Costain Group PLC (LSE:COST) shares tumbled 14% despite the construction group hiking its interim dividend 150% and launching a new £10 million share buyback programme as it expressed confidence in hitting its profit margin targets for this year.
A 3.1% rise in adjusted operating profit of £16.8 million was reported for the first six months of 2025, as adjusted operating margins increased 70 basis points to 3.2%.
However, profit before tax was down 4% to £18.6 million as revenue declined 18% to £525.4 million due to a reduction in road-building work in the period and a rephased schedule from the HS2 rail project, offsetting growth in energy, defence and nuclear energy, plus stable revenue from water sector work.
High-quality forward work rose to £5.6 billion and bidding activity levels were said to remain high.
Net cash stood at £144.9 million, down from £166 million a year ago, but with year-end cash expected to be around £170 million.
As well as the new buyback, the interim dividend was lifted to 1.0p from 0.4p a year ago, in line with a policy that targets dividend cover of three times adjusted earnings, and a previously-stated intention to "normalise" the half-year dividend split in 2025 back to a 33%:67% ratio.
"We have delivered another strong performance in the first half of 2025," said CEO Alex Vaughan, adding that management remains confident of delivering their adjusted operating margin run-rate target of 4.5% this year, up from 3.4% last year.
He said Costain continues to "win new work and add new customers in growth markets that provide essential infrastructure" and pointed to recent government infrastructure commitments and regulatory investment in sectors such as water, energy, and aviation as supporting future growth.
Shares in the company, which had risen 54% since the start of the year, fell 22.4p to 141p in early trading.
** Update: Adds price details **