5 34.9 26.8 Net profit (£m) 33 33 -2.9 -78.0 -5.8 25.9 22 Reported EPS (p) 27.1 26.8 -2.4 -36.7 -2.1 9.4 7.8 Normalised EPS (p) 27.1 35.2 16.1 -31.2 -2.1 9.8 8.5 Operating cashflow/share (p) 42.8 -39.2 -26.5 -22.1 10.7 5.1 19.7 Capex/share (p) 1.7 1.1 5.7 1.9 0.8 0.2 0.0 Free cashflow/share (p) 41.1 -40.3 -32.2 -24.0 9.9 4.9 19.7 Ordinary dividend per share (p) 12.4 13.4 3.4 0.0 0.0 0.0 1.2 Covered by earnings (x) 2.2 2.0 -0.7 0.0 0.0 0.0 6.5 Return on total capital (%) 19.8 17.5 -1.3 -41.1 -3.8 14.9 11.4 Cash (£m) 249 189 181 151 159 124 164 Net debt (£m) -178 -119 -34.9 -70.8 -93.2 -94.3 -140 Net assets/share (p) 129 151 129 56.9 72.4 76.8 79.3 Source: historic company REFS and company accounts Costain proclaims it can raise operating margins towards 5%, hence would transform profit on, say, £1.4 billion revenue – considering there is no interest charge, instead, net interest from £166 million cash. The capitalisation around 105p currently is £290 million. Care is needed swallowing such a claim, given management will be talking of an adjusted, not reported, margin; although Costain also says it is expecting exceptional and restructuring-type charges to tail off in 2025. For now, the latest interims to 30 June proclaim an adjusted margin of 2.5%, while the income statement computes at 2.2%, hence no major discrepancy. Within the two main divisions: transportation-relat More upgrades for ‘too cheap’ projects firm Stockwatch: four stocks to back a UK building boom The financial summary table shows scant capital expenditure required over the years; but implicitly something radical needs to happen within administrative expenses that eased from 5.0% of 2023 interim revenue to 4.8% in 2024. How practical is it, to grind them materially lower? Competitive pitching on contracts’ price is not going away, unless Costain can demonstrate more effective work, worth paying more for. Government and utilities seem likely be price-conscious. Yet Costain’s CEO has put his neck on the block, saying he can nearly double the group operating margin. Mind, his referencing a 3.5% margin this year means the run-rate – which could imply exiting 2024 at such a level, than delivering with the annual results. The dynamics of Costain’s income statement are such that a reported interim net profit of £13.5 million can be outstripped in the second half, hence £30 million or more, plenty achievable for the full year. In which case, earnings per share (EPS) around 12p with scope to double by 2026 if the CEO delivers on margin. If realistic, this share is on a mid-single-digit forward P/E like it was around 50p. Not to fret overly on margin but make clear, buyers on such hope are trusting management. ‘Strategy of the past years has built momentum’ Again, is the CEO’s pitch versus interim group revenue easing 4% amid a small fall in the main transportation side versus growth in natural resources. Such a contractor is always going to be “lumpier&rdquo He contends, a significant volume of high-quality work has been secured in the first half and the group order book is three times revenue. In a presentation he has hinted at more announcements due in the second half. Over £500 million work has been awarded from the water industry in the last two months, and this sector is seen as offering the best growth opportunity over the next few years. Indeed, public controversy persists over water quality, sewage spillages and so on, with utilities under pressure – from the new government also - to improve. Sign up to our free newsletter for share, fund and trust ideas, and the latest news and analysis UK stocks backed after ‘remarkable&rs Water giant backed to keep dividend afloat This helps counter concern over how Labour’s new chancellor has axed some infrastructure projects after a spending audit located nearly £800 million unfunded transport projects. After experiencing cancellation on parts of the HS2 rail link, in 2022 Costain won £60 million work for the £1.7 billion road tunnel under Stonehenge – now put on hold. This is modest, however, in context of a £4.3 billion order book which has moved on from risky fixed-price construction contracts. Modest dividend yield albeit £10 million share buyback scheme It appears that buybacks to March 2025 are an alternative means of delivering shareholder return than materially raising the dividend, where a parity arrangement exists with contributions to the pension scheme. From a question at the interim results’ presentation, the chief financial officer said this parity matter will be reviewed next March, but hopefully will not persist and the board considers it very important to return to a progressive dividend policy. Meanwhile, it looks as if earnings cover for the dividend could end up as high as 10x this year alone – so if the operating margin is raised then dividends over 5p a share (as in previous years but respecting dilution) would provide a more material yield in due course. With a robust cash flow profile (albeit interim net operating cash flow down 20% at £14 million) management says it is also seeking acquisitions. If proving attractive then they ought to help sustain interest in the stock besides contract wins. Shifts from ‘deep value’ to a more speculative ‘buy’ Costain’s financial profile has overall become less risky and I regard the stock as at least a strong “hold”. In a relatively tight market, it has been teased up from an 80p range since last spring to a week ago, as buyers react to upside potential towards 150p and more – if operating margins around 5% can be delivered. On an enterprising view I maintain a “buy” rating; but please respect that this involves an aspect of speculation rather than a disciplined investment approach based on “margin of safety”. Edmond Jackson is a freelance contributor and not a direct employee of interactive investor. |
