Taylor Wimpey says it will rein in sales in the year ahead in order to prioritise profitability.
Announcing final results for the year to December 2019, the UK’s third largest housebuilder said it had built 16,042 homes in 2019, up 6% on 2018, reporting sales of £4.3bn.
However, it said its operating profit margin had fallen from 22% to 20%, due to rising construction costs and the need for investment in the business.
The firm said in its statement to the City that “volumes for 2020 are expected to be slightly lower and we will be targeting a slighter lower sales rate as we focus on capturing value”.
Speaking to analysts, group finance director Chris Carney underlined the point. “We expect to see slightly lower sales rates in 2020 to place slightly more emphasis on value,” he said.
The firm’s statement said the stronger market since the start of the year had seen the business achieve a 1.5% increase in average selling price.
Chief executive Pete Redfern said he was being cautious on volume in order to give his regional businesses the flexibility to focus on driving the margin back up. “I can’t tell them to focus on price if at the same time I’m cracking the whip on volume,” he added.
The news is unlikely to be welcomed by the government, which has a long-term target to drive housing completions from the current level of around 240,000 net additions per year to 300,000.
Redfern said the political stability given by a decisive election result in December had boosted the market and produced a “more fertile” environment to drive prices higher, with the Brexit “cloud” on the market having lifted.
“The environment we see at the moment, it takes you to a 3-3.5% price inflation for the year,” Redfern added. “There is a different feel in the market – not that everything is rosy. But it doesn’t feel particularly late [housing market] cycle, and it feels that interest rates are low for the long term.
“So, if we look at the road ahead, it’s longer than we thought [before the cycle ends].”
The firm reported underlying pre-tax profit of £822m, down from £857m last year. The net private sales rate for the year so far was 0.97 homes per week per site, down fractionally from 0.99 at the same point last year.
The firm has already forward-sold 10,901 homes for the year, up from 9,622 at the same point last year.
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