31st Jul 2024 17:19
(Alliance News) - Taylor Wimpey PLC on Wednesday reported a well-received set of results, with the housebuilding sector likely to face a more hopeful set of circumstances in the coming months.
The Buckinghamshire, England-based house builder said in the first half that ended June 30, pretax profit fell 58% to GBP99.7 million from GBP237.7 million the previous year.
Revenue reduced 7.3% to GBP1.52 billion from GBP1.64 billion, while cost of sales fell 4.5% to GBP1.23 billion from GBP1.28 billion.
"While double-digit profit declines are never easy for investors to stomach, that's not a bad showing in the context of things. Housebuilders are cyclical beasts, with their fortunes tending to wax and wane in line with the health of the economy," said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
The analyst continued: "And competitors are struggling too, with some posting much bigger profit slumps than this. Given performance was always expected to be weighted to the second half, Taylor Wimpey's built itself a solid foundation to deliver."
Last month, Crest Nicholson Holdings PLC reported a GBP30.9 million pretax loss for the six months to April 30, swung from a GBP28.4 million profit a year before.
Taylor Wimpey raised its interim dividend for the period by 0.2% to 4.80 pence per share from 4.79p, while adjusted net debt has increased 34% to GBP89.6 million from GBP66.9 million.
Taylor Wimpey commented: "There was an encouraging start to the year with good demand in the traditionally strong Spring selling season and conditions remained relatively stable in the second quarter. However, it is clear the delay in interest rate cuts and comparatively high mortgage rates continue to have some impact on market transactions.
Excluding joint ventures, 4,512 UK homes were completed in the first half, down 7.0% from 4,854. Included among these new builds were 1,004 affordable homes, equating to 22% of total completions.
At period end, the net book value of the company's UK short-term landbank stood at GBP2.7 billion, encompassing 78,678 plots. Meanwhile, Taylor Wimpey's strategic pipeline covers approximately 140,000 potential plots.
Chief Executive Jennie Daly said: "Looking to the second half, our performance to date means we now expect to deliver 2024 full year UK completions towards the upper end of our previous guidance range of 9,500 to 10,000 [compared with 10,438 before] and group operating profit in line with current market expectations."
The company expects to achieve an operating profit of GBP416 million, which would reflect a 12% reduction from GBP470.2 million reported in 2023.
The results come on the eve of the Bank of England's interest rate decision on Thursday. Analysts are leaning towards predicting that it will enact a 25 basis point cut to bank rate, though for many, it is too close to call.
Regardless of what transpires on Thursday, the market is largely convinced that the next direction for UK interest rates will be down - a tailwind for housebuilders.
There are further reasons to be cheerful for housebuilders, RBC Brewin Dolphin noted, as the UK's new Labour government pushes to build more housing.
"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," senior investment manager John Moore said.
Taylor Wimpey shares closed up 0.7% to 159.70 pence each in London on Wednesday.
By Elijah Dale, Alliance News reporter, and Elizabeth Winter, deputy news editor
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