Interim Management Statement

RNS Number : 2430W

Taylor Wimpey PLC

16 November 2010

 



16 November 2010

Taylor Wimpey plc

Interim Management Statement, Bank Refinancing Agreement and Board Change

The following statement constitutes Taylor Wimpey's Interim Management Statement, covering the period from 5 July 2010 to the date of this announcement.

The Group has performed well, with trading stable against a backdrop of economic uncertainty.  We are now fully sold for 2010 and we expect Group profit before tax to be at the upper end of our expectations. We look forward to 2011 with a healthy order book and our focus remains on driving further margin improvement through cost reductions and prioritising profit over volumes.

We have also made significant progress in our refinancing discussions, with terms agreed on a revised credit facility with all of our banks.

UK Housing

Despite the ongoing political and economic uncertainty, which we highlighted at the time of our Half Year Results, our UK Housing business has continued to deliver stable sales rates and pricing in the second half to date. 

Trading since the half year has been in line with our overall expectations, with sales over the summer slightly ahead and the autumn marginally below as customers awaited the announcement of the Comprehensive Spending Review.  We have seen an incremental improvement in sales since the announcement, but mortgage availability remains a constraint on industry volumes.

Private net reservation rates for the second half to date average 0.47 per site per week (H1 2010: 0.58, H2 2009: 0.48) and cancellation rates are broadly in line with the 16% experienced in the first half of this year.  Outlet numbers average 277 for the second half to date (H1 2010: 295).  Average selling prices on reservations have been broadly flat since the half year and we have not experienced the marked swings recorded by some of the national house price indices.

We are fully sold for 2010 and, as we move into 2011, our sales focus remains on driving margin improvement, rather than growing volumes.  The current total order book value is £883 million (week 44 2009: £964 million).

We continue to make good progress with our build cost reduction and replanning initiatives and expect to deliver an operating profit towards the upper end of our expectations, from volumes at the lower end of the range.

We are seeing attractive opportunities in the UK land market and have approved new land purchase commitments for 3,055 new plots since the half year (H2 2009: 3,003 plots).  Included within these commitments is an agreement to develop 378 homes across a portfolio of eight high-quality residential sites in the south-east of England.  These sites are all expected to be active outlets in 2011.

North America Housing

After a period of weak trading conditions from the late spring and through the summer in our US markets, we have seen greater stability in the autumn as the underlying impact of the cessation of the Homebuyer Tax Credit programme starts to diminish.  Affordability levels remain exceptionally good in our US markets and the level of inventory in the market remains stable.  Our markets in Canada remain strong.

Net reservation rates for North America overall in the second half to date are running at 0.47 per outlet per week, broadly in line with the first half rate of 0.50.  Our reservation rate in Canada remains strong at 1.42 (H1 2010: 1.12), reflecting the ongoing strength of market conditions.  In the US, reservation rates are weaker than those of the first half across all of our markets, although we have seen improvements in recent weeks. 

For North America as a whole, cancellation rates remain in line with the long term average at around 17% (H1 2010: 16%).  Average selling prices have remained broadly flat over the second half to date.  Outlet numbers remain in line with the average of 148 from the first half of 2010.  We are fully sold for 2010 and have a current total order book value of US$1.10bn (week 44 2009: US$1.05bn).

A combination of ongoing cost savings and enhanced margins from recently acquired outlets will enable us to deliver an operating profit above the upper end of our expectations, despite completions running at around 10% below the 2009 level.

We continue to acquire new land in North America on a selective basis, focusing on longer-term opportunities in attractive sub-markets.  We have approved new land purchase commitments for 754 plots in the second half of the year to date (H2 2009: 3,723 plots).  As indicated at our Half Year Results presentation, the ongoing market weakness may result in a small additional impairment to the carrying value of our US landbank at the year end.

Spain and Gibraltar

Our business in Spain continues to perform well in very challenging market conditions and we have now completed our exit from the Gibraltar market.

Update on refinancing discussions

As announced on 3 August, we entered discussions with our banks earlier in the year regarding an early refinancing of the Group's debt facilities.  We are pleased to report that we have now reached full agreement with these banks on the terms of a revised £950 million credit facility, which is conditional on obtaining £350 million of debt capital market funding in the public or private debt capital markets.

The new agreement includes a revised set of covenants, which removes a number of the current operational restrictions and significantly increases our flexibility with regard to future operational decisions.  In particular, there is no restriction on new land investment.  We will provide further detail regarding the terms of our refinancing once the second stage, which relates to the Group's Private Placement Notes and Eurobonds, has been completed.  The bank agreement strengthens the Group's financial position and we expect to conclude the refinancing by the end of the first quarter of 2011.

Discussions to agree the triennial valuations with the pension trustees have progressed well and are expected to be completed by the end of the year.  As part of the refinancing, we anticipate making a one-off deficit reduction payment of £75 million.

Net debt stands at c£720 million, a further reduction from the £860 million at the equivalent point last year.

Board change

Following the completion of this key stage in the refinancing process, it has been agreed that Chris Rickard will today stand down from his position as Group Finance Director and leave the Company in order to allow him to pursue other opportunities.

The Company is pleased to announce that, following a rigorous selection process involving internal and external candidates, Ryan Mangold, who joined Taylor Wimpey as Group Financial Controller in April 2009, has been appointed as the new Group Finance Director.  Ryan will also be appointed to the Board with immediate effect.  Before joining Taylor Wimpey, Ryan was Group Financial Controller of Mondi Group for five years, prior to which he held various other senior finance roles with Anglo American plc.

Pete Redfern, Group Chief Executive commented, "On behalf of the Board, I would like to thank Chris for his significant contribution over the last two years and wish him well for the future.  Ryan also played an important role in progressing the refinancing and it is reflective of the strength in depth of our senior management that we have been able to make this internal appointment."

Taylor Wimpey plc confirms that no disclosure is necessary in respect of Ryan Mangold as required by Listing Rule 9.6.13.

Outlook

In the UK, we anticipate that trading will continue to be subdued for the remainder of this year due to the continuing impact of constrained mortgage lending and ongoing wider economic uncertainty. We expect to enter 2011 with a solid order book and we remain focused on our strategy of maximising margins and returns rather than looking to accelerate volume growth.

In the US, although conditions have been volatile as expected, strong affordability and the gradually reducing level of foreclosures provide the potential for a strong recovery as confidence returns.  We continue to expect market conditions in Canada to remain robust for the foreseeable future. 

The significant progress we have made on refinancing the Group gives us greater operational flexibility and puts us in a strong position as we look forward to 2011.

-ends-

For further information please contact:

Taylor Wimpey plc                                                                  Tel: [phone]

Peter Redfern, Group Chief Executive

Ryan Mangold, Group Finance Director

Jonathan Drake, Investor Relations

Finsbury                                                                                  Tel: [phone]

Faeth Birch

Andrew Dowler

Notes to editors:

Taylor Wimpey plc builds homes in the UK, North America and Spain. It aims to be the homebuilder of choice for customers, employees, shareholders and communities.

For further information, please visit the Group's website:

www.taylorwimpeyplc.com 

 

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