Taywood rejig pays off as margins clear 3%

Taylor Woodrow has pushed the operating margin in its construction division passed 3% for the first time. "That's a top quartile performance," said chief executive Iain Napier, "and shows we now have a good construction business."

After a bout of brutal trimming, the reshaped construction business is moving ahead. While turnover was down to £360m (£440m), operating margin rose to 3.2% (2.8%) as operating profit held steady at about £12m.

The fastest-growing element of construction's workload was in providing support to Taywood's other two divisions: housebuilding and commercial property. The internal construction workload climbed to £82m (18% of the total workload) and is set to rise further to a figure of 25% in 2003.

Construction work for external clients is both open-book and fixed price. "We work with blue-chip clients and the forms of contract are whatever we can negotiate," said Napier.

"The proportion of repeat work is increasing: we have been Shell's and Tesco's preferred contractor for more than three years."

Napier wants to secure a strong position in PFI, but only where political reality points to a sizeable workload. So while the government talk is of big opportunities in both healthcare and roads, Taywood is following only one of these routes.

"We've plumped for PFI healthcare and hope to bid for two new schemes during the year," said Napier.

"We're not into roads, the deputy prime minister might talk a good story on roads but at the end of the day it's not a vote winner."

The group's latest financial results (12 months to 31 December) show turnover slightly ahead at £2.2bn (£2.1bn), while the pre-tax profit figure of £230m (£200m) represents a 15% rise on last year.

Taywood has increasingly focussed on housebuilding with the division turning in an operating profit of £245m (£182m), which puts everything else rather in the shade. It has £840m-worth of assets, largely in its landbank. A national strategy for land acquisition has been introduced.

"Beforehand, the land team was regionalised, with each doing its own thing," said Napier. "But greenfield pockets were getting more difficult to find and more brownfield was needed. Much of this came from government sell-offs and we needed a more focussed team."

The national team is based in Solihull.