Costain Increases Profit, Cash and Shareholder Returns as Order Book Reaches Record £7bn

Costain (LSE:COST) reported another year of profit growth despite lower overall revenue, with adjusted operating profit rising 9.3% to £47.1 million and operating margins improving to 4.5%. The improvement reflects the company’s strategic exit from lower-margin road contracts alongside strong performance in its natural resources and integrated transport divisions. Net cash increased to £189.3 million, supported by solid free cash flow, enabling the group to raise its dividend and continue share buybacks as it prepares to rejoin the FTSE 250 index.

The company’s forward work position expanded by 30% to a record £7 billion, representing nearly seven times annual revenue. This increase was driven by new contract awards and extensions across multiple sectors, providing strong visibility over future workloads. Management said the robust pipeline, together with opportunities linked to the UK’s long-term infrastructure investment plans in areas such as water, energy and aviation, supports expectations for further revenue and profit growth in 2026, with a more significant performance uplift anticipated from 2027.

Costain’s outlook reflects a strong financial position, supported by stable operational performance and continued contract wins. Technical indicators also point to positive momentum in the share price. However, relatively modest profit margins and some pressure on cash flow efficiency remain areas the company aims to improve. Overall valuation appears balanced, with the combination of solid fundamentals and a strong order book supporting a favourable outlook for the stock.

More about Costain

Costain Group is a UK-based engineering and construction company specialising in complex infrastructure projects across transportation, natural resources, energy, defence and water sectors. The company primarily works on large-scale, long-term projects for government bodies and regulated customers, benefiting from multi-year investment programmes and collaborative framework agreements focused on national infrastructure development.