The Investment Column: Taylor Woodrow stays risk-averse

Colin Parsons, Taylor Woodrow's innately cautious executive chairman, says he prefers a four-legged chair to a shooting stick, especially when the wind starts to blow hard. That's a pretty Delphic justification for diversity but robust interim results yesterday from the construction group would seem to vindicate his risk-averse strategy.

Having inherited an almost bust, heavily-loss making company in 1992, Mr Parsons has succeeded in putting Taylor back on an even footing afterhectic cost-cutting and asset sales.

Pre-tax profits in the year to June rose by 81 per cent to pounds 25.4m on sales less than 2 per cent higher at pounds 556m. Earnings per share doubled to 4.4p and the dividend was raised by a third to a penny.

The turnaround has been achieved against the backdrop of continuing pain in the contracting industry, which shows no signs of abating in the UK or abroad.

Mr Parsons sees contracting, where losses were cut from pounds 10.7m to pounds 1.2m in the first half and is now back in the black, as the smallest contributor to future growth. But he remains committed to staying in the sector even if the Government's private finance initiative has not been the tooth fairy Mr Parsons might have wished.

He identifies the drivers of future growth as housing and land development, followed by property and Greenham Trading, Taylor's merchanting arm. All these business improved profits in the first half.

The question now is whither Taylor? For the answer we may have to wait until March, when a successor should be announced to Tony Palmer, who is standing down as chief executive after 43 years with Taylor.

Pre-tax profits of pounds 55m this year imply a premium p/e ratio of 16. The shares, down 3p to 173p, are at levels last seen in 1991 after rising by 70 per cent this year alone. They are now likely to pause for breath.