Costain falls into stormy waters again

Costain, the troubled construction group, was at the centre of controversy again yesterday after its shares were suspended pending clarification of its financial position and further details about asset disposals.

The company is expected to make an announcement regarding its disposal process and subsequent financial arrangements shortly.

The shares were suspended at 46p and the board called an emergency meeting yesterday afternoon.

The news caught the market off-guard as Costain was thought to be heading for calmer times after a pounds 74m rescue rights issue in the summer. This saw Malaysian group Intria take a 40 per cent stake in the business.

Costain has been looking to sell its US coal interests and it is likely that this is the asset disposal in question. Lonrho pulled out of talks to buy the coal business in July. However, Costain said it had been approached by several other potential purchasers since then. The subsidiary made operating losses of pounds 2.8m last year.

Only two months ago, Costain's chief executive, Alan Lovell, said the company was "feeling good about life".

This was in spite of the announcement in September of doubled first-half losses of pounds 19m. The company blamed delays on starting contracts, including the controversial Newbury by-pass.

Management hoped to achieve a turnaround in the second half on the back of an order book said to be 15 per cent up at pounds 636m.

The rights issue in July rescued Costain from receivership. It had been battered by poor investment in property and US mining in the late 1980s and by thin margins on contracting work.

Its shares were suspended in the summer ahead of an emergency meeting to pass the rights issue. The chairman, Sir Christopher Benson, then told shareholders: "If you vote against it there will not be a Costain and you will not be shareholders."

The shares resumed trading in July.