City File: Costain Group

PETER COSTAIN, chairman of Costain Group, must be wondering what he needs to do to please the City. On Wednesday, he announced that he was considering offers for the whole of his Australian mining business, which could raise up to pounds 130m and produce a pounds 50m profit over book value. Yet the group's shares ended the week 4p lower than they started.

The sad fact is the City recognises that any profit on the sale could be eaten up by provisions on housing land and Spitalfields, the development site in London's East End in which Costain has a 33 per cent stake. While the proceeds would significantly reduce the group's debt - up pounds 34m to pounds 240m at the half-way stage - borrowings could still be 37 per cent, or 50 per cent if the pounds 52m off-balance sheet debt on Spitalfields is included, at the year end.

Australia is also the jewel in the crown. Shorn of that, Costain will be left with a poor-quality housing business, a contracting business that will still be suffering from falling workloads, and a US mining business that it has been unable to improve despite years of trying.