US setback takes toll on top builder
THE credit crunch demolished profits at housebuilder Taylor Wimpey last year.
Pre-tax profits fell from £776.5million to £535.6million for the year to December as the United States mortgage crisis, the original driver of the global credit trauma, took hold.
Revenues at the UK’s biggest housebuilder fell from £6.7billion to £5.9billion. Chief executive Peter Redfern said the company had been forced to suspend a £750million share buyback programme to conserve cash in the face of continued uncertainty and “challenging” market conditions.
But the shares rose 3bp to 167fp as Redfern said the UK housing market had improved since last autumn, and dismissed fears of a price crash.
As a sign of confidence in the future, Taylor Wimpey lifted the full-year dividend 5 per cent to 10bp.
“We are experiencing a seasonal uplift, and cancellation rates are down,” said Redfern. “We expect house prices to be flat this year. There is pent-up demand but people seem to be waiting for the right time.”
To cope with the subdued market, the company has slowed building.
Average selling prices rose from £186,000 to £188,000 last year, and profit margins improved from 12.8 per cent to nearly 15.2 per cent as costs were cut. UK profits rose from £533million to £608.5million.
The profits slump was almost entirely in the US where they fell from £336.8million to £62.4million. The company was forced to make large writedowns against the value of the land.
It was also affected by a weak market in Spain where profits fell from £26.4million to £7.9million.
Taylor Wimpey was formed last year by the merger of Taylor Woodrow and George Wimpey.
Analysts warned the company might be forced to take further hits. “The US is trending lower, so we see the need for a second round of writedowns,” said Merrill Lynch.