12th Jan 2015 09:57
LONDON (Alliance News) - Housebuilder Taylor Wimpey PLC Monday reported strong growth in completions and average selling prices for 2014, and said it is entering 2015 with a record order book, giving it confidence in its prospects as it starts the first year of its new medium-term target period.
In a statement, Taylor Wimpey said it completed 12,454 homes in 2014, up 6% from 11,696 in 2013, and it achieved an average selling price of GBP234,000, up 11% from GBP210,000 a year earlier.
It said its order book stood at nearly GBP1.40 billion at the end of 2014, up 12% from GBP1.25 billion a year earlier, driven mainly by strong private reservations. The order book represents 6,601 homes, down from 6,627 a year earlier.
"We view this as the optimum size for the business at this point in the cycle," it said.
"Whilst the macro economic outlook is uncertain, with a reduced risk of UK interest rate increases in the near term and sensible mortgage regulation, we believe that the market and political risk for our sector is balanced as we enter 2015, and the outlook remains positive," the company said in an outlook statement.
Taylor Wimpey's net cash position was about GBP113 million at the end of 2014, slightly ahead of its expectations and significantly more than the GBP5.4 million in net cash it had at the end of 2013.
"This is largely as a result of outperformance in underlying trading, whilst at the same time continuing to invest in our landbank as we approached our optimal scale," it said.
It added that it will report a 2014 operating margin slightly over 400 basis points ahead of the 2013 operating profit margin of 13.6%.
Taylor Wimpey said it is continuing to source and invest in short term "value-creating" land opportunities at similar margins to 2013, but thinks it has also reached its optimal short term landbank size, and so its strategy is to maintain, rather than grow, this proportion of its landbank.
It said it had converted over 9,000 plots from its strategic pipeline into its short-term landbank during 2014, which it called a record performance.
"We enter 2015 with 305 outlets (31 December 2013: 314), with the decrease due to faster outlet closings in a healthier market and the time required to meet additional planning permission requirements to start working on site. We expect the total number of outlets to increase in 2015, reflecting our success in the land market and our continued focus to get newly acquired sites and phases opened properly and efficiently," it said.
Last May, the housebuilder set out its medium-targets for the three years from 2015 through 2017. It is targeting an average operating margin of 20% over the three years, a return on net operating assets of at least 20% a year, and an average increase in net assets including returns to shareholders of 15% a year. It also wants to convert an average of at least 65% of operating profit into operating cash flow over the three year period.
"Our view on this stock and the sector overall has not changed ? we stick with a target price for Taylor Wimpey of 148p and keep this as a core investment in the sector," Shore Capital analyst Robin Hardy wrote in a note to clients. Shore has a Buy rating on Taylor Wimpey.
Jefferies, meanwhile, said the housebuilder enters the year in the strongest position it has ever been in, with a record forward order book and a landbank to be envied. "We see limited downside risks to our estimates, and although we are not changing estimates, we would not be surprised if consensus numbers nudged up today," said Jefferies analyst Anthony Codling.
Jefferies, which reiterated its Hold rating and 121.00p price target on the stock, estimates Taylor Wimpey will deliver a 2015 pretax profit of GBP577.3 million, up 28% on 2014 consensus of GBP443.0 million and the Jefferies estimate of GBP450.6 million.
Still, Taylor Wimpey's shares were down 1.0% at 124.50 pence Monday morning.
Shore analyst Robin Hardy said he continues to see limited and selected value in the housebuilding sector, as UK house prices have been flat for the last six months. Mortgage approvals have been weakening for 10 months and potentially now looking like bottoming out, and there is the UK general election in May which is likely to cause some hiatus in the market, Hardy says, noting the issues are already well known to the market.
By Steve McGrath; [email protected]; @stevemcgrath1
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