REG - Costain Group PLC - £10m Share Buyback Programme & H1 Trading Update

CostainAnnouncement

Mon 07:00

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RNS Number : 8713M  Costain Group PLC  16 June 2025

THIS ANNOUNCEMENT CONTAINS INFORMATION WITHIN THE MEANING OF ARTICLE 7 OF THE
MARKET ABUSE REGULATION (EU) 596/2014 AS IT FORMS PART OF UK LAW BY VIRTUE
OF

THE EUROPEAN UNION (WITHDRAWAL) ACT 2018

 

 

16 June 2025

On-market Share Buyback Programme of £10m and H1 Trading Update

 

Costain Group PLC ("Costain" or the "Group") today announces that it will
launch an on-market share buyback programme (the "Buyback") for a maximum
aggregate consideration of £10m. This follows the valuation of the Group's
defined benefit pension scheme (the "Scheme") as of 31 March 2025 (on a
Technical Provisions basis), which was more than 101% at the valuation date,
meaning the Scheme is in surplus for the second consecutive year. As a result,
both Scheme contributions and the "dividend parity" arrangement are suspended
from 1 July 2025 to 30 June 2026.

The Board regularly reviews the Group's cash performance and ongoing capital
requirements and has concluded that an on-market share buyback programme for a
maximum aggregate consideration of £10m (excluding stamp duty and expenses)
is an appropriate and value-enhancing use of cash, while maintaining the
Group's financial flexibility to continue to invest in its strategy to deliver
sustainable growth and attractive returns. The Buyback will reduce the
Company's share capital and, accordingly, any ordinary shares purchased by the
Company will be cancelled.

H1 Trading update

Ahead of publishing results for the six months ended 30 June 2025 on 20 August
2025, Costain confirms that trading remains in line with the Board's
expectations for FY 25.

 

The Group retains a strong, high-quality forward work position that is more
than four times annual revenue and is busy bidding further new work across all
sectors. Wins in FY 25 to date include:

·    new contracts in Nuclear Energy with Urenco and Sizewell C, as
announced in the Group's AGM trading update on 15 May 2025; and

·    further work with Anglian Water, as part of the Strategic Pipeline
alliance, to deliver an additional 260 kilometres of major strategic pipeline
in the East of England over the next five years, to improve resilience to
drought and climate change.

 

Together with growth of existing frameworks across our broad customer mix,
this gives the Board increasing confidence in the Group's ability to deliver
further progress, and the Group remains on track to meet its 4.5% adjusted
operating margin run rate target during FY 25.

 

Dividend

The Board recognises the importance of dividends for shareholders. It has a
target dividend cover of three times adjusted earnings, which provides
headroom for further dividend growth as and when the current dividend parity
arrangement is no longer in place. Following the doubling of the final
dividend for FY 24, the first half FY 24 dividend represented 17% of the full
year dividend, compared to 33% in 2023. It is the Board's intention that in FY
25 the first half dividend will represent around 33% of the full year
dividend.

 

Alex Vaughan, Chief Executive Officer, 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.

"We have increased our net cash position from £123.8m at the end of FY 22 to
£158.5m at the end of FY 24, including the resumption of dividend payments
towards our target earnings cover, the £10m share buyback programme in FY 24,
and investment in our people and systems.

"Accordingly, with our defined benefits pension scheme in surplus for the
second consecutive year, we are pleased to announce a further share buyback
programme that is consistent with the Group's capital allocation framework."

 

Annual actuarial pension review as of 31 March 2025

The contribution plan from the Group to the Costain Pension Scheme runs from 1
July 2023 to 31 March 2027 and is for a payment of £3.3m per year, payable in
monthly instalments, scheduled to increase in line with inflation (CPI) each 1
April. An assessment of the Scheme funding position was carried out as of 31
March 2025 and, as the funding level (on a Technical Provisions basis) is more
than 101%, contributions will stop from 1 July 2025 to 30 June 2026. This
follows a similar Scheme assessment undertaken as of 31 March 2024, in which
the Scheme funding level was also valued at more than 101%.

