4 July 2012
Taylor Wimpey plc
Half year trading statement
Delivering further performance improvement
Taylor Wimpey is issuing the following update on trading ahead of its half year results for the period ended 1 July 2012, which will be announced on 1 August 2012.
Despite the continued uncertainty in the Euro-zone and global economy, the UK housing market has remained stable throughout the first half of 2012 and we will report improvements across all key financial metrics at our half year results.
These improvements are the result of the continuing implementation of our strategy, driven by a combination of: increasing the proportion of strategic land sites; improving returns from land purchases since the downturn; an ongoing tight focus on costs and value optimisation; and the increasing benefits from our new housetype range.
We continue to focus on the creation of medium to long term value for our shareholders, which we believe is best delivered through the core skills of strategic land management, targeted and well-timed land acquisition and providing our customers with high quality, desirable homes that are efficient to build. While we retain an overall cautious approach, maintaining tight control over the level of debt and exposure to land creditors, we continue to take advantage of selective opportunities to acquire land at attractive return levels.
In the short term, assuming that current stable UK housing market conditions continue, we expect to continue to achieve improved performance period on period and to deliver full year returns in 2012 that are ahead of our cost of capital and in line with our expectations. Should market conditions weaken, our high quality land portfolio, increased order book and strong balance sheet put us in a strong position.
UK market conditions remain stable, with underlying pricing unchanged over the course of the first half of 2012. Mortgage lending continues to be restricted, although we have been encouraged by the introduction of a number of higher loan to value products since the start of the year, most notably under the NewBuy scheme.
We have maintained our strong sales performance during the first half of this year, achieving an average private net reservation rate of 0.60 sales per outlet per week (H1 2011: 0.56). This rate includes a total of 201 home reservations under the NewBuy scheme since its launch in March 2012, representing around one-third of overall industry reservations. We have increased our use of the government-backed FirstBuy scheme, although we retain our cautious approach to the use of shared equity incentives in general. Cancellation rates remain below the long term average at 15.1% (H1 2011: 15.1%).
We completed a total of 5,083 homes during the first half of 2012 (H1 2011: 4,707), of which 4,137 were private completions (H1 2011: 3,675), 893 were affordable completions (H1 2011: 1,004) and 53 were our share of joint venture completions (H1 2011: 28). The overall average selling price of these completions increased to circa £175k (H1 2011: £168k). The average selling price on private completions increased to circa £188k, reflecting a higher quality product mix in terms of both size and location (H1 2011: £182k). The average selling price on affordable completions decreased to circa £115k (H1 2011: £117k).
Having completed the roll-out of our new housetype range during 2011, the benefits to the business are increasing as they are plotted on a growing number of sites. These homes, which are designed to be high quality, desirable, extremely energy efficient, cost effective and safe to build, have been well received by our customers.
As previously announced, following the disposal of our North American business, the Group will no longer be reporting a 'Corporate' segment in our financial statements, with the former 'Corporate' overheads now being accounted for within the UK Housing segment. We expect to report an operating margin for the first half of approximately 11% (H1 2011 restated: 8.4%).
Our continuing prioritisation of margin improvement ahead of volume growth is also reflected within our order book, where we have achieved additional margin progression since the year end. The total order book value, excluding completions to date and joint ventures, was £960 million at 1 July 2012 (3 July 2011: £932 million), representing 5,720 homes (3 July 2011: 5,989 homes). This growth in the value of the order book has been driven by private reservations, with an 18% increase in the value of the private order book more than offsetting a decline in the value of the affordable order book.
Land portfolio, planning and outlets
We maintain our consistent, disciplined approach to land acquisition and we have approved the purchase of circa 7,000 plots during the period on approximately 50 sites. We also continue to enhance the quality of our strategic land portfolio, both by the progression of existing sites through the planning process and by the targeted addition of new potential plots.
We aim to become the industry leader in managing the planning process across our business and we have been encouraged by the early successes that we have achieved as we adapt to the recent changes in the planning system.
Our primary goals with new outlets continue to be to optimise planning consents and to value-engineer sites prior to opening. We are currently operating from 314 outlets (3 July 2011: 310).
Market conditions have continued to be challenging in Spain during the first half of this year, particularly in respect of local buyers, given the ongoing economic uncertainty. We completed 13 homes in Spain during the first half of 2012 (H1 2011: 30) at an average selling price of £172k (H1 2011: £266k). The order book value was £20 million at 1 July 2012, (3 July 2011: £17 million), representing 97 homes (3 July 2011: 75 homes).
Group financial position
Our balance sheet remains strong, with net debt below £150 million as at 1 July 2012. Since the start of the year, we have repurchased a further £5.6 million of the 10.375% Senior Notes due 2015, with £159 million remaining outstanding at 1 July 2012.
Following the recommencement of the dividend at the 2011 full year results, the Group intends to pay an interim dividend. In line with the policy outlined at that time, this interim dividend will be calculated with reference to the net asset value of the Group and is expected to represent around one-third of the total dividend for the year.
Following the favourable resolution of an historic potential tax liability, the associated provision has been released in the first half. This results in an exceptional tax credit of £59.6 million and an exceptional interest credit of £23.0 million to the income statement in the period. The associated enhancement to the net asset value of the Group is expected to be partially offset by an increase in the IAS19 pension deficit.
Trading in recent weeks has continued to be stable, in spite of the ongoing uncertainty in the wider economy. Assuming that current stable market conditions persist, we expect to continue to achieve improved performance period on period and to deliver full year returns in 2012 that are in line with our expectations.
For further information please contact:
Taylor Wimpey plc Tel: +44 (0) 7816 517039
Pete Redfern, Chief Executive
Ryan Mangold, Group Finance Director
Jonathan Drake, Investor Relations
RLM Finsbury Tel: +44 (0) 20 7251 3801
Notes to editors:
Taylor Wimpey plc is a UK-focused residential developer which also has operations in Spain. Our vision is to become the UK's leading residential developer for creating value and delivering quality.
For further information, please visit the Group's website: