Trading Statement

RNS Number : 6220Z

Taylor Wimpey PLC

18 January 2011

 



18 January 2011

Taylor Wimpey plc

Trading Statement for the year ended 31 December 2010

Taylor Wimpey plc is issuing the following update on trading ahead of its Full Year Results for the year ended 31 December 2010, which will be announced on 3 March 2011.

Overview

·    Underlying operating profit and profit before tax ahead of the upgraded expectations set in the November IMS due to outperformance in North America

·    Full year reported operating margin for UK Housing expected to be approximately 7% (FY 2009: 0.8%)

·    Refinancing completed, giving the Group greater operational flexibility and secured funding at a lower blended rate

·    Strong cash generation and lower than expected net debt of c.£660 million, despite one-off refinancing payments and pension contribution of £183 million

·    Strong position to deliver further margin improvement in 2011

Pete Redfern, Chief Executive of Taylor Wimpey, said "We have delivered a much improved performance in 2010.  We are now in a strong position to add significant value by maximising returns from our existing land portfolio and adding high quality new land on attractive terms."

UK Housing

Despite the ongoing economic uncertainty, trading during the second half of the year was in line with our overall expectations, with mortgage availability remaining the key constraint on industry volumes.

Our net private reservation rate for the full year was 0.51 homes per outlet per week (2009: 0.55) with cancellation rates remaining in line with the long term average at 18.2% (2009: 18.7%).  Selling prices remained stable through the second half of the year, after some small increases in the first half, and we continue to be sparing in our use of shared equity incentives.  We have increased our number of outlets to 301 at the year end from a low point of 271 in September 2010 and expect to deliver further growth during 2011. 

We completed a total of 9,962 homes in 2010 (2009: 10,186), of which 8,103 were private completions (2009: 8,432), 1,824 were affordable homes (2009: 1,709) and 35 were joint venture completions (2009: 45).  The overall average selling price for these completions was £171k, an increase of 7% over the 2009 equivalent of £160k.  The average selling price for private completions increased to £184k (2009: £171k) and the affordable average selling price rose to £116k (2009: £108k).

Having substantially achieved our target of reducing private build cost per square foot by 10% by the end of the first half, we have delivered further savings in the second half of this year and expect to exceed our target by the end of 2011.  In combination with the benefits achieved through our ongoing replanning programme, these savings will enable us to deliver a full year underlying operating margin from our UK Housing business (excluding the benefit from the one-off pension curtailment credit recorded in the first half) that is slightly above the 6.1% achieved in the first half (2009: 0.8%).  We anticipate that the reported operating margin, including the £12 million pension curtailment credit, will be approximately 7% for the full year.  We expect to deliver an improved UK operating profit in line with the expectations that we set in our November update. 

Our year end order book stands at 4,684 homes (2009: 5,431), reflecting our ongoing strategy of prioritising margin over volume.  The success of this approach is illustrated by the margins in our order book, which are higher than the 2009 comparative. 

We remain focused on enhancing the quality of our landbank, through replanning, selective new acquisitions and promotion of our strategic plots.  At the year end we owned or controlled c63,500 plots in our consented landbank (04/07/2010: 63,291), which represents approximately 6.4 years of supply at current completion levels.  In addition, we have maintained our consistent, disciplined approach to land acquisition and have approved new land purchase commitments for 4,561 new plots since the half year (H2 2009: 3,003 plots), with limited use of deferred payment terms. 

North America Housing

We saw greater stability in our US markets through the autumn as the underlying impact of the cessation of the Homebuyer Tax Credit programme started to diminish and this stability has continued through to the end of the year.  Our markets in Canada remain strong.

Net reservation rates in North America as a whole for the full year were 0.47 per site per week (2009: 0.60).  Sales rates in Canada remain very strong, while in the US we saw improvements in the latter part of the year.  The cancellation rate for the full year for North America as a whole was 17%, in line with the long term average (2009: 15%), and average selling prices have remained broadly flat over the second half.

We completed a total of 4,140 homes in North America as whole (2009: 4,755), with 2,570 completions in the US (2009: 3,347) and 1,570 completions in Canada (2009: 1,408).  We achieved an average selling price of US$274k in the US (2009: US$255k) and C$374k in Canada (2009: C$347k).

A combination of ongoing cost savings and enhanced margins from recently acquired outlets will enable us to deliver a full year operating profit in North America above the level of our increased expectations as set out in our recent Interim Management Statement.

Our North America order book was 2,756 homes at the year end (2009: 3,216).

We continue to acquire land on a selective basis in North America, focusing on longer term opportunities in attractive sub-markets.  We approved new land purchase commitments for 1,002 plots in the second half of 2010 (H2 2009: 3,723 plots) and owned or controlled a landbank of c30,000 plots at the year end (04/07/2010: 30,435 plots).  As indicated at our half year results, we expect to record an additional impairment to the carrying value of our US landbank when the year end accounts are finalised.

As previously outlined, our intention is to refocus the business of the Group on the UK market in the medium term.  We have received interest regarding our North American operations and we are in the early stages of evaluating these approaches.  We will update the market as appropriate in due course and there is no guarantee that any transaction will be concluded.

Spain & Gibraltar Housing

We have completed 136 homes in Spain and Gibraltar in 2010, including the final home completions from our Gibraltar business (2009: 225).  The average selling price of these home completions was £217k, reflecting the change in mix of our Gibraltar completions (2009: £260k).

Market conditions are likely to remain challenging in Spain during 2011 and we are reviewing our strategy for the business and we expect to take a more aggressive approach to driving sales rates.  This may result in a requirement for a further provision against the carrying value of our land assets in Spain, but any adjustment is not be expected to be material to the Group balance sheet.

Group Financial Position

Our year end net debt was considerably better than market expectations at c£660 million.  This represents a reduction of c£90 million from the prior year, despite cash outflows of £183 million relating to the recent refinancing and previously announced one-off pension contribution.  We are making good progress in managing the pension deficit and will update the market with our year end results announcement.

Given the return to profit of our UK Housing business and the stable market outlook in the UK, we expect to be in a position to recognise approximately £300 million of our UK deferred tax asset in our year end results. In addition, we are making good progress in respect of our ongoing tax reviews with the respective revenue authorities and will update the market with our year end results.

Outlook

In the UK, constrained mortgage lending and the continuing uncertainty in the wider economic environment remain the greatest restriction on the market and we continue to run the business cautiously.  We expect to make further progress in 2011 with regard to build cost reduction and have been encouraged by the enhanced sales rates, sales prices and margins that we are achieving on recent outlet openings, whether new acquisitions or from the existing landbank.  Our focus remains on maximising margins rather than volume growth and we remain on track to achieve our target of double-digit operating margins in 2012, subject to continuing stable market conditions.

In the US, affordability remains at excellent levels and, combined with gradually reducing foreclosure levels, provides the potential for a strong recovery as confidence returns.  We continue to expect market conditions in Canada to remain robust for the foreseeable future.

-ends-

For further information please contact: 

Taylor Wimpey plc                                                Tel: [phone]

Pete Redfern, Group Chief Executive

Ryan Mangold, Group Finance Director

Jonathan Drake, Investor Relations

Finsbury                                                                Tel: [phone]

Faeth Birch

Andrew Dowler

Notes to editors:

Taylor Wimpey plc builds homes in the UK, North America and Spain. It aims to be the homebuilder of choice for customers, employees, shareholders and communities.

For further information please visit the Group's website:

www.taylorwimpeyplc.com

 

END

 

 

TSTLFFFILRIDLIL