House price inflation outstripping inflation, says housebuilding giant

Taylor Wimpey said it is on track to improve its operating profit margin as house price growth outstrips rising inflation.

jennie daly 2

Jennie Daly today takes over as chief executive of Taylor Wimpey

The £4.3bn-turnover housebuilding giant, in a market update for the period covering 1 January to 26 April, said trading had been as expected, leaving it on track to deliver against its previous market guidance.

This included increasing its operating margin from 19.3% towards 21% or 22% and a ‘low single digit’ percentage increase in annual completions. Taylor Wimpey completed 14,087 homes in the year ending 31 December and has an aim of increasing this to between 17,000 and 18,000 in the ‘medium term’.

The update comes as insider Jennie Daly takes over as chief executive from Pete Redfern, following his decision in December to stand down. This means Daly, previously group operations director, has today become the first female leader of a large listed housebuilder.

The housebuilder said its net private sales rate for the year to 17 April had remained stable at 0.96, compared to 1 in the same period in the previous year. Its order book stands at £2.97bn, up from £2.81bn the previous year, representing nearly 11,000 homes.

It said the Bank of England’s increase in interest rates from 0.5% to 0.75% in March “has not impacted customer appetite” and the market “remains healthy, underpinned by continued strong customer demand” and “good mortgage availability”.

It added: “We continue to see healthy levels of house price growth reflecting the strength of the market, that are offsetting labour and material cost inflation. “

The housebuilder said however it remains “mindful” of uncertainty caused by the conflict in Ukraine, rising energy prices and inflation and is focusing on “price optimisation, operational delivery and cost control”.

Taylor Wimpey also re-iterated that it has signed Michael Gove’s building safety deliver pledge to pay for ‘life-critical’ fire safety remediation works on its buildings over 11 metres going back 30 years. As a result it has put aside a further £80m, bringing the total it is providing for fire safety remediation works to £245m.

See also>> UPDATED: full list of developers to have signed the cladding pledge

See also>>Gove’s cladding deal - what does it mean for the sector?

See also>> Gove cladding deal tracker: how much extra will each housebuilder pay?

It however called on other organisations to also contribute. It said: “We continue to believe this is an industry-wide issue involving many types of organisations, and therefore needs an industry-wide solution.”

Daly described it as an “honour” to be taking over as chief executive.

She said: “Trading has continued to be strong, supported by a healthy market backdrop. We have also continued to make good progress against our strategic priorities, including driving growth in operating profit margin and outlet openings.

“Demand for our homes remains strong, with the business well positioned to deliver further progress in 2022 and beyond.”

Taylor Wimpey reported in March that it increased its annual turnover 53% in the year to 31 December, with its revenue of £4.28bn roughly in line with pre-pandemic levels falling a fall to £2.8bn in 2020.

Taylor Wimpey’s pre-tax profit in 2021 increased 157% to £680m, but remained some way off the £836m recorded in 2019, pre-pandemic.