Taylor Wimpey 'encouraged' despite sizeable annual loss

Taylor Wimpey posted another sizeable annual loss today but said it was encouraged by recent trading after an improvement in UK sales.

The housebuilder, which was created from the merger of Taylor Woodrow and George Wimpey in 2007, reported bottom-line losses of £700 million following a further review of the value of its land and work in progress.

Major write-downs also meant the company reported a deficit of £1.97 billion in 2008, but Taylor noted improved trading in the second half of last year as it achieved operating profits of £43.3 million for 2009.

Chief executive Pete Redfern said: "Trading conditions for our main businesses stabilised through 2009 and we were pleased to return to operating profit in both the UK and North America in the second half of the year.

"Whilst we remain cautious, we are continuing to see slowly improving conditions across our main markets."

The company described UK trading as encouraging in the first two of months of 2010, with continued improvement in visitor levels, sales rates and cancellations.

It completed the sale of 10,186 homes in the UK last year, down on the 13,394 reported for 2008. The average selling price fell to £160,000 from £171,000, but the figure was higher than the £153,000 seen at the half year stage.

Operating profits in the UK were £14.3 million, compared with £53 million a year earlier.

Taylor noted that the structural undersupply of new housing in the UK has been exacerbated by the downturn, while restrictions on mortgage availability continued to have an impact on customers' ability to fund purchases.

It added: "When mortgage availability increases and consumer confidence returns, we will see an even greater imbalance between demand and supply, creating the potential for a significant recovery in house prices in the future."

Taylor spent the start of last year in a battle for survival - leaving its shares at just over 3p at one point - before a refinancing deal in April gave it bank facilities totalling £2.47 billion. A £510 million cash call on shareholders also helped as its debt is now around £750 million, compared with £1.5 billion at the end of 2008.

In North America, Taylor said the stability seen in the housing market during the majority of 2009 had continued into the early months of this year. Profits for the division in 2009 were £48.1 million, down from £59.9 million.

Analysts at Panmure Gordon stockbrokers expect that Taylor Wimpey will post another loss in the current financial year.

They added: "Our concerns remain on the group's capacity for land spend. We believe that it does not have the capacity to grow its landbank like other housebuilders, and will only be able to replace what it uses.

"This is likely to limit future profit and net asset value growth at the business in our opinion."