August 27, 2008 / 6:31 AM / 11 years ago

Taylor Wimpey slumps on property values

LONDON (Reuters) - The country’s biggest housebuilder, Taylor Wimpey (TW.L), slumped to a 1.54 billion pound half-year pretax loss as the market for homes dried up and said it has yet to agree a crucial loan deal with its banks.

A George Wimpey building site is seen in north London, August 27, 2008. REUTERS/Suzanne Plunkett

The loss was accounted for by writedowns on the value of its land bank and its brand value, and it scrapped its interim dividend.

Its shares, which have crumbled over 75 percent this year, were 5.77 percent lower at 49 pence at 1128 GMT after Britain’s biggest housebuilder, as measured by number of homes sold, 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 statement, echoing sentiment expressed in the last week by peers Persimmon (PSN.L) and Bovis Homes (BVS.L).

“We do not anticipate any material recovery until 2009 at the earliest in the U.S. housing market,” it said.

The housing market has ground to a halt due to lower consumer confidence and the drying up of mortgage availability as a result of the credit crunch, leading to a fall of around 10 percent in house prices since last August. Taylor Wimpey also has exposure to the weak Spanish housing sector.

The British Bankers’ Association said on Tuesday that mortgage approvals for house purchases remained near a record low in July, around 65 percent lower year-on-year, and said there was no sign yet of a property market recovery.

Taylor Wimpey, formed last year from the merger of Taylor Woodrow and George Wimpey, reported 4.3 million pounds in profit before tax and exceptionals for the six months to end-June, compared with 119.8 million pounds last year and a median consensus of 55.05 million in a Reuters poll.

Exceptional items totalled 1.55 billion pounds, which included 690 million pounds in land writedowns announced last month plus a fresh writedown of goodwill, intangible assets and the George Wimpey brand for a further 816 million pounds.

The remaining 40 million pounds in losses arise from restructuring costs in the UK, following the 900 job cuts and closure of 13 offices already announced.

DEBT, COVENANT ISSUES

Taylor Wimpey, which in July failed to raise the 500 million pounds it said it needed to satisfy lenders, said its priority is to reach an agreement to avoid breaching its existing interest cover covenants next 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,” Chief Executive Pete Redfern told reporters in a conference call.

“Both our lenders and private placement holders, which account for over 40 percent of total debt, are supportive,” he added. “We don’t expect to raise new capital to reach an agreement with lenders.”

Peer Barratt said on July 10 that it had managed to renegotiate terms with lenders, relaxing covenants, without the need to raise cash.

“Whilst the group comments that it believes negotiations will reach a satisfactory conclusion by the year-end, there is no conclusion yet,” Panmure Gordon analyst Mark Hughes said.

“On that basis, we feel there are too many negatives surrounding the stock at the current time and therefore maintain our sell recommendation.”

The company said it currently remains in full compliance with its debt covenants and will seek to reduce its 1.7 billion debt pile, which is the highest in the sector alongside Barratt.

A George Wimpey building site is seen in north London, August 27, 2008. REUTERS/Suzanne Plunkett

Redfern admitted that the group has received approaches but said it is not looking to sell a stake or its construction business and is not in any formal talks.

He said the order book had remained stable since April, when market conditions weakened “markedly”, and was around 35 percent lower year-on-year. Cancellations were lower than in April but clearly higher than last year.

Home completions for the six months were 31 percent lower at 8,494 units.

Reporting by Marc Roca; editing by Sue Thomas/Rory Channing

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