Costain Group – up to expectations, boosted by its £5.4bn record Order Book, heading for £180m net cash and £52m profits – shares 122p, TP 150p plus

16.05.2025

Ahead of yesterday’s AGM, the £333m-capitalised Costain Group (LON:COST), the infrastructure specialists declared that trading in the period from 1st January this year had been in line with expectations.

The group remains on track to meet its 4.5% adjusted operating margin run rate target during 2025 and continues to expect its 2025 full year net cash position to be in line with current market expectations of around £180m.

Costain retains a high-quality forward work position that aligns with its strategic plans. 

The successful execution of its strategy delivered a record increase in the forward work position of £1.5bn to £5.4bn in 2024.

In 2025, the group remains busy bidding further new work across all sectors and broadening its customer mix.

Outlook

Cautiously the group commented that, while mindful of the macro-economic backdrop, through its focus on critical national needs Costain continues to improve the quality of its contract portfolio and deliver on its targets, and that the Board remains confident in the group's strategy and growth prospects.

Broker’s Views

Following the Trading Update, analysts Joe Brent and Joe Walker, at Panmure Liberum, noted four key points:

1) The forward work position has increased from £3.9bn at FY 23 to £5.4bn in FY 24 and is stable at that level, with strength in Nuclear;

2) We are bullish on UK Infrastructure, with more upside in Natural Resources than downside in Transportation, and are hopeful that ‘blockers’ will be removed;

3) Consultancy is growing in the mix, which supports margins and feeds the rest of the business; and

4) The business is operating effectively and should be capable of FD EPS of 20p based on margins ambitions.

Their broker’s Buy rating carries a Target Price of 150p.

For the year to end-December they estimate £1,260m (£1,250m) sales, with pre-tax profits of £52.1m (£48.5m), generating earnings of 14.3p (14.4p), while looking for an increased dividend of 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

The group’s shares hit 124.20p in reaction to the AGM Update, the highest level in the last year.

With record Order Books, there is still plenty of upside for the share price to rise – add to holdings while they are so under-rated.

Costain Transport

(Profile 05.09.19 @ 155p set a Target Price of 250p)

(Profile 02.08.21 @ 55p set a Target Price of 69p*)

(Profile 24.08.23 @ 50p set a Target Price of 62p*)

Asterisks * denote that Target Prices have been achieved since Profile publication.