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Lower Brexit risks

Robust outlook for housing, says Taylor Wimpey

housebuildingHousebuilder Taylor Wimpey reported a healthy backdrop to the market and unveiled a substantial cash return to shareholders.

The company said the early signs of stability and resilience of the market following the EU Referendum continued and it believes the risk of material impact from this in the short term has “significantly reduced”.

Profit for the year before exceptionals rose 21.5% and the company is handing £1.3 billion back to shareholders.

Shareholders will receive a total dividend of c.£450 million (c.13.8p per share), comprising an ordinary dividend of c.£150 million (c.4.6p per share) and a special dividend of c.£300 million (9.2p per share).

Pete Redfern, chief executive, said: “In 2016 we delivered an excellent performance set against an uncertain political and economic environment that stabilised in the final quarter. The outlook for 2017 is for ongoing stability and incremental price growth, which is a healthy backdrop for our business and our customers.”

Good progress made towards all medium term targets for the period 2016-2018

Target total of £1.3 billion of dividends to be paid in cash to shareholders over the period

–  £355.9 million paid in 2016 (2015: £308.4 million)

–  c.£450 million declared for 2017 (subject to shareholder approval)

Target average annual return on net operating assets of 30%

–  30.7% in 2016 (2015: 27.1%)

Target average operating profit margin of c.22%

–  20.8% in 2016 (2015: 20.3%)

2016 Group financials

·    Completed a total of 14,112 homes, including Spain, up 4.8% (2015: 13,470), excluding joint ventures

·     10.9% increase in UK total average selling price to £255k (2015: £230k), excluding joint ventures

2016

2015

Change

Revenue £m

3,676.2

3,139.8

17.1%

Operating profit* £m

764.3

637.0

20.0%

Profit before tax and exceptional items £m

733.4

603.8

21.5%

Profit for the year £m

589.3

489.8

20.3%

Adjusted basic earnings per share pence††

18.1

14.9

21.5%

Basic earnings per share pence

18.1

15.1

19.9%

Tangible net asset value per share pence

88.6

83.5

6.1%

Net cash £m

364.7

223.3

63.3%

UK current trading and outlook

In a statement, the company said it had made a good start to 2017 and is encouraged by robust trading and levels of demand. The UK housing market fundamentals remain good with strong customer confidence in our core geographies, it said.

“The market is underpinned by a competitive mortgage market and low interest rates. Customer interest remains high, with website visits solid and customers continuing to register interest in forthcoming developments and progress their home purchase plans.

“Whilst the wider London market remains robust, prime central London is softer, as previously highlighted, however, house prices are stable, and there are good levels of underlying demand.”

The net private sales rate for the year to date (w/e 19 February 2017) has increased to a very strong 0.91 (2016 equivalent period: 0.77).

As at 19 February 2017, the company was c.49% forward sold for private completions for 2017, with a total order book value of £1,978 million (2016 equivalent period: £2,030 million), excluding joint ventures. This order book represents 8,573 homes (2016 equivalent period: 8,409).

It expects underlying build cost increases during 2017 to be at a similar level to 2016, at around 3-4%.

The company said the government’s Housing White Paper, recognises the importance of housing to the UK and the part all housebuilders can play in the economy.

“Whilst some of the detail is of course to be finalised, we welcome the measures set out in the White Paper which are balanced and aim to sustainably increase the delivery of much needed homes.

“In line with our strategy, we will continue to closely monitor market risks, particularly around long term mortgage cost. However we believe that a cautiously regulated market and low interest rate environment is likely to prolong the period of stability that we are seeing in the UK housing market.

“We have a clear strategy and a strong focus on where we can add further value to the business. In this way, we are confident that we can adapt to all market conditions from a position of strength and perform well, underpinning our value proposition to shareholders and other stakeholders.

“We remain fully committed to the dividend policy set out in May 2016 and our objective to provide a consistent and reliable income stream for investors. Our focus remains on adding value and steady, sustainable growth as we maximise efficiency through operational excellence and discipline on our sites and throughout our business.”

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