Costain Group Stock

Good morning, ladies and gentlemen. Welcome to Costain Group PLC Half year results Q&A session.

[Operator Instructions]

And I'd now like to hand you over to the team from Costain Group PLC. Matt.

Good morning, Zane. Thank you very much, and good morning, everyone. Thank you for joining us this morning for our investor meet Q&A session following the announcement of our half year results for 2026 last Thursday. Hopefully, you would have all seen in the presentation that is on the website and may have listened to the recording of the webcast from Thursday analyst presentation. So this morning, we are just in the limited to questions and answers. You can answer your questions on to the platform whilst we're speaking now.

I'm joined by Alex Vaughan, Chief Executive Officer; and Helen Willis, Chief Financial Officer. Alex is going to make some introductory comments and take you through the sort of highlights from the last week, and then we'll get into Q&A straight away. So over to you, Alex.

Thank you, Matt, and good morning, everyone. Thanks very much for taking the time to join us this morning. Just going to give you a very brief sort of overview of the half year results. So it's been widely appreciated as another strong performance in the first half of 2026 for the business, which was great. Four things I would draw out. The first thing a good financial performance in the first half. So revenue was up. We've had growth in operating profit, and we're continuing to deliver those industry-leading margins that we've been talking about. We've also maintained our strong cash generation for the business. And all of that is part of the momentum that we've been maintaining over the last 5 years.

We had a good increase in a good track record of increasing adjusted operating profit together with margins, generating cash. So the business is in good health. Second thing is we're continuing to win more high-quality work. The outlook in all of our markets continues to be very positive and is stable. So to remind you, that is transportation, which is road, rail, aviation and ports, water, energy, defense and nuclear energy. So the outlook in all of those markets continues to be very favorable, and we have got good position in those markets. We've secured further new work and extensions in the first half of the year, and we were able to maintain our record forward work position at GBP 7 billion that's over 6x our annual revenue, which by any measure is a very high level of forward work. So it continues to be really healthy. And that is -- that supports a really balanced and growing portfolio of markets and customers right across the business. So we've got a much more resilient business, broadening that customer base. And we've successfully broken into a number of additional market segments in the first half, accessing the great grid upgrade in energy and water reservoirs in water.

So overall, positive markets, winning our fair share and continuing to strengthen the quality of that forward work. The third thing, we're on track to deliver increased growth. So we set out in our results statement and in the presentation that we've got a route map to deliver growth in the second half of this year with visibility of 91% of the work in the second half, and a step change in growth in profits in 2027. And we said in the results statement that we have got visibility of 91% of the consensus numbers. And if you want to find those, they're on our website under the investor area, the consensus numbers. So good progress and on track to deliver that increased growth that we've been talking about. And then finally, what does all of that mean? All of that means that the business is in the greatest health and shape that it's been for a long, long time and that we are delivering an increase in shareholder returns. So we've increased the dividend from 3x cover to 2.5x cover. So that's doubling the interim dividend and the buyback that we are in the middle of is progressing really well. So overall, really positive update.

Great. Thank you very much, Alex. So we do have some questions that have come in while you were speaking. So let me start with one from David.

I was asked whether the amount of business we've been doing with HS2 has increased in reducing or remaining about the same over the last sort of 6-month period?

Yes, David. Just to remind you, we've got 3 contracts with HS2. We've got the main civils contract, which is the contract that we're on the ground delivering at the moment, and we're about sort of 60% of the way through that. And the value of that hasn't increased in the period. We just continue to deliver against the program, and the schedule and the budget for that. And then we've got 2 system contracts, which will follow the civils contracts right across the entire program. One is that the M&E fit-out of all of the tunnels. And on HS2, there's a significant volume of tunnels. And then the other one is the high-voltage power supply for the HS2 line. So the delivery is on track, online, very strong and making good progress. Thank you.

Great. Thank you, Alex. I'll give you -- the next one, I'll give to Helen to start with, and then I'm sure Alex will add. It's from Rajid who asks, are we becoming more selective on contract opportunities and really how are we thinking about risk as the order book strengthens? And are there contracts you would walk away from that you might previously have pursued?

Thanks, Rajid. So this is a really great question. That consideration of risk is sort of foundational for us. So we've been talking over the last 2 years about the investments we've been making on how we manage ourselves as a business and how we think about and manage risks. So we have been very selective on what we will bid and win. And if I think about what's making up that record forward work book of GBP 7 billion, it's absolutely on the terms that we have wanted and the right risk profile. So no fixed-price lump sum as an example. So really foundational for us. If we win the right work on the right terms, with the right risk profile, then we absolutely will be able to deliver predictably. So that view of risk, that consideration of risk, has been a constant for us over the last few years and will continue to be.

Great. [Audio Gap] All without taking on additional risk, et cetera. So just perhaps building on your last answer there, Helen, in the context of how we get to those sort of 5% margins.

Absolutely. So you see that we've got to 4.5% margin last year and if you look at the consensus that Alex has mentioned on our website, you'll see that margin is anticipated to be about 4% for this year and next year. We think about that as an underlying rate. How will it move between that and our ambition of greater than 5%? I think there's a continuation of improvement in the portfolio, but that's by and large done. But in addition to that, as we scale up, we will get reasonably significant operating leverage as we have greater revenue base to cover our costs. So that will be the next big dial mover for us.

Great. And then another margin question has just come in as well from Richard, this time bringing us a little bit back to the near term. So Richard said that the operating margin in the second half of last year was 5.8% and he's asking how close to that do you think will be in the second half of this year?

So you've done your homework, that's great to see. It will be slightly less. We talked last year about the fact that we had a significant number of contracts closeouts in 2025, you think about some of the road jobs coming to a close, and as we shifted from AMP7 to AMP8. So we won't have the same concentration of contract closeouts this year. So it will be lower. And as I say, our anticipation is that this full year will be around about 4%.

Thank you, Helen. I'm still waiting for more questions to get on here. There's another question coming in. So this one looks like for Alex. So this is around consultancy. And another question from Rajid asking whether a larger consultancy presence is as ambition securing subsequent construction work and can we quantify the conversion from consultancy relationships into the larger capital projects?

Thanks very much. Good question. So the consultancy for Costain is quite broad. So we've got the design and engineering, which you're talking about. So absolutely, there's a great opportunity that we get involved very early in future programs. So for example, we're working with Network Rail on rail programs that probably won't start construction for 10 years, at least. So it gives us that long-term visibility. It allows us to start influencing those projects. The outcomes, the way they would deliver, build our intelligence, our insight into those programs, and we can then follow through.

So you're absolutely right, that opens up opportunity. The other areas in design and engineering is actually where we design for ourselves now. So increasingly, if I look at water, a lot of the water programs, the solutions that we're developing on those programs, on those projects, we've designed those ourselves. So we want to continue to grow engineering and design element of the business. And we grew it by about 60% last year. So that's an area that we see a great opportunity for us. The other areas of consultancy are where we act as the client's project management and engineering business, we call it delivery partner type contracts.

And that's where in certain markets, clients prefer to have, so for example, on the BP contract and some of the defense contracts, the clients prefer to have a main contractor in the consultancy role delivering as their delivery partner, and that's an area that we want to continue to grow. And then also how we provide engineering and project management support to our clients through other commissions. So it's an area that we want to continue to grow the business. But overall, we're focused on how we grow the overall business.

Great. Thank you, Alex. We've had another question from John. I'll maybe give this one over to Helen. This is around automation and what plans do we have to increase automation of physical tasks and elsewhere across the business?

Thanks, John. It's a really important topic for us, and we've talked in the past about our intention to digitalize the business so we standardize what we do and therefore use digital tools to the greatest extent possible. So I think there's obviously thinking about better quality data, but also automation, as you say, there are plenty of things that we already do. And at there's a link into AI as well. So we are looking at these cases across the business on how we might use the tools that are out there. And of course, this landscape is leaving very quickly indeed. So we did use some robotics. We do use some sort of data collection, for example, monitoring our plant is being used and -- so there's a number of instances across the business where we are already using it. And of course, we will maximize to the greatest possible to, I guess, modernize the sector that we're in.

