End nigh for bleeding Costain

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The Independent Online
So, farewell then, Costain. Not just yet - the poison pill of the troubled US coal mines will keep bidders at bay for a few months - but it would be surprising if the company were still around in a year's time.

Yesterday's £180m loss, the fourth in five years, came as no surprise - it had been well-flagged. But, in effect, it seals Costain's fate, and with it the jobs of Peter Costain and Sir Christopher Benson whose survival thus far has been a tribute to teflon technology.

Costain has been a disaster for shareholders, especially those who stumped up £160m in two rights issues in 1991 and 1993 at 155p and 30p.

The question for investors is whether the eventual take-out of the company will be at a worthwhile premium to the current share price, which yesterday closed 1.25p lower at 12.5p. Existing shareholders and punters looking for a turn will probably be disappointed.

After the write-down of the US coal mining assets that accounted for £141m of the loss, the West Kentucky mines are probably in the books at a reasonable £38m.

So, apart from the fact that their disposal is a necessary precursor to the sale of the rest of the business, they are of no significance.

The sale of US coal interests will probably happen in the autumn after six months or so of now profitable trading.

After that the auction for the rest of Costain will follow fairly quickly.

The cleaned-up balance sheet sports just under 20p of net assets, which looks attractive superficially. But about 7p of pension surplus cannot rightfully be said to belong to shareholders and Costain's one-third stake in the vacant Spitalfields site in the City is plainly not worth the £50m at which it has been optimistically booked.

One of the great names of British construction, Costain punches far above its now pitiful weight. It is sad to see such a company go, especially one run by a chap as nice as Peter Costain, but go it will and at a lower price than the shares currently suggest.

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