Costain has increased its profit margin to 2.6% on the back of a strong technology focus, its results for the half-year ended 30 June 2018 show.
But the contractor reported lower revenues of £758.7m for the period, down from £847.8m in the first half of 2017.
Despite that, reported pre-tax profit increased from £15.7m to £19.5m, propelling the firm’s margin from 1.9% to 2.6%.
Hailing a "good performance", chief executive Andrew Wyllie said rapid change in the deployment of technology by clients in the UK’s energy, water and transport infrastructures to increase network capacity and optimise performance was having a "profound impact" on the market and was creating a range of opportunities for Costain.
Wyllie said the company aimed to transform into the UK’s leading smart infrastructure solutions company, embedding technology in everything it does.
He highlighted the fact that Network Rail has increased its spending in Control Period 6 by 25% to £47bn but has also indicated that spending will be targeted towards asset enhancement and the ‘digital railway’.
Meanwhile, the company also pointed to a forecast that the market for connected and autonomous vehicles (CAVs) and their enabling infrastructure is expected to be worth £11bn per year in the UK by 2030.
‘Wi-fi road’ contract
Yesterday, Costain announced it had been awarded a flagship CAV and Cooperative Intelligent Transport Systems (C-ITS) contract by Highways England to install and implement one of the UK’s first pilot connected vehicles on a live road.
Known as the A2M2 connected corridor, the technology will allow vehicles to connect to each other and the road around them to make journeys safer and more reliable.
Costain will deliver roadside technology using data supplied by TfL, Highways England and Kent County Council and a technology testbed for C-ITS.
The company now has 1,300 of its 4,000 people working across consultancy or technology roles.
Costain’s order book at 30 June 2018 stood at £3.7bn – the same level as a year before, although the company said it considered it to be "higher quality" as individual contracts evolved to reflect its changing strategic market positioning.
Its infrastructure division, which operates in the highways, rail and nuclear markets delivered revenue of £587m for the period, down from £694.1m in the same period a year before. Underlying operating profit was down to £21.5m from £24.8m. Costain said the reductions resulted in a lower level of large capital project activity in the first half and that it expected the division’s margin to return to the target range of 4-5% in the second half of the year.
Utilities boost
Its natural resources arm, which operates in the water, power and oil & gas markets, increased revenue to £183.1m, up from £177.7m in the same period a year before. Underlying operating profit was £4.7m, up from £0.2m. Costain said the "significant improvement" was as a result of growth in profits from the water and power sector activities, although it was presently impacted by lower contributions from oil & gas operations. The division is expected to move towards the underlying target margin of 4-5% in the medium term.
Wyllie said: "This performance is due to our differentiation as we evolve into the UK’s leading smart infrastructure solutions company. The shape and nature of our activities continues to develop, reflecting our clients’ changing needs and their demand for integrated solutions to improve the performance and capacity of their assets."
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