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Costain shows its positive side

Finance City Site

AFTER almost a decade in the wilderness, Costain appears to be renewing some friendships in the City.

When the group unveiled its finals last month, chief executive Stuart Doughty hosted the company's first City analysts results meeting since the mid 1990s. The figures hardly sparkled, with profit before interest of just £2.2 million.

But Mr Doughty's plan to return the company to a growth path has clearly impressed some investors. Last week Costain's shares shot up by 35 per cent to 21.25p in heavy trading, adding around £19 million to the firm's stock market value.

Profit forecasts for Costain are thin on the ground, but if the firm achieves its target of increasing its £450 million turnover by 15 per cent annually with a 3 per cent operating margin, analysts think the shares are cheap.

The firm's growing asset management order book, particularly for the water industry and its strong presence in the UK civils market are seen as positives, as is new finance director Charles McCole's background in Private Finance Initiative and Public Private Partnership projects.

Costain has disappointed in the past. But the continuing strength of shares in rivals such as Amec (up 5 per cent earlier this week) and Balfour Beatty may well intensify the search for alternative stock market plays on the PFI/PPP themes.