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Major house builders halt land purchases and suspend dividends in coronavirus cash-saving drive
Major house builders are suspending dividends to shareholders and halting land purchases as they seek to protect their businesses from the fall-out of coronavirus.
Supply of new homes and demand from buyers are both expected to plummet as a result of the pandemic, while sales could also be cancelled or take far longer to complete – posing risks to cash flows and balance sheets.
Several of the country’s biggest developers have already confirmed plans to shut down construction sites because of the pandemic, despite the government advising that they can stay open.
Taylor Wimpey has halted all discretionary land spend and cancelled dividend payments worth a combined £485m.
It has also drawn down a £550m revolving credit facility, leaving its cash position at £807m as of Monday.
In a statement, the firm said: “We have taken rapid proactive measures to protect the balance sheet in the short term.
“However, we are 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.”
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In half-year results published yesterday, Bellway said it is taking “immediate action to preserve the strength and resilience of the balance sheet”, including pausing new site acquisitions and prioritising resources for schemes which are nearly completed as well as postponing interim dividend payments until later in the calendar year.
It warned that the COVID-19 crisis poses “a threat to liquidity across the wider economy”.
Vistry Group – formed early this year from Bovis Homes’ acquisition of Galliford Try – also announced a delay to dividend payments worth £60m set for 29 May and said it has halted all discretionary land spend.
It also plans to submit valuations totalling around £95m for work completed for its contracting clients in March – mostly housing associations and councils.
Vistry also hopes to access additional government support for industry during the crisis.
Greg Fitzgerald, chief executive of Vistry, said the “decisive actions” would “protect the future prospects of the group”.
Countryside Properties has suspended dividend payments until further notice and withdrawn financial guidance for the current financial year.
It also said it has started discussions over potential new finance to add to its current £300m revolving credit facility in place until May 2023.
Persimmon has said it will cancel a proposed 125p per share interim dividend of surplus capital previously planned for 2 April and delay the proposed annual 110p per share dividend for 6 July to be reassessed later in the year.
It said in a statement that while the annual dividend has been stress-tested for payment throughout the housebuilding cycle, “the COVID-19 virus presents an exceptional set of circumstances”.
Last week, construction trade bodies warned that the pandemic’s impact on construction is likely to be “catastrophic and unavoidable”.
Large housing association developers L&Q, Wheatley Group, Clarion and Sovereign have also now put building work on hold following Monday’s announcement of a government-imposed lockdown.
These associations will also be hit financially by the coronavirus downturn. On Tuesday, L&Q said it was taking measures to tightly manage its working capital and capital expenditure, and had taken the decision to stop all discretionary spend and delay capital expenditure plans.
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