Costain Shares Surge 9% on Strong Profitability Despite Revenue Miss

Shares in Costain Group (COST.L) jumped 9% in early trading following the release of its full-year 2025 results. This positive market reaction comes despite the company reporting revenue of £1,045.7 million, which fell short of the consensus estimate of £1,073 million.

The market’s enthusiasm appears to be driven by Costain’s improved profitability and future growth prospects.

Adjusted operating profit for the year reached £47.1 million, exceeding the consensus forecast of £46.6 million. This represents a 9.3% increase compared to the £43.1 million reported in the previous year.

The adjusted operating margin also saw a notable improvement, rising to 4.5% from 3.4% in FY24, a 110 basis point increase. Reported operating profit surged even higher, up 44.1% to £44.8 million.

The company’s financial strength is further underscored by a robust balance sheet, boasting net cash of £189.3 million, a significant increase from £158.5 million the prior year.

This was fueled by a surge in adjusted free cash flow to £63.1 million, more than double the £27.1 million generated in FY24. This financial stability has enabled Costain to increase shareholder returns.

Costain is initiating a £20 million share buyback program in FY26 and increasing the final dividend for FY25 to 3.2p per share, a substantial rise from the 2.0p paid in FY24.

The company also intends to implement a target dividend cover of 3x adjusted earnings. This commitment to returning value to shareholders is likely contributing to the positive market sentiment.

Key Drivers:

• Margin Expansion: Improved contract portfolio quality driving profitability.
• Strong Cash Generation: Efficient operations leading to significant free cash flow.
• Forward Work Position: Record £7.0bn backlog providing revenue visibility.

CEO Alex Vaughan commented, “I am pleased to report another strong performance… Strong cash generation has resulted in a strengthened balance sheet and supports increased shareholder returns.”

The record £7.0 billion forward work position, a 30% increase year-over-year, provides strong visibility into future revenue streams and underpins management’s confidence in delivering a step change in performance in FY27 and beyond.

This backlog, almost seven times FY25 revenue, signifies substantial growth opportunities across target markets, particularly within the government’s 10-year Infrastructure Strategy.