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Taylor Wimpey beats profit expectations

Housebuilder Taylor Wimpey will beat its upgraded pre-tax profit expectations after further squeezing costs and raising prices.

In a trading update ahead of its full year results for the year ended 31 December 2010 which will be announced on 3 March, the company said its operating and
pre-tax profits were ahead of the upgraded expectations set in November.

The group credits outperformance in North America for the upbeat results, as the market remains bullish in Canada and the situation improves in the United States.

But much of the hard work was done in the first half of 2010 when build costs were squeezed by 10 per cent, allowing a UK housing operating margin of 7 per cent, up from just 0.8 per cent in 2009.

Taylor Wimpey chief executive Pete Redfern said:  “We have delivered a much improved performance in 2010.  We are now in a strong position to add significant value by maximising returns from our existing land portfolio and adding high quality new land on attractive terms.”

The company completed its refinancing in the second half, achieving greater operational flexibility and securing a lower blended rate.

Its lower than expected net debt of £660 million - despite one-off refinancing payments and a pension contribution of £183m – has the company confident it is in a strong position to deliver further margin improvement in 2011.

Going forward the company will enjoy an increased number of active UK sales outlets, up to 301 from a low of 271 in September 2010.

While reservations, cancellations and completions were broadly unchanged in the UK, the company saw a slight swing towards affordable housing with private completions down 329 at 8,103 and affordable up 115 at 1,824.

Average selling prices for these completions were up seven per cent at £171,000, with increases to both private ASP -  up £13k to £184k – and affordable – up £8k to £116k. 

The UK housing year end order book stands at 4,684 homes (2009: 5,431), reflecting the “ongoing strategy of prioritising margin over volume”. 

In an update to the stock market the group said its outlook for 2011 remained cautious. The firm said: We expect to make further progress in 2011 with regard to build cost reduction and have been encouraged by the enhanced sales rates, sales prices and margins that we are achieving on recent outlet openings, whether new acquisitions or from the existing landbank.  Our focus remains on maximising margins rather than volume growth and we remain on track to achieve our target of double-digit operating margins in 2012, subject to continuing stable market conditions.”

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