Posted at 20/8/2024 16:21 by the count --->ALLA write up today in UK INvestor Magazine by Mark Watson Mitchell.... hxxps://ukinvestorma Costain Group – Creating A Sustainable Future Is Good Business For £245m Valued Group With £169m Cash In The Bank By Mark Watson-Mitchell 20/08/2024 The £245m capitalised Costain Group (LON:COST) is due to announce its Interim Results tomorrow morning. With some £700bn of infrastructure investment expected over next decade the group will continue its role as a major player in the sector. It looks to shape, create and deliver pioneering solutions that transform the performance of the infrastructure ecosystem across the UK’s energy, water, transportation and defence markets. Employing over 3,200 people across its business, the group engineers and delivers sustainable, efficient and practical solutions, utilising its unique mix of construction, consulting and digital experts. Management Targets Last year it reported a 10.5% increase in adjusted operating profits and strong net free cash flow. Looking to its revenue and operating profit growth, it aims at an adjusted operating profit margin run rate of 3.5% during 2024, rising to 4.5% during 2025, and in excess of 5.0% thereafter. Chair Kate Rock stated that: “We are delivering well on our strategic objectives with an increase in our adjusted operating profit and margin. We continue to build a pipeline of future opportunities for 2025 and beyond.” Group Divisions Transportation delivered a resilient performance in 2023 with rephasing and rescoping of contracts during the year – £943m sales. Natural Resources saw revenue growth in the year together with positive margin improvement – £389m sales. Recent Trading Update In its mid-May AGM Trading Update the group noted that from the start of the year its trading for the period was in line with Board expectations and that the group continued to have a high-quality forward work position that aligns with its strategic plans for both the Transportation and Natural Resources divisions. The average weekly net cash position from 1st January to 30th April 2024 was £168.8m (of which £60.4m was held in joint ventures). The average weekly net cash position for the same period last year was £122.9m (of which £57.2m was held in joint ventures). While the Board is mindful of the macro-economic backdrop, the group stated that it remained confident in its strategy and medium-to-long-term prospects. Recent Contract Win Late last week the group announced that its CMDP+ joint venture with MWH Treatment has been selected by Southern Water to shape and deliver its next strategic asset upgrade programme. The award is for an initial seven-year term worth at least £500m to Costain, with an option to extend by up to five years. The framework will deliver upgrades to water and wastewater assets, including treatment sites, pumping stations and reservoirs, CEO Alex Vaughan stated that: “This AMP8 announcement builds on our growing positions with the leading water companies as they prepare for a nationally important period of record investment. This framework marks three decades of delivering industry leading essential solutions for Southern Water. Through our successful joint venture with MWH Treatment, we will upgrade water and wastewater services for Southern Water and its customers, safeguarding the environment, and securing water supplies across the region; as well as creating new jobs and added social value.” This contract extension adds to Costain’s growing positions with leading water companies, which include Anglian Water, Northumbrian Water Group, Severn Trent Water, Thames Water, United Utilities and Yorkshire Water. The Equity There are some 278.5m shares in issue. The larger holders include ASGC Construction (14.96%), JO Hambro Capital Management (9.79%), Ennismore Fund Management (6.69%), Gresham House Asset Management (5.39%), Hargreaves Lansdown Asset Management (3.37%), Artemis Investment Management (3.04%), FIL Investment Advisors (UK) (2.85%), KBI Global Investors (2.61%), and Amundi Asset Management SA (2.03%). Analyst View There are four analysts following the company, rating the shares as a Buy, with an average consensus Price Objective of 95p, the highest view being 104p, and 80p for the lowest. At Panmure Liberum, analyst Joe Brent, with colleagues Alex O’Hanlon and Sanjay Vidyarthi, rates the shares as a Buy looking for 100p a share as the Price Objective. Their current year estimates to end-December are for £1,219m (£1,332m) sales, with pre-tax profits of £46.5m (£44.2m), generating earnings of 12.3p (11.9p) and maintaining its 1.2p dividend per share. For 2025 the broker looks for £1,216m sales, £52.1m profits, 13.8p earnings and a 1.4p dividend. Going forward into 2026 estimates are for sales of £1,243m, £56.7m profits, 14.9p earnings and a 1.5p dividend. In My View Costain Group shares, at 89p, are far too cheap considering that they are on just 7.24 times current year price-to-earnings, while the group should end the year with around £164m of cash on its balance sheet, compared to its current £245m capitalisation. Regards, TC! |
