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City Site - Picky City looks to contractors

FINANCE

THE CITY is becoming increasingly selective about companies within the building and construction sector.

Contractors are being favoured over house builders and within the materials sector lightside producers are more popular than heavyside groups.

Shares in Costain, which have risen 17 per cent this year, continued to tick up last week after the AGM highlighted the healthy state of its order book.The firm has started this year well and its building division is in talks on projects worth around £250 million. Its international business is also continuing to make progress.

Meanwhile, a confident statement from Wilson Bowden noting that its reservations in the year to date were 25 per cent up on a year ago did little to revive its shares, which are now some 10 per cent off their March peak. Since the Countryside profit warning last month, there seems to be little that the quoted house builders can do to assuage City concerns about the housing market.

By contrast sentiment remains strong towards builders' merchant Travis Perkins, which last week reported a 12 per cent rise in overall sales during the first 4 months.

The firm has added 31 branches to its network of 700 outlets already this year and it expects further earnings growth. Shares in fellow lightside materials group SIG, the insulation distributor, are close to a year-high after the firm reported good first quarter trading.

Conversely, shares in heavyside producer RMC came under pressure last week after its AGM heard that the group remained cautious about UK market conditions this year.

The firm is in the throes of a re-organisation and costcutting exercise at its UK business and its first half performance will be hit by extra production downtime at the group's Rugby cement plant.

A restructuring at RMC's German arm is well underway and the group is on track to deliver earnings recovery for the full year. But with a review underway into growth prospects at each of its businesses, further changes are looming.