Shares in Taylor Wimpey sank by more than 7% yesterday, after Britain�s biggest housebuilder posted a £1.54bn half-year pre-tax loss as the market for homes dried up, and said it has yet to agree a vital loan deal with its banks.
Shares in Taylor Wimpey sank by more than 7% yesterday, after Britain's biggest housebuilder posted a £1.54bn half-year pre-tax loss as the market for homes dried up, and said it has yet to agree a vital loan deal with its banks.
The loss stemmed from two major blows to the value of its assets in key markets - Britain, Spain and North America. The London-based firm had to writedown £690m of its land holdings. Market conditions have become increasingly difficult because potential home buyers cannot secure mortgages from lenders as a result of the global credit squeeze.
The writedown reflects the lower price that the company is likely to receive for home sales on that land.
At the same time, Taylor Wimpey - which was formed by the £4.3bn merger of Taylor Woodrow and George Wimpey in July 2007 - had to writedown £816m of goodwill and intangible assets, including the cost of losing the George Wimpey brand.
As a result of the merger, which raised the company's total home sales despite the deteriorating housing market, revenue in the first half rose by 35% to £1.89bn.
Taylor Wimpey's shares, which have lost about 75% of their value this year, closed 3.75p, or 7.2%, lower at 48.25p after the group said it saw no real recovery soon in its main markets. "The current operating environment in the UK housing market remains very challenging and we do not anticipate any recovery in the short term," it said in a regulatory statement, echoing sentiment expressed in the last week by peers Persimmon and Bovis Homes.
"We do not anticipate any material recovery until 2009 at the earliest in the US housing market," it said. The group also said the market in Spain, where many British people have bought retirement or holiday homes, is also poor.
The UK housing market has ground to a halt because of falling consumer confidence and tighter conditions for mortgages imposed by lenders. These factors have led to a fall of around 10% in house prices since last August.
The British Bankers' Association said on Tuesday that mortgage approvals for house purchases remained near a record low in July, around 65% lower year-on-year, and said there was no sign yet of a property market recovery.
To reduce costs, Taylor Wimpey has already announced plans to close a third of its British offices by the end of September, cut 900 jobs and cancel the half-year dividend payment. It paid 5.5p a share in the first half of 2007.
Taylor Wimpey, which in July failed to raise the £500m it said it needed to satisfy lenders, said its priority is to reach an agreement to avoid breaching its existing interest cover covenants in February, and it expects a satisfactory outcome to negotiations by the end of the year. "We are in the middle of talks to renegotiate covenant structures and I am confident of a satisfactory conclusion," Redfern said in a conference call.
"Both our lenders and private placement holders, which account for over 40% of total debt, are supportive," he added. "We don't expect to raise new capital to reach an agreement with lenders."
