Taylor Wimpey says market remains stable despite political uncertainty

Taylor Wimpey updated the market on its current trading on Thursday, reporting that the UK market for new build housing had remained stable in the first four months of 2019.

The FTSE 100 housebuilder, which was holding its annual general meeting later in London, said the underlying drivers of housing demand remained “robust”, with continued good accessibility to mortgages and low interest rates for customers, combined with high employment levels.

Throughout the spring selling season, its sales had continued to be at “encouraging” levels, according to the board.

It said average private sales for the year-to-date were 1.03 per outlet per week, up from 0.85) at the same time last year, and ahead of the firm’s own expectations for 2019, which Taylor Wimpey said demonstrated continued progress in optimising its larger sites as part of its strategy.

Sales pricing remained flat relative to the end of 2018, while cancellation rates remained low at 13%, in line with the same time last year.

Taylor Wimpey said it had continued to prioritise building a strong order book, reporting that as of the week ended 21 April, its total order book value stood at about £2.4bn, up from £2.16bn year-on-year.

That represented 10,291 homes, rising from 9,050 homes year-on-year, excluding legal completions to date.

The company said it had seen higher-than-expected cost inflation in early 2019, particularly in materials, and now expected build cost inflation for 2019 to be around 5%.

“This is driven by a combination of underlying cumulative inflation and exchange rates impact on the cost base of suppliers, and a higher than expected demand in the short term from defensive additional buffer stock holding in the construction industry supply chain,” the Taylor Wimpey board said in its statement.

Looking at its land portfolio, the company said the short-term land market remained “stable”, with opportunities to acquire land at attractive profit margins.

It said its land teams remained active in the market, with land acquisition year-to-date described as “encouraging”.

At the end of March, the firm’s short term landbank stood at about 79,000 plots, up from 77,000 plots year-on-year.

Taylor Wimpey was continuing to engage “widely” and work with local authorities and communities to secure planning permission for its strategic pipeline sites.

It said its strategic land pipeline stood at around 128,000 potential plots as at the end of March, following the conversion of 3,000-odd plots into the short term landbank so far this year.

“We remain focused on progressing our sites through the planning system to enable us to start work on sites with implementable planning as efficiently as possible and open our sales outlets in the right way for our customers.

“We have made good progress on outlet openings, with progress slightly ahead of our expectations.”

Taylor Wimpey was currently operating from 261 outlets, down from 278 outlets year-on-year.

On the shareholder distribution front, subject to shareholder approval at Thursday's annual general meeting, Taylor Wimpey said it would be paying a final ordinary dividend of 3.8p per share on 17 May, with that payment rising from 2.44p per share year-on-year.

That would give a total ordinary dividend for the year of 6.24p per share - an increase of 32%.

As it had previously announced, Taylor Wimpey was also set to pay a special cash dividend of about £350m, or 10.7p per share, on 12 July, also subject to shareholder approval.

Looking ahead, Taylor Wimpey said trading through the spring selling season had been good, with “robust” customer confidence despite the wider political uncertainty.

It said it remained on track to meet its overall expectations for the year, but expected results to be weighted towards the second half.

Given its strong sales performance, the board said it expected full-year volumes to be “slightly higher” than 2018, but given the greater build cost inflation for the year, it expected margins to be slightly lower.

“We are well positioned with a clear strategy in place that provides the flexibility to further increase our pace of build in future years, provided market conditions remain supportive,” the board explained.

“Subject to land spend variations, we expect to end the year with a net cash‡ position of [around] £500m after dividend payments of £600m, which are subject to the approval of shareholders today.”

Taylor Wimpey said its priority remained to deliver further improvements to customers, as part of its customer-led strategy, which would in turn drive increased value for shareholders.

It noted that it had recently been recognised as a five-star home builder with a customer recommendation score of over 90%, as measured by the National New Homes Survey undertaken by the National House-Building Council (NHBC), on behalf of the Home Builders Federation (HBF).

The directors said the company was focussed on getting its homes “right first time”, referring to the ‘snagging’ problems plaguing the new-build industry, as well as creating “thriving” communities, together with enhancing its delivery capability and investing in the right resource to enable it to deliver high-quality homes to more customers in the years ahead.

“We've made a good start to 2019 and in spite of wider macroeconomic uncertainty, the housing market has remained stable,” said chief executive Pete Redfern.

“We are achieving a record sales rate and building a solid forward order book for the year, although we see increased build cost pressures.

“We continue to make encouraging progress in embedding our customer-centric strategy and driving significant improvements in our quality and delivery, and it was pleasing to be recognised by the Home Builders Federation (HBF) as a five-star homebuilder in March this year.”

Redfern reiterated that the firm’s priority was to enhance “every step” of the buying and aftercare service for customers, so that it delivered the “highest quality” homes and could become the first choice housebuilder.

“Looking ahead, we are focused on delivering our ambitious strategic goals to drive sustainable growth and create long term value for our customers and shareholders.”