REG - Costain Group PLC - Final Results
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RNS Number : 9446V Costain Group PLC 10 March 2026
10 MARCH 2026
COSTAIN GROUP PLC
("Costain", the "Group", or the "Company")
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2025 ("FY 25")
Record £7bn forward work, improved quality of earnings, strong markets
underpin future growth
Alex Vaughan, Chief Executive Officer, commented: "I am pleased to report
another strong performance, with 9% adjusted operating profit growth and a
4.5% adjusted operating margin. Strong cash generation has resulted in a
strengthened balance sheet and supports increased shareholder returns, with
confirmation that we will proceed with a £20m share buyback programme in FY
26 and implement our target dividend cover of 3x adjusted earnings. As we
return to the FTSE 250, thank you to everyone in the Costain team for their
valued support.
"The Group is strongly positioned in structurally growing markets where
significant long-term investment is being made to meet critical national
needs, and where we work in long-term collaborative partnerships with an
increasing number of customers. Our forward work position has grown by 30% to
a record £7.0bn, almost seven times FY 25 revenue, giving good visibility of
future work and, combined with our strong balance sheet, underpins our
confidence in delivering revenue and operating profit growth in FY 26 and a
step change in performance in FY 27 and beyond."
Continued strong performance reflecting the quality of our contract portfolio
· Revenue of £1,045.7m (FY 24: £1,251.1m), with growth in Natural
Resources offset by the previously announced reduction in Transportation.
· Adjusted operating profit(1) up 9.3% to £47.1m (FY 24: £43.1m).
· Further margin improvement, with adjusted operating margin(1) up
110bps to 4.5% (FY 24: 3.4%).
· Reported operating profit up 44.1% to £44.8m (FY 24: £31.1m),
principally reflecting a reduction in adjusting items.
· Adjusted EPS(1) of 14.5p (FY 24: 14.6p), principally reflecting
increased adjusted operating profit offset by a higher adjusted effective tax
rate. Reported EPS up by 23.0% to 13.9p (FY 24: 11.3p).
Financial strength and cash generation enabling increased shareholder returns
· Strong balance sheet with net cash of £189.3m (FY 24: £158.5m),
reflecting significant growth in adjusted free cash flow to £63.1m (FY 24:
£27.1m) and the £10m share buyback programme in FY 25.
· Removal of dividend parity arrangement will lead to an increase in
the FY 25 final dividend to 3.2p (FY 24: 2.0p) and the launch of a £20m share
buyback programme in FY 26.
Strong market momentum and increased forward work position underpins growth
prospects
· Forward work position up 30% to a record £7.0bn (FY 24: £5.4bn),
with contract awards and extensions across all sectors, underpinning our
confidence in a step change in performance in FY 27 and beyond.
· Substantial growth opportunities across all target markets outlined
in the government's 10-year Infrastructure Strategy, including regulatory
commitments in water, energy and aviation.
Financial summary
(£m unless otherwise stated) FY 25 FY 24 Change
Revenue 1,045.7 1,251.1 (16.4)%
Adjusted operating profit(1) 47.1 43.1 9.3%
Adjusted operating margin 4.5% 3.4% 110bps
Adjusted profit before tax(1) 50.5 48.5 4.1%
Adjusted EPS(1) 14.5p 14.6p (0.7)%
Adjusted free cash flow(1) 63.1 27.1 132.8%
Reported operating profit 44.8 31.1 44.1%
Reported profit before tax 48.2 36.5 32.1%
Reported EPS 13.9p 11.3p 23.0%
Dividend per share 4.2p 2.4p 75.0%
Net cash balance(1) 189.3 158.5 £30.8m
Forward work position(2) £7.0bn £5.4bn £1.6bn
1. See notes 1, 3 and 4 of the financial statements for adjusted
metric details and definitions, and Financial Review for reconciliation to
reported metrics.
2. Forward work is the total of order book and preferred bidder
book which includes revenue from contracts which are partially or fully
unsatisfied and probable revenue from frameworks included at allocated volume.
Note: Company-compiled consensus for FY 25, FY 26 and FY 27 expectations can
be found at https://www.costain.com/investors/consensus/
(https://www.costain.com/investors/consensus/) .
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)
Analyst & investor presentation
A live webcast of our results by Alex Vaughan (CEO) and Helen Willis (CFO)
will be at 9am on 10 March 2026. Please register for the event at
https://brrmedia.news/COSTFY25 (https://brrmedia.news/COSTFY25) . This will be
available for playback after the event at https://www.costain.com/
(https://www.costain.com/) .
There will also be a live presentation relating to our results via Investor
Meet Company at 10am on 11 March 2026. Please visit
https://www.investormeetcompany.com/costain-group-plc/register-investor
(https://www.investormeetcompany.com/costain-group-plc/register-investor) to
sign up to this meeting.
Use of alternative performance measures
Throughout this release we use 'adjusted' measures to provide users with a
clearer picture of the underlying performance of the business. To aid
understanding of the underlying and overall performance of the Group, certain
amounts that the Board considers to be material or non-recurring in size or
nature, or related to the accounting treatment of acquisitions, are adjusted
because they are not long term in nature and will not reflect the long-term
performance of the Group. This is in line with how management monitors and
manages the business on a day-to-day basis. These adjustments are discussed in
further detail in the Financial Review and in notes 1 to 4.
GROUP TRADING PERFORMANCE
Strong financial performance reflecting quality of contract portfolio and
predictable execution
We report both statutory results (reported) and results excluding adjusting
items (adjusted).
Revenue was £1,045.7m in FY 25 (FY 24: £1,251.1m). In Natural Resources,
there was increased revenue across Energy, and Defence and Nuclear Energy,
with stable revenue in Water, a good performance given the water industry was
transitioning from the delivery of AMP7 to early design work in the AMP8
regulatory cycle and Tideway neared completion. In Transportation, there were
revenue reductions in Road, due to the expected completion of historic
Regional Delivery Partnerships (RDP) framework projects, and in Rail, as
previously announced, due to the development of a revised schedule for HS2,
which moved work into FY 26 and future years. There was strong growth in
Integrated Transport, reflecting the expansion of our work at Heathrow.
Adjusted operating profit grew by 9.3% to £47.1m (FY 24: £43.1m), with
increased volumes and strong in-year contract performance in Natural Resources
and the positive impact of normal course of business contract completions in
both divisions partially offset by lower volumes in Transportation. The
adjusted operating margin increased to 4.5% (FY 24: 3.4%), benefiting from the
increase in adjusted operating profits and the lower volumes of completed
historic RDP framework projects, which operated at below normal margin levels.
Reported operating profit increased to £44.8m (FY 24: £31.1m), with lower
adjusting items of £2.3m (FY 24: £12.0m), reflecting £2.6m of restructuring
costs (FY 24: £0.1m credit), £0.7m of residual Transformation programme
costs (FY 24: £5.4m), and a £1.0m provision release relating to fire safety
compliance liabilities (FY 24: £6.7m cost).
Net finance income was £3.8m (FY 24: £5.4m), reflecting lower interest
income from lower bank deposits and interest rates, and higher bank charges on
the accelerated amortisation of charges relating to our prior refinancing.
Adjusted profit before tax increased 4.1% to £50.5m (FY 24: £48.5m).
Adjusted basic earnings per share (EPS) was broadly flat at 14.5 pence (FY 24:
14.6 pence), with the increase in adjusted operating profit and a reduced
share count following the FY 24 and FY 25 share buyback programmes offset by a
higher adjusted effective tax rate and lower net finance income. Reported
profit before tax was up 32.1% at £48.2m (FY 24: £36.5m), while reported
basic EPS was up 23.0% at 13.9 pence (FY 24: 11.3 pence).
Further strengthening of the balance sheet
Our net cash position at the end of the year was £189.3m (FY 24: £158.5m)
after taking account of the £10m share buyback programme and higher dividend
payments in FY 25.
Cash from operations in FY 25 was £50.7m (FY 24: £41.7m), with the increase
reflecting increased adjusted operating profits and working capital timing.
Adjusted free cash flow in FY 25 of £63.1m (FY 24: £27.1m) was higher than
in the same period last year, benefiting from the above-mentioned increase in
cash from operations and lower capital expenditure following the investment in
a new HR system in FY 24. During FY 25 we paid 97% of invoices within 60 days
(FY 24: 98%).
We expect our FY 26 year-end net cash position to be approximately £175m
after the partial unwind of historic working capital benefits and enhanced
shareholder returns, in the form of a £20m share buyback programme and an
almost doubling of dividend cash payments.
Record forward work position
Costain continues to secure further strategic programme awards and enjoys good
visibility on future work. As at the end of FY 25, our forward work position,
which is our combined order book and preferred bidder book, stood at £7.0bn
(FY 24: £5.4bn; H1 25: £5.6bn), representing an increase of 30% and almost
seven times our FY 25 annual revenue. It includes £1.1bn of revenue for FY
26, equivalent to 90% of our forecast revenue for the year. This forward work
position is built on long-term programmes that enable us to deliver a high
consistency, continuity and quality of work for our customers. As at the end
of FY 25, it included no single-stage lump sum contracts and was predominantly
long-term programmes of work with target cost contracts where the scope of
work, design and budget are developed and agreed with the client.