Thanks, Helen. Question for Alex. This one is around our employees, particularly the younger new employees. Can you -- just an open question from Stephen. Can you talk about the way we're training and hiring new employees today?

Yes, Stephen, great question. Look, we are very proud that we are recruiting, and we've recruited the highest number of graduates and apprentices into the business over the last 2 years, and that's been increasing. So a really strong pull and as the business grows, that we're bringing in more people to grow with the business. We support apprentices on a number of different programs, including degree apprenticeships. And they all go through day release and on the job training as we bring them through.

Interestingly, Helen is the Executive Board sponsor for our frontline supervisor programs. So there's a lot of development for youngsters to come through and be the work superintendents, and general for persons of the future and how we're developing them. And then obviously, on the other programs, there is -- for the graduates, for example, there's a 3-year graduate program where they come through, get developed and the business has a good track record of mentoring, coaching in the workplace, giving people opportunities to grow, supporting and developing them. So yes, look, a lot going on in the business. And it isn't just the young people that we grow and develop either. There's a lot of people that we move around the business into different sectors, give them new opportunities, perhaps change the their career direction and a lot of training and development that we put into supporting people as they grow.

One of our priorities for every year is about how we unlock the full potential of everyone who works for Costain. So on the job training and structured training is a bigger part of that.

Great. Thank you, Alex. I am currently not seeing any further questions. Maybe just give it a few more seconds. But if nothing appears, then I'll turn back to you Alex, shortly for some closing remarks. It looks like there's still nothing coming through. So thank you, Alex.

Okay. Well, look, thank you very much, everyone. Thanks for those questions. Great questions, and it's great to hear your interest in the business through those questions. As I said, we're very proud. Another strong performance for the business. The business is in good health, and we look forward to giving you further update in 6 months' time. But in the meantime, have a good rest of the day. Keep safe, and I look forward to speaking to you soon.

Perfect guys. If I may just jump back in there at this point, and thank you very much indeed for updating investors this morning.

[Operator Instructions]

On behalf of the management team of Costain Group plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.

Right. Good morning, everyone, and thanks very much for joining Costain's 2026 Half Year Results Presentation. I'm going to start with sharing my reflections on the first half of the year. And then Helen Willis, our Chief Financial Officer, is going to come in and sort of take you through the financial results and the financial performance of the business before I return to sort of give you a bit of a strategic overview and update, operational insight and an outlook for the business as we move forward.

Look, we're really pleased with -- to have reported another strong set of results for the business in the first half. It really reflects the quality, the resilience and the balance of the portfolio of business that we've got and also how our teams expertly deliver our services. We've returned to revenue growth in the first half. We've also grown operating profits and increased shareholder returns, again, thanks to the strong balance of cash and the strong cash generation in the business. I think as we said in our results statement, the revenue growth in the first half marks that beginning of a sustained period of growth for the business, built on the successful positioning of us in what are significant growing markets.

I'm going to use a phrase a lot, but this is a really exciting time for U.K. infrastructure. And in our markets, we've continued to secure a good number of high-quality new contracts and extensions that underpins the fact that we've maintained our record forward work position of GBP 7 billion. For a business of our size, that is 6x our annual revenue, which really underpins that confidence in the growth. And the fact that the forward work visibility of 91%, not just for this year, but for next year, gives us that confidence in how we're going to grow and move the business forward.

Our forward work also benefits from having added new customers. So we've now added Dover Ports, Gatwick Airport and National Grid in the first half of the year. And we've also accessed new market segments. So we've broken into the Great Grid Upgrade, and we've got a real presence already on the reservoir program. All of that really improves the strength of the group. We remain on track to deliver 2026 in line with expectations and to deliver that step change in growth for 2027.

And I just wanted to sort of reflect that our first half year results mark a continuation of the progress that we've been making as a business, that momentum in the business. And based on 2026 consensus, we're going to be delivering a full year '26. We're on track to make it 6 years' worth of growth and industry-leading margins as a business. And as a result of the quality of the contracts that we take on and their nature and the fact that they're cash generative, this has continued to strengthen our balance sheet. And this consistent cash position, which is a feature of the type of business that we do, while strengthening the balance sheet has also allowed us to increase increased returns to our shareholders.

Over the past 3 years, we've returned GBP 31.5 million in terms of shareholder returns, and that trajectory is going to increase. And today, we've announced a doubling of the interim dividend that we've got, which combined with the GBP 20 million share buyback means in 2026 alone, we'll be giving GBP 34 million worth of shareholder returns. This continued momentum is now set to accelerate in the second half of this year, as we've talked about with a step change in 2027.

For the second half of the year, we've pulled together this graph that shows that in Water, we've spent last year and the beginning of this year, just finalizing design solutions for a lot of the water infrastructure. In the second half, we're now getting into the delivery of that infrastructure, which is why you get the step-up. And you'll see that really moving forward into next year as well, where we'll be at full operational level delivering that water infrastructure. Heathrow, we continue to expand the amount of work that we're doing to support their investment plans.

And then from a road point of view, we've got the M60. We've spent 4 years in the design and consenting phase for the M60. We've now mobilized. We're on site. We've started construction activities. And obviously, the second half, you're going to get that. And then next year, we're going to get a full year. We've also got the ramping up of the nuclear energy work we talked about last year together with that Great Grid Upgrade. And we've also got some of the road -- local road contracts coming through. So a clear path for that increased growth coming through. The step change in '27 really builds on our momentum, that clear visibility of that GBP 7 billion worth of forward work. Our business is in great shape, and we're really excited.

And I'll hand over to Helen.

Good morning, everyone. I'm just relieved to have navigated the step there. So all good so far. So thanks, Alex. And we've talked about momentum a lot, and it really does feel like that's coming through now. As Alex said, we're on track to deliver the sixth consecutive year of profit growth and with an industry-leading margin, which we intend to maintain. The balance sheet position continues to strengthen. We significantly increased shareholder returns having resumed in 2023. And we're winning the right work, and we maintain that GBP 7 billion forward work book.

And of course, we entered the FTSE 250 earlier this year. It really is exciting to be part of this, even as a CFO, I can say that. So let me take you briefly through the headline financial results. Revenue up to just over GBP 0.5 billion, up 3.4% on prior year. Adjusted operating profit up 3%, up to GBP 17.3 million with no adjusting items, so that falls through to GBP 17.3 million on reported as well. Adjusted operating margin, consistent with the first half of last year at 3.2%. Adjusted basic earnings per share increased by 3.6% to 5.7p, and that's primarily reflecting the increase in adjusted operating profit and a reduced share count following the share buyback programs.

The group has adopted a new target dividend cover, as Alex mentioned, to 2.5x adjusted earnings. And previously, that was 3x earnings. And that would be paid 1/3 H1 and 2/3 H2 as we have in the past. We continue to maintain a strong balance sheet, as I mentioned, and net cash was GBP 164.4 million at the end of the half, and that's GBP 20 million higher than half year last year, and that's after the increased shareholder returns.

So revenue, as I mentioned, is up 3.4% on the half. And that was following the expected small reduction on Transportation, but more than offset by growth across all sectors in natural resources. Crucially, this marks a key inflection point, and we are confident of the step change in revenue growth in H2 this year, followed by a sustained period of growth thereafter. In Transportation, revenues in roads, as I said, reduced in line with expectations as several of our RDP framework projects completed. And we expect to return to growth in the second half, as Alex was mentioning, as we go into construction phase on the M60 and on the M5 thereafter.

Integrated Transport increased almost 40% as we really are hitting our stride with the work at Heathrow. There was strong growth in Natural Resources across all sectors. In Water, we see the transition from design into construction phase as we are into AMP8 regulatory cycle. And we're scaling up to deliver a strong pipeline of work in the second half of '26 and thereafter. Energy revenue increased by 25.7%, and that's driven by a range of services we provide, including design and delivery of the carbon capture program at BP and the management of gas mains replacement for Cadent. And revenue increased on Defense and Nuclear by 3.6%, driven by our current delivery partnership roles.

