Taylor Wimpey confirms another 1,000 job losses

The running total of job losses at Taylor Wimpey now stands at 1,900 which is 1,000 higher than the previously published figure of 900.

The increase is the result of site-by-site job losses as the number of active sites has been cut from 500 to 400 over the past three months.

The extra 1,000 job cuts have been made since TW’s last Stock Exchange statement on 29 August.

Will there be more?

The latest tally might indeed grow further still, though there are hopes that the housing market has settled to a new lower base and, as a result, no further cutbacks will be necessary.

Shares in TW are 13% down today and currently stand at less than 12p.

Clyde Lewis and Aynsley Lammin, analysts with stockbroker Citigroup, have put a value of 60p on the house builder’s shares but then argue that a 75% discount to this figure is justified by the potential risk of a swath of new shares being issued to ease the group’s debt problems.

The need for a 75% discount figure in their sums would suggest the need for TW’s existing shareholders to brace themselves for the call for a 4-for-1 deal.

The Citigroup analysts look ahead at what profits and losses could be in the pipeline and come up with figures of:

• Pre-tax loss of £62m in 2008
• Pre-tax loss of £54m in 2009
• Pre-tax profit of £130m in 2010

Turnover in the same three years is expected to dip from the 2007 figure of £4.7bn to:

• £4.3bn in 2008
• £4.0bn in 2009
• £4.5bn in 2010

Net debt has grown to £1.9bn. “We think the group will struggle to get down to our target of £1.4bn at the end of the year,” say the analysts.

The operating cash flow that they pencil in shows:

• £16m in 2008
• £348m in 2009
• £459m in 2010

“We are not expecting a quick rebound in the housing market,” say the pair. “We expect a 10% fall in house prices this year and next.

“We rate Taylor Wimpey as Speculative Risk. Dilutive equity issuance could be required to ease the financial strains the group would be under following an expected collapse in profits.”

Charlie Campbell, analyst with Liberum Capital, sees shares in TW as “risky although the equity is cheap”

His verdict on today’s company announcement is: “Taylor Wimpey’s trading update reveals that it has hit its volume targets for the year and so will take a less aggressive pricing stance.

“The other good news on cash is that the US continues to generate cash and land commitments have been reduced.

“If Taylor Wimpey becomes less aggressive on pricing, this would be good for the industry. The company now only has eight-weeks of finished stock left, and we would expect industry pricing to become much less aggressive once levels of finished stock are run down.”