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Materials 'security of supply' the focus for Taylor Wimpey as profits soar

Taylor Wimpey’s focus in the first half of 2014 has been on materials “security of supply” the housebuilder said today as it posted a leap in pre-tax (pre-exceptional) profits of more than 60 per cent to £178.4m.

Improved market conditions have resulted in build cost increases, which the housebuilder said were manageable.

Its focus for the first six months of the financial year has been on “security of supply” of materials such as bricks, which it has secured around 18 months ahead of build schedule.

Labour cost inflation has also increased, which the group said was “inevitable [but] controlled”. The group’s employee turnover for the period rose by 2 percentage points to 7 per cent, from 5 per cent.

It flagged the industry’s ability to attract and retain highly skilled workers as a challenge ahead.

Taylor Wimpey financials

“As the economy improves there is an increased risk of employee turnover as a result of increased workload, perceived lack of career prospects, uncompetitive reward or lack of job satisfaction, potentially leading to business disruption, process failure and knowledge drain.”

Build cost per unit increased 5.6 per cent to £109,300 compared with £103,500 for the same period in 2013. The group said it anticipates build cost inflation to “somewhat reduce” as the industry adjusts to an increase in labour and material demand.

The housebuilder said the government’s Help to Buy scheme had improved mortgage availability and the overall UK housing market, resulting in previously impaired sites becoming more valuable.

Operating profit for the period ended 29 June 2014 was up 300 basis points to 16.6 per cent, from 13.1 per cent for the first half of 2013.

Revenue for the first half of the year stood at £1.2bn, showing an 18.2 per cent increase from £1bn the year before.

Completions for the first six months stood at 5,766, up 11 per cent on H1 2013, with 5,191.

Of this private completions leaped to 4,755 from 4,229 the year before, while affordable completions moderately rose to 940 from 930. Joint ventures accounted for 71 of overall completions.

In the first half of the year, 37 per cent of the group’s completions were from land sourced from its strategic pipeline.

The land market remained “disciplined and balanced” according to group, with land identified into and beyond 2017.

Taylor Wimpey said it worked with local authorities and communities in the first half of the year to convert 7,195 plots from its strategic pipeline. It added that it would continue to grow its completions to the “optimum scale” of 14,000.

Taylor Wimpey land and completions

The average selling price of completions increased by 10 per cent to £206,000 from £188,000. Private completions selling price jumped 9 per cent to £224,000 from £205,000, which the housebuilder said was a result of its “weighting towards better quality locations”.

Taylor Wimpey, chief executive Pete Redfern said the group had delivered £116m to local communities.

He added: “In early July we began our cash return to shareholders, a key part of our active management of the cycle, and with confidence in the underlying strength and future performance of the business, we are pleased to announce that we now plan to increase our July 2015 payment.”

Cash return to shareholders in July 2015 will increase by £50m to £250m, equating to around 7.68 pence per share.

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