31st Oct 2007 07:02
Taylor Wimpey PLC31 October 2007 31 October 2007 Taylor Wimpey plc Trading Update Taylor Wimpey plc is hosting a briefing for analysts in London later today, atwhich management will discuss the progress of integration since the merger on 3July 2007. Updates will also be given on current trading, the fair value reviewand the share buyback programme. Copies of the presentations will be availableat www.taylorwimpey.com later today. Overview Taylor Wimpey is making strong progress on integration and we remain on track todeliver synergy savings in line with the previously stated value and timetable.Although market conditions in the UK are subdued and conditions continue to bechallenging in North America, the Group remains well placed to deliver on itsstrategic objectives. Integration Progress We continue to make excellent progress on our integration targets. We areconfident of achieving the synergy run rate targets of £70m by the end of 2008and £100m by the end of 2009, in line with the previously stated timetable.Estimated merger costs remain at £60m. In the UK, we have been able to accelerate our progress on achieving synergiesin both build and overhead costs. We are also identifying opportunities toimprove working capital efficiency during 2008. In North America, the merger has brought us to critical mass in a number of ourmarkets, enabling us to negotiate beneficial supplier agreements at both anational and a regional level. We have now completed a procurement and buildcost benchmarking exercise and will have a set of integrated operationalprocesses in place by the year end. Current Trading UKAs we anticipated at our Interim Results on 31 July, market conditions in thesecond half to date have proved to be more subdued. Prices are stable, howeverwe have seen reductions in both visitor and reservation levels which have beenexacerbated by the recent turbulence in the financial markets. Over the last three months, we have continued to focus on maintaining our marginimprovements rather than driving volume. Consequently we remain confident ofdelivering an operating margin of 14 per cent for 2007 for the pro forma TaylorWimpey business, before fair value and accounting policy alignment adjustments.Completion volumes for the year are expected to be around 5 per cent below the2006 pro forma volume. North AmericaMarket conditions in the United States have deteriorated significantly over thelast two months, with turmoil in the US mortgage industry and a very low levelof customer confidence. Heavy discounting by competitors has led to furtherprice falls in many markets and a cancellation rate of c.30 per cent for ourNorth American business over the third quarter. In contrast, our Canadian business continues to benefit from a robust operatingenvironment. We are reviewing the carrying value of our land bank in North America and, giventhe changing market conditions, we expect to make further inventory provisionsof around 15 per cent of North American capital employed at the end of the year.The final outcome of this review will be reported with our Preliminary Results. Spain, Gibraltar & ConstructionMarket conditions on mainland Spain have continued to worsen, although onMallorca and Gibraltar conditions have remained stable. Our Construction business continues to perform in line with expectations. Theforward order book currently stands at £1.3bn, with significant contract awardsacross the business and, in particular, for our Facilities Managementactivities. Fair Value Review Following the merger between Taylor Woodrow plc and George Wimpey Plc, which waslegally structured as an acquisition of George Wimpey Plc, accounting standardsrequire a fair value review of the assets acquired as at 3 July 2007. We have now reached a provisional result for this exercise. The overall outcomeis a net reduction of £26m in the book value of the assets acquired from GeorgeWimpey Plc and a resulting goodwill figure for the transaction of £332m. The book value adjustments include decreases in value of £154m in US inventoryand £34m in UK inventory. The review has also resulted in a valuation of thebrands acquired of £140m. These adjustments are in addition to and separate fromthe provisions made against the carrying value of our North American inventory. These adjustments are expected to have a negative impact of approximately £38mon the reported profit of the combined Group for 2007. Share Buyback Programme Following the announcement of our £750m share buyback programme at the time ofour Interim Results, we have now bought back a total of 52.6m shares at a totalcost of £164.3m. Outlook In North America, due to the continued fall in both prices and sales volumes weonly expect a modest contribution to profits in the second half of 2007.Conditions are expected to remain extremely challenging for the balance of thisyear and throughout 2008. Our strategy is to focus on recovering cash fromexisting sites, reducing the cost base, and focusing on the fundamentals of thebusiness. In the UK we anticipate that market conditions will remain subdued into the NewYear. However, long term supply constraints in the UK continue to providesupport to the market and our strong progress on integration will assist ourdrive for relative margin improvement. -ends- Notes to editors: On 3 July 2007, Taylor Woodrow plc and George Wimpey plc completed their mergerto form Taylor Wimpey plc. Taylor Wimpey plc is the UK's largest homebuilder andis a member of the FTSE100. Taylor Wimpey plc builds homes in the UK, North America, Spain and Gibraltar. Itaims to be the homebuilder of choice for customers, employees, shareholders andfor the communities in which it operates. For further information please visit the company's website - www.taylorwimpey.com For further information please contact: Taylor WimpeyJonathan Drake 020 7355 8109 / 07816 517 039 FinsburyJames Murgatroyd 020 7251 3801 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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