Volume house builder Taylor Wimpey has taken the decision to close all of its construction sites in response to the coronavirus outbreak.
The listed house builder has also become the latest to announce that it is cancelling its dividend to shareholders, while adding that it will also stop all discretionary land spend and will draw down its unused revolving credit facility (RCF) of £550m.
Barratt and Bovis Homes also confirmed this afternoon (24 March 2020) that they will be closing offices and sites, with teams deployed to make the areas safe and secure.
In an update to the markets this morning, Taylor Wimpey – which completed more than 15,700 homes in 2019 – said the “health and safety and well-being of our employees, subcontractors and customers is our number one priority”.
It said: “We are doing all we can to support them during this unprecedented crisis; to help prevent the spread of the virus and to ensure they stay safe and are following the latest government and public health guidance.
“In the interest of customer and employee safety, we have taken the decision to close all of our show homes, sales centres, and construction sites for all work except that needed to make the sites safe and secure.”
It said construction sites will begin the close-down process today.
In his public address last night, prime minister Boris Johnson instructed the entire population to stay at home apart from in exceptional circumstances, with only essential businesses and services allowed to remain open.
However, there is uncertainty as to whether construction sites should close, with other house builders and firms appearing to remain open.
Housing secretary Robert Jenrick followed up the prime minister’s speech on social media, saying advice for the housing, construction and building maintenance industries is to work from home where possible.
But he stopped short of site closures, saying: “If you are working on site, you can continue to do so. But follow Public Health England guidance on social distancing.”
Listed house builders and the wider stock markets have seen a significant fall in share prices as fears grow and confidence is shaken by the spread of the virus.
Crest Nicholson recently announced that it would be cancelling its final dividend payment, suspending all its financial guidance, and said that the virus is set to have “a significant impact on visitor levels, production capability and trading performance over an unclear timeline”.
At the weekend, the Financial Conduct Authority wrote to all listed firms asking for a two-week moratorium on reporting their financial results to the markets, to prevent investors acting on out-of-date information.
But this morning, house builder Redrow put an update to the financial markets saying its sites would stay open, although it has also decided to cancel its dividend.
Redrow – which completed almost 6,500 homes in 2019 – also said its main priority is to safeguard the well-being of its workforce and customers.
But it added that sites are currently remaining open “with strict precautions in place including enhanced levels of cleaning, additional hygiene facilities and social distancing”.
Bolstering cash flow
Taylor Wimpey said it has “operated the business with caution in recent years and [has] a well capitalised balance sheet and net cash position”.
It said: “As we enter a period of uncertainty that may last for several months, we have been putting contingency plans in place to respond to the likely potential changes in customer behaviour and reduced productivity.”
It said to conserve cash and increase flexibility, it will stop all discretionary land spend and is drawing down its unused RCF of £550m, resulting in a gross cash position of £807m and net cash of £165m as at 23 March 2020.
It added that it is still likely to face weeks or months of uncertainty, “including periods of inactivity which will limit our ability to complete on homes and therefore generate cash”.
“Whilst our ordinary dividend of at least c.£250m per annum, has been stress-tested and is payable though a ‘normal’ downturn, the global COVID-19 pandemic goes beyond normal and even severe cyclical swings and represents an exceptional case.
“Accordingly, we have taken the decision to cancel the 2020 final dividend of 3.80 pence per share (c.£125m) that was due to be paid on 15 May and the planned special dividend payment of 10.99 pence per share (c.£360m) that was due to be paid on 10 July, both of which were subject to shareholder approval.
“We remain an inherently cash generative business and will revisit the payment of dividends and the resumption of guidance when there is more certainty on the outlook.”
Redrow said it has a strong balance sheet together with £250m of committed facilities and is “working proactively to protect our cash flow”.
But it said: “Given the ongoing uncertainty, we have also decided to cancel our 10.5p interim dividend amounting to £37m which was due to be paid on 9 April 2020 to holders of ordinary shares on the register at the close of business on 6 March 2020.”
It said trading has “remained resilient” in the first 12 weeks of the second half to 20 March 2020, with the value of net reservations up £121m at £525m compared with last year, and a £1.4bn order book.
Redrow added: “As the government’s escalating measures to contain the spread of the virus take effect, it is inevitable our sales rate will be seriously impaired over the coming weeks and build output will be significantly affected by labour and material shortages.
“We also expect outlet openings to slip as local authorities delay planning committee meetings.”
*Story updated on 24/3/20 to include Barratt and Bovis Homes site closures