There was a plethora of interim management statements released this morning among the 350 largest companies listed on the LSE, but one of the most closely scrutinised was undoubtedly Taylor Wimpey (LSE: TW.) – one of Britain’s largest home builders.
Like many of Taylor Wimpey’s peers, the company has been through a difficult two years, to say the least. Forced to incur massive write downs on the value of its land bank, combined with large amounts of debt at a time when credit was tight, brought many residential and commercial property group’s to the brink. And like many other house builders, Taylor Wimpey was forced to come to the market and raise a significant amount of capital to cut its debt pile, causing massive dilution to shareholders.
Now that the storm appears to have largely passed, investors are hoping for sunnier days for house builders and their cousins in the commercial property sector. Investor’s canny enough to buy Taylor Wimpey during its darkest hour have already made a handsome return – shares in the company hit a 52 week low of just 3.3 pence in late 2008, but has since rebounded to a 52 week high of 53 pence. Shares in the house builder are currently trading 6.5% higher this morning at 39.5 pence which values the company at £1.2 billion.
This morning Taylor Wimpey released a relatively upbeat assessment of its own financial health and that of the markets it operates in. The company’s UK business has “remained encouraging” in the second half of the year, and reported that it did not witness the usual seasonal dip in sales over the summer. The group’s further highlighted that the average selling price for homes on its order book had risen 9%, thanks to a combination of higher prices and different sales mix.
The total order book value now stands at £1 billion (week 43 2008: £1.06 billion), while net private reservation rates for the second half to date is 0.56 homes per site per week (H1 2009: 0.65, H2 2008: 0.40). Reservation rates cancellations are also much better, at 16% in the second half to date compared to 46% in H2 2008.
The Company also confirmed that it had made several land purchases, but was still witnessing “below normal levels” of transactions in the land market.
“We have also made good progress in reducing build costs,” the company stated. “Regular benchmarking exercises across our business have identified considerable opportunities for reductions in the cost of building our homes on current sites, with no compromise on quality.”
In North America, it was a tale of two countries - Canada hasn’t witnesses anywhere near the kind of housing collapse seen in the United States. Taylor reported that the Canadian housing market was comparatively more robust to the United States, but the company did state that the US housing market had shown “continued stability” in the second half, though foreclosures “remain an issue”.
In Taylor Wimpey’s two other key markets, Gibraltar and Spain, the company said it was “performing well in challenging market conditions”.
Total net debt currently stands at £860 million, down from £1.87 billion 12 months ago, and is expected to fall below £800 million by year end.