- Positive trading in first half
- On track to hit margin target
- Returning more surplus cash
Infrastructure and construction group Costain (COST) published an unscheduled trading update for the six months to the end of June along with a commitment to buy back another £10 million of its shares.
The news sent the stock up as much as 11p or 8.5% to new five-year high of 139.5p.
MARGIN TARGET IN SIGHT
Trading in the first half of 2025 has been in line with management expectations, and the firm expects to meet its 4.5% adjusted operation margin target during 2025.
On top of its existing forward order book of more than four times annual revenue, the group is actively bidding on new work, having already won a contract in nuclear energy with Urenco and Sizewell C and been awarded further work with Anglian Water to deliver an additional 160 miles of strategic pipeline in the east of England over the next five years.
Chief executive Alex Vaughan commented: ‘Over the past three years we have executed on our strategic plans, improved the quality and size of the group's contract portfolio, delivered on our margin targets, significantly strengthened our net cash position and successfully refinanced our bank and bonding facilities, giving the group the financial strength and capability to support its future growth opportunities.’
BUYBACK AND DIVIDENDS
The decision to return cash to shareholders was prompted by the latest review of the firm’s defined benefit pension scheme at the end of March, which was more than 101% meaning it was in surplus for a second year running.
That means contributions to the scheme and the ‘dividend parity’ arrangement can be suspended for 12 months from the start of July 2025, allowing for upside in the payout.
‘We have increased our net cash position from £123.8m at the end of FY22 to £158.5m at the end of FY24, including the resumption of dividend payments towards our target earnings cover, the £10m share buyback programme in FY24 and investment in our people and systems,’ explained Vaughan.
‘Accordingly, with our defined benefits pension scheme in surplus for the second consecutive year, we are pleased to announce a further share buyback programme consistent with the group's capital allocation framework.’
