Taylor Wimpey: Walls crumble

Angela Jameson

Investors have largely given their verdict on Taylor Wimpey and it is not a positive one. Shares in the housebuilder slumped by a further 19 per cent this morning, after the company reported absolutely no improvement in its UK business since July.

This housebuilder was worth £4.3 billion last year and is now worth just £139 million. There was no good news today - if anything what little confidence there was in the UK market in July has entirely ebbed away and in North America, the rising tide of repossessions is competing directly with Taylor Wimpey's efforts to offload stock.

Yet the company will sell 13,300 homes in the UK this year - which still means that it has cash coming in - and has indicated that while margins have fallen to single figures, it does expect to have positive earnings in the full year.

The question is can it renegotiate its £1.9 billion borrowings before time runs out in February? Since the beginning of October it has brought Eurobond holders into the talks, which has pushed the timetable to its very limit. That much was confirmed by Pete Redfern, chief executive, today, who said that that while he was still confident that covenants would not be breached they would be cutting it fine.

While the debt talks are proceeding, talk of a private equity buyer taking any sort of stake is something of a red herring. That is a deal for next year and is certainly being given much less importance by the management than the debt negotiations. The same is true of land sales, which would be very difficult to achieve in the current climate.

Furthermore uncertainty surrounding the extent to which Taylor Wimpey has to make further write-downs will continue to drag on the shares. Panmure Gordon even suggested today that additional writedowns of £1.2 billion would have to be made - over the rest of this year and 2009 and 2010.

With this in mind, Taylor Wimpey shares are still to be avoided. However, if you happen to have the stock in your portfolio there is little point in selling, although any recovery still looks a long way off.

Trade deficit: Deceptive

Grainne Gilmore

We hate to be the ones to burst the bubble but the apparently comforting news on the narrowing trade deficit masks a worrying underlying trend.

While the falling deficit appears to indicate that exports are burgeoning, much of the fall in the trade balance was due to the oil deficit tumbling to just £68 million from £236 million in August.

The core figures suggest that, despite the falling pound, exporters are enjoying only a limited boost to trade. The hopes that as consumer demand weakened in the UK, the country could depend on exports now looks forlorn as demand in overseas markets has slipped sharply too. Just a week after the International Monetary Fund forecast that the wordwide economy was set to shrink for the first time since the Second World War, the outlook remains bleak.

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