Adjusted operating profit, as I mentioned, grew 3% in the first half to GBP 17.3 million, and that was really reflecting the increased revenue, but maintaining the adjusted operating margin, so stable at 3.2%. We've seen the lower volumes, as I mentioned, in the RDP frameworks, offset by Natural Resources revenue. It should be remembered that last year, we had a normal course of business contract closure benefits in Natural Resources. And so the level this year is a more normalized level, I would say. We've spoken about our targeted areas of investment in recent periods, and it's important to note that we've seen another period of increased operating profit despite continued investment across the business, ensuring that we're really well positioned for growth.

I'll now take you through the cash walk and moving from left to right, opening net cash of GBP 189.3 million and closing net cash of GBP 164.4 million. The first boxed area represents adjusted free cash flow, an outflow of GBP 1.4 million, and this outflow reflects strong operating profit, offset by the timing of working capital around the period ends as well as modest CapEx and tax outflow of GBP 3 million. Interest receipts were GBP 0.3 million. Lease expenditure is shown separately from cash from operations and was GBP 5.7 million for the first half, and we've seen an increase in lease expenditure in the period as we invest on contracts ahead of planned growth.

There was a significant increase in shareholder returns, which totaled GBP 15.4 million in the period. GBP 7.2 million was spent as part of the FY '26 share buyback program and dividend payments of GBP 8.2 million, almost doubling against half year '25 of GBP 4.9 million. Other financing costs of GBP 2.7 million reflect the purchase of treasury shares to fund our employee share schemes, an increase in the first half driven by both increased share price as well as volume of options and awards. We expect to see this continue in the second half as the first of our SAYE schemes for a number of years vest at the end of the year.

We expect that adjusted free cash flow will increase in H2, reflecting the typical second half weighting of adjusted operating profit. And we expect our FY '26 year-end net cash position to be around GBP 170 million after the step-up in purchase of treasury shares I just mentioned as well as enhanced shareholder returns in the form of the GBP 20 million share buyback program and significantly higher dividend payment.

The net cash position at the end of half 1 comprised of Costain cash balances of GBP 94.8 million, cash held by joint operations of GBP 69.6 million and borrowings of 0. The chart illustrates the maintenance of a significantly stronger balance through H1 when compared to FY '25 and H1 '25. The group's average weekend net cash balance in the period was GBP 177.3 million, a GBP 25 million increase on H1 in the prior year and GBP 28 million on the full year of '25. In the first half of the year, we paid 97% of invoices within 60 days as we have done in previous periods. You remember at the full year presentation, I confirmed that in 2025, the group successfully concluded negotiations with its bank and surety facility providers to refinance the new 4-year agreement of those facilities to September '29.

Comprising a revolving credit facility of GBP 100 million and surety and bank bonding facilities totaling GBP 295 million. Further to this, in May '26, Costain exercised a one-year optional extension clause, and this agreement was extended by a further year to September 2030 and the RCF facility remains undrawn.

So our continuing strong financial performance, robust balance sheet and cash position and the agreement reached with the trustee of the defined benefits pension scheme to remove the constraint of the dividend parity arrangement has enabled us to significantly increase returns to shareholders. The graph shows the year-on-year increase in shareholder returns, having resumed returns in '23. The board undertook a review of its options regarding dividend and on the 10th of March '26 confirmed its intention to pay a final dividend for FY '25, in line with its target dividend cover of 3x adjusted earnings. The board regularly reviews its capital allocation policy and following its latest review, the group has adopted a new target dividend cover of 2.5x adjusted earnings to be paid approximately 1/3 H1 and 2/3 H2.

Based on the new target dividend cover of 2.5x and the completion of our GBP 20 million share buyback program this year, which will be our third share buyback program, we anticipate doubling shareholder returns in FY '26 to circa GBP 34 million compared to GBP 17 million last year. As of the 12th of August '26, the group had purchased a total of 6.1 million shares for an aggregate consideration of GBP 12.1 million under the FY '26 share buyback program.

We shared this slide before at half year and full year results presentations, but I think it bears repeating. The effective management of risk in our portfolio continues to be central to how we manage our business. Over recent years, we've invested in strengthening our processes, controls and assurance activities. We've invested in our systems, and we've invested in key capabilities across the business. This approach has applied to the opportunities we bid and win all the way through to delivery on site and through to completion of our works.

And this approach has driven improvement in the quality of the forward work, the right risk profile, the right contractual terms and hence, the right conditions for a predictable delivery of results. It's this focus that's driven the path to higher margins as demonstrated by our continued margin progression over the last few years.

Costain continues to secure further significant strategic program awards and extensions to existing contracts and enjoys good visibility on future work. We've maintained our record forward work position of GBP 7 billion in the first half of the year. Our forward work position is greater than 6x our FY '25 revenues, and we've seen a year-on-year increase of 25% and an increase of 67% over the last 6 years. 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.

As at the end of H1 '26, the forward work comprises order book of GBP 3.5 billion and preferred bidder book of GBP 3.5 billion. It includes no single-stage lump sum contracts and is predominantly target cost contracts where the scope, design and cost are developed with and agreed with the customer. This disciplined approach to contract selection ensures that our forward work consists of the right risk profile, underpinning our predictable delivery results.

We also continue to transform the balance of our contract portfolio. Reliance on central government spend shown in the light blue, has reduced significantly with the proportion of forward work falling from 64% to 29%. This is mirrored by increases in private and regulated forward work from 30% to 48% and devolved government from 6% to 23%, all proportions, of course, of a much larger figure.

The diversity of our forward work position continues to build with additions in H1 '26 coming from target growth segments such as electricity transmission with National Grid, reservoir program management work, Thames Water and Anglian Water, devolved authority Rail with TfL and port infrastructure with Port of Dover. We continue to experience higher win rates than we have historically achieved, which combined with a strong pipeline of bidding opportunities across all sectors gives us confidence that our high-quality contract portfolio will remain balanced and resilient going forward.

This slide importantly illustrates the increased visibility for FY '26 and FY '27 revenues. The forward work position is comprised of GBP 1.9 billion of revenue across the second half of '26 and FY '27, GBP 1.7 billion over '28 and '29 and a further GBP 3.4 billion beyond that. The result is 91% of consensus revenues are already secured for both 2026 and '27. Circa 50% of the forward work will convert and be delivered over the next 4 years. This visibility allows us to plan resources and supply chain to support the anticipated growth. The bar chart also shows a broadly equal split across the two divisions over the next 4 years, supporting growth over all of our sectors.

So we're on track for another -- for a sixth year of profit growth. High quality and volume of our forward work together with growth on existing frameworks gives us good visibility for the future and profit visibility of circa 90% of our consensus for '26 and '27. 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 164.4 million, and we expect the FY '26 year-end cash to be approximately GBP 170 million after those enhanced shareholder returns.

I'll hand you over to Alex.

Right. So thanks very much, Helen. I'm now going to provide you sort of a brief update on the strategy and then cover sort of the operational performance and business outlook. Look, our growth in revenues, operating profits, industry-leading margins, cash generation are derived from how we're expertly delivering the clear strategy we've got for the growth and value creation of Costain. We're focused on those markets where strategic long-term essential investment needs to be made. So that's around Transport and creating greater prosperity and growth for the business, Road, Rail, aviation, ports, Water, Energy, and Defense.

And we explicitly choose to only work for customers who want to work with their partners in strategic long-term partnerships where Costain has the chance to maximize the value that we can add to those customers. And we enhance the value that we bring to customers by ensuring that we provide services that basically engineer pretty amazing solutions for them and expertly deliver them, whether that be as a construction partner or as a consultancy partner. This strategy with our strategic focus on growth in strong markets, predictable best-in-class delivery, building that resilient customer mix building a meaningful consultancy service and being admired in everything that we do is what is delivering a step change in our growth in revenues, operating profits, industry-leading margins and will further enhance returns to our shareholders.

I've talked about it being a really exciting place infrastructure. The market focus -- our market focus is built on the very clear visibility that we have on the investment that's going to be made in infrastructure, building on the government's infrastructure strategy that they launched last year to turn around and spend GBP 725 billion over the next 10 years on infrastructure.

