Costain Group – Trading Update predicts strong second-half this year, £7bn Order Book, £172m cash, mkt cap £522m, making £1m a week profit, shares cheap at 196p

Mark Watson-Mitchell - 14.05.2026

Ahead of today’s AGM, Costain Group (LON:COST) has issued a Trading Update indicating that the business is performing in line with market expectations, while it is making good progress towards its step change in its 2027 full year.

In reaction, brokers have today upped their Target Prices on the group’s shares.

The infrastructure group that provides its services and support to the transport, water, energy, nuclear and defence markets, is boasting a record Order Book of some £7bn, with a pipeline of bidding opportunities remaining strong across all sectors.

That forward work position was split as: 51% with private and regulated customers, up from 30% two years ago; 31% with central government customers, down from 64% two years ago; and 17% with devolved government customers, up from 6% two years ago.

The pipeline and recent contract wins have come from United Utilities, The Department for Transport, London Gatwick Airport, Severn Trent Water, Thames Water, Port of Dover Harbour Board, Manchester Airports Group, National Grid, Procure Partnerships, National Highways and the Government Commercial Agency.

AGM Trading Update

The group reported that its trading is 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 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 remains broadly consistent with £7bn 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.

Broker’s View

Analyst Max Hayes, at Cavendish Capital Markets, considers that the group’s shares are a Buy, offering a 51% Upside to his Target Price of 297p.

He notes that Net cash is now expected to reach around £175m by year‑end, marginally ahead of its £172.3m forecast, despite dividend cash outflows almost doubling and the continuation of the £20m share buyback programme.

Hayes comments that activity levels are building across the business, reinforcing confidence in a strong 2H and underlining growing momentum into a step‑change in delivery against the broker’s FY27E forecasts.

His estimates for the 2026 year are for revenues of £1,272.0m (£1,045.7m) with adjusted pre-tax profits of £53.0m (£53.6m), lifting earnings to 15.0p (14.7p) and paying a dividend of 5.1p (4.2p) per share, with end-year net cash of £172.3m.

For next year, he sees £1,394.0m revenues, £59.6m profits, 17.3p earnings and 5.8p dividend, net cash of £179.0m.

For the 2028 year, he looks for £1,467.6m revenues, £64.3m profits, 18.7p earnings and a dividend of 6.3p per share, with £202.6m of net cash at the year-end.

He concludes that the current levels undervalue the quality and visibility of the secured order book and a balance sheet that supports both attractive shareholder returns and continued investment flexibility.

Over at Panmure Liberum, its analysts Joe Brent and Joe Walker have today upped their Buy note Target Price on the group’s shares from 220p to 245p.

They are going for a 67% weighting in the second-half year in 2026.

The analysts state that raising their Target Price from 220p to 245p reflects growing confidence about the step change in FY 27; a CY 26 P/E and yield of 12.7x and 2.6% are too cheap.

“We retain our BUY recommendation but increase our target price from 220p to 245p to reflect growing confidence on the step-change on FY 27.

Given the complexity of lease accounting, we believe EV/EBITDA is a good way to value construction businesses.

Assuming c.£30m of sustainable FCFe we estimate a FCFe yield of 5.7%.

The shares are trading on a P/E of 8.9x, assuming recovered FD EPS of 22p.

The shares remain too cheap given the exposure to the strong infrastructure outlook in the UK, the Energy Trilemma, Water and Nuclear, and £171m of expected cash on the balance sheet.

Costain's CY 26 EV/EBITDA of 5.9x is slightly higher than constructor peers, but Costain is more than just a constructor.

The dividend yield has improved following the near-doubling of DPS in FY 26.”

My View

At 196p Costain’s shares offer massive value and substantial upside.

The £522m-capitalised group is cash-rich and deserves a significantly higher market rating.

The UK Stock Market Price-to-Earnings Ratio Average is at 18.16 times – that would put its shares at 267p on historic earnings, 272p on current-year earnings, then up to 314p on 2027 estimates.

Costain Group shares, now at 196p, represent a very attractive investment in the UK economy, capable of rising to soon trade the 230p/260p price range.

The Interims will be declared on Thursday, 13^th August.

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Costain Transport