Our order book stood at £3.6bn at period end (FY 24: £2.5bn; H1 25:
£3.4bn). The preferred bidder book stood at £3.4bn at period end (FY 24:
£2.9bn; H1 25: £2.2bn). The preferred bidder book comprises contracts for
which we have been selected on frameworks, and allocated an intended volume of
work, but where a further works order is required prior to the works
commencing. We note that some of our framework and consulting revenue is not
recorded in either our order book or preferred bidder book, as it is
undefined.
Rigorous and disciplined risk management - underpinning strong forward work
position
The stringent assessment and management of risk is central to the successful
execution of our strategic plans. Our risk management processes and
disciplines continue to ensure a robust operational and trading performance,
and our ambition remains to deliver improving operating margins in excess of
5.0%. This is achieved through rigorous risk management and commercial control
throughout our operations in three key areas:
· a disciplined approach to contract selection, which includes robust
commercial and legal reviews, proactive shaping of procurement approaches with
our customers, and a rigorous multi-stage gating process;
· commercial and operational assurance, which includes project level
controls, management oversight of forecasts, and cross-disciplinary contract
review meetings; and
· working with strategic supply chain partners, with application of
robust supply chain management processes.
Capital allocation
The Group's capital allocation priorities remain consistent. As announced on
26 January 2026, a new agreement has been reached with the Trustee of the
defined benefit pension scheme that removes the dividend parity arrangement
that previously existed, taking away a significant constraint that had existed
in respect of returns to shareholders. Recognising this, the Board undertook a
review of its options regarding both the dividend and other returns of
capital, and on 26 January 2026 it announced two intentions: to pay a dividend
in line with its target of dividend cover of three times adjusted earnings,
and to undertake a £20m share buyback programme in FY 26. The Board will
proceed with both actions. Our capital allocation priorities continue to be:
· Investing for growth. Costain will continue disciplined investment in
key areas such as systems and digitalisation to accelerate its business
transformation and expects to invest around £10m per annum in this area in
the coming years. We will also continue to prioritise investment in
capabilities and expertise to support targeted growth opportunities.
· Dividend. The Group has a target dividend cover of three times adjusted
earnings. The Board has proposed an increase of 60% in the final dividend for
the year ended 31 December 2025 to 3.2 pence per share (FY 24: 2.0 pence).
This results in an increase of 75% in the full-year FY 25 dividend to 4.2
pence per share (FY 24: 2.4 pence). If approved at the AGM, the final dividend
will be paid on 26 May 2026 to shareholders on the share register at close of
business on 17 April 2026.
· Selective M&A. The Group retains optionality to pursue strategic
investments in technology, skills and capabilities to enhance our ability to
support customers.
· Returning surplus capital. After ensuring a strong balance sheet,
identified surplus capital will be returned to shareholders through share
buybacks or special dividends. The Group completed a £10m share buyback
programme in both FY 24 and FY 25, and on 10 March 2026 it plans to announce a
£20m share buyback programme, to be completed during FY 26.
STRATEGIC PROGRESS
Group strategy
Costain is an infrastructure solutions business, with a purpose of improving
people's lives, and is implementing its growth and value creation strategy
through:
· a clear focus on markets where there is strategic long-term
investment being made to meet critical national needs, to create a sustainable
future for a more prosperous, resilient, and decarbonised future;
· working with our targeted customers in long-term strategic
partnerships, normally for five years or more; and
· enhancing our value by providing services and innovative engineering
solutions to meet our customers' broad and changing needs.
The Group made good progress during FY 25 in executing its strategic
priorities.
Growth in strong markets
We have increasing confidence that we are well positioned in our chosen growth
markets of Transport (Road, Rail and Integrated Transport, including aviation
and ports), Water, Energy, and Defence, where there is strategic long-term
investment being made to meet critical national needs, as evidenced through:
· the UK Government's 10-year Infrastructure Strategy and
Infrastructure Pipeline, providing greater clarity on £725bn of investment;
· regulated determinations in water, energy and aviation that are
expected to result in significant increases in future investment in these
sectors; and
· the mix of our record forward work position of £7.0bn.
Predictable, best-in-class delivery
It is critical that the services and programmes that we deliver for our
customers are predictable and best-in-class as standard. We continuously drive
improvements in this area. In FY 25 we:
· opened the M1 National Emergency Area Retrofit North programme ahead of
schedule, and opened our projects on the M6, A30 and A1 on time;
· had a very positive close to AMP7, with our teams achieving 100%
compliance with our customers' regulatory date commitments across over 100
projects;
· successfully completed the twin-bore Northolt Tunnel from West Ruislip
to Old Oak Common for HS2 safely and on schedule;
· safely managed the complex demolition of the Allerdene bridge on the A1
Birtley to Coal House project with no disruption to the busy East Coast Main
Line;
· delivered extensive upgrades to dock infrastructure at Devonport to the
highest safety and environmental standards, to enable Royal Navy submarines to
undergo critical maintenance;
· safely completed the demolition of the connector between Terminal 1 and
Terminal 2 (T2) at Heathrow ahead of schedule, a key milestone in the T2
baggage handling facility project; and
· unlocked significant efficiency through our engineering-led solutions
on our programmes.
Growing, resilient customer mix
We choose to work with customers in strategic long-term programmes, which are
normally of a duration of five years or more. We build long-term, valued
partnerships, with many of our customer relationships extending over 20 years
as we repeatedly extend programmes of work. These include National Highways,
Sellafield, Southern Water, Thames Water, and United Utilities. New customer
relationships added over the past five years include Heathrow, Manchester
Airports Group, Babcock, TfL, Anglian Water, bp and Northumbrian Water Group.
During FY 25, we continued to build and expand our customer base and increase
the breadth of activities with new and existing customers to enhance the
business' resilience in the event of short-term changes in individual customer
investment plans.
Customer relationships extended during FY 25 include:
· Sellafield: 15-year contract to deliver critical utilities
infrastructure upgrades at the nuclear power station, extending and expanding
a relationship that began in 2005;
· Anglian Water: contract to deliver an additional 260km of pipeline in
the east of England over the next five years, as part of the Strategic
Pipeline Alliance;
· EDF: a five-year extension to our existing contract to provide project
controls services across their fleet of eight nuclear power stations; and
· Babcock, Heathrow, Severn Trent Water, Thames Water and TfL: expansion
of our work on existing framework agreements to progress refurbishment of
their critical infrastructure.
Post year-end we were awarded a contract for the design and build of a
junction on the M5 in Somerset, extending our long-standing relationship with
National Highways.
New customer relationships in 2025 include:
· Urenco: a programme delivery partner framework to deliver new and
upgraded infrastructure at its Cheshire site, and an additional design
services FEED for Europe's first commercial scale high-assay low-enriched
uranium facility;
· Eastern Highways Alliance (EHA): a place on the multi local authority
framework that covers civil engineering and construction works across the EHA
road network;
· Nuclear Restoration Services (NRS): a contract to deliver a
decommissioning project at the Trawsfynydd nuclear power station in North
Wales; and
· Sizewell C: a 10-year contract to provide project management expertise.
Post year-end we were awarded a place on two framework contracts with London
Gatwick airport, covering a range of capital projects to upgrade the airport's
infrastructure.
Building a meaningful consultancy service
Our business is differentiated in seeking to meet our customers' broader
business needs, not just their new capital infrastructure construction and
maintenance. Consultancy services grew to 17% of FY 25 Group revenues (FY 24:
12%). In addition to the Urenco, EDF and Sizewell C awards noted above, during
FY 25 we won consultancy business with:
· Department for Energy Security & Net Zero: to provide technical and
strategic consultancy services on the Department's Energy and Net Zero
Professional Services Framework;
· National Highways: where we secured a place on the Specialist
Professional and Technical Services Framework 3 (SPaTs3) through the RIS3 road
investment cycle;
· Department for Transport: to provide technical and commercial advice to
develop a range of rail infrastructure enhancement projects in the Western,
Wales and Wessex regions;
· Storengy UK: to deliver two FEED contracts to support the development
of their underground hydrogen storage facility in Cheshire;
· Manchester Airports Group: to conduct two biodiversity studies at
Manchester Airport and East Midlands airport; and
· further design commissions as part of our AMP8 water framework
agreements and Network Rail professional services framework agreement.
Sustainability performance
Being a sustainable business is fundamental to Costain's purpose of improving
people's lives and is central to our vision to create infrastructure for a
more prosperous, resilient and decarbonised future. Demonstration of
sustainability credentials is often a key component of our customers'
selection process when awarding new work. Our sustainability programme brings
together the sustainability issues materially important to Costain, driving
towards our medium-term goals as set out in our 2030 sustainability programme.
The safety of our people is a core value and an important component of our
sustainability programme. Following several years of improving safety
performance to industry-leading levels, culminating in a record performance in
FY 24, we saw a rise in our lost time injury rate (LTIR) to 0.16 in FY 25 from
0.11 in FY 24, although other safety metrics showed improvement in the year.
