Taylor Wimpey sees half-year profits drop as rising costs take their toll
House-builder Taylor Wimpey reiterated warnings over rising build costs as it reported a drop in half-year profits.
Shares in the group fell 5% after it posted a 9.4% drop in underlying pre-tax profits to £299.8 million for the six months to June 30 as rising build costs took their toll.
On a statutory basis, pre-tax profits were 0.4% lower.
Taylor confirmed warnings made earlier this year over a hit to profit margins in 2019 from forecasts for build costs to rise by around 5%.
It said: “In this environment where pricing is flat, and there is increased build cost pressure, our margins will be lower in 2019 than in 2018.”
But it stuck by its full-year forecasts and said that, despite Brexit uncertainty, it had not seen “any meaningful” hit yet to home-buyer confidence.
The group is also expecting full-year house sales by number to be “slightly higher” than in 2018.
Its figures come as the latest Nationwide Building Society data revealed Britain’s wider property market remains subdued, with annual house price growth running below 1% for the eighth month in a row in July.
Across the UK, the average house price in July stood at £217,663 – up just 0.3% on a monthly, quarterly and an annual basis, according to Nationwide.
In its interim results, Taylor Wimpey gave a bullish view on the new-build outlook.
It said: “Our customers’ decisions to purchase a home continue to be primarily driven by aspiration and the affordability of, and access to, mortgage finance.
“There remains a competitive mortgage environment across a wide range of loan to value ratios and Help to Buy continues to be a differentiator for new-build customers.”
The group saw average selling prices on private completions edge 2% higher to £301,000.
It added that its order book remained solid at 10,137 homes worth £2.4 billion, up 9% on a year earlier.
Investors were offered the promise of a special dividend shareholder payout for 2020 of £360 million.
But this failed to boost shares amid Taylor’s warning over build costs and flat pricing.
Glynis Johnson, an equity analyst at Jefferies, said “Given all the other macro and economic uncertainties in the UK, this may be more cautiously received by investors.”