16th Jun 2025 10:48
(Alliance News) - Costain Group PLC on Monday announced a GBP10 million share buyback after reporting its defined benefit-pension scheme was in surplus for the second consecutive year.
The London-based construction and engineering firm said an assessment of the scheme funding position was carried out as of March 31. Since the funding level is more than 101%, contributions will stop from July 1 to June 30 2026.
In addition, 'dividend parity' will be suspended for a year, Costain said.
Under the current dividend parity arrangement, an additional matching contribution is paid to the pension scheme when the total of the interim and final dividends is greater than the contributions paid into the scheme in the previous scheme financial year, which runs from April 1 to March 31.
Given this, and the company's improved cash position, Costain said it will start an up to GBP10 million share buyback split into two tranches. The first GBP5 million tranche will be run by Investec Bank PLC and the second by Panmure Liberum Ltd.
The first tranche will commence immediately, with the second tranche anticipated to end no later than December 23, 2025.
The buyback is an "appropriate and value-enhancing use of cash", while maintaining the "financial flexibility to continue to invest in its strategy to deliver sustainable growth and attractive returns," Costain said in a statement.
In response, shares in Costain rose 7.9% to 138.80 pence each in London on Monday.
In addition, Costain said 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.
It intends that in 2025 the first half dividend will represent around 33% of the full year dividend. In 2024, the interim dividend was 17% of the total payout for the financial year.
Chief Executive Officer Alex Vaughan said Costain has significantly strengthened its net cash position over the past three years giving the group the financial strength and capability to support its future growth opportunities.
Costain has increased its net cash position to GBP158.5 million at the end of financial 2024 from GBP123.8 million at the end of financial 2022.
Costain said trading in the six months to June 30 is line with the board's expectations for 2025 and that it remains on track to meet its 4.5% adjusted operating margin run rate target during 2025.
"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," Costain said.
By Jeremy Cutler, Alliance News reporter
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