Housebuilder Taylor Wimpey (LON:TW.) said it completed more homes in 2017 as demand remained supported by low interest rates, healthy employment levels and the government’s Help-to-Buy scheme.
Total home completions rose 5% to 14,541, including joint ventures, in the year to December 31, the group revealed in a trading update.
READ: Taylor Wimpey reports 'strong' second half but order book down on last year
“Despite wider macroeconomic uncertainty, housing market fundamentals remain solid and our trading performance has been good,” said chief executive Pete Redfern.
“We go into 2018 with positive momentum and expect to achieve further progress against our medium term targets.”
Order book shrinks and average selling price growth slows
However, its shares fell 3.06% to 202.50p in morning trading as the order book fell and house price growth slowed.
The order book shrunk at the end of 2017 to 7,136 homes worth £1.62bn from 7,567 homes worth £1.68bn at 31 December 2016. Taylor Wimpey said the decline in the order book was due to increasing the pace of production to meet market demand in the year.
Average selling prices edged up 4% to £264,000, marking a slowdown from the prior year’s 11% growth to £255,000.
The net private reservation rate for 2017 was 0.77 homes per outlet per week, compared to 0.72 in 2016, while the cancellation rate remained unchanged at 13%.
The short-term landbank stood at 75,000 at the end of the year, compared to 76,000 in 2016, while the strategic landbank expanded to 117,000 plots from 108,000 plots.
In Spain, Taylor Wimpey completed 301 homes, down from 304 the previous year, while average selling prices fell to €352,000 from €358,000. The order book grew to 320 homes from 293 at the end of 2016. The company said it expects to report a “significantly improved operating profit” for the Spanish business in 2017.
Taylor Wimpey to increase dividends in 2018
The group ended the year with net cash of £512mln after £450mln in dividend payments, compared to net cash of £365mln after £356mln in dividends the previous year.
Taylor Wimpey said it will pay a total dividend in fiscal year 2018 of £500mln, subject to shareholder approvals.
Results in 2017 were in line with the company's expectations and it expects to achieve “further growth and performance improvement” in 2018.
Operating profit margins in 2017 are expected to rise to 21.2% from 20.8% a year earlier and sees a return on net operating assets of more than 32.0%, up from 30.7%.
The firm said it has started the new financial year in a "strong financial and operational position with significant embedded value in our short term landbank and strategic pipeline".
“Whilst we are aware of potential political and economic risks, we expect to demonstrate further progress in 2018 against our medium term financial targets, whilst also driving further operational improvements where we can add value, including customer service and product quality," it said.
Better value elsewhere in the sector, says Liberum
Liberum repeated a 'hold' rating on the stock, saying it expects continued resilience in the market for new houses but believes margin growth will become tougher in a slower market.
This limits scope for outperformance to growing housebuilders: our top picks are Bellway (BUY, TP 3930p), Galliford Try (BUY, TP 1550p), MJ Gleeson* (BUY, TP 844p) and Redrow (BUY, TP 730p)