Homebuilding Industry

Case Study
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1. Rationale - This paper is intended to analyze the prospects of investing in George Wimpey plc based on the following: A. Company's resilience as seen in its 125 years in the industry that has been marked by highs and lows in the market; B. How the company fared in previous years based on a financial analysis of its 2005 & 2006 financial statement; C.


This finding however is hinged on the condition that the company will endeavor to intensify measures to control cost of sales, which is actually one of the pillars of the company's business model.
1. Scope - The industry addresses the demand for housing in U.K. and the U.S. The homebuilding business process entails land banking, site development and sales, which are mostly attained thru financing.
A. Cause - According to Home Builders Federation chairman, i.e., Stewart Baseley, the slump is "unique" since it is due to the lower number of approved mortgage applications, attributable to global tightening in the credit market, rather than high unemployment or inflated borrowing interest rates. In fact, in March 2008, the volume of approved mortgage applications marked the lowest since 1997 (Bloomberg).
B. Effect - With the contraction of demand, house prices fell year on year in April 2008, homebuilders are compelled to cut down on overhead. As of July 2008, Bloomberg reports that about 60,000 employed in the industry are likely to lose their jobs in the process.
III. THE BUSINESS MODEL - George Wimpey plc's business model encompasses activities like acquisition of land, home and community design, urban regeneration and the development of supporting infrastructures (TaylorWimpey plc). ...
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