Taylor Wimpey cuts debt by £300m but more job losses planned

Taylor Wimpey has no plans for a debt-for-equity swap said chief executive Peter Redfern this morning as he revealed that the group has cut its net debt by £300m in the space of just six months.

That still leaves a mountain of borrowings – now standing at £1.55bn – but at least the business is generating sufficient cash, despite the state of the housing market, to pay down the sum owed to numerous banks and bondholders.

TW’s last reported debts were running to £1.9bn.

After 1,400 job cuts in 2008, leaving a workforce one-third smaller than when Taylor Woodrow and George Wimpey staged their recent merger, there are still more to come.

“The figure will be significantly smaller this year,” said Redfern. “Some of this number were announced last year and are still to take effect, so that’s not a new cut that I’m announcing today.”

After seeing debt-for-equity swaps by private house builders McCarthy & Stone and Crest Nicholson in the past two months, there has been speculation that TW might be forced down the same route.

“Both of them had more debt, in comparison with their scale, than Taylor Wimpey” said Redfern. That left them in greater need of a solution that was damaging for existing shareholders.

“I don’t see us in the same situation,” said Redfern.

This morning’s (Tuesday) trading update by TW provided a detailed insight into 2008 trading and in the UK a performance summary shows (previous year's figures in brackets):

• 13,400 completions (20,700)
• 17% affordable homes (15%)
• £171,000 average selling price (£188,000)
• 390 outlets (500)
• 20% fall in forward order-book
• 50% cut in use of part-exchange

“I’m pretty pleased with the way we have performed under the circumstances,” said Redfern.

“I’m hoping UK selling prices have stabilised. Today we are selling at the equivalent [price] to November, after a period in the autumn when incentives took the price down, then stabilised.”

When TW finally signs off its new arrangements with its debt providers, the recent experience of the likes of Bovis Homes suggests it will be saddled with the added cost of substantial arrangement fees.

Redfern skated over the issue nimbly. “We would expect a fee, its not unusual, but I won’t comment on whether it’s likely to be the same percentage as Bovis.”

TW’s reduction in net debt would have been a more substantial sum had it not been for the toll of £200m adverse effect of changes in the exchange rate (dollars to sterling).