Biggest housebuilder reveals £1.5bn losses

Aug 28 2008 by Peter McCusker, The Journal

THE UK’s biggest housebuilder has racked up half-year losses of £1.54bn after market turmoil caused it to slash the value of its land bank.

Taylor Wimpey reported the deficit for the six months to June 30 after writing off £586m from its UK land portfolio – around 16% of the total – as well as more than £816m linked to goodwill recognised from the merger between Taylor Woodrow and George Wimpey last year.

In another picture of the impact from the housing market downturn, the firm’s underlying profits plunged 96% to £4.3m during the period, with house sales down nearly a third.

Rivals Persimmon and Bovis Homes have also revealed massive half-year profit slumps as the industry grapples with a mortgage squeeze and battered consumer confidence.

And shares in the housebuilding sector took a nosedive on the back of Taylor Wimpey’s performance with North East builders Barratt and Bellway both suffering. Taylor Wimpey, which is labouring under a £1.7bn debt mountain as well as the housing market woes, added that it was still trying to secure breathing space from its lenders, with a deal expected to be finalised by the year end.

The group faces breaching its banking covenants – which measure how well placed the firm is to repay the debt – because of its poor results, and investors were hoping to see new arrangements unveiled yesterday.

But chief executive Pete Redfern said discussions with banks were ongoing.

“Our key priority is renegotiating our covenant structure,” he said.

“We are in the middle of discussions with our lenders ... and we feel pretty happy with the way that process is going.”

Mr Redfern added that he was not expecting to have to raise new capital in order to strike a deal with lenders, which comprise a range of banks and US private investment firms.