LTIR is calculated as the ratio of the total number of lost time incidents per
every 100,000 hours worked.
We made good progress towards many of our 2030 sustainability goals during FY
25, including:
· a reduction in our gender and ethnicity pay gaps;
· the creation of over £600k of social value as we implemented our
social value plan and celebrated Costain's 160th anniversary with an employee
volunteering campaign;
· an average score of 46/50 in the Considerate Constructors Scheme
(industry average of 41/50);
· a reduction in environmental incidents, waste and water consumption;
· a 41% year-on-year decrease in emissions and continued improvements to
data collection following the introduction of our Environmental Construction
Data Tracker in 2024; and
· retention of the Green Economy Mark, recognising that our revenue
exceeds the 50% 'green income' threshold.
The above strategic progress is supporting our goal to be admired as a valued
partner by our customers and supply chain, as a trusted employer and community
partner, and as a business that delivers increasing and sustainable
shareholder returns.
OUTLOOK
Strong market momentum and increased forward work position underpins our
growth prospects. We are well placed to capture the substantial multi-year
growth opportunities that exist across all our chosen markets. Our confidence
is underpinned by our strategic long-term relationships with customers and the
strength of our forward work and balance sheet. As we deliver these higher
volumes of work, we will remain focused on maintaining the rigorous contract
management disciplines that have led to today's high-quality contract
portfolio and industry-leading margins. We expect to remain highly cash
generative and to deliver progress in both revenue and adjusted operating
profit in FY 26 with an adjusted operating margin of around 4.0% for the full
year, in line with market expectations, as the positive contract completions
in FY 25 are not expected to repeat in FY 26, and as we invest in the business
to support the attractive growth opportunities. We continue to expect a step
change in performance in FY 27 and beyond, driven by the step up in our
customer's investment spending plans and growth across all our markets, and
our ambition remains to deliver improving operating margins in excess of 5.0%.
DIVISIONAL REVIEW
TRANSPORTATION
£m FY 25(1) FY 24(1) Change(1)
Road 165.8 330.3(2) (49.8)%
Rail 344.3 459.9(2) (25.1)%
Integrated transport 95.2 55.6 71.2%
Total revenue 605.3 845.8 (28.4)%
Divisional operating profit 24.9 29.9 (16.7)%
Divisional operating margin 4.1% 3.5% 60bps
1. On a reported and adjusted basis. See notes 1, 3 and 4 of the
financial statements for adjusted metric details and definitions, and
reconciliation to reported metrics.
2. Road and Rail in FY 24 includes revenue previously included
in Integrated Transport, reported within Road and Rail from the start of FY
25.
· Revenue of £605.3m was down 28.4%, as previously announced,
reflecting significantly lower revenue in Road, due to the completion of
historic RDP framework projects, and lower revenue in Rail, due to the
development of a new integrated programme schedule for HS2, which moved work
into FY 26 and future years, partially offset by strong growth in Integrated
Transport due to our expanding work at Heathrow.
· Adjusted operating margin increased by 60bps to 4.1%, reflecting
the positive impact of normal course of business contract completions in Road,
and the lower volumes of historic RDP road projects, which operated at below
normal margin levels.
· Our forward work position for FY 26 is £616m as at 31 December
2025.
We are encouraged by the UK Government's 10-year Infrastructure Strategy and
Infrastructure Pipeline, which sets out plans to increase investment in
Transport (excluding HS2) in the medium term, notably in local, regional and
devolved transport (such as the Northern Powerhouse Rail, East West Rail
schemes and regional road infrastructure), together with the regulatory
commitments and major expansion plans that will increase investment in the
aviation sector.
Road revenue declined by 49.8% to £165.8m, driven by a reduction in National
Highways schemes revenue as several historic RDP framework projects reached
completion, partially offset by growth with TfL. As a strategic partner for
National Highways, we support their key investment programmes through the RDP
major projects frameworks, the Specialist Professional and Technical Services
(SPaTs) consultancy frameworks, and Area 14 highway maintenance contract.
On RDP, in Cornwall we opened to traffic a critical piece of infrastructure
with a new stretch of A30 dual carriageway between Chiverton and Carland
Cross. Our work to upgrade the A1 around Newcastle was also successfully
completed at the end of 2025. We are progressing the detailed design phase of
the M60 Simister Island scheme, which has been confirmed as part of the
Infrastructure Pipeline, and we won a place on the SPaTs3 framework to provide
technical and engineering services through National Highways' RIS3 road
investment programme for the period 2026 to 2031.
Within the Smart Motorways Programme (SMP) Alliance, we completed the delivery
of the M6 Junction 21a-26 smart motorway upgrade, and our work to support the
National Emergency Area Retrofit (NEAR) programme on the M1, through the
design and delivery of 41 additional emergency areas for smart motorways,
opened ahead of schedule. This programme of work is now complete.
With TfL we increased the volume of work, progressing contracts at Gallows
Corner and Brent Cross and completing critical works on the A40 Westway, and
we continue to support TfL's CCTV service.
During 2025, we won a place on a multi local authority framework with the
Eastern Highways Alliance (EHA), covering civil engineering and construction
works across the road network of 11 local authorities in the east of England.
This is the first time Costain has been awarded a place on a multi local
authority schemes framework. This is of strategic importance given the greater
emphasis on the local roads sector in the coming years, with investment
targeted at unlocking new infrastructure and housing schemes.
In January 2026, we announced the award of a contract to design and build a
new junction on the M5 in Somerset to provide access to the planned Agratas
factory, which will be Britain's biggest electric vehicle battery
manufacturing facility.
Rail revenue decreased by 25.1% to £344.3m, principally because of the
revised schedule for HS2, which moved work into FY 26 and future years, as
previously announced. During FY 25, the last of the tunnel boring machines
(TBMs) in the Northolt Tunnel successfully completed their drives safely and
on schedule, a major milestone for the HS2 project as it completed the
twin-bore tunnel between West Ruislip and Old Oak Common. Work has now begun
on the tunnel from Old Oak Common to Euston, with the first TBM beginning its
drive in Q1 26. Above ground there is significant work in delivering key
infrastructure to support the new railway. As previously announced, the HS2
programme continues to be navigating a change in its programme delivery
strategy, with an integrated programme being developed.
We continue to expand our portfolio of work for Network Rail and DfT through
our professional services consulting framework contracts.
Integrated Transport revenue increased by 71.2% to £95.2m, reflecting the
growing volumes at Heathrow where we are upgrading the Terminal 2 baggage
handling facilities and systems. We are involved in several other key projects
at Heathrow, such as replacing the cladding on the main road tunnel in and out
of the airport.
We also continue to support Manchester Airports Group at East Midlands,
Manchester and London Stansted airports, and we have been awarded a place on
two framework contracts at London Gatwick airport, to cover a range of capital
projects to upgrade and modernise the airport's infrastructure. As a result,
we are now working for the three largest aviation customers in the UK, a
market where we see strong medium-term growth potential driven by regulatory
commitments and major expansion plans.
NATURAL RESOURCES
£m FY 25(1) FY 24(1) Change(1)
Water 250.8 251.5 (0.3)%
Energy 64.2 46.2 39.0%
Defence and Nuclear Energy 125.4 107.6 16.5%
Total revenue 440.4 405.3 8.7%
Divisional operating profit 35.0 23.8 47.1%
Divisional operating margin 7.9% 5.9% 200bps
1. On a reported and adjusted basis. See notes 1, 3 and 4 of the financial
statements for adjusted metric details and definitions, and reconciliation to
reported metrics.
· Revenue increased by 8.7% to £440.4m, reflecting growth in Energy
and Defence and Nuclear Energy, with stable revenues in Water as the industry
transitioned from AMP7 to AMP8 and Tideway neared completion.
· Divisional adjusted operating profit increased to £35.0m (FY 24:
£23.8m), and adjusted operating margin increased by 200bps to 7.9%,
reflecting a higher mix of consultancy revenue and positive normal course of
business contract completions as AMP7 concluded.
· Our forward work position for FY 26 is £500m as at 31 December 2025.
Water revenue was stable at £250.8m, a good performance given the water
industry was transitioning from the delivery of AMP7 to early design work in
the AMP8 regulatory cycle and Tideway neared completion. We provide a broad
range of services to improve asset and operational resilience across the
sector, together with decarbonisation capabilities.
We delivered a very strong close to AMP7, achieving 100% of our regulatory
date commitments on behalf of our customers across over 100 projects. Our
focus has now moved to the successful mobilisation of the AMP8 capital
delivery programmes for both existing AMP7 customers (Anglian Water, Severn
Trent Water, Southern Water and Thames Water) as well as our new AMP8
alliances with United Utilities and Northumbrian Water. We also have a managed
service provider contract with United Utilities and a professional services
contract with Yorkshire Water. Following our successful contract awards in FY
24 we have good visibility across 2025-2030 and continue to expect a doubling
of investment in AMP8 compared to AMP7, to over £100bn. The AMP8 investment
is expected to peak in 2027-2029 and is a key component of the expected step
change in the Group's performance in FY 27 and beyond. These high levels of
investment are expected to continue into AMP9, which runs from 2030-2035. Our
contracts with United Utilities, Northumbrian Water and Southern Water extend
through to the end of AMP9.
