Page last updated at 17:28 GMT, Wednesday, 27 August 2008 18:28 UK

Taylor Wimpey hit by massive loss

Property for sale
Like other house builders, Taylor Wimpey is cutting jobs

Housebuilder Taylor Wimpey has reported a huge loss for the past six months after having to sharply reduce the value of its assets including land.

The firm slumped to a loss of 1.54bn in the six months to 30 June, saying it faced "very challenging" conditions.

It was hit by the lower value of its land in the UK, US and Spain, and the cost of downsizing its UK business.

Excluding these reductions in asset values, Taylor Wimpey made a profit of 4.3m, down from 119.8m last year.

Shares in Taylor Wimpey fell as much as 11% on the news in early trading before recovering slightly to close down 7.2%

Other housebuilders were affected by the news with shares in Persimmon, Bovis Homes and Barratt Developments all falling.

Sagging demand

Taylor Wimpey is cutting about 900 jobs in the UK as the squeeze on mortgage finance has severely reduced demand for new homes.

Other leading property developers, including Persimmon, Barratt Developments and Bovis Homes, have been forced to streamline their UK operations in response to the malaise in the market.

The BBC's Economics Editor Hugh Pym said that thousands of people losing their jobs in the construction industry would have an impact on the wider economy as it would depress household spending.

The first half of 2008 has been characterised by the very challenging trading conditions in the UK, US and Spain
Norman Askew, Taylor Wimpey chairman

The UK market remained "very challenging", Taylor Wimpey said, with no imminent prospect of recovery.

Profits from its UK business fell 39% over the period as the average selling price for private homes fell by 22,000 to 202,000.

The situation is similarly bleak in the US, where the firm's profits fell by 63% and in Spain, where profits fell 85%.

Tough conditions in all its major markets has forced the firm to write down the value of land it owns by 690m.

It is also writing down the value of other assets, including the George Wimpey brand that it bought last year, to the tune of 816m.

In addition, the firm had restructuring costs of 40m, primarily relating to its UK housing business

"The first half of 2008 has been characterised by the very challenging trading conditions in the UK, US and Spain," said the firm's chairman Norman Askew.

But he added: "The board remains convinced of the fundamental value of the business over the medium and the long term."

Bank discussions

Taylor Wimpey said it was in discussions with banks and other lenders about amending some of its borrowing agreements.

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It has borrowed 1.7bn from the banks and has been seeking to renegotiate terms of the loans.

The firm failed to secure additional financing from its investors earlier this year, leading to a sharp fall in its share price.

However, it stressed that its cash position was strong and it was "fully compliant" with its banking covenants.

"We are focused on giving ourselves the flexibility to navigate through the market downturn and strengthen our position for a market recovery," the firm added.

Analysts said the firm was paying the price for concluding the costly merger of Taylor Woodrow and George Wimpey last year just as the property market was showing signs of turning.

Calls for action

Property firms have renewed calls on the government to intervene to kick-start the housing market after figures showed that new mortgage approvals were 65% lower in July than the same month last year.

House under construction
Empty properties should be bought for social housing, the Lib Dems believe

The number of new homes begun in the second quarter of this year was 19% lower than in the same period last year.

The Liberal Democrats have urged fresh action to tackle what they describe as a "downward spiral" in the housing market.

They want it to be harder for banks and lenders to repossess properties and for people to be allowed to stay in their homes as tenants if they cannot pay their mortgages.

Councils and housing associations should also be allowed to acquire unoccupied properties and land owned by developers.

"A lot of building companies and developers are going bust. They are in a pretty desperate state and they need cash," said Vince Cable, the party's Treasury spokesman.

"In a falling market there are opportunities for social landlords and councils to acquire empty property and land at a discount to make it available for building new social houses for people who need it."




SEE ALSO
Housing slump hits Bovis profits
26 Aug 08 |  Business
Taylor Wimpey woes hammer shares
02 Jul 08 |  Business
Taylor Wimpey seeks refinancing
30 Jun 08 |  Business
Taylor Wimpey to close 13 offices
20 May 08 |  Business

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