Taylor Wimpey Rises As Builder Tips FY Profits At Top End Of Forecasts

FTSE 100 housebuilder Taylor Wimpey rose on Thursday after predicting that profits for the full year would come in at the top end of guidance.

At 118.2p, the Taylor Wimpey share price was 2.3% higher on the day.

Thanks to what it described as “[a] focus on optimising price and sharp cost discipline,” the builder said it expects to deliver operating profit at the upper end of its £440 million to £470 million forecasted range.

The company recorded operating profit of £923.4 million in 2022.

Sales Rate Rises

Taylor Wimpey said that “the market continues to be impacted by weak consumer confidence influenced by high mortgage rates and cost of living pressures which are negatively affecting affordability for our customers.”

However, it added that “we have attractive and resilient locations which, combined with our enhanced customer and marketing tools, has enabled us to deliver a good performance against a challenging backdrop.”

In response to tough market conditions, the company has slashed home construction for 2023 to between 10,000 and 10,500 units from 14,154 from last year.

During the second half to date, Taylor Wimpey’s weekly net private sales rate per outlet was unchanged year on year at 0.51. This was up from 0.47 in the first half.

Meanwhile, its cancellation rate declined to 21% from 24% in the corresponding 2022 period.

Taylor Wimpey said that its total order book (excluding joint ventures) stood at £1.9 billion as of 5 November, down from £2.6 billion a year earlier. This comprised of 7,042 homes versus 9,153 at the same point in 2022.

The company’s net private sales rate since the start of January stands at 0.63, down from 0.74 in the same 2022 period. Its cancellation rate remains unchanged at 18%.

“Resilient Performance”

Chief executive Jennie Daly said that “Taylor Wimpey has delivered a resilient performance in what continues to be a challenging market backdrop, reporting a robust sales rate and strong financial position, and reiterating our full year 2023 UK volume guidance.”

Describing the company as “a strong, sustainable and agile business underpinned by a robust balance sheet and an excellent well-located landbank,” she added that while the market backdrop remains uncertain, we are confident in the medium to long term sector fundamentals, with a meaningful supply and demand imbalance in UK housing.”

“Cautious Optimism”

Analyst Andy Murphy of Edison Group commented that “with the stalling of mortgage rates and inflation, the continued undersupply of housing in London and the South East, and a slight rise in house prices in October, the residential property sector can end 2023 with cautious optimism.

He added that “from these results, Taylor Wimpey seems to have successfully ridden out the storm.”

Garry White, analyst at Charles Stanley, said that “no real guidance for 2024 has been issued and we remain cautious on the sector due to the expected decline in completions in 2023 and 2024, which will result in a significant downturn in sector earnings.”

He went on to say that “although volumes are likely to hit a floor soon as the mortgage market stabilises and build cost inflation eases, the increased use of incentives and tough economic backdrop means margins are unlikely to recover rapidly.”

Royston Wild owns shares in Taylor Wimpey.

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