Taylor Wimpey says profits should hit top of forecasts this year and next

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Taylor Wimpey PLC (TW.) has said that not only will this year’s financial results be at the upper end of expectations but it is also feeling more confident about next year as well.

Having said at the time of its half-year results that housing completion volumes, revenues and profit margins would be reduced as coronavirus distancing restrictions were reducing operating capacity to 80%, the FTSE 100 housebuilder reported today that building capacity was now “close to normal”.

With the housing market having recently been humming with demand, amid low interest rates and government support measures, Taylor Wimpey chief executive Pete Redfern said that while full-year volume expectations remain unchanged the company has improved its performance and was “on track to deliver full year 2020 results towards the upper end of market expectations”.

It has been selling an average of 0.76 homes per site per week since the start of July, compared to 0.93 this time last year, according to the trading statement on Monday, lifting the sales rate for the year to date to 0.73.

On many sites, the company said it was selling for houses where the sale is not expected to complete until at least April next year.

Looking forward, Redfern added that completions in 2021 are expected to be 85-90% of 2019 levels and “with strong operational momentum and positive forward indicators, our confidence in 2021 has increased.

“As a result, assuming the market remains broadly stable, we expect to deliver 2021 operating profit materially above the top end of the current consensus range.”

The total order book, excluding joint ventures, stood at 11,530 homes or roughly £3bn at November 1, 2020, compared to 10,486 or £2.7bn a year ago, with private average selling price in the order book ahead of 2019 levels.

Redfern and the board have already stated their intention to restart ordinary dividend payments with a final dividend for the current year and said that they will also examine the prospect of a special dividend to be paid in 2022. 

The shares shot up 11% to 136.97p in early trading on Monday.

Analysts at broker Peel Hunt said City consensus forecasts are “likely to rise by 5% or so” for the current year and “15% or so” for the next.

The analysts also noted that the housebuilder has been active on the land-buying front, with £826mln of gross land over 70 sites and 14,500 plots purchased or agreed terms, at normal operating margins and a healthy return on capital employed, giving the group a strategic pipeline of 137,000 plots. 

   –Adds shares and broker comment–

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