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City Site - Construction buoyed by bid rumours

FINANCE

WITH takeover fever gripping the City, traders continue to see rich pickings in the construction and house building sector.

Last week shares in Crest Nicholson leapt 15 per cent on bid rumours linking it with Bovis Homes and privately-owned Miller Group declared it was interested in making more acquisitions. Meanwhile Amec is making progress in the sale of its Spie operation and bid talk resurfaced at Hanson.

As the only major materials group to remain under UK ownership, Hanson remains subject to bid rumours. Yet the speculation has a more credible ring to it this time. Since Hanson reported a 24 per cent rise in profits last month, the group's shares have risen by 10 per cent to 778p and at one point last week they spiked at 875p. The group's significant stake in the UK brick market and its major US and UK aggregates operations could be a major draw for large Continental groups such as Lafarge.

The strength of the FTSE 100 and positive news from the sector will add to the City's enthusiasm for consolidation. Yet strategies at those national contractors that unveiled results last week were more focused on taking advantage of buoyant market conditions than doing big deals.

Kier seems to be firing on all cylinders and the City was encouraged by its growing public sector workload and a homes order book up 50 per cent on last year.

At Alfred McAlpine the reshaping of its operation in recent years is bearing fruit with a record £3.5 billion order book and 75 per cent of its revenues from long-term partnering.

Costain, which is also sporting a record order book, worth £1.9 billion, is aiming to forge more market-leading positions and repeat its success in water asset management in other sectors such as roads, health and nuclear power.

Only Amec, whose UK construction profits were well down, is on course to change shape dramatically over the coming year.