Taylor Wimpey brushes off uncertainty in upbeat trading statement

November 13, 2018 / Isla MacFarlane
Taylor Wimpey brushes off uncertainty in upbeat trading statement

The group issued a trading statement saying it was on target to deliver a 20% increase in dividends to its shareholders, despite political headwinds.

Pete Redfern, Chief Executive, said, “We have delivered a strong performance during the second half of 2018, with very good sales rates supported by positive customer demand and a supportive lending environment. This builds on our strong forward order book and puts us on track to meet full year expectations.

“Looking ahead to 2019, we remain mindful of wider political and economic risks and the potential impact on customer confidence. However, with a strong balance sheet in place and a high-quality landbank, our business is well positioned to deliver further sustainable growth and cash flow over the medium term.”

The UK housing market has remained stable through the second half of 2018, despite the wider political and economic uncertainty. Customer demand for new build homes continues to be robust, underpinned by low interest rates, a wide choice of mortgage deals and the Government’s Help to Buy scheme, the statement said.

Taylor Wimpy said its efforts to reduce cyclical risk by creating a strong order book has been effective. Sales rates for the year to date have remained strong at 0.81 sales per outlet per week with strong demand. Cancellation rates for the year to date remain low at 14% (2017 equivalent period: 13%).

The housebuilder’s current total order book, excluding joint ventures, represents 9,783 homes, which is 12% above last year (2017 equivalent period: 8,751). This order book stands at c.£2.4 billion (2017 equivalent period: c.£2.2 billion), an increase of 9%.

“This is at the upper end of our expectations at this stage, and we would expect this to reduce naturally towards the end of the year as more homes complete,” the statement said. “Underlying prices in the period, and in the order book, remain in line with the first half of the year.”

Build costs are expected to increase 3-4% this year, as previously indicated, it said. Taylor Wimpey expects to end 2018 with a net cash balance of around £600 million (31 December 2017: £511.8 million), subject to the timing of conditional land purchases, and after the payment of £500 million of dividends to shareholders in 2018.

“We welcome the Government’s announcement within the Autumn Budget to introduce tapering measures to the Help to Buy scheme as the equity loan scheme transitions to a close in 2023,” it said. “Help to Buy has been popular with our customers and has supported them in getting onto and moving up the housing ladder, however we believe that the changes announced are appropriate and are in the best interests of the long term health and fairness of the market. As announced at our Capital Markets Day in May, we will continue to develop our own plans to extend the affordability and accessibility of our homes, providing a wider range of high-quality homes for more people.

“We are on track to deliver full year 2018 results in line with our expectations, and subject to shareholder approval, we reiterate our commitment to return £600 million by way of total dividend to shareholders in 2019, a 20% increase on 2018.

“Looking ahead, whilst current forward indicators for sales continue to be solid, unsurprisingly due to the heightened political and economic uncertainty, we have seen some signs of customer caution, particularly in the South East. We expect next year’s volume to be broadly flat in current market conditions.

“As we transition to our new strategy, there is the potential for significant growth from 2020 onwards, as previously indicated.

“We continue to monitor the potential risks around general customer confidence given the political and economic uncertainty. However, with a very real underlying need for more homes in the UK, the key drivers over the medium term for our customers will remain interest rates and mortgage availability, together with wage growth.”

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