Our chosen markets represent the U.K.'s critical economic infrastructure, those essential national needs where the largest amount of nondiscretionary investment is being made. And our chosen customers in our markets, as I've said, predominantly operate through 5-year business plan regulated periods, really strong, clear visibility of what infrastructure. And many of them select to work with us on those 5 years or longer periods, and we do have contracts where we have 15 years' worth of work visibility ahead. As Helen has outlined, we continue to demonstrate a proven track record of winning more than our fair share of the work in these positions, and this drives the growth in the business.

Having outlined the sort of strategy that we've got and talked about the scale of investment that's been made in infrastructure, in the full year results for 2025, I set out a case study that brought our strategy to life around the energy -- our nuclear energy market. And I'm now going to share with you our Water market as an example. Just to talk you through how we have uniquely differentiated ourselves in the market in how we access that Water market. Firstly, the market investment in Water is incredibly -- is significant in scale, as you can see. And it's increased significantly to GBP 104 billion for this regulated period. And today, the regulators announced another GBP 3.4 billion, GBP 3.2 billion for our customers to support the growth in data centers, et cetera, to support economic growth. So huge investment in this market.

And what is driving that investment is the urgent need to maintain and optimize what is a very old aged asset base for us to meet even tighter regulatory standards by reducing water abstraction from rivers, but also to improve the water quality in the natural habitat. For them to respond to the challenges of climate change, perfectly timed for today. It's pretty hot out there. And so we've either got high levels of rainfall that we can't deal with or we've now got two years' worth of extreme drought and a shortage of water with higher temperatures.

It's also to support the growth in demand. That GBP 3.4 billion is to support data centers, housing, et cetera, that is driving that growth. It's also to ensure that we meet the 25-year plans to have a sustainable long-term supply of clean water for the U.K. So it's a pretty important sector.

Now operating in the water sector requires you to have a differentiated expertise. You need to have an intimate understanding of the water industry, the water process and the expertise. It really benefits to have really mature relationships with the customers who operate in this place. And positively, that's why the customers choose to work with their partners in those long-term partnerships, 5 to 10 years.

Through our unique strategy, we've successfully positioned ourselves in all 3 of the critical market elements. We're involved in maintaining the existing infrastructure, optimizing its performance and repurposing it to meet the changing needs of the customer. And trust me today, the phone calls we get, they've got very changing needs of how they can produce as much water as they can. The contract we've got with United Utilities, we are delivering a wide range of replacement, refurbishment, asset upgrade services across their whole estate in the Northwest of England. We secured the contract originally in 2019. We've since had two further extensions that's now taken it through to 2029. That's going to be a 10-year partnership. And we're obviously working to expand this across the other water companies. But at the moment, United Utilities are the only people buying this type of service.

Moving to the regulatory capital delivery programs. We're working with the five major water companies across England, Northumbrian Water, Severn Trent Water, Southern Water, Thames Water and United Utilities. Interestingly, GBP 3.3 billion of this GBP 3.4 billion worth of investment. So this is where the significant investment is being made. And we work in designing and coming up with pretty incredible solutions to meet their needs and then expertly delivering large programs of capital programs for them. We're also the technical assurance partner for Yorkshire Water. Now as a result of our expertise and reputations, we've worked with all of these companies on multiple regulatory cycles. And the current contracts we've got for United Utilities, Southern Water and Northumbrian Water go into the next decade. So they're pretty long in nature. And some of the relationships we've got span more than 30 years of a proven trusted partnership.

Now we're also coming to the third one, we're also a key partner building the U.K.'s future strategic water assets. As you know, we've just completed the Thames Tideway project, a pretty major strategic infrastructure asset that's going to allow the U.K.'s capital to grow and expand and flourish in a sustainable way. And we're already a partner to Anglian Water, delivering their Strategic Pipeline Alliance, which is to take water from some of the wet areas on the East Coast to some of those areas where there is not a lot of water. And we've been doing that. We won the original contract began in 2020, and it's now been extended to last until 2030 as we drive further capital investment.

And the market, as you'll have seen, is now preparing for a long-awaited period of significant investment in reservoirs, 15 years too late, but we're getting on with it. And we've already secured an important role in this market. We are already the enabling works partner for Anglian Water and Thames Water on their reservoir scheme, supporting the development of what is going to be a GBP 50 billion market investment. Our focus on this critical investment, our markets, our customers and service has resulted in Costain building the strongest ever breadth and scale of water service that exists. This case study, again, shows how we position ourselves under our strategy in our markets and is typical of all the markets that we operate in, and I believe underpins the strength of our strategy.

Now I'm now going to talk about each of the divisions. Transportation has been an incredible successful journey over the last couple of years. We've now built a very broad Transportation business. We're exposed in the roads market on the strategic highway and the local and devolved highway networks. We're involved in rail, right across from the strategic infrastructure on HS2 to supporting Transport for London upgrade their rail infrastructure. We've broken into the aviation market where we now work for all three of the major airport operators, Heathrow Airport, Gatwick Airport and Manchester Airports Group.

And we're also now we've broken into the ports market that we're beginning to see expand as it supports trade with the rest of the world, but also to support the offshore wind market. So huge success. And in roads, we've completed a number of contracts, but we're now mobilizing those two strategic highways on the M5 and the M60 as well as some of the devolved work that we've got. And on rail, the HS2 contracts, just to remind you, we've got three contracts for HS2. We're in the middle of delivering the major civils program at the moment with two tunneling machines making their way to Euston as we speak at great pace.

And we've also got the two systems contracts, one for the HV power upgrade that's going to power the whole of HS2 and the second one, the tunnel fit-out from an M&E point of view. But we've also had a breakthrough contract with Transport for London, which has been great because we've been working with them on roads, and they told me that we were doing an all right job, actually said that we were doing a good job. And now we've broken through into their rail, and we've won a leading position on upgrading their stations and the step-free access program that they've got running there. And also in local roads, we're making good headway.

And then from an Integrated Transport, I've talked about the aviation, and I've talked about Port of Dover already. It's really pleasing to see us making this progress. And if I look at the pipeline in transportation, it's incredibly strong. The future opportunities right across this broader business that we've built are very strong, and we see a very positive outlook for Transportation.

Natural Resources is clearly benefiting from strong delivery performance and significant investment right across Water, Energy, Defense and Nuclear Energy. In Energy, we're focused on future-proofing the existing gas network, supporting gas capacity resilience and now growth of the U.K.'s electricity network. Our performance for Cadent Gas has continued to be excellent, and we're progressing the delivery of BP's landmark great carbon capture and storage project in Teesside.

Importantly, we've also broken into the electricity transmission distribution market in the first half, targeting those substation upgrade programs. And in Defense, which again, on the back of the strategic investment plan for defense where the CASD program investment has been ring-fenced. We're now actively continuing to deliver the AWE program and Devonport upgrade. And there's a strong pipeline of opportunities that have come straight at us on the back of that, which present huge opportunities for us in defense where we have a great position.

And in nuclear energy, we've won the work last year, huge amount of work working for Sellafield, Urenco, and NRS, who are part of the decommissioning and how we're driving growth in that market as well. Again, there's an outstanding pipeline of future opportunities across all of our market segments in natural resources, and we see a positive outlook for this division as well.

So in final summary and to close, the quality and balance of our contract portfolio and broader customer and service mix is delivering growth in revenue, operating profit and strong cash generation. Our strong balance sheet is increasing the net cash position is allowing us to increase returns to shareholders via dividends and share buybacks. We will continue to benefit from the committed growing investment in target markets that we've chosen to operate in and have demonstrated our ability to enter new growth market segments and expand our serving offering with existing and new customers.

As I've said before, our record forward work position of GBP 7 billion, over 6x our annual revenue gives us excellent visibility of the future revenue and underpins our future growth that we've been talking about. Bringing this all together, as Helen has said, we're now at that key inflection point as a business with growth coming in the second half of this year, a step change in 2027, followed by a period of continued growth thereafter.

The business is in great shape. It has a team who pride themselves on solving the most complex challenges and delivering them to best-in-class standards predictably. We have a growing momentum, and we continue to take advantage of the significant opportunities ahead. This is a very exciting time for the U.K., and it's a very exciting time for U.K. infrastructure. So thank you very much.

