Costain Group – the question now is will the shares rise to 200p, on good news, or fall away to 150p, as the Buyback programme removes the price prop?

13.08.2025

Yesterday the UK-based Costain Group (LON:COST), which creates connected, sustainable infrastructure for the natural resources and transportation sectors, bought a load more of its own shares.

By bringing together its unique mix of construction, consultancy, engineering and digital services, the group provides predictable, best-in-class solutions across the transport, water, energy and defence markets.

£10m Share Buyback Programme

On Monday, 16^th June, the company announced the launch of an on-market share Buyback programme for up to £10m.

The programme is said to be 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 effects of the Buyback will be to reduce the company's share capital and, accordingly, any ordinary shares so purchased will be cancelled.

Yesterday’s Purchases

Yesterday, Tuesday 12^th August, saw the group purchase a total of 173,096 of its own shares, at an average 169.32p a share.

It paid up to 170.80p at its highest price – taking the overall total bought back up to 5,822,207 shares – which are not being held for ‘Treasury’ but all now being cancelled, leaving the total at 267,176,268 now in circulation.

Latest Trading Update

When announcing its new £10m Buyback, the group updated that its trading for the six months to end-June had remained in line with the Board's expectations for FY 25.

It stated that the group retained a strong, high-quality forward work position that is more than four times its annual revenue and that it was busy bidding for further new work across all sectors. 

At that time, wins in FY 25 had included: new contracts in Nuclear Energy with Urenco and Sizewell C, and further work with Anglian Water, as part of the Strategic Pipeline alliance, to deliver an additional 260km 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.”

Analyst Opinions

On the back of the recent updates and the Buyback, analysts Joe Brent and Joe Walker, at Panmure Liberum, continued to rate the group’s shares as a Buy, while increasing their Target Price from 150p to 170p a share.

The analysts estimate that the current year, to end-December 2025, will show group sales of £1,260m (£1,251m) while pre-tax profits should improve to £52.0m (£48.5m), with earnings of 14.4p (14.4p) and a raised dividend of 2.6p (2.4p) per share.

For the 2026 year, they see £1,275m sales, £56.4m profits, 15.9p earnings and a 2.9p dividend.

The year to end-December 2027, the analysts estimate £1,413m sales, with £63.0m profits, 17.7p earnings and a 3.2p per share dividend.

In My View

I featured Costain on Friday 7^th March as I bullishly rated the shares as a Buy, then 105p, stating that they looked primed for an early move above the 130p/140p price range.

The subsequent price rise to 169p shows a very useful near 61% improvement, while I still feel that there is more to come.

On the basis of analyst estimates this group’s shares are ‘as cheap as chips’.

On ‘a back of the envelope’ calculation, there can only another three or days more for the completion of its £10m programme.

That would coincide impressively with the group in a week’s time, on Wednesday 20^th August, declaring its Interim Results, which, no doubt, will be combined with a bullish ongoing Trading Outlook statement.

But the question now is,

Costain Defence

will the shares rise to 200p, on good news, or fall away to 150p, as the Buyback programme takes away the price prop?