Costain Group (LSE:COST) has been awarded a three-year extension to its Managed Service Provider contract with United Utilities.
The infrastructure services group first won the role in 2019, and the extension takes the partnership through the remainder of the AMP8 regulatory cycle, United Utilities' current five-year investment period.
More than 120 Costain professionals deliver replacement, refurbishment and asset upgrade work across United Utilities' network in the north west of England.
Under the framework to date, Costain has completed more than 900 capital maintenance projects and approximately 9,000 responsive maintenance activities, helping United Utilities meet more than 160 regulatory commitments ahead of schedule.
United Utilities is investing £13.5bn in regional water and wastewater infrastructure during AMP8, up from £3.8bn in the prior AMP7 cycle, with an option to extend the Costain relationship to the end of AMP9 in 2035.
"We are a long-term, trusted partner to United Utilities and this latest extension is testament to our track record of delivering predictably and consistently", said Alex Vaughan, chief executive officer of Costain.
The extended contract keeps Costain embedded in United Utilities' capital programme through the current regulatory cycle, with the option period stretching visibility toward 2035.
In London, Costain shares traded on the front foot, up 3.6% changing hands at 214.5p.
Panmure Liberum repeats a Buy rating
Panmure Liberum analyst Joe Brent says the United Utilities contract extension strengthens Costain's growth outlook and follows the positive Norfolk Roads win.
The broker repeated a buy rating, and a 245p price target (versus the current market price of 214.5p), and the analyst points to an expected positive trading update on 13 August as the next catalyst.
Brent estimates the UU deal at roughly £200m over three years alongside a c.£900m capital budget and models a 67% EPS weighting to H2, and, he added that a CY27 P/E of 11.1x is too cheap given the growth on offer.
