Commercial Property News

In it's H1 statement today, housebuilder Taylor Wimpey Plc reported an operating sharply up at £79.3 million (H1 2009 £2.8 million), thanks to a restoration of trading margins (UK 7.5%, H1 2009 -1%) and an increase in sales to £1.219.3 billion compared to £1.132 billion in H1 2009. TW is the first in the parade of housebuilders bringing their results to the market this week, it's pretax profit before exceptional items of £19.6 million, compared with a loss of £68.9 million in the same period last year, but
after exceptional items, its profit reduced for the six months to £7.5 million, after a relatively stable period of rising prices and confidence in the period leading up to the Election.

Taylor Wimpey plc builds homes in the UK, North America, Spain and Gibraltar. TW completed 1,843 homes in North America during the period (H1 2009: 1,933) of which 1,373 were in the US (H1 2009: 1,279) and 470 were in Canada (H1 2009: 654), increasing revenue to £373.3 million for the period (H1 2009: £356.1 million). The Gibraltar operation is being closed down whilst in Spain, midst mounting losses in a market flooded with inventory, a few sales are being made.

In the UK, TW completed a total of 4,804 homes in the H1 2010, a slight increase on the 4,702 completions achieved in H1 2009.  Of these, 3,925 were private homes (H1 2009: 3,854), 866 were affordable homes (H1 2009: 840) and 13 were joint venture completions (H1 2009: 8).  The overall average selling price of completions rose by 9.8% to £168k (H1 2009: £153k), with private average selling prices up by 10.4% to £180k (H1 2009: £163k) and affordable average selling prices rising 6.4% to £116k (H1 2009: 109k),  Whilst mix changes have had a beneficial effect on the prices achieved, TW have also been successful in obtaining underlying price increases, with the average selling price per square foot for private completions increasing by 7.3% to £177 (H1 2009: £165).  As a result, revenue has increased by 11.1% to £827.1 million (H1 2009: £744.4 million).

First time buyers, the lifeblood of the market, continue to represent around 30% of TW sales and they have achieved this high proportion despite their relatively limited use of Government-funded and other shared equity schemes.

TW have delivered further reductions in build cost during the period, with the total build cost per square foot for private homes averaging £104 during the first half (H1 2009: £114).  This represents a total reduction of 9% and TW remain confident of delivering further savings over time.  

The UK operating margin of 7.5% includes a one-off pension curtailment credit of £12.0 million.  Adjusting for this, the underlying operating margin of 6.1% shows significant growth against the negative 1.0% achieved in the first half of 2009.  This strong performance reflects the successful implementation of the plans that TW set out in 2008 focusing on sales price improvement, replans, supplementing our landbank with new purchases on attractive terms, reducing build cost and closely controlling overheads.

TW have over 6 years of land supply at current completion levels and an average owned plot cost of 18% of selling prices at current levels, the Company is well-placed to manage the impact of changes in planning policy on the availability of new consented land. The TW landbank contains a high proportion of longer-term sites,  which TW expect to deliver higher margins over the market cycle.

TW have agreed the purchase of 3,841 new plots during H1 2010, replenishing the majority of the plots completed during the period.  These are in addition to the 3,003 plots approved for purchase in H2 2009.  Over the last three months, the number of such opportunities has started to increase slowly and, whilst TW remain cautious about major land investments, they expect to continue new land purchases.

Tw enter the second half with a strong forward order position.  Taking into account first half completions TW are now in excess of 86% sold for their full year targeted completions.  In total, including sales for future years, TW have an order book of £952 million (31 December 2009: £819 million).

Pete Redfern, Group Chief Executive, said:

 "We have performed well in the first half of the year and I'm pleased with the progress we've made in reducing costs, improving the margin and developing the landbank.  We have significantly strengthened our business and we are well-positioned to grow shareholder value."

 No interim dividend is being declared, a sign that the company feels uncertain about the UK market outlook of sliding market prices and failing consumer confidence, but shares surged yesterday up 7.5% at 28.62pence, valuing the company at £872 million