Costain Group has “strongly increased (its) presence” in the UK water sector in 2024, with significant growth in AMP8 programmes, according to its full year results for the year ended 31 December 2024 (FY24) published this morning.

The company is reporting another strong financial performance, with record growth in its forward work position to £5.4 billion, reflecting a record increase of £1.5 billion in its high-quality forward work position - more than four times FY 24 revenue (FY 23: £3.9bn).

Adjusted operating profit rose 7.5% to £43.1 million (FY 23: £40.1m) at the upper end of expectations with an increased operating margin in its two divisions of Natural Resources, where water sits, and Transportation. Reported operating profit increased 16.0% to £31.1 million (FY 23: £26.8m).

Costain is also reporting a further year of margin improvement with an adjusted operating margin increase of 40bps to 3.4% (FY 23: 3.0%) and a 4.4% margin achieved in H2 24.

Commenting on its water sector work, revenue increased by 2.5% as the industry moves from AMP7 to AMP8 projects.

Costain says it has good visibility across its ongoing five-year AMP7 programmes through to 2025, and its AMP8 projects for the period 2025-2030, where it expects to see strong growth.

Costain is continuing to work on capital delivery programmes for Anglian Water, Severn Trent Water, Southern Water, and Thames Water in AMP7. The firm has also started clay compaction trials and the provision of constructability advice to support the design of a new reservoir in Oxfordshire for Thames Water. In addition, it has a managed service provider contract with United Utilities and a professional service contract with Yorkshire Water.

The company’s work for Tideway, where it is responsible in a joint venture for the eastern section – Tideway has now moved into the final stage of the programme commissioning as the tunnel becomes operational.

The results report states:

“The breadth of our service offering continues to grow with work including wastewater to gas, water quality assurance and water treatment, as well as design, maintenance, capital delivery and strategic resource options….

“We have strongly increased our presence in the water sector in the year, with the combination of the rollover of current contracts, contract extensions and new customer wins. During FY 24 these include: major AMP8 contract wins with Northumbrian Water, United Utilities and Southern Water; finalising contract extensions with Severn Trent Water and Thames Water; and the provision of programme management services through to 2032 as part of a major framework for Thames Water.

"Our CMDP+ joint venture with MWH Treatment was awarded contracts by Southern Water as part of its AMP7 investment programme.”

During the year Costain expanded its customer portfolio adding Northumbrian Water, together with a “deepened and broadened presence” via frameworks with Anglian Water and Thames Water.

Major contracts wins, including significant AMP8 agreements, include:

• Northumbrian Water - Costain will shape and deliver its strategic infrastructure upgrade programme over a potential 12-year period.
• Severn Trent Water - Costain will improve water and wastewater treatment infrastructure across the company’s portfolio.
• Southern Water - in CMDP+ joint venture.
• United Utilities – Costain will work with other partners to deliver a £3 billion programme to upgrade assets including water and wastewater treatment sites, pumping stations and reservoirs.
• Southern Water and Thames Water - additional contracts won to support new strategic assets, water supply resilience and improved wastewater treatment.

“In line with the priorities of the National Infrastructure Commission’s Second National Infrastructure Assessment, the Government’s five Missions and outline 10-year Infrastructure Strategy, we are strategically well positioned in our four chosen markets of Transport, Water, Energy and Defence”, the report says.

"Record growth in forward work position"

Costain’s forward work position is the combination of its order book and preferred bidder book and stood at £5.4 billion at period end (FY 23: £3.9bn). Its order book stood at £2.5 billion at 31 December 2024 and the preferred bidder book increased to £2.9 billion.

Costain is reporting a continuing shift towards the preferred bidder book away from the order book as it continues to secure long-term (five-to-ten-year) framework positions with its customers, especially in the water sector, providing a reliable and long-term stream of future work.

The company will double its full year dividend to 2.4p (FY 23: 1.2p) with a proposed final dividend per share of 2.0p (FY 23: 0.8p), as it moves towards its target three times dividend cover.

Alex Vaughan, Chief Executive Officer, commented:

“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.”