Housebuilding: Taylor Wimpey suffers huge £1.5bn loss

Housebuilding: Taylor Wimpey suffers huge £1.5bn loss

Taylor Wimpey, Britain's biggest housebuilder, crashed to a £1.5bn loss in the first half of the year, hit by the slump in the market and huge write-downs. The company said it had not yet reached a deal with its banks to renegotiate crucial lending agreements, but was confident it would do so before the end of the year.

Pete Redfern, chief executive, said it could be some time before the market picked up. "We are battening down the hatches. It could be six, 12, maybe 18 months."

Taylor Wimpey, which was formed by the merger last year of Taylor Woodrow and George Wimpey, has operations in the UK and North America and a smaller business in Spain. In the six months to the end of June it said profit before tax and exceptional items had fallen from £119.8m to £4.3m.

However, exceptional items were £1.55bn. These were made up of a write-down of £690m against its land banks, a write-off of £816m against intangible assets, including goodwill and the George Wimpey brand, and £40m restructuring costs, mainly related to the UK housing business. The company is closing 13 of its 39 UK regional offices, with the loss of 900 jobs.

Taylor Wimpey described trading conditions as "very challenging" across all three of its markets but it said it remained convinced of the fundamental value of the business. The company said the North American operation was "fighting fit" and that lessons learned in that market were now being.....continued below

Advertisement starts

---

---

Advertisement ends

applied in Britain. "I think the single most important lesson is the speed of reaction: slowing land purchases, attacking costs hard," Redfern added.

Taylor Wimpey said that although it was not in breach of any of its loan covenants, it was "engaged in a constructive dialogue" to amend some of its existing borrowing agreements.

Earlier in the summer Taylor Wimpey sought unsucccessfully to raise fresh equity capital to strengthen its financial position. Redfern said yesterday that it was concentrating on restructuring its existing debt agreements, but that did not mean the company had completely written off the idea of raising equity capital. However, it was not actively pursuing the option in the short term.

In North America and UK housebuilding, margins have fallen sharply, while in Britain the proportion of completions accounted for by social housing has risen from 17% to 24%. Redfern said that was largely as result of the downturn in the private housing sector, rather than volume growth in social housing. He said he expected the proportion of social housing completions to remain steady.

Oliver Gilmartin, Rics senior economist, said the results highlighted the problems facing the sector and underlined the need for a rethink of the new homes policy.

"Marginal projects will be put on hold as financial pressure on housebuilders intensifies and transaction volumes remain low, pushing government housebuilding targets further into the wilderness. A rapid policy rethink is vital if 2m homes are to be built by 2016 to achieve government targets.

"Housebuilding is set to fall below 100,000 over the next year, with housing starts already down 25%. To reduce the excesses of this boom-and-bust cycle a more sustainable approach to housebuilding needs to be enacted sooner rather than later."

guardian.co.uk © Guardian Newspapers Limited 2008