Posted at 19/8/2024 21:17 by dickbush I am enjoying the share price but, like you, Roguemale1, I think the share price is capped because the deal with the pension fund means a low dividend/yield until that deal changes. That may require a bidder. |
Posted at 01/7/2024 10:32 by mirabeau Costain Group – Are These Shares Significantly Undervalued?“We shape, create and deliver pioneering solutions that transform the performance of the infrastructure ecosystem across the UK’s energy, water, transportation and defence markets.” That is the claim by the 150 year-old Costain Group (LON:COST) – which is a business that I continue to rate as significantly undervalued. Its shares, now 84.20p, could double and still look cheap. Costain brings together a unique mix of experts to transform the performance of infrastructure that connects, protects and powers people’s lives. The Business The group operates in six main sectors – Rail, Integrated Transport, Road, Water, Energy, and Defence and Nuclear Energy. Rail – it delivers end-to-end asset lifecycle solutions across the entire railway, from major station projects to multi-disciplinary rail projects. Integrated Transport – it works with diverse customers spanning Aviation, Light Rail and Place to transform organisational performance and accelerate the transition to net zero. Road – it is a leading provider of end-to-end highway services, delivering technology-led solutions for its customers. Water – it is a leading provider of engineering solutions to UK water utility companies across the asset lifecycle. Energy – it supports the decarbonisation of the UK’s energy infrastructure by improving existing asset efficiency and life extension while leading the transition to a sustainable clean, green energy future. Defence and Nuclear Energy – it supports the strategic defence capabilities and energy resilience that protect and power the UK, its people, values, and interests. Recent Comment The AGM Trading Update issued on 16th May saw the company confirm that trading in the first four months of the current year were in line with expectations and that the group continued to have a high-quality forward work position that aligns with its strategic plans for both the Transportation and Natural Resources divisions. It is in line to deliver its margin targets of an adjusted operating margin run-rate of 3.5% during the course of 2024 and 4.5% during the course of 2025. “While the Board is mindful of the macro-economic backdrop, it remains confident in the group’s strategy and medium to long-term prospects.” Brokers’ Views Analysts Joe Brent, Alex O’Hanlon and Sanjay Vidyarthi at Liberum Capital have a 100p a share Price Objective on their Buy recommendation. Ahead of the First Half Results to end June being announced on Wednesday 21st August, the brokers have estimates for the current full year to show £1,219m sales, £46.5m profits, 12.3p earnings and paying a 1.2p per share dividend. For next year they see £1,216m revenues, £52.1m profits, 13.8p earnings and a 1.4p dividend. Recent Order Book intake is looking very positive, with hopes of better margins. My View I am impressed that Joe Brent is so convinced about this group’s value that he predicts that the company will be showing a 20p a share earnings figure in due course. I have been a long-term fan of this group and I continue to rate its potential very highly. Importantly, I also like that its balance sheet is predicted to have £140m net cash within its coffers by the end of this year – which compares with its current market capitalisation of £235m, with its shares trading at around 84.20p each. It may well take a very long time to achieve my first pre-Brexit, pre-Covid Target Price, even so these shares are destined to rise substantially, in my view, over the next couple of year or so – they remain a Very Strong Hold. |
Posted at 26/6/2024 07:13 by someuwin Costain Group PLC26 June 2024 Costain and MWH Treatment joint venture CMDP awarded £65m programme by Southern Water Infrastructure upgrades will provide long-term resilience of water supply Costain Group PLC ("Costain") announces that its CMDP joint venture with MWH Treatment has been awarded contracts worth £65m by Southern Water as part of the water company's AMP7 investment programme. The work will run until late 2025 and will see the joint venture improve the resilience of the local water supply and upgrade wastewater treatment works at Testwood near Southampton, and Burham in Kent. The integrated CMDP team will work closely with Southern Water and its engineers to develop cost-efficient solutions, optimise asset performance and deliver the implementation through to the end of AMP7. Both sites will see major renovation, refurbishment and expansion of existing assets to