Water resilience is a critical area of focus for the industry, and in June
2025, we announced a five-year extension to our Strategic Pipeline Alliance
contract with Anglian Water to improve resilience to drought and climate
change by transferring water from wetter regions to drier parts of the east of
England. During the year, our work for Tideway, where in a joint venture we
are responsible for building the eastern section of London's new 'super
sewer', became operational, bringing significantly greater environmental
resilience to London.
The breadth of our service offering continues to grow; for example, it now
includes constructability advice to customers as they design new strategic
reservoirs. We secured a key position supporting the South East Strategic
Reservoir Option (SESRO) project, positioning us well for future reservoir
programmes over the next 10 years.
Energy revenue increased by 39.0% to £64.2m. We provide our customers in this
sector with a range of services including engineering design, managed services
and programme management, solving our customers' complex energy challenges
through excellence in engineering and delivery.
In energy transition (hydrogen and carbon capture), we continue to support bp
with the design and delivery of its leading industrial scale carbon capture
programme. We were awarded two FEED contracts with a new customer, Storengy
UK, for its pioneering underground hydrogen storage project in Cheshire. We
also continue to provide studies to Wales and West Utilities to assist them as
they develop their hydrogen vision.
In energy connectivity (gas and electricity networks), we continue to manage
the safety-critical gas mains replacement programme for Cadent in the east of
England, achieving very high customer satisfaction scores. Ofgem has an £80bn
investment programme planned for the RIIO-3 regulatory period from 2026 to
2031 to maintain critical gas networks and upgrade the UK's electricity grid.
This is four times the level of investment made during RIIO-2, with the first
£28bn tranche of this programme now approved, and we continue to expect
strong growth opportunities as the UK embarks on its 'Great Grid Upgrade'.
Defence and Nuclear Energy revenue increased by 16.5% to £125.4m, driven by
growth within our current delivery partnership roles for executive
non-departmental public and government bodies and with Tier 1 companies.
During the period, we completed extensive upgrades to the dock infrastructure
at Devonport for Babcock, to enable Royal Navy submarines to undergo critical
maintenance before returning to sea, and we continued to support the Atomic
Weapons Establishment (AWE) as their construction delivery partner to deliver
major infrastructure projects.
We made significant progress in the nuclear energy sector in FY 25. In
October, we announced the award of a major delivery partnership contract with
Sellafield, worth up to £1bn over 15 years, to deliver critical utilities
infrastructure upgrades, thereby extending a relationship that began in 2005.
We also extended our project controls services contract with EDF to support
their fleet of nuclear power stations for a further five years, and won a
contract with Nuclear Restoration Services (NRS) for decommissioning work at a
nuclear power station in North Wales.
In March, we added Urenco as a new customer, securing a programme delivery
partner framework to deliver new and upgraded infrastructure at its Cheshire
site and then an additional design services FEED for Europe's first commercial
scale high-assay low-enriched uranium facility. This facility will provide the
fuel for the small modular reactor and advanced modular reactor units for
Rolls Royce as part of Great British Nuclear's drive to deliver cheaper,
cleaner and more secure energy. We also won a 10-year framework with Sizewell
C to provide engineering, project delivery and quality control expertise to
support the construction of the new nuclear power station.
Geopolitical uncertainty is leading to significant investment in national
security, including defence infrastructure, as well as a renewed focus on
civil nuclear energy to improve energy resilience, and the government is
committed to long-term development of the civil nuclear energy sector. As a
result, we continue to see strong medium-term growth opportunities in Defence
and Nuclear Energy and are well positioned across the Defence Nuclear
Enterprise.
FINANCIAL REVIEW
Divisional adjusted to reported reconciliation
Transportation Natural Resources Group
FY 25 FY 24 Change FY 25 FY 24 Change FY 25 FY 24 Change
Revenue £m
Reported 605.3 845.8 (28.4%) 440.4 405.3 8.7% 1,045.7 1,251.1 (16.4%)
Operating profit £m
Adjusted 24.9 29.9 (16.7)% 35.0 23.8 47.1% 47.1 43.1 9.3%
Adjusting items - - - - - - (2.3) (12.0) (80.8%)
Reported 24.9 29.9 (16.7)% 35.0 23.8 47.1% 44.8 31.1 44.1%
Adjusting items
Adjusting items were significantly lower in FY 25, amounting to £2.3m (FY 24:
£12.0m). We incurred £0.7m (FY 24: £5.4m) of residual Transformation
programme costs and £2.6m (FY 24: £0.1m credit) of restructuring costs,
partially offset by a £1.0m provision release (FY24: £6.7m cost) relating to
historic fire safety compliance claims.
Net financial income
Net finance income amounted to £3.8m (FY 24: £5.4m). The interest payable on
loans and other similar charges was £1.8m (FY 24: £1.4m), reflecting higher
bank charges on the accelerated amortisation of charges relating to our prior
refinancing, and there was lower interest income on the lower bank deposits of
£5.0m (FY 24: £6.7m). In addition, the net finance income includes the
interest income on the net assets of the pension scheme of £3.0m (FY 24:
£2.6m) and the interest expense on lease liabilities of £2.4m (FY 24:
£2.5m) under IFRS 16.
Tax
The Group had a tax charge of £10.9m (FY 24: £5.9m) giving an effective tax
rate of 22.6% (FY 24: 16.2%). The adjusted effective tax rate was 22.8% (FY
24: 18.3%). This is lower than the statutory tax rate due to permanent
differences, including tax relief on the exercise of share-based payments. We
expect the effective tax rate in FY 26 to remain marginally below the
statutory tax rate of 25%.
Cash flow
The Group generated adjusted free cash flow of £63.1m in FY 25 (FY 24:
£27.1m), higher than the previous year largely due to the timing of year-end
working capital and lower tax and capital expenditure payments.
£m FY 25 FY 24
Cash from operations 50.7 41.7
Add back adjusting items 3.5 8.6
Add back pension deficit contributions 0.0 2.0
Add back / (less) cash flows on cash and cash equivalents - with restrictions 12.4 (14.0)
Less taxation (0.7) (2.2)
Less capital expenditure (2.8) (9.0)
Free cash flow 63.1 27.1
The Group had a positive net cash balance, excluding cash with restrictions,
of £189.3m as of 31 December 2025 (FY 24: £158.5m; H1 25: £144.9m)
comprising Costain cash balances of £121.6m (FY 24: £95.8m; H1 25: £85.0m),
cash held by joint operations of £67.7m (FY 24: £62.7m; H1 25: £59.9m) and
borrowings of £nil (FY 24: £nil; H1 25: £nil). During FY 25, the Group's
average month-end net cash balance was £152.6m (FY 24: £169.8m; H1 25:
£149.4m) and the Group's average week-end net cash balance was £149.2m (FY
24: £164.3m; H1 25: £152.9m) with both average metrics impacted by the
timing of working capital unwinds that did not reverse until the latter part
of the year. Utilisation of the total bonding facilities as of 31 December
2025 was £72.4m (FY 24: £65.3m; H1 25: £71.2m).
£m FY 25 FY 24
Cash and cash equivalents at the beginning of the year 158.5 164.4
Net cash flow 30.8 (5.9)
Cash and cash equivalents at the end of the year 189.3 158.5
Borrowings - -
Net cash 189.3 158.5
Pensions
Cash contributions made to the Group's defined benefit pension scheme (Scheme)
during FY 25 amounted to £nil (FY 24: £2.0m). This reflected the annual
actuarial assessments of the Scheme funding position carried out as at 31
March 2024 and as at 31 March 2025, both of which concluded that the funding
level (on a Technical Provisions basis) was more than 101%, in turn triggering
a pause in cash contributions from 1 July 2024 to 30 June 2025, and then again
from 1 July 2025 to 30 June 2026.
The charge to operating profit in respect of the administration cost of the
Scheme in FY 25 was £nil (FY 24: £0.1m). As at 31 December 2025, the Scheme
was in surplus in accordance with IAS 19 at £60.0m (FY 24: £54.9m surplus;
H1 25: £56.1m surplus). The movement in the IAS 19 valuation, being a slight
increase in surplus from 31 December 2024 to 31 December 2025, was principally
due to a change in inflation assumptions, which resulted in a decrease in
benefit obligations.
On 26 January 2026, we announced that an agreement had been reached with the
Trustee of the Scheme on the 31 March 2025 triennial actuarial funding
valuation and ongoing Scheme contributions. Following this, the dividend
parity arrangement that previously existed has been removed, there is no
requirement going forward for an annual assessment of the Scheme funding
position and there will be no further cash contributions made by the Company
into the Scheme under the new schedule of contributions, which is in place
until January 2031. We will continue to review options for restructuring the
Scheme with the Trustee.
