Costain Group – Record Order Book seven times 2025 revenue, AGM Update due soon, mkt cap £482m, net cash £189m, shares at 181p, brokers TP 297p

Mark Watson-Mitchell
2 days ago
4 min read

Mark Watson-Mitchell – 27.04.2026

In just over two weeks, on Thursday, 14^th May, my favourite infrastructure business, the Costain Group (LON:COST), will be holding its AGM to cover its year to end-2025.

Seven weeks ago, the £482m-capitalised company declared its 2025 results, showing a strong performance, with adjusted operating profit increasing by 9.3% to £47.1m and an improved adjusted operating margin of 4.5%.

Revenue for the year was £1,045.7m, down from £1,251.1m in FY 24, primarily due to a reduction in the Transportation sector offset by growth in Natural Resources.

The company achieved a record forward work position of £7.0bn, representing a 30% increase and nearly seven times its FY 25 revenue, providing significant visibility for future growth.

Strong cash generation resulted in a net cash balance of £189.3m, enabling increased shareholder returns, including a planned £20.0m share buyback programme in FY 26 and a proposed final dividend of 3.2p per share.

The group’s shares were trading at around 170p before the results and subsequently touched 206p a month later, before gradually drifting back to the current 181p.

At the current level, just two weeks ahead of issuing its AGM Trading Update, the group’s shares have very strong investment appeal – especially as it is now in the FTSE 250 Index.

The Business

Costain has been improving the lives of people for more than 160 years, by creating connected, sustainable infrastructure that enables people and the planet to thrive.

Through the delivery of predictable, best-in-class solutions across the transport, water, energy and defence markets, it is creating a sustainable future and securing a more prosperous, resilient and decarbonised UK.

It offers a unique mix of construction, consultancy, engineering and digital services, working strategically with its customers and suppliers to meet critical national needs.

Operating through two main segments: Natural Resources and Transportation, the company offers various services, such as consultancy and advisory, digital technology solutions, and complex programme delivery.

It shapes, creates and delivers pioneering solutions that transform the performance of the infrastructure ecosystem.

Management Comment

With the 2025 Finals, CEO Alex Vaughan stated that:

"I am pleased to report another strong performance, with 9% adjusted operating profit growth and a 4.5% adjusted operating margin.

Strong cash generation has resulted in a strengthened balance sheet and supports increased shareholder returns, with confirmation that we will proceed with a £20m share buyback programme in FY 26 and implement our target dividend cover of 3x adjusted earnings.

The Group is strongly positioned in structurally growing markets where significant long-term investment is being made to meet critical national needs, and where we work in long-term collaborative partnerships with an increasing number of customers.

Our forward work position has grown by 30% to a record £7.0bn, almost seven times FY 25 revenue, giving good visibility of future work and, combined with our strong balance sheet, underpins our confidence in delivering revenue and operating profit growth in FY 26 and a step change in performance in FY 27 and beyond."

Latest Contract News

This morning it has been reported by EnergyPathways (LON:EPP) that Costain has completed the initial engineering studies to locate potential sites for its long-duration energy storage project.

The energy transition company said the Mesh project at Barrow-in-Furness in Cumbria, the UK, is now entering its second phase for further site evaluation and front-end engineering and design for the onshore facilities.

EnergyPathways said the project will be connected to Britain's energy network through new and existing pipelines and transmission lines.

The development of the facilities is subject to financing and regulatory approvals.

That news follows on from the mid-March announcement that Severn Trent had selected Costain to deliver "critical infrastructure upgrades" at its Rugby Newbold Sewage Treatment Works, in a programme valued at around £45m and set to run until 2028.

Costain stated that it will be the principal designer and contractor, "designing and building new facilities and upgrading systems to improve operational resilience and increase the site's feed and storm capacity."

At that time, CEO Alex Vaughan commented:

"This new contract continues our long-term trusted partnership with Severn Trent built on delivering essential infrastructure upgrades that make the UK's water system more resilient.

This award is testament to our excellent track record of identifying construction efficiencies and delivering predictable, best-in-class solutions that maximise value for Severn Trent and its customers."

The Equity

There are some 266.71m shares in issue.

The larger holders include JO Hambro Capital Management (5.04%), FIL Investment Advisors (4.76%), Gresham House Asset Management (Investment Management) (4.45%), KBI Global Investors (3.17%), OP Asset Management (3.05%), Ennismore Fund Management (3.04%), BlackRock Investment Management (1.92%), Hargreaves Lansdown Fund Managers (1.71%), and HSBC Global Asset Management (UK) (1.29%).

Broker Views

There are six broking firms following the group, five of whom call the shares a Buy, the other as a Hold.

Analysts Joe Brent and Joe Walker, at Panmure Liberum, rate the group’s shares as a Buy, with a ‘sum-of-the -parts’ value of 220p per share.

For the current year to end-December, they look for sales of £1,245m (£1,046m) with pre-tax profits of £53.4m (£50.6m), lifting earnings to 15.4p (14.3p) and the dividend to 5.1p (4.2p) per share.

For 2027, they have £1,370m sales, £62.9m profits, 18.6p earnings and a 6.2p dividend per share.

The 2028 year could see £1,445m sales, £66.8m profits, 19.7p earnings and 6.6p dividend.

Over at Cavendish Capital Markets, analyst Max Hayes looks for 2026 to show £1,272m revenue, adjusted profits of £53.0m, 15.0p earnings and a 5.1p per share dividend.

For 2027, he sees £1,394m of revenues, £59.6m profits, 17.3p earnings and a 5.8p dividend.

The 2028 year could show £1,467m revenue, £64.3m profits, 18.7p earnings and a 6.3p dividend.

Hayes has a 297p Target Price on the group’s shares.

My View

Considering the group’s circa £7bn forward work position, and its balance sheet strength, I continue to feel that the analysts are too conservative in their ratings.

After having recently peaked at 206p, the group’s shares, now at 181p, look extremely investable.