Taylor Wimpey publish half year results, Chief Executive comments

Pete Redfern, Chief Executive, comments on Taylor Wimpey’s half year results for the period ended 3 July 2016:

“We have delivered a strong operational and financial performance with continued growth in profitability, building over 6,000 new homes across the country during the first half of 2016.

“One month on from the EU Referendum, current trading remains in line with normal seasonal patterns. Customer interest continues to be high, with a good level of visitors both to our developments and to our website. We are monitoring customer confidence closely across a number of metrics, including appointment bookings, and these continue to be solid. Whilst it is still too early to assess what the longer term impact from the Referendum result on the housing market may be, we are encouraged by the first month’s trading and by continued competitive lending from the mortgage providers as well as the positive commentary from Government and policymakers.

“With a strong order book which has grown to over £2.2 billion as at 24 July, we are c.90% forward sold for 2016. We remain fully committed to the Dividend Policy we announced earlier this year which will deliver increased returns to shareholders.”

H1 2016 UK operational performance

  • Completed a total of 6,019 homes, excluding joint ventures, up 3.0% (H1 2015: 5,842)
  • 5.8% increase in total average selling price to £238k (H1 2015: £225k), excluding joint ventures
  • 12.1% increase in profit before tax and exceptional items to £266.6 million (H1 2015: £237.9 million)
  • Strong order book representing 8,683 homes (28 June 2015: 8,120) with a total value of £2,156 million (28 June 2015: £1,859 million), excluding joint ventures, which has continued to grow to £2,237 million as at 24 July (2015 equivalent period: £2,005 million)
  • Short term landbank of c.78k plots with over 60% sourced from the strategic land pipeline

H1 2016 returns to shareholders announced

  • Interim maintenance dividend of 0.53 pence per share (H1 2015: 0.49 pence per share) to be paid on 7 October 2016, bringing 2016 total dividends to c.£356 million or 10.91
    pence per share
  • Remain fully committed to the Dividend Policy announced on 17 May 2016:
    • Enhanced ordinary dividend from 2017 of approximately 5% of Group net assets and at least £150 million per annum through the cycle
    • Special dividend of £300 million (c.9.20 pence per share) to be paid in July 2017 (July 2016: £300.2 million and 9.20 pence per share)

H1 2016 Group financials

H1 2016 H1 2015 Change FY 2015
Revenue £m 1,457.2 1,335.3 9.1% 3,139.8
Operating profit* £m 279.1 255.9 9.1% 637.0 279.1 255.9 9.1% 637.0
Operating profit* margin 19.2% 19.2% 20.3%
Profit before tax and exceptional items £m 266.6 238.0 12.0% 603.8
Profit for the period before exceptional
items £m
213.3 190.3 12.1% 482.3
Adjusted basic earnings per share
pence††
6.5 5.9 10.2% 14.9
Basic earnings per share pence 6.6 5.8 13.8% 15.1
Tangible net asset value per share pence† 88.5 82.1 7.8% 83.5
Net cash £m 116.7 87.6 33.2% 223.3
Return on net operating assets** 25.2% 23.2% 2.0ppt 27.1%

Current trading and outlook
Whilst it is still too early to assess what long term impact the EU Referendum result will have on the UK housing market, there has been no meaningful change to date, with trading in the last month at a normal seasonal range with a net private sales rate of 0.65. The net private sales rate for the year to date (w/e 24 July 2016) is 0.77 (2015 equivalent period: 0.78).

Since 24 June, the early forward confidence indicators amongst homebuyers, together with the continued competitive lending by mortgage providers, have been encouraging and support confidence in the resilience of the UK housing market. We are monitoring both our own internal measures of customer confidence and external data closely. Help to Buy has continued to be a differentiator for new build housing, and remains popular with our customers. Over the last month, the actions and commentary by the Government, Bank of England and mortgage lenders demonstrate a commitment to housing supply and a recognition that there remains a fundamental imbalance between demand and supply in the UK.

Customer interest remains high, with website visits solid and customers continuing to register interest in forthcoming developments and to make appointments to progress their
home purchases. Whilst we saw a small increase in the average cancellation rate immediately following the Referendum, this remained low compared to long term historic norms and is now back in line with recent low levels.

The markets in all of our core regional geographies, which are the primary drivers of our business, continue to trade positively. Whilst the wider London market remains robust and in line with the rest of the UK, the central London market has continued to slow, particularly at the upper end of the market.

As at 24 July 2016, we were c.90% forward sold for private completions for 2016, with a total order book value of £2,237 million (2015 equivalent period: £2,005 million), excluding joint ventures.

A fundamental part of our strategy is a proactive and flexible approach to managing through the housing cycle, with a focus on creating long term value and mitigating future risk. We believe that through all market conditions, quality of location is a key determinant of a home purchase. We are currently operating from 286 high-quality outlets, in locations in villages, towns and cities where people want to live, supported by strong demographics and local economies. This approach, together with a strong balance sheet and a strong strategic land position, optimally positions us for the future to perform well through all market conditions. We remain fully committed to the Dividend Policy which we set out in May 2016 and our objective to provide a consistent and reliable income stream for investors.

* Operating profit is defined as profit on ordinary activities before net finance costs, exceptional items and tax, after share of results of joint ventures.

** Return on net operating assets is defined as 12-month rolling operating profit divided by the average of the opening and closing net operating assets, which is defined as net assets less net cash less net tax balances, excluding any accrued dividends.

*** Operating cash flow is defined as cash generated by operations before tax and interest paid on a rolling 12-month basis.

† Tangible net assets per share is defined as net assets before any accrued dividends excluding goodwill and intangible assets divided by the number of ordinary shares in issue at the end of the period (H1 2015 divided by weighted average number of ordinary shares in issue during the period).

†† Adjusted basic earnings per share represents earnings attributed to the shareholders of the parent, excluding exceptional items and tax on exceptional items, divided by the weighted average number of shares in issue during the period.

†* Net operating asset turn is defined as total revenue divided by the average of opening and closing net operating assets. Based on rolling 12 months.

†** The method of calculation is in line with the Annual Injury Incidence Rate methodology and covers the period between 1 January 2016 and 3 July 2016.