Profits build as Taylor Wimpey takes confident view

Housebuilder Taylor Wimpey expects full-year profit for 2016 to come in at the top end of consensus, although analysts expressed concern that the firm faces several hurdles this year.

Taylor Wimpey turned in a 'strong performance' despite the uncertain economic backdrop. Picture: Jim Bamford
Taylor Wimpey turned in a 'strong performance' despite the uncertain economic backdrop. Picture: Jim Bamford

The company said in a trading update, in advance of the results being published on 28 February, that it saw continued “good demand and solid trading” into the second half, despite the uncertain macroeconomic backdrop.

Core profit is expected to come in towards the top of the £706.4 million to £755m range, which was rather wide due to Brexit and ensuing uncertainty, group finance director Ryan Mangold told The Scotsman.

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“I think it’s quite a strong performance year on year,” Mangold said, also noting that it translates to an operating profit margin of 20.8 per cent, up from 20.3 per cent, “a pleasing performance in what the market would perceive as a bit more of a challenging year”.

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Taylor Wimpey also said 2016 was its first year of operating towards its enhanced medium-term targets, and it saw total home completions grow by 4 per cent to 13,881, with its overall average selling price up by 11 per cent to £255,000. However, its order book valued at £1.68 billion at 31 December was down from £1.78bn 12 months previously.

The group was upbeat over its outlook, and chief executive Pete Redfern said: “Looking ahead, we remain confident that our disciplined strategy will enable us to continue to deliver value over the long term.”

However, Shore Capital analyst Robin Hardy said that while 2016 was all in all a positive year, “there are headwinds on many fronts running in to 2017 that make outcomes uncertain” such as build costs.

Mangold acknowledged that some analysts forecast a “softer” market this year, particularly in the second half, but he said the firm was optimistic nonetheless.

He added that strong demand north of the Border, flagged in November, continued to the end of the year. The company is still investing in Scotland, and while this year could be “slightly more exaggerated by political noise”, he expects it to “continue to make progress” with overall demand remaining positive.

George Salmon, equity analyst at Hargreaves Lansdown, deemed the firm’s latest figures “reassuring in the context of the wider uncertainty around the sector” and said that given the UK’s “chronic” housing shortage “the fires of demand continue to burn strongly”.