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鈥淚f Costain were a football club, it would have to be Newcastle Utd,鈥� says Panmure Gordon analyst Andy Brown. 鈥淎 big name once, but one that really should be doing a lot better by now.鈥�

Like the Magpies, Costain insists it belongs in the 鈥減remier league鈥� of contractors. Founded in 1865, it is the UK鈥檚 oldest and one that has a proud history. But it has struggled in recent years and even teetered on the brink of bankruptcy in the mid-nineties.

Now, in similar fashion to the fervent fanbase on Tyneside, there are many who believe the glory days are coming back. Last week the company posted full-year pre-tax profit of 拢19.8m, not bad considering the previous year鈥檚 拢61.7m plunge into the red.

Andrew Wyllie, Costain鈥檚 chief executive (pictured, left), says: 鈥淚t鈥檚 the first time since 1990 that every division has delivered a profit.鈥� Not quite Kevin Keegan, but welcome relief for investors.

The return to profit follows a root and branch restructuring of the business. Under Wyllie, Costain has left unprofitable areas and its international division, focusing almost exclusively on government and blue-chip infrastructure work in the domestic sector.

The company鈥檚 cash reserves have more than doubled, to 拢133m thanks to last year鈥檚 拢60m rights issue, and increased debt facilities give it a further 拢200m to draw on. And as Wyllie said, all its divisions are in the black, even its troublesome oil and gas unit, which has been leaking cash for more than six years. Meanwhile, repeat orders are up to 80% from 70%.

As a result, finance director Tony Bickerstaff (pictured, above) was able to announce the company鈥檚 first dividend in 17 years, giving 拢3m back to shareholders. Following the results, Dresdner Kleinwort said that 鈥渢here could be a rally in the share price now the dust has settled post-rights issue鈥�.

But not everyone is convinced. Costain鈥檚 share price remains in a miserable state. The company is trading just above its year low of 18p at 21.25p, which is a long way off the 12-month peak of 46.63p.

Brown says uncertainty about the Spanish property market, where Costain has a joint venture with the Banesto bank, and earnings dilution from the rights issue has made it a less attractive proposition. 鈥淲ith more visible earnings growth elsewhere, our stock preference remains away from Costain,鈥� he says.

It is worth pointing out, too, that Costain鈥檚 bottom line was helped by a 拢5.7m contribution from the disposal of a couple of PFI stakes 鈥� Bridgend prison and a road project called Sirhowy Enterprise Way.

But the big question for Costain is whether it will enter the booming global infrastructure market.

Stephen Wells, the firm鈥檚 business developer director, says: 鈥淚 think at the moment our aspiration is to be a business with 80% of its work in the UK and 20% internationally,鈥� he says. 鈥淚nternational markets are tricky, and one-off projects abroad aren鈥檛 our style.鈥�

Costain is perennially linked with takeover speculation in the Square Mile. Just three shareholders account for more than 52% of its ownershio, with the lion鈥檚 share controlled by Malaysian contractor UEM Builder, and the Kuwait-based Kharafi family.

Wyllie insists that UEM and Kharafi 鈥渁re both in it for the long term鈥�, but the attractions of steady earnings from PFI and the amount of cash generally going into infrastructure work, increases the likelihood that a bid could come sooner rather than later.