Costain Group considers restarting dividends on Gatwick boost

Costain Group is considering the resumption of dividends after revealing a healthy first-half performance and an improved financial position.

The civil engineering firm, which helped construct the Channel Tunnel Rail Link and London’s Thames Barrier, saw flat turnover of £664.4million for the six months ending June.

Trading in the company’s larger division, transportation, was boosted by work on upgrading Gatwick Airport Station and building the southern section of the HS2 high-speed rail line.

This was offset by declining revenues from road and integrated transport projects due partly to some contracts being completed, such as the Edith Rigby Way near Preston in Lancashire.

By comparison, Costain’s natural resources arm saw a minor uplift in sales primarily because of its role as a construction delivery partner on contracts for defence contractor Babcock and the Atomic Weapons Establishment.

This helped the group’s adjusted operating profits grow by 7.1 per cent to £15million, as did the benefits of its ‘transformation programme’.

The Maidenhead-based business has also strengthened its balance sheet by ensuring pension deficit payments were ‘substantially reduced’, and by refinancing its banking and bond surety facilities.

Consequently, it is contemplating restarting dividend payments, including an interim dividend payout for the recent half-year period.

Alex Vaughan, chief executive of Costain, said: ‘There remains a positive outlook across our markets while recognising the short-term rephasing of the government’s transport spending.’

He added: ‘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 per cent of revenue secured for the remainder of 2023.’

Costain had a combined order and preferred bidder book of £4billion at the end of June, which included contracts from Magnox on decommissioning numerous nuclear sites and providing consultancy advice to BP and Yorkshire Water.

Since then, the firm has gained further work from the Department for Transport and United Utilities, with the latter group providing a two-year contract extension for maintenance activity and delivering larger capital projects.

Having secured 90 per cent of revenue for the second half of this year, its annual expectations for 2023 are unchanged.

Costain Group shares were 3.3 per cent higher at 49.5p on Wednesday morning and have expanded by around a quarter since the beginning of the year.

Founded in Liverpool by Richard Costain in 1865, the company took off during the UK suburban housing boom of the 1920s before venturing into railway, ports, and chemical plant construction.

It helped build the Cardiff Bay Barrage and restore St Pancras Station, while outside Britain, the firm was involved in constructing Dubai International Airport and Tsing Ma Bridge in Hong Kong.