Costain Homes is sold

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The Independent Online
COSTAIN eased its debt burden and departed from the British private sector house-building market yesterday when it sold its loss-making Costain Homes division for pounds 23m. The buyer, Redrow, is now the UK's largest private property group.

The sale will cut group debt to below pounds 200m at Costain, whose pre-tax losses doubled last year to pounds 148.6m. The shares closed down 3p at 36p, valuing the company at pounds 82.9m.

Costain Homes has a land bank of 1,800 plots and built about 410 houses last year. But it also made a pre-tax loss of pounds 48.5m after land write-downs and provisions of pounds 40.8m.

Analysts questioned the wisdom of selling the division so soon after the write-downs and at the bottom of the market for land values. But the company said reducing debt remained the overriding priority.

'The division would still have required investment . . . but the decision was taken to come out of residential property,' a spokesman said.

Redrow is paying pounds 15m immediately and the remainder over about five years. Costain will keep pounds 4m worth of assets, primarily second mortgages on property, which should mature over the next five years.

Thirty people will be made redundant as a result of the deal.

Peter Costain, chief executive, said Costain would now focus on its core activities - engineering and construction and US coal mining.

Costain's construction division will become responsible for social and partnership housing ventures. 'A lot of money is being spent by housing associations and we would like to get a reasonable slice,' the company said.