Business Review

Construction

Construction

Performance
The UK Construction business was sold on 9 September 2008 to VINCI PLC, generating a profit on disposal of £55.6 million. The discontinued operations generated a loss for the year, before exceptional items, of £2.5 million (2007 profit: £10.3 million).

Ghanaian operations
Given the small scale of the Ghanaian construction operations in relation to the Group as a whole they are reported as part of the Corporate segment for this accounting period.

As the talks progressed, it became clear that the conditions in the UK housing market were continuing to weaken. As a result, there was an increasing risk of additional land write downs, which might have led to a breach of covenants within the Eurobonds. We therefore took the decision to bring the holders of these bonds into the discussions. Whilst extending the discussions to include the Eurobond holders prolonged the negotiations, it was necessary to do so in order to meet our objective of securing a comprehensive financing structure that is robust against various scenarios.

As announced on 7 April 2009, these discussions have now concluded and we have reached agreement on a revised set of covenants to allow the Company to trade through the current downturn. As you would expect, this agreement comes at the cost of an increased interest charge and an arrangement fee for our debt providers. Whilst the revised financing deal does not require the Group to raise new equity capital, it does allow for the terms to be adjusted to the Group's advantage in such circumstances. Chris Rickard provides more detail on these costs, along with the revised covenant terms, in his Group Financial Review page of this report .

I am delighted that these discussions are now behind us and that we have established a firm financial base for the Company to weather the downturn and plan for the opportunities that will come with a return to more normal market conditions.

Construction activities

We have completed our exit from Construction and are now a focused homebuilder. We announced on 9 September 2008 that we had sold the UK business of our Construction operation to VINCI PLC for £74 million in cash. This transaction generated a profit on disposal of £55.6 million.

As previously announced, we completed our exit from construction activities with the sale of our construction businesses in Ghana on 21 April 2009.

We are positioning the business to be ready to take advantage of the opportunities that an upturn will provide.

People

During 2008, conditions have impacted heavily on our employees, both through the redundancy programmes that we have undertaken, and through the additional challenges of working in such difficult market conditions.

The Board acknowledges the way in which employees have reacted to these challenges and would like to take this opportunity to thank all staff for their commitment and hard work. We move forward with high calibre teams in all of our businesses, who are focused on the Group's objectives.

Corporate responsibility

Corporate responsibility is an integral part of corporate governance. We remain committed to being a responsible company and to playing our part in building increasingly sustainable homes and communities. We also believe that a positive approach to corporate responsibility makes sound commercial sense.

Further information on our progress during 2008 is contained on Our Corporate Responsibility Approach page of this report and within our Corporate Responsibility Report, which is available on-line at www.taylorwimpey.com/CRreports.

Outlook

Taylor Wimpey can face the challenges that 2009 will inevitably bring with significant confidence. As we trade through these difficult conditions, we are positioning the business to be ready to take advantage of the opportunities that an upturn will provide.

Trading in the UK has been encouraging during the first few months of 2009, with the underlying pick up in demand coming from all major customer groups and geographies. The industry has controlled stock well, reducing the risk of a repeat of the extreme price competition that was experienced in the last major UK housing downturn (and in the US recently).

However, we remain cautious about the prospects for a significant short term recovery in the UK housing market. Whilst we welcome the recent reductions in interest rates, the availability of mortgage finance remains restricted and, together with increasing economic uncertainty, continues to have a detrimental impact on consumer confidence. We believe that the prospects for the UK housing market in the medium and long term are very good, with the current market exacerbating an existing shortage of supply. Given the level of reduction in capacity and investment in the industry over the last 12 months, we anticipate that this situation will continue for some time.

In North America, housing market conditions have been more stable in recent weeks, however the state of the US economy as a whole remains a significant concern. With the impact of Government stimulus now being felt, there are tentative signs of improving conditions. The scale of the market correction has been dramatic, and has resulted in many markets falling well below long term norms. As general economic conditions stabilise, there is the potential that some of these losses will reverse quickly.

The steps that we have taken to restructure our debt finance and position our business for the challenges of current market conditions have enhanced the opportunity to deliver value for shareholders in the medium term.

Pete Redfern, Group Chief Executive

Pete Redfern
Group Chief Executive

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