Costain Group PLC ($COST)

All right. Good morning, everyone, and thank you very much for joining Costain's 2025 Full Year Results Presentation. I'm Alex Vaughan, Chief Exec of Costain, and I'm going to start with a bit of reflections on the year. And then Helen Willis, our Chief Financial Officer is going to present the financial results for last year, before I return and give you a strategic update and operational overview and an outlook for the business ahead of taking your questions. So look, I'm really pleased and proud to report as expected, that we've delivered another strong performance through 2025, which reflects the quality of the contract portfolio of work that we have and how our amazing teams expertly deliver it. We've grown operating profits and margins, making good progress towards our ambition of 5% margins. As a result of the strong cash generation in the business and taking actions on our defined -- legacy defined benefit pension scheme, we further strengthened the balance sheet of the business last year, and we've announced today an increase in returns to our shareholders. And the resolute commitment of -- in critical essential investment in critical national infrastructure in meeting those national needs is happening, and we're seeing that. And we've continued to win high volumes of really good quality work, now having a record forward work position of GBP 7 billion, all of which underpins our growth for 2026 this year and 2027 beyond. And the combination of our continued strong performance and the outlook for us has secured our return to the FTSE 250 this month. So over the past 5 years, we've delivered profit and cash growth and now industry-leading margins. The left-hand graph shows that over the past 5 years, we've predictably and incrementally grown our adjusted operating profit by a CAGR of around 12%. This year, delivering an adjusted operating profit of GBP 47.1 million, slightly ahead of consensus. The orange line is a measure of the quality of our contract portfolio with adjusted operating margins increasing to now industry-leading levels of over 4%, demonstrating the expected progress that we're making towards achieving our ambition of 5% margins. As a result of the quality of our contract portfolio and our increasing adjusted operating profit, the graph on the right-hand side shows the growth in our corresponding net cash balance. With a net cash balance again increasing by a CAGR of 12%. So quite nice that both of those line up. And during the period, there's been GBP 100 million increase in the gross cash in the business. This consistent cash position is a feature of our business. It's a feature of the quality of the contracts we've got. And as I said, combined with the actions that we've taken regarding the legacy pension scheme, has both strengthened our balance sheet and has unlocked additional returns to shareholders, where we've returned GBP 31.5 million over the past 3 years. And as I said, today, we've announced an increase in dividends and a new GBP 20 million share buyback program for 2026, building on the two previous GBP 10 million buybacks that we completed in 2024 and 2025. Now looking forward, we expect this momentum to continue building with revenue and profit growth in '26 and a step change in 2027 and beyond. Over the past 12 months, we've been awarded a further GBP 2.6 billion worth of new work, growing our forward work position to a record GBP 7 billion, which is over 6x our annual revenues. This reflects the strong investment in our markets, our valued proposition to our customers and the enhanced win rates at which we're securing work. Now the right-hand side of this slide shows the spread of our forward work position right across the country where we are and who we work with. Positively, it's an increasingly busy picture. We've successfully built a broader range of Tier 1 customers, and we work with in long-term programs of work. And in the year, we've added a number of new customers, Urenco, the Eastern Highways Alliance, the Nuclear Restoration Services, Sizewell C and this year, Gatwick Airport. We've also extended long-term partnerships working in the year with Sellafield, Anglian Water and EDF as well as expanding positions on frameworks that we've previously secured. As I said, we expect this momentum to continue delivering revenue and profit growth in 2026 and a step change in 2027 and beyond. Overall, the business is in great shape with significant opportunities ahead. And I'll now pass you over to Helen.

