Profits slump 96% at Taylor Wimpey

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by Kay Murchie

Taylor Wimpey has continued the trend amongst housebuilders and reported a massive 96% fall in profits for the first six months to the end of June.

Profits fell to £4.3 million compared to £119.8 million in the same period last year. The group said the UK market remained very challenging with no recovery in the short-term.

The news follows that from fellow housebuilders after Bovis announced yesterday that profits fell 83% in the first-half.

Meanwhile, last week Persimmon, reported a 64% slump in first-half pre-tax profits to £100.9 million for the half-year to the end of June, this compares with £281.1 million in the same period last year.

Furthermore, Bellway reported a 45% fall in reservations of its homes in the second half of the financial year, compared with the same period last year.

Falling house prices and the mortgage squeeze has meant that housebuilders have been suffering and many have reported a significant amount of job losses as a result.

Taylor Wimpey, which was formed by the merger of Taylor Woodrow and George Wimpey last July, has also had to sharply reduce the value of its assets including land.

According to analysts, the firm is paying the price for the costly merger just as the property market was showing signs of turning.

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

The group is in talks with banks and other lenders about amending some of its borrowing agreements. The housebuilder has already borrowed £1.7 billion and said it is likely to breach its banking covenants if a deal could not be agreed.

The Government is being urged to kick-start the market after recent figures from the Council of Mortgage Lenders showed that gross mortgage lending slumped by 27% last month compared with July 2007.

Furthermore, many estate agents are being forced to close as a result of the housing slowdown. Halifax recently announced it is to close 53 of its estate agency branches following a decline in the number of house sales made over the last 12 months.

In addition, the new owner of estate agent chain Foxtons, private equity group BC Partners, has called in investment bank, NM Rothschild, to deal with a mountain of debt.