Taylor Wimpey has announced a strong performance in 2015, delivering an increase in the number of homes sold, at higher selling prices. Total home completions rose by 7% to 13,341. Average selling prices on private completions increased by 9% to £254k, benefiting from a positive housing market and the group's focus on better quality locations. Taylor Wimpey points to a favourable land market, which has continued to support margins; and enters 2016 with a record order book, providing confidence in the outlook. The shares were broadly flat in early morning trading.
Financial highlights for FY15:
- Operating profit margin of over 20% (2014: 17.9%)
- Return on net operating assets of over 25% (2014: 22.5%)
- Net cash of c.£225 million at year end (31 December 2014: £112.8m net cash)
Taylor Wimpey welcomes the Government's commitment to housing delivery which was demonstrated by the Autumn Statement. It starts the year in an excellent position with a strong order book (up 27% on the prior year) and is confident of delivering further progress throughout 2016, against its medium term targets.
Taylor Wimpey is enjoying strong volumes and rising selling prices, whilst the forward order book provides good visibility. The group is in excellent shape, and plans to pay a £300m special dividend to shareholders in July 2016. Including regular dividends, this should see the group return more than £350m in 2016, equating to a dividend yield of 5.5%.
The housing market is currently being supported by rising disposable incomes, low mortgage rates and government schemes such as Help-to-Buy, which are encouraging more people onto the housing ladder. Changes announced in the Autumn Statement (alluded to by Taylor Wimpey in its pre-close trading update) should further support the outlook. George Osborne plans to invest almost £7 billion on measures to help people, especially first-time-buyers, purchase their own home.
Land price inflation is running at modest levels, with the government keen to open up further land for development, in recognition of the UK's chronic housing shortage. This is supporting margins, cash flows and returns of capital to shareholders.
It has not escaped investors' attention that the house builders are in a sweet spot, meaning the sector is trading at a significant premium to book value. This means share prices are likely to be vulnerable when the next housing downturn arrives. For now, market conditions look set to remain favourable, suggesting the house builders' purple patch could last a while longer.
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