Taylor Wimpey, the Britain-based parent company of Taylor Woodrow in the United States, has cut 1,900 jobs and scaled down its neighborhoods by 20% to shrink itself to match a market CEO Peter Redfern said he doesn't expect to improve any time soon.
The company didn't issue detailed numbers in its interim management statement Tuesday Nov. 11, but it did say that its sales pace is down 27% compared to the same period last year. Its order book, backlog in U.S. vernacular, holds 6,607 homes, compared with 11,074 last year at the same time. And, If things don't improve, Redfern said the company will need to take further write-downs on its land and work in progress.
The company's North American market, which includes Taylor Morrison Homes in the United States and Monarch in Canada, has shown better stability than it has in 18 months, Redfern said. Of course that includes the company's Canadian operations, where sales have been steadier than in the U.S, Redfern said.
"We are pretty comfortable with our performance in North America," Redfern said. "We don't expect major land write downs. We expect to turn a profit in North America."
In addition to dealing with deteriorating market conditions in the United Kingdom, Taylor Wimpey is under pressure to renegotiate its debt covenants, which it is on track to breach by early next year. The company's debt had grown to 1.9 billion pounds, roughly $3.8 billion.
"The company is pretty clear about what it needs," said Christopher Rickard, the company's newly appointed group finance director. "It needs protection from any likely covenant breach. It needs a package going forward that allows the company to trade efficiently and that takes into account requirements of all the stake holder groups"
Meeting the deadline is going to be difficult. "Those discussions are continuing. They are complex. There are a lot of issues involved and we expect that to continue into the new year," Rickard said.
While the company's primary focus now is renegotiating its debt, Redfern did not eliminate the possibility of seeking other avenues to recapitalize the company, including talking to potential private equity investors or selling off parts of the company.
"We will talk to them (private equity) and have a conversation and see," he said. "We are not deep into negotiations with anybody and we do not think it is likely that we will raise equity capital before debt renegotiation. But we will have these conversations in the background to make sure we know what our options are and to make sure we choose the best options for our existing investors."
Selling off the company's North American assets is not on the table now, he said.
"But if there are ways of getting sensible value for parts of our UK land bank or for discreet parts of the business that don't damage the underlying strength of the business going forward, then we are looking at those options," he said