Fri 18 Apr 2008
Taylor Wimpey announce profit shortfall
Taylor Wimpey, the UK’s largest housebuilder, highlighted the plight facing much of the housing market at the moment, after announcing a profit shortfall. They also forecasted a negative outlook for the rest of 2008. The company, which posted its first loss in 15 years last year, said that conditions in the UK housing market had weakened. This is largely due to the fact that buyers are finding it harder to get a mortgage, particularly first-time buyers, as banks put a squeeze on lending.
Consequently, demand for housing stock has fallen in recent months. Taylor Wimpey reports that, “sales rates remain significantly below those of the equivalent period of 2007 on a pro forma basis, with higher levels of cancellations being experienced.”
In fact, the firm’s order book is now worth 26 per cent less than it was this time last year. This has seen the company’s value decline rapidly – it has more than halved since last summer, at the height of the housing boom. After yesterday’s close, it was worth just £1.67 billion.
Taylor Wimpey says that it was trying to cut costs, but the company’s weighty exposure to the US market, following last year’s £5.5 billion merger of Taylor Woodrow and George Wimpey.
“We do not expect market conditions in the US to improve significantly during the remainder of 2008. In the short term, our strategy remains to focus on managing our existing sites and reducing the cost base,” the company said.
Taylor Wimpey’s profit warning saw its share value fall 6.25p to 1583.75p. This caused repercussions across the sector, as investors shied away from investing in the division. Shares in Bovis Homes fell 18p to 524p, while Persimmon dropped 23p to 659p. Wolseley, the building materials supplier, fell 22½p to 529½p.
It’s now hoped that the Bank of England will intervene in the mortgage sector as early as next week, by permitting banks to temporarily swap mortgage-backed securities for government bonds.
Yesterday’s announced 26 per cent fall in profits comes just days after Ian Sutcliffe stepped down as UK homes chief of Taylor Wimpey. Peter Redfern (pictured), group chief executive of the company, has now replaced him.
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