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Doughty will bow out on a high note

FINANCE City Site

WHEN Costain chief executive Stuart Doughty hangs up his hard hat at some point over the next 18 months, he can look back on a job well done.

Since he arrived at the group five years ago, Costain's share price has climbed from 8.5 p to 45.75p. Under Mr Doughty and his predecessor, John Armitt, the group's reputation as one of the UK's leading contractors has been restored.

Costain has recovered by focusing on contracting markets where it can add value - particularly in transport, water and building - and by minimising risk.Mr Doughty vets all of the 50 or so jobs worth more than £20 million the group takes on each year.The result has been a steady improvement of results without the provisions and exceptional losses which have recently marred some rivals' figures.

Today the group has an order book of £1.1 billion and is making a respectable margin of 2.7 per cent on a turnover which is set to grow at 15 per cent annually and should top £1 billion in coming years.

Of course, this is small consolation for long-term shareholders whose investment in the company is still only worth a fraction of its value in the late 1980s.

But a balance sheet restructuring to deal with losses left over from the disasters of the 1990s, means dividends should resume. Costain's weak balance sheet has limited the size of its PFI operations and the fancy prices being asked today for social housing businesses has closed one promising avenue for now.

But the group has other windows, particularly by extending the comprehensive framework approach which has succeeded in the water market into other areas.

The consortium it belongs to that has been named preferred bidder for Southern Water's capital programme will handle the bulk of its £1.5 billion water quality and environmental improvement programme.

If that approach can be extended to buildings and infrastructure in the health and education sectors, it could open up some huge markets.