The collapse in the housing market has left Taylor Wimpey, the country's largest builder, £1.5bn in the red.
The colossal deficit, after slashing jobs, closing offices and writing down the value of its building land, mirrors the drastic retrenchment carried out by other leading housebuilders.
But doubts still remain about prospects for Taylor Wimpey, which is locked in meetings with its bankers to hammer out a new finance package and to avoid breaching loan terms.
The company was confident of reaching a deal but one analyst said there were too "many negatives" surrounding the shares even though they have lost two-thirds of their value in the last year. The company, created out of the £4.3bn merger between Taylor Woodrow and George Wimpey a year ago, is now worth £548m.
Taylor Wimpey built 8,494 homes in the first half to the end of June, compared with 12,228 a year ago. The average selling price plunged by 9.8 per cent to £202,000. At the pre-tax level, the group earned a profit of just £4.3m, compared with £119.8m last year. But tough and uncertain conditions have forced the company to write down the value of its land bank by £690m, much worse than feared, with a further £816m written off the value of other assets, including the George Wimpey brand. A further £40m is set aside to cover restructuring costs in the UK, after the loss of 900 jobs and closure of 13 offices, leaving an eye watering overall deficit of £1.5bn. The company has also scrapped payment of its interim dividend.
"The current operating environment in the UK housing market remains very challenging and we do not anticipate any recovery in the short term," said the company's statement.
However, the immediate focus for the stock market is the progress of negotiations with its bankers to secure new facilities aimed at avoiding a breach of the present arrangements. The group has £1.7bn of debts. Last month, the company failed to raise funds from various backers in order to reach new terms with its banks, triggering a sharp fall in the share price.
The chief executive, Pete Redfern, said: "The process is going fine and we would hope to complete in the next few weeks. It is a detailed process but there are no roadblocks."
But the market remains cautious. Mark Hughes at broker Panmure Gordon said: "In our view, the key thing is that no conclusions have been reached yet. We believe that there are too many negatives surrounding the Taylor Wimpey statement at the current time." He sees the shares falling to 30p compared with a closing price last night of 48.25p.
The group has taken a mauling in all three main markets: the UK, United States and Spain. Mr Redfern said that the experience of the downturn in the US helped it recognise the early signs of weakness in the UK and impose swift measures to minimise the effects. UK profits fell 39 per cent as the credit crunch cut off flows of mortgage finance in what has been the worst crisis in the industry for more than 30 years.
Cutting jobs and closing offices should save about £45m a year. In the meantime, the group, like many of its competitors, is aggressively cutting prices of its new homes in what remains of the buying season. US profits collapsed by 63 per cent, although the company says it has seen "pockets of stabilisation" and the business is "fighting fit". Even so, it still sees no prospect of recovery until "2009 at the earliest".
In Spain, the situation is even worse. Profits fell by 85 per cent and there are plans to pull out of Gibraltar. There is speculation it would be keen to get out of Spain but the prospect of finding any buyers seems remote.Reuse content