Costain Group Reports Strong Progress and Contract Wins in AGM Trading Update

Costain AGM trading update: in line, cash-rich and building towards a bigger FY 27

Costain’s AGM trading update is the sort of statement investors usually like to see: calm, confident and backed by decent numbers. The headline is simple enough – trading since 1 January 2026 is in line with the Board’s expectations, and management still expects revenue growth and further growth in adjusted operating profit in FY 26.

That matters because it suggests the business is executing properly rather than having to row back on guidance. In construction and infrastructure, where project timing can move around and margins can wobble, steady delivery counts for a lot.

Key numbers from the Costain AGM statement

Metric	Figure
Expected FY 26 adjusted operating margin	Around 4.0%
Expected FY 26 net cash	Approximately £175m
Share buyback programme	£20m
Shares bought back by 13 May 2026	2.1 million
Aggregate buyback spend so far	£4.0 million
Revolving credit facility	£100m
Bonding facilities	£295m
Facility expiry after extension	September 2030
Forward work at FY 25 year end	£7bn

Why Costain’s “in line with expectations” message is more useful than it looks

“In line with expectations” can sound a bit dull, but dull is not a bad thing when a company is mid-way through a financial year. Costain is also keeping its target of an industry-leading adjusted operating margin of around 4.0% for FY 26, which is a sign that profitability is not being sacrificed just to chase revenue.

Adjusted operating profit means profit from the core business, stripping out certain one-off or exceptional items. Investors should remember that adjusted numbers are management’s preferred view, but in this RNS there is no sign of any change in direction.

The more interesting line is the one about a “step change” in financial performance in FY 27 and beyond. That tells you management thinks the groundwork being laid now – mobilising contracts and ramping activity – should translate into a stronger earnings profile later on.

Second half weighting in FY 26: good opportunity, but execution now really matters

Costain says FY 26 revenue and adjusted operating profit will be second half weighted. In plain English, more of the year’s progress is expected to land later in the year rather than in the first six months.

There is a positive and a negative to that. The positive is that customers’ investment spending plans appear to be accelerating, which supports the idea of stronger delivery ahead. The negative is that second half weighting always creates a bit more pressure – management has to turn mobilisations into actual work and revenue on time.

So this is encouraging, but not a free pass. The half year results on 13 August 2026 will matter because investors will want evidence that the second half ramp-up is on track rather than merely hoped for.

Costain balance sheet strength stands out with £175m net cash and undrawn facilities

One of the strongest parts of this update is the cash position. Costain expects FY 26 net cash of approximately £175m, even after the partial unwind of historic working capital benefits, the ongoing £20m share buyback programme and almost doubling dividend cash payments.

That is a solid message. Net cash means cash exceeds borrowings, and in Costain’s case it gives the group flexibility if project timing shifts or bidding activity rises.

There is more reassurance in the refinancing detail too. Costain has extended its £100m revolving credit facility and £295m bonding facilities by a further year to September 2030, and the revolving credit facility remains undrawn.

That does not mean investors should ignore risk, but it does mean liquidity looks comfortable. For a contractor, strong cash and available facilities can be the difference between resilience and stress when markets get choppy.

Forward work stays near £7bn as Costain diversifies away from central government reliance

Forward work is basically the value of future contracted work and visible workload. Costain says that after allowing for revenue delivered in the period, forward work remains broadly consistent with the £7bn FY 25 year end position.

That stability is important in itself, but the mix has changed in a way that looks sensible. At the end of FY 25, 51% of forward work was with private and regulated customers, up from 30% two years ago. Central government customers were 31%, down from 64%, while devolved government customers rose to 17% from 6%.

My read is that this is one of the more important lines in the whole release. A broader customer base should make the business more resilient, because it is less exposed to one funding source or one political spending cycle.

Costain forward work mix at FY 25 year end

• 51% private and regulated customers – up from 30% two years ago
• 31% central government customers – down from 64% two years ago
• 17% devolved government customers – up from 6% two years ago

Market tailwinds in water and roads give Costain a supportive backdrop

Costain also points to two helpful external developments. United Utilities has increased its AMP8 capital investment programme by £2.5bn, or around 30%, to £11.5bn. AMP stands for Asset Management Period, the regulated investment cycle in the UK water sector.

That matters because water investment is a major opportunity area for Costain. More spending by a significant existing customer usually means a healthier market backdrop, even if the exact benefit to Costain is not disclosed.

Then there is the Department for Transport’s Road Investment Strategy 3, which includes £27bn of investment over the five years to 2031, including a £1bn Structures Fund. Again, no direct revenue figure for Costain is disclosed, but these are the kind of programmes that support bidding pipelines and long-term visibility.

Contract wins across Gatwick, Thames Water, National Grid and National Highways show breadth

The list of work won during the period is another positive. Costain has picked up business across airports, water, energy, roads and consultancy, which supports the idea that it is not leaning too heavily on one niche.

• London Gatwick Airport – two capital projects frameworks and a separate North Terminal departure lounge upgrade
• Severn Trent Water – sewage treatment infrastructure upgrade at Rugby
• Thames Water – new AMP8 work across nine sites
• Port of Dover Harbour Board – place on a six-year utilities infrastructure framework
• Manchester Airports Group – five-year strategic advisory consultancy framework
• National Grid – contract to upgrade the Landulph substation
• Procure Partnerships – place on the North West Contractor Framework
• National Highways – contract to design and build a new junction on the M5
• Government Commercial Agency – place on the Construction Professional Services 2 consultancy framework

One important note, though: the RNS does not disclose contract values for these awards. So while the breadth is clearly encouraging, investors cannot yet quantify the earnings impact from this statement alone.

What this Costain RNS means for retail investors

On balance, this is a positive update. Costain has kept guidance intact, maintained a large forward work position, shown strong cash generation and highlighted supportive end markets with fresh contract wins.

The company also looks more balanced than it did two years ago, with less dependence on central government and more exposure to private and regulated customers. That feels strategically smart, especially when public sector spending priorities can change quickly.

The main watch-out is timing. Because FY 26 is expected to be second half weighted, there is still work to do before this update turns into hard reported progress. If mobilisation slips, the market could get twitchy.

Still, based on this RNS alone, Costain appears to be doing the right things: protecting margin, keeping cash strong, returning capital to shareholders and positioning itself for a stronger FY 27. Not flashy, but in this sector, steady and disciplined can be exactly what investors want.

Next date for the diary after the Costain AGM trading update

The next scheduled trading announcement is the group’s half year results on 13 August 2026. That will be the next real checkpoint for investors looking to see whether the promised second half build is taking shape.