Taylor Wimpey, the UK’s largest housebuilder, this week insisted it was “in good shape” to come out of the housing slump in the US, despite taking a further £61m hit in its first half results, writes Sarah Richardson.
The company reported a pre-tax profit of £140.9m on turnover of £2.7bn in its first results since it was formed from a merger of Taylor Woodrow and George Wimpey in July.
This represents a drop from a combined profit of £313.1m a year ago owing to merger costs and the US loss, together with an earlier writedown of £25m in the US announced by Taylor Woodrow in May.
Ian Sutcliffe, Taylor Wimpey’s UK chief executive, said that despite the latest problem in the US, which was a result of land provisions in the Florida market, the company was in a good position to recover when market conditions improved. The US accounts for 20% of its earnings.
He said: “Subcontractor prices are falling and we are retendering work to take account of that. We are also starting to see lower land prices in the US.” Taylor Wimpey is set to make 700 staff redundant in the US, which it has already announced.
The US provision was bigger than expected. They can’t give assurances it won’t happen again
In the UK market margins increased strongly to 11.7% despite interest rate rises, with greater efficiencies driving the improvement.
In addition the company increased its overall synergy estimate to £100m from £70m, saying that substantial progress was being made in the integration of the two businesses. Taylor Wimpey is to open a head office near High Wycombe, Buckinghamshire.
It also announced a share buyback of up to £750m, which was well received by the City. Shares rose 10% to 330p when its results were announced on Tuesday. However, many City sources still expressed caution. One analyst said: “We’re still of the opinion they’re one to watch but the US provision was bigger than expected. They can’t give us any assurances it won’t happen again.”
For more on Taylor Wimpey go to www.building.co.uk/archive