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(Alliance News) - Taylor Wimpey PLC on Friday set out a cost cutting programme as sales remain "significantly" below levels seen before the third quarter of 2022, when mortgage rates started to rise.
The Buckinghamshire, England-based home construction company said it aims to cut costs by GBP20 million per year. "As market conditions changed at pace in the third quarter we acted quickly and decisively implementing even tighter cost scrutiny, significantly reducing land commitments, and closely controlling the release of investment in work in progress," Taylor Wimpey explained.
"As we focus on maximising the efficiency of all our operations, we have begun a consultation on a series of proposed changes. If these proposals go ahead, it will achieve annual savings of GBP20 million. This incorporates proposed changes identified as part of our ongoing drive to increase operational efficiency and others that, if implemented, would reduce overheads to reflect market conditions. The proposed changes would neither affect our existing market coverage or ability to deliver volumes from our landbank, nor our ability to deliver high quality product and service to our customers," Taylor Wimpey added.
The company's short term landbank as at December 31 stood at 83,000 plots, down from 85,000 a year prior.
Meanwhile, Taylor Wimpey said during 2022, it performed well due to selling price discipline and operational controls. UK average selling price was up 6.0% to GBP352,000 from GBP332,000 in 2021. Meanwhile in Spain, the average selling price fell by 8.2% to EUR383,000 from EUR417,000 due to a higher proportion of sales being in Alicante, where prices are lower.
The company said annual profit was in line with expectations and its margin improved, despite a slowdown in the UK housing sector. Taylor Wimpey expects 2022 operating profit, including joint ventures and excluding exceptional items, in line with consensus of GBP921 million. Operating profit a year earlier amounted to GBP828.6 million.
Total group completions slipped to 14,154 in 2022, from 14,302 in 2021. Its net private reservation rate for 2022 slowed 25% to 0.68 homes per outlet per week from 0.91 in 2021.
Taylor Wimpey said it starts 2023 with a lower private order book than in recent years and expects overall volumes to reduce in the year.
"Although we have strengthened our outlet position during 2022 as planned, the ongoing market uncertainty means that sales remain significantly below levels seen prior to the rise in mortgage rates in the third quarter of 2022...We remain confident that the medium to long term fundamentals of our business remain highly attractive. With a strong balance sheet, excellent landbank and a focus on operational execution, we continue to run the business in the interests of all our stakeholders, maximising long term shareholder value whilst delivering much needed high quality homes," the company said.
Taylor Wimpey shares were 0.3% higher at 113.00 pence each in London on Friday morning.
By Tom Budszus, Alliance News reporter
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