Good morning, everyone. How are you doing at the back? So thanks, Alex, and good morning. I'm really delighted to be here to present these results. It's a lovely moment to reflect on what was actually quite proud moment for us last week at Costain, moving into the FTSE 250. As Alex has just shown you, we've been building, but it's a very nice proof point to make that formal shift into 250. And we are jointly very proud of it, as are all our colleagues at Costain. So we've been building over the last few years. We've been improving the quality of the portfolio, improving the resilience of the business and growing the business. We've managed the balance sheet tightly, improving the resilience of that business and growing, as I said. Cash generation and shareholder returns coming from that. 2025 has been another good year in exceeding expectations. So I'm going to take you through the results briefly, but I want to spend a bit more time on our forward work. And as Alex has said, a record forward work of GBP 7 billion. And I want to bring that to life for you to share why we're confident in that growth. So as previously announced, the revenue was GBP 1 billion for the year, down 16.4%, and I'll cover that in more detail on the next slide. Adjusted operating profit was up 9.3% at GBP 47.1 million, and that was ahead of expectations. And the reported operating profit was 44.1% up to GBP 44.8 million. We saw continued margin improvement with adjusted operating margin increasing 110 basis points to 4.5%, and that was compared to 3.4% last year. I'll give you some more detail on that in a later slide. Adjusted basic earnings per share was broadly flat at 14.5p, and that was with operating profit growth, lower share count but offset by increased effective tax rate. We've significantly enhanced shareholder returns with an increase in the dividend for FY '25 to 4.2p compared to 2.4p in FY '24. We continue to maintain a strong balance sheet with net cash of GBP 189.3 million at the end of the year. And as I just mentioned, and we will shamelessly mention throughout the presentation, a further increase to our forward work position at GBP 7 billion, up 30% year-on-year. So revenue is down, as I just mentioned, but that wasn't at the expense of profit, as I just took you through. In Transportation, there were revenue reductions in Road due to expected completion of the historic regional delivery partnership framework projects. That was partially offset by growth in integrated transport as we carry out more work for Heathrow, not supporting their terminal asset renewal partner and major project partner frameworks. In Rail, there were also revenue reductions principally because of the previously mentioned rephasing by the client as some of the work for HS2 has moved out to '25 and into '26 and future years. In Natural Resources, the stable revenue in Water, as the Water industry transition from AMP7 to AMP8, and as our work nears completion on Tideway. Typically, between AMP cycles we've seen periods of reduced volumes. However, the stable revenue profile demonstrates that we've had a really positive close to AMP7 and a good start to AMP8. Energy levels -- sorry, Energy revenue -- Energy levels -- somewhat slumped clearly from last night. Energy revenue increased by 39% and we provide our customers here with a range of services, including engineering design, managed services and program management. And revenue increased in Defense and Nuclear by 16.5% and that's driven by the growth in our current delivery partnership roles. So as I mentioned, adjusted operating profit up 9.3%, Transportation profit reduced by GBP 5 million as expected with those lower volumes in Rail and Road. Natural Resources profit grew by GBP 11.2 million, primarily within Energy and Defense and Nuclear Energy. There were positive impacts in both divisions from normal course of business contract completions, the result of cautious revenue and profit recognition through the contract life cycle. Central costs were higher primarily on increased share-based payments and investment in capabilities. The adjusted operating margin increased from 3.4% to 4.5%, primarily on the positive impact of normal course of business contract completions, as I just mentioned, and also on lower volumes of completed historic RDP framework projects, which operated at below normal margin levels. So as I have done in previous years, I'll walk you through the chart from left to right. And this shows, on the left side, opening net cash of GBP 158.5 million moving across to the right with closing net cash of GBP 189.3 million. The first bar represents cash flow on adjusting items of GBP 3.5 million, down from prior year. Adjusted free cash flow of GBP 63.1 million is shown in the boxed area. This cash inflow reflects strong operating profit, partially offset by capital expenditure of GBP 2.8 million and a tax outflow of GBP 0.7 million in the year. The next bar represents net interest receipts in the year of GBP 1.3 million lower than net finance income on the payment of accelerated arrangement fees in the period on our prior refinancing. It's worth noting that the operating lease expenditure is shown separately from cash from operations and that was GBP 10.8 million for the year. Dividend payments totaled GBP 7.3 million following the increased final dividend declared in FY '24. In line with the annual assessments in March '24 and March '25, no cash contributions were made to the defined benefit pension scheme. And we subsequently reached agreement on the triennial valuation and no cash contributions are required. We expect our FY '26 net cash position to be around GBP 175 million, and that's after taking account of the GBP 20 million share buyback program announced today, as well as significantly higher dividend payments. The net cash position at the end of FY '25 comprised cost and cash balances of GBP 121.6 million, cash held by joint operations of GBP 67.7 million and borrowings of nil. During the year, the group announced that it had successfully concluded negotiations with its bank and surety facility providers to refinance a new 4-year agreement of its bank and bonding facilities to September '29, with an option to extend by a further year. Terms were more favorable as a result of the increasing strength of the business, the existing banking group remained, and we're very pleased to be able to add another bank to the group. Shareholder returns. So we continue to perform well against our strategic targets, and we expect to deliver long-term sustainable value to our stakeholders. Costain is investing for growth. Our cost base continues to prioritize investment in capabilities and expertise to support growth, and we'll continue to invest in key systems as we digitalize the business further accelerating the business transformation. On the 26th of January this year, we announced that the company reached agreement with the pension trustee on the triennial valuation, removing dividend parity and ceasing cash contributions. The Board recognizes the importance of dividends for shareholders, and it's been increasing the dividend payout since the resumption of '23. The Board has a target dividend cover of 3x adjusted earnings. And we're confirming today achieving that level with a final dividend for FY '25 at 3.2p. Can you excuse me just a moment. Just need a tissue. Under there, under that pad. Thank you very much. Sorry. Cold. Sorry, everyone. So 3.2p. After ensuring a balance sheet and cash position, we've identified -- if we identify surplus capital, we will return to shareholders through either share buybacks or special dividends. So on 16th of June '25, the group launched a GBP 10 million share buyback program, which completed in August of '25. This followed a GBP 10 million share buyback program that was announced and completed in the second half of '24. And today, a GBP 20 million share buyback program has been announced for FY '26. Shareholder returns, as you'll see on this chart, are anticipated to be circa GBP 32 million for FY '26, almost double FY '25. So I'm now going to take you through three slides that just brings to life the forward work position and why it gives us such confidence in the future. So first, in summary, the forward work stands at the GBP 7 billion at the end of the year, representing almost 7x our '25 annual revenue. We've been busy bidding and have been successful. So forward work was GBP 5.4 billion at the end of FY '24, up to GBP 5.6 billion at half year '25 and now to GBP 7 billion. This forward work position is built on long-term programs that enable us to deliver a high consistency, continuity and quality of work for our customers. It includes no single-stage lump sum contracts and is predominantly target cost contracts where the scope of work, design and cost are developed and agreed with the client. That's to say the forward work consists of the right risk profile to ensure predictable delivery results. So this is a new view of the forward work that we haven't presented before. The forward position -- forward work position is now spread over a much broader range of customers as these pie charts show comparing FY '23 to FY '25. And you can see by the dramatic change in the shape of those charts that we've had a considerable shift in the balance of those works. The splits on there are Central Government, Devolved Government, and Private & Regulated. So there's a very significant reliance in Central Government spend shown in light blue, and that's moved from 64% of the forward work to 31% at the end of FY '25. The share with Devolved Government has increased significantly as well from 6% to 17% and the work with Private & Regulated bodies has increased to 51%, the dark blue. And of course, remember that these are all proportions of a much bigger forward work position. This demonstrates an important diversification from heavy reliance on Central Government spend to a very much broader and more resilient mix of future business. This, again, is a new view of the forward work position. So it's giving a view over time how that GBP 7 billion spreads over time. So you'll see on the bar chart, GBP 2.4 billion over the next 2 years; GBP 1.8 billion over the following 2 years; and a further GBP 2.9 billion beyond that, coming to the total GBP 7 billion. So we secured about 90% of forecast revenue for FY '26 and we've got good visibility for '27. The pipeline is significant and our win rate is good, meaning that we will add further to the forward work, giving us confidence in the step change in FY '27. The bar chart is also split between the two divisions between light blue and dark blue, and you can see there's a relatively equal split over the next 4 years with both divisions winning work and growing. And this visibility really importantly for us, allows us to plan resources, plan our supply chain and invest in growth where it's needed. So in conclusion, there's real momentum in the business with predictable delivery and growth. The high quality and volume of our forward work together with growth on existing forward frameworks, gives us good visibility on revenue and profit into the future. We've already secured approximately 90% of our forecast revenue for FY '26 and our bidding activity levels remain high. We're delivering industry-leading margins and have an ambition to deliver margins in excess of 5%. Our balance sheet continues to strengthen with net cash of GBP 189.3 million at the end of the year. And we expect FY '26 year-end net cash position to be approximately GBP 175 million after enhanced shareholder returns in the form of the GBP 20 million share buyback announced today and increased dividends. All this makes us confident in delivering growth in FY '26 with a step change in performance in FY '27 and beyond. Predictable delivery and growth driving a very significant increase in shareholder returns. Alex?