DIRECTORS REPORT
Going concern
In determining the appropriate basis of preparation of the financial
statements for the year ended 31 December 2025, the Directors are required to
consider whether the Group and the Company can continue in operational
existence for the foreseeable future, being a period of at least twelve months
from the date of approval of the accounts. Having undertaken a rigorous
assessment of the financial forecasts, including its liquidity and compliance
with covenants, the Board considers that the Group has adequate resources to
remain in operation for the foreseeable future and, therefore, have adopted
the going concern basis for the preparation of the financial statements.
Please see note 1 for more details.
For and on behalf of the Board
Alex Vaughan
Helen Willis
Chief Executive
Officer
Chief Financial Officer
9 March 2026
Cautionary statement
This report contains forward-looking statements. These have been made by the
Directors in good faith based on the information available to them up to the
time of their approval of this report. The Directors can give no assurance
that these expectations will prove to have been correct. Due to the inherent
uncertainties, including both economic and business risk factors underlying
such forward-looking information, actual results may differ materially from
those expressed or implied by these forward-looking statements. The Directors
undertake no obligation to update any forward-looking statements whether as a
result of new information, future events or otherwise.
Shareholder information
There is a large amount of information about our business on our website,
www.costain.com (http://www.costain.com) . This includes copies of recent
investor presentations as well as London Stock Exchange announcements.
GROUP INCOME STATEMENT
For the year ended 31 December 2025
£m Note 2025 2024
Revenue 4 1,045.7 1,251.1
Cost of sales (931.9) (1,147.8)
Gross profit 113.8 103.3
Administrative expenses (69.0) (72.2)
Operating profit 44.8 31.1
Share of results of joint ventures and associates (0.4) -
Profit from operations 44.4 31.1
Finance income 5 8.0 9.3
Finance expense 5 (4.2) (3.9)
Net finance income 3.8 5.4
Profit before tax 48.2 36.5
Taxation 6 (10.9) (5.9)
Profit for the year attributable to equity holders of the parent 37.3 30.6
Earnings per share
Basic 7 13.9p 11.3p
Diluted 7 13.7p 11.1p
GROUP STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
For the year ended 31 December 2025
£m 2025 2024
Profit for the year 37.3 30.6
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation transferred to the income statement (1.0) -
Total items that may be reclassified subsequently to profit or loss (1.0) -
Items that will not be reclassified to profit or loss:
Remeasurement of retirement benefit asset 2.1 (3.1)
Tax recognised on remeasurement of retirement benefit asset (0.5) 0.8
Tax recognised on share-based payments 0.8 -
Total items that will not be reclassified to profit or loss 2.4 (2.3)
Other comprehensive income/(expense) for the year 1.4 (2.3)
Total comprehensive income for the year 38.7 28.3
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 December 2025
£m Note 2025 2024
Assets
Non-current assets
Intangible assets 9 51.1 51.2
Property, plant and equipment 10 34.5 35.3
Equity accounted investments - 0.4
Retirement benefit asset 12 60.0 54.9
Trade and other receivables 2.3 4.3
Deferred tax 2.9 8.6
Total non-current assets 150.8 154.7
Current assets
Trade and other receivables 191.5 185.3
Insurance recovery asset 4.3 8.8
Income tax - 1.5
Cash and cash equivalents - with restrictions 26.0 38.4
Cash and cash equivalents 11 189.3 158.5
Total current assets 411.1 392.5
Total assets 561.9 547.2
Liabilities
Non-current liabilities
Other payables 1.1 1.8
Lease liabilities 16.5 12.8
Total non-current liabilities 17.6 14.6
Current liabilities
Trade and other payables 267.4 271.0
Income tax 0.3 -
Lease liabilities 8.5 13.0
Provisions for other liabilities and charges 9.9 12.9
Total current liabilities 286.1 296.9
Total liabilities 303.7 311.5
Net assets 258.2 235.7
Equity
Share capital 13 2.7 2.7
Share premium 17.1 16.5
Translation reserve (0.4) 0.6
Treasury shares (1.1) (0.7)
Capital redemption reserve 136.5 136.5
Retained earnings 103.4 80.1
Total equity 258.2 235.7
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2025
£m
Share capital Share premium Translation reserve Treasury shares Capital redemption reserve Retained earnings Total equity
At 1 January 2024 138.3 16.4 0.6 (1.9) - 66.0 219.4
Profit for the year - - - - - 30.6 30.6
Other comprehensive expense - - - - - (2.3) (2.3)
Issue of ordinary shares under employee share option plans 0.9 - - (0.6) - (0.3) -
Shares awarded to satisfy employee share schemes - - - 1.7 - (1.7) -
Equity-settled share-based payments - - - - - 2.3 2.3
Acquisition of treasury shares - - - (1.1) - - (1.1)
Nominal value reduction (136.4) - - 1.2 136.4 (1.2) -
Share buyback (0.1) - - - 0.1 (10.0) (10.0)
Dividends paid - 0.1 - - - (3.3) (3.2)
At 31 December 2024 2.7 16.5 0.6 (0.7) 136.5 80.1 235.7
At 1 January 2025 2.7 16.5 0.6 (0.7) 136.5 80.1 235.7
Profit for the year - - - - - 37.3 37.3
Other comprehensive (expense)/ income - - (1.0) - - 2.4 1.4
Shares awarded to satisfy employee share schemes - - - 1.6 - (1.6) -
Equity-settled share-based payments - - - - - 3.1 3.1
Acquisition of treasury shares - - - (2.0) - (2.0)
Share buyback - - - - - (10.0) (10.0)
Dividends paid - 0.6 - - - (7.9) (7.3)
At 31 December 2025 2.7 17.1 (0.4) (1.1) 136.5 103.4 258.2
GROUP CASH FLOW STATEMENT
For the year ended 31 December 2025
£m Note 2025 2024
Cash flows generated from/(used by) operating activities
Profit for the year 37.3 30.6
Adjustments for:
Share of results of joint ventures and associates 0.4 -
Finance income 5 (8.0) (9.3)
Finance expense 5 4.2 3.9
Taxation 6 10.9 5.9
Loss on disposals of property, plant and equipment 0.4 0.6
Depreciation of property, plant and equipment 10 11.8 11.9
Amortisation of intangible assets 9 1.1 0.3
Transfer from translation reserve (1.0) -
Share-based payments expense 3.1 2.3
Cash generated from operations before changes in working capital and 60.2 46.2
provisions
(Increase)/decrease in receivables (3.1) 15.0
Decrease in payables (3.4) (13.4)
Decrease in provisions (3.0) (4.2)
Contributions to defined benefit pension scheme - (1.9)
Cash generated from operations 50.7 41.7
Interest received 6.0 6.7
Interest paid (4.7) (3.5)
Taxation paid (0.7) (2.2)
Net cash generated from operating activities 51.3 42.7
Cash flows generated from/(used by) investing activities
Additions to owned property, plant and equipment and leasehold improvements (1.4) (5.5)
Additions to intangible assets (1.4) (3.6)
Proceeds on disposals of property, plant and equipment - 0.1
Net cash used by investing activities (2.8) (9.0)
Cash flows generated from/(used by) financing activities
Ordinary dividends paid (7.3) (3.2)
Share buyback (10.0) (10.0)
Acquisition of treasury shares (2.0) (1.1)
Repayments of lease liabilities - principal (10.8) (11.3)
Net cash used by financing activities (30.1) (25.6)
Net (decrease)/increase in cash and cash equivalents - with restrictions (12.4) 14.0
Net increase/(decrease) in cash and cash equivalents 30.8 (5.9)
Net increase in cash and cash equivalents (including cash with restrictions) 18.4 8.1
Cash and cash equivalents at beginning of the year (including cash with 11 196.9 188.8
restrictions)
Cash and cash equivalents at end of the year (including cash with 11 215.3 196.9
restrictions)
Cash and cash equivalents at beginning of the year (excluding cash with 158.5 164.4
restrictions)
Net increase/(decrease) in cash and cash equivalents 30.8 (5.9)
Cash and cash equivalents at end of the year (excluding cash with 189.3 158.5
restrictions)
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
Costain Group PLC ("the Company") is a public limited company domiciled in
England and incorporated in England and Wales. The consolidated financial
statements of the Company for the year ended 31 December 2025 comprise the
Group and the Group's interests in associates, joint ventures and joint
operations and have been prepared and approved by the Directors in accordance
with UK-adopted international accounting standards and with the requirements
of the Companies Act 2006 as applicable to companies reporting under those
standards. A duly appointed and authorised committee of the Board of Directors
approved the preliminary announcement on 9 March 2026. The financial
information set out above does not constitute the Company's statutory
consolidated financial statements for the years ended 31 December 2025 and
2024 but is derived from those financial statements. Statutory financial
statements for 2024 have been delivered to the Registrar of Companies and
those for 2025 will be delivered in due course.
The auditor has reported on these financial statements. Their report for 2025
was (i) unqualified and (ii) did not contain a statement under section 498(2)
or (3) of the Companies Act 2006. Their report for the financial statements of
2024 was (i) unqualified, and (ii) did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
While the financial information included in this preliminary announcement has
been prepared in accordance with UK-adopted international accounting
standards, this announcement does not itself contain sufficient information to
fully comply with UK-adopted international accounting standards.
