House builder Taylor Wimpey reported a 3.1% rise in annual profit after it completed more homes, though its underlying performance was hurt by higher building costs.
Pre-tax profit for the year through December increased to £835.9m, up from £810.7m year-on-year.
Revenue rose 6.4% to £4.34bn, as housing completions climbed 5% to 16,042.
Pre-tax profit before exceptional items, however, fell 4.1% to £821.6m as a combination of the higher building costs and flat house prices shrunk operating margins to 19.6%, back from 21.6%.
As previously announced, Taylor Wimpey said it would pay dividends for the year of around £610m, or 18.6p per share.
MARGINS WORTH FIGHTING FOR
AJ Bell investment director Russ Mould says: ‘A key takeaway from housebuilder Taylor Wimpey’s results is the big step back in margin performance.
‘For several years conditions were set fair for the industry with low interest rates, plenty of mortgage availability, the Help to Buy scheme stoking demand and house prices continuing to rise.
‘Now build costs are increasing and asking prices are stalling, and this is inevitably having an impact on levels of profitability. Though Taylor Wimpey doesn’t appear to be willing to give up 20%-plus margins without a fight.
‘This means tight control of the purse strings but also a reduction in volumes to better capture value. Management also hope to see build cost inflation ease.’
Canaccord Genuity analyst Aynsley Lammin says: ‘Detailed guidance points to flat margins in 2020 with more improvement being seen in the second half, and volumes slightly lower reflecting lower site numbers and more margin focus.
‘Consensus 2020 pre-tax profit could edge back by around 1% to 2% on the lower volume guidance, with most expecting flat volumes.’