Costain holds £7bn forward work position

Costain maintained a £7bn forward work position at the end of June as first-half revenue and profit increased and the infrastructure group added work across electricity transmission, reservoirs, rail, and ports.

Revenue for the six months to 30 June 2026 rose by 3.4% to £543.1m from £525.4m a year earlier. Reported operating profit increased by 5.5% to £17.3m, while reported pre-tax profit reached £19.2m.

Net cash at the half year stood at £164.4m. Costain also doubled its interim dividend to 2p per share as the company maintained its full-year expectations and forecast higher revenue in the second half.

The £7bn forward-work figure requires a more precise reading than a conventional backlog number. It is split evenly between a £3.5bn order book and a £3.5bn preferred-bidder book.

The preferred-bidder element covers frameworks where Costain has been selected and an intended volume of work has been allocated, but where a further works order is still needed before individual packages begin. It therefore represents probable future work rather than the same degree of contractual commitment as every item within the order book.

That distinction is important on long infrastructure programmes, where contractors may hold strategic framework positions years before the final scope of individual projects is instructed. The commercial value of those positions can be substantial, but delivery still depends on clients releasing work, agreeing budgets, developing designs, and progressing the programme.

Costain’s order book was £3.5bn at the period end, slightly below the £3.6bn reported at the end of 2025, while the preferred-bidder book increased from £3.4bn to £3.5bn. Combined, the £7bn total was unchanged from year end but up from £5.6bn at the 2025 half year.

The company says the position, together with revenue already delivered in the first half, provides visibility over 91% of consensus forecast revenue for both 2026 and 2027. That level of coverage gives management a clearer workload base while leaving execution and the conversion of preferred work into orders as separate commercial tasks.

The customer mix has also changed considerably. Private and regulated customers now account for 48% of forward work, compared with 30% in 2023, while devolved-government customers represent 23% and central government 29%.

New additions during the half included electricity-transmission work for National Grid, reservoir programme-management appointments for Thames Water and Anglian Water, Transport for London rail work, and port infrastructure for the Port of Dover.

The spread reduces Costain’s dependence on any one public procurement cycle and aligns the contractor more closely with regulated infrastructure programmes where investment is committed over several control periods.

Water is already contributing to revenue growth. Natural Resources revenue increased by 13.3% to £237.1m, with water revenue rising by 15.1% to £136.9m as the AMP8 programme begins to move from design and development into construction.

Energy revenue within the division increased by 25.7% to £37.2m, while Defence and Nuclear Energy revenue was £63m. The figures show why Costain is broadening its future-work position around utilities and nationally significant infrastructure rather than relying on roads alone.

Transportation revenue fell by 3.2% to £306m as older road projects completed, although integrated transport grew strongly within the division. Costain expects roads activity to increase again as projects including the M60 programme move further into construction.

The contract structure is as relevant as the sector mix. Costain reported that its forward work contained no single-stage lump-sum contracts at the half year and consisted predominantly of long-term programmes using target-cost arrangements where design, scope, and budget are developed with the client.

Target-cost contracts do not remove commercial risk, but they can avoid some of the problems created when contractors are asked to price complex and incomplete designs years before the final construction conditions are understood. The trade-off is a greater requirement for open-book cost control, collaborative change management, and continuing agreement over scope.

Costain’s preferred-bidder book reinforces that programme-based model. A framework can create long-term visibility without guaranteeing that every anticipated pound will become an instructed contract, making conversion rates and customer investment decisions important alongside headline pipeline growth.

The same framework structure can benefit the supply chain where main contractors provide earlier visibility of likely demand. Water, electricity transmission, roads, reservoirs, rail, and ports all require substantial civil engineering, plant, mechanical and electrical systems, materials, temporary works, and specialist design capacity once projects move into physical construction.

That transition is now becoming visible in water, and Costain expects further second-half revenue growth as AMP8 work scales, Heathrow activity expands, and road projects move from design into construction.

The £7bn figure therefore gives Costain a sizeable platform, but it is not £7bn of identical contractual certainty. Half is current order book and half sits at preferred-bidder stage, leaving the coming periods to demonstrate how efficiently those programme positions convert into instructed, profitable construction work.