Taylor Wimpey reported a predictably grim set of first-half results this morning: the housebuilder recorded a £1.54bn loss, thanks largely to the shrinking value of its land bank in the UK, the US and Spain. As its shares promptly dived by another 10%, the builder admitted it was in talks with its banks about adjusting its borrowing agreements. We’re sure they’ll jump at the chance…
Taylor Wimpey’s UK profits were down 39%, which is bad enough – but the picture was even worse in the US, where profits slid 63%, and worse still in Spain, down 85%. All in all, its land is worth nearly £700m less than it was at the start of the period. The other big hit was a write-down to the value of intangible assets like the George Wimpey brand that it bought last year – it reckons these are now worth £816m less than lbefore, which says a lot about the current sentiment towards the sector…
In an attempt to salvage this dire situation, Taylor Wimpey has been frantically cutting costs, with about 900 jobs due to go in the UK alone. It’s set aside £40m to cover this restructuring effort, which it’s trying to pass off as a pre-emptive strike. ’Our experience of the downturn in the US housing market has enabled us to recognise the early signs of market weakness in the UK and act swiftly to position our UK housing business for a difficult trading environment,’ said CEO Pete Redfern optimistically.
But even without all these ‘exceptionals’, profits still plunged by 96% to £4m. So its first priority will be to get its bankers off its back. Rumours were rife yesterday that it would announce a refinancing of its £1.7bn debt burden today, but apparently not. Chairman Norman Askew said only that he was in ‘constructive dialogue’ with the banks, and expects to reach an agreement by the end of the year – suggesting the talks might be taking rather longer than expected.
Taylor Wimpey won’t exactly be flavour of the month with its shareholders, given that its stock price has now dropped by 85% from its one-year high. But the top brass were insisting today that the long-term prospects are a lot better: although it’s expecting tough conditions to continue for a while yet, it claims to be seeing ‘pockets of stabilisation’ in the US, and some reasons for optimism in the UK.
And a good thing too – if it has many more half-years as bad as this one, it might not live to tell the tale....
In today's bulletin:
Taylor Wimpey slumps to £1.5bn loss
RBS beefs up with boardroom bruisers
Bratz maker faces big Barbie smack-down
A pain to train for small businesses?
Elliott demands Time Out on BBC publishing arm