Costain Group share price: what's the outlook as new strategy is announced?

The construction company has set its sights on a 7% margin after announcing it plans to transform the business into the ‘Uber of construction’ by using disruptive technologies.

London Source: Bloomberg

Costain has unveiled a major turnaround plan that aims to transform the company into the ‘Uber of construction’, with the five-year strategy promising to increase the group’s margins to between 6% - 7%.

The ambitious new plan, which looks to harness the power of ‘disruptive technologies’, comes after the company’s share price plummeted more than 38% following its profit warning last week.

Can Costain become the ‘Uber of construction’?

As part of the company’s ‘leading edge’ growth strategy, Costain plans to expand higher-margin asset management, digital solutions and consultancy, with the aim of increasing their contribution to group profit from 35% to 55% by 2024.

‘Costain aims to shape the future infrastructure we have in UK, in the same way that Apple has shaped the way we use our mobile phones and the way we buy music,’ Costain CEO Alex Vaughn said.

‘In the same way that Amazon used digital technology to transform the way retail services are provided, we are today and will increasingly use technology to enhance the performance of our service,’ he added.

The company is not only focused on improving its technology offering but is also looking to restrict the business into four key markets, including Transportation, Water, Energy and Defence.

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Costain looks to rebound after major contract delays

Shares in the company fell sharply on Friday last week after its profit warning which was precipitated by a string of delayed or cancelled contracts that hurt its revenues.

Costain was hit by delays to works on the HS2 railway project, as well as the M6 smart motorway contract, while the Welsh government cancelled its £1.4 billion M4 project over fears the works would damage the habitat of local wildlife.

‘Despite delays to the timing of certain contract start dates and new awards, our markets are strong, as evidenced by the breadth of our new contract awards in the first half,’ Vaughan said.

‘We have a strong balance sheet, profitable operations and a broad range of capabilities to support the growth of the business. Costain is well placed to secure the opportunities ahead of us,’ he added.


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