cope with rising demand for drinking water and increasing volumes of wastewater. This contract extension adds to Costain's growing positions with leading water companies, which include Anglian Water, Northumbrian Water Group, Severn Trent Water, Thames Water, United Utilities and Yorkshire Water. Alex Vaughan, CEO, Costain, said: "We are pleased to extend our relationship with Southern Water and to bring our strategic expertise to critical upgrades of its infrastructure. We will ensure Southern Water continues providing clean drinking water to its customers while improving its resilience for the future. This is important work that will have a transformative impact on the lives of residents and local communities, and builds on Costain's growing positions with the leading water companies as they continue to improve the quality of our water supply." |
Posted at 09/5/2024 19:48 by someuwin Costain selected by Thames Water to upgrade key treatment sites9 May 2024 * Upgrade to sewage treatment works will transform the lives of local communities in Sandhurst and Selborne. Costain, the infrastructure solutions company, has been awarded a design and build contract with Thames Water to upgrade two strategic treatment assets in Sandhurst, Berkshire and Selborne, Hampshire. The award, valued at more than £5m for the two sites, will see Costain support Thames Water’s upgrading of wastewater treatment assets as part of its Wastewater Asset Assurance Programme (WAAP). The schemes are the first that have been awarded to Costain as part of a wider investment programme for sewage treatment sites (STWs). This could see up to 25 similar projects allocated to Costain to create cost-efficient infrastructure solutions for Thames Water. The planned construction will involve implementing flow monitoring technology to validate flow-to-full treatment for wastewater before it is discharged, upgrading the existing screening operations at the inlet station, improving storage tank capacity and revising the storm return pumping systems. The work will improve the ability of both sewage treatment works to treat the increasing volumes of incoming sewage, reducing the need for untreated discharges in wet weather. The schemes are due to complete in 2025. Thames Water is currently undertaking its largest ever upgrade of sewers and STWs, with plans to improve more than 250 sites in the coming years as part of a £1.12bn investment in its wastewater sites. Gerard Shore, water director at Costain, commented: “Thames Water is investing in river health and has a clear plan to upgrade hundreds of treatment plants across the region. This will have a transformative impact on the lives of residents and local communities. We know we can add considerable value by identifying further opportunities at the outline design stage to maximise efficiencies for the upgraded treatment infrastructure. This will help ensure that these assets are fit for purpose for the long term.” Andrew Popple, director of delivery at Thames Water, added: “We have an excellent track record of working with Costain and we are looking forward to collaborating with them once again for this work. We operate in a changing environment, with a population that is growing in many areas, so we continually monitor the potential need for upgrades at our STWs.” The news follows Costai |
Posted at 23/4/2024 18:44 by mirabeau Bullish IC article from Feb 2024 --- How Kier and Costain are thriving as rivals fail More construction companies went bust last year than in any other industry, but some shares are soaring - Lack of exposure to residential projects has helped - Both struggled during the pandemic but have shored up their balance sheets More construction companies went bust last year than in any other sector for the third year running, but most of the major listed contractors continue to thrive. Some 4,370 construction companies entered an insolvency process in the year ended November 2023, equating to 17 per cent of all UK corporate insolvencies, according to an analysis of Insolvency Service data by accountancy firm Mazars. “There are now on average a dozen building companies going under every single day in the UK,” said Mark Boughey, a restructuring services partner at the firm. Small and medium-sized contractors said workloads declined by 15 per cent last year and almost half reported a fall in new enquiries, the Federation of Master Builders said. However, contractors at the top end of the sector are flourishing, though, with most listed operators recording share price gains that comfortably outperformed the market. Kier’s (KIE) shares are up 82 per cent over the past 12 months. Shares in Costain (COST) are up 55 per cent, Galliford Try (GFRD) 47 per cent and Morgan Sindall (MGNS) 31 per cent. Only Balfour Beatty (BBY) has been a laggard, with its shares trading 8 per cent lower. Jefferies analysts highlighted investor concerns about a slowing US construction market and cancellations to future work from HS2 as factors for this. In general, listed contractors’ lack of exposure to the UK’s moribund residential new-build market has been a bonus. Output in private housing shrank by 19 per cent last year and is set to contract by a further 4 per cent this year, according