Costain (LSE:COST) delivered further growth in the first half of 2026, with a stronger cash position and record forward work providing increased visibility as the infrastructure group prepares for what management expects to be a significant acceleration in growth from 2027.
Revenue increased 3.4% to £543.1 million, while adjusted operating profit rose 3%. The adjusted operating margin was maintained at 3.2%, demonstrating continued profitability as Costain positions the business for its next phase of expansion.
Management views the current period as an inflection point, with recently secured contracts and major infrastructure programmes expected to translate into stronger activity over the coming years.
Net Cash Rises Despite Higher Shareholder Returns
Costain’s net cash position strengthened to £164.4 million, improving year on year despite increased dividend payments and continued expenditure on share buybacks.
The balance sheet strength allowed the board to double the interim dividend, reflecting confidence in the group’s financial position and future cash-generating potential.
Costain’s improved liquidity also provides flexibility to invest in growth opportunities while continuing to return capital to shareholders.
Record £7 Billion Forward Work Provides Revenue Visibility
The group’s forward work reached a record £7.0 billion, providing substantial visibility over future revenue. The secured workload covers approximately 91% of forecast revenue for both 2026 and 2027.
Activity is expected to strengthen during the second half of 2026, supported by projects across the water, airport and road sectors.
The scale of the order book provides a foundation for management’s expectation of a step-change in growth beginning in 2027, when several major infrastructure programmes are expected to contribute more meaningfully to revenue.
Costain is particularly well positioned for investment associated with the AMP8 water cycle, alongside continued spending on transport infrastructure and other nationally significant projects.
Improving Fundamentals Support Outlook
Costain’s outlook is supported by improving profitability, a strong balance sheet and healthy cash generation. These measures point to a substantially stronger financial position than the company experienced during 2020 and 2021.
Technical indicators also remain constructive, with Costain shares trading above key moving averages and MACD in positive territory, while broader momentum is relatively neutral.
Valuation appears reasonable rather than particularly inexpensive. The principal financial concern remains the longer-term decline in revenue recorded over recent years, making delivery of the expected growth acceleration an important test of the company’s strategy.
The record order book and high level of revenue coverage provide greater confidence in that transition, although successful project execution will be necessary to translate secured work into sustained revenue, margins and cash flow.
More About Costain
Costain Group is a UK infrastructure solutions specialist operating principally across transportation and natural resources.
The company delivers complex infrastructure programmes spanning roads, rail, aviation, water, energy, defence and nuclear energy. Its business model is centred on long-term relationships with government departments, regulated utilities and other major infrastructure clients.
Costain is positioned to benefit from sustained UK infrastructure spending, including investment associated with the AMP8 water programme and major upgrades across the country’s transport, energy and strategic infrastructure networks.
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