The Costain group has substantially reduced its pension deficit payments, after its triennial review revealed a £58.7m surplus on an IAS 19 basis.

This marks a fall on the £86.2m surplus recorded in H1 2022, which Costain attributed to the impact of a reduction in the value of scheme assets being slightly greater than the reduction in scheme liabilities, primarily driven by performance of the growth assets.

Alongside the triennial valuation, the group agreed a new contribution plan for the Costain Pension Scheme, to run from 1 July 2023 to 31 March 2027.

The new agreement will require a payment of £3.3m per year, payable in pro rata monthly instalments, which will increase in line with inflation (CPI) each 1 April.

This replaces the previous contribution plan to the scheme, which from April 2023 had increased to an annual payment of £11.98m paid in monthly instalments.

As a result of the new contribution plan, the full year 2023 pension contribution payment by the group will total £7.4m, and payments for 2024 and thereafter will be £3.3m annually, plus inflationary increases.

An assessment of the scheme funding position will also be carried out each 31 March and, if the funding level (on a Technical Provisions basis) is more than 101 per cent, contributions will stop from the following 1 July to 30 June.

However, should the funding level fall below 101 per cent at the following 31 March, contributions will resume for the next year starting 1 July to 30 June at the agreed new level.

The group’s dividend parity agreement will also remain in place until 31 March 2027.

Under this agreement, an additional matching contribution (the excess of the total dividend above the scheme contribution) to the Costain Pension Scheme will be made when the total of the interim and final dividends for a financial year paid to the shareholders of Costain are greater than the contributions paid into the scheme in the previous Scheme financial year.

However, if the funding level is above 101 per cent as at 31 March each year, then no contributions will be payable in respect of dividend parity for the following year.

Commenting in the interim results, Costain chief executive officer, Alex Vaughan, stated: "Costain's performance in the first half of 2023 demonstrates the strength and resilience of our business, with an increase in adjusted operating profit supported by the robust growth in Natural Resources, resilience in Transportation and continued positive cash generation.

"In the period, we delivered important actions to strengthen our balance sheet, including finalising our actuarial pension review, and securing the refinancing of our banking and bond surety facilities; both of which increases our ability to generate further cash for the group.

“The increase in operating performance and the positive outcomes regarding the pension review and refinancing, enables the board to consider the resumption of dividend payments, including the payment of an interim dividend in respect of the period to 30 June 2023.

"There remains a positive outlook across our markets, while recognising the short-term rephasing of the government's transport spending.

"Our expectations for 2023 remain unchanged and we continue to be confident in the group's long-term prospects."

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