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Taylor Wimpey Says Trading Environment Gradually Improving, But Still Uncertain - Update

taylorwimpey 062810

UK-based homebuilder Taylor Wimpey plc (TW.L) Monday issued a trading update ahead of its half year results for the period ending on July 4, stating that the group continues to perform in line with its expectations in a gradually improving, but still uncertain, trading environment.

The company said that its UK housing market maintained an encouraging level of stability since the company's interim management statement on April 29, and mortgage availability improved slowly since the start of the year.

Taylor Wimpey said it witnessed a slight softening in sales around the time of the general election, but sales performance has strengthened in recent weeks. "Our order book remains strong and we are now 83% sold for our full year targeted completions," it said.

The company also said its focus remains on achieving price improvement rather than increasing volume. Prices on reservations have shown a further slight improvement since the interim management statement. Cancellation rates remain at historic low levels, Taylor Wimpey noted.

The company expects to complete around 4,650 homes in the first half of the year, lower than 4,702 completions in the year-ago period. Average selling price is estimated to be GBP 167 thousands, down from GBP 153 thousands a year ago.

However, with continuing broader economic uncertainty, the company remains cautious about the scale and pricing of its land buying.

According to the company, pricing in its U.S. markets remained stable so far in 2010, with sales rates in line with the prior-year period. However, average number of active outlets was lower at 136 for the year-to-date period, compared with 174 in the second half of 2009.

The company expects to complete approximately 1,800 homes in North America in the first half, down from 1,933 last year, at an average selling price of around US$300 thousands, compared with US$275 thousands in the year-ago first half. The company has now sold 78% of its expected 2010 completions.

Taylor Wimpey said it remains focused on selective deals where it can earn strong returns over the medium term and that its business in Canada continues to perform strongly.

In the Spain & Gibraltar housing market, Taylor Wimpey expects to complete approximately 75 homes in the first half at an average selling price of around GBP 233 thousands. These are comparable with the completion of 72 homes in the first half of 2009 at an average selling price of GBP 288 thousands.

Commenting on the group's financial position, the company stated that it sees a reduction in net debt to about GBP 650 million at the end of the period from GBP 750.9 million as at December 31, 2009.

Going forward, Taylor Wimpey believes that the underlying shortfall of new build housing and the strong levels of demand will continue to support pricing in the housing market in the UK. The company intends to continue to run the UK business cautiously in the short term with selective land investment and an ongoing focus on costs and cash, given the continuing political and economic uncertainty.

The company also remains concerned regarding future spending reviews by the UK government that could impact on housing initiatives, particularly the level of Social Housing Grant.

In the US, Taylor Wimpey continues to forecast volatility in key market metrics over the next few months due to the impact of the Homebuyer Tax Credit cessation. However, the company still believes that clearer signs of a sustainable recovery will become evident towards the end of this year. The company expects the Canadian market conditions to remain robust for the foreseeable future.

Taylor Wimpey is set to announce its half year results on August 3.

TW.L is trading at 29.59 pence on the LSE, down 0.87 pence or 2.86%, on a volume of 1.38 million shares.

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