27th Feb 2019 10:27
LONDON (Alliance News) - Taylor Wimpey on Wednesday reported its 2018 results broadly in line with market expectations and with a record cash position, despite uncertainty within the UK housing market.
Shares in the blue-chip housebuilder were up 0.5% at 171.80 pence on Wednesday morning.
Pretax profit for 2018 was GBP810.7 million, up 19% on last year. Excluding exceptional items pretax profit came in at GBP856.8 million, slightly above company-compiled analyst consensus of GBP854.0 million and up 5.5% on the GBP812.0 million generated in 2017.
Operating profit for the year rose by 4.3% to GBP880.2 million from GBP844.1 million, driven by improved performances in Taylor Wimpey's UK and Spanish businesses.
Taylor Wimpey's revenue came in at GBP4.08 billion, up 2% on the year before, but marginally short of consensus of GBP4.10 billion.
Revenue rose as overall home completions for the year grew by 3% to 14,933 from 14,541 in 2017, with affordable home completions rising to 3,416 homes, which now makes up 23% of Taylor Wimpey's total builds.
However, the average selling price for UK completions remained flat GBP264,000 from GBP264,000. There was a fall in the average selling price for the group's Spanish business at EUR344,000, compared to EUR352,000 in 2017.
Operationally, Taylor Wimpey said the UK housing remained stable during 2018 despite continued uncertainty, with robust demand for new build homes underpinned by low interest rates and the government's Help to Buy scheme.
Some 36% of sales used the UK government's Help to Buy scheme, and of these, 77% of sales were to first time buyers at an average price of GBP270,000, up from GBP256,000 the year before.
At the end of 2018, Taylor Wimpey's order book was "very strong", with 8,304 homes from 7,136 homes at the end of 2017. This was valued at GBP1.78 billion, from GBP1.63 billion the year before.
For 2018, the housebuilder declared a dividend of GBP499.5 million. Despite the payout, Taylor Wimpey's net cash rose to a record level of GBP644.1 million at the end of the year from GBP511.8 million in 2017.
AJ Bell in particular was impressed by the record net cash achieved by the housebuilder for the year, and expressed confidence in Taylor Wimpey making good on its GBP600 million dividend payout for 2019.
"A pledge to pay circa GBP600 million in dividends during 2019 clearly won't be a problem to fulfil. And the cash-generative nature of its business means the housebuilder could still have plenty of money left over," said AJ Bell investment director Russ Mould.
"Housebuilders in general haven't given any signals that they want to start making acquisitions but they are in a strong enough financial position to change their minds," Mould added.
For 2019 to date, Taylor Wimpey reported a net price sales rate of 0.99, a substantial improvement from 0.82 for the same period in 2018, with an order book value of GBP2.17 billion and 47% of private completions forward sold for the year.
Looking ahead, the housebuilder reiterated its guidance for 2019, with volumes to remain flat and underlying build cost increases to be around 3% to 4%, a similar level to 2018 should market conditions remain stable.
"Despite ongoing macroeconomic and political uncertainty, we have made a very positive start to 2019 and are encouraged to see continued strong demand for our homes. We enter the year with a strong order book and a clear strategy in place to deliver long term value for shareholders," said Chief Executive Officer Pete Redfern.
However, Shore Capital remained cautious on the year ahead, highlighting Taylor Wimpey's expectations of a flat output for 2019.
"We see no reason to change our forecasts and we still believe that margins are likely to fall again this year [due to] higher selling costs/purchaser incentives, higher customer care costs, unrecovered construction cost inflation and the likelihood that prices will fall in 2019," said Shore.
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