2nd Aug 2023 10:57
(Alliance News) - Taylor Wimpey PLC's half-year results on Wednesday were a "clear case of 'it could have been worse'", according to Edison Group Director Andy Murphy, as a weakening property market and high operational costs put pressure on the housebuilder.
The High Wycombe, England-based firm reported pretax profit of GBP237.7 million in the six months ended July 2, down 29% from GBP334.5 million the previous year. Revenue fell 21% to GBP1.64 billion, from GBP2.08 billion the year prior.
Taylor Wimpey said house completions fell 26% to 5,120 homes from 6,922 homes in the previous year, with the housing market hit by rising interest rates. The net private sales rate for the first half was 0.71 homes per outlet per week, down 21% from 0.90 year-on-year.
Richard Hunter, head of markets at interactive investor, said the update provided "further proof" of the "tightening shackles" which the housebuilders are currently facing.
"A brief bounce in fortunes due to the traditionally strong Spring selling season was largely undone by a further interest rate rise, which in turn resulted in higher mortgage rates. This has unsurprisingly driven a reduction in reservations and completions, an increase in cancellations and questions over general mortgage availability and affordability, especially for first time buyers," he said.
Looking forward, Taylor Wimpey expects full year completions in the range of 10,000 to 10,500, down from 14,154 completions in the prior financial year. Full year operating profit is expected to range between GBP440 million and GBP470 million, a decrease from GBP923.4 million the year before.
ii's Hunter said the guidance was "understandably cautious" but added there are "glimmers of hope" on which Taylor Wimpey can build as the year continues.
"It has a short-term landbank of 83,000 plots and a strategic pipeline of a further 140,000 plots, giving it considerable leeway and avoiding the need for an immediate buying spree," Hunter said.
"At the same time, notwithstanding the lower numbers, the average selling price for a property rose by 6.7% to GBP320,000, offsetting some of the inflationary pressure. From a broader perspective, the most recent economic data has suggested that inflation may have peaked, which in turn could lead to more stable interest rates (and therefore mortgage rates) in due course. At the same time, the group has pointed out that there remains a major supply and demand imbalance in UK housing, with significant underlying demand for new homes."
AJ Bell's Laith Khalaf noted that this supply-demand dynamic should, in theory, provide support for UK house prices over the longer term.
Shares in Taylor Wimpey were up 3.1% at 117.63 pence on Wednesday morning in London.
By Heather Rydings, Alliance News senior economics reporter
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