to the Construction Products Association. Over the past decade, the likes of Kier, Costain and Balfour Beatty have switched their domestic focus much more towards delivering large infrastructure projects. The high-profile failure of Carillion in 2018 and Interserve a year later means this is a less crowded field and contract terms for this work are more industry-friendly. It is typically done on a ‘cost-plusR “You’ve got arguably less of the more ill-disciplined players left because the likes of Carillion have gone bust and the ones that remain are just managing that whole risk, contract appraisal and bidding process a lot better,” said Aynsley Lammin, an analyst at Investec. According to Balfour Beatty’s most recent annual report, only 10 per cent of UK construction work is carried out under a fixed-price contract, compared with 50 per cent in 2018. This isn’t a luxury afforded to smaller firms, and in many cases risk is “passed down the supply chain”, Boughey said, with tier two and tier three suppliers often tied into fixed-price contracts. “They don’t seem to have much bargaining power with the main contractors,” he said. Firm foundations The other major factor behind listed contractors’ rerating has been balance sheet strengthening. Kier had been in a precarious position even before the pandemic and undertook two rights issues between 2018-2021, raising over £500mn and offloading non-core businesses in a bid to stay afloat. Shareholders understandably took flight, and it’s taken a couple of years of significantly improved trading and debt reduction to tempt them back. Average month-end net debt fell from £582mn in 2021 to £232mn last year and last week the company announced plans to refinance its remaining debt through a £250mn bond issue. The five-year notes offered an interest rate of 9 per cent and attracted a BB+ rating from Fitch. The ratings agency said that 60 per cent of Kier’s contracts have pass-through clauses, allowing for costs to be recouped. Costain also had to complete a £100mn rights issue at the height of the pandemic in March 2020 at a time when its revenue and profits were plummeting. It has also had to rebuild trust – when we featured the company in our ideas section in September 2022 its shares were so lowly rated that the company was only valued at around half of its net assets. Even after their recent upgrade, they are valued at just six times forecasted earnings. Lammin said Costain has made “good progress” on improving profitability, with the company’s adjusted operating margin edging up to 2.3 per cent at the half-year and a roadmap in place to bump this up above 5 per cent. “If you believe in the sustainability of those structurally higher margins as they deliver them and a less risky balance sheet, then [Costain] looks very, very cheap,” he said. [But] they’ve got to convince the market the improvements they’re making are sustainable.” The government’s Infrastructure and Projects Authority (IPA) updated its project pipeline last week and acknowledged that a 40 per cent increase in construction prices since January 2020 meant project owners had been forced to “reset expected outputs to remain within approved budgets”. However, the IPA said there were still £164bn of investments planned by the end of the next fiscal year, adding that £700bn-£775bn of work needs to be done over the next decade. Whether all of this gets commissioned (or how quickly) will play a big part in listed contractors’ fortunes in the coming years. end |
Posted at 22/4/2024 08:17 by someuwin Share tip: Costain is building itself up againBuilder is leading the resurgence in the construction sector Lucy Tobin Sunday April 21 2024, 12.01am, The Sunday Times "The construction sector is picking itself up out of the rubble. Last year, more building companies went bust than in any other industry — a record 4,400 collapsing due to supply chain disruption, high material prices and labour shortages. The larger players stayed the course — most had improved their risk calculations after the liquidation of rival Carillion and Interserve’s rescue by its lenders. Now, more stable interest rates, easing inflation and more contract tendering are boosting construction’s appeal. The City has noticed, to an extent: Kier and Costain’s shares are 20 per cent higher than at the start of the year; Balfour Beatty and Galliford Try are up about 7 per cent. But they’re still a long way from their past peaks. Costain, for example, is now trading at 75p, less than half its pre-pandemic share price of 194p, while back in May 2019, its shares changed hands for £3. Since then, the firm, founded in Liverpool in 1865 has been punished for booking expensive charges for badly priced energy and road contracts, and diluted by a £100 million rights issue at the start of the pandemic, required to secure the balance sheet. But Costain is a vastly improved outfit from the housebuilder it was long ago. It has been transformed into an infrastructure contractor with tentacles in many a sector. It works with most of the major water suppliers on pollution-kerbing upgrades, with National Highways, Transport for London and National Rail, on the government’s contracts to decommission first-generation nuclear sites, and