The accounting policies have been applied consistently by the Group to each
period presented in these financial statements.
Going concern
The Group's principal business activity involves work on the UK's
infrastructure, mostly delivering long-term contracts with a number of
customers. To meet its day-to-day working capital requirements, it uses cash
balances provided from shareholders' capital and retained earnings and its
borrowing facilities.
In 2025, the Group successfully concluded negotiations with its bank and
surety facility providers to refinance a new four-year agreement of its bank
and bonding facilities to September 2029, with an option to extend by a
further year. The Group's new facilities agreement replaces the previous
three-year facilities agreement to September 2026 and comprises a £100m
revolving credit facility (RCF) (previous RCF: £85m) and surety and bank
bonding facilities totalling £295m (previous facilities: £270m). The RCF
facility is currently undrawn.
These facilities have a leverage covenant of net debt/adjusted EBITDA ≤1.5
times, an interest covenant of adjusted EBITA/net interest payable of ≥4.0
times and a liquidity covenant whereby the aggregate of, without double
counting, any cash and cash equivalent investments and the available
commitment under the facility does not fall below £50m. These financial
covenants are tested quarterly. As at 31 December 2025, the Group had a
leverage covenant ratio of below zero (the Group had no net debt) and an
interest covenant ratio of 11.1 times. As part of its contracting operations,
the Group may be required to provide performance and other bonds. It satisfies
these requirements by utilising its £30m bank bonding and £265m surety
bonding facilities.
In determining the appropriate basis of preparation of the financial
statements for the year ended 31 December 2025, the Directors are required to
consider whether the Group and the Company can continue in operational
existence for the foreseeable future, being a period of at least twelve months
from the date of approval of the financial statements.
In assessing the going concern assumption, the Board reviewed the Group's base
case plans for the 15 month period to 30 June 2027, being a period of more
than 12 months from the date of approval of these financial statements. The
Directors have assumed that the current RCF remains in place with the same
covenant requirements through to its current expiry date, which is beyond the
end of the period reviewed for Going Concern purposes. The base case assumes
delivery of the Board approved strategic and financial plans. As part of the
assessment, the Board also identified severe but plausible downsides affecting
future profitability, working capital requirements and cash flow. The severe
but plausible downsides include applying the aggregated impact of lower
revenue (-30% on work to be secured), lower margins (-3% on work to be
secured), higher working capital requirements and adverse contract
settlements.
Both the base case and severe but plausible forecasts show significant
headroom and indicate that the Group and the Company will be able to operate
within available banking facilities and covenants throughout this period.
Having undertaken a rigorous assessment of the financial forecasts, including
its liquidity and compliance with covenants, the Board considers that the
Group and the Company have adequate resources to remain in operation for the
foreseeable future and, therefore, the Directors have adopted the going
concern basis in the preparation of the financial statements.
Alternative performance measures
Income statement presentation - adjusting items
The Group discloses alternative performance measures, in addition to statutory
disclosures, to provide investors with supplementary information which may be
relevant to the Group's future performance. 'Adjusted profit' excludes
'adjusting items', which are significant items of income and expenditure that
the Board considers are incremental to business operations and do not reflect
the long-term performance of the Group. These adjusted measures are reconciled
to statutory disclosures, with the tax impact given, in note 3, and disclosed
in the segmental reporting in note 4. Presenting results on this basis is
consistent with internal reporting to the Board. Alternative performance
measures do not have standardised meanings and, therefore, they may not be
comparable between companies.
The Directors exercise judgement in determining classification as an
'adjusting item' using quantitative and qualitative factors. Consideration is
given, both individually and collectively, to the circumstances giving rise to
the item, its materiality and whether it is expected to recur.
'Adjusted profit' may exclude income and expenditure related to acquisitions,
discontinued operations, transformation costs, costs of a function or
sector-wide restructuring programme, claims and litigation, and impairments,
where the impairment is the result of an isolated, non-recurring event.
'Adjusted earnings per share' is calculated using 'adjusted profit'.
The Group also presents 'net cash/bank debt' and 'adjusted free cash flow' as
alternative performance measures in the front of the Annual Report. 'Net
cash/bank debt' is defined as cash and cash equivalents less interest-bearing
borrowings (excluding leases under IFRS 16 and net of unamortised arrangement
fees) and excluding 'cash and cash equivalents - with restrictions'.
'Adjusted free cash flow' is defined as cash generated from operations,
excluding cash flows relating to 'adjusting items' and pension deficit
contributions, less taxation and capital expenditure and excluding cash flows
related to 'cash and cash equivalents - with restrictions'.
The Directors consider that these measures provide useful information about
the Group's liquidity position.
2. SIGNIFICANT AREAS OF JUDGEMENT AND ESTIMATION
The estimates and underlying assumptions used in the preparation of these
financial statements are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
The most critical accounting policies and significant areas of estimation and
judgement arise from the accounting for long-term contracts under IFRS 15,
'Revenue from Contracts with Customers' and the assumptions used in the
accounting for defined benefit pension schemes under IAS 19, 'Employee
benefits'.
Long-term contracts
The majority of the Group's activities are undertaken via long-term contracts
and IFRS 15 requires the identification and separation of individual, distinct
performance obligations, which are then accounted for individually. The most
common type of contracts undertaken by the Group with multiple performance
obligations are framework contracts. In most cases, the obligations are
satisfied over time and estimates are made of the total contract costs and
revenues. In many cases, these obligations span more than one financial year.
Both cost and revenue forecasts may be affected by a number of uncertainties
that depend on the outcome of future events and may need to be revised as
events unfold and uncertainties are resolved. Cost forecasts take into account
the expectations of work to be undertaken on the contract. Revenue forecasts
take into account compensation events, variations and claims and assessments
of, for example, the impact of pain/gain arrangements and disallowed or
withheld costs, to the extent that the amounts the Group expects to recover
can be reliably estimated and are highly probable not to reverse.
Management bases its estimates of costs and revenues and its assessment of the
expected outcome of each long-term contractual obligation on the latest
available information. This includes detailed contract valuations, progress on
discussions over compensation events, variations and claims with customers,
progress against the latest programme for completing the works, forecasts of
the costs to complete and, in certain cases, assessments of recoveries from
insurers, suppliers and contractors, where these are considered virtually
certain. Revenue is recognised when the related compensation events,
variations and claims are agreed with the customer (or are otherwise legally
enforceable), and only to the extent that the resulting forecast consideration
is considered highly probable of not resulting in a significant reversal.
There are a small number of material contracts where management has been
required to make significant accounting estimates and, which result in
estimation uncertainty, as at 31 December 2025. In relation to these
contracts, the Group has included estimated recoveries with a combined value
of £13.4m (2024: £8.6m), on the basis that these are considered highly
probable not to reverse. However, there are a range of factors which will
affect the ultimate outcome once these contracts are finalised. Management
considers that the estimation uncertainty in relation to these contracts
ranges from a potential upside of £15.8m to a downside of £13.4m (2024: a
potential upside of £11.2m to a downside of £8.6m). The ultimate financial
impact of this estimation uncertainty will depend, inter alia, on the terms of
the contract and the interaction with incentive arrangements, such as
pain/gain mechanisms and bonus or KPI arrangements, as well as final
conclusions regarding claims and compensation events and assessments of, for
example, costs disallowed under the contract.
In addition, the HS2 programme is currently navigating a change in its
programme delivery strategy with an integrated programme being developed, and
discussions are underway on a potential revised programme with the supply
chain, including the Skanska-Costain-Strabag Joint Venture. Our 2025 financial
result reflects the current contractual position.
The estimates of the forecast contract outcome and the profit or loss earned
to date are updated regularly and significant changes are highlighted through
established internal review procedures. The impact of any change in the
accounting estimates (both positive and negative) is then reflected in the
financial statements.
While management believes it has recorded positions that are highly probable
not to reverse on the basis of existing facts and circumstances, there are
uncertain factors which will impact the final contract outcome and could give
rise to material adjustments within the next financial year. Given the
inherent complexity and pervasive impact of the various judgements and
estimates impacting revenue, cost of sales and related balance sheet amounts,
it is not considered plausible to quantify the impact of taking alternative
assessments on each of these judgements.
Defined benefit pension scheme
Defined benefit pension schemes require significant estimates in relation to
the assumptions for the discount rate, inflation and member longevity that
underpin the valuation. Each year in selecting the appropriate assumptions,
the Directors take advice from an independent qualified actuary. The
assumptions and resultant sensitivities are set out in note 12.
3. RECONCILIATION OF REPORTED OPERATING PROFIT TO
ADJUSTED OPERATING PROFIT
'Adjusted operating profit' and 'adjusted earnings per share' are presented as
non-GAAP alternative performance measures. The Board considers the adjusted
measures better reflect the underlying trading performance of the Group for
the reasons described in note 2.
The profit adjustments represent amounts included in the income statement.