Thank you, Helen. I'm now going to provide an update on the strategy, operational performance and business outlook. For those of you who might be new to Costain, this slide is one I talk to a lot. It's our strategy on a page, and we're delivering against this very clear strategy for the growth and value creation of Costain. Now you'll have heard us that we're very focused on those markets where significant long-term investment is being made, that investment being very strategic in nature to meet the critical national needs of the U.K. It's about creating a sustainable future for a more prosperous, resilient and decarbonized U.K. And the markets that we're focused on Transportation, which includes Road, Rail, Aviation and Ports, Water, Energy and Defense. We explicitly choose to only work with Tier 1 customers who want to work with their partners in strategic long-term arrangements, where Costain is able to build value through its long-term relationship building, maximize the value that we can bring to solving their challenges and effectively jointly managing risk, which Helen talked to earlier. We enhance the value to our customers and maximize our market opportunity by providing services and innovative engineering solutions to meet their broad and changing needs, being both a construction company and a valued consultancy partner. This strategy is and will deliver further growth in revenues, operating profits, industry-leading margins and enhanced returns to our shareholders. Now that's our strategy, and this slide shows the clear visibility that we all have on the long-term committed investment where we operate. The government has published its national infrastructure strategy, outlining a commitment to invest GBP 725 billion in infrastructure over the next 10 years. And yesterday, they published an update on their pipeline, which set out GBP 710 billion worth of investment that has already been committed to. Our chosen markets represent the most of this investment and those critical national needs and it's non-discretionary investment. It's about enhancing our transport system to provide resilience and future prosperity and productivity. Local and regional transport investment is being prioritized and increased to drive improvements and to unlock housing investment, which you would have seen. Aviation investment is increasing significantly to improve access to global markets and to meet demand. That is outside of any potential future opportunity around significant expansion, which isn't included in any of these numbers or in the government's GBP 725 billion worth of investment. And then fixing our Water system to ensure that we've got future resilience is a major part of this investment program. And the Water industry has now embarked upon a 25-year program of work to invest to make our future water system resilient. And it will soon embark upon record investment in reservoir programs as well, again, not part of the GBP 725 billion investment plans. And then you'll have seen a lot of talk, especially over the last week about building a new energy system for the prosperity, resilience and decarbonization future of the U.K. Ofgem has now signed off a record investment in upgrading our electricity system to meet demand and to decarbonize our networks. And the Nuclear Decommissioning Authority has this month launched its strategy in meeting its obligations to decarbonize legacy assets. And in Defense, a lot of investment will be made to safeguard our national security. Now we've said many times before, our chosen Tier 1 customers in our markets predominantly operate through underwritten and committed 5-year business plans. That's what gives us certainty and confidence and predictability about investment. Choosing to work with their partners in those 5-plus 5-year partnerships, and we're beginning to see those getting longer and longer. And as Helen has outlined, we continue to have a demonstrable proven track record of securing positions with our customers through these cycles and in building and maintaining long-term positions with our chosen customers. Now we've talked about the strategy and the scale of investment. I want to bring our strategy to life by -- through the lens of the nuclear energy position that we've successfully built. Now there are three tenets to the strategy that we talk about. Firstly, that there is a strategic essential national need for investment. And for Nuclear Energy, this is incredibly clear, as it meets the critical need for a resilient lower-cost decarbonized energy system supporting greater prosperity and the decarbonization of our energy system. Secondly, the market investment is significant in scale, and it's somewhere where Costain has a competitive advantage and a differentiated proposition. And this market spans operating the existing nuclear fleet, pretty critical and safely decommissioning age nuclear assets and waste and building tomorrow's nuclear generation. Thirdly, the customers that operate in this market see the value in working with their supply chain in strategic long-term partnerships where they can unlock the value to meet the very complex and challenging needs. And as a result of our strategy, we successfully positioned ourselves in all three of these market elements. So today, for EDF we are helping them extend and optimize the existing nuclear generation capacity. We've got 180 people through a consultancy project controls commission supporting the life extension of every single existing AGR nuclear power generator around the U.K. And we've had this contract since 2017. And last year, it's now been extended to 2030, a consistent and continuous partnership for 13 years. For Sellafield and NRS, we are partners on their decommissioning programs to safeguard the U.K.'s nuclear legacy. We deliver services both through our construction delivery capability as well as our engineering and design expertise. Now we've worked with Sellafield since 2005, and the new contract that we've now secured takes us through to 2040, a partnership of 35 years. And we've worked for NRS, previously known as Magnox since 2005, and we've now got a framework through to 2029. And then empowering the U.K.'s nuclear future, we've secured a number of positions. We're now the delivery partner, a consultancy proposition for Urenco overseeing the full uranium enrichment program that they are embarking upon. And we're also designing a number of the solutions for them for a number of their projects. This is a brand-new partnership for us. It's a first of a kind for Europe, uranium in Richmond. And this starts at 4 years, and we would expect to extend that relationship longer. And we're also now providing support through a number of consultancy and advisory services to Sizewell C. This is a partnership for 10 years, which, again, we would hope to extend. This very clear focus on following the investment being in markets where long-term strategic investment is going to be made working for customers who value long-term partnerships and a service proposition that helps meet their very changing