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Costain Group PLC (LSE:COST) has initiated a £10 million share buyback program, signaling confidence in its long-term growth prospects while maintaining its current dividend level. This move comes as the infrastructure construction firm reported a recovery in its balance sheet and expressed optimism about future performance.
For the first half of 2024, Costain reported revenue of £639.3 million, marking a 4% decrease compared to the previous year. This decline was attributed to a downturn in the transportation sector, which was partially offset by growth in its natural resources division. This division, which caters to the water, waste, hydrocarbons, chemicals, and nuclear sectors, contributed positively to the overall results.
Adjusted operating profits increased by 8.7% to £16.3 million, benefiting from improved margins in both transportation and natural resources sectors. Profits before tax saw a significant rise, doubling to £17 million.
The company's forward work portfolio reached £4.3 billion, up from £4.0 billion a year earlier, representing more than three times the revenue from the previous year. This portfolio is described as comprising "high-quality" contracts across various sectors. The water sector, in particular, has been a strong contributor, with over £500 million in new contracts secured since the half-year mark.
The interim dividend payment remains unchanged at 0.4p per share. Chief Executive Alex Vaughan highlighted the buyback initiative as a reflection of the company's robust cash position, which has grown to £166 million, and its confidence in long-term prospects.
Vaughan noted, "We are performing strongly and are progressing with our strategic priorities in our chosen growth markets, including broadening our customer and service mix." The company is on track to meet its adjusted operating margin targets of 3.5% for the full year and 4.5% for 2025, with additional significant water contracts anticipated in the latter half of the year.