Taylor Wimpey posted a 44.5 per cent decline in operating profit in the half year, as the house builder said it was “inevitably” impacted by red hot mortgage rates which have shattered consumer confidence.
The London-listed construction firm reported a 21.2 per cent contraction in revenues down to £1.6bn compared to £2bn in the same period last year.
Profit before tax was also down 28.9 per cent to £237m.
“The first half of the year has been characterised by variable market conditions including substantially higher mortgage rates,” chief of Taylor Wimpey, Jennie Daly, said.
“While this has inevitably impacted our results, I am pleased that we have delivered a resilient performance with first half completions slightly ahead of our expectations.”
The group ended the quarter with net cash of £654.9m up from £642.4m in the same period last year.
The results come amid a challenging period for the house builders, which have been battling a decline in activity ever since the central bank hiked interest rates for a 13th consecutive time.
While some high street lenders were beginning last week to reduce the cost of their deals, which would boost buyer confidence, the Bank of England is expected to raise rates again in efforts to fight inflation.
However, Taylor Wimpey said that its order book remains at the “upper end” of its previous guidance, with plans to build between 10,000 to 10,500 homes during the year.
Taylor Wimpey’s share price remains around half of its peak prior to the pandemic.
This morning, its share price rose 3.69 per cent.
The firm is also sitting on a ‘short term landbank’ equivalent to just north of 80,000 homes.
“There are glimmers of hope on which Taylor Wimpey can build. It has a short-term landbank of 83,000 plots and a strategic pipeline of a further 140,000 plots, giving it considerable leeway and avoiding the need for an immediate buying spree,” Richard Hunter, head of markets at Interactive Investor, said.
“At the same time, notwithstanding the lower numbers, the average selling price for a property rose by 6.7 per cent to £320,000, offsetting some of the inflationary pressure.”
“From a broader perspective, the most recent economic data has suggested that inflation may have peaked, which in turn could lead to more stable interest rates (and therefore mortgage rates) in due course. At the same time, the group has pointed out that there remains a major supply and demand imbalance in UK housing, with significant underlying demand for new homes.”