Tag: currency risk

Taylor Wimpey Keen To Sell Its Spanish Subsidiary

3 March 2017 – Expansión

The British group has said that it will consider offers for its subsidiary, which builds homes along the Mediterranean coast and owns assets worth €150 million.

Taylor Wimpey said on Monday that its presence in Spain “is not strategic over the long term”, which is why the company is willing to sell its business in the country if an interested party submits an attractive acquisition proposal.

The Spanish subsidiary of the British real estate company generated an operating profit of GBP 20.6 million (€24 million) in 2016, a figure that doubled the amount (GBP 10 million) it obtained in the previous year. The improvement in results was due to an increase in house sales in the Balearic Islands, Andalucía and Alicante, the main areas where the company has developments.

The firm completed the sale of 304 Spanish properties in 2016 at an average price of €358,000, exceeding the 251 homes sold the previous year at an average price of €315,000. Most of those properties were sold to foreigners wanting a second home in Spain for their holidays or to retire. In total, Taylor Wimpey recorded turnover of GBP 93.6 million in Spain during 2016, compared with €58.1 million during the previous year.

“The residential market in Spain remained positive throughout 2016”, said the company on Monday during the presentation of its results for last year. “Although the weakness of the pound had an impact on British buyers, we still managed to generate a healthy rate of sales during the year, thanks to our diverse client base”. Citizens from Germany, Belgium and Sweden made up for the decrease in interest from UK investors, who in addition to being hit by a reduction in purchasing power due to the depreciation of the pound, were also fearful about the possibility of losing their rights to travel to and reside in Spain post-Brexit.

Pete Redfern, CEO at Taylor Wimpey, was asked during a meeting with analysts about the possibility of selling the firm’s business in Spain, once its profitability has been restored after the losses it suffered during the real estate crisis. According to Redfern, “the environment in Spain has improved, although it is still an environment that is not seeing a significant entry of new capital. Our business is functioning well, but if a good offer appears to buy it (then we would be interested). Our strategy over the long term does not involve staying in Spain”.

Taylor Wimpey has assets on its balance sheet in Spain worth GBP 123.7 million (€145 million). On 28 June last year, five days after the Brexit referendum, the company undertook a €100 million bond issue, to cover the currency risk of its Spanish business, whereby ceasing to finance its assets in pounds. Those bonds pay out an annual return of 2.02% and have a repayment term of seven years.

In total, the Spanish subsidiary has 19 developments, with a portfolio of 293 homes reserved, for a value of GBP 88 million.

The real estate company left the market in Gibraltar three years ago.

The Taylor Wimpey group, which besides Spain, operates only in the United Kingdom, recorded turnover of GBP 3,676 million in 2016 and generated a net profit of GBP 589.7 million.

Original story: Expansión (by Roberto Casado)

Translation: Carmel Drake

Wimpey Protects Its Homes In Spain From Brexit

28 July 2016 – Expansión

The British real estate company has refinanced its property developments on the coast through the issue of bonds amounting to €100 million.

One of the consequences of the UK referendum, held on 23 June in which Britons voted in favour of Brexit (to exit the European Union), may be a decrease in the volume of house purchases on the Spanish coast by citizens of the United Kingdom, as a result of the depreciation in the pound against the euro and fears about future restrictions over the free movement of people between the two countries.

Taylor Wimpey, the real estate company that has property developments in Andalucía, Alicante and the Baleric Islands, aimed mainly at British buyers, has decided to protect itself against those risks through a debt issue in euros to “hedge its investments in Spain”.

On 28 June, just five days after the referendum, the company completed a private placement of bonds amounting to €100 million with institutional investors, secured by its Spanish assets. The securities pay annual interest of 2.02% and are due to mature in June 2023.

According to market sources, this operation seeks to refinance in euros Taylor Wimpey’s debt associated with its assets in Spain, which amount to €168 million. By having the assets and debt of its Spanish subsidiary denominated in the same currency, the group’s balance sheet is more stable in the face of possible fluctuations in exchange rates in the future.

Currently, Taylor Wimpey has several property developments underway along the Spanish coast, where it has already committed to sell 399 homes.

During the first half of 2016, the firm completed the sale of 53 homes in Spain, at an average price of €342,000. Interestingly, one of these property buyers was Pete Redfern, the CEO of Taylor Wimpey. The chief executive of the group acquired two houses from the Spanish subsidiary, one for €278,000 and the other for €350,250. According to the company, the first home was sold at market price, whilst the other was purchased by Redfern taking advantage of the discount plan offered to employees “under the same terms offered to all other staff”.

Taylor Wimpey’s revenue in Spain between January and June amounted to GBP 14.8 million (€17.6 million), generating an operating profit of GBP 0.3 million. “We hope to continue making progress in the Spanish market during the rest of the year, given the strength of our order book” said the group. “Looking further ahead, we remain cautiously optimistic, given the potential implications of the macroeconomic environment in Europe”.

The company, which besides its business on the Spanish coast, is heavily focused on the United Kingdom, recorded revenues of GBP 1,457 million during H1 2016, up by 9.1%. At the results presentation yesterday, Redfern said that Brexit had not yet affected the group’s sales in the British market.

Original story: Expansión (by Roberto Casado)

Translation: Carmel Drake