- First half completions above forecasts
- Operating profits now seen top end of estimates
- Growing cash pile may mean higher shareholder returns
Taylor Wimpey (TW.), the UK’s third-biggest housebuilder by market value, became the latest firm in the sector to raise its guidance after a stronger than expected first half of 2022.
Despite a strong comparative period last year, home completions were slightly ahead of expectations allowing the firm to increase its operating margin to over 20%.
As a result, it now expects full year operating profits to be around the top end of market estimates, which range from £873 million to £924 million with an average of £905 million.
The shares climbed 3.7% to 124.5p, reversing more than half of the previous day’s sell-off.
NO LET-UP IN DEMAND
The new-build housing market continues to see strong demand despite recent rate rises as the banks compete to offer attractively-priced loans.
Group completions excluding joint ventures were 6,790 homes, down from 7,303 in the fix six months of last year but ahead of estimates.
At the same time the average selling price on private completions rose 3.1% to £337,000, while the total average selling price including affordable homes - which made up 22% of completions against just 16% last year - was £300,000.
The use of Help to Buy continued to reduce during the half with around 20% of private buyers using the scheme compared with 27% last year.
The firm will stop taking reservations under Help to Buy by the end of October, with remaining completions delivered by next March in line with government regulations.
The group operating margin increased to 20.4% from 19.3% thanks to better prices on land sales and a strong contribution from joint ventures.
GOOD VISIBILITY
At the end of July, the firm’s total order book value excluding joint ventures was £2.89 billion against £2.7 billion last year, equivalent to 10,392 homes of which 77% are already exchanged.
Completions are seen growing by low single digits for the full year, despite bottlenecks in the planning system which has been a bugbear for many builders.
Build cost inflation continues to run at close to 10%, and the market for land to build new houses is highly competitive, but the firm says it is offsetting input cost rises through higher house prices.
Its short-term land bank rose around 6,000 plots to 88,000 plots, ensuring a good supply of available land out to the end of the decade at current build rates.
Subject to timing of land sales, the company expects to end the year with a net cash balance of £600 million, giving it scope to return more capital to shareholders after its £150 million first-half buyback.
