View from City Road: Mining disaster for Costain

The sale of Costain's US coal interests is the last straw for possibly the City's worst-treated shareholders. If Peter Costain, the chief executive, survives this one, it will truly be a miracle of teflon technology.

Having tapped shareholders for pounds 77m in 1991 when the shares were 155p, he held out the hat again a year ago for a further pounds 84m at 30p. Yesterday they closed at 24.5p, after the latest haemorrhage of shareholder value.

The effect on their wallets aside, what investors should really object to is the way they were conned last year into stumping up for a heavy investment programme in the supposed core business of US coal mining.

Twelve months later, after an appalling first half, the business is up for sale and not expected to achieve anywhere near its book value of pounds 200m.

Shareholders who were offered the carrot of a highly geared play in what was perceived to be a recovering US coal market have now been left with devalued shares in a pure contractor, operating in dreadful markets with no prospect of a decent return for years.

The only winners, as usual, have been the bankers, whose debts will be repaid by the sale of the coal business, which could leave Costain with net cash of almost pounds 100m.

It is the latest black mark in a catalogue of woe: a dreadful record in housebuilding around the world, over-investment in property at the top of the market and forced sales of the only decent businesses left, the coal interests in Australia.

Now Costain has returned to its roots as a relatively small contracting business, Mr Costain, who still carries real weight within the industry, could be at his most useful. But the balance of power has shifted from Costain's bankers to its shareholders, who are much more likely to call for his head. The shares have no prospects, however you look at them - assets, cash flow or earnings. The time has arrived for Mr Costain to go.