Costain is back in profit

Costain is celebrating an operating profit of £34.9m in its 2022 full year results following a £9.5m loss the previous year.

The company’s strong financial performance is revealed in its 2022 full year results.

The results show a growth in profitability with adjusted operating profit up 20.6% to £36.3m, compared to £30.1m in 2021. The adjusted operating margin was unchanged at 2.6%, as volume increases and an improved mix and operational improvements were offset by inflationary impacts, targeted up-front investment in its consultancy capability, and increased bid activity on a series of major opportunities, primarily in transportation.

Costain’s strong adjusted free cash flow in 2022 of £72.9m reflected its continued working capital management which benefited from cash collection timings prior to year-end, and operating profit growth. The year-end net cash position of £123.8m includes the previously disclosed payment of £43.4m relating to the Peterborough & Huntingdon contract in February 2022.

Costain is also implementing a number of recommendations across the business including changes to industry practice following a fatality on one of its rail contracts citing “our people are our principal asset, and their safety remains our number one priority”.

The company reported strong growth in FY22 in road and rail including HS2, with £746m of revenue secured for FY23, reflecting Costain’s major complex programme delivery contracts in road, rail and integrated transport. In FY22, they were appointed as a delivery assurance partner for the A303 road upgrade, design partner to TfL on several schemes, solution partner to Heathrow, and construction partner on the A66 highway scheme.

Looking ahead to full year 2023 results, the company reports good visibility with more than £1bn of revenue already secured for year-end 2023, representing around 80% of expected revenue, and a good pipeline of growth expected from secured and preferred bidder frameworks.

Alex Vaughan, chief executive officer, said: “Our performance in 2022 delivered strong growth in revenue and operating profits, with significant free cash flow, ending the year with a net cash position of £123.8m. 

“I am pleased that we have grown our core complex programme delivery revenue and further strengthened our consultancy market position. Consequently, we are seeing good opportunities emerge in our chosen sectors, at margins we aspire to. 

“Costain has effectively negotiated the challenges of material availability and inflation, as well as delays to some contract awards, delivering a robust operational performance. We expect to increase margins as we enact further operational improvements in the business during 2023 and beyond, and as we continue to grow the scale of our consultancy services. 

“While we are mindful of the macro-economic backdrop, the quality and nature of our secured and preferred bidder work gives us good visibility on future revenue and we remain confident in the Group’s strategy and long-term prospects.”