Taylor Wimpey sees 2020 results at upper end of forecasts

(Sharecast News) - Taylor Wimpey said full-year results would be at the upper end of expectations after better-than-expecting trading in the second half driven by a mini housing boom.
The house builder on Monday said that with sites operating at or near to normal capacity and "a strong order book and resilient customer demand we now expect 2021 completions to be between 85-90% of 2019 levels".

It reiterated plans to restart ordinary dividend payments in 2021, starting with the payment of the 2020 final dividend and would review the special dividend in 2021 for payment in 2022.

Taylor Wimpey added that it had used the £515m raised in June to "confidently and assertively re-enter the land market" and take advantage of increased opportunities, agreeing terms on £826m of gross land purchases, comprising 70 sites and 14,500 plots.

"This is significantly ahead of our normal rate of acquisition. These sites have been secured at attractive returns in line with our medium term operating margin target of 21% - 22% and with an average return on capital employed of 34%."

"Combined with the strength of our underlying landbank, these sites give us increased confidence of delivering our medium term operating margin target and will enable us to accelerate our volume growth from 2023 onwards."

The order book was up 11% at £3bn, with private average selling prices ahead of 2019 levels.

The housebuilder in July announced a £39.8m pre-tax loss for the first half after closing its sites because of the coronavirus pandemic. After the government lifted restrictions in June the market has soared, fuelled by pent-up demand, the stamp duty holiday and people looking for bigger homes.

The sales rate was 0.76 homes per outlet per week in the second half of the year to date compared with 0.93 and 0.73 homes per outlet per week for the year to date against 0.97 in 2019.

"On many sites, we are selling today for completions in the second quarter of 2021 and beyond, and as construction catches up with sales over the next few months, we expect rates to improve further."

Cancellation rates for the year to date continued to reduce but still remained slightly above normal levels at around 20% over recent weeks compared with 15% in 2019.

The current total order book, excluding joint ventures, was 11,530 homes at November 1, up from 10,486 a year ago "giving us ongoing confidence in our ability to manage short term market uncertainty and price", the company said.

Cost reductions were expected to save around £15m from next year, include middle management redundancies at head office and a "rationalisation of our London operating structure to focus on affordable price points that meet the affordability needs of Londoners, and a series of reductions in central and business unit overhead levels", the company said.

Chief executive Pete Redfern said: "We have made good progress in the second half of the year to date, maintaining a robust sales rate and building a strong forward order book. Looking ahead, we are on track to deliver full year 2020 results towards the upper end of market expectations and with strong operational momentum and positive forward indicators, our confidence in 2021 has increased."