needs has built us a very strong position in nuclear energy, growing from 2% of our forward work position in 2023 to 18% of our record forward work position in 2025. There's also an enduring nature of this position, because whilst we are helping maintain the current fleet, at some point, it will need to be decommissioned and guess who's around to come and do that for them. This is how we position ourselves in all of our markets. And it's typical of all the other market segments, how we go about Road, Rail, Aviation, Energy and Defense and Water, and I'm sure you'll hear more about that in the future. It underpins the real strength of our strategy and the growth of us as a construction and consultancy business. Now, I'm now going to move to the two divisions. So in transportation, with strong investment commitments being made, we're successfully building a broader position in the Transportation market under the leadership of Jonathan Willcock. In Roads, we're focused on the strategic road network, devolved government networks and local authority road system, both designing infrastructure, building new infrastructure and maintaining it. In 2025, we completed a number of contracts for National Highways and we're targeting further opportunities, and we've got two new schemes on the M60 and the M5, really starting this year. And we're also continuing to maintain the road network in the Northeast of England. Having built a strong position with Transport for London and delaying my journey into London on Sunday, we're enhancing and upgrading the capital's road network, and we're now building a much stronger position in the local roads market as well, having been awarded a place on the Eastern Highways Alliance. And in Rail, our work on the major HS2 program continues, and we've now launched the first tunnel boring machine. It's very exciting. You should come and have a look at it, towards Houston, as the government has really prioritized that redevelopment of the Houston area. It's a critical milestone for the program. And our two HS2 rail systems contracts are now working through the design and planning stages. And for Network Rail, we're continuing to support them in a lot of design and master planning work to help them with their future plans. We've successfully also built a very strong position in the Aviation market with now having contracts for all three of the major airport operators in the U.K. We're growing our position at Heathrow Airport. We're building a strong consultancy position with Manchester Airports Group. And for Gatwick Airport, we've announced today that we've won two long-term frameworks with them for their airport upgrade. So we're very well placed in that market. There's a very strong pipeline of future opportunities across all of our market segments due to the fact that we've built a much broader business in Transportation with new opportunities also emerging in Ports where we have extensive expertise. Natural Resources is clearly benefiting from strong delivery performance and significant investment in growth in Water, Energy and Defense and Nuclear Energy, which I've talked about, and is now being led by Peter Mumford, who I'm delighted he's joined us and he's here today. In Water, we're focused on delivering the asset management plans for the major water companies, and this covers the design and build of new asset infrastructure, but we also help our customers optimize and repurpose a lot of the existing infrastructure, and we maintain for some their network, and we're involved in the strategic resource options on the strategic pipelines and the future reservoirs. As Helen said, we had a very positive closeout to AMP7. We achieved the 100% of every regulatory date we were asked to meet. And that is why they buy more. And we're seeing a smooth transition to the ramp-up for AMP8 capital delivery programs. We've got great visibility of that work and we're seeing that double of investment starting to come through. And these are the highest levels that they've been for decades, and they're going to be higher in AMP9 as well. And our contracts endure into AMP9 for United Utilities, Northumbrian Water and Southern Water. Now on the news every day, water resilience is a critical area of focus for the industry. And in June, we announced a 5-year extension to the Strategic Pipeline Alliance for Anglian Water. And we've built a continuing position helping Thames Water with the SESRO reservoir scheme in Oxfordshire. And as Helen said, during 2025, we've now commissioned and has become operational, the Tideway contract. In Energy, we're focused on future-proofing the existing gas network supporting gas capacity resilience pretty topical today and the growth of the U.K.'s electricity network. Our performance for Cadent has been outstanding, and we're very proud of what they've done there. And we've commenced the delivery of BP's landmark, carbon capture and storage project at Teesside. Building on our extensive gas process expertise, we've been awarded a number of early design contracts for new customers looking at pioneering underground gas storage and hydrogen storage schemes in Cheshire. And we've also secured our first contract for National Grid on their wide large substation program and see strong future growth in supporting the decarbonization and electrification of the U.K.'s energy system. And in Defense, we're focused on supporting the continuous at sea submarine program in upgrading critical infrastructure around the U.K. And I've already covered Nuclear Energy. So let me bring it to a close and in final summary. Now despite these uncertain times in the financial market, it's not been great to look at the share price over the last week, but it's great to look at it this morning. And noting the impact of the latest developments in the Middle East, we remain very confident, and we're benefiting from the significant strategically committed investment and growing investment that's been made in our target markets. We've got greater clarity provided by the government's pipeline, again, updated yesterday. And together with this significant increase in already committed regulatory investment that's already been made, we see a very positive future. Our record forward work position of GBP 7 billion underpins that future growth, as Helen outlined earlier. And the quality of the contract portfolio we have, the broader customer mix that we've got, the wider service mix that we're delivering is delivering that growth in operating profits, industry-leading margins and strong cash generation. We're in great shape. And our ambition remains to deliver industry-leading operating margins in excess of 5%. And as Helen said, our strong balance sheet and increasing net cash position is enabling us to really invest in taking advantage of the opportunities ahead as well as increasing returns to our shareholders. Bringing all this together, we're very confident of further progress this year in '26 and continue to expect a step change in performance in 2027 and beyond. Thank you very much. We'll take your questions.

