Taylor Wimpey upbeat after year of broad growth

Housebuilder Taylor Wimpey updated the market on its trading ahead of its full year results for the 2016 calendar year, which it said will be announced on 28 February.

The FTSE 100 firm said that during the year, total home completions increased by 4% to 13,881, including Taylor Wimpey’s share of joint venture completions.

It delivered 2,663 affordable homes, up from 2,509, equating to 19% of total completions, which was in line with 2015.

The company’s net private reservation rate was 0.72 homes per outlet per week, down marginally from 0.73, while its cancellation rates remained low at 13%, up from 12%.

Taylor Wimpey said the mix impact of better quality locations continued to have a positive impact with average selling prices on private completions increasing by 13% to £286k, while its overall average selling price increased by 11% to £255k.

The firm ended 2016 with a year end order book valued at £1.68bn, down from £1.78bn excluding joint ventures, with a small fall in the average selling price largely due to a number of high value Central London completions in December 2016.

Taylor Wimpey’s board said that order book represented 7,567 homes, up from 7,484 homes at the end of December 2015, and the company was entering 2017 with 285 outlets - 12 fewer than it began 2016 with.

“Against the backdrop of a stable housing market in 2016, we continued to see good demand and solid trading into the second half of the year, despite wider macroeconomic uncertainty,” the company’s board said in a statement.

“Customers continue to benefit from a wide range of mortgage products and low interest rates with customer confidence remaining robust.

“We have continued to make good progress towards each of our enhanced medium term targets during 2016.”

As at the end of December, Taylor Wimpey’s short term landbank stood at around 76,000 plots - precisely in line with 2015 - having successfully converted more than 9,000 plots from the strategic pipeline into the short term landbank.

“Looking ahead, we remain mindful of the wider macroeconomic uncertainty created by the outcome of the EU referendum,” the board said.

“In line with our disciplined strategy and with the benefit of a long landbank and underpin of strategic pipeline, we will continue to be selective in further land investment.”

In Spain, the board said the market continued to be positive, and it completed 304 homes in 2016 - up from 251 - at an average selling price of €358k - improving from €315k.

The total order book as at 31 December stood at 293 homes, compared to 270 homes at the end of 2015.

“We expect to report a significantly improved operating profit for the Spanish business in 2016,” the board said, without offering any further indication.

The board said it expected to report an improved operating profit margin of 20.8%, compared to 20.3%, and a return on net operating assets of over 30%, up from 27.1%.

Taylor Wimpey ended the year in a strong position with net cash of £365m, compared to £223.3m a year earlier, which it said was due to the strength in underlying trading, and after the payment of £355.9m of dividends to shareholders in 2016, up from £308.4m.

“We remain confident in our ability to pay significant dividends through the cycle, and are focused on our medium term target for dividends which is to pay a total of £1.3 billion of dividends in cash to shareholders over the period 2016-2018.”

The company said it started the current year in an excellent financial and operational position with significant embedded value in its short term landbank and strategic pipeline

It expected to demonstrate further progress throughout 2017 against all of of its medium term targets, delivering increased returns for our shareholders and focusing on areas of the operational business where it can add value, including driving further improvements in its customer service processes and product quality.

“We are pleased to report good progress in 2016, with an increase in housing completions and robust trading despite wider macroeconomic uncertainty,” said chief executive Pete Redfern.

“In a market characterised by solid fundamentals, we ended the year with a strong forward order book and made good progress against our enhanced medium term targets.

“We expect to deliver full year profitability at the upper end of market consensus.

“Looking ahead, we remain confident that our disciplined strategy will enable us to continue to deliver value over the long term.”