A strong first quarter set against a still improving backdrop sees housebuilder Taylor Wimpey (TW.) shares edging a tough more than 2% higher to 109.4p after an upbeat trading update reassured investors. The thrust of the announcement is that confidence remains high on plans to supply accessible and affordable homes for the legions of the UK's home-owning hopefuls, while also driving operating margins 200 to 300 basis points higher this year.
Taylor Wimpey, like many British housebuilders, remains in something of a sweet spot with average house prices rising steadily in some parts of the country, rampantly in others, aided to a degree by the government's Help to Buy scheme. Land prices are still rising at a rate benign enough for the High Wycombe-head-quartered constructor to remain a net buyer.
A long-term beneficiary of the UK housing market's positive momentum, investors will be happy to read that positive trends continue beyond 2013 results unveiled in February, right across the group's operating landscape.
In keeping with traditional seasonal patterns, Taylor told investors that a strong spring selling season saw an average private net reservation rate of 0.75 sales per outlet per week for the year to date compared to the 0.66 achieved in the same period last year and the company anticipates average sales rates for the year as a whole to be slightly ahead of 2013. The robust nature of both the housing market and a signifier of improving credit conditions, the group reported that cancellation rates are historically low at 10% compared to 13.7% at the same stage in 2013 and during the period, the builder worked with over 1,600 customers to secure a home using Help to Buy.
Total order book volume rose by 13% to 8,139 homes in the first quarter, year-on-year while quarter-on-quarter Taylor is showing a 23% increase. Average selling prices in the quarter rose 22% on the same period a year earlier and while margin improvement wasn't set out in the statement, the group was able to confirm that gains had been made since the end of 2013.
The landbank remains well-stocked and, at the end of March, the short term landbank stood at around 73,000 plots, following the conversion of approximately 4,800 from its strategic pipeline, which now stands at 110,000 potential plots.
Looking under the hood, the groups balance sheet remains robust and net debt at the end of the first quarter remained low at £130 million. The group also reiterated its commitment to paying a special cash dividend on 3 July 2014 of 1.54p per share.
Liberum's Sebastian Jory remains a fan, noting the special dividend in particular.