10th Jan 2005 07:00
Taylor Woodrow PLC10 January 2005 TAYLOR WOODROW PLC Trading Statement • Housing completions 13,091, up 21% on last year• Housing order book £1,130m, up 2% on last year• Strong cash generation, with net debt reduced to under £600m (down from £743m at 31st December 2003)• Record profits, at the lower end of market expectations* Commenting on trading through 2004, Iain Napier, Chief Executive, stated: 2004 has been another year of good progress for Taylor Woodrow. The successfulintegration of Wilson Connolly and our investment strategy in North America havedelivered record levels of home completions and profits. Looking ahead, thecontinued strength of our international operations provides us with channels forgrowth while in the UK we are well placed to respond to an improvement inconsumer confidence. The full trading statement is below. * Note: Estimated consensus 2004 PBT (post exceptionals, post goodwill), is£402.2m, with a high of £411.3m and a low of £387.5m. Taylor Woodrow plc, the international housing and development company, todayissues an update on trading for the year ended 31st December 2004. Preliminaryresults will be announced on 1st March 2005. Introduction 2004 has been another record year for Taylor Woodrow. Housing completions grewby 21% to 13,091 as we successfully integrated Wilson Connolly and grew ourinternational operations. The benefits of our portfolio investment strategy havebeen apparent in a period when UK markets have weakened relative to previousyears, but our North American operations have continued to perform verystrongly. As a result, our total housing order book at 31st December was 2%ahead of the previous year at £1,130m. We expect to confirm a year of record profits at the lower end of current marketexpectations when we report our results for the year to 31st December 2004. UK Housing Home completions in 2004 were 9,053, up 18% on last year, but below our previousexpectations. This was a result of continuing uncertainty over house prices, aconsequent cautious approach by house buyers and a reluctance to chase volume.As we noted in October, customers are taking longer to commit than earlier inthe year. Visitor levels were up slightly in the first half of the year, but down about10% in the second half. Visitor levels to our sites in the last 6 weeks of theyear were actually ahead of 2003 however, suggesting consumers remain veryinterested in new homes and that latent demand exists in the market. In the first half of the year, net reservations per site were slightly ahead ofthe same period last year, but in the second half were significantly below lastyear, broadly in line with the market. Competitive pressure has increased in thelast few months and this has led to a greater use of incentives in the market. Our average selling prices increased by 9% to £197k. Prices for new homes havebeen less volatile than the overall housing market. In the last few months, whenthe prices of existing houses are reported to have fallen, we have seen new homeprices remain broadly stable, reflecting the value for money offered by newhousing. Our approach in this market has been to be prudent in land buying, manageinventory, and protect margins through cost control. • We increased our hurdle rates for land buying in March 2003 and again in July 2004 in order to limit exposure to an over inflating land market. As a result of this approach, we are likely to have on average approximately 200 selling sites in 2005 (versus 213 in 2004), with greater weighting of site openings towards the second half of the year and some larger sites giving us better volume opportunities. We have recently seen some stabilisation in the land market and continue to pursue opportunities where we see value. • We have made good progress in managing our supply chain by using our purchasing scale, rationalising the number of suppliers and working with them to reduce unit costs and wastage. As a result, we have been able to keep material costs below inflation. Labour rates continue to rise ahead of general inflation due to the high level of activity in the construction market at large, although we are working with our subcontractors to manage overall costs down. The integration of Wilson Connolly was achieved ahead of schedule and remains ontarget to achieve £25m synergies in a full year. Full year operating margins forthe combined business will show improvement over the 2003 pro forma level. Our forward order book at 31st December 2004 was £407m, representing 21% of 2004volume. At the year end, the UK housing landbank consisted of approximately 33,000 ownedor controlled plots with outline planning permission (compared to 34,918 at theend of 2003), representing some 3.6 years' supply. Of these, approximately 9,100have detailed or outline planning permission for development in 2005. Looking forward, we believe the fundamentals of the market remain good,particularly given the health of the economy, continuing low interest rates andthe substantial undersupply of housing. The company has a balanced spread acrossall regions of the market. We expect that consumers will remain cautious in thefirst half of 2005, and have planned our site openings in anticipation of a pickup in activity in the second half. North America Total home completions in 2004 were 3,634, up 30% on 2003, with all regionsgrowing volumes and profits. Average selling prices for home completions increased by 10% to US$375k. Theincrease reflects the strength of our products in their local markets and theimpact of our successful move upwards towards the mid-market in Arizona. All regions have performed well. The Arizona operation, which we purchased in2002, continues to exceed expectations. In California, we have now largelycompleted our product repositioning down towards the mid market, and as a resulthave achieved strong volume and profit growth. In Canada, the low rise markethas remained good, and the high rise market has recovered. In Florida we haveseen good growth in both our low rise and high rise businesses. Texas continuesto perform well. Our forward order book at 31st December 2004 was at a record level of US$1,246m,an increase of 57%. Approximately half the increase was contributed by our newwaterfront condominium business in Florida, which is extensively pre-sold andwill start to deliver a strong profit contribution in the second half of 2005. In line with our previously stated strategy of investing in North America, weare likely to have approximately 10% more sites on average in 2005 than in 2004.At the year end, the North America housing landbank consisted of over 30,000owned or controlled plots with outline planning permission (up 17% on the year),representing some 5.1 years' supply. Spain and Gibraltar Our housing operations in Spain and Gibraltar have continued to perform well,with 404 home completions, up 18% on last year. Average sales prices were £177k,down 5% on last year due to changes in mix. The forward order book at 31stDecember 2004 was £75m, 15% higher than last year. Construction Construction has continued to perform steadily in 2004 and enters 2005 with aforward order book of £815m, up 4% on last year. This figure excludes £375mrelating to the St Helens PFI Hospital project where we have been appointed asthe preferred bidder. Cash position At the end of the year, we had reduced net debt to under £600m after completingthe share buyback of £50m during 2005. Our 2005 cash position will be furtherimproved by the sale of the K2 development for £117m. Summary 2004 has been another good year and our record Group order book positions uswell for 2005. The strategy of balancing our housing business between the UK andNorth America provides us with continued growth opportunities. In the UK,although the market is uncertain, we remain cautiously optimistic and are wellplaced to respond to an improvement in consumer confidence. In North America weanticipate another year of substantial growth. - ends - For further information: Taylor Woodrow Investor Relations:John Holland-Kaye - Tel: 07816 517 200 Taylor Woodrow Media Enquiries:Ian Morris - Tel: 0121 600 8520 / 07816 518 767 Maitland Consultancy:William Clutterbuck / Emma Burdett - Tel: 020 7379 5151 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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