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Taylor Wimpey sees subdued start to 2020 as it focuses on value

The housebuilder has reiterated operating profit margin target of 21-22% for the current year

Taylor Wimpey - Taylor Wimpey builds on post-election improvement

Housebuilder Taylor Wimpey PLC (LON:TW.) expects a subdued first half in 2020 as it grapples with rising costs and the issue of build quality dogging the sector.

“Volumes for 2020 are expected to be slightly lower and we will be targeting a slighter lower sales rate as we focus on capturing value,” it said.

READ: Taylor Wimpey dividend yield impresses, but analysts worry about housing affordability

First-half profits will also be flat due to cost inflation, lower selling prices and the 'investment in quality and business improvement'.

The end of the ‘help-to-buy’ scheme is manageable, it said.

“We remain supportive of government plans to introduce an independent ombudsman service to the new build sector to provide impartial rulings on unresolved customer issues and to help raise standards in the wider industry,” it added.

Generally, confidence has improved in the housing market since the election with the current total order book value worth £2.6bn, or 17% ahead of last year.

Cost pressures should also ease in the second half and the builder sees margins recovering to 21-22%.

AJ Bell's Russ Mould said the margin target implies tight control of the purse strings but also a reduction in volumes to better capture value.

"Any cost-cutting needs to be balanced against the need to maintain build quality – an issue which has tripped up a number of Taylor Wimpey’s rivals," he commented.

 In the year to 31 December, revenue rose 5% to £4.3bn while profit before tax rose 3% to £674mln.

Cash in the bank dropped 14% to £546mln, while the total dividend was hiked 18% to 7.64p.

Shares dropped 4% to 211.1p on Wednesday morning.

--Adds analyst's comment, shares--

Quick facts: Taylor Wimpey

Price: 119.85 GBX

LSE:TW.
Market: LSE
Market Cap: £3.94 billion
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