Profit Boost Forecast For Taylor Wimpey Plc

The Motley Fool

Taylor Wimpey (LSE: TW) this morning released its trading update ahead of full-year results, and lauded a successful strategic implementation.

The housebuilder forecasts operating profit to rise over 40%, with operating margin ahead of that reported for both the first half of 2012 and 2011 full year (H1 2012: 11.1%, FY 2011: 8.8%).

Benefiting from the Funding For Lending scheme, some major lenders have recently reduced their rates as mortgage availability remains restricted, and that spells good news for the housebuilding sector and the company -- Taylor Wimpey purchased 1,203 homes under the Government's FirstBuy scheme in 2012.

The firm's average selling price increased 6% to £181k, compared to 2011's average price of £171k. One cause management highlighted was the "enhanced quality of locations". Home completions increased rose 7% to 10,886 (including its share of joint-venture completions) up from 10,180 in 2011, with a slight decline in affordable housing completions (18% against 2011's 20%).

Chief executive Pete Redfern commented:

"2012 was another year of significant progress for Taylor Wimpey with an increase of over 40% in Group operating profit. We are delivering on the strategy that we set out in 2011, including a return to UK double digit operating margin ahead of schedule. As we look forward to 2013, we are confident that we will continue to deliver against our key objectives and target further improvement."

The company's order book is in a strong position as well, with an increase of 14% in value to £948m as at 31 December 2012 (31 December 2011: £835m), representing 5,966 homes (31 December 2011: 5,379 homes).

Unsurprisingly, Taylor Wimpey's strategy for the year ahead is much the same as the one for 2012: actively managing its level of land investment in line with the housing market. During 2012, the housebuilder approved the purchase of 14,172 new plots on 112 new sites (2011: 11,756 plots on 106 new sites), and enters 2013 with 328 outlets (31 December 2011: 314).

Shares remained reasonable stable on the news this morning, with little change in early morning trade. They can currently be bought for around 74.10p, which is a massive six-fold gain on their five-year low back in 2009 of 11.7p. Since then, the share price has increased year on year, and forecasts are for the trend to continue.

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