£2.6m was incurred as a result of restructuring of some of the central
functions within the business in 2025, as well as £0.7m on residual
Transformation costs. There has been a £1.0m provision release in relation to
the fire safety provision taken in 2024 as a result of progressing
negotiations. In 2024, adjusting items of £5.4m were incurred on the Group's
Transformation programme and £6.7m in relation to the settlement of a fire
safety compliance claim on one building and a provision for the sole other
identified obligation. A £0.1m credit was also recognised as a result of the
sale in 2024 of assets written down during restructuring in 2023.
Year ended 31 December 2025 Adjusted Adjusting items Total
£m £m £m
Revenue 1,045.7 - 1,045.7
Cost of sales (931.9) - (931.9)
Gross profit 113.8 - 113.8
Administrative expenses before adjusting items (66.7) - (66.7)
Adjusting items:
Restructuring costs - (2.6) (2.6)
Transformation costs - (0.7) (0.7)
Fire safety provision release - 1.0 1.0
Administrative expenses (66.7) (2.3) (69.0)
Operating profit 47.1 (2.3) 44.8
Share of results of joint ventures and associates (0.4) - (0.4)
Profit from operations 46.7 (2.3) 44.4
Net finance income 3.8 - 3.8
Profit before tax 50.5 (2.3) 48.2
Taxation (11.5) 0.6 (10.9)
Profit for the year attributable to equity holders of the parent 39.0 (1.7) 37.3
Basic earnings per share 14.5p 13.9p
Year ended 31 December 2024 Adjusted Adjusting items Total
£m £m £m
Revenue 1,251.1 - 1,251.1
Cost of sales (1,147.8) - (1,147.8)
Gross profit 103.3 - 103.3
Administrative expenses before adjusting items (60.2) - (60.2)
Adjusting items:
Restructuring credit - 0.1 0.1
Transformation costs - (5.4) (5.4)
Fire safety claims - (6.7) (6.7)
Administrative expenses (60.2) (12.0) (72.2)
Operating profit 43.1 (12.0) 31.1
Net finance income 5.4 - 5.4
Profit before tax 48.5 (12.0) 36.5
Taxation (8.9) 3.0 (5.9)
Profit for the year attributable to equity holders of the parent 39.6 (9.0) 30.6
Basic earnings per share 14.6p 11.3p
4. OPERATING SEGMENTS
The Group has two business segments: Transportation and Natural Resources.
These segments are strategic business units with separate management and have
different customers or offer different services. Segmental information is
provided to the Chief Executive who is the chief operating decision maker. The
segments are discussed in the Strategic Report section of the financial
statements.
The Group evaluates segment performance on the basis of profit or loss from
operations before interest and taxation and before 'adjusting items'. The
segment results that are reported to the Chief Executive include items
directly attributable to a segment as well as those that can be allocated on a
reasonable basis. Other items are allocated to the operating segments where
appropriate but otherwise are viewed as Central costs.
2025 Natural Central costs
Resources Transportation Total
£m £m £m £m
Segment revenue
Revenue 440.4 605.3 - 1,045.7
Segment profit/(loss)
Operating profit/(loss) before other items 35.0 24.9 (12.8) 47.1
Share of results of joint ventures and associates (0.4) - - (0.4)
Operating profit/(loss) before adjusting items 34.6 24.9 (12.8) 46.7
Adjusting items:
Restructuring costs - - (2.6) (2.6)
Transformation costs - - (0.7) (0.7)
Fire safety provision release - - 1.0 1.0
Profit/(loss) from operations 34.6 24.9 (15.1) 44.4
Net finance income 3.8
Profit before tax 48.2
2024 Natural Central costs
Resources Transportation Total
£m £m £m £m
Segment revenue
Revenue 405.3 845.8 - 1,251.1
Segment profit/(loss)
Operating profit/(loss) before adjusting items 23.8 29.9 (10.6) 43.1
Adjusting items:
Restructuring credit - - 0.1 0.1
Transformation costs - - (5.4) (5.4)
Fire safety claims - - (6.7) (6.7)
Profit/(loss) from operations 23.8 29.9 (22.6) 31.1
Net finance income 5.4
Profit before tax 36.5
5. FINANCE INCOME/(EXPENSE)
£m 2025 2024
Interest income from bank deposits 5.0 6.7
Interest income on the net assets of the defined benefit pension scheme 3.0 2.6
Finance income 8.0 9.3
Interest payable on interest bearing bank loans, borrowings and other similar (1.8) (1.4)
charges
Interest expense on lease liabilities (2.4) (2.5)
Finance expense (4.2) (3.9)
Net finance income 3.8 5.4
Other similar charges includes arrangement and commitment fees payable.
6. TAXATION
£m 2025 2024
On profit for the year
UK corporation tax at statutory rate of 25.0% (2024: 25.0%) (5.1) (4.1)
Adjustment in respect of prior years 0.2 1.0
Current tax charge for the year (4.9) (3.1)
Deferred tax charge for the current year (5.3) (4.0)
Adjustment in respect of prior years (0.7) 1.2
Deferred tax charge for the year (6.0) (2.8)
Tax charge in the consolidated income statement (10.9) (5.9)
£m 2025 2024
Tax reconciliation
Profit before tax 48.2 36.5
Taxation at 25.0% (2024: 25.0%) (12.0) (9.1)
Amounts qualifying for tax relief and disallowed expenses 1.6 1.0
Adjustments in respect of prior years (0.5) 2.2
Tax charge in the consolidated income statement (10.9) (5.9)
7. EARNINGS PER SHARE
The calculation of earnings per share is based on profit of £37.3m (2024:
£30.6m) and the number of shares set out below.
2025 2024
Number Number
(millions) (millions)
Weighted average number of ordinary shares in issue for basic earnings per 268.5 271.3
share calculation
Dilutive potential ordinary shares arising from employee share schemes 4.2 3.3
Weighted average number of ordinary shares in issue for diluted earnings per 272.7 274.6
share calculation
8. DIVIDENDS
An interim dividend of 1.0 pence per share was paid for the six months ended
30 June 2025. The Board is proposing a final dividend of 3.2 pence per share.
Payment of the final dividend will be both as a cash dividend and scrip
dividend alternative (to be renewed at the 2026 AGM). Shareholders wishing to
join the scrip dividend scheme should return a completed mandate form to the
Registrar, Equiniti, by 11 May 2026. The scrip dividend reference price will
be announced on 23 April 2026.
9. INTANGIBLE ASSETS
Goodwill Customer relationships Other acquired intangibles Other intangibles Total
£m £m £m £m £m
Cost
At 1 January 2024 54.1 15.4 9.7 16.2 95.4
Additions - - - 5.8 5.8
Disposals - - - (7.6) (7.6)
At 31 December 2024 54.1 15.4 9.7 14.4 93.6
At 1 January 2025 54.1 15.4 9.7 14.4 93.6
Additions - - - 1.0 1.0
At 31 December 2025 54.1 15.4 9.7 15.4 94.6
Accumulated amortisation and impairment
At 1 January 2024 9.0 15.4 9.7 15.6 49.7
Charge in year - - - 0.3 0.3
Disposals - - - (7.6) (7.6)
At 31 December 2024 9.0 15.4 9.7 8.3 42.4
At 1 January 2025 9.0 15.4 9.7 8.3 42.4
Charge in year - - - 1.1 1.1
At 31 December 2025 9.0 15.4 9.7 9.4 43.5
Net book value
At 31 December 2025 45.1 - - 6.0 51.1
At 31 December 2024 45.1 - - 6.1 51.2
At 1 January 2024 45.1 - - 0.6 45.7
Goodwill has been allocated to the applicable cash generating units of the
Transportation segment (£15.5m (2024: £15.5m)) and the Natural Resources
segment (£29.6m (2024: £29.6m)).
The Group reviews the value of goodwill and, in the absence of any identified
impairment risks, tests are based on internal value in use calculations of the
cash-generating unit (CGU). The key assumptions for these calculations are:
operating margins, discount rates and growth rates. Discount rates have been
estimated based on pre-tax rates that reflect current market assessments of
the time value of money and the risks specific to the CGU. The rates used to
discount the forecast cash flows for the Transportation and Natural Resources
CGUs were 13.5% and 13.8% respectively. In 2024, the rates used to discount
the forecast cash flows for both the Transportation and Natural Resources CGUs
was 15.9%.
The value -in-use calculations use the Group's four-year cash flow forecasts,
which are based on the expected revenues and profitability of each CGU, taking
into account the current level of secured and anticipated orders, extrapolated
for future years by the expected growth rate applicable to each CGU, 2.0% for
both Transportation and Natural Resources (2024: 2.0% for both Transportation
and Natural Resources).
At 31 December 2025, based on the internal value-in-use calculations,
management concluded that the recoverable value of both the Natural Resources
and the Transportation cash-generating units exceeded their respective
carrying amounts with substantial headroom.
