Costain Group – a cash-rich balance sheet, a record Order Book and only trading on 12.8 times earnings, these shares now 194p offer massive upside!

Mark Watson-Mitchell
9 minutes ago
5 min read

Mark Watson-Mitchell - 15.06.2026

‘We improve people’s lives by creating connected, sustainable infrastructure that enables people and the planet to thrive.’

It was about this time last year that the £517m-capitalised Costain Group (LON:COST) announced an Interim Trading Update, relating to the six months up to end-June 2025.

It also announced a £10m Share Buyback programme.

In March this year, it announced another such programme, but larger, this time seeking to repurchase £20m of its stock, by way of two tranches of £10m each, to be completed by the end of this year.

The recent contract wins by this leading infrastructure group have seen it maintain its record Order Book.

I foresee its shares, now 194p, rising to at least 240p.

The Business

Costain Group is a British construction and engineering company headquartered in Maidenhead.

Founded in 1865, its history includes extensive housebuilding and mining activities, but it later focused on civil engineering and commercial construction projects.

It was part of the British/French consortium which constructed the Channel Tunnel at the end of the 1980s and has been involved in Private Finance Initiative projects.

The sustainable infrastructure solution company is focused on four key UK markets with long-term investment in infrastructure: transport, water, energy, and defence.

It operates through two segments: Natural Resources and Transportation.

Its sectors include road, rail, integrated transport, energy, water, and defence and nuclear energy.

Its road sector provides a full range of services to support investment across the road network, increasing capacity, cutting emissions and supporting the UK economic stability.

Its energy sector creates and delivers energy security for the UK with focus on energy transition, energy resilience, and energy connectivity.

The company is involved in research and development in its highways, integrated transport, aviation, energy, defence, water, and rail sectors.

AGM Trading Update

On Thursday, 14^th May, the group issued an AGM Update stating that trading was in line with expectations, with revenue growth and further adjusted operating profit growth anticipated for FY 26, targeting an industry-leading adjusted operating margin of around 4.0%.

The company stated that it expects FY 26 revenue and adjusted operating profit to be second-half weighted due to increased activity and contract mobilisations.

Costain anticipates a net cash position of approximately £175m for FY 26, despite a share buyback programme and increased dividend payments, and has extended its £100m revolving credit facility and £295m bonding facilities to September 2030.

The group's forward work position remained broadly consistent with the £7bn booked at the end of FY 25, with a strong pipeline of opportunities across its chosen markets, including significant wins with private and regulated customers like United Utilities and National Grid.

Recent Wins

In mid-March, the group announced that it had secured a new contract valued at approximately £45 million with Severn Trent to undertake critical infrastructure upgrades at the Rugby Newbold Sewage Treatment Works, with work scheduled to continue until 2028.

As the principal contractor and designer, Costain will focus on constructing new facilities and enhancing existing systems to improve operational resilience and increase the site's capacity.

This award extends Costain's long-standing partnership with Severn Trent, which began in 2010 and has spanned multiple regulatory cycles, reinforcing Costain's track record in delivering essential infrastructure solutions.

In early April, Costain secured places on Lot 11 and Lot 12 of The North West Contractor Framework, with a total estimated value of £120m and covering infrastructure projects worth between £15m and £30m, whilst Lot 12 has a total estimated value of £144m and covers projects worth more than £30m.

Early in May, the company declared that it had been selected by Dover Harbour Board to deliver critical upgrades as part of its Project Contractors Framework.

Costain was selected for Lot 1, Utilities, and its responsibilities will involve refurbishing and replacing a variety of essential utilities distribution systems serving the Port of Dover, with a focus on enhancing asset value and embedding decarbonisation.

Last week, on Tuesday, 9^th June, the company noted that it had been selected by Transport for London as one of three contractors for its Infrastructure Improvement Framework, valued at approximately £700m over a two-year term with a potential two-year extension.

This multi-discipline framework will involve Costain providing design, engineering, programme delivery, and supply chain management for major transportation infrastructure projects across London, including upgrades at South Kensington tube station and the step-free access programme.

This award continues Costain's long-standing partnership with TfL, now extending over 25 years.

Costain chief executive Alex Vaughan said:

“We are a trusted, long-term partner of TfL, and our growing relationship with this important customer is testament to our proven track record in delivering best-in-class infrastructure services across the capital.

Upgrading London’s transport network is critical for a more prosperous, resilient and decarbonised UK.

We look forward to bringing our capabilities in engineering, design and construction to deliver high-impact projects on time and on budget, underpinning London’s growth for future generations.”

The next day, Wednesday, 10^th June, the group announced that it had been awarded a place on two framework contracts with London Gatwick.

The airport’s Civils Framework and Buildings Framework cover a range of capital projects to upgrade and modernise its infrastructure, support growing passenger demand, and enhance resilience.

The frameworks will run for a four-year period, with an option to extend by a further two years.

Costain’s experience in delivering sustainable infrastructure solutions will support London Gatwick’s programme of major capital investment projects to enhance the airport’s operational efficiency, resilience, capacity and sustainability.

The frameworks will deliver multiple design and construction projects both airside and landside.

The company is currently delivering critical infrastructure upgrades, including baggage systems at Heathrow Terminal 2 and various civil works for the Manchester Airports Group.

The Equity

There are some 266.85m shares in issue.

The larger holders include Gresham House Asset Management (Investment Management) (10.73%), BNP Paribas Financial Markets (5.89%), Gresham House Asset Management (5.62%), J.O. Hambro Capital Management (5.02%), FIL Investment Advisors (UK) (4.74%), KBI Global Investors (3.15%), OP Asset Management (3.04%), BlackRock Investment Management (UK) (1.91%), HSBC Global Asset Management (UK) (1.29%), SEB Funds AB (0.96%), and Ninety One UK (0.93%).

Broker’s Views

Six analysts closely follow the group’s progress.

The consensus average estimates for 2026 are for £1,233.2m sales, adjusted operating profit of £50.5m, with adjusted earnings per share of 15.1p, as well as the group having a net cash balance of £180.5m at the year-end.

For 2027, the average estimates are for £1,398.5m sales, £58.2m profits, 17.5p earnings and with an end-year net cash of £195.7m.

Looking further forward into 2028, the analysts go for £1,487.0m revenues, £62.4m profits, 18.6p earnings and £219.1m cash at bank.

Analyst Max Hayes, at Cavendish Capital Markets, rates the shares as a Buy, with a 297p Target Price.

Berenberg Bank last week reiterated its Buy rating on the group’s shares with a 240p Target Price.

My View

The group has stated that the next scheduled trading announcement will be its half year results on Thursday, 13^th August.

However, between now and then, I will look for further corporate statements on contract wins and current trading prospects.

At just 194p, trading at 12.8 times current-year earnings and only 11.1 times prospective earnings, this group’s shares offer balance sheet strength, a significant Order Book, and a mass of upside potential – with 240p as an easy price objective.