in defence. Costain looks poised to benefit from the UK’s likely Labour-led investment in more infrastructure projects. As Joe Brent, head of research at Liberum, explained: “We are optimistic about the outlook for infrastructure and believe Costain is the purest trade on this theme.” Last month, the firm posted a 10.5 per cent rise in adjusted operating profit to £40 million for 2023. This year, more than 80 per cent of its revenues have already been booked. Chief executive Alex Vaughan pointed out that the value of this is about three times last year’s earnings. This confidence helped Costain bring back its annual dividend. Its cashflow is smoother due to recent cost-cutting tinkering: for example, its pension fund contributions were dramatically slashed following a review last year. Net cash stands stronger at £164 million, from £124 million a year ago. The relatively small gap between those cash reserves and Costain’s £217 million market capitalisation hammers home its good value. Of course, the firm remains vulnerable to the ebbs and flows of contract-awarding mandarins, as has been seen with HS2. But analysts predict its pre-tax profit will exceed £52 million next year, and Costain’s shares are trading on just five times earnings for this year. It has a packed order book of blue-chip customers and has rebuilt its reputation: Buy Costain." |
Posted at 14/3/2024 14:28 by catabrit Stdyeddy - thank you. I try my best to be objective.Rougemale1 - my rant is about Costain pre and post Alex. In Alex’s defence he would point to zero contract issues (albeit the problems tend to be back ended so if there are provisions on contracts signed during his reign we won’t know for another few years). But if he was in charge of consulting and digital pre becoming CEO why have we gone from smart infra company to just infra? Why are we re-structuring digital? Does that mean he got the strategy wrong? And why are we not breaking out the consulting revenue and income line? I don’t care if it is bundled or hard to figure out - just do it. Don’t tell us - show us. Show us your revenue and income pie is safer / better than peers. Why should we investors do the hard work? If he wants his LTIP then he better break it out AND hit margins AND sort out the derisory capital return. Yes he’s handcuffed by the pension trustees and yes the wording has changed to allow him to return cash to shareholders if it’s in surplus but for God’s sake, bang the bloody drum as CEO. The Balfour CEO clearly articulated the value proposition in his shares during the presentation yesterday. He said here are our infrastructure investments, here’s our net cash and here’s our market cap. Oh and here’s all the cash we plan to generate over the next 5-yrs. Very simple math. Even IR should be breaking this out in their presentations. There should be an entire page in the deck about the market cap vs the net cash and the 30m of annual free cash flow they think they can generate I.e. we are aware of the past guys and we are sorry but here is the future and it is going to be rosy. Alex talks about the business and customers and mega trends and that’s great. It’s part of the job. But it’s only one part. The other is to be a steward of our capital and to send the tanks in when there is blood on the streets. I will likely sell my shares regardless if the buyback isn’t a very meaningful one as it shows he does not get it. Or I will go activist and put it up for a vote. We know they need at least 100m for banking purposes. Make that 120m. Does 160m in the bank vs 120m really move the needle order book wise? I doubt it. But a 30-40m buyback meaningfully moves the needle in terms of market cap. So divi at level of FTSE all share and buy back as much as the business will allow. If he refuses to do it, it either means he cannot because of business purposes which means the cash is a value trap or he does not get how capital allocation works. Nigelpm - I also bought in 2022 because of this and have done well as net cash has risen. But I believe that Costain spent a long time trading at net cash in the past. From 2010 to 2013 I believe. They only started to get a proper valuation on the core business from 2014 to 2018 when the order book was growing. I do think we will get there and we just need the actuarial surplus to be confirmed or not. And we probably need a few more years of zero contract issues. So I anticipate a good risk adjusted return from these levels but it might take longer than we all expect and I think that scepticism from the wider market is probably valid considering Costain’s prior promises and the general disdain towards contractors and contracting. Costain was openly telling shareholders that its target cost model was better than a fixed cost one (and 90 percent of its book was target cost as far back as 2013). Yet target cost can lead to issues if there is too much vagueness around scope and a high degree of complexity. So I think management need to be more open with us about what is in the order book and how they have dealt with target cost risk management and why they believe no major provisions will be forthcoming. Trust us is not enough considering the past. |
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