It's Ed Prest from Berenberg. Firstup, asking in relation to margin in that 5% margin aspiration. What needs to happen in order to get there? Is that a structural margins coming through and the contracts you've got? Or is it better execution? Secondly, on the forward work piece, it looks like you've got a greater weight -- you've got a greater weighting towards natural resources further out. Is that a shift in the business? Or is it mainly the way in which natural resources contracts come through? Are they just longer and therefore, you get longer-term visibility relative to the transport? And then thirdly, energy costs, oil is around $100 at the moment. And how far is Costain able to pass those on to customers? And how far is it -- would it have to absorb them?

Do you want to take the first one, and I'll take the next two.

Sounds good. So margin, we've guided '26 and '27 around 4%. How does it shift to 5%, is your question, Ed. I think there's two parts there. There's still movement in the portfolio. So as we have worked very hard to manage the business and the risk in the business and the contracts, there is still more to come there. But also with the step change in the size of the business, there's a not insignificant contribution from operating leverage as well. So we will continue to be better, more efficient. We will continue to grow consultancy and then you finally layer on operating leverage. So there's plenty that contributes to that ambition.

And then coming to the next two. So in terms of -- look, the forward work is definitely weighted towards natural resources at the moment just because of the long-term frameworks that we've got there. But our plan for the business is that we'll have two businesses that are of equal size larger than they are now just because of the scale of opportunities we see in transportation. If we look at investment in aviation, we look at investment in ports, we look at the road infrastructure programs that are coming through now and our enduring position on HS2 and where we see rail moving forward as well, we see a big opportunity to grow that, and that's certainly in our plan. So our business has a very balanced two larger divisions as part of the future. In terms of the Energy costs, look, I think two bits, all I would say. So I was at a meeting yesterday with treasury and very clearly, the very clear message is this is a central critical infrastructure and we have to invest. And we're very confident about that investment continuing. And then coming to your question about can we pass on costs. All of our contracts have inflation protection, which is in there. And we will work hard to help our customers mitigate the impact on that as well. So whilst we are protected, then we'll keep driving the efficiency that we are at the moment.

Aynsley Lammin from Investec. Just two for me, please. When we think about the kind of big step-up in FY '27, just interested, maybe hear a bit more color around kind of the mobilization, how much you've got to do there in terms of CapEx, people and the good confidence you've got that all going smoothly, I guess? And then secondly, just on the share buybacks, obviously, balance sheet is strong. Just wondered how you get to the kind of GBP 20 million. Is there a certain level of cash you want to maintain or how you come up with that number?

So shall I take the first one and you have the second one. Happy with that? So yes, look, in terms of the step-up, so we've got -- the great thing we benefit from in this business is having that long-term visibility of that pickup. So we're designing a lot of that work now that we're going to be delivering in '27. So for example, in Transportation, the M5 and a lot of the pipeline that we have at Heathrow, and we've got the further work at HS2 that we're going to do. We're in that -- we're designing it now. That gives us the opportunity to really be thinking about those mobilization plans. This is what keeps Jonathan and Peter awake at night is the whole mobilization of this work. And then exactly the same in Water. I mean, Helen pointed to the fact that normally, you'd see a dip moving from AMP7 to AMP8. This year, it's flat even with Tideway coming to an end. So we historically have had Tideway volumes in there. But we're very busy just designing infrastructure. And then this year and next year, we really get into delivering a lot of that infrastructure. So yes, look, we're recruiting the most graduates and apprentices we've ever recruited by a significant margin and building our team and growing that team. But that's really helped us by the fact that we have clear visibility of all of that work coming through, and we can see it coming. So yes, really helpful.

So why GBP 20 million on share buyback, why not a different number is your question. I'll be asked this through the whole investor roadshow. I'm quite sure. So I think we -- when we launched the first one in FY '24, the expression we've been using without giving a number is we have more than enough cash in FY '24 to contemplate greater shareholder returns. We still have the impediment of the pension fund dividend parity marker at that point. So we were less inclined to go beyond that. We can only do it annually. We couldn't talk about longer term -- a longer range. So I think with the dividend parity being removed, you'll note from the announcement of the share buyback, we're anticipating carrying that out during the course of FY '26 rather than doing it in a shorter period as we have the last two, where we had to navigate the annual checks on the pension scheme. So we have much more latitude now to plan these things. And of course, all through that, we've been generating more cash. So profit is going up, we are generating cash. The balance sheet is very tightly controlled. We are looking at M&A. There's nothing that's particularly attractive. We are investing in the business, but we are generating more cash. So a step-up from the GBP 10 million that we have done in the previous two felt appropriate. But we don't want to curtail any other possibilities. So it felt like the right number. It's not a scientific answer, but that's -- hopefully that helps.

