A depressing re-run for Taylor

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A strong sense of deja vu surrounds Taylor Woodrow, the construction group. Results for 1992 were hammered by loss- making contracting work, Channel tunnel provisions and the high cost of the group's housebuilding land bank.

The company reportedly promised then never to take on another loss-making contract, a commitment it would no doubt wish to forget in the light of yesterday's profits warning following a pounds 10.5m loss from construction in the first half of 1995.

Add to that renewed hostilities with Eurotunnel, and a dismal outlook for UK housing, and the picture looks wearily familiar.

Those problems were reflected in pre-tax profits cut from pounds 22m to pounds 14m in the six months to June, which might have been pounds 5m higher had not the threat of legal action made Taylor nervous about releasing some of the pounds 20m provision made against the Channel tunnel contract.

But the numbers were also hit by a reduction in profits from selling the remainder of the holding in Eurotunnel units, which netted just pounds 1.3m, down from pounds 6.4m last time.

The results hid a generally strong performance from overseas businesses. Contracting, chipping in pounds 3m profits, seems to have put memories of past contracts such as the infamous Storebaelt link in Denmark behind it.

But these considerations are swamped by the problems at home. The axe was taken to UK construction again earlier this year, with 300 jobs going, management trimmed and two businesses closed for a combined cost of pounds 8.3m.

The underlying trading losses of pounds 6.5m included pounds 2m for the discontinued businesses, but even so, the company is warning that profits will be negligible at best next year, with little sign of upturn in sight for several more.

After at least half-a-decade of negligble or negative returns, Colin Parsons, chairman, clings to the belief that by concentrating on profitable areas the company can outclass the competiton. But with rivals thinking along exactly the same lines, this strategy looks self-defeating if it merely intensifies the race for the few remaining money-spinning contracts at a time when government spending cuts reduce the size of the overall pie.

With the outlook for the UK housing market as it has been for some time, Taylor may also not be doing itself any favours by signalling its interest in parts of UK housebuilding businesses currently up for sale.

Even assuming the Eurotunnel provision comes back in the second half, profits of pounds 45m would put the shares on a forward multiple of 14. Overvalued.