Taylor Wimpey lays strong foundation ahead of bumpy year with earnings at the upper end of expectations

 
Jasper Jolly
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Taylor Wimpey reported earnings at the upper end of expectations (Source: Getty)

Taylor Wimpey says it expects full-year profits at the “upper end of market consensus”, as the housebuilder remains confident of its ability to continue dividend payments – although its order book for 2017 weakened from last year.

The figures

Earnings are expected at the top end of the £706.4m to £755m range Taylor Wimpey has identified as market consensus.

Home completions increased by four per cent last year, to reach 13,881 (compared with 2015’s 13,341).

Operating profit margins have improved, with Taylor Wimpey expecting it to have risen to 20.8 per cent in 2016 – a rise of 0.5 percentage points. The company said it is “confident” it can continue on the way to its target of paying £1.3bn in dividends over 2016 to 2018.

Average selling prices on private completions rose by 13 per cent to £286,000 – a £32,000 increase from last year.

The year-end order book was valued at £1.682bn, a decrease from last year after a spate of Central London completions in December 2016.

The proportion of affordable houses stayed flat, with 2,663 completions. Cancellation rates rose slightly to 13 per cent, up from 12 per cent in 2015.

Shares were down by 1.2 per cent in morning trading.

Why it's interesting

Ahead of the UK’s construction output later today, FTSE 100 housebuilder Taylor Wimpey is an important marker of the housing sector’s progress.

Mortgage approvals have picked up since a deep dive around the time of the EU referendum in June and July. Investors and economists will be keen to see if house purchases can keep up with post-referendum growth.

Taylor Wimpey’s share price has reflected that pattern, with steep falls in the aftermath of the Brexit vote followed by a gradual recovery of some – but not all – of the losses.

They may also have to contend with rising material costs, as inflation for producer prices has risen ahead of an expected rise in headline consumer figures.

Seventy per cent of builders have seen price increases caused by the devaluation of the pound.

Robin Hardy, a company analyst at Shore Capital, described the performance as: “Overall, a good year in 2016 but there are headwinds on many fronts running in to 2017 that make outcomes uncertain: selling prices, mortgage pricing, build costs and policy impact are the main pressures.”

What Taylor Wimpey said

Pete Redfern, chief executive, said:

We are pleased to report good progress in 2016, with an increase in housing completions and robust trading despite wider macroeconomic uncertainty.

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.

In short

Taylor Wimpey is hoping it has laid a strong foundation for the bumpy ride for UK home buyers in the year ahead.

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