15 January 2014
Taylor Wimpey plc
Trading statement for the year ended 31 December 2013
Significant improvements delivered in 2013
Taylor Wimpey is issuing the following update on trading ahead of its full year results for the year ended 31 December 2013, which will be announced on 26 February 2014.
We expect to deliver significant improvements across all of our key strategic objectives in line with our expectations.
Pete Redfern, Chief Executive, commented:
"We saw a meaningful step change in market conditions in 2013, after several years of a declining or flat market. In these improving conditions, Taylor Wimpey is benefitting from the discipline that has been instilled over the past five years with a clear focus on margin as the best measure of the quality of our business. Focussing on the long term health of the business allows us to take the right decisions today to deliver much needed homes all the way through the housing cycle."
UK current trading
During 2013, we saw a measurable improvement in the housing market underpinned by solid consumer confidence, together with Government measures, in particular Help to Buy, which have helped address the significant unsatisfied demand for housing through increased access to mortgage availability and affordability.
Total home completions increased by 7% to 11,696 (including our share of joint venture completions) up from 10,886 in 2012, of which 18% were affordable housing completions (2012: 18%). Our net private reservation rate for the full year was 0.62 homes per outlet per week (2012: 0.58) with very low cancellation rates at 13% (2012: 15%). Help to Buy continues to prove popular with our customers and, during 2013, we worked with over 2,900 households to take their first step to move onto or up the housing ladder using this initiative.
Average selling prices on private completions increased by 7% to £210k (2012: £197k). This increase is the result of our underlying shift to better quality locations and the market sales price increases in line with the general level of inflation that we saw in the second half of 2013. Our overall average selling price has increased by 6% to £191k (2012: £181k). In current market conditions, we expect to be able to deliver further increases in the number of completions and average selling prices in 2014 and remain confident of driving an improvement of 200 to 300 basis points to operating margin in 2014.
At this point in the cycle, and relative to the size of the business, the total order book is at the optimal level. We start 2014 in an excellent position with an increase of 27% in value to £1.2 billion as at 31 December 2013 (31 December 2012: £948 million), with further inherent margin improvement driven largely by the strength of private reservations. The order book represents 6,627 homes (31 December 2012: 5,966 homes).
Land portfolio, planning and outlets
The land market remained relatively stable throughout 2013 and we were able to secure value creating opportunities in both the short term and the strategic land markets. Our strategic land performance was particularly strong in 2013 and we added over 10k plots in 2013 to bring the total strategic landbank to a record level of over 110k including pipeline plots. We approved the purchase of 15,667 new plots on 105 new sites during 2013 (FY 2012: 14,172 plots on 112 new sites) at the high margin levels that we have been able to achieve over the last two years. As previously indicated, we continue to see attractive opportunities in the land market, albeit we have seen initial signs of tightening in some local markets which we continue to monitor very carefully, retaining our focus on value in these conditions.
We enter 2014 with 314 outlets (31 December 2012: 327), with the decrease due to faster outlet closings in a healthier market and the time taken to meet additional planning permission requirements. We expect total outlets to modestly increase in 2014 as we continue to focus our efforts on getting our newly acquired sites and phases opened in an efficient and timely manner.
Spain current trading
During 2013, we completed 118 homes (2012: 156) at an average selling price of £194k (2012: £197k). We anticipate that average selling prices will naturally increase in 2014 with increased completions from our newly acquired sites, which are performing very well due to their quality locations. The total order book stands at 195 homes (31 December 2012: 53 homes). Customer confidence still remains subdued on the whole and in certain locations continues to be extremely challenging. The Spanish housing business again made a small profit during 2013.
Group financial position
Full year Group operating margin will be towards the upper end of our expectations, ahead of that reported at the half year, and over 200 basis points ahead of FY 2012 operating margin (H1 2013: 13.1%; FY 2012: 11.2*%).
On 31 December 2013, at the first call date, we redeemed and cancelled the £250 million 10.375% Senior Notes due 2015, of which £149.4 million remained outstanding. This will reduce interest costs in 2014 by over £15 million. As a result of the redemption, our £100 million term loan has been extended by 5.5 years to mature in 2020 with amortisation beginning in 2017.
We are pleased to report that we ended the year with a marginal net cash position, largely as a result of outperformance in underlying trading, but also due to the timing of land and other payments (31 December 2012: £59.0 million net debt; 30 June 2013: £68.4 million net debt). As part of our medium term strategy we continue to generate cash as we approach our optimum scale and we will give a fuller update on our capital allocation approach for 2014 and beyond with our full year results on 26 February 2014.
We enter 2014 with an excellent order book, with improved margins and pricing and a very strong set of selling locations. In addition to the improved mortgage environment, the level of consumer confidence in housing has improved across most of our main markets and in the opening weeks of 2014, interest levels, visitors and reservations have remained high.
Looking further ahead, we have been able to secure very high-quality short term land over the past four years, and build an exceptionally strong strategic landbank, which positions us well over the medium and longer term. The planning environment in the UK remains generally quite slow and cumbersome, although the changes over the last three years are starting to have a positive impact. We remain committed to bringing all of our sites through the planning process and developing them to create value for our shareholders and deliver much needed homes for the communities in which we operate.
* 2012 has been restated following the adoption of IAS19R 'Employee Benefits', with changes in the presentation of certain costs relating to the defined benefit schemes.
This trading update may contain certain statements about the future outlook for Taylor Wimpey. Although we believe our expectations are based on reasonable assumptions, any statements about future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.
For further information please contact:
Taylor Wimpey plc Tel: +44 (0) 1494 885656
Pete Redfern, Chief Executive
Ryan Mangold, Group Finance Director
Debbie Sempie, 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: