- Home completions expected at upper end of forecasts despite first half dip
Taylor Wimpey expects to build as many as 10,000 homes this year on the back of a second-half bounce back, after high interest rates dented demand and hammered profits in the first half.
The FTSE 250 housebuilder posted a 22.6 per cent plunge in operating profits to £182.3million for the six months ending 30 June, with sales down 7 per cent and home completions falling by around 7.7 per cent to 4,728.
Taylor Wimpey pinned the blame on ‘the delay in interest rate cuts and comparatively high mortgage rates’.
Lower interest rates are expected to lift property market demand
However, it told investors that expectations of looming interest rate cuts meant it was on track to meet full-year financial guidance and ‘the upper end’ of completion guidance of 9,500 to 10,000 homes.
Markets are split as to whether the Bank of England will on Thursday opt for its first interest rate cut after a two-year hiking cycle, which has taken base rate to a 16-year-high of 5.25 per cent and subdued demand across the property market as mortgage rates have risen in tandem.
Taylor Wimpey’s average UK selling price on completion fell by just shy of 1 per cent to £317,000 on the same time last year, which it said was due to ‘both underlying price deflation and mix’.
As at 30 June, it boasted a total order book of 7,451 homes, excluding joint ventures, with a value of just over £2billion. This is down from 7,866 homes with a value of roughly £2.15billion last year.
Chief executive Jennie Daly described the result as a ‘good financial and operational performance… against a relatively stable market backdrop’.
The group announced a 2024 interim dividend of 4.8p per share, up slightly from 4.79p last year and in line with its policy to return 7.5 per cent of net assets annually.
Taylor Wimpey shares were up 2.5 per cent to 162.55p in early trading, taking one-year gains to 42.6 per cent.
Analysts tip Taylor Wimpey to cash-in on planning reform
Taylor Wimpey also told investors it looked forward to ‘working constructively with the new government’, and welcomed its ‘recognition…that planning is a major barrier to economic growth, of which housebuilding is a significant component’.
The new Labour government has proposed changes to the National Planning Policy Framework as it gears up to meet national housebuilding targets of 370,000 homes per year.
Taylor Wimpey said: ‘Though we expect changes to take some time to impact, we see the planning reforms outlined by the new Government as key to unlocking future years land supply and the investment in skills and resources necessary to support future housing need.
‘We are well positioned for the medium term and have been actively preparing for planning changes and focused on developing high-quality planning applications from the strategic pipeline.
‘We have c.30k applications in the planning process and additional applications ready to go if we see the proposed grey belt changes come through.’
And City analysts have tipped the firm to stand out among housebuilders as a key beneficiary of any ramp-up in housebuilding.
Anthony Codling, head of European housing and building materials for investment bank RBC Capital Markets, said Taylor Wimpey’s ‘broad national footprint’ and ‘high quality strategic landbank’ puts it in ‘an enviable position to take advantage’ of planning reform.
He added: ‘The impact won’t be seen over night, but in our view those willing to be patient will be handsomely rewarded.’
John Moore, senior investment manager at RBC Brewin Dolphin, said: ‘The government’s commitment to building new housing and reforming the planning system could bring significant tailwinds for the housebuilding sector – Taylor Wimpey should be in line to be among the primary beneficiaries.
‘With plenty of cash in the bank and a more stable backdrop, management may have one eye on possible acquisitions after withdrawing from a deal for Cala and consolidation in the sector continuing.’
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