Finally, as I hope you're aware, we'll be hosting a Capital Markets event on the 19th of November here in London, where we're going to discuss more some of these growth drivers and bring that to life in more detail. And I hope to see as many of you as you can attend that event. Thank you very much.

We'll take your questions. But first, we're just going to move and sit over here.

Charlie, are you going to hand the mic out?

It's Ed Prest from Berenberg. I seem to have sat in the best seat. I seem to have sat in the best seat. Three from me, please. Firstly, you note that Costain continues to achieve higher win rates than it has historically. From your perspective, what's driving this? Is this down to a broader change in market dynamics? Or is it a change in the perception of Costain from customers?

Secondly, consultancy, you note in the statement that at 18.2%, that's an increase on where it was last year. Do you have an optimum level for consultancy revenue in mind? Is there still further increase to go? Or do you expect some normalization to come?

And thirdly, Energy Transmission. Are you able to talk about the competitive dynamics here? How difficult will the incumbents be to compete against? Or does the massive growth in the sector represent an opportunity that you're able to capitalize on?

All Right, if I take those three.

Absolutely.

Yes. So look, what do I think is behind the higher win rate? I think a massive part of that is the insight that we have in the customers because we've worked for a lot of these customers for a long time. And we really -- we get to understand their business. I think we work really hard on really getting underneath what is it that they want? What's their ambition from the investment? What do they need? And then I do think we're really good at coming up with solutions. We talk about ourselves as an infrastructure solutions business. We've got amazing people that come up with faster, more efficient, better solutions than and we work really hard on that. And therefore, the value we add, and we put a lot of hard work into it.

I was asked on a media call earlier, do you ever turn work down? There is a lot of work we turn down every single month. We're very selective on what meets our risk appetite, but also where do we think we can win. If we don't think we've got a reason to beat someone else, why should we bid it? So we're pretty rigorous on that. So I hope that answers your first question.

Second one, optimal volume of consultancy. I think we're going to say more about that at the Capital Markets Day definitely. Look, if we look at the decision-making tree, it isn't just about growing consultancy. It comes down to where can we have the best position with the customer, where can we maximize the value and therefore, the return that we can get out of it and how best should Costain position ourselves. And that's how we drive it. So we're certainly growing our engineering and design that is -- grew 60% last year. And that's going to grow because we actually think we're a better designer than the traditional designers, and that's something that we're investing in to grow.

But in terms of the delivery partner and some of the other services, there's that decision to make whether we go for a capital program or whether we go for consultancy, and that's based on where do we think is the best position to go there. So I wouldn't give you a fixed percentage at this stage. But as I say, we'll say more at the Capital Markets Day on that.

Energy Transmission, look, every market is competitive. I would love it if they weren't, but they're not. They're competitive. And I think we've got a great offer. We've got a great proposition, and we've certainly been successful so far on a couple of opportunities, which we'll certainly say more again at the Capital Markets Day. But yes, look, competition is strong and healthy as always.

Aynsley Lammin from Investec. Just two for me, please. When we look at the visibility and secured work for next year, you've got 90%. One, just kind of how unusual is that? What's driving that visibility? And also, if we think about the margin, if there's a bit of cost inflation, how well protected you are in terms of contract terms to pass on and deliver the margins you expect?

And then the second question, just on kind of share capital returns. Obviously, you reduced the dividend cover to 2.5%, a bit more around your thinking there. Is it the share price had a good run? Does that mean there's less kind of chance of share buybacks? There's going to be more dividends? Could that go down further? Just any color or insight there.

I'll take the first one, you take the second one, you're all right with that.

Yes.

So look, in terms of visibility, I think what's great around the visibility is we've won the framework. We've now spent 18 months doing a lot of design work, preparation work and we're now into starting the delivery. And then so we've had long-term visibility of this work. And it's one of the points that Helen makes. We get asked the question about do you have the capacity to be able to deliver all this infrastructure? Well, because we've been able to see it coming for three years and sometimes longer, we're able to plan because we've done that work, one of the great things is that we codevelop the solutions with the customer.

So we can identify risk, we can eliminate risk, make sure we're not carrying that risk. So effectively, the design is complete. We're then able to deliver it. So we're in that phase now of now going to site and delivering a lot of that work we've spent the last 18 months, and that's what gives you that visibility and that confidence.

Just coming back to your cost inflation point, look, I mean, the big drivers on cost inflation are the same thing that affects everyone at the moment. It's energy prices and energy-intensive industries. We have as do our clients, actually, we have protection from inflation and our clients do as well in their budgets. So we're seeing that come through. But we don't just sit back and accept that happening. We work really hard with the clients to determine and go, okay, well, what are we going to do? Because at the end of the day, they've got to try and manage their cash flow and their budget as well. But we have got protection. And at the moment, it is limited to energy prices.

Yes. So share capital allocation -- capital allocation rather in the divi versus share buyback. I mean, obviously, this has been the first year that we've been able to be unconstrained in how we've returned -- how we plan to return to shareholders. We have the dividend parity removed in January that we announced. So this has been the first year where we've been able to set those levels without constraint. Obviously, a GBP 20 million buyback program this year, GBP 10 million previous year, GBP 10 million before that. I think the 3x policy was set way back when we did the capital raise before I joined even -- even before me.

And looking at the market, looking at the level of returns we want to make, we felt 2.5x was a sensible progression. I guess you could say it's a sign of our increasing confidence. Obviously, we've got the cash balance to back it up and the growth is coming. So it's -- you should really view it as a sign of that confidence. How are we seeing that capital allocation going forward? I guess, Capital Markets Day, we'll talk a bit more about that. That's not easy to say. But I think we have got still the same policy. We're still investing in the business. That's really important. but we do recognize the importance of those returns. We have talked a bit about M&A in the past, and we're actively looking at that. We won't rush into anything, but we're well set to consider all of those elements of our policy.

Max Hayes from Cavendish. Just two questions. So you've spoken about AMP8 contracts moving from design to delivery during the second half. Just looking at the wider portfolio, how should we think about sort of the timing of other projects in other verticals, similarly moving from design to delivery over the next few years? And then as they move into those larger delivery phases, just how you continue to build margin?

Yes. Look, thanks, Max. So look, AMP8, I've talked about, as you said. So the M60 is another classic example. We've spent four years working on the design, consenting. It's a project that's going to be delivered in a lot of people's back garden or right next to people's back garden. So it's taken a lot of planning. So we've completed that. And it's the same with a number of the nuclear energy projects. A lot of work has been in the design phase. So we have this and this is what we've got to look at. You have this period within the regulatory period that you get allocated the work, you then start designing and develop solutions and then you spend. And that's why you always see that curve is sort of like a wave, which actually the customers are now going to help flatten out that we get that.

And it's the same for Gatwick. We've just been -- we've won the contract. We're spending the time at the moment. But next year, we'll go into the delivery phase of those contracts. So it's a pretty similar message right across the book, if that helps.

Just how do we -- the really important thing about how do we drive margins is really getting value out of that Stage 1. The fact that we spend so much time to spend four years on the M60 really working through the design, what's the best way to deliver it, how do we assure it? How do we make it predictable, means that when you get to the delivery phase, you've eliminated the uncertainty. You haven't got design challenges. You haven't got ground conditions, you haven't got procurement challenges. You've done all of that work, which sort of means that you just go and execute it and we call it assembly now. You just go and assemble the solution. So that's really what is going to drive the margins. Helen has a great phrase.

I'll just build slightly, and then I'll give the magic phrase. I will...

Helen has got a great phrase in the business, which is what really helps us drive that.

So just one build on that. I think it's the quality of the portfolio gradually coming through. So you've got three elements. So the portfolio delivering exactly as Alex has described, but we've talked about still the tail end. I mentioned in the presentation about the RDP frameworks, which were signed back in 2016. So as everything comes on in the right risk profile and right terms as we've been working very hard on, you see that quality of the portfolio increasing the predictable delivery, making sure we're reaching all the milestones and gain shares that gradually pushes that margin up. But the biggest piece is as we grow in scale, we will get, I think, a reasonably significant operating leverage uplift as well. So various factors contributing.

