Costain half-year results 2026: dividend doubles as £7bn forward work supports growth

Costain Group PLC has delivered steady first-half growth while keeping its full-year expectations unchanged. The UK infrastructure specialist also doubled its interim dividend and maintained a record £7.0 billion forward work position.

The headline numbers are solid rather than spectacular. Revenue increased by 3.4%, adjusted operating profit rose by 3.0%, and the adjusted operating margin remained at 3.2%.

What makes these results more interesting is the outlook. Costain expects activity to accelerate during the second half, followed by what management describes as a step change in financial performance from 2027.

Costain's key half-year figures

Metric	H1 2026	H1 2025	Change
Revenue	£543.1 million	£525.4 million	3.4%
Adjusted operating profit	£17.3 million	£16.8 million	3.0%
Adjusted operating margin	3.2%	3.2%	No change
Adjusted profit before tax	£19.2 million	£18.6 million	3.2%
Adjusted earnings per share	5.7p	5.5p	3.6%
Adjusted free cash flow	£1.4 million outflow	£3.0 million outflow	£1.6 million improvement
Net cash	£164.4 million	£144.9 million	£19.5 million increase
Interim dividend	2.0p	1.0p	100%
Forward work position	£7.0 billion	£5.6 billion	£1.4 billion increase

There were no adjusting items during the period, meaning reported and adjusted operating profit were both £17.3 million. That keeps the presentation relatively clean and avoids investors having to look through substantial exceptional charges.

Reported profit before tax rose by 5.5% to £19.2 million, while reported earnings per share increased by 5.6% to 5.7p.

The full figures are available in the original company announcement.

The dividend increase is a clear positive

Costain doubled its interim dividend from 1.0p to 2.0p per share. The increase follows the removal of a previous pension-related dividend constraint and a revision to the company's capital allocation policy.

The new target is dividend cover of 2.5 times adjusted earnings, compared with 3 times previously. Dividend cover measures how many times earnings could pay the dividend, so a lower target usually means a larger proportion of profits can be distributed to shareholders.

The interim dividend is due to be paid on 23 October 2026 to shareholders on the register on 18 September 2026. A scrip alternative, allowing shareholders to receive shares instead of cash, will also be available.

Costain is returning capital through buybacks as well. It spent £7.6 million during the period on its £20 million 2026 programme, representing 38% of the planned total.

These returns are being supported by a strong balance sheet. Net cash stood at £164.4 million, up from £144.9 million a year earlier, although it was below the £189.3 million reported at the end of 2025.

Management expects year-end net cash of approximately £170 million after dividends, buybacks, treasury share purchases and the partial reversal of historic working capital benefits.

A record forward work position provides visibility

Costain maintained its forward work position at a record £7.0 billion. This combines the order book with the preferred bidder book, which represents work where Costain has been selected but may still require further orders before activity begins.

The total includes £1.1 billion of revenue for 2026 and £1.3 billion for 2027. Together with revenue already delivered in the first half, Costain says this provides visibility over 91% of consensus forecast revenue for both years.

That is helpful, but the distinction between secured orders and preferred bidder work matters. The order book was £3.5 billion, while another £3.5 billion sat in the preferred bidder book. The latter should not be treated as being as firm as fully contracted work.

Contract quality is another important part of the picture. Costain said the forward work position contained no single-stage lump-sum contracts at the end of June. Instead, it was mainly made up of longer-term programmes and target-cost contracts, where scope, design and budgets are developed with the customer.

This structure may reduce the risk of the sort of fixed-price contract problems that can damage construction sector margins.

Natural Resources led the growth

Natural Resources revenue rose by 13.3% to £237.1 million, with growth across Water, Energy, and Defence and Nuclear Energy.

Water revenue increased by 15.1% to £136.9 million as the industry began moving from design into construction under the AMP8 regulatory cycle. AMP8 is the five-year investment period running across the regulated water industry.

Energy revenue grew by 25.7% to £37.2 million, while Defence and Nuclear Energy revenue increased by 3.6% to £63.0 million.

The division's operating profit edged up by 1.9% to £16.4 million. However, its margin declined from 7.7% to 6.9%, reflecting the non-repeat of contract completions that benefited the previous period. This margin reduction is one of the less positive elements of the results.

Transportation revenue fell by 3.2% to £306.0 million. Road revenue dropped by 32.6% following the completion of several older projects, while Rail declined by 1.4%. Integrated Transport performed much better, growing by 39.5% as work at Heathrow expanded.

Despite lower Transportation revenue, divisional operating profit rose by 5.5% to £7.7 million and its margin improved from 2.3% to 2.5%.

Why management expects faster growth

Costain expects second-half revenue to exceed the first-half level. The anticipated drivers include Water projects moving into construction, further expansion at Heathrow, and the M60 road project progressing from design to construction.

The company also won work with new customers and entered target markets including electricity transmission, reservoir programmes, devolved authority rail and port infrastructure.

Consultancy services accounted for 18.2% of group revenue, up from 16.5%. Building this part of the business could support closer customer relationships and provide work beyond traditional construction activity.

Full-year revenue, adjusted operating profit and adjusted operating margin are expected to remain in line with the board's expectations. Exact full-year figures were not disclosed.

Management continues to target an operating margin above 5.0% over the medium term. That would be a meaningful improvement from the current 3.2%, but it remains an ambition rather than an achieved result.

What investors should watch next

The first-half performance supports Costain's claim that growth is beginning to accelerate, but the real test will come during the second half and into 2027.

Investors will want to see the £7.0 billion forward work position convert into revenue without weakening contract discipline. They should also watch whether Water and Transportation activity increases as planned, and whether group margins begin moving towards the medium-term target.

For now, the positives are clear: revenue and profit growth, substantial net cash, a doubled dividend and strong work visibility. The main uncertainties are execution, the conversion of preferred bidder work into firm activity, and whether the expected increase in revenue can produce stronger margin progress.