Shares in Costain Group PLC (LSE:COST) fell 16% on Wednesday after the construction group's rail operation was singled out as the weak link by analysts.
A raised interim dividend and a £10 million share buyback did little to appease the market. But, with a more than 30% resurgence in the year-to-date, some might argue the stock was in 'overbought territory'.
Whatever the reason, the results were uninspiring rather than dull and full-year guidance was maintained.
The UK infrastructure company reported adjusted operating profit of £16.8 million for the six months to June, up 3.1%, with operating margins improving to 3.2%.
But pre-tax profit slipped 4% to £18.6 million as revenue dropped 18% to £525.4 million.
The fall reflected less road-building activity and a revised schedule for the HS2 rail project, which offset growth in defence, nuclear and energy work, alongside steady income from water contracts.
Costain lifted its interim dividend to 1p from 0.4p and confirmed confidence in reaching a 4.5% margin target for the year. Its order book rose to £5.6 billion. Shares, which had gained more than 50% this year, slid 22.4p to 141p in early trading.
Analysts at Panmure Liberum maintained a “buy” rating on the stock, raising their price target from 170p to 190p.
They noted that margins improved by 70 basis points in the period and forecast further progress, with a “step change” expected in 2027.
The broker highlighted a strong balance sheet, a pension scheme in surplus, and £173 million of expected year-end cash, which it said left the shares trading at valuations that “look simply too cheap”.
It also pointed to the growing contribution of consultancy work, now 17% of sales, as an important driver of profitability.
None of this cheerleading helped, with the share dropping 26.2p to 137.2p.