It's all happening on the right of the room today. Three questions, if I may. Firstly, a very helpful case study on Water. But can we just revisit the nuclear one at the full year and remind us how that is progressing and what share of the order book is nuclear? Secondly, your FY '27 visibility of 91% is pretty standout. Can you give us an indication of what the same number would have been a year ago roughly? And thirdly, no talk about the pension, which is good news. But do you have any plans for the pension?

Okay. Well, let me talk about the first one, and I'll let you do the difficult ones. So yes, look, I mean, what we're trying to do with these case studies is sort of bring the strategy to life. I think what it shows is a really strategic focus on what is the investment, what is it trying to solve and therefore, where can Costain add best value and not just sitting there saying, right, what do they want to build? It's the wider challenges. And I hope that came across in that. And for nuclear, we're making great progress. So if I look at for Urenco, we're now moving into the delivery phase, having spent time with them on a lot of the uranium enrichment. And it's not one big project. It's a sort of series of about 30 individual projects on a program of work with them. So we're doing that. We've got in North Wales, we're doing some decommissioning work of our existing old power stations for NRS doing that.

And then clearly, with Sellafield, we've got this 15-year program, and we've been helping to mobilize. So the first half of this year has been all about mobilizing it, get the clients' team ready, get our team ready. We've now got the pipeline of opportunities that we're starting to develop and design to be able to deliver that. And then we've got a pipeline of some pretty exciting stuff, which hopefully, we'll be able to talk about soon. The U.K. government has made a very clear state that it wants to have a sovereign capability around that nuclear capability. So they don't want to become reliant on other nations for the supply of anything within the nuclear area.

So what you're going to see is quite significant investments supporting the fact that we've got Sizewell C, but we've got SMRs, and that's a market that we are targeting to build a position in, but also some of the wider -- you've seen the uranium enrichment with Urenco is a clear thing that the government is saying, right, we're going to produce that ourselves. But there's a lot of other nuclear energy capability they want to build ourselves that we're actively engaged on. So yes, pretty an exciting place to be.

So visibility. So it's fairly usual for us to be at around about the 90% for current year, but the 91% for next year is much higher. We haven't given a number before, Joe, so I'm not going to do that now, but it is significantly better. And I think it comes from where we are in the growth trajectory, where we are in terms of design going into construction, as Alex was describing on Water and for example, roads, we've landed those call-off contracts within the frameworks. We've landed the design. We're actively going into construction. So that gives you really solid visibility into next year and indeed, the further year.

So yes, it's bigger. It's nice to have that visibility, but really, really crucially planning the resources around it. So we need to know we've got the right people in place, the right supply chain. And that's one of the reasons that we pay so well as well. There's a lot of work out there, which is great. But obviously, we've got some competitors who want the best as well. So we do everything we can to make sure we've got the best of both of those.

Pension plans, so it's great not to be able to talk -- not to have to talk about it too much. So, no cash contributions ongoing with the triennial we landed in January. We are looking at -- so what do we do with it, buy in, buyout versus run on, and we're actively doing some analysis at the moment. So no concrete plans, but we are obviously looking at it and keeping it under consideration as you'd expect.

Andrew Nussey from Peel Hunt. A couple of questions of three actually. If we start off with customer diversification, activity diversification, which has been a sort of key part of the strategy. Can you reassure us that on the sort of the day one risk-adjusted margin is acceptable and it's not been work secured in the hope of future workloads coming from that customer?

Second question on road. If we look beyond the M60 and the M5, do you still see that as a growth market for Costain, particularly given the news flow around focus on asset renewal and replacement rather than miles of new Tarmac? And then the third question, GBP 70 million of cash tied up in joint operations. If that could be restructured in a way with your partners, would that then lead to a review of the capital allocation strategy?

Secret's out. I'll let you cover the last one. So just in terms of customer diversification, we very purposely turned around a couple of years ago and decided that this business needed to diversify. It was, if you look back at Helen's slide, almost 70% of the business was the Department for Transport. Very big in rail, very big in road. And to grow the business, we felt we needed to break into other markets, which we've successfully done, as you can see. And we've grown -- and again, if we look at the quality of the customers that we're buying, we're being very selective about who wants to work with their partners in strategic long-term relationships, not one-off contracts. And every opportunity that we look at in winning those frameworks has the same risk appetite applied to it as we do on any of our other work.

So we're very clear about we really always want a Stage 1 that we basically get to jointly create the solution together, before we commit to what the price and the budget is. That's a common way of working with customers, even the new customers, and then we can get into executing and delivering it. So there's no discount or adjustment made for a future growth opportunity. We look at every opportunity on its merits against our criteria. And generally, everything, so if you look at this TfL Rail contract, it's a program of work that's going to be delivered over the next five years worth of work to go and deliver it, and it will be in that same style as will Dover, as will National Grid. So yes, pretty -- so we don't -- we certainly don't sacrifice returns just to get in with the customer.

The road market, look, definitely the type of work, so new -- great new build apart from the M5, which is going to be a great new build, but it's being funded by a data center who needs -- who needs the access. The M60 is exactly what you've just talked about. It's an existing junction that requires a total redesign and a rephasing because it is -- if you listen to a travel program, it is every single day, Simister Island will be on the news talking about how it's gridlocking Manchester because it's where three motorways come and converge, and that needs to be reconfigured. That is exactly the type of work that National Highways are going to be doing on their strategic network. It is about are there assets under distress that need doing or are there congestion pinch points that need. So that type of project will continue.

But we're seeing a lot more money being given also to the local roads. So the contract we've won for Norfolk County Council is to allow access for 4,000 new homes. So we're seeing a lot of that going around the country about what unlocks either data centers, homes or other economic drivers in the U.K. So -- and also, we do maintenance. So we maintain all of the highway infrastructure in the Northeast of the country. So we grit the roads. We maintain them. We cut the grass. So there's a whole lot of work that we do there that will continue as well. So we're pretty confident that, that market is going to continue to be an attractive place for us as well as the other exciting things that we've added to make us a much broader transportation business.

So GBP 70 million of cash tied up in joint operations. So yes, we always talk about our cash as what's liquid. Cash does flow through from joint operations into us, but obviously, it's not fully liquid. It's a chunk of cash. It's from a couple of joint operations, one of which you won't be surprised to hear is HS2 with our JV arrangements with SCS, in SCS. So clearly, it would fundamentally change our liquid cash balance and therefore, would lead us to consider it. But we do have to negotiate that. We do have to think about what's appropriate for ourselves and our joint venture partners in those operations. So it's absolutely something we're looking at, but not something we have any certainty on yet.

Jonny Coubrough from Deutsche Numis. I'm just looking at your market pipeline, Slide 20, and the reservoir program isn't there. So is that beyond 2032? I think you mentioned, Alex, GBP 50 billion program. Is that right? So could this replace your HS2 workload on a run rate basis as we go into the 2030s? And probably a follow-up question from Andrew. Would this be JV-ed? And what would the cash dynamics be? And sorry, last one, more broadly, generally, you haven't seen big working capital swings in your business, but we're seeing some infrastructure markets like power become more cash generative. Are you seeing that in any of yours? And could that be the case in Water, for example?

Yes. So look, the reservoirs isn't on there because the regulator hasn't necessarily provided the capital for there. So what we've put on there is what the regulators basically signed off even though everyone knows I was in meetings with DEFRA last week talking to them about the reservoir program. So it is critical. Those 23 reservoirs do need to be built.

And where Costain positions itself is quite key. So there'll be some reservoirs that we won't go for. So for example, White Horse for Thames Water because they're looking for a DBFO partner. The terms and conditions could -- are likely to be fixed price lump sum. That's a type of contract that we wouldn't go for, whereas there are others that are being funded by the water companies, and they want to work in a similar way to the way we deliver the water infrastructure at the moment.

But again, where we've positioned ourselves with White Horse at the moment is we are the clients' enabling works partner. So we've been doing all of the trials to proof prove the design of the reservoir. And also, we're doing all the -- overseeing all the archaeological surveys and service diversions and all of that at the moment. So again, getting in there. So where exactly we choose to position ourselves will depend on risk profile and also where we think we can add the most value. So yes, that's sort of still up in air.

