Taylor Wimpey flags profits leap on loans boost
Housebuilder Taylor Wimpey nearly went bust in 2009 but hailed thawing mortgage markets today as it flagged up profits at the top end of City hopes.
Just two weeks into 2013, the firm says “consumer sentiment towards the housing market is more positive than we have seen in recent times”, reigniting the threat of long-term price rises as housebuilding fails to keep up.
The firm, which was almost sunk by an ill-timed merger with George Wimpey at the top of the market in 2007, hailed cash flooding into mortgage lending from the Bank of England’s Funding for Lending drive. Government backed initiatives to help first-time buyers — the FirstBuy and NewBuy schemes — are also helping.
Chief executive Pete Redfern is still cautious about the rest of the year but said: “We tend to be a lead indicator of sentiment. We have more than 300 sites and we are seeing a more positive tone. The mortgage market feels more open for business.”
Pre-tax profits this year will be towards the top end of City forecasts of £210 million-£230 million. The firm returned to the dividend list last year and Taylor Wimpey’s order book is already bristling with £948 million in new orders, up 14% on last year.
Net debt, which stood at £1.6 billion four years ago, has been slashed to just £60 million.
The builder has 35 sites in the capital but says the signs of life are not confined to buoyant London and the South-east. “It is fairly broad based in terms of customer and geography,” Redfern added.
Prices are also being boosted by a shortage of housing. Aside from the mortgage market, Redfern said: “The other very significant factor is scarcity of supply. There is high demand, the rental market is very strong and gradually the economics of the housing market are moving in favour of buying.”
He adds: “It seems extremely unlikely that the level of planning permissions is going to increase significantly, while as the economy recovers there will be untapped demand emerging. It is difficult to see how that is not going to lead to house price increases.”
The shares were flat at 74.1p today although investors have enjoyed a 90% rise over the past year.
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