Kuwaitis increase stake in Costain

Kuwaiti builder Kharafi has lifted its stake in Costain to 13% through its third bout of share buying. Costain has welcomed the move - in which Kharafi paid œ1.5 million for 1.5 million Costain shares - as a vote of confidence in its future policy to expand in the Middle East.

Despite the backing of Kharafi, the price of Costain's shares continue to slide and this week stood at 105p.

Last week the firm issued a brief statement saying: 'The Kharafi group continues to be very supportive and we are continuing to discuss with them proposals for projects throughout the Middle East region. This has always been a fruitful area for us. We are trying to lift turnover there and have set up Costain Middle East, based in Dubai, and with Michael Minassian as managing director.'

Minassian, previously managing director of Costain's UK building products division, has worked overseas extensively.

David Mathers, analyst with City brokers James Capel, said: 'Costain has been lucky to find itself supported by a long-term trade investor. There is not likely to be a takeover - I don't think a bid is likely in any construction company, including Costain, as contracting margins are so thin.'

Continued speculation about what will happen to the company has led to various industry rumours on possible developments. Costain has denied, for instance, that its profitable civils division is to be subject of an management buy-out.

Such a move has been rumoured within Costain for more than six months. But civils chief George May told CJ: 'We're not likely to see anything like that. I'm the managing director and I'm not leading it.'

The company saw a pre-tax loss of œ180 million last year and has seen its shares in recent months shares stumble to just 11p, prompting a 10-to-1 share consolidation which means shares now trade at 100-105p.

Share consolidation is not unusual when shares fall to less than their face value of 25p.

The potential saviour, Kharafi, is run by two brothers Jassim and Naser and is part of the M A Kharafi Group which was founded by their father back in 1956.

Turnover of the Kharati's construction division has climbed steadily to a current figure of œ190 million. It has œ400 million worth of projects in hand in the Middle East and Africa.