The Investment Column: Walking a tightrope at Taylor Woodrow

John Castle, the new chief executive of the Taylor Woodrow, has a tricky tightrope to walk. On the one hand, he is attempting to imprint his mark on the group by giving a prod to an existing review of the still limping construction operation. On the other, he is constrained from taking the sort of radical action the City might like to see by the continuing presence on the board of Colin Parsons, the executive chairman, who is probably some two years away from retirement.

Let there be no mistake, Mr Parsons has been the saviour of Taylor Woodrow, turning it into one of the quality companies in the sector in the space of five years. Just to prove the point, the group yesterday reported a very acceptable 43 per cent jump in pre-tax profits to pounds 36.2m for the six months to June.

But to take it on from here, Mr Castle must get to grips with construction, which turned a pounds 1.2m loss into a meagre pounds 1m profit on sales of pounds 307m in the half-year. That remains an unacceptable return for a business which has averaged less than 1 per cent on sales since 1985.

Mr Castle talks of the business taking on less general contracting and more complicated work, such as projects under the Government's Private Finance Initiative. But he is in effect ruling out an exit from contracting in the short term.

So housing will continue to lead the group for now, reporting a 71 per cent leap in profits to pounds 16.4m in the latest numbers. The figures were inflated by a one-off pounds 4m profit uplift from upmarket housing schemes at London's Kensington Green and in Toronto. With the underlying housing trend strong and property also on the up, full-year profits of pounds 80m are in sight, putting the shares, up 1.5p at 186p, on a forward p/e of 13. Attractive.