Costain Shares Plunge as Revenue Drops 18% in H1

The Costain Group (LON:COST) share price fell more than 15% at the open on Wednesday after the company reported an 17.8% year-on-year decline in first-half revenue, despite growth in profit margins and a stronger order book.

The stock remains up 57% over the past 12 months.

Revenue for the six months to 30 June dropped to £525.4 million from £639.3 million a year earlier, mainly due to the completion of certain road projects and a rephased schedule on HS2.

Despite the top-line decline, adjusted operating profit rose 3.1% to £16.8 million, while operating margin increased to 3.2% from 2.5%. Reported operating profit also climbed 18% to £16.4 million, helped by a reduction in adjusting items following the completion of Costain’s transformation programme.

However, adjusted profit before tax declined 4.1% to 18.6 million, with adjusted earnings per share down 1.7% at 5.5p.

The group’s forward work position expanded to £5.6 billion, up from £4.3 billion in the prior-year period, equivalent to more than four times 2024 revenue.

Costain also announced a sharp rise in its interim dividend to 1.0p per share from 0.4p and launched a £10 million share buyback programme in H1.

Chief executive Alex Vaughan said: “We have delivered another strong performance in the first half of 2025. Growth in adjusted operating profit and margin reflects the improving quality of our contract portfolio, and we remain confident that we will deliver our adjusted operating margin run-rate target of 4.5% during FY 25.”

While management highlighted a strong pipeline and government commitments to infrastructure, the market reaction underscored investor concern over the near-term revenue fall.

Looking ahead, Costain said that following the greater clarity provided by the Government's commitments in its recent 10-year Infrastructure Strategy and Infrastructure Pipeline, as well as the increase in committed regulatory investment in key sectors, “there is real momentum in our chosen markets of Transport, Water, Energy, and Defence and Nuclear Energy.”

The firm is mindful of the macro and geopolitical environment, but the improvements in the market outlook underpin its confidence in delivering on expectations for further progress in FY25 and FY26, with a step change in performance expected in FY27 and beyond.