15th Jan 2008 07:01
Taylor Wimpey PLC15 January 2008 Taylor Wimpey plc Trading Statement Taylor Wimpey plc is issuing the following update on trading ahead of itsPreliminary Results for the year ended 31 December 2007, which will be announcedon 6 March 2008. Introduction Since the completion of the merger in July 2007, the two businesses have beensuccessfully integrated and the synergy benefits arising from being a largerbusiness are increasingly apparent. Despite decreased buyer confidence in thelast six months in both the UK and the United States, the Board expects toreport full year results in line with its expectations. Group Despite a challenging second half in 2007, we have delivered on our keyobjective of improving UK housing margins. We expect the 2007 pro formaoperating margin, before the impact of accounting policy changes and fair valueadjustments, to be around 2 percentage points ahead of the 12.5 per centachieved on a pro forma basis in 2006. We continue to make excellent progress on our integration targets. We remain oncourse to deliver our previously stated synergy run rate targets of £70 millionby the end of 2008 and £100 million in aggregate by the end of 2009. Asexpected, one-off merger costs of circa £60 million will be recognised in the2007 results. Gearing stood at around 40 per cent at the year end, following the repurchase of8.3 per cent of Taylor Wimpey's shares in issue through our buyback programme todate. UK Housing Market conditions in the UK were subdued throughout the second half of 2007. Inline with previous guidance, our strategy has been to focus on marginimprovements, rather than driving volume. Combined with cost savings and otherimprovements in underlying performance, this has enabled us to achieve ourtarget of a pro forma operating margin (before the effect of accounting policychanges and fair value adjustments) of over 14 per cent (2006 pro forma: 12.5per cent). We are ahead of schedule with merger synergies and have, in addition, deliveredthe £25 million of cost reductions targeted by George Wimpey Plc prior to themerger. We completed 20,645 homes on a pro forma basis (2006 pro forma: 21,910). Pricesremained stable in the second half of the year, following the growth seen in thefirst half, resulting in a full year average selling price of £190k (2006 proforma: £185k). The year end order book stood at £1,064 million (2006 pro forma:£1,316 million). Margins in the order book are in line with those achieved in2007. Following the merger, we have a strong UK landbank with a good balance betweenboth current and strategic sites. As at 31 December 2007, we have detailedplanning for 42,460 owned plots (2006 pro forma: 41,866 plots). We enter 2008with detailed planning consents in place for all of this year's forecastcompletions. As a result, we have been able to be increasingly selective in ourland purchasing since the start of October 2007 and we expect to continue withthis policy into 2008. We have also achieved our stretch target of operating 500 outlets as we enter2008, an increase of circa 12 per cent over the 2006 pro forma position. Thisincludes around 100 new outlets which were opened in November and December 2007. North America Housing Market conditions in the United States remained exceptionally challengingthrough the second half of 2007, with weak customer confidence continuing tohave an adverse effect on visitor, reservation and cancellation rates. Incontrast, our Canadian business continues to benefit from a robust operatingenvironment. Our integration programme remains on course to deliver the targeted synergiesand we have also achieved additional market related cost savings. Pro forma home completions in 2007 were 6,740 (2006 pro forma: 8,839) at anaverage selling price of £172k (2006 pro forma: £212k). Our land developmentbusiness also sold 966 lots (2006 pro forma: 2,638 lots). Our year end orderbook stands at £529 million (2006 pro forma: £549 million), with margins in linewith those achieved in the second half of 2007. We remain cautious with regard to purchasing land in the United States, althoughwe are continuing to invest in land for our Canadian operations. As a result,our North American landbank has been reduced to 40,789 plots (2006 pro forma:50,090 plots). In line with previous guidance, we are reviewing the carrying value of ourlandbank in North America. We expect additional inventory provisionsrepresenting just over 15 per cent of North American capital employed and willreport the final outcome with our Preliminary Results. We expect that our USbusiness will not, in 2007, be able to recognise, in full, deferred tax assetsgenerated by these provisions. Spain & Gibraltar Housing Whilst market conditions remain stable in Gibraltar and Mallorca, the markets inmainland Spain continue to be challenging. In line with previous guidance, fullyear profits will be well below the levels achieved in 2006. We completed a total of 212 homes in Spain and Gibraltar during 2007 (2006: 379homes) at an average selling price of £279k (2006: £205k). Our order book stoodat £83 million (2006: £100 million) and we have a landbank of 2,493 plots (2006:2,482 plots). We are currently undertaking a review of the carrying value of our landbank inSpain and will update the market on the outcome when we announce our PreliminaryResults. The quantum of any provision is not expected to be significant in aGroup context. Market conditions are expected to remain weak in mainland Spain in 2008. Construction The performance of our UK Construction operations has been strong. However, theoverall profitability of our Construction business before interest and tax isbelow the £8 million achieved last year due to the underperformance of a smallnumber of overseas road construction projects. The Construction business enters 2008 with a strong order book. Share Buyback Following the announcement of our £750 million share buyback programme at thetime of our Interim Results, we have now bought back a total of 94.8 millionshares at a total cost of £250 million. The Board will continue to review thepace of our share buyback programme over the course of 2008. Outlook Following the merger, the Group remains well-placed to benefit from astrengthened landbank, operational efficiencies, ongoing cost savings programmesand our strong financial position despite the current trading conditions in ourmain markets. We have continued to identify additional areas for further savingsand efficiencies, in the light of current market conditions. In the UK, we anticipate a subdued start to the Spring selling season withinterest rates and mortgage availability being key determinants of customerconfidence. However, long term supply constraints in the UK continue to providesupport to the market and our strong progress on integration will assist ourdrive for relative margin improvement, which will remain a priority over volume. In North America, we are not expecting market conditions in the US to improveduring 2008. Our strategy remains to focus on recovering cash from existingsites, reducing the cost base, and focusing on achieving a steady sales rate. -ends- Notes to editors: On 3 July 2007, Taylor Woodrow plc and George Wimpey Plc completed their mergerto form Taylor Wimpey plc. Taylor Wimpey plc is the UK's largest homebuilder andis a member of the FTSE100. Taylor Wimpey plc builds homes in the UK, North America, Spain and Gibraltar. Itaims to be the homebuilder of choice for customers, employees, shareholders andfor the communities in which it operates. Taylor Wimpey also operates in theConstruction sector under the Taylor Woodrow brand. For further information please visit the company's website -www.taylorwimpey.com For further information please contact: Pete Redfern, Group Chief Executive James MurgatroydPeter Johnson, Group Finance DirectorJonathan Drake, Investor RelationsTaylor Wimpey plc FinsburyTel: +44 (0) 20 7355 8105 Tel +44 (0) 20 7251 3801 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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