And in terms of replacing HS2, our HS2 contracts are going to continue until late in the 2030s. And the growth in the balanced portfolio of the business is what fulfills any decline in HS2. So this isn't about one major project being replaced by another major project. If I look at the growth at Gatwick, I look at the growth in Energy and right across when we look at our business, we can see an even more balanced portfolio of business in the future even without HS2 in it. Although at the moment, we've still got HS2 in it for a long, long time.

I think there are the frameworks that we've won, I think it's important to recognize that there are call-off contracts within the framework even though they're very large framework values. There's a much steadier stream of work that comes through from there, and they're all two-stage where we're designing and then going into construction. So that diversity of customer sector, procurement cycles and so on just all helps to smooth the overall shape for Costain. So we don't have any cliff edges at all. And Reservoirs, I guess, we view that as an additional opportunity. So absolutely, we'll look at it. But it's all about the risk profile, as Alex said.

Working capital swings.

Working capital swings. We wouldn't take anything on that is going to put us under stress. So everything that we're looking at, at the moment is very similar in cash shape. It tends to be that we pay out our suppliers and then we receive in on a monthly basis. So as I've said before, the real key in this sector is managing the design, managing the scope, managing how you deliver on the ground such that you don't have issues with the customer. You don't have balances tied up in work in progress and then the cash does flow in a fairly steady fashion.

Are we done? Rather than me standing there, if you don't mind, I'll just conclude now. Look, thanks very much for taking the time to join us. I hope it's a bit cooler out there for you when you do get out there. Look, it's a really exciting time for Costain. We've made tremendous progress in building a much broader business, strength in the performance is coming through, and we've got a really exciting future. So thank you very much. See you soon.

Good morning, ladies and gentlemen. Welcome to the Costain Group PLC Full Year Results Investor Q&A session. [Operator Instructions]

Before we begin, we would like to submit the following poll. I would now like to hand you over to the team from Costain Group PLC, Matt. Good morning, sir.

Good morning, and thank you very much. Thank you, everyone, for joining us for the Costain Full Year 2025 Results question-and-answer session hosted by Investor Meet. I am joined this morning by Alex Vaughan, Chief Executive Officer; and Helen Willis, Chief Financial Officer.

As I said, this is a Q&A session. So we won't be going through the presentation. You can download that from our website. The webcast from the analyst presentation yesterday is also available for viewing on the website and the assumption is that you would have gone through those slides already.

So what I will do is hand over to Alex to make some opening remarks. And then we do have some pre-submitted questions, which we will then turn to. But just to remind you, you can ask questions now on the platform. So I encourage you to please ask anything you have while you have the time, of Alex and Helen.

Alex, thank you over to you.

Yes. Thanks very much, Matt, and good morning, everyone. I hope you're well. So look, just to sort of take you through the highlights of the results that we announced yesterday. So we're very pleased to report, as expected, we delivered another strong performance through 2025, which really reflects the quality of the contract portfolio that we have and how we and our teams expertly deliver it.

We announced that we grew operating profits by 9% to GBP 47.1 million, which is ahead of consensus, and we delivered margins of 4.5%, making good progress towards our ambition of 5% industry-leading margins. As a result of the strong cash generation that comes off delivering that growth in profits and the actions that were taken on our legacy defined benefit pension scheme, we further strengthened our balance sheet and have announced increased returns to our shareholders. So we've increased dividends to our target of 3x cover. And we've yesterday launched a GBP 20 million share buyback. That's our -- now our third share buyback that we've gone on to. And I think everyone has seen that the strong performance of the company recently has seen us return to the FTSE250 this month, which is an important milestone for us and shows the development of the company.

We remain set to benefit from committed investment in essential critical infrastructure. We've highlighted in our presentation the government's national infrastructure strategy that sets out a road map for GBP 725 billion worth of investment in infrastructure over the next 10 years. And on Monday, the government had updated its infrastructure pipeline that sets out that committed investment that's going to happen. And we're certainly seeing that this investment in essential infrastructure to meet those national needs is happening. And we've continued to secure further high-quality work, now having a record forward work position that was up 30% in the year to GBP 7 billion, which is over 6x our revenues and underpins the growth for the business that we've highlighted for 2026 and a step change in 2027 and beyond.

And the presentation that we included with the results set out very clearly a lot more detail around that forward work position in terms of the changing customer mix that we've got, which increases the resilience of the business and supports the confidence in the returns that the revenues that we'll be delivering in 2026 and 2027. So these are exciting times for the business. We're in great shape and moving forward at pace. Thanks, Matt.

Great. Thank you very much, Alex. So let's turn to the pre-submitted questions. The first one is for you, Alex. So we've referenced the step change in performance that is expected for 2027 financial year. Since that will soon be upon us, can you give us a bit more disclosure around the drivers of that and why you feel as certain as you can be in achieving that? How much of that is down to new business that we -- that you know is coming in that reporting period? And how much of that is driven by margin improvement? And if it is driven by margin, how much of that is down to pricing or cost reductions?

Yes. Thanks. Great question. And one of the things I sort of highlighted yesterday is that most of the questions that we received were about the future, which was really great to be able to talk about because it's very positive. So if you get a chance, do have a look at the results presentation that we ran everyone through yesterday because in there is a lot more detail that will help answer this question. What we set out in the results presentation was how much work that we've got secured moving forward.

So we've got 90% of our work for 2026 already secured, which gives us great confidence that we will be able to deliver 2026 in line with expectations. And in the presentation, we also highlighted that we had GBP 2.4 billion worth of forward work for the period 2026. So again, that should give everyone confidence that it is the increased volume of work that's coming through that's going to deliver that step change in 2027 that we've talked about, and I've now talked about it twice more today.

So we never miss the opportunity to talk about it. And this comes from growing work in the business, certainly in water as we are now in AMP8, and we're moving from the design phase where we were in 2025 into delivery. And certainly, that will come through in the second half of 2026 and 2027 will receive a good volume of that water growth. And just to remind you, we've highlighted that investment in AMP8 is twice the levels it was in AMP7. So we're really seeing that water growth come through, and that is a big part of 2027.

Also, we've got a number of new road contracts. So those will be in full delivery through 2027. And our work in aviation continues to grow, and we highlighted yesterday that we've also been now awarded 2 frameworks for Gatwick Airport. So good to see that coming through. And also the nuclear energy, where we've won a very large contract for Sellafield, and that work will be coming through, and we'll be delivering that in 2027. So the margin that we're saying is coming through is going to be pretty consistent. So we signaled yesterday that whilst we've delivered 4.5% margins for 2025. For 2026 and 2027, our margins will be sort of normalized around about 4%, which is industry-leading and well on our way to deliver the growth to 5% margins.

So -- and if I sort of look at those margins, what's it driven by? It's driven by the quality of the contract portfolio that we have, really good contracts, long term in nature, and we get to develop the design and develop the pricing and develop the schedule with the customer before we make any commitments, which is great. So really good from a risk management point of view. And we've also got the consultancy services that we provide continuing to grow. And we've got an opportunity for greater productivity to still drive over and above that 4% margin.

So in a really good place. So I hope that gives you confidence to understand why we talk about the confidence in 2026, step change in 2027 and the strength of most of that coming through new work being won, but really solid margins in the business.

Great. Thank you very much, Alex. I will pass over to Helen now, I think, for the next question, if I may. So the question is around margins and costs. So we achieved an operating margin of 4.5% for 2025. But just looking at recent events, there's likely to be cost increases in oil-related products and labor. Do you think this will have an impact on margins for us this year? We do have a related question on this coming through this morning from [ Gary B. ], which is around the ongoing inflation and supply chain pressures and how well our contracts might be protected from these type of cost increases. So we wrap that into this question, Helen. And then separately, but along the same lines, given recent events and the potential for interest rate rises, might that help our net cash position going forward as well?

Okay. Thanks, Matt. So on the sort of inflationary pressures that most businesses will be facing, I mean, this is a sort of 2-part answer to the question. Commercially, our contracts do protect us against inflation. And so it's not an immediate concern for us. But there's a corollary to it as well, which is that we need to, therefore, help our customers, because they will be feeling that inflationary pressure. So we work very hard with our customers to think about the solutions and outcomes that they're driving for, and we work very hard to help them to find more effective and sort of lower cost solutions to delivering those.

