Shares at the construction company at the centre of the London Bridge station regeneration leapt five per cent this morning after releasing half-year results and shrugged off concerns about the Brexit vote.
Speaking with City AM, Costain's finance chief Tony Bickerstaff hailed the results and said that "we see as many opportunities coming out of Brexit as concerns."
"It is even more important that we invest in our infrastructure post-Brexit," he said.
Underlying profit jumped 21 per cent from £13.1m to £15.8m on revenues of £791m – up from £621m.
Costain's order book was slightly up (five per cent) on last year at £3.9bn.
The waste division took a £11.4m additional hit from a legacy project in Manchester. Although all 46 waste sites have now been handed over, Costain is still liable under a defect warranty agreement.
Net cash dropped from £108m to £69m.
Interim dividends were raised by 15 per cent to 4.3p per share, in line with the company's intended policy of dividend growth.
Why it's interesting
Markets responded positively to the results that show despite the troublesome Manchester waste venture, profits are growing.
Analysts were also impressed. Peel Hunt said:
Excellent underlying performance. The interims were in line despite increased provisioning.
Liberum agreed and summarised:
Strong H1 results despite additional hit from Manchester waste
An increase in working capital has soaked up considerable cash.
Furthermore, the company has a tri-annual pension scheme valuation and if its movement is in line with other pension schemes, it may require a cash injection. Added to this is the £17m cash-funded purchase of SSL, which completed after the period end.
But despite the decrease in the net position Bickerstaff said that there is considerable headroom in Costain's banking facilities.
Bickerstaff also said that future legacy costs at the Manchester waste sites have been accounted for "as far as is foreseeable".
However, a defect warranty remains in place until 2018. That means any costs at the sites that are not "foreseeable" (and which Costain can be held accountable for) could eat into future profits.
What Costain said
Chief executive Andrew Wyllie said:
These are exciting times as billions of pounds are being spent upgrading and renewing the country’s energy, water and transportation infrastructure.
There is a revolution in the deployment of technology-led innovative solutions to meet the increasingly complex requirements of our national infrastructure needs, and we are continuing to rapidly transform the Costain business to be at the heart of the opportunity this presents.
Costain remains on course to deliver a result for the year in line with the Board’s expectations.