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Economy

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Financial

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Financial

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Banks

RBS share drop accelerates on stress test flop

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Categorized | Property

Taylor Wimpey profits jump 42%


Posted on July 31, 2013

Taylor Wimpey provided further evidence of a booming UK housebuilding market as it posted a 42 per cent jump in pre-tax profits, helped by improving consumer confidence and government homebuying schemes.

The company – Britain’s second-largest housebuilder by market value – said its pre-tax profits rose to £109m in the first half of 2013, while sales increased 11 per cent to more than £1bn.

    In line with the majority of the London-listed housebuilders, Taylor Wimpey has reported an increase in demand since the launch of the government’s Help to Buy scheme in April. The first phase of the scheme helps purchasers buy new-build properties with a deposit as small as 5 per cent.

    However, since its launch, critics ranging from the International Monetary Fund to the UK’s Office for Budget Responsibility have warned that it will push up house prices rather than encourage housebuilders to build homes.

    Nevertheless, Pete Redfern, chief executive of Taylor Wimpey, suggested the benefits of the scheme for housebuilders had been overplayed. “Of course, Help to Buy is having an impact but it would be misleading to think it’s the only thing,” he said.

    Help to Buy equity loans accounted for just 235 of Taylor Wimpey’s 5,191 completed sales in the six months to June 30. However, the true impact will become more apparent in the second half of this year, when a further 1,300 reservations through the scheme are due to be completed.

    Although Mr Redfern has previously called for a clear end point for Help to Buy, he disputed concerns that it would lead to inflated house prices. “I don’t think we are going to see a housing bubble,” he said. “If we see a housing bubble, it will be because of a shortage of land and planning permission over the long term, not Help to Buy.”

    Taylor Wimpey spent £233m on land during the first half of the year and now has a land bank of 101,566 plots. It has a forward order book of a record 7,378 homes, valued at £1.3bn.

    Despite this, Antony Coldling, analyst at Jeffries, the investment bank, argued that Taylor Wimpey’s had not shifted towards building more homes at the expense of returns.

    “Although the housing market has changed gear Taylor Wimpey’s strategy has not; it remains focused on optimising shareholder value ahead of growing volumes,” he said.

    The company’s 5,191 completed homes in the period was a slight increase on the 5,083 completed in the same period last year. Average prices rose from £176,000 to £188,000.

    Group operating margin increased to 13.1 per cent, compared with 11.1 per cent for the same period last year. The company continued to develop land that it had bought cheaply during the financial crisis.

    Taylor Wimpey raised its interim dividend to 0.22p per share. The stock rose 0.3p to 106.5p on Wednesday.