Costain Group is on the move upwards ahead of next week’s AGM and Trading Update, shares 120p, TP 150p plus

Mark Watson-Mitchell
8 minutes ago
4 min read

08.05.2025

Costain Group (LON:COST) – ahead of next week’s AGM, its shares are moving higher, still plenty of time to get into the equity before further good news.

Goodness knows why, but the shares of this infrastructure specialist are still far lower than their more proper market rating.

Perhaps next Thursday’s AGM, 15th May, will see a positive Trading Update being published to help correct the low rating problem.

This Maidenhead-based group, which was set up some 160 years ago, is one of the UK’s leading construction and engineering companies.

It currently has an Order Book of some £5.4bn worth of contracts – a record figure!

The Business

Although the group’s corporate history includes extensive housebuilding and mining activities, it is now focused on civil engineering and commercial construction projects.

The base of the group’s strategy is that Costain helps to improve people’s lives by

creating connected, sustainable infrastructure that enables people and the planet to thrive.

It shapes, creates and delivers pioneering solutions that transform the performance of the infrastructure ecosystem across the UK’s transport, energy, water, and defence markets.

The group operates in six main sectors – Rail, Integrated Transport, Road, Water, Energy, and Defence and Nuclear Energy.

Rail – it delivers end-to-end asset lifecycle solutions across the entire railway, from major station projects to multi-disciplinary rail projects.

Integrated Transport – it works with diverse customers spanning Aviation, Light Rail and Place to transform organisational performance and accelerate the transition to net zero.

Road – it is a leading provider of end-to-end highway services, delivering technology-led solutions for its customers.

Water – it is a leading provider of engineering solutions to UK water utility companies across the asset lifecycle.

Energy – it supports the decarbonisation of the UK’s energy infrastructure by improving existing asset efficiency and life extension while leading the transition to a sustainable clean, green energy future.

Defence and Nuclear Energy – it supports the strategic defence capabilities and energy resilience that protect and power the UK, its people, values, and interests.

Within its chosen markets the company works with a growing number of Tier 1 customers who choose to work with their partners on strategic five-to-ten-year programmes of work, aligned to the company meeting their five-year business plan outcomes.

The strategic nature of those contracts allows Costain to build strong, long-lasting, valued relationships; to broaden its service value and for it to maintain consistency and continuity of workflows over the business plan period.

That ensures a good quality of work and service, and an optimal risk profile.

Management Comment

Commenting upon the 2024 results, CEO Alex Vaughan stated that:

"I am pleased that we had another good year with adjusted operating profit at the upper end of expectations.

We delivered a further increase in operating profit and earnings per share, building on our strong financial performance track record of the past three years.

Adjusted operating margin increased significantly, exceeding our target for FY 24, and we remain on track to deliver our margin target for FY 25.

The record growth in forward work position is expected to deliver further progress in FY 25 and FY 26, followed by a step change in FY 27 performance.

The quality, balance and better risk profile of our forward work position of £5.4bn across our two divisions, together with continued investment in our chosen markets, gives us increasing visibility on future revenue and margin.

We continue to deliver improvements and invest in the business, and are increasingly confident in the Group's growth prospects, with our strong cash position and cash generation enabling the Group to enhance returns to shareholders."

Chair Kate Rock stated that:

“We continue to deliver well, growing our adjusted operating profit, and importantly, exceeding our 2024 margin target.

Our forward work position of £5.4bn was a record increase as we build a long-term pipeline of future opportunities for the Group, and together with our customers we are creating the prosperity, resilience and decarbonisation of the UK.”

Broker Views

Analysts Joe Brent and Joseph Walker, at Panmure Liberum, are rating the group’s shares as a Buy, looking for 150p in due course.

Their estimates for the year to end-December 2025 are for £1,260m (£1,251m) of revenues, a higher profit of £52.1m (£48.5m), with earnings of 14.3p (14.4p) and increasing its dividend to 2.6p (2.4p) per share.

The brokers are looking for £1,275m in sales in 2026, with £56.7m profits, worth 15.5p in earnings and paying a 2.8p dividend per share.

It is well worth noting the analyst estimates for the group’s end-of-year cash balances – for 2025 £180.6m (£158.5m), and for end-2026 a massive £202.7m in cash.

My View

Without doubt I believe that the current valuation of the Costain Group is out somewhat, possibly by 25%, if not considerably more.

Then even at such higher levels of 150p plus they would still be cheap!

This morning the £326m-capitalised group’s shares are trading at just 120p.