Taylor Wimpey talk lifts building sector By Stanley Pignal Published: August 26 2008 08:47 | Last updated: August 26 2008 20:35 Poor sales figures from Bovis Homes dashed the fragile recovery in sentiment in the housebuilding sector on Tuesday, though the gloom was soon lifted by rumours of a debt lifeline for larger rival Taylor Wimpey. Shares throughout the sector fell on Tuesday morning as Bovis, one of Britain’s leading developers, revealed it had sold only 92 homes since June 30 – or fewer than two per day – barely a third of the figure in 2007. But reports in the trade press that Taylor Wimpey’s lenders had agreed to relax loan conditions without forcing the company to issue more shares reversed the sell-off just as investors were digesting the information. Taylor Wimpey, which is to update the market on first quarter results on Wednesday, declined to comment on the article in Building magazine. But one person close to the developer expressed “surprise” at the report. Most analysts are expecting the complex debt negotiations to take several months – as well having to deal with a consortium of several banks, Taylor Wimpey has to assuage US-based bondholders and there is uncertainty surrounding its large pension deficit. The heavily-indebted builder last month appointed NM Rothschild, the investment bank, to restructure its debt after it failed spectacularly in its bid to raise £500m in new capital earlier this summer. As things stand, it remains at risk of breaching banking covenants according to its own projections. The putative news sent Taylor Wimpey shares up 6½p to 52p, and carried through to other housebuilders despite the weaker-than-expected news from Bovis. Bovis said on Tuesday it had slashed about 40 per cent of its staff since the start of the year to deal with what David Ritchie, chief executive, called “the toughest period of trading [Bovis] has experienced in its time as a public company”. “The group anticipates private home sales volumes continuing at the current absolute level for the remainder of 2008,” added Malcolm Harris, the recently departed chief executive, who now serves as chairman. The interim dividend, originally touted at 20p, was cut to 5p to reflect earnings per share down by four-fifths to 5.7p (34.1p). Pre-tax profits in the first six months, partly affected by restructuring costs, were down to £9.5m from £58.4m, as margins wilted in line with the rest of the sector. Revenues were down two-fifths from £259.9m to £149.3m. Bovis met some success in sourcing land: 3,735 lots were granted planning permission, increasing potential values. Its total land bank has shrunk as it has stopped purchasing land in an attempt to strengthen its balance sheets. Unlike its peers, it reported no write-downs in the value of its land. Bovis has £93m of net debt and is relatively modestly geared compared with other housebuilders, but it is due to start discussions with its banks soon on a £220m facility that runs out in early 2010. Its shares closed up 13¼p at 441¼p, after the Taylor Wimpey rumours reversed early trading weakness. Copyright The Financial Times Limited 2008MORE FROM THIS SECTOR
Wednesday, 27 August 2008
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