Costain trading in line, hails strong H1 cash performance

Infrastructure specialist Costain said on Thursday that trading was in line with its expectations as it hailed a strong cash performance in the first half.

In an update ahead of its half-year results in August, the company said underlying trading has remained profitable, with good cash generation resulting in a "strong" net cash position of £113m as at 30 June, compared to £140.9m in the same period a year ago, ahead of its expectations.

In addition, the group has continued to secure new contracts in line with its strategic ambitions.

"This continued progress underpins our confidence in delivering further growth in profits this year, in line with the board's expectations," Costain said.

As at 30 June, the order book stood at £4bn, compared to £4.2bn a year ago, with around £1.2bn secured for 2021. The group’s net cash position of £113m comprised £100m of cash, £57m share of cash in joint operations and £44m of drawn debt.

Broker Peel Hunt, which rates the stock at ‘buy’ with an 80p price target, said it was maintaining its FY21 pre-tax profit estimate of £26.5m, versus consensus of £26.1m, to give an earnings per share forecast of 7.8p.

"There should be a slightly greater 2H bias," said analyst Andrew Nussey. "FY22E PBT is also unchanged at £34.5m (EPS 10.0p). We expect Costain to return to the dividend list in FY21E with a 2.6p payment (3x cover). As confidence builds in FY21E expectations the shares should re-rate from the current December 2021E price-to-earnings of 7.5x."