In addition to contributions being stopped for a year, as the funding level is
above 101%, "dividend parity" will be suspended for a year. Under the current
dividend parity arrangement, an additional matching contribution (the excess
of the total dividend above the Scheme contribution) is paid to the Costain
Pension Scheme when the total of the interim and final dividends (or other
return of capital such as a buyback) is greater than the contributions paid
into the Scheme in the previous Scheme financial year, which runs from 1 April
to 31 March.

Details of the Buyback

Costain has instructed Investec Bank plc ("Investec") and Panmure Liberum
Limited ("Panmure Liberum") to execute the Buyback. Costain has entered into a
non-discretionary and irrevocable instruction with Investec and Panmure
Liberum, pursuant to which Investec (in respect of the First Tranche) and
Panmure Liberum (in respect of the Second Tranche) will each purchase the
Company's ordinary shares of 1 pence each ("Ordinary Shares") for up to a
maximum consideration of £5m for each tranche, each acting severally as
riskless principal. The First Tranche will commence immediately. The Second
Tranche will commence following completion of the First Tranche and it is
anticipated it will end no later than 23 December 2025, subject to market
conditions.

The maximum number of Ordinary Shares that can be purchased in aggregate under
the First Tranche and Second Tranche is 26,876,608, being the number of shares
the Company is authorised to purchase pursuant to the authority granted by
shareholders at the Company's 2025 annual general meeting (the "2025 AGM") and
any subsequent authority.

Investec and Panmure Liberum will make their trading decisions in relation to
the Ordinary Shares independently of, and uninfluenced by, the Company, within
the terms and pre-set parameters of the Buyback.

Any purchase of Ordinary Shares under the Buyback will take place in open
market transactions and may be made from time to time depending on market
conditions, share price and trading volumes. The Buyback will be effected
under the general authority to repurchase Ordinary Shares granted by the
Company's shareholders at the 2025 AGM and in accordance with Chapter 12 of
the UK Financial Conduct Authority's Listing Rules, and Regulation (EU) No
596/2014 and Commission Delegated Regulation (EU) No 2016/1052 (both as they
form part of UK domestic law by virtue of the European Union (Withdrawal) Act
2018), including where relevant pursuant to the UK Market Abuse Regulation.

Any purchase of Ordinary Shares pursuant to the Buyback will be announced by
not later than 07:30 on the business day following the calendar day on which
the purchase occurred.

The Company will make further announcements in due course following the
completion of any repurchases. There is no guarantee that the Buyback will be
implemented in full or that any Ordinary Shares will be repurchased by the
Company. The Buyback will not impact the Company's existing Ordinary Share
dividend policy, which will continue unaffected through the regular awards of
interim and final dividends. At the time of this announcement, the Company's
share capital comprises 272,998,475 Ordinary Shares with voting rights.

This announcement contains inside information. The person responsible for
this announcement at Costain is Helen Willis, Chief Financial Officer.

Enquiries:

 

Investors and
analysts
matt.jones@costain.com

Matt Jones,
Costain
+44 (0) 7860 922341

 

Financial media -
Headland
costain@headlandconsultancy.com (mailto:costain@headlandconsultancy.com)

Andy
Rivett-Carnac
+44 (0) 7968 997 365

Charlie
Twigg
+44 (0) 7946 494 568 (tel:+44%20(0)79%204649%204568)

 

Notes to editors

 

Costain improves people's lives by creating connected, sustainable
infrastructure that enables people and the planet to thrive. Through the
delivery of predictable, best-in-class solutions across the transport, water,
energy and defence markets, we are creating a sustainable future and securing
a more prosperous, resilient and decarbonised UK.

 

By bringing together our unique mix of construction, consultancy, engineering
and digital services, we work strategically with our customers and suppliers
to meet critical national needs. Together, our people transform the
performance of the infrastructure that connects, protects and powers people's
lives.

 

 

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