Demand for Taylor Wimpey homes stable in Q1 despite political uncertainty
Source - SMW
Housebuilding company Taylor Wimpey said the market for new-build housing had remained "stable" in the first four months of 2019 despite ongoing political uncertainty and added it was on track to meet its full-year expectations.
Underlying drivers of housing demand for the period covering 1 January 2019 to 25 April 2019 had remained robust with continued good accessibility to mortgages and low interest rates for customers, combined with high employment levels.
"We've made a good start to 2019 and, in spite of wider macroeconomic uncertainty, the housing market has remained stable. We are achieving a record sales rate and building a solid forward order book for the year, although we see increased build cost pressures," said Chief Executive Pete Redfern.
Average private sales for the year to date were 1.03 per outlet per week (compared with 0.85 in 2018 week 16), ahead of the firm's 2019 expectations. Sales pricing, meanwhile, remained flat relative to the end of 2018 and cancellation rates stood at 13%, in line with levels from week 16 in 2018.
As at week ending 21 April 2019, Taylor Wimpey's total order book value stood at approximately £2,399m (up from 2018 week 16 when it was £2,155m). This represented 10,291 homes (versus 9,050 in 2018), excluding legal completions to date.
However, the firm said it had seen higher-than-expected cost inflation in early 2019, particularly in materials, and now expected build cost inflation for 2019 to be around 5%. This was driven by a combination of underlying cumulative inflation and exchange rates impacting on the cost base of suppliers, and a higher-than-expected demand in the short term from defensive additional buffer stock holding in the construction industry supply chain.
Looking forward, it expected full-year results to be weighted towards the second half and, given the strong sales performance, it anticipated that full-year volumes would be "slightly higher" than 2018, but given the greater build cost inflation for the year, margins would be slightly lower.
Taylor Wimpey noted that the short-term land market also remained "stable": at end-March, the firm's short-term landbank stood at around 79k plots, up some 2k plots year on year. Its strategic land pipeline stood at approximately 128k potential plots, as at the end of March 2019, following the conversion of around 3k plots into the short term landbank so far this year.
Further, it has made good progress on outlet openings, with progress slightly ahead of expectations. The company said it was currently operating from 261 outlets, slightly fewer than 2018's 278.
Subject to shareholder approval, the company said it would be paying a final ordinary dividend of 3.8p per share on 17 May 2019, giving a total ordinary dividend for the year of 6.24p per share, an increase of 32%.
It would also pay a special cash dividend of approximately £350m (10.7p per share) on 12 July 2019, subject to shareholder approval.
Taylor Wimpey said it was "well positioned" for the future with a clear strategy that provided flexibility to further increase its pace of build in the future, provided market conditions remained supportive. Subject to land spend variations, it expected to end the year with a net cash position of around £500m after dividend payments of some £600m.