Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

Taylor Wimpey - with a revised financing package in place how can you go wrong with this one?!

Taylor Wimpey’s debt refinancing has come at a huge additional cost (c£60m) with loads of incentives to seek further equity to pay down debt sooner rather than later – I assume there are some equity holders out there that consider house building, at least in the form of Taylor Wimpey, has a future! Hopefully the latest round of exceptional write offs will have covered things and we are left with a more realistic picture of the current state of the business.

The shares have staged a decent recovery over the past few months rising off lows of 4.4p at the end of November to the current heady level of 43.50p facilitating the possibility of an attractively discounted Rights Issue. One thing is for sure, with these punitive finance costs they won’t be able to stomach that debt package for too long!

Yesterday’s announcement stated the group recorded an unaudited loss from continuing operations before tax and exceptional items of £74.7m and exceptional costs of a whopping £1,895m (one can assume/hope that was sufficiently prudent!), primarily relating to goodwill and other intangible asset impairment and land and work in progress write-downs.

More encouragingly and before the impact of previously committed land spend, the Group created £842m of positive operating cash flow in 2008. Unaudited tangible net assets per share at 31st December 2008 were 158p (c£1.7billion?), with the Group having 106,216 plots in its owned and controlled land bank – doesn’t that equate to a value of only approx £16,000 per plot?

Recent trading has been at the upper end of management’s expectations with net debt at approximately £1.57 billion on Friday 3rd April – so debt nicely in line with net assets!
After today’s little boost the shares are trading at an approximate 73% discount to net asset value and are sure to continue to attract a lot of interest from traders!


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