Joe Brent from Pam Librium. Three questions, if I may. Firstly, that very interesting slide showing the type of work you're winning suggests more private sector work. And obviously, the construction flavor it really was meant to apply to the public sector. Are you seeing the private sector now adopting better procurement practices in line with the public sector? Secondly, I think there's a comment in the statement talking about reviewing options for the pension. I just wondered if you could share with us what those options are, noting, I think you've got like a GBP 60 million surplus or something that. And thirdly, clearly, contract completions is a feature of the FY '25 results. Can you tell us what your budgeting assumptions are for '26 and beyond? And is there the possibility of further contract completion benefits in future?

So I'll leave the last two to you. You're happy with that. Right. So look, in terms of -- we've consciously made a decision 4 years ago to broaden the number of customers for the business, and we've successfully done that. The real positive, I think, is the whole sector has recognized that the way the construction playbook set out the apportionment of risk and the type of contracts that we should have is widely recognized by everyone. So all of those customers use it. We really benefit and Helen made the point in her presentation that before we commit to a program or a budget with a customer, we get to spend an extensive amount of time working with them to make sure that we all understand the risks and we can manage that and then get into contract from a well-informed basis, which is a transformation for the industry. So it's really good, and we're going to continue to drive that change because you can see from the government that they're seeking more and more private investment coming into infrastructure and will play an increasingly important role in that place.

So pension scheme, clearly, we're in accounting surplus, but you've seen from the January announcement that we were in actuarial surplus, which allowed us to make the sort of favorable agreement that we did with the trustee. So the last piece, I suppose, of that jigsaw is, are we able to move it from the balance sheet or not. And of course, we're always actively looking at that and trying to assess the cost of that buy in and buy out and balancing that then with how that stacks up against other possible uses of cash. So we are actively looking at it, but it would need to be modest and make sense in terms of our other investment opportunities and of course, shareholder returns. So always under scrutiny. And then contract completion. So I think 2025 was a higher number of those completions. So, two big factors in there. One is moving from AMP7 to AMP8. So all of those closing in the year moving into the new AMP. So that's a high activity. And obviously, it'll be another 5 years before we see that repeat. And then also in Road, we had three road jobs completing during '25. So you had a year with a higher number of completions than is the norm. How we think about margin going forward, as I mentioned earlier, so 4% feels like the right balance in terms of the portfolio that we see. And the way that we recognize revenue and profit means that 4% is cautious. And we should only expect to see if we deliver well as we plan to do and we have been, we should only see upside at the end of contracts, and so that will move through the portfolio over the coming years. And then you layer on the operating leverage, as I mentioned earlier. And you start to get -- start to get close to your 5%.

Stephen Rawlinson from Applied Value. Just two questions for me, if I may. You're saying the tax that consultancy services grew to 17% of the FY '25 group revenues. Could you just sort of talk us through how you price the consultancy services? Because I mean, in terms of the margin increase, it could be that it's accounting -- the consultancy services growth accounts for quite a lot of it. I mean, normally, consultancy services are 8% to 10% margin businesses. So if you go from 17% this year or the year reported from 12% in the prior year would seem to indicate quite a big improvement in margin just from that alone. And the second question is in and around -- I mean, every meeting this group goes to -- everybody can see all your peers are saying demand is going gangbusters. It's not -- if you think it's good today, it's going to be better tomorrow. Just talk us through a little bit, if you don't mind, about how you're going to train the people, grow the people, find the people to do all of this in an environment which is changing quite constantly. I mean, no mention here of AI, but some companies saying that's going to be the salvation. Well, yes, we know that that's not going to happen, but it's part of an answer. But your answer would be very helpful indeed, please.

Okay. Well, I'll give it my best shot, Stephen. Well, if I just talk about consultancy services. So yes, it has grown again in the year. And I think as I outlined, to be able to get hold of the market opportunity, as I did in the nuclear energy one by having that consultancy proposition that allows you to play a bigger, more strategic role. We wouldn't be able to support EDF in extending the existing asset life if all we wanted to do was build new infrastructure because they don't need it. And the same way with the Urenco delivery partner contract, they needed someone now to help shape and develop the strategy of how are they going to go about it. It's a program of what, Peter, sort of, 30 projects that they're going to have, and they've asked us to come and oversee and manage that program for a very thin client. So we've turned up as sort of like their team. So that is. And you're absolutely right, we earn higher margins on that because it's you're selling people and therefore, you'll be selling them at a higher rate than you would see coming through a construction contract. So it's margin accretive. But as Helen said, probably the volume isn't going to make as meaningful a difference as you might think to the 5%, but the combination of delivering really well. And at the moment, we're delivering 4%, 4.5% margin. So that's great. Plus, we continue to grow that consultancy even more, give us more. And then the -- what's the term we use?

Operating leverage.

