A writedown on the value of a company’s overseas operations and a gloomy outlook on trading at home would not appear the best formula for one of the biggest rises in the FTSE 100.

But this is housebuilding, or more specifically, Taylor Wimpey, the worst performer this year in what has been one of the stock market’s worst-performing sectors. So with the shares down 55 per cent over the past six months, yesterday’s 6 per cent gain can be read as no more than the covering of short positions and relief that its tidings were not any worse.

Not that all was gloom. Perhaps the biggest surprise was that Taylor Wimpey, now Britain’s largest housebuilder, repeated its confidence that it can achieve operating margins of 14 per cent in the current year. Given that improving Taylor Woodrow’s historically below-par margins was one of the key reasons behind the merger with Wimpey, that affirmation is encouraging. The company said that the UK – which accounts for three-quarters of sales – was subdued, with volumes down 5 per cent, although prices have remained stable.

That such margin targets should remain achievable says much about the savings that the combined company expects to wring from the tie-up. These are put at £70 million for next year and £100 million for 2009. Apart from efficiencies in procurement, the company expects to benefit from a standardisation of its housebuilding techniques, which should knock about 7 per cent off its average development cost.

As for the US, trading remains as bad as expected, with market conditions having deteriorated further over the past two months. Cancellation levels rose to 30 per cent during the third quarter, while the company does not expect any recovery in the United States this year or next. The valuation of its American land holdings are being written down by £140 million, against expectations of about half that level.

So what of the upside? Taylor Wimpey has one of the strongest land banks among its UK peers but, because of its exposure to the US, the lowest valuation in its sector. It is perhaps only sensible that the company is using surplus capital to buy back its shares rather than buying land, which could be available more cheaply next year. And with Taylor Wimpey having spent only £164 million on share repurchases out of a planned £750 million, that firepower should provide valuable support and enhance reported earnings by nearly 18 per cent.

But buying Taylor Wimpey now requires faith that the US is near the trough and that UK interest rates will fall. Even at 247½p, or seven times next year’s earnings and a yield of 6.4 per cent, it seems better to miss out on short-term gains than make that leap. Avoid.

Johnson Service

Few chief executives have enjoyed a stock market reception as rapturous as the one that greeted Charles Skinner.

Shares in the linen rental and dry-cleaning specialist rose 15 per cent on his appointment to the top job in March on hopes that he could rapidly turn round one of the serial underperformers of the support services sector.

But with Johnson issuing a profit warning yesterday, a month after its first-half results, and the shares down 31 per cent to less than half their level before his arrival, that optimism would seem to have been misplaced.

The company said that poor trading in its noncore operations means it will miss forecasts for both 2007 and 2008. With Johnson declining to be drawn on its estimates for 2008, analysts cut their numbers by as much as 20 per cent and suggested the dividend – once the biggest reason to hold the shares – could be halved. Johnson’s problem is debt of £150 million which overshadows last night’s stock market value of £87 million. And with the divisions earmarked for disposal faring badly, paying down that debt will be slow, bringing the prospect it will have to be renegotiated or fresh equity raised. In Johnson Apparelmaster and Sketchley the company has market-leading positions. But the strain on its balance sheet and an uncertain 2008, mean Johnson, even at less than 5 times next year’s earnings, is still best avoided.

Celsis International

The agar plate – a sterile dish in which bacterial cultures are left to grow – has long been one of the more colourful features of school biology lessons.

But it is also still the most widely used method by makers of personal care products to detect whether their goods are free of contamination before they leave the factory. Celsis, the Cambridge-based biotech minnow, is doing its best to change that. It has a rapid detection system that gives results within a day, rather than a week, enabling its customers to get their goods on the shelves faster and reducing their working capital tied up in inventory.

The division of Celsis, which supplies the likes of Procter & Gamble and Colgate Palmolive, was one of the star performers in yesterday’s first-half figures, with revenues up 19 per cent. The company has only 10 per cent of that market, and with customers under pressure to cut costs and more sophisticated versions of the test under development, Celsis appears well-placed to at least maintain growth. Sales at its analytical services division were flat after the loss of a US contract but should recover given the increased opportunities for cross-selling following last year’s acquisition of InVitro Technologies.

At 208p, Celsis sits at 13 times next year’s earnings, which is low given double-digit growth and negligible debt. Celsis needs to make acquisitions to put it on more investors’ radar but is worth holding.

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