7 days ago
Engineer Costain readies £10m share buyback thanks to pension surplus
Costain Group shares soared on Monday after the engineering company announced a £10million share repurchase scheme.
The London-based firm, which built the Thames Barrier and Channel Tunnel, said the buyback follows the valuation of its defined benefit pension scheme being in surplus for the second consecutive year.
It added that the scheme was an 'appropriate and value-enhancing use of cash' that would still allow the business to invest for growth.
Costain also told shareholders trading in the first half of 2025 had been in line with annual forecasts, and it expects to achieve a 4.5 per cent adjusted operating margin target.
Shares in the company climbed 8.2 per cent to 139.2p on Monday morning, making them one of the FTSE All-Share Index's biggest risers.
Costain has continued to win new work this year, including a contract to support the construction of the Sizewell C nuclear plant in Suffolk.
The UK Government committed last week to investing £14.2billion in building Sizewell C, which will generate enough energy to power six million homes once completed.
Costain also struck deals with Urenco, a nuclear fuel consortium, to design a new advanced fuels production facility and upgrade infrastructure at some enrichment sites in Cheshire.
And earlier this month, the firm secured further work with Anglian Water to deliver an additional 260 kilometres of pipelines across the East of England over the next five years.
Costain's forward work position is over four times its annual revenue.
'Costain is well positioned to benefit from the government's emerging infrastructure plan, and strength in regulated markets like water and energy,' said analysts at broker Panmure Liberum, which has raised the group's share price target from 150p to 170p.
Fellow brokers Investec and Peel Hunt similarly lifted Costain's share price target from 135p to 145p and 150p, respectively.
Alex Vaughan, chief executive of Costain, said: '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.'
Founded in 1865, Costain is a major contractor on HS2, gaining a deal worth up to £400million last December to provide tunnel and line-side mechanical and electrical systems for the high-speed rail line.
Five years ago, the business won a £3.3billion contract to design and construct the tunnels connecting HS2 to London Euston station.
