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Taylor Woodrow provision warning

Taylor Woodrow warned yesterday that profits in the first half of its current financial year will be hit by substantial one-off provisions for restructuring and redundancy costs as the company scales down its UK contracting activities.

Analysts estimate that the cost of provisions to first-half profits will be pounds 8m. However, this will be offset to some extent if the company releases an earlier provision made in previous years against costs it had expected to incur on the Channel Tunnel project.

The release of the Channel Tunnel provision is expected to save the company pounds 5m, according to analysts, making the net hit on the company's interim profits in the region of pounds 3m.

The chairman, Colin Parsons, broke the news to shareholders at today's annual general meeting. He said that after the restructuring charge had been absorbed, its UK construction business would produce better results.

Mr Parsons said: "The firm actions we have taken in UK construction should enable us to have reliable profit performances from all parts of our operations in future years. Overall, we expect our construction operations to move into profitability in the second half but we are unlikely to recover all the first-half losses in UK construction by the year end."

The company's overseas construction business was restructured two years ago and has performed well since then.

Mr Parsons said that excellent progress was being made with its Light Rail Transit project in Kuala Lumpur, Malaysia, and discussions about the next phase were moving forward.

Mr Parsons said Taylor Woodrow's businesses were continuing to move forward and, apart from construction, it expected to show improved results this year in all sectors.

The company's shares closed down 4p at 117p. Malcolm Brown, an analyst with James Capel, said: "There is a high net asset value in this company which will support the share price. They have a level of investment properties compared to other construction companies which provides an element of floor worth about 130p a share."