So initially, not a risk for us, but something we're very alive to, and we need to work very hard with our customers to help them to alleviate those spend pressures. And that goes across materials and people. So the 4.5% to the 4%, as Alex has said, it really is -- the 4% is our normalized view for our portfolio, 4.5% in 2025 is because we had a higher number than usual of contract completions that did complete very well and were cash backed. So 4% is what we consider to be normal and prudent, and then we will layer on those additional factors that Alex just mentioned. So that's margin.

Yes, interest rates for us, we have cash. We don't have any borrowings. And so if the interest rates stay higher than we thought, then we will absolutely benefit from that higher interest rate on our sort of fairly sizable cash balances and you'll see. We talk about our cash as costing cash and then cash held in joint ventures. So both of those balances are earning interest. So yes, we're protecting ourselves against, I guess, and that is a silver lining for what everyone is going through at the moment, yes.

Okay. Thank you very much, Helen. Next question from [ Chris G. ]. I'll put to Alex. So it is, again, related really to the current global economic uncertainty. And given that, do you have any, I guess, initial views on the strength of our contracts that are underway and the risk of those getting postponed or canceled if the government finds funding to come under pressure. For example, HS2, we've seen some pushouts before. Is there risk around some of those contracts?

Yes. Look, [ Chris ], thanks very much for that question. Look, clearly, uncertain times for everyone in the Middle East and not where any of us would like us to be. But just to give you some confidence, I had a meeting with government with treasury on Monday. And they've reconfirmed that this investment in infrastructure from their point of view is, to use their words, both essential and crucial. Very clearly, the government is focused on driving prosperity, growth in the economy and to improve the productivity of the U.K. as well as resilience. So we can see now around energy, the need for us to have a resilient lower-cost energy system.

So very clear message from government was that, that investment has got to happen, and it's going to happen, and we've been -- we've now got a lot of that in our forward work position. But also a lot of the investment comes through committed regulations. So those companies have now signed up to regulatory commitments that they have to meet. Those aren't discretionary. They've got to make that investment. They've got to achieve the improvements that they set out. And so that investment will be coming through. And we've purposely positioned this business to be focused where the nondiscretionary investment is going to be made. And it's been a long time that we've had a number of factors globally affecting the U.K. economy, and that's one of the reasons why our strategy has focused on that nondiscretionary investment.

So we're very confident that, that investment will come through. We can see it because of the long-term nature of our contracts, we can see it coming through. We know it's essential. We know it's crucial. And certainly, all the conversations that we're having is that there will be no change in that investment coming through, and we're very confident in certainly 2026, '27 and beyond.

Thank you, Alex. I actually had a follow-up question from [ Chris ]. He is asking, so if you were to look into your crystal ball, is there a share price you have in mind that you think would truly reflect the value of Costain and its potential going forward?

If I -- well, [ Chris ], great question. If I had a crystal ball that could foresee things, I'm not sure I would be the Chief Exec of Costain. I'd probably be on a yacht somewhere. But look, I think, everyone has turned around and said, we're very pleased with the reaction to the share price yesterday. I think that just demonstrates people's confidence in the growth prospects for this business and the direction of travel and the fact that we're doing what we said we were going to do, which is -- which we're very pleased with. And all the feedback that we've had is that investors believe that there's still much more room for us to grow. And if I look at yesterday's results, we didn't upgrade our numbers. We did what we said we're going to do.

So it's just confidence in the business, and there's still more to go. So the share price should be higher than it is today. And we've got big ambitions for this business that would unlock further value for the business. So I'm certainly not going to put a forecast out there. I'm certainly not going to make a comment other than we believe there's great value still to come in Costain. Helen, anything to add on that?

No. And I completely agree with you, Alex. We believe us to be currently undervalued. We're signaling that we're going to grow. And all of that should work its way into increasing the share price. So yes, we're very excited about that.

Great. Thank you. Just another question, just in. I'll come to Helen for this one, which is a broad question really about how we manage contract risk across sort of long-term framework projects. So just a broad, how we go about it.

Fantastic question. It's so important for us, managing risk for ourselves and for our customers is really at the heart of our company performance. So we've worked really hard over the last few years on exactly that topic. So it starts with winning the right business, and we've talked about the forward work position of GBP 7 billion having the right risk profile. So we've invested in expertise to help us think, first of all, develop the right business, then to scrutinize the opportunities that we are working on to understand the risk profile, to mitigate those risks in terms of how we price our contracts, how we share risk between ourselves and our customers and therefore, get into contracts that protect us -- incentivize us clearly because customers want us to work with them, but protect us in a way that wasn't always the case in the past.

So that's winning the right business. There's a lot of work that goes into that, a lot of different sets of expertise, financial, legal, commercial, risk specialists along with what you would expect in terms of how deliverable is the contract. So lots of different sets of expertise coming into that assessment, and we believe that the forward work we have now represents exactly that, the risk profile that we can manage. And then you go into delivery, and it's constant scrutiny by really good people throughout the business driving delivery, driving it really hard. Focusing on safety, a safe site is one that's going to be successful overall. That's what I've learned in my 5 and a bit years here, running a site really well, you're running a project really well. And that takes very good people with good processes and plenty of review and scrutiny and always challenging ourselves to be better.

So it's something we're constantly striving to do better. We think there's more we can do to be more efficient. We're always striving to be the safest we possibly can be and therefore -- and to be as predictable as possible. And you can see that in the quality of our results over the last few years in that margin improvement. So it's the thing that we talk about every single day, and we're always striving to be better.

Great. Thank you very much, Helen. It looks like there's one final question, which I will take, I think. It's from initials R.W., who starts by congratulating yourselves on the share price reaching a new sort of post 2019 high. But then he expresses some irritation, which I share, by the way, about the -- our RNS feed getting clogged up with UBS holding notices where they're shifting their position around. So -- and you've asked whether there's any way we can do away with those by checking with the FCA as to whether they're necessary.

So I absolutely share that frustration and irritation. We have done lots of checks on this. We have unfortunately been told that this is a result of UBS essentially moving their holdings between different accounts within their bank. Some of those accounts are disclosable and some aren't. So that is our understanding from what is taking place there. We will continue to try and find ways to see if we can work with UBS to stop that, but it is an unfortunate just outcome of how UBS are holding that position at the moment.

One more just come in as I answered that question from [ Daniel ]. I will put this to Alex. So back on margins, is it theoretically possible for the business to ever get to a 10% operating margin? Or should -- is that something which would be inconceivable for this type of business to get to?

Is that from [ Daniel ]? I love [ Daniel's ] challenge. So look, do we think we're worth 10% margin? Yes. But realistically, that would be very challenging in this marketplace. It's never been seen before anywhere. I think doing what the business does today, I think, the margins that we're earning are at the top end of the marketplace. Certainly, 4.5% that we delivered for last year is industry-leading. And we've set a very clear ambition that we want to get to 5% margins, which we think would be really top of the market and would represent the good value for the business.

So I honestly can't see a way to get to 10% margins doing what we're doing. But all I can say is that this business in this market is operating at the highest margin levels that are around, which is a measure of the quality of the contracts that we've got and the caliber and expertise of the teams that work in Costain every day. So we're very proud of it, but not satisfied.

Thank you very much, Alex. So that does seem to be all of the questions that we have come through this morning. Thank you very much to everyone. Some great questions there. Given there are no more, I will just hand back to Alex, I think, for some closing remarks and then hand back to our presenter.

Yes. So look, thank you very much for joining this call this morning. Thank you for your questions. And thank you mostly for believing in Costain and being an investor in Costain. We really appreciate you taking the opportunity to engage with us. These are exciting times for investment in infrastructure, in creating prosperity for the U.K., resilience in the U.K. and to decarbonize the U.K. We're proud of the role we're playing, and we're really proud of the progress we're making in growing shareholder returns for our business and making a difference. So thank you very much, and take care. Look after yourselves.

Perfect, guys. That's great. If I may just jump back in there. Thank you very much indeed for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback.

On behalf of the management team of Costain Group PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.

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.