I can never get it in my head. Operating leverage. I just -- anyway, operating leverage as we grow the business and we've only got one chief exec, we become much more efficient and we can make and we can increase the margins that way. So -- so look, consultancy services. It isn't just the be all and end all, but it is for us to really help our customers, we've got to offer something more than just building new infrastructure, because there's more infrastructure in the U.K. that needs repurposing, optimizing, improving that it needs rebuilding, and that's where we've got that track record and we're doing it massively in Water as well in helping those water companies. So yes, exciting place, and we price those contracts the same way an AtkinsRéalis would price it or a WSP would price it, we price it. And we make similar margins. We're competitive in that place. And the one thing that under Jonathan's leadership since he's joined us, is he's really grabbed hold of the design and engineering piece and really that has grown significantly. I think we've doubled. We've increased by 50%, the volume of people that we've got doing design and engineering in the business now, which is fantastic. So that's moving on. From a skills point of view, yes, look, it's a big challenge. But what helps us is that long-term visibility. If we were suddenly going to win a contract and they wanted us to start tomorrow, it would be a real headache. But the fact that with our customers, we're able to see 3, 4 years out, and we can really start building the team and recruiting, getting out there. There's a lot of great people out there. BT Openreach are coming to the end of their fiber program. We've been talking about, right, how do we bring those resources into our infrastructure. So our new water directors come from that company. So that's helping us access where we can get people that may be transitioning different markets. Personally, I'm also the lead for the government's Construction Skills Mission board. So for infrastructure, I'm leading the long-term plan for the whole industry. And I'm working with the top 30 customers. We've put together a 25-year visibility of the growth in investment that's going to happen. And by region, we've set up regional skills, collaborative hubs that we're actually pooling skills academies, development routes and how we market the industry because if you go on the CITB website, it still looks a bit of a traditional industry, whereas it's got very exciting careers, very different jobs, some of which leverage AI, which we use. But yes, we need to develop the skills. And we're now getting a lot of government attention because they're very keen for us to employ lots of young people as well.

Just one small build on that. The supply chain...

Long-winded answer.

The supply chain as well. So we deliver the majority of our work through our supply chain. So how -- I mean, obviously, they need to scale up and increase numbers as well, but how we interact with our supply chain is really important for us. So we actively work with them and have more strategic relationships, giving them forward visibility as well helps. We pay them very well. So we need to treat them as part of Costain essentially. So it's our people and our supply chain and building that future view that's really important.

Alastair Stewart from Progressive. Another question on the nice pie charts on Slide 14. If you look at the private and regulated chunks, the actual monetary value goes up from GBP 1.2 billion in 2023 to GBP 3.6 billion. I presume a lot of that will be the AMP7, the tank running dry and a big chunk of the GBP 3.6 million will be AMP8. Can you actually quantify millions very roughly within those two chunks, which were AMP7 turning into AMP8? And then any other major moving parts in that. That's question one. And question two, any opportunities given the yoyo-ing in Energy costs over the last 24 hours, basically, any signals coming from government?

Well, let me start those. So I certainly won't give any numbers, Helen. So from an energy cost point of view, let me start with that in reverse. I think we probably all read the articles over the weekend the U.K. had 2 days gas supply. This is -- we're currently -- as I said in my presentation, we're working with a number of customers, private customers that are looking at creating capacity for greater storage for the U.K. So who knows? Maybe I've been challenging it for 10 years. No one's listened to me in the past. Maybe they will start to think about the need for greater capacity so that we can withstand. Sorry? Nobody has rang me. No, no, no, I can't say anybody's rang me but I know certainly, Peter sent me an e-mail on Monday saying that there were opportunities coming up. So if I come to the pie chart, I think it shows the broadening of the business when you look at that dark blue. It's got AMP8 in there, which is clearly double. So we've won. We're now working for more customers than we did in AMP7. And we're delivering bigger volumes of work than we did in AMP7. So definitely, the AMP8 picture is a lot better in there. We've also got nuclear decommissioning. So we've won two frameworks there. We've got Sellafield, we've got NRS. We've also got the work at Heathrow that the team are leading. So that's growing. We've got a very significant pipeline of work that we've been appointed to develop the designs with Heathrow as well. So it's a mixture of definitely larger volumes, but also that we've now got a much broader customer mix in that space. No numbers. Did you want to add anything to that?

No. I think just to build on that, the aviation is the new -- there's a new piece in that private chunk on the pie chart. So those frameworks will continue to grow. So there's more to come there. There's Heathrow and what we see at the moment, but there's significant spend there. And we just announced that win at Gatwick. So I would expect there to be more coming into that. But you're right, the majority of it is Water, so you'll see that gradually burning through the 5 years. But then it's a question of what we extend and what other work comes through into AMP9 as well. So it's a moving picture and all of which is positive, I think.

But, can you actually say how much of the GBP 3.6 billion is AMP...

We've given you a lot here, Alastair. So I'm choosing not to give any further detail on that at the moment.

Andrew Nussey from Peel Hunt. Again, a couple of questions. Firstly, I guess, following on from Ed's point on the margin aspiration. How important is that? Are you choosing not to bid for lower risk-adjusted margin work or work which might lead you back to concentrating your client portfolio? Secondly, on capital allocation, you made the point you've looked at M&A, but nothing attractive, what would be attractive? And the third point on the forward order or the forward work position. The actual order books only increased modestly. Can you give us any comfort that your assumptions around framework drawdown will flow into secured work?

