Costain Group (LSE:COST) shares climbed 5.7% to 232.05p after the UK infrastructure solutions specialist reported revenue up 3.4% to £543.1m for the six months to 30 June, against £525.4m a year earlier.
Adjusted operating profit rose 3% to £17.3m, with adjusted operating margin held at 3.2%, while adjusted earnings per share climbed 3.6% to 5.7p.
Growth came from Natural Resources, where revenue rose 13.3% across water, energy, and defence and nuclear work, offsetting a 3.2% decline in Transportation as prior-year road framework projects rolled off.
Net cash stood at £164.4m, down from £189.3m at the end of the last financial year, after an £8.2m dividend payment and £7.6m spent on the share buyback programme.
The board declared an interim dividend of 2.0p per share, double the 1.0p paid a year earlier, reflecting a new target dividend cover of 2.5 times adjusted earnings, reduced from 3 times.
Forward work remained at a record £7bn, unchanged from the last financial year end and up from £5.6bn a year earlier, giving visibility over 91% of consensus forecast revenue for both this year and next.
Chief executive Alex Vaughan said the company was "on track to deliver FY 26 revenue, operating profit and margin in line with the Board's expectations and a sixth consecutive year of profit growth", and expects the strong forward work position to drive "a step change in our financial performance in FY 27 and beyond."
The company expects revenue growth in the second half compared with the first, driven by the water sector's shift from design to construction, expansion of work at Heathrow, and the M60 road project entering its construction phase.
Panmure Liberum analyst Joe Brent, in a note, said the results show strong forward-work cover and margin momentum, suggesting earnings are inflecting.
Brent, who rates Costain as a 'Buy' with a 270p target (current price: 232p), has raised the broker's DPS expectations and flagged a potential FD EPS of c.22p, arguing that with 2027 11.8x P/E and 3.3% yield, the share looked inexpensive.
News Intelligence what this means for the company
Costain reported 3% adjusted operating profit growth to £17.3m on 3.4% revenue growth to £543.1m in H1, while doubling its interim dividend to 2.0p per share and maintaining forward work at a record £7bn. The dividend increase reflects a relaxed payout policy (cover target cut from 3× to 2.5× earnings), signalling management confidence in sustained cash generation and visibility: forward work covers 91% of consensus revenue for both FY26 and FY27.
Modest profit growth masks a shift toward shareholder returns and forward visibility. The £7bn order book, up 25% year-on-year, underpins management's expectation of 'a step change in financial performance in FY27 and beyond', but near-term growth remains constrained by Transportation headwinds (down 3.2%) as prior-year road frameworks roll off. The dividend policy reset is material to income investors but does not alter the underlying earnings trajectory.
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