Housebuilder Taylor Wimpey has reported a huge loss for the past six months after having to sharply reduce the value of its assets including land.

The firm slumped to a loss of £1.54bn in the six months to 30 June, saying it faced “very challenging” conditions.

It was hit by the lower value of its land in the UK, US and Spain, and the cost of downsizing its UK business.

Excluding these reductions in asset values, Taylor Wimpey made a profit of £4.3m, down from £119.8m last year.

Shares in Taylor Wimpey fell as much as 11% on the news in early trading before recovering slightly to close down 7.2%

Other housebuilders were affected by the news with shares in Persimmon, Bovis Homes and Barratt Developments all falling.

Sagging demand

Taylor Wimpey is cutting about 900 jobs in the UK as the squeeze on mortgage finance has severely reduced demand for new homes.

Other leading property developers, including Persimmon, Barratt Developments and Bovis Homes, have been forced to streamline their UK operations in response to the malaise in the market.

The BBC’s Economics Editor Hugh Pym said that thousands of people losing their jobs in the construction industry would have an impact on the wider economy as it would depress household spending.

“The first half of 2008 has been characterised by the very challenging trading conditions in the UK, US and Spain” Norman Askew, Taylor Wimpey chairman

The UK market remained “very challenging”, Taylor Wimpey said, with no imminent prospect of recovery.

Profits from its UK business fell 39% over the period as the average selling price for private homes fell by £22,000 to £202,000.

The situation is similarly bleak in the US, where the firm’s profits fell by 63% and in Spain, where profits fell 85%.

Tough conditions in all its major markets has forced the firm to write down the value of land it owns by £690m.

It is also writing down the value of other assets, including the George Wimpey brand that it bought last year, to the tune of £816m.

In addition, the firm had restructuring costs of £40m, primarily relating to its UK housing business

“The first half of 2008 has been characterised by the very challenging trading conditions in the UK, US and Spain,” said the firm’s chairman Norman Askew.

But he added: “The board remains convinced of the fundamental value of the business over the medium and the long term.”

Bank discussions

Taylor Wimpey said it was in discussions with banks and other lenders about amending some of its borrowing agreements.

It has borrowed £1.7bn from the banks and has been seeking to renegotiate terms of the loans.

The firm failed to secure additional financing from its investors earlier this year, leading to a sharp fall in its share price.

However, it stressed that its cash position was strong and it was “fully compliant” with its banking covenants.

“We are focused on giving ourselves the flexibility to navigate through the market downturn and strengthen our position for a market recovery,” the firm added.

Analysts said the firm was paying the price for concluding the costly merger of Taylor Woodrow and George Wimpey last year just as the property market was showing signs of turning.

Calls for action

Property firms have renewed calls on the government to intervene to kick-start the housing market after figures showed that new mortgage approvals were 65% lower in July than the same month last year.

Empty properties should be bought for social housing, the Lib Dems believe

The number of new homes begun in the second quarter of this year was 19% lower than in the same period last year.

The Liberal Democrats have urged fresh action to tackle what they describe as a “downward spiral” in the housing market.

They want it to be harder for banks and lenders to repossess properties and for people to be allowed to stay in their homes as tenants if they cannot pay their mortgages.

Councils and housing associations should also be allowed to acquire unoccupied properties and land owned by developers.

“A lot of building companies and developers are going bust. They are in a pretty desperate state and they need cash,” said Vince Cable, the party’s Treasury spokesman.

“In a falling market there are opportunities for social landlords and councils to acquire empty property and land at a discount to make it available for building new social houses for people who need it.”

News reported by The BBC

Capitalise on your greatest asset – “Your existing customers!”

Marketing to gain new customers is possibly 5-10 times more expensive than marketing to your exisiting customers. Your existing customers already know you and have crossed the “Trust barrier” and purchased from you.

Customer service

It is crucial that your customer service is excellent and the product or service that you sell is a good one so that when a customer buys from you, they will want to come back. So if this is the case and you have happy customers, then why would you not market to them and ask them for more business?

Advertising and brochure production or cold calling is very expensive and you will be lucky to get over 1-2% response for your efforts! So if you can add further products or services to your business that either compliment or would appeal to your existing customers then you would not believe how much your business can grow!

I am not suggesting that you cease advertising for new customers, as you never should. However, you may wish to divert some of your spend towards marketing to your exisiting customers In fact, I recommend that you link your marketing spend to your turnover as a percentage of your total sales, so that the more sales you make the more you spend on advertising and so on!

Troubled banking giant Citigroup has sold its German consumer banking business to French bank Credit Mutuel.

The 4.9 billion euro ($7.7bn: £3.9bn) cash deal is part of Citi’s efforts to return to profit after losing more than $40bn on sub-prime related investments.

It wants to sell $400bn worth of assets over the next three years as well as cut 16,000 jobs worldwide.

In May it announced plans to close two UK mortgage businesses which could lead to the loss of 600 jobs.

These were mortgage supplier Future Mortgages and CitiFinancial, a UK personal loans business.

“This is another strategic step in our effort to reorganize Citi, strengthen our balance sheet, and put us squarely on the path to future growth driven by our core businesses,” said Citi chief executive Vikram Pandit.

Citigroup will continue to provide services for business customers in Germany as well as investment banking and financial research.

News reported by BBC

Royal Bank of Scotland shareholders have agreed to buy more than 95% of the shares offered in a £12bn rights issue.

The rights issue is the biggest in UK corporate history, and the firm said investors would take up 5.8bn new shares at a value of 200 pence each.

But shares in RBS ended 5% lower in London at 234 pence.

The bank is not alone in having to ask investors for extra cash after problems in the world credit and US housing markets cut the value of its assets.

Banking sector blues

HBOS and Bradford & Bingley have also asked their investors for extra cash.

Analysts are particularly concerned that HBOS, which was formed by the merger of Bank of Scotland and Halifax, will struggle to raise the £4bn it requires to help restore the bank’s finances.

This is because private investors, rather than institutional investors, dominate its share base and are generally less supportive of rights issues.

HBOS’s shares ended 7.2% lower, while Barclays shares fell almost 6% on speculation that it would be the next bank to try and sell new shares.

“It’s a good level of takeup for one of the biggest ever rights issues, done in not easy circumstances” Alan Beaney, Principal Investment Management

Check RBS’s share price

Royal Bank of Scotland (RBS) shares have more than halved in value over the past year – including a 25% slump since the rights issue was announced in April.

Despite a brief rally last week, analysts warned that the bank and its shares may remain under pressure in the coming weeks.

Fundraising

RBS and other banks have suffered from a drop in the value of risky assets, particularly those focused on US sub-prime mortgages.

Sub-prime borrowers are those with poor or non-existent credit histories, and in recent months the number of defaults has jumped.

As a result, many lenders have had to find ways of boosting their cash reserves.

RBS’s circumstances have been exacerbated after it headed a group that bought Dutch lender ABN Amro for 71bn euros last year.

There are about 200,000 RBS shareholders; 93% of the shares are held by major investors, such as pension funds, with the other 7% owned by private individuals.

Shareholders are generally not keen on new share issues because it means that their investments are diluted, the firms’ earnings are spread more thinly and each share takes a smaller slice of the company’s earnings.

To compensate for these downsides, they are offered the shares at a discount to the market price so they could sell for a quick profit.

“It’s a good level of takeup for one of the biggest ever rights issues, done in not easy circumstances,” said Alan Beaney, head of investment at Principal Investment Management.

“The company (RBS) is still trading reasonably well and now doesn’t have that capital worry so maybe it can be knocked forward now.”

News reported by BBC