Okay. Let me have a go at starting those, just writing myself. So look, we have this conversation quite a bit. So we're not slavishly, I think we sort of said this 18 months ago, we're not slavishly going to drive consultancy just because we want to make the margins. So we have good chat as a business to turn around and say if we look at a customer and we look at what they're going to invest in, where best should Costain position itself. And sometimes, for companies like Babcock where we look at a 20-year program of work, we've taken the decision to be their delivery partner. One, we can maximize our influence with them in that position and enhance our value. And number two, we've got a greater opportunity to be there for 20 years than we would if we just won a 4-year construction project and then waited for the next one. So it is a discussion that can get quite lively at times as to where should we position ourselves. So I think to answer your question, it's about where best should we position ourselves that is going to give us the longest term opportunity with that customer and where we can maximize our value and enhance our reputation. That is the focus rather than slavishly sitting there going. We've made a promise to grow consultancy. That's what we need to do, forget the capital. So it's a bit more convoluted than that. I think M&A, what needs to make it attractive. It needs to be a business that makes Costain better. So yes, you can get access to markets. But for it to be an enduring value business, it's got to be something that we're excited about, that we're going to bring into the Costain and it's going to make us better, because the risk is you bring in a business that makes Costain a little bit worse and it just -- you just spend your time trying to sort the business out rather than running and growing our position in the market. So that's what I would say. And then the order book follow-through, look, I think you can you can see the track record that we've got. We've got a lot of work coming through. So we've had preferred bidder work that's been there for the water programs, that's coming to the order book this year as we've governed. And just to react -- remind people what we've said, what goes in preferred bidder is stuff where we have been awarded a contract, we have signed that contract, and we have been told the volume of work we're going to get for that contract and being allocated work. So that what goes in. It doesn't go into order book, so that's preferred bidder. It doesn't go into order book until we have signed the final works order that we can start on site and start delivering it. So that's why we do it. And there is everything that we've got in that preferred bidder. The customer has already allocated to us. We've started working on the early design and it will come through and flow through. So there's -- it's high. It's not preferred bidder that we haven't signed the contract. It doesn't include that stuff, which I think historically we might have talked about. It doesn't include stuff where we haven't yet signed that contract. So I just want to make that explicitly clear, which is why we're confident about it flowing through. Okay.

Can I just add a couple of things. So, just back to that first question on consultancy. I think scale is important to us. So we have talked a lot through this presentation on -- about growth. So that's absolute growth, because that throws off cash, that's going to be driving shareholder returns. So -- but the consultancy piece, I think, is accretive and therefore, interesting for us. And its scale and its risk, those primary pieces. And then the forward work, anything I'd add, Alex, is we talked about the 90% being secured for 2026, and that's going to be a higher number. So you can see that move coming through. So -- but we're very strict about what goes in what bucket and controlling it. But we're driving that call off all the time as you might expect.

Jonny Coubrough from Deutsche Numis. In terms of Transportation, from what you were saying there, Alex, about wanting two similarly sized divisions, it sounds like you have ambitions to get that division back to where it was. Are you confident that following the contracts that ended last year, you've maintained the capability within Roads in particular. And in terms of the guidance for a step change in FY '27, I think consensus has revenue growth of 20% in FY '26. So what's the step change relative to that? It feels like a step change itself. And then just in terms of the growth in the free cash flow, I think in the bridge, there was a significant inflow from cash with restrictions. So it'd be helpful to hear what that was.

I'll take the first one and then you do the second one. Thanks for your patience, Jonny. So -- and great questions. These are all about the future. So it's a much more positive experience sitting here. So look, Transportation, it's not just an ambition. It's a plan. So Jonathan has been through his plan with us. We're very excited about it. The opportunities are there. So -- and the capability, we are maintaining it. We're doing a lot of highway work in London at the moment. And some of that team has gone to Heathrow. So the good thing about operating this business as one company is that we're able to move people around the business, which is great for transferring knowledge. It's also great for broadening people skills and capabilities, and it's also ensuring that we can maintain that capability that if you are in a moment in time that there's just a low volume of road work, then you're not losing that team. You've got the team in the business. And then when it comes back, then you've got that access, and they will have sucked up and absorbed a lot of learning from some of the other marketplaces that they've been operating in as well. So hopefully make that better. So yes, exciting times for Transportation and Natural Resources. Step change in '27 and then free cash flow, that's definitely your question.

So step change in '27. So a lot of that will be coming from Water as we've been talking about. We're ramping up through '27, we'll be really sort of hitting our stride in '27. But there are other sectors that will be growing as well. So the big win at Sellafield, for example, that's GBP 1 billion over a number of years. That will be well into growth. The road jobs will be in delivery, as Alex has been mentioning. So there are a number of layers that give us that step change in volume in '27. So it's revenue step change that's going to flow into profit. So it's all work that we've won and we can see, but it's really about when those properly come in line in terms of the sort of the big scale delivery piece. Then the cash flow, you mentioned cash flow with restrictions. I've had to put my glasses on to look at the sub notes. So you're reading all the detail. So those refer to our PPAs as we call them. So they are completely separately run from our cash. The project bank accounts. So the cash flow that moves through them is receipt in from the customer and out to our supply chain. So those are accounted for quite differently, and that's what's being expressed there. So the cash that we talked to on the cash flow is our cash after profit receipts and so forth. So quite separate and sits on the balance sheet, separate from our net cash.

Have we got anything online, yes?

Yes, we have one question from the Max Hayes from Cavendish. He asks, could you provide more detail on the early benefits from Transportation program? You've seen areas you're targeting with allocated GBP 10 million per annum, for Helen?

So I didn't catch that, did you?

Early benefits from the Transportation program.

Well, we look distinctly different. So we -- through the transformation program, we took the opportunity to look at the cost base that we had and be quite ruthless about what we kept and then what we then chose to reinvest in. So we've built a number of capabilities in the business. One of the most important ones was real expertise in risk, for example, we invested in our business development, how we tackle our work winning. So I guess if you look at the quality of the forward work that we've been talking to, all of those skill sets that we chose to invest in early on are really paying dividends now. Also, sort of operating model work that we did is allowing us to think about our processes and think about how we digitalize the business. So I guess we were creating the foundations, but we also have been very mindful about what costs we have and what we want to continue to invest in to drive the business to improve and to drive that healthy growth.

Thank you. All the rest of the questions were answered. So over to you for some closing remarks.

Well, thanks very much for your time. Thanks for your questions. We're really excited. We're very proud. It's been an amazing achievement to become a FTSE 250 business. It's great for Costain. I love this business. We love this business. We've got a very exciting future, and we look forward to updating you again. So have a good rest of the day and keep safe. Thank you.