10. PROPERTY, PLANT AND EQUIPMENT
Right-of-use assets
Leasehold improvements Plant & Equipment Vehicles Land & Buildings Plant & equipment Total
£m £m £m £m £m £m
Cost
At 1 January 2024 - 15.0 19.6 19.5 13.1 67.2
Additions 8.2 0.1 8.9 7.3 2.3 26.8
Disposals - (7.1) (5.7) (10.9) (9.8) (33.5)
At 31 December 2024 8.2 8.0 22.8 15.9 5.6 60.5
At 1 January 2025 8.2 8.0 22.8 15.9 5.6 60.5
Additions 0.3 1.1 6.6 0.1 4.5 12.6
Disposals - (0.1) (4.0) (2.1) (4.9) (11.1)
At 31 December 2025 8.5 9.0 25.4 13.9 5.2 62.0
Accumulated depreciation
and impairment
At 1 January 2024 - 14.6 9.0 9.8 7.0 40.4
Charge in year 0.2 0.2 6.1 2.8 2.6 11.9
Disposals - (7.1) (5.6) (8.3) (6.1) (27.1)
At 31 December 2024 0.2 7.7 9.5 4.3 3.5 25.2
At 1 January 2025 0.2 7.7 9.5 4.3 3.5 25.2
Charge in year 1.1 0.1 6.9 1.8 1.9 11.8
Disposals - (0.1) (4.0) (1.8) (3.6) (9.5)
At 31 December 2025 1.3 7.7 12.4 4.3 1.8 27.5
Net book value
At 31 December 2025 7.2 1.3 13.0 9.6 3.4 34.5
At 31 December 2024 8.0 0.3 13.3 11.6 2.1 35.3
At 1 January 2024 - 0.4 10.6 9.7 6.1 26.8
11. CASH AND CASH EQUIVALENTS
Cash and cash equivalents are analysed below and include the Group's share of
cash held by joint operations of £67.7m (2024: £62.7m).
2025 2024
£m £m
Cash and cash equivalents 189.3 158.5
Net cash 189.3 158.5
Cash and cash equivalents - with restrictions
'Cash and cash equivalents - with restrictions' comprise amounts held in trust
accounts on behalf of certain customers and designated for future payment to
suppliers under contracts where Costain is acting as a principal.
2025 2024
£m £m
Cash and cash equivalents - with restrictions 26.0 38.4
Cash and cash equivalents - with restrictions in the cash flow statement 26.0 38.4
12. PENSIONS
The Group operates a defined benefit pension scheme in the UK; contributions,
if due, are paid by subsidiary undertakings. There are also two defined
contribution pension schemes in place in the UK, to which contributions are
made by both subsidiary undertakings and employees. The total pension charge
in the income statement is £13.1m, comprising £16.1m included in operating
costs less £3.0m interest income included in net finance income (2024:
£12.2m, comprising £14.8m included in operating costs less £2.6m interest
income included in net finance income).
Defined benefit scheme
The defined benefit scheme was closed to new members on 31 May 2005 and from 1
April 2006, future benefits were calculated on a Career Average Revalued
Earnings basis. The scheme was closed to future accrual of benefits to members
on 30 September 2009. A full actuarial valuation of the scheme was carried out
as at 31 March 2025 and this was updated to 31 December 2025 by a qualified
independent actuary. At 31 December 2025, there were 2,875 retirees and 2,296
deferred members (2024: 2,886 retirees and 2,601 deferred members).
The weighted average duration of the obligations is 12.0 years (2024: 11.0
years).
2025 2024 2023
£m £m £m
Present value of defined benefit obligations (491.0) (497.5) (542.6)
Fair value of scheme assets 551.0 552.4 596.1
Recognised asset for defined benefit obligations 60.0 54.9 53.5
Movements in present value of defined benefit obligations
2025 2024
£m £m
At 1 January 497.5 542.6
Interest cost 26.4 25.0
Remeasurements - demographic assumptions (14.0) 0.5
Remeasurements - financial assumptions (6.0) (41.0)
Remeasurements - experience adjustments 20.3 3.7
Benefits paid (33.2) (33.3)
At 31 December 491.0 497.5
Movements in fair value of scheme assets
2025 2024
£m £m
At 1 January 552.4 596.1
Interest income 29.4 27.6
Remeasurements - return on assets 2.4 (39.9)
Contributions by employer - 2.0
Administrative expenses - (0.1)
Benefits paid (33.2) (33.3)
At 31 December 551.0 552.4
Expense recognised in the income statement
2025 2024
£m £m
Administrative expenses paid by the pension scheme - (0.1)
Administrative expenses paid directly by the Group (2.3) (1.8)
Interest income on the net assets of the defined benefit pension scheme 3.0 2.6
0.7 0.7
Fair value of scheme assets
2025 2024
£m £m
Global equities 90.8 90.0
Multi-asset growth funds 22.6 20.7
Multi-credit fund 80.6 83.8
LDI plus collateral 345.1 339.7
Cash 11.9 18.2
551.0 552.4
Principal actuarial assumptions (expressed as weighted averages)
2025 2024
% %
Discount rate 5.45 5.50
Future pension increases 2.75 2.95
Inflation assumption 2.85 3.10
Weighted average life expectancies from age 65 as per mortality tables used to
determine benefits at 31 December 2025 and 31 December 2024 are:
2025 2024
Male Female Male Female
(years) (years) (years) (years)
Currently aged 65 21.3 23.3 21.9 23.8
Non-retirees currently aged 45 22.1 24.1 22.9 25.1
The discount rate, inflation and pension increase and mortality assumptions
have a significant effect on the amounts reported. Changes in these
assumptions would have the following effects on the defined benefit scheme:
Pension liability Pension cost
£m £m
Increasing the discount rate by 0.25%, decreases pension liability and 11.9 0.6
increases pension income/reduces pension cost by
Decreasing inflation by 0.25% (which reduces pensions increases), decreases 8.7 0.5
pension liability and increases pension income/reduces pension cost by
Increasing life expectancy by one year, increases pension liability and 19.5 1.1
reduces pension income/increases pension cost by
As highlighted in the table above, the defined benefit scheme exposes the
Group to actuarial risks such as longevity, interest rate, inflation and
investment risks. The LDI portfolio is designed to respond to changes in gilt
yields in a similar way to a fixed proportion of the liabilities. With the LDI
portfolio, if gilt yields fall, the value of the investments will rise to help
partially match the increase in the trustee valuation of the liabilities
arising from a fall in the gilt yield-based discount rate. Similarly, if gilt
yields rise, the value of the matching asset portfolio will fall, as will the
valuation of the liabilities because of an increase in the discount rate. The
leverage within the LDI portfolio means the equivalent of 95% of the value of
the assets is sensitive to changes in interest rates and inflation and this
mitigates the equivalent movement in the liabilities of the scheme as a whole.
In accordance with the pension regulations, a triennial actuarial review of
the Costain defined benefit pension scheme was carried out as at 31 March
2025. In January 2026, the funding valuation and ongoing Scheme contributions
were agreed with the Scheme Trustee. Following this, the dividend parity
arrangement that previously existed has been removed, there is no requirement
going forward for an annual assessment of the Scheme funding position and
there will be no further cash contributions made by the Company into the
Scheme under the new schedule of contributions which is in place until January
2031.
The next triennial actuarial review will be carried out as at 31 March 2028.
Any surplus of deficit contributions to the Costain Pension Scheme would be
recoverable by way of a refund, as the Group has the unconditional right to
any surplus once all the obligations of the Scheme have been settled.
Accordingly, the Group does not expect to have to make provision for these
additional contributions arising from this agreement in future financial
statements.
The DWP has, through the Pension Schemes Bill, introduced a mechanism to allow
trustees to address any issues arising from the Virgin Media and the NTL
Pension Trustee judgement. This legislation will allow trustees of affected
schemes to retrospectively obtain written actuarial confirmation that any
historic benefits changes that may have been made meet the necessary
standards. The Trustee of the Costain Pension Scheme will review if any action
needs to be taken.
Defined contribution schemes
Two defined contribution pensions schemes are operated. The total expense
relating to these plans was £13.8m (2024: £12.9m).
13. SHARE CAPITAL
2025 2024
Number (millions) Nominal value £m Number (millions) Nominal value £m
Issued share capital
Shares in issue at beginning of year - ordinary shares of one pence each, 268.8 2.7 276.7 138.3
fully paid (2024: 50 pence each)
Issued in year (see below) 4.3 - 1.8 0.9
Nominal value reduction - - - (136.4)
Share buyback (6.4) - (9.7) (0.1)
Shares in issue at end of year - ordinary shares of one pence each, fully paid 266.7 2.7 268.8 2.7
The Company's issued share capital comprised 266,714,895 ordinary shares of
one pence each as at 31 December 2025 (2024: 268,766,087 ordinary shares). All
shares rank pari passu regarding entitlement to capital and dividends.
The 2022 LTIP vested in the year and 3,800,000 shares were issued in April
2025 to satisfy this vesting. A total of 543,908 shares were issued under the
Scrip Dividend Scheme during 2025.
In June 2025, Costain announced an on-market share buyback programme. This
programme was completed in August 2025 and resulted in the purchase of
6,395,100 ordinary shares in aggregate for cancellation.
14. EVENTS AFTER THE REPORTING DATE
There are no events after the reporting date.
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