Taylor Wimpey considers scheduling overhaul as peak interest rates hit profits
- Expect the number of homes completed to be at the top end of forecasts, despite the decline in the first half of the year
Taylor Wimpey expects to build about 10,000 homes this year, thanks to a recovery in the second half of the year after high interest rates depressed demand and profits in the first half of the year.
The FTSE 100 housebuilder reported a 22.6 per cent fall in operating profit to £182.3m for the six months to 30 June, with sales falling 7 per cent and the number of homes completed falling around 7.7 per cent to 4,728.
Taylor Wimpey blamed the delay in rate cuts and relatively high mortgage rates.
Lower interest rates are expected to boost housing demand
However, the company told investors that expectations of looming interest rate cuts meant it was on track to meet its full-year financial guidance and reach the “upper end” of its expected delivery range of 9,500 to 10,000 homes.
Markets are divided over whether the Bank of England will make its first interest rate cut on Thursday after a two-year run of hikes that has seen the base rate rise to 5.25 percent, a 16-year high, and has dampened housing demand as mortgage rates have risen in tandem.
Taylor Wimpey’s average sales price in the UK on completion fell almost 1 per cent to £317,000 on the same period last year, with the company saying this was due to ‘both underlying price deflation and mix’.
As of 30 June it had a total order book of 7,451 homes, excluding joint ventures, worth just over £2bn, down from 7,866 homes worth around £2.15bn last year.
Chief Executive Jennie Daly described the result as ‘a good financial and operational performance… against a relatively stable market backdrop’.
The group declared an interim dividend of 4.8p per share for 2024, up slightly from 4.79p last year and in line with its policy of paying out 7.5 per cent of net assets annually.
Taylor Wimpey shares rose 2.5 percent to 162.55p in early trading, taking a year-on-year gain to 42.6 percent.
Analysts expect Taylor Wimpey to benefit from planning reform
Taylor Wimpey also told investors it looked forward to “working constructively with the new government” and welcomed the “recognition… that planning is a major barrier to economic growth, of which housebuilding is an important part”.
The new Labour government has proposed changes to the National Planning Policy Framework to help meet the national housing target of 370,000 homes per year.
Taylor Wimpey said: ‘While we expect it will take some time for the changes to take effect, we see the planning reforms outlined by the new Government as essential to unlocking the land supply of the future and investing in the skills and resources needed to meet future housing needs.
‘We are well positioned for the medium term and are actively preparing for changes in the planning and focusing on developing high-quality planning applications from the strategic pipeline.
“We have approximately 30,000 applications in the pipeline and more applications are on the way if the proposed changes to the grey belt are implemented.”
City analysts believe the company stands out from other homebuilders as one of the main beneficiaries of any potential housing revival.
Anthony Codling, head of European housing and building materials at investment bank RBC Capital Markets, said Taylor Wimpey’s “broad national footprint” and “high quality strategic land bank” put the bank in “an enviable position to benefit” from planning reforms.
He added: ‘The impact will not be felt overnight, but we believe that those who are prepared to be patient will be richly rewarded.’
John Moore, senior investment manager at RBC Brewin Dolphin, said: ‘The government’s commitment to building new homes and reforming the planning system could provide a significant boost to the housing sector, and Taylor Wimpey should be among the main beneficiaries.
‘With sufficient cash in the bank and conditions more stable, management may now focus on potential acquisitions, having pulled out of a deal for Cala and continuing consolidation in the sector.’
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