UK support for home buyers helps builder Taylor Wimpey
BRITISH housebuilder Taylor Wimpey has raised its profit margin forecast for 2014 and expects profitability will return to long-run levels the year after, helped by government schemes to support home buyers.
The company, which like rivals saw profitability slide during a long and deep recession, said on Thursday its 2014 operating profit margin could improve by 200-300 basis points, up from a previous forecast rise of 100-200 basis points.
In its latest results for the 2012 financial year, Taylor Wimpey reported a margin of 11.5pc and analysts expect it to post a 2013 margin of 13.5pc. The raised forecasts indicates a 2014 margin of 15.5-16.5pc.
"17pc is what we would see as a long run norm, where the business has probably recovered from the market conditions we've been through ... We'd expect to be at that 17pc norm in 2015," Chief Executive Pete Redfern told Reuters.
"By saying (the 2014 forecast) this early in the reporting cycle, we're giving people a sense of confidence," he said.
Taylor Wimpey and other housebuilders have been big beneficiaries of government schemes to help Britons purchase homes with deposits as small as five percent and have seen their profits also improve as they build on land that they snapped up cheaply during the recession.
Taylor Wimpey's comments echo that of rival Persimmon , which hit its margin targets of 15-17pc more than a year earlier than expected.
At lunchtime, shares in Taylor Wimpey, which have risen 76pc over the past year, were up 3.5pc at 107p- one of the biggest rises on the midcap FTSE 250 index.
Numis Securities analysts called the company's results "a solid update", and said they expected Taylor Wimpey to return cash to shareholders at its full-year results next year.
Redfern said he would set out a capital return plan next year, but added he would not explicitly state when those capital returns would start.
The company said it had sold off all the homes it was building this year, and had so far sold 30pc of the homes it will be building next year. Its current total